-----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, N3cxSvg22K5u4gLGV97F7JaVFXD+9qjrZ85miNgJpiv+ZbZ2Tm6pbUZOL3sOmk5x H+k89IgISPYj2/htHxG/9w== 0000950144-98-000329.txt : 19980115 0000950144-98-000329.hdr.sgml : 19980115 ACCESSION NUMBER: 0000950144-98-000329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REXALL SUNDOWN INC CENTRAL INDEX KEY: 0000901620 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 591688986 STATE OF INCORPORATION: FL FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21884 FILM NUMBER: 98506527 BUSINESS ADDRESS: STREET 1: 851 BROKEN SOUND PARKWAY N W CITY: BOCA RATON STATE: FL ZIP: 33487 BUSINESS PHONE: 4072419400 MAIL ADDRESS: STREET 1: 4031 NE 12TH TERRACE CITY: FT LAUDERDALE STATE: FL ZIP: 33334 10-Q 1 REXALL SUNDOWN 10-Q 11-30-97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended NOVEMBER 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 0-21884 REXALL SUNDOWN, INC. ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) FLORIDA 59-1688986 - ------------------------------- ----------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 851 BROKEN SOUND PARKWAY, NW, BOCA RATON, FLORIDA 33487 ------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (561) 241-9400 Indicate by check mark whether Registrant has (1) filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- As of January 9, 1998, the number of shares outstanding of the Registrant's Common Stock was 68,106,054. 2 REXALL SUNDOWN, INC. TABLE OF CONTENTS PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of November 30, 1997 and August 31, 1997 .................. 3 Consolidated Statements of Operations for the Three Months Ended November 30, 1997 and 1996 .......... 4 Consolidated Statements of Cash Flows for the Three Months Ended November 30, 1997 and 1996 .......... 5 Notes to Consolidated Financial Statements ............. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....... 8 PART II. OTHER INFORMATION ...................................... 11 SIGNATURES ...................................................... 13 -2- 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements REXALL SUNDOWN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)
November 30, August 31, 1997 1997 ----------- ---------- ASSETS Current assets: Cash and cash equivalents $ 78,987 $ 81,942 Marketable securities 19,985 24,829 Trade accounts receivable, net 40,246 22,294 Inventory 45,273 38,623 Prepaid expenses and other current assets 8,083 5,941 Net current assets of discontinued operations 4,076 4,076 --------- --------- Total current assets 196,650 177,705 Property, plant and equipment, net 45,905 33,789 Other assets 13,261 12,620 --------- --------- Total assets $ 255,816 $ 224,114 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 17,644 $ 11,781 Accrued expenses and other current liabilities 26,526 20,295 --------- --------- Total current liabilities 44,170 32,076 Other liabilities 512 449 --------- --------- Total liabilities 44,682 32,525 --------- --------- Shareholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares, no shares outstanding -- -- Common stock, $.01 par value; authorized 100,000,000 shares, shares issued: 67,880,901 and 67,260,018, respectively 679 673 Capital in excess of par value 129,672 123,402 Retained earnings 81,554 68,004 Cumulative translation adjustment (771) (490) --------- --------- Total shareholders' equity 211,134 191,589 --------- --------- Total liabilities and shareholders' equity $ 255,816 $ 224,114 ========= =========
See accompanying notes -3- 4 REXALL SUNDOWN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)
Three Months Ended November 30, ---------------------------------- 1997 1996 ------------ ------------ Net sales $ 102,493 $ 56,070 Cost of sales 39,982 20,679 ------------ ------------ Gross profit 62,511 35,391 Selling, general and administrative expenses 42,327 24,455 ------------ ------------ Operating income 20,184 10,936 Other income (expense): Interest income 1,208 569 Other income 33 -- Interest expense (69) (9) ------------ ------------ Income before income tax provision 21,356 11,496 Income tax provision 7,806 4,254 ------------ ------------ Net income $ 13,550 $ 7,242 ============ ============ Net income per common share $ 0.19 $ 0.11 ============ ============ Weighted average common shares outstanding 69,911,035 64,844,214 ============ ============
See accompanying notes -4- 5 REXALL SUNDOWN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended November 30, -------------------------- 1997 1996 -------- -------- Cash flows provided by (used in) operating activities: Net income $ 13,550 $ 7,242 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 983 754 Amortization 320 482 Deferred income taxes (422) 44 Foreign exchange translation adjustment (281) (95) Compensatory stock options issued 238 -- Changes in assets and liabilities: Trade accounts receivable (17,952) (4,588) Inventory (6,650) 496 Prepaid expenses and other current assets (2,142) (751) Other assets (505) (656) Accounts payable 5,863 (512) Accrued expenses and other current liabilities 9,664 4,364 Other liabilities 63 (21) Discontinued operations - non cash charges and changes in assets and liabilities -- (72) -------- -------- Net cash provided by operating activities 2,729 6,687 -------- -------- Cash flows provided by (used in) investing activities: Acquisition of property, plant and equipment (13,099) (1,712) Payments for purchase of marketable securities (15,595) -- Proceeds from sale of marketable securities 20,439 5,988 Proceeds from sale of fixed assets -- 16 Other -- 186 -------- -------- Net cash provided by (used in) investing activities (8,255) 4,478 -------- -------- Cash flows provided by (used in) financing activities: Net proceeds from offering -- 51,870 Exercise of options to purchase common stock 2,571 599 -------- -------- Net cash provided by financing activities 2,571 52,469 -------- -------- Net increase (decrease) in cash and cash equivalents (2,955) 63,634 Cash and cash equivalents at beginning of period 81,942 13,450 -------- -------- Cash and cash equivalents at end of period $ 78,987 $ 77,084 ======== ========
See accompanying notes -5- 6 REXALL SUNDOWN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) 1. BASIS OF PRESENTATION AND OTHER MATTERS The accompanying unaudited consolidated financial statements, which are for interim periods, do not include all disclosures provided in the annual consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Rexall Sundown, Inc. (the "Company") Annual Report on Form 10-K for the year ended August 31, 1997, as filed with the Securities and Exchange Commission. The August 31, 1997 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. 2. NET INCOME PER COMMON SHARE Net income per common share is calculated by dividing net income by weighted average shares outstanding, giving effect to common stock equivalents (common stock options). Net income per share of common stock is presented in the accompanying consolidated statements of income on an adjusted basis, which gives retroactive effect to a two-for-one stock split paid on October 23, 1997 to shareholders of record on October 7, 1997. All references to the number of shares of common stock, except shares authorized, and to per share data in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis. 3. INVENTORY The components of inventory as of November 30, 1997 and August 31, 1997 are as follows: NOVEMBER 30, 1997 AUGUST 31, 1997 ----------------- --------------- Raw materials, bulk tablets and capsules $24,307 $20,429 Work in process 5,013 1,147 Finished products 15,953 17,047 ------- ------- $45,273 $38,623 ======= ======= -6- 7 REXALL SUNDOWN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (Dollars in thousands) (Unaudited) 4. SALES TO A MAJOR CUSTOMER The Company had sales to a national retailer which represented approximately 30% and 13% of net sales for the three months ended November 30, 1997 and 1996, respectively. Trade accounts receivable from this customer amounted to approximately $24,240 and $11,310 at November 30, 1997 and August 31, 1997, respectively. 5. CONTINGENCIES The Company believes that it is not presently a party to any litigation, the outcome of which would have a material adverse impact on the Company. 6. SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES The Company recognized a reduction of income taxes payable and a corresponding increase in additional paid-in capital related to the exercise of stock options of $3,467 and $981 for the three months ended November 30, 1997 and 1996, respectively. 7. RECENT ACCOUNTING STANDARDS SFAS No. 128 changes the method of calculating earnings per share. The statement requires the presentation of "basic" earnings per share ("EPS") and "diluted" EPS on the face of the income statement. SFAS No. 128 is effective for financial statements issued for periods ended after December 15, 1997 and requires restatement of all prior-period EPS data presented. The Company has not yet determined the impact, if any, the adoption will have on the Company's financial statements. 8. SUBSEQUENT EVENTS On December 24, 1997, the Company signed a definitive agreement to merge with Richardson Labs, Inc., a provider of diet and weight management supplements. To consummate the transaction, which will be structured as a pooling of interests, the Company will issue approximately 2,885,000 shares of its common stock to Richardson Labs' shareholders. The transaction is subject to certain approvals and is expected to close in late January 1998. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL Rexall Sundown, Inc. (the "Company") develops, manufactures, markets and sells vitamins, nutritional supplements and consumer health products. The Company distributes its products using three channels of distribution: sales to retailers; direct sales through independent distributors; and mail order. Revenue from the sale of the Company's products is recognized at the time products are shipped. Net sales are net of all discounts, allowances, returns and credits. Initial costs associated with acquiring sales agreements with certain retail customers are amortized over the expected term of the relevant agreement and the amortization of such costs is recorded as a reduction in net sales. Gross margins are impacted by changes in the relative sales mix among the Company's channels of distribution. In particular, gross margin is positively impacted if sales of the Company's direct sales subsidiary, Rexall Showcase International, Inc. ("Rexall Showcase") increase as a percentage of net sales because such products command a higher gross margin. In a related manner, selling, general and administrative expenses as a percentage of net sales are typically higher if sales of Rexall Showcase increase as a percentage of net sales because of the commissions paid to Rexall Showcase's independent distributors. Conversely, if Rexall Showcase's sales as a percentage of net sales decrease, gross margins will decrease as a percentage of net sales and selling, general and administrative expenses will increase as a percentage of net sales. Historically, operating margins from sales to retailers and mail order have been higher than operating margins from the Rexall Showcase division. RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 1996 Net sales for the three months ended November 30, 1997 were $102.5 million, an increase of $46.4 million or 82.8% over the comparable period in fiscal 1997. Of the $46.4 million increase, sales to retailers accounted for $32 million, an increase of 107.1% over the comparable period in fiscal 1997. The increase in sales to retailers was primarily attributable to increased distribution as well as an increase in the Company's existing customer base business. Net sales of Rexall Showcase increased by $14.1 million, an increase of 63.3% over the comparable period in fiscal 1997. Net sales of the Company's mail order division, SDV, increased by $321,000 or 8.3% over the comparable period in fiscal 1997. The increase in net sales in each division was primarily due to increased unit sales. Gross profit for the three months ended November 30, 1997 was $62.5 million, an increase of $27.1 million or 76.6% over the comparable period in fiscal 1997. As a percentage of net sales, gross profit decreased from 63.1% for the three months ended November 30, 1996 to 61.0% for the three months ended November 30, 1997. The decrease in gross margin was related principally to the decreased net sales of Rexall Showcase as a percentage of the Company's net sales. -8- 9 Selling, general and administrative expenses for the three months ended November 30, 1997 were $42.3 million, an increase of $17.9 million or 73.1% over the comparable period in fiscal 1997. As a percentage of net sales, such expenses decreased from 43.6% for the three months ended November 30, 1997 to 41.3% for the comparable period in fiscal 1997, primarily as a result of increased net sales and the relatively fixed nature of such expenses, except for the commission expense of Rexall Showcase, which is variable and comprises the majority of Rexall Showcase's selling, general and administrative expenses. Such commission expense increased by $7.8 million over the comparable period in fiscal 1997. The Company also had approximately $3.3 million in expenses related to national television advertising for which there was no corresponding expense in the same period last year. Interest income for the three months ended November 30, 1997 was $1.2 million, as compared to $569,000 for the comparable period in fiscal 1997. Such increase was primarily a result of investment of the Company's available cash balances, which were higher in the first quarter of fiscal 1998 than the comparable period in fiscal 1997. Income before income tax provision was $21.4 million for the three months ended November 30, 1997, an increase of $9.9 million or 85.8% over the comparable period in fiscal 1997. As a percentage of net sales, income before income tax provision increased from 20.5% for the three months ended November 30, 1996 to 20.8% for the comparable period in fiscal 1998. Net income was $13.6 million for the current fiscal quarter, an increase of $6.3 million or 87.1% from the prior year's comparable quarter, due to the reasons described above. SEASONALITY The Company believes that its business is not subject to significant seasonality based on historical trends, with the exception of Rexall Showcase, which typically experiences lower revenues in the second and fourth fiscal quarters due to winter and summer holiday seasons, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $152.5 million as of November 30, 1997, compared to $145.6 million as of August 31, 1997. This increase was principally the result of increased inventory and trade accounts receivable due to higher sales in the first quarter of fiscal 1998. Net cash provided by operating activities for the three months ended November 30, 1997 was $2.8 million compared to $6.8 million for the comparable period in fiscal 1997. Net cash provided by operating activities decreased primarily due to increased accounts receivable and inventory, partially offset by increases in net income, accounts payable and accrued expenses, all of which were primarily a result of increased sales in the first quarter of fiscal 1998. Net cash used in investing activities was $8.3 million for the three months ended November 30, 1997 compared to $4.5 million provided by investing activities for the comparable period in fiscal 1997. Net cash used in investing activities increased primarily due to capital expenditures of $13.1 million, partially offset by net proceeds from the purchase and sale of marketable securities of $4.8 million. Net cash provided by financing activities was $2.5 million for the three months ended November 30, 1997 compared to $52.4 million for the comparable period in fiscal 1997 reflecting $51.9 million of net proceeds received from the public offering in the first quarter of fiscal 1997. -9- 10 The Company believes that its existing cash balances, internally generated funds from operations and its available bank line of credit will provide the liquidity necessary to satisfy the Company's working capital needs, including the purchase and maintenance of inventory, the financing of the Company's accounts receivable, as well as the financing of anticipated capital expenditures. RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS SFAS No. 128 changes the method of calculating earnings per share. The statement requires the presentation of "basic" earnings per share ("EPS") and "diluted" EPS on the face of the income statement. SFAS No. 128 is effective for financial statements issued for periods ended after December 15, 1997 and requires restatement of all prior-period EPS data presented. The Company has not yet determined the impact, if any, the adoption will have on the Company's financial statements. INFLATION Inflation has not had a significant impact on the Company in the past three years nor is it expected to have a significant impact in the foreseeable future. FORWARD LOOKING STATEMENTS This report contains certain "forward-looking statements" within the meaning of Section 21E of the Securities Act of 1934, which represent the Company's expectations or beliefs. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors described in the Company's filings with the Securities and Exchange Commission. -10- 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.1 Letter Agreement dated September 1, 1997 by and between the Company and Carl DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Carl DeSantis). 10.2 Letter Agreement dated September 1, 1997 by and between the Company and Christian Nast (amending the terms of that certain Employment Agreement dated April 24, 1995 between the Company and Christian Nast). 10.3 Letter Agreement dated September 1, 1997 by and between the Company and Dean DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Dean DeSantis). 10.4 Letter Agreement dated September 1, 1997 by and between the Company and Damon DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Damon DeSantis). -11- 12 10.5 Letter Agreement dated September 1, 1997 by and between the Company and Nickolas Palin (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Nickolas Palin). 10.6 Letter Agreement dated September 1, 1997 by and between the Company and Geary Cotton (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Geary Cotton). 10.7 Letter Agreement dated September 1, 1997 by and between the Company and Richard Werber (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Richard Werber). 10.8 Employment Agreement dated November 3, 1997 by and between the Company and Gerry Holly. 11 Earnings Per Share Computation 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K. None. -12- 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REXALL SUNDOWN, INC. Date: January 13, 1998 By: /s/ Carl DeSantis ---------------------------------------- Carl DeSantis, Chairman of the Board Date: January 13, 1998 By: /s/ Geary Cotton ---------------------------------------- Geary Cotton, Vice President-Finance, Chief Financial Officer, Treasurer and Chief Accounting Officer -13- 14 EXHIBIT INDEX
SEQUENTIALLY NUMBERED EXHIBIT NUMBER DESCRIPTION PAGE -------------- ----------- ------------ 10.1 Letter Agreement dated September 1, 1997 by and between the Company and Carl DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Carl DeSantis). 10.2 Letter Agreement dated September 1, 1997 by and between the Company and Christian Nast (amending the terms of that certain Employment Agreement dated April 24, 1995 between the Company and Christian Nast). 10.3 Letter Agreement dated September 1, 1997 by and between the Company and Dean DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Dean DeSantis). 10.4 Letter Agreement dated September 1, 1997 by and between the Company and Damon DeSantis (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Damon DeSantis). 10.5 Letter Agreement dated September 1, 1997 by and between the Company and Nickolas Palin (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Nickolas Palin). 10.6 Letter Agreement dated September 1, 1997 by and between the Company and Geary Cotton (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Geary Cotton). 10.7 Letter Agreement dated September 1, 1997 by and between the Company and Richard Werber (amending the terms of that certain Employment Agreement dated April 1, 1995 between the Company and Richard Werber). 10.8 Employment Agreement dated November 3, 1997 by and between the Company and Gerry Holly. 11 Earnings Per Share Computation 27 Financial Data Schedule (for SEC use only)
EX-10.1 2 LETTER AGREEMENT/ CARL DESANTIS 1 Exhibit 10.1 September 1, 1997 Mr. Carl DeSantis Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Carl: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF FOUR HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($475,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST --------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ CARL DESANTIS - -------------------------------- Carl DeSantis EX-10.2 3 LETTER AGREEMENT/ CHRISTIAN NAST 1 Exhibit 10.2 September 1, 1997 Mr. Christian Nast Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Chris: Reference is hereby made to the Employment Agreement ("Agreement") dated April 24, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF FOUR HUNDRED THOUSAND DOLLARS ($400,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO ONE HUNDRED PERCENT (100%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CARL DESANTIS ------------------------------------ Carl DeSantis, Chairman of the Board AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ CHRISTIAN NAST - -------------------------------- Christian Nast EX-10.3 4 LETTER AGREEMENT/ DEAN DESANTIS 1 Exhibit 10.3 September 1, 1997 Mr. Dean DeSantis Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Dean: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF THREE HUNDRED THOUSAND DOLLARS ($300,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO SIXTY-TWO AND ONE-HALF PERCENT (62-1/2%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST -------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ DEAN DESANTIS - -------------------------------- Dean DeSantis EX-10.4 5 LATTER AGREEMENT/ DAMON DESANTIS 1 Exhibit 10.4 September 1, 1997 Mr. Damon DeSantis Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Damon: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF THREE HUNDRED THOUSAND DOLLARS ($300,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO SIXTY-TWO AND ONE-HALF PERCENT (62-1/2%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST -------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ DAMON DESANTIS - -------------------------------- Damon DeSantis EX-10.5 6 LETTER AGREEMENT/ NICKOLAS PALIN 1 Exhibit 10.5 September 1, 1997 Mr. Nickolas Palin Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Nick: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO SIXTY-TWO AND ONE-HALF PERCENT (62-1/2%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST ------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ NICKOLAS PALIN - -------------------------------- Nickolas Palin EX-10.6 7 LETTER AGREEMNET/ GEARY COTTON 1 Exhibit 10.6 September 1, 1997 Mr. Geary Cotton Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Geary: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF THREE HUNDRED THOUSAND DOLLARS ($300,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO SIXTY-TWO AND ONE-HALF PERCENT (62-1/2%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST -------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ GEARY COTTON - -------------------------------- Geary Cotton EX-10.7 8 LETTER AGREEMENT/ RICHARD WERBER 1 Exhibit 10.7 September 1, 1997 Mr. Richard Werber Rexall Sundown, Inc. 851 Broken Sound Parkway, NW Boca Raton, Florida 33487 Dear Rick: Reference is hereby made to the Employment Agreement ("Agreement") dated April 1, 1995 between Rexall Sundown, Inc. (the "Company") and you, as amended. All capitalized terms used herein which are not defined shall have the meaning ascribed to them in the Agreement. Effective as of September 1, 1997, the Company and you have agreed to make the following amendments to the Agreement: 1. Article III, Section 3.1 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "III. COMPENSATION 3.1 SALARY. IN PAYMENT FOR THE OBLIGATIONS TO BE PERFORMED BY THE EMPLOYEE DURING THE TERM, THE COMPANY SHALL PAY TO THE EMPLOYEE (SUBJECT TO ANY APPLICABLE PAYROLL AND/OR TAXES REQUIRED TO BE WITHHELD) ANNUAL COMPENSATION ("ANNUAL COMPENSATION") EQUAL TO (I) A SALARY OF TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) IN CASH FOR THE YEAR COMMENCING SEPTEMBER 1, 1997 AND (II) FOR EACH SUCCEEDING YEAR DURING THE TERM, A SALARY EQUAL TO THAT OF THE PREVIOUS YEAR INCREASED BY THE GREATER OF (A) 5%, (B) THE INCREASE IN THE COST OF LIVING BASED UPON THE REVISED CONSUMER PRICE INDEX (1982-84=100) PUBLISHED BY THE BUREAU OF LABOR FOR BOCA RATON, FLORIDA UTILIZING SEPTEMBER 1997 AS THE BASE MONTH, OR (C) SUCH INCREASE AS THE COMPANY'S BOARD OF DIRECTORS MAY DETERMINE." 2. Article III, Section 3.3 of the Agreement is hereby amended by deleting Article III, Section 3.1 in its entirety and inserting the following provision in lieu thereof: "3.3 INCENTIVE COMPENSATION. THE COMPANY SHALL PAY THE EMPLOYEE AN INCENTIVE COMPENSATION BONUS IN AN AMOUNT UP TO SIXTY-TWO AND ONE-HALF PERCENT (62-1/2%) OF EMPLOYEE'S ANNUAL COMPENSATION FOR EACH OF THE COMPANY'S FISCAL YEARS DURING THE TERM HEREOF BASED UPON SUCH CRITERIA AS ARE MUTUALLY DETERMINED BY THE COMPANY AND THE EMPLOYEE." If the foregoing is in accordance with our understanding, please execute the enclosed copy of this letter and return to the undersigned. Very truly yours, REXALL SUNDOWN, INC. By: /s/ CHRISTIAN NAST -------------------------- Christian Nast, President AGREED TO AND ACCEPTED this 1st day of September, 1997. /s/ RICHARD WERBER - -------------------------------- Richard Werber EX-10.8 9 LETTER AGREMENT/ GERRY HOLLY 1 Exhibit 10.8 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into as of November 3, 1997 by and between REXALL SUNDOWN, INC., a Florida corporation (the "Company"), and GERRY HOLLY (the "Employee"). R E C I T A L S The Company desires to employ the Employee, and the Employee desires to be employed by the Company, in accordance with the provisions contained in this Employment Agreement (the "Agreement"). NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of each of the Company and the Employee contained in this Agreement, each of the Company and the Employee agrees as follows: I. EMPLOYMENT 1.1 The Company employs the Employee and the Employee accepts such employment. Subject to the direction of the Board of Directors of the Company, the Employee shall serve as the Executive Vice President-Operations of the Company. The Employee shall have such responsibilities, perform such duties and exercise such power and authority as are inherent in, or incident to, the office of Executive Vice President-Operations. The Employee shall devote his full business time and attention and his best efforts to the performance of his duties as an employee of the Company. 1.2 During the Term (as hereinafter defined), the Employee, if elected, shall serve as a Director of the Company and/or a Director or officer of any subsidiary of the Company without any additional compensation for such services other than the compensation provided for hereunder. II. TERM 2.1 Subject to the provisions of Article V hereof, the term of this Agreement shall be for the period commencing on November 3, 1997, and terminating on November 2, 2000 (the "Term"). III. COMPENSATION 3.1 SALARY. In payment for the obligations to be performed by the Employee during the Term, the Company shall pay to the Employee (subject to any applicable payroll and/or taxes required to be withheld) annual compensation ("Annual Compensation") equal to (i) a salary of Two Hundred Twenty Five Thousand Dollars ($225,000.00) in cash for the year commencing November 3, 1997 and (ii) for each succeeding year during the Term, a salary equal to that of the previous year increased by the greater of (A) 5% or (B) the percentage increase in the cost of living based upon the Revised Consumer Price Index (1982-84=100) published by the Bureau of Labor Statistics of the United States Department of Labor for Boca Raton, Florida utilizing November 1997 as the base month. 3.2 PAYMENT OF SALARY. Payments of salary shall be made to the Employee in installments from time to time on the same dates that payments of salary are generally made to all senior management employees of the Company. 3.3 INCENTIVE COMPENSATION. The Company shall pay the Employee an incentive compensation bonus in an amount up to sixty-two and one-half percent (62.5%) of Employee's Annual Compensation for each of the Company's fiscal years during the Term hereof pursuant to the Company's Management Incentive Plan in effect from time to time. 2 IV. CERTAIN FRINGE BENEFITS 4.1 GENERALLY. The Employee shall be entitled to reimbursement for reasonable business expenses incurred in connection with his employment including customer entertainment. The Company shall provide the Employee with an automobile allowance of $10,500 per year. The Company will also provide the Employee with a country club membership and a car or cellular telephone, a company credit card for business travel, entertainment and gas for the Employee's automobile. The Employee shall further be entitled to receive such benefits and to participate in such benefit plans as are generally provided from time to time by the Company to its senior management employees; provided, however, that nothing contained in this Section 4.1 shall be construed to obligate the Company to provide any specific benefits to its employees generally. 4.2 VACATIONS. The Employee shall be entitled to such vacation time on an annual basis as is provided in accordance with the policies as are from time to time in force for the Company's employees, or as otherwise approved by the Company's President. 4.3. MOVING AND RELOCATION EXPENSES. Pursuant to a separate agreement, the Company has agreed to reimburse the Employee for all interim living expenses prior to moving to southern Florida, for moving expenses in connection with such move, and closing costs, attorneys' fees and real estate brokerage costs in connection with the sale of Employee's current house and purchase of a new house. In addition, the Company shall reimburse the Employee for up to two round trip air tickets between southern Florida and California per month. V. TERMINATION OF EMPLOYMENT 5.1 CERTAIN DEFINITIONS. The following terms shall have the following respective meanings when utilized in this Agreement: (a) "Acquisition of Control" shall mean: (i) any person (including a Group), without the approval of a majority of the Incumbent Directors, becoming the Beneficial Owner of, or acquiring the power to direct the exercise of voting power with respect to, directly or indirectly, securities which represent thirty percent (30%) or more of the combined voting power of the Company's outstanding securities thereafter, whether or not some portion of such securities was owned by such person (or by any member of such Group) prior thereto; provided, however, that this provision shall not apply to acquisitions by a director, executive officer or their affiliates if such person had such status on November 3,1997; or (ii) the Incumbent Directors cease at any time to constitute a majority of the Board of Directors, whether of (A) the Company or (B) after any cash tender offer or exchange offer, merger, consolidation or other business combination, recapitalization of the Company, sale, liquidation or dissolution (or adoption of a plan for liquidation or dissolution), or any combination of any or all of the foregoing transactions, including but not limited to a series of such transactions, any successor to the Company; provided, however, an Acquisition of Control shall not be deemed to have occurred with respect to the Employee if the action of the Employee was voluntary and would have been sufficient, without the action of others, to constitute an Acquisition of Control. (b) "Beneficial Owner" shall have the meaning provided in Section 607.0901(1)(e) of the Florida Statutes. (c) "Cause" shall mean any action by the Employee or any inaction by the Employee which is reasonably believed by the Company to constitute: (i) fraud, embezzlement, misappropriation, dishonesty or breach of trust; 3 (ii) a felony or moral turpitude; (iii) material breach or violation of any or all of the covenants, agreements and obligations of the Employee set forth in this Agreement, other than as the result of the Employee's death or Disability; (iv) a willful or knowing failure or refusal by the Employee to perform any or all of his material duties and responsibilities as an officer of the Company, other than as the result of the Employee's death or Disability; or (v) gross negligence by the Employee in the performance of any or all of his material duties and responsibilities as an officer of the Company, other than as the result of the Employee's death or Disability; provided, however, that if the basis for any termination of the Employee's employment by the Company as set forth in the Termination Notice delivered by the Company to the Employee is any or all of the definitions of Cause set forth in Section 5.1(c)(iii) or Section 5.1(c)(iv) of this Agreement, then, in such event, the Employee shall have thirty (30) days from and after the date of his receipt of such Termination Notice to cure the action or inaction specified therein to the reasonable satisfaction of the Company. (d) "Compensation" shall mean the cash payment to which Employee is entitled under the provisions of Sections 3.1 and 3.3 hereof. (e) "Disability" shall mean any mental or physical illness, condition, disability or incapacity which prevents the Employee from reasonably discharging his duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Employee as to whether the Employee suffers from any Disability, then, in any such event, the Employee shall submit to the physical or mental examination of a physician licensed under the laws of the State of Florida, who shall be mutually selected by the Company and the Employee, and such physician shall make the determination of whether the Employee suffers from any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon each of the Company and the Employee. The entire cost of any such examination shall be borne solely by the Employee. (f) "Group" shall mean any combination of persons knowingly participating in a joint activity or interdependent consciously parallel action toward a common goal, whether or not pursuant to an express contract; provided, however, that actions taken by a director of the Company acting as such shall not alone constitute membership in a Group. (g) "Incumbent Director" shall mean any director of the Company serving at November 3, 1997 or one elected thereafter if nominated or approved by at least two-thirds of the then Incumbent Directors. (h) "Protracted Disability" shall mean any Disability which prevents the Employee from reasonably discharging his duties and responsibilities as an officer of the Company for a period of six (6) consecutive months. (i) "Termination Date" shall mean a specific date not less than ten (10) nor more than thirty (30) days from and after the date of any Termination Notice upon which the Employee's employment by the Company shall be terminated in accordance with the provisions of this Agreement. (j) "Termination Notice" shall mean a written notice which (i) sets forth the specific provision of this Agreement relied upon to terminate the Employee's employment by the Company, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for the termination of the Employee's employment by the Company pursuant to the specific provision of this Agreement relied upon therein and (iii) sets forth a Termination Date. 4 5.2 TERMINATION OF EMPLOYMENT. (a) Notwithstanding the provisions of Article II hereof, this Agreement (i) shall be automatically terminated upon the death of the Employee pursuant to the provisions of Section 5.3 hereof, (ii) may be terminated at any time by the Company pursuant to the provisions of Section 5.4 or 5.5 hereof and (iii) may be terminated by the Employee pursuant to the provisions of Section 5.6 hereof. (b) If either the Company or the Employee shall desire to terminate the Employee's employment by the Company pursuant to any of the provisions of Sections 5.4, 5.5 or 5.6 hereof, then the party causing any such termination shall give to the other party a Termination Notice. (c) If this Agreement shall be terminated pursuant to any of the provisions of this Article V, the Company shall be discharged from all of its obligations to the Employee hereunder upon its payment to the Employee of the required amount set forth in the section of this Article 5 pursuant to which such termination shall occur. 5.3 DEATH OF EMPLOYEE. If at any time during the Term the Employee shall die, then the employment of the Employee by the Company shall automatically terminate on the date of the Employee's death. In such event, not more than thirty (30) days from and after the date of the Employee's death, the Company shall pay to the Employee's estate or heirs, as the case may be, an amount in cash equal to the Employee's Compensation (subject to any applicable payroll and/or other taxes required by law to be withheld) determined as of the date of the Employee's death. 5.4 DISABILITY OF EMPLOYEE. (a) If at any time during the Term the Employee shall suffer any Disability, then the Company shall be obligated to continue to pay in the ordinary and normal course of its business to the Employee or his legal representatives, as the case may be, the Employee's Compensation (subject to any applicable payroll and/or other taxes required by law to be withheld) from the date that the Employee shall first suffer any such Disability to the date that the Employee's employment by the Company shall be terminated pursuant to any of the provisions of this Agreement. (b) If the Employee shall suffer any Protracted Disability during the Term, then the Company may terminate this Agreement. In such event, in addition to any other benefits which may have been provided by the Company to the Employee or his legal representatives, as the case may be, pursuant to the provisions of Section 5.4(a) hereof, not later than thirty (30) days after the Termination Date specified in the Termination Notice, the Company shall pay to the Employee or his legal representatives, as the case may be, an amount in cash equal to the Employee's Compensation (subject to any applicable payroll and/or other taxes required by law to be withheld) determined as of the Termination Date. Subsequent to such Termination Date, the Employee or his legal representatives, as the case may be, shall also be entitled to receive any benefits which may be payable under any disability insurance policy or disability plan provided by the Company. 5.5 TERMINATION OF EMPLOYMENT BY COMPANY. (a) The Company may terminate this Agreement at any time with Cause. In such event, the Company shall be obligated to continue to pay in the ordinary and normal course of its business to the Employee his Annual Compensation (subject to any applicable payroll and/or other taxes required by law to be withheld) until the Termination Date. (b) The Company may terminate this Agreement at any time without Cause. If the Company shall terminate the employment of the Employee by the Company without Cause, and not pursuant to any other provision of this Agreement, the Company shall continue to pay to the Employee the Employee's Annual Compensation (subject to any applicable payroll and/or other taxes required by law to be withheld) for a period of 5 one (1) year from the date of termination. If the Employee is terminated without cause, the provisions of Section 6.1(b) hereof shall be of no further force and effect. 5.6 CHANGE IN CONTROL. Notwithstanding any other provisions of Sections 5.1 through 5.5 hereof, if (i) there is an Acquisition of Control and, (ii) at any time within three (3) months prior to such Acquisition of Control or at any time within one (1) year thereafter, either (A) the Employee for any reason terminates his employment with the Company, or (B) the Employee's employment is terminated without Cause, then the Employee shall have the option, but not the obligation, of being paid in cash an amount equal to three (3) times his Compensation for the then current fiscal year of the Company (amounts due under this Section 5.6 are referred to as the "Payment"). If the Employee opts to receive the Payment under this Section 5.6, whether his employment is terminated by the Company or by himself, the provisions of Section 6.1(b) hereof shall be of no further force or effect. Subject to the provisions of Section 5.7 hereof, the Payment shall be made not later than three (3) months after the Employee gives notice to the Company in the form of a Termination Notice of his election under this Section 5.6. 5.7 PAYMENTS. Notwithstanding anything in the foregoing to the contrary, if any of the payments provided for in this Agreement, together with any other payments which the Employee has the right to receive from the Company, would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code), the payments pursuant to this Agreement shall be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed in Section 4999 of the Internal Revenue Code; provided, however, that the Employee shall have the absolute discretion to direct the Company to pay any amount which shall be payable to him pursuant to Section 5.6 hereof in such equal annual installments as the Employee may direct, with the first such installment payable when such amount would otherwise have been payable; and further provided that the Employee shall have the absolute discretion to allocate any reductions required by this Section 5.7 from amounts due him under Section 5.6 hereof. The Company shall be obligated to comply with any directions given to it by the Employee pursuant to the preceding sentence. VI. CERTAIN RESTRICTIONS ON THE EMPLOYEE 6.1 CERTAIN RESTRICTIONS. The Employee covenants and agrees with the Company as follows: (a) He shall not at any time, directly and indirectly, for himself or any other person, firm, corporation, partnership, association or other entity which competes in any manner with the Company or any of its subsidiaries or affiliates in the United States of America or its territories or possessions (collectively, the "Territory"), attempt to employ, employ or enter into any contractual arrangement for employment with, any employee or former employee of the Company or any of its subsidiaries or affiliates, unless such former employee shall not have been employed by the Company or any of its subsidiaries or affiliates for a period of at least one (1) year. (b) He shall not, during the term of this Agreement, and for a period of eighteen (18) months from and after the date of termination of this Agreement, directly or indirectly, (i) acquire or own in any manner any interest in, or loan any amount to, any person, firm, partnership, corporation, association or other entity which competes in any manner with the Company or any of its subsidiaries or affiliates in the Territory, (ii) be employed by or serve as an employee, agent, officer, director of, or as a consultant to, any person, firm, partnership, corporation, association or other entity, other than the Company and its subsidiaries and affiliates, which competes in any manner with any of the Company or its subsidiaries or affiliates in the Territory, or (iii) compete in any manner with the Company or its subsidiaries or affiliates in the Territory. The foregoing provisions of this Section 6.1(b) shall not prevent the Employee from acquiring or owning not more than five percent (5%) of the equity securities of any entity whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market. (c) He shall not at any time disclose, directly or indirectly, to any person, firm, corporation, partnership, association or other entity, any confidential information relating to the Company or any of its subsidiaries or affiliates, including, without limitation, any information concerning the financial condition, assets, personnel, procedures, techniques, products, customers, sources of leads and methods of obtaining new business or 6 the methods generally of doing and operating the respective businesses of the Company and its subsidiaries and affiliates, trade secrets, product ideas, processes, techniques, formulas, know-how, marketing plans and strategies, except to the extent that such information is a matter of public knowledge or is required to be disclosed by law or judicial or administrative process. (d) He shall return all Company documents to the Company upon the termination of his employment by the Company. 6.2 INJUNCTION. It is recognized and acknowledged by each of the Company and the Employee that a breach or violation by the Employee of any or all of his covenants and agreements contained in Section 6.1 hereof will cause irreparable harm and damage to the Company and its subsidiaries and affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, the Employee recognizes and acknowledges that the Company and its subsidiaries and affiliates shall be entitled to a temporary restraining order and/or injunction from any court of competent jurisdiction enjoining and restraining any breach or violation by the Employee and/or his affiliates, employees, associates, partners or agents, either directly or indirectly, of any or all of the Employee's covenants and agreements contained in Section 6.1 hereof. Such right to a temporary restraining order and/or injunction shall be cumulative and in addition to whatever other rights or remedies the Company and its subsidiaries and affiliates may possess hereunder, at law or in equity. Nothing contained in this Agreement shall be construed to prevent the Company and its subsidiaries and affiliates from seeking and recovering from the Employee damages suffered by any or all of them as a result of any breach or violation by the Employee and/or his affiliates, employees, associates, partners or agents of any or all of the Employee's covenants and agreements contained in this Agreement. 6.3 REDUCTION IN SCOPE. In the event that any of the covenants and agreements of the Employee contained in Section 6.1 hereof shall be held invalid or unenforceable by a court of competent jurisdiction because of its duration or geographic area, then, in any such event, such covenant or agreement shall be reduced by such court in duration or geographical area or both to such extent as to make it valid and enforceable in the jurisdiction where such court is located, and in all other respects it shall remain in full force and effect. VII. MISCELLANEOUS 7.1 PREVAILING PARTY. If any litigation shall arise between the Company and the Employee based, in whole or in part, upon this Agreement or any or all of the provisions contained herein, the prevailing party in any such litigation shall be entitled to recover from the non-prevailing party, and shall be awarded by a court of competent jurisdiction, any and all reasonable fees and disbursements of trial and appellate counsel paid, incurred or suffered by such prevailing party as the result of, arising from, or in connection with, any such litigation. 7.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without application of any conflicts of laws principles. The Employee waives any plea of jurisdiction as not being a resident of, or being located or conducting business in, Palm Beach County, Florida and agrees that any litigation or action directly or indirectly connected with this Agreement, shall, at the Company's election, be subject to binding arbitration administered by the American Arbitration Association in West Palm Beach, Florida. 7.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Employee with respect to the subject matter hereof and supersedes all prior negotiations, agreements, understandings and arrangements, both oral and written, between the Company and the Employee with respect to such subject matter. This Agreement may not be modified in any way, except by a written instrument executed by each of the Company and the Employee. 7.4 NOTICES. Any and all notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand, sent by a recognized overnight carrier such as Federal Express or when deposited in the United States mail, by registered or certified mail, return receipt requested, postage prepaid, as follows: 7 If to the Company: Rexall Sundown, Inc. 851 Broken Sound Parkway, N.W. Boca Raton, FL 33487 Attn: Richard Werber, Vice President and General Counsel If to the Employee: Gerry Holly 851 Broken Sound Parkway, N.W. Boca Raton, FL 33487 or to such other address as either party may from time to time give written notice of to the other. 7.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of, and shall be binding upon, each of the Company and the Employee and their respective heirs, personal representatives, legal representatives, successors and assigns. 7.6 SEVERABILITY. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part hereof, all of which are inserted conditionally on their being valid in law. Except as is otherwise provided in Section 6.3 hereof, if any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid by a court of competent jurisdiction, then, in any such event, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 7.7 WAIVERS. The waiver by either party of a breach or violation of any term or provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation of any provision of this Agreement nor of any other right or remedy. 7.8 SECTION HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions of this Agreement. 7.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the separate parties hereto in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to be the one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of November 3, 1997. REXALL SUNDOWN, INC. By: /s/ DEAN DESANTIS ------------------------------------- Dean DeSantis, Senior Vice President /s/ GERRY HOLLY ---------------------------------------------- Gerry Holly EX-11 10 EARNINGS PER SHARE COMPUTATION 1 Exhibit 11 REXALL SUNDOWN, INC. AND SUBSIDIARIES NET INCOME PER COMMON SHARE CALCULATION
Three Months Ended November 30, ---------------------------------- 1997 1996 ------------ ------------ Net income $ 13,550,202 $ 7,242,441 ============ ============ PRIMARY Weighted average common shares outstanding(1) 67,545,759 62,427,126 Common stock equivalents(2) 2,365,276 2,417,088 ------------ ------------ Primary weighted average common shares outstanding 69,911,035 64,844,214 ============ ============ Primary net income per common share $ 0.19 $ 0.11 ============ ============ FULLY DILUTED(3) Weighted average common shares outstanding(1) 67,545,759 62,427,126 Common stock equivalents(2) 2,566,339 2,227,174 ------------ ------------ Fully diluted weighted average common shares outstanding 70,112,098 64,654,300 ============ ============ Fully diluted net income per common share $ 0.19 $ 0.11 ============ ============
- ---------- (1) Represents weighted average common shares outstanding for the periods indicated. (2) Common stock equivalents associated with stock options calculated pursuant to the treasury stock method. (3) All share data in the financial statements are stated using the primary earnings per share calculation as the above fully diluted calculation is anti-dilutive. EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS AUG-31-1998 NOV-30-1997 78,987,791 19,984,566 40,246,381 0 45,272,329 196,649,829 45,905,195 0 255,816,291 44,170,743 0 0 0 678,809 210,455,186 255,816,291 102,493,470 102,492,470 39,982,529 39,982,529 42,326,715 0 68,534 21,356,329 7,806,126 13,550,203 0 0 0 13,550,203 0.19 0 Net of allowance. Net of depreciation. Includes Long-term obligations.
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