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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
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)
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Florida 59-1688986
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
851 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code:
(561) 241-9400
________________________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required 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. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The number of shares outstanding of the Registrant's common stock is
30,721,571 (as of October 10, 1996).
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is $354,608,780 (as of October 10, 1996).
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Shareholders to be held on February 6, 1997, which will be filed with the SEC,
are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets and
sells vitamins, nutritional supplements and consumer health products through
three channels of distribution: sales to retailers; direct sales through
independent distributors; and mail order. The Company offers a broad line of
approximately 1,500 products consisting of approximately 1,900 stock keeping
units ("SKUs"), including vitamins in both multivitamin and single-entity
formulas, minerals, herbals, homeopathic remedies, weight management products,
skin care products and over-the-counter ("OTC") pharmaceuticals.
The Company's principal executive offices are located at 851 Broken Sound
Parkway, NW, Boca Raton, Florida 33487 and its telephone number is (561)
241-9400. As used herein, the "Company" means Rexall Sundown, Inc. and its
subsidiaries, except where the context indicates otherwise.
INDUSTRY OVERVIEW
As reported by industry sources, the annual domestic retail market for
vitamins and nutritional supplements grew from $3.3 billion in 1991 to $4.9
billion in 1995. In the last several years, public awareness of the positive
effects of vitamins and nutritional supplements on health has been heightened
by widely publicized reports of scientific findings. Recent studies have
indicated a correlation between the regular consumption of selected vitamins
and nutritional supplements and reduced incidences of conditions such as heart
disease, cancer, stroke, osteoporosis and neural tube birth defects. The rise
of alternative medicine and the holistic health movement has also contributed
to increased sales of nutritional supplements.
The Company expects that the aging of the United States population,
together with a corresponding increased focus on preventative health measures,
will result in increased demand for vitamins and nutritional supplement
products. According to the United States Census Bureau, through 2010, the
35-and-older age group of consumers, which represents approximately 78% of
regular users of vitamin and nutritional supplements, is expected to grow
significantly faster than the general United States population. Based on a
national survey indicating that only 33% of Americans consumed vitamins and
nutritional supplements on a regular basis in 1995, the Company believes that
there is a large untapped domestic market for vitamins and nutritional
supplements. Industry sources also report that vitamin consumers are taking
more vitamins and nutritional supplements per day than in the past.
The primary channels of distribution in the vitamin and nutritional
supplement industry are: (i) mass market retailers which include mass
merchandisers, drug stores, supermarkets and discount stores; (ii) health food
stores; (iii) direct sales organizations; and (iv) mail order. Within the mass
market retailer channel, there are three primary vitamin product categories:
national brands, broadline and other brands, and private label brands. According
to industry sources, during 1994 and 1995, the market for national brands and
broadline and other brands of vitamins in the mass market was approximately 60%
of total domestic vitamin sales and the market for private label vitamins was
approximately 40% of such sales. For the first six months of calendar 1996,
industry sources indicate that the market for national brands and broadline and
other brands of vitamins in the mass market was approximately 63% of total
domestic vitamin sales and the market for private label vitamins was
approximately 37% of such sales. The national brand category primarily consists
of multivitamins and mineral products marketed under nationally advertised names
such as Centrum(R), One-A-Day(R) and Theragran(R). Broadline brands, such as the
Company's Sundown (R) brand, offer a complete range of products under one brand
name, including multivitamins, single-entity vitamins, minerals and nutritional
supplements, including herbal products. Private label products marketed under
the retailer's store brand name also offer a wide product assortment, albeit
somewhat narrower in scope than broadline brands, including national brand
equivalent formulas positioned as lower-priced "compare and save" products. The
Company believes that broadline brands have gained market share primarily at the
expense of national brands as consumers have increased their consumption of
single-entity vitamins and nutritional supplements while the market for
multivitamins has remained essentially flat.
While the retail channel of distribution for vitamins and nutritional
supplements has been consolidating, there has not yet been any significant
consolidation among the companies that manufacture and sell these products. The
vitamin and nutritional supplement industry remains fragmented, and the Company
believes that no company controls more than 10% of the market.
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SALES BY DISTRIBUTION CHANNEL
Set forth below for the periods indicated are the net sales and percent of
net sales of the Company's products through the Company's three current
distribution channels.
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FISCAL YEAR ENDED AUGUST 31,
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DISTRIBUTION CHANNEL 1992 1993 1994 1995 1996
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(DOLLARS IN THOUSANDS)
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Sales to retailers:
Sundown....................... $42,112 56.7% $46,571 50.0% $ 54,216 47.5% $ 62,427 41.8% $ 71,387 38.0%
Other(1)...................... 10,293 13.9 12,231 13.2 14,050 12.3 17,722 11.8 22,728 12.1
------- ----- ------- ----- -------- ----- -------- ----- -------- -----
Total net sales to 52,405 70.6 58,802 63.2 68,266 59.8 80,149 53.6 94,115 50.1
retailers.............
Direct sales -- Rexall 10,418 14.0 20,535 22.0 29,510 25.9 52,606 35.2 76,483 40.7
Showcase......................
Mail order -- SDV(R)............ 11,417 15.4 13,810 14.8 16,343 14.3 16,718 11.2 17,246 9.2
------- ----- ------- ----- -------- ----- -------- ----- -------- -----
Total net sales......... $74,240 100.0% $93,147 100.0% $114,119 100.0% $149,473 100.0% $187,844 100.0%
======= ===== ======= ===== ======== ===== ======== ===== ======== =====
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(1) Rexall(R), Thompson(R), private label and Rexall Managed Care(R) sales.
SALES TO RETAILERS
For its sales of vitamins and nutritional supplements to retailers, the
Company employs a marketing strategy directed at the end-user, with an emphasis
on educating these consumers. The Company provides a wide product selection with
many unique formulations, value pricing, clear and informative labeling, timely
and innovative product introductions, and specially designed shelf organization
systems. Net sales to retailers have grown from $52.4 million in fiscal 1992 to
$94.1 million in fiscal 1996.
Sundown. The Company has been selling vitamins and nutritional supplements
under the Sundown tradename since 1976. The Sundown brand offers a broad
selection of high quality products at prices lower than comparable-quality
branded vitamins, thereby creating value for consumers as well as higher rates
of shelf inventory turnover for retailers. The Company believes that its retail
customers experience increased profits per linear shelf foot due to the high
sales velocity of the Sundown brand. According to data from Information
Resources, Inc. ("IRI"), a retail information gathering service, in the
broadline vitamin category, Sundown generates the highest rate of dollar and
unit sales per share of ACV distribution and is currently the number two brand
in dollar and unit sales, despite its availability in outlets representing only
35% of ACV sales.
Historically, a majority of the Sundown brand sales were to regional deep
discount retailers. The success of the Company's value pricing strategy and high
sales velocity has enabled the Company to increase its sales to mass
merchandisers, chain drug stores and supermarkets. In fiscal 1995, the Company
gained nationwide distribution of Sundown products to all Kmart stores. Since
May 1996, the Company has begun nationwide distribution of Sundown products to
all Wal*Mart stores and Thrifty-Payless and Eckerd drug stores. Sundown's net
sales have increased from $42.1 million in fiscal 1992 to $71.4 million in
fiscal 1996.
The Company sells approximately 290 vitamins and nutritional supplements
under the Sundown tradename, including among others, vitamin C, vitamin E,
multivitamins, folic acid, calcium, lecithin, selenium, magnesium, iron,
potassium, herbals and food supplements. Because the Company offers most of
its products in varying quantities, the Sundown line consists of approximately
750 SKUs. Vitamins and minerals are sold as single-entity supplements,
multivitamin combinations and in varying potency levels, and are offered in
tablet, softgel, two-piece capsule, chewable, liquid and powder forms to
accommodate various consumer preferences. The Company also offers national
brand comparisons under the Sundown brand which have comparable multivitamin
formulas to such products as Centrum(R), One-A-Day(R) and Theragran(R).
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The Company monitors new and developing health and nutrition trends in
order to anticipate consumer demand and to introduce new products and
reformulate existing products. Examples of the Company's anticipation of and
response to consumer demand in the past two years include the introduction of
(i) three new herbal and food supplements (Saw Palmetto, Hawthorn Berry and
Bilberry) to complement the early 1995 introduction of 13 herbal products; (ii)
Fortified Pycnogenol(R), which includes additional key antioxidants Coenzyme
Q-10, Selenium and Grape Seed Extract (the Pycnogenol(R) trademark is owned by
a third party); (iii) Grape Seed Extract, an antioxidant that provides abundant
amounts of proanthocyanidins; (iv) Melatonin at the lower 300 mcg level to
allow consumers to better regulate their dosage; (v) Intelligent Multiple(R),
a multivitamin that excludes vitamins C and E, which consumers often take
separately; and (vi) E-400/Folic Acid, fortified with vitamins B6 and B12,
which, when combined, play an important role in energy production and the
formation of red blood cells. The Company has not incurred material research
and development expenses with respect to vitamins and nutritional supplements.
Product concepts are internally developed by the Company's product development
team, which consists of representatives of the Company's research and
development, sales and marketing and purchasing departments and members of
senior management. See "-- Product Development."
The Company markets its Sundown vitamin and nutritional supplements
internationally through a network of distributors. The Company has exclusive and
non-exclusive distribution agreements in foreign countries throughout the world,
with the majority of international revenues presently being generated from South
America. The Company believes that certain markets in South America, the Middle
East and the Far East represent the most attractive international outlets for
its products. All international sales are settled in United States currency.
Other Sales to Retailers. In addition to sales of Sundown products, the
Company's other sales to retailers include sales under the Rexall brand to
wholesalers, convenience stores and independent drug stores, the Thompson brand
to health food stores, private label products to selected mass merchandisers and
drug stores and the Rexall Managed Care brand to HMOs, hospitals and long-term
care facilities.
In 1989, the Company purchased the Rexall tradename, under which health
products have been marketed since 1903. An independent study has shown that the
Rexall tradename is widely recognized by households in the United States. The
Company's marketing strategy with respect to both its Rexall vitamin and OTC
drug lines is to emphasize a national branded product at generic prices. The
Company markets a full line of approximately 100 moderately-priced vitamins and
nutritional supplements under the Rexall tradename, primarily to independent
drug stores, wholesalers and convenience stores. In addition, approximately 75
OTC pharmaceutical products, including aspirin, cold remedies and analgesic
formulas, are offered under the Rexall tradename in formulas comparable to
nationally advertised products such as Bayer(R), Advil(R), Nuprin(R),
Tylenol(R), Contac(R), Robitussin(R), Sudafed(R), Benadryl(R) and Mylanta(R).
Recently, the Company has begun to license the Rexall name in various
international markets for vitamins and OTC pharmaceuticals.
In 1990, the Company acquired the operating assets of Wm. T. Thompson Co.,
Inc., which was founded in 1935, including the Thompson trademark. The "Rainbow"
line of Thompson vitamins is sold through health food stores and consists of
approximately 135 products in approximately 160 SKUs, many of which have high
potencies and are unique to Thompson. The Rainbow line represents the Company's
premium line, and is priced competitively with other similar vitamin products
sold in health food stores. Because the Company's targeted customer for Thompson
products is the sophisticated vitamin consumer, the Company's strategy includes
constantly monitoring new and developing trends in health and nutrition and
adapting its product offerings accordingly.
While the Company does not emphasize private label manufacturing, in select
instances the Company offers these products to accommodate specific customer
requests. For fiscal 1996, approximately 3.8% of the Company's net sales were
from private label products.
The Rexall Managed Care Division was formed in 1995 to market and sell
vitamins, nutritional supplements and OTC pharmaceuticals to the managed care
marketplace with a focus on HMOs, hospitals and long-term care facilities. The
Rexall Managed Care line currently consists of approximately 70 OTC
pharmaceuticals, 55 vitamin products and three prescription products.
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DIRECT SALES THROUGH INDEPENDENT DISTRIBUTORS
In 1990, the Company formed Rexall Showcase International, Inc. ("Rexall
Showcase") its network marketing subsidiary, to market and sell unique health
and wellness products through a sales force of independent distributors. Rexall
Showcase products include weight management products, homeopathic medicines,
personal care products, health and nutritional supplements and water
filtration systems. Rexall Showcase products are specially formulated and
packaged only for this distribution channel and are not available through
retailers. Rexall Showcase's independent distributors are not required to make
any inventory purchases and, to become a distributor, must only purchase a
$49.50 distributor kit. Rexall Showcase recently initiated its international
expansion by commencing operations in Mexico in February 1996 and South Korea
in April 1996 and intends to commence operations in selected other countries
in the future. Rexall Showcase's net sales have increased from $10.4 million
in fiscal 1992 to $76.5 million in fiscal 1996.
The Rexall Showcase distributor kit includes product brochures and
information, sales aids, order forms and other business information. Such
distributor kits are sold at approximately Rexall Showcase's cost. Rexall
Showcase processes, fills and ships orders from the Company's distribution
center, usually within a 24 hour period after the order is placed by the
distributor. Rexall Showcase guarantees the quality of its products and
customers may return any product to the selling distributor within 30 days for a
total refund or replacement. Prior to placing orders for additional products,
distributors are required to certify that they have sold at least 70% of their
prior order. In the event of termination of the relationship between Rexall
Showcase and a distributor, Rexall Showcase will repurchase from such
distributor all resaleable inventory purchased by such distributor within 12
months of such termination for 90% of the original net cost to the distributor.
To date, such returns have not been material.
Rexall Showcase's success is dependent upon continued sales of its products
to consumers by its distributors and the ongoing recruitment and maintenance of
a motivated, experienced network of distributors. Rexall Showcase sponsors and
conducts regional and national conventions in order to educate and recruit
distributors, and employs various technologies and innovations which allow for
fast and efficient communication and service between Rexall Showcase, its
distributors and their customers. These include such tools as (i) the Autoship
program, which allows products to be regularly shipped each month directly from
Rexall Showcase to the end-user; (ii) voice mail, which allows Rexall Showcase
or its distributors to send phone messages to large numbers of distributors at
once or communicate to specific distributors; and (iii) the private Rexnet(SM)
satellite network, which the Company uses to broadcast educational and training
programs describing Rexall Showcase products and business opportunities to
distributors, prospective distributors and customers. The Company also maintains
a dedicated department to provide information and assistance to distributors.
The Company publishes and distributes a bi-monthly newsletter to inform its
distributors of recent developments and other relevant information and to
recognize the accomplishments of certain distributors. Rexall Showcase also
offers participation in a stock option plan and stock purchase plan to
distributors who reach certain sales targets.
MAIL ORDER
The Company's mail order division markets and sells products primarily
under its SDV brand directly to consumers through catalogs and direct mailings.
This division targets approximately 200,000 of the most active customers out of
an approximate 565,000 household proprietary mailing list developed by the
Company since its inception in 1976. The Company's SDV division offers
approximately 420 products in approximately 940 SKUs, including a full line of
vitamins, minerals and other nutritional supplements along with selected
health-related products at prices which are competitive with those of other
mail order companies. Net sales for the Company's SDV division have increased
from $11.4 million in fiscal 1992 to $17.2 million in fiscal 1996. As the
Company has focused primarily on its Sundown brand and Rexall Showcase, the
Company has not allocated significantly increased resources to its mail order
division.
SALES SUPPORT AND CUSTOMER SERVICES FOR RETAILERS
The Company utilizes its information systems and staff of sales and
customer support professionals to provide retailers with a comprehensive array
of services. The Company seeks to assist the retailer with sales initiatives,
sales data analyses and marketing and merchandising programs, all of which are
designed to maximize in-store awareness of the Company's products and improve
results in the retailer's vitamin and nutritional supplement category. For a
number of its retail customers, the Company serves as a category manager, at no
additional cost to the retailer, actively analyzing, monitoring and advising on
product selection, profitability, sales velocity and overall performance of the
retailer's entire vitamin and nutritional supplement category. To help optimize
the performance of its retailers' departments, as well as sales of the Company's
products, the Company develops computerized plan-o-grams designed to efficiently
utilize shelf space and direct consumers' attention to the Company's products.
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In addition, the Company provides marketing support for its product lines
by developing customized marketing programs. The Company's graphic arts
department provides customer support by designing packaging displays and point
of purchase material for customers as well as informative, easy-to-read labels
and packages for the Company's products. The Company believes that its
double-sided label gives it a shelf-facing advantage appreciated by retailers.
Support for retail sales is further provided through various in-store
merchandising centers, including information pamphlets for consumers, displays'
featuring key and topical products and "Nutrition News," a Company publication
directed to pharmacists. The Company employs and contracts with merchandisers
who periodically visit certain retailers to restock the shelves, place new
orders and monitor and update the presentation of the Company's product line
through floor displays, side wings, shelf-talkers, store signs, promotional
packs and other individualized promotions.
To further support sales, the Company has historically expended
approximately 2% of its net sales on advertising. To date, this spending has
primarily been in the form of cooperative support to retailers; however, the
Company has also conducted some brand advertising on a limited basis. In
addition, Dick Clark is the Company's national spokesperson, Sundown is the
official vitamin brand of the Miami Dolphins and the Company sponsors various
sports personalities and events. In the future, the Company expects to use
various forms of mass media advertisement to build the national reputation and
recognition of its brands, primarily Sundown.
At October 1, 1996, the Company had a total sales force of approximately 30
employees responsible for accounts located throughout the United States, who are
paid on a salary and commission basis. In addition, the Company utilizes a
national brokerage alliance of approximately 70 independent representative
organizations in the United States and internationally, substantially all of
which sell the Company's brands on an exclusive basis in their respective
product categories. The Company also had a total of approximately 80 employees
devoted to customer service and support for retailers.
PRODUCT DEVELOPMENT
The Company consistently and timely introduces new and innovative products.
New product ideas are generated from a variety of sources, including clinical
studies reported in scientific and medical periodicals such as the New England
Journal of Medicine and the Journal of the American Medical Association. The
Company also responds to suggestions from vendors and consumers. Such product
ideas are developed by the Company's product development team which consists of
representatives of the Company's research and development, sales and marketing
and purchasing departments and members of senior management. For select
products, the Company's product development team is assisted by independent
consultants. The ideas are then submitted to the Company's operations
department which determines the overall feasibility of developing and producing
the product. As part of this overall feasibility analysis, the Company's
regulatory department conducts a thorough investigation of the safety and
potential regulatory issues with respect to the new product, and reviews any
patent and trademark issues. Following the regulatory department's review, the
Company's purchasing department obtains any raw materials necessary to produce
the new product and, after applicable testing, the Company begins production of
an initial pilot sample to study various characteristics of the products. The
Company's technical services department conducts tests on the pilot sample to
ensure that the new product meets all applicable regulatory and internal
quality standards. Based on these tests, final labels and product
specifications, including any substantiated statements of nutritional support,
such as structure and function claims for the new product, are developed, along
with the final costs of production which are reviewed by the financial and
marketing teams to determine that expected margins can be obtained based on the
anticipated sales price. The Company has typically been able to complete the
cycle from product concept to final production in a period ranging from several
weeks to several months. During fiscal 1996, the Company introduced 15 new
products for Sundown, 10 new products for Rexall Showcase and 24 new products
for other divisions.
MANUFACTURING AND QUALITY CONTROL
In June 1994, the Company commenced manufacturing vitamin tablets at its
82,000 square foot plant located adjacent to the Company's administrative office
building in Boca Raton, Florida. The Company's vitamin manufacturing facility
enables the Company to better ensure continued sources of supply, reduce cost of
goods sold and maintain high product quality. The Company recently began
manufacturing two-piece capsules at this facility. Currently, the Company
manufactures approximately 60% of its products. The balance of the Company's
vitamins and nutritional products are purchased from independent third parties
that manufacture such products to the Company's specifications and standards.
At this time, the Company does not believe it is cost-effective to manufacture
softgels and, accordingly, it will continue to purchase these products from
independent suppliers. In the future, the Company will continue to monitor the
cost of manufacturing other products in order to determine whether in-house
manufacturing of such products would be cost-effective. The Company purchases
all of its OTC pharmaceuticals from various independent suppliers. The
Company's manufacturing and distribution operations employ over 350 persons and
have recently been enhanced by the opening of its western distribution facility
in Sparks, Nevada.
The Company emphasizes quality control. All of the Company's products are
manufactured in accordance with the applicable CGMPs of the FDA and other
applicable regulatory and compendial standards, such as the United States
Pharmacopeia ("USP"). All raw materials and finished products undergo various
testing procedures, including sample testing, weight testing, purity testing
and, where required, microbiological testing. In November 1995, H.V. Shuster,
Inc., an independent quality assurance and testing service, awarded the Company
its highest rating for vitamin manufacturing companies for its vitamin
manufacturing facility and operations, including its manufacturing, testing and
quality control procedures.
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Upon receipt by the Company of raw materials or finished products such as
tablets or softgels at its manufacturing facilities, such raw materials or
products are placed in quarantine and tested by the Company's technical services
department. When the raw materials released from quality control are ready for
production, they are blended and produced into tablets or two-piece capsules.
The principal raw materials used in the manufacturing process are natural and
synthetic vitamins, which are purchased by the Company from bulk manufacturers
in the United States and internationally and are believed to be readily
available from numerous sources. Although the Company believes that all of its
sources of raw materials and products are reliable, the Company's results of
operations could be adversely impacted should it be forced to find replacement
sources of supply on short notice.
GOVERNMENT REGULATION
The manufacturing, processing, formulating, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the FDA, the Federal Trade Commission (the "FTC"),
the Consumer Products Safety Commission, the United States Department of
Agriculture, the United States Postal Service, the United States Environmental
Protection Agency and the Occupational Safety and Health Administration. These
activities are also regulated by various agencies of the states, localities and
foreign countries, in which the Company's products are sold. In particular, the
FDA regulates the safety, manufacturing, labeling and distribution of dietary
supplements, including vitamins, minerals and herbs, food additives, food
supplements, OTC and prescription drugs and cosmetics. In addition, the FTC has
overlapping jurisdiction with the FDA to regulate the labeling, promotion and
advertising of dietary supplements, OTC drugs, cosmetics and foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was
enacted on October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic
Act by defining dietary supplements, which include vitamins, minerals,
nutritional supplements and herbs as a new category of food separate from
conventional food. DSHEA provides a regulatory framework to ensure safe, quality
dietary supplements and the dissemination of accurate information about such
products. Under DSHEA, the FDA is generally prohibited from regulating dietary
supplements as food additives or as drugs unless product claims, such as claims
that a product may heal, mitigate, cure or prevent an illness, disease or
malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements effective January 1, 1997, although final regulations have not been
published and the FDA has indicated that implementation will be delayed. DSHEA
permits substantiated, truthful and non-misleading statements of nutritional
support to be made in labeling, such as statements describing general well-being
resulting from consumption of a dietary ingredient or the role of a nutrient or
dietary ingredient in affecting or maintaining structure or function of the
body. Any statement of nutritional support beyond traditional claims must be
accompanied by disclosure that the FDA has not evaluated such statement and that
the product is not intended to cure or prevent any disease. The Company
anticipates that the FDA will promulgate CGMPs which are specific to dietary
supplements and require at least some of the quality control provisions
contained in the CGMPs for drugs. The Company currently manufactures its
vitamins and nutritional supplement products in compliance with the applicable
food CGMPs.
The FDA has proposed but not finalized regulations to implement DSHEA. The
Company cannot determine what effect such regulations, when promulgated, will
have on its business in the future. Such regulations are likely to require
expanded or different labeling for the Company's vitamins and nutritional
supplement products and could, among other things, require the recall,
reformulation or discontinuance of certain products, additional recordkeeping,
warnings, notification procedures and expanded documentation of the properties
of certain products and scientific substantiation regarding ingredients, product
claims, safety or efficacy. The Company believes that it is in material
compliance with all applicable laws.
DSHEA created two new governmental bodies. The Commission on Dietary
Supplements was established for two years to provide recommendations for the
regulation of supplement labeling and health claims, including procedures for
making disease-related claims. The Office of Dietary Supplements, established
within the National Institute of Health, is charged with coordinating research
on dietary supplements and disease prevention, compiling research results, and
advising the Secretary of Health and Human Services on supplement regulation,
safety and health claims.
Although the vitamin and nutritional supplement industry is subject to
regulation by the FDA and local authorities, dietary supplements, including
vitamins, minerals, herbs and nutritional supplements, now have been statutorily
affirmed as a food and not as a drug or food additive. Therefore, the regulation
of dietary supplements is far less restrictive than that imposed upon
manufacturers and distributors of drugs or food additives. Unlike food
additives, which are more pervasively regulated, and new drugs, which require
regulatory approval of formulation and labeling prior to marketing, dietary
supplement companies are authorized to make substantiated statements of
nutritional support and to market manufacturer-substantiated-as-safe dietary
supplement products without FDA preclearances. Failure to comply with applicable
FDA requirements can result in sanctions being imposed on the Company or the
manufacturers of its products, including warning letters, fines, product recalls
and seizures.
The OTC pharmaceutical products distributed by the Company's Rexall, Rexall
Showcase and Rexall Managed Care divisions are subject to regulation by a number
of federal and state governmental agencies. In particular, the FDA regulates the
formulation, manufacture, packaging and labeling of all OTC pharmaceutical
products. Rexall Showcase is subject to regulation under various international,
state and local laws which include provisions regulating, among other things,
the operations of direct sales programs.
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COMPETITION
The market for the sale of vitamins and nutritional supplements is highly
competitive. Competition is based principally upon price, quality of products,
customer service and marketing support. There are numerous companies in the
vitamin and nutritional supplement industry selling products to retailers such
as mass merchandisers, drug store chains, independent drug stores, supermarkets
and health food stores. Most companies are privately held and the Company is
unable to precisely assess the size of such competitors. No company is believed
to control more than 10% of this market.
The market for OTC pharmaceuticals and health and beauty care products is
highly competitive. Competition is based principally upon price, quality of
products, customer service and marketing support. The Rexall brand competes with
nationally advertised brand name products and private label products.
Although Rexall Showcase competes with other health and nutritional food
companies, the Company believes its primary competition stems from direct sales
companies. The Company competes in the recruitment of independent sales people
with other direct sales organizations whose product lines may or may not compete
with the Company's products.
Although certain of the Company's competitors are substantially larger than
the Company and have greater financial resources, the Company believes that it
competes favorably with other vitamin and nutritional supplement companies and
other OTC pharmaceutical companies because of its competitive pricing, marketing
strategies, sales support and the quality, uniqueness and breadth of its of
product line.
TRADEMARKS AND PATENTS
The Company owns trademarks registered with the United States Patent and
Trademark Office or certain other countries for its Sundown(R), Thompson(R),
Rexall Showcase International(R) and Rexall(R) trademarks, and has rights to use
other names material to its business. In addition, the Company has obtained
trademarks for certain of its products including Plenamins(R), Super
Plenamins(R), SunVite(R), Ultra Max(R), Perfect Iron(R), Perfect Antioxidant(R),
Ginstamina(R), Circus Chews(R), Digest-It(R), Bios Life 2(R), In-Vigor-ol(R),
Calmplex(R), Metaba-trol(R), Nature Force(R), Human Nature(R), Mature
Choices(R), Memory Plus(R), Advanced Release Technology(R), Cardio Basics(R),
Defend-ol(R), Intern-ol(R) and Traum-ex(R). The Company has trademark and
service mark applications pending for Cellular Essentials(TM), Vascular
Complete(TM), Rexnet(SM), Rexweb(SM) and Rextel(SM). Federally registered
trademarks have perpetual life, as long as they are renewed on a timely basis
and used properly as trademarks, subject to the rights of third parties to seek
cancellation of the marks. The Company regards its trademarks and other
proprietary rights as valuable assets and believes they have significant value
in the marketing of its products. The Company vigorously protects its trademarks
against infringement. The Company owns certain patents in the United States
relating to its Bios Life 2 and Bios Life 2 Natural weight management products
and a patent for double-sided labels in the vitamin industry. Although the
Company owns the Rexall(R) trademark, none of the operating Rexall Drug Stores
are owned by the Company or have any obligation to purchase products from the
Company.
PRODUCT LIABILITY INSURANCE
The Company, like other manufacturers, wholesalers, distributors and
retailers of products that are ingested, faces an inherent risk of exposure to
product liability claims if, among other things, the use of its products results
in injury. The Company currently has product liability insurance for its
operations in amounts the Company believes is adequate for its operations. There
can be no assurance, however, that such insurance will continue to be available
at a reasonable cost, or if available, will be adequate to cover liabilities.
The Company requires that each of its suppliers certify that it carries adequate
product liability insurance covering the Company.
-9-
<PAGE> 10
EMPLOYEES
At October 1, 1996, the Company employed approximately 740 full-time
persons. None of the Company's employees is represented by a collective
bargaining unit. The Company believes that its relationship with its employees
is good.
ITEM 2. PROPERTIES.
As of August 31, 1996, the Company owned or leased the following
facilities:
<TABLE>
<CAPTION>
APPROXIMATE EXPIRATION DATE OF
LOCATION TYPE OF FACILITY SQUARE FEET LEASED OR OWNED LEASE
- ------------------- --------------------------- -------------------- --------------- --------------------
<S> <C> <C> <C> <C>
Boca Raton, Florida Administrative Offices 58,000 Owned --
Boca Raton, Florida Manufacturing and 82,000 Owned --
Production
Boca Raton, Florida Warehouse and Distribution 100,000 Owned --
Boca Raton, Florida Warehouse and Distribution 90,000 Leased (1)
Sparks, Nevada Warehouse and Distribution 65,000 Leased September 1999
Seoul, South Korea Administrative Offices 4,700 Leased December 1996
Seoul, South Korea Distribution Service Center 5,000 Leased March 1997
Seoul, South Korea Warehouse 3,500 Leased April 1997
Mexico City, Mexico Administrative Offices, 5,600 Leased December 1997
Warehouse and Distribution
</TABLE>
(1) This facility is subject to two leases. The lease for 60,000 square feet
of the facility expires in March 1998 and the lease for 30,000 square feet
of the facility expires in April 1997.
ITEM 3. LEGAL PROCEEDINGS.
L-Tryptophan Litigation. Numerous unrelated manufacturers, distributors,
suppliers, importers and retailers of manufactured L-tryptophan are or were
defendants in an estimated 2,000 lawsuits brought in federal and state courts
seeking compensatory and punitive damages for alleged personal injury from
ingestion of products containing manufactured L-tryptophan. The Company has
been named in 27 lawsuits, of which 25 have been settled or discontinued
through October 1, 1996 and additional suits may be filed. Prior to a request
from the FDA in November 1989 for a national, industry-wide recall, the Company
halted sales and distribution of, and also ordered a recall of, L-tryptophan
products. Subsequently, the FDA indicated that there is a strong
epidemiological link between the ingestion of the allegedly contaminated
L-tryptophan and a blood disorder known as eosinophilia myalgia syndrome
("EMS"). Investigators at the United States Center for Disease Control suspect
that a contaminant was introduced during the manufacture of the product in
Japan. While intensive independent investigations are continuing, there has
been no indication that EMS was caused by any formulation or manufacturing
fault of the Company's supplier or any of the other companies that manufactured
tablets or capsules containing L-tryptophan.
The Company and certain companies in the vitamin industry, including
distributors, wholesalers and retailers, have entered into an agreement (the
"Indemnification Agreement") with Showa Denko America, Inc. ("SDA"), under
which SDA, a United States subsidiary of a Japanese corporation, Showa Denko
K.K. ("SDK"), which appears to be the supplier of the apparently contaminated
product, has assumed the defense of all claims
-10-
<PAGE> 11
against the Company arising out of the ingestion of L-tryptophan products and
has agreed to pay the legal fees and expenses in that defense. SDA has agreed
to indemnify the Company against any judgments and to fund settlements arising
out of those actions and claims if it is determined that a cause of the
injuries sustained by the plaintiffs was a constituent in the bulk material
sold by SDA to the Company or its suppliers, except to the extent that the
Company is found to have any part of the responsibility for those injuries and
except for certain claims relating to punitive damages. While the
Indemnification Agreement remains in effect, the Company and SDA have agreed
not to institute litigation against each other relating to claims based upon
products containing L-tryptophan. In March 1993, SDK entered into an agreement
with the Company to guarantee the payment by its subsidiary, SDA, pursuant to
the Indemnification Agreement. However, it should be noted, in attempting to
prosecute claims against foreign nationals, complex legal problems arise, such
as jurisdiction, service of process, conflict of laws, enforceability of
judgments and cultural differences, among others.
It is the intention of the Company to hold SDA, and if necessary, SDK,
responsible for any liabilities and expenses incurred in connection with this
litigation, even if the Indemnification Agreement is terminated. SDA has posted
a revolving irrevocable letter of credit of $20 million to be used for the
benefit of the Company and other indemnified parties if SDA is unable or
unwilling to satisfy any claims or judgments. Although the parties have agreed
that the letter of credit will be replenished as needed, there can be no
assurance that such replenishment will occur or that there will be sufficient
funds available for the satisfaction of any and all claims or judgments. The
Company has product liability insurance, as does its supplier of L-tryptophan
products, which the Company believes provides coverage for all of its
L-tryptophan products subject to these claims, including legal defense costs.
Due to the multitude of defendants, the probability that some or all of the
total liability will be assessed against other defendants and the fact that
discovery in these actions is not complete, it is impossible to predict the
outcome of these actions or to assess the ultimate financial exposure of the
Company. The Company does not believe the outcome of these actions will have a
material adverse effect on the Company, and, accordingly, no provision has been
made in the Consolidated Financial Statements for any loss that may be
incurred by the Company as a result of these actions.
Hines Litigation. In April 1992, an action was commenced by Patrick J.
Hines, on behalf of himself and others similarly situated against the Company,
Rexall Showcase and certain of its officers in the United States District Court
for the Southern District of Florida (CIV 92-6387). The complaint alleges,
among other things, violation of the United States securities laws, RICO and
unfair advertising with respect to the operations of Rexall Showcase. Virtually
identical lawsuits on behalf of various plaintiffs were filed at approximately
the same time against various other direct sales companies by two law firms,
including the law firm representing Mr. Hines. The Company and Rexall Showcase
filed a motion to dismiss the complaint on numerous grounds, including failure
to state a cause of action and violations of the federal civil procedural
rules. Such motion was granted in June 1994 and the plaintiff was given leave
to file a new complaint, which he did. The allegations in the new complaint
are similar to those in the original complaint and include additional claims of
violations of various Florida statutes, including those relating to deceptive
advertising, business opportunities, franchises and securities. The Company and
Rexall Showcase have filed a motion to dismiss the new complaint on numerous
grounds, including failure to state a cause of action and violations of the
federal rules of civil procedure. Although the Company believes that such
lawsuit is without merit, no assurances can be given in this regard. The
Company will vigorously defend itself and believes any adverse decision will
not have a material adverse impact on the Company or Rexall Showcase.
Other Litigation. The Company is also involved in litigation relating to
claims arising out of its operations in the normal course of business, none of
which are expected, individually or in the aggregate, to have a material
adverse affect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to the vote of security holders during the fourth
quarter of fiscal 1996.
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<PAGE> 12
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning the
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- -------------------------------------------------------------
<S> <C> <C>
Carl DeSantis....... 57 Chairman of the Board and Chief Executive Officer
Christian Nast...... 65 President, Chief Operating Officer and Director
Dean DeSantis....... 34 Senior Vice President-Operations and Director
Damon DeSantis...... 32 Executive Vice President, President of Rexall Showcase and
Director
Nickolas Palin...... 49 Senior Vice President-Sales and Marketing and Director
Geary Cotton........ 44 Vice President-Finance, Chief Financial Officer and Treasurer
Richard Werber...... 44 Vice President-Legal Affairs, General Counsel and Secretary
</TABLE>
CARL DESANTIS founded the Company in 1976, has served as its Chairman of
the Board and Chief Executive Officer since its inception, and served as its
President from 1976 to April 1995. Mr. DeSantis has had over 17 years of
experience with retail drug store companies, including Super-X Drug Stores and
Walgreen Drug Stores. He is the father of Dean DeSantis and Damon DeSantis.
CHRISTIAN NAST has been President and Chief Operating Officer of the
Company since April 1995 and a Director of the Company since October 1993. From
December 1989 to April 1995, Mr. Nast was employed by Colgate Palmolive Co. as
its executive vice president--North America. Mr. Nast has over 40 years of
experience in the consumer products industry with companies such as
Bristol-Myers Company, Chesebrough-Ponds, Inc. and the Procter & Gamble
Company.
DEAN DESANTIS has been Senior Vice President- Operations of the Company
since June 1989, a Director of the Company since March 1990 and joined the
Company in 1985. He is the son of Carl DeSantis and the brother of Damon
DeSantis.
DAMON DESANTIS has been President of Rexall Showcase since January 1993,
Executive Vice President and a Director of the Company since July 1988, and was
a Vice President of the Company from September 1983, when he joined the
Company, until July 1988. He is the son of Carl DeSantis and the brother of
Dean DeSantis.
NICKOLAS PALIN has been Senior Vice President-Sales and Marketing of the
Company since August 1989, a Director of the Company since December 1995 and
joined the Company in 1984. Prior to 1989 he served as the Company's General
Manager-Sales and Administration.
GEARY COTTON has been Vice President-Finance and Treasurer of the Company
since March 1993, Chief Financial Officer of the Company since August 1989, and
joined the Company in 1986. Mr. Cotton is a Certified Public Accountant.
RICHARD WERBER has been Vice President-Legal Affairs and General Counsel
of the Company since August 1991 and Secretary of the Company since March 1993.
Prior to that, Mr. Werber was a partner in the law firm of Holland & Knight.
-12-
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock was first quoted and began trading on the Nasdaq National
Market on June 18, 1993 under the symbol RXSD.
Set forth below are the high and low sales prices of the Common Stock as
reported on the Nasdaq National Market for the periods indicated, retroactively
adjusted to reflect the two-for-one stock split effected on October 28, 1993
and the three-for-two stock split effected on April 4, 1996.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED AUGUST 31, 1995:
First Quarter..................... $ 8.50 $ 5.83
Second Quarter.................... 8.67 6.25
Third Quarter..................... 7.33 5.50
Fourth Quarter.................... 10.75 5.50
FISCAL YEAR ENDED AUGUST 31, 1996:
First Quarter..................... 13.00 9.08
Second Quarter.................... 19.00 11.67
Third Quarter..................... 37.00 16.75
Fourth Quarter.................... 36.25 21.25
</TABLE>
The Company presently intends to retain all earnings for the operation and
development of its business and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. Any future determination as to
the payment of cash dividends will depend on a number of factors, including
future earnings, capital requirements, the financial condition and prospects of
the Company and any restrictions under credit agreements existing from time to
time, as well as such other factors as the Company's Board of Directors may
deem relevant. The Company's current line of credit prohibits the payment of
any dividends on the Company's Common Stock. The approximate number of record
holders of the Common Stock as of October 10, 1996 was 700.
-13-
<PAGE> 14
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The selected consolidated financial data presented below is derived from
the Consolidated Financial Statements. The Consolidated Financial Statements as
of and for the years ended August 31, 1992, 1993, 1994, 1995 and 1996 have been
audited by Coopers & Lybrand L.L.P., independent accountants. The following
information should be read in conjunction with Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Consolidated Financial Statements and related notes and other consolidated
financial information included herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31,
--------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................................... $74,240 $93,147 $114,119 $149,473 $187,844
Cost of sales................................. 40,238 45,447 54,475 65,032 71,682
------- ------- -------- -------- --------
Gross profit................................ 34,002 47,700 59,644 84,441 116,162
Selling, general and administrative expenses.. 29,301 37,390 47,005 65,825 86,673
------- ------- -------- -------- --------
Operating income............................ 4,701 10,310 12,639 18,616 29,489
Other income, net............................. 50 810 1,080 588 2,602
------- ------- -------- -------- --------
Income before income tax provision............ 4,751 11,120 13,719 19,204 32,091
------- ------- -------- -------- --------
Income from continuing operations (pro
forma)(1)................................... 2,905 7,104 8,572 12,338 20,293
Loss from discontinued operations(2).......... -- -- (2,377) (7,976) --
------- ------- -------- -------- --------
Net income (pro forma)(1)..................... $ 2,905 $ 7,104 $ 6,195 $ 4,362 $ 20,293
======= ======= ======== ======== ========
Income (loss) per share (pro forma)(1):
Continuing operations....................... $0.13 $0.31 $0.29 $0.42 $0.66
Discontinued operations..................... -- -- (0.08) (0.27) --
------- ------- -------- -------- --------
Net income per share................ $0.13 $0.31 $0.21 $0.15 $0.66
======= ======= ======== ======== ========
Weighted average shares outstanding........... 21,942 23,168 29,269 29,497 30,726
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31,
--------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 5,289 $28,771 $ 21,027 $ 29,292 $ 54,133
Total assets.................................. 22,194 53,126 61,633 67,351 103,095
Long-term debt, net of current portion........ 4,938 1,151 776 448 105
Shareholders' equity.......................... 8,273 41,714 48,962 55,038 86,692
</TABLE>
- ---------------
(1) The Company was an S Corporation until June 1993 and accordingly was not
subject to corporate income taxes until the termination of its S
Corporation status. For fiscal years 1992 and 1993, income from continuing
operations, net income, income per share from continuing operations and net
income per share have been computed as if the Company was subject to
corporate income taxes, based on tax laws in effect during such periods.
(2) Net of tax benefit.
-14-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, and the Notes to the Consolidated
Financial Statements included herein. Additionally, certain divisional data of
the Company is set forth in Item 1 - "Business -- General."
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, and sales to Rexall Showcase's independent distributors are
recorded at wholesale prices. Initial costs associated with acquiring sales
agreements with certain retail customers are amortized over the term of the
relevant agreement and the amortization of such costs is recorded as a reduction
in net sales. Approximately 96.2% of the Company's net sales are of products
sold under one of the following brand names: Sundown, Rexall Showcase, Rexall,
Thompson, SDV and Rexall Managed Care. Sales of private label products
accounted for approximately 3.8% of net sales for fiscal 1996.
Cost of goods sold includes the cost of raw materials and all labor and
overhead associated with the manufacturing and packaging of the products. The
majority of the Company's products are in tablet, softgel or two-piece capsule
forms. In 1994, the Company initiated manufacturing, beginning with vitamins
in tablet form, which resulted in lower costs than outsourcing such
manufacturing. Presently, the Company manufactures approximately 90% of its
tablet formulations and recently began manufacturing two-piece capsules. The
Company does not presently intend to manufacture softgel formulations or other
products. The Company's manufacturing facility as currently configured is
estimated to be operating at approximately 70% of capacity. However, the
Company believes capacity could be doubled by adding additional equipment,
personnel and shifts.
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 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. Historically, operating margins from sales to retailers and mail
order have been higher than operating margins from Rexall Showcase sales.
On August 31, 1995, the Company approved a plan to divest Pennex
Laboratories, Inc. ("Pennex"), its subsidiary which manufactured and sold OTC
pharmaceuticals. The fiscal 1994 and 1995 results of Pennex have been presented
as discontinued operations in the Consolidated Financial Statements. See
"-- Discontinued Operations."
On October 3, 1996 the Company filed a registration statement with the
Securities and Exchange Commission in connection with a proposed public offering
of 4,000,000 shares of Common Stock. Of those shares, 2,000,000 are being
offered by the Company and 2,000,000 are being offered by certain shareholders
of the Company. The Company intends to use the net proceeds received from the
offering primarily to acquire complementary products, product lines or
businesses, to provide working capital and for general corporate purposes.
RESULTS OF CONTINUING OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31,
-----------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0%
Cost of sales........................................... 47.7 43.5 38.2
----- ----- -----
Gross profit.......................................... 52.3 56.5 61.8
Selling, general and administrative expenses............ 41.2 44.0 46.1
----- ----- -----
Operating income...................................... 11.1 12.5 15.7
Other income, net....................................... 0.9 0.4 1.4
----- ----- -----
Income before income tax provision...................... 12.0 12.9 17.1
Income from continuing operations....................... 7.5% 8.3% 10.8%
</TABLE>
-15-
<PAGE> 16
FISCAL YEAR ENDED AUGUST 31, 1996 COMPARED TO FISCAL YEAR ENDED AUGUST 31,
1995
Net sales for fiscal 1996 were $187.8 million, an increase of $38.4 million
or 25.7% over fiscal 1995. Of the $38.4 million increase, sales to retailers
accounted for $14.0 million, an increase of 17.4% over fiscal 1995. The increase
in sales to retailers was partially attributable to approximately $7.0 million
of initial shipments of Sundown products to Wal*Mart and Thrifty-Payless in the
second half of fiscal 1996. Net sales of the Company's direct sales subsidiary,
Rexall Showcase, increased by $23.9 million, an increase of 45.4% over fiscal
1995. The increase in direct sales was partially due to the commencement of
Rexall Showcase's operations in Mexico in February 1996 and South Korea in April
1996. Net sales of the Company's mail order division, SDV, increased by $528,000
or 3.2% over fiscal 1995. The increase in net sales in each division was
primarily due to increased unit sales.
Gross profit for fiscal 1996 was $116.2 million, an increase of $31.7
million or 37.6% over fiscal 1995. As a percentage of net sales, gross margin
increased from 56.5% for fiscal 1995 to 61.8% for fiscal 1996. The increase in
gross margin was due primarily to an increase in net sales of products with
higher margins, related principally to the increased net sales of Rexall
Showcase as a percentage of the Company's net sales. The increase was also due,
in part, to improved margins as a result of manufacturing efficiencies achieved
from higher volume at the Company's vitamin manufacturing facility. The average
number of tablets manufactured per month increased from approximately 85 million
tablets for fiscal 1995 to approximately 170 million tablets for fiscal 1996.
Selling, general and administrative expenses for fiscal 1996 were $86.7
million, an increase of $20.8 million or 31.7% over fiscal 1995. As a percentage
of net sales, such expenses increased from 44.0% for fiscal 1995 to 46.1% for
fiscal 1996, primarily as a result of increased sales of Rexall Showcase as a
percentage of the Company's net sales. In addition, selling, general and
administrative expenses associated with Rexall Showcase increased due to the
commencement of international operations. This increase was partially offset by
reductions of other divisions' selling, general and administrative expenses as a
percentage of net sales. The reduction in other divisions' selling, general and
administrative expenses was due in part to new incentive and cost control
programs initiated by management in fiscal 1996.
Other income, net, increased from $588,000 in fiscal 1995 to $2.6 million
in fiscal 1996 as a result of increased interest income, decreased interest
expense and increased amounts included in other income. Interest income for
fiscal 1996 was $1.3 million, as compared to $119,000 for fiscal 1995. Such
increase was primarily a result of investment of the Company's available cash
balances, which were higher in fiscal 1996 than fiscal 1995, and interest
received in fiscal 1996 from the note receivable related to the sale of
Pennex's assets, which interest is at a higher rate than the Company's average
rate of return on available cash balances. Interest expense for fiscal 1996 was
$40,000 as compared to $424,000 for fiscal 1995 as there were no borrowings
under the Company's line of credit in fiscal 1996.
Income from continuing operations before income tax provision was $32.1
million for fiscal 1996, an increase of $12.9 million or 67.1% over fiscal 1995.
As a percentage of net sales, income from continuing operations before income
tax provision increased from 12.9% for fiscal 1995 to 17.1% for fiscal 1996.
Income from continuing operations was $20.3 million for fiscal 1996, an
increase of $8.0 million or 64.5% over fiscal 1995. As a percentage of net
sales, income from continuing operations increased from 8.3% for fiscal 1995 to
10.8% for fiscal 1996 due to the reasons described above.
FISCAL YEAR ENDED AUGUST 31, 1995 COMPARED TO FISCAL YEAR ENDED AUGUST 31,
1994
Net sales for fiscal 1995 were $149.5 million, an increase of $35.4 million
or 31.0% over fiscal 1994. Of the $35.4 million increase, sales to retailers
accounted for $11.9 million, an increase of 17.4% over fiscal 1994. Included in
sales to retailers is $1.7 million of net sales of the Company's Rexall Managed
Care division for which there were minimal sales in fiscal 1994. Net sales of
Rexall Showcase increased by $23.1 million, an increase of 78.3% over fiscal
1994. Net sales of SDV increased by $375,000 or 2.3% over fiscal 1994. The
increase in net sales in each division was primarily due to increased unit
sales.
-16-
<PAGE> 17
Gross profit for fiscal 1995 was $84.4 million, an increase of $24.8
million or 41.6% over fiscal 1994. As a percentage of net sales, gross margin
increased from 52.3% for the fiscal year ended August 31, 1994 to 56.5% for
fiscal 1995. The increase in gross margin was due primarily to an increase in
net sales of products with higher margins, related principally to the increased
net sales of Rexall Showcase as a percentage of the Company's net sales. In
fiscal 1995, the Company achieved a modest increase in gross margin of its other
divisions.
Selling, general and administrative expenses for fiscal 1995 were $65.8
million, an increase of $18.8 million or 40.0% over fiscal 1994. As a percentage
of net sales, such expenses increased from 41.2% for the fiscal year ended
August 31, 1994 to 44.0% for fiscal 1995, primarily as a result of increased net
sales of Rexall Showcase as a percentage of the Company's net sales. While
selling, general and administrative expenses in the Company's other business
divisions increased in absolute dollars, such expenses declined as a percentage
of net sales.
Other income, net, decreased from $1.1 million in fiscal 1994 to $588,000
in fiscal 1995, primarily as a result of reduced interest income and increased
interest expense. Interest income for fiscal 1995 was $119,000, as compared to
$361,000 for fiscal 1994. This decrease is a result of the reduction of
marketable securities. Interest expense for fiscal 1995 was $424,000 as compared
to $109,000 for fiscal 1994. This increase resulted from borrowings under the
Company's line of credit.
Income from continuing operations before income tax provision was $19.2
million for fiscal 1995, an increase of $5.5 million or 40.0% over fiscal 1994.
As a percentage of net sales, income from continuing operations before income
tax provision increased from 12.0% for fiscal 1994 to 12.9% for fiscal 1995.
Income from continuing operations was $12.3 million for fiscal 1995, an
increase of $3.8 million or 43.9% from fiscal 1994. As a percentage of net
sales, income from continuing operations increased from 7.5% for fiscal 1994 to
8.3% for fiscal 1995 due to the reasons described above.
DISCONTINUED OPERATIONS
On September 30, 1993, Pennex acquired substantially all the assets of
Pennex Products Co., Inc., a manufacturer of OTC pharmaceuticals. The assets
primarily consisted of a 300,000 square foot manufacturing and distribution
facility along with all manufacturing equipment and inventory located on
approximately 22 acres in Verona, Pennsylvania. The purchase price was $5.1
million in cash. On August 31, 1995, the Company approved a plan to divest
Pennex and the Company's Consolidated Financial Statements for fiscal 1994 and
1995 have been presented to include Pennex's results as discontinued operations.
In the fourth quarter of fiscal 1995, the Company recorded an estimated loss on
the disposition of Pennex in the amount of $3.7 million, net of the related tax
benefit of $2.1 million, for the loss on disposition of the related assets and
liabilities of Pennex and other expenses related to the closing of Pennex. This
amount included $964,000 for the estimated operating losses of Pennex during the
phase-out period. On November 17, 1995, Pennex ceased operations and on February
1, 1996, substantially all the remaining assets of Pennex were sold for
$6,495,000. The Company received a $500,000 deposit and a collateralized note
for the balance. The terms of such note provide for interest at 12%, payable
monthly through March 1996. The rate of interest increased to 18% on April 1,
1996, although interest is currently being paid at 12% with the balance
accruing until February 28, 1997, when the entire balance under such note is
due in full. The note was assigned from Pennex to the Company as partial
consideration for amounts owed to the Company by Pennex. The Company has been
recording interest income on the 12% interest paid to the Company.
As of August 31, 1996, the Company had recorded net assets of discontinued
operations of $3.9 million. Assuming full collection of the balance of the
collateralized note, the Company expects to record a reduction to the estimated
loss on disposition of approximately $1.4 million (net of tax) or $.04 per
share, which would be reflected as an adjustment to discontinued operations.
-17-
<PAGE> 18
QUARTERLY RESULTS OF OPERATIONS; SEASONALITY
The following table sets forth certain quarterly financial data for fiscal
1995 and 1996. This quarterly information is unaudited, has been prepared on the
same basis as the annual financial statements and, in the opinion of the
Company's management, reflects all normally recurring adjustments necessary for
fair presentation of the information for the periods presented. Operating
results for any quarter are not necessarily indicative of results of any future
period.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
------------------------------------- -------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... $32,105 $37,868 $38,291 $41,209 $40,867 $40,560 $54,781 $51,636
Operating income.................. 4,371 5,245 4,133 4,867 5,314 5,932 8,801 9,442
Income from continuing
operations(1)................... 2,750 3,488 2,965 3,135 3,556 4,074 6,134 6,529
Income per share from continuing
operations(1)................... $0.09 $0.12 $0.10 $0.11 $0.12 $0.13 $0.20 $0.21
</TABLE>
- ----------------------
(1) Does not reflect discontinued operations. See "Selected Consolidated
Financial Data," "--Discontinued Operations" and Notes to the Consolidated
Financial Statements.
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 $54.1 million as of August 31, 1996,
compared to $29.3 million as of August 31, 1995. This increase was principally
the result of increased cash and cash equivalents, marketable securities,
inventory and trade accounts receivable due to higher sales in fiscal 1996
compared to fiscal 1995.
Net cash provided by operating activities for fiscal 1996 was $19.6 million
compared to $4.3 million for fiscal 1995. Net cash provided by operating
activities increased primarily due to increased net income, decreases in net
assets of discontinued operations and recognition of deferred income taxes,
partially offset by increases in accounts receivable and inventory. Net cash
used in investing activities was $13.5 million for fiscal 1996 compared to $5.1
million for fiscal 1995. Net cash used in investing activities, including $5.4
million used for capital expenditures, increased primarily due to the purchase
of marketable securities in fiscal 1996. Net cash provided by financing
activities was $6.2 million for fiscal 1996 compared to $123,000 for fiscal
1995. The Company's cash flow from financing activities for fiscal 1996 of $6.2
million reflects $6.5 million received for the exercise of options to purchase
Common Stock partially offset by debt payments.
The Company presently has a line of credit with a financial institution in
the amount of $10 million, under which there were no borrowings in fiscal 1996.
The Company believes that the net proceeds to the Company from this offering,
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 and the financing of the Company's accounts receivable, and
anticipated capital expenditures for the next fiscal year. Capital expenditures
for fiscal 1997 are anticipated to be approximately $11 million, including
approximately $6 million for upgrades to the Company's information systems and
the majority of the balance for manufacturing equipment.
-18-
<PAGE> 19
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.
RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS
Recent pronouncements of the Financial Accounting Standards Board, which
are not required to be adopted by the Company until fiscal 1997, include
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
and SFAS No. 123, "Accounting for Stock Based Compensation."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This pronouncement is not expected to have a material impact on the
financial statements of the Company.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. It encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on new fair value accounting
rules. Companies that choose not to adopt the new fair value accounting rules
will be required to disclose pro forma net income and earnings per share under
the new method. The Company anticipates adopting the disclosure provisions of
SFAS No. 123, although the impact of such disclosure has not been determined.
-19-
<PAGE> 20
FORWARD LOOKING STATEMENTS
This Report contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
which represent the Company's expectations or beliefs, including, but not
limited to, statements concerning industry performance, the Company's
operations, performance, financial condition, growth and acquisition
strategies, margins and growth in sales of the Company's products. 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, including uncertainty related to acquisitions,
government regulation, managing and maintaining growth, the effect of adverse
publicity, reliance on independent distributors of Rexall Showcase, the
centralized location of the Company's manufacturing operations, availability of
raw materials, risks associated with international operations, competition,
product liability claims, volatility of stock price and those factors described
in the Company's filings with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data for the Company are on the
following pages F-1 through F-18.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-20-
<PAGE> 21
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Shareholders' Equity....................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors
Rexall Sundown, Inc.
Boca Raton, Florida
We have audited the consolidated financial statements and financial statement
schedule of Rexall Sundown, Inc. and subsidiaries listed in Item 14(a) of this
Form 10-K. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Rexall
Sundown, Inc. and subsidiaries as of August 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1996 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
October 4, 1996
F-2
<PAGE> 23
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31,
--------------------
1995 1996
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 1,154 $ 13,450
Restricted cash....................................................... -- 278
Marketable securities................................................. -- 7,988
Trade accounts receivable, net of allowance for doubtful accounts of
$78 at August 31, 1995 and 1996.................................... 6,957 11,410
Inventory............................................................. 20,512 28,179
Prepaid expenses and other current assets............................. 4,526 5,018
Net current assets of discontinued operations......................... 8,008 3,855
------- --------
Total current assets.......................................... 41,157 70,178
Property, plant and equipment, net...................................... 21,489 24,078
Other assets............................................................ 4,705 8,839
------- --------
Total assets.................................................. $67,351 $103,095
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 5,592 $ 5,599
Accrued expenses and other current liabilities........................ 5,941 10,100
Current portion of long-term debt..................................... 332 346
------- --------
Total current liabilities..................................... 11,865 16,045
Long-term debt.......................................................... 448 105
Other liabilities....................................................... -- 253
------- --------
Total liabilities............................................. 12,313 16,403
------- --------
Commitments and contingencies (Note 15)
Shareholders' equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares, no
shares outstanding................................................. -- --
Common stock, $0.01 par value; authorized 100,000,000 shares, shares
issued: 29,416,050 and 30,660,128, respectively.................... 196 307
Capital in excess of par value........................................ 42,192 53,563
Retained earnings..................................................... 12,650 32,943
Cumulative translation adjustment..................................... -- (121)
------- --------
Total shareholders' equity.................................... 55,038 86,692
------- --------
Total liabilities and shareholders' equity.................... $67,351 $103,095
======= ========
</TABLE>
See accompanying notes
F-3
<PAGE> 24
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................. $ 114,119 $ 149,473 $ 187,844
Cost of sales.............................................. 54,475 65,032 71,682
---------- ---------- ----------
Gross profit..................................... 59,644 84,441 116,162
Selling, general and administrative expenses............... 47,005 65,825 86,673
---------- ---------- ----------
Operating income................................. 12,639 18,616 29,489
Other income (expense):
Interest income.......................................... 361 119 1,251
Interest expense......................................... (109) (424) (40)
Other income............................................. 849 938 1,391
Minority interests in income of consolidated
subsidiary............................................ (21) (45) --
---------- ---------- ----------
Income before income tax provision......................... 13,719 19,204 32,091
Income tax provision....................................... 5,147 6,866 11,798
---------- ---------- ----------
Income from continuing operations.......................... 8,572 12,338 20,293
Discontinued operations:
Loss from discontinued operations (net of tax benefit of
$1,302 and $2,425 in 1994 and 1995, respectively)..... (2,377) (4,278) --
Loss on disposal of discontinued operations including a
provision of $964 for operating losses during the
phase-out period (net of tax benefit of $2,057)....... -- (3,698) --
---------- ---------- ----------
Net income................................................. $ 6,195 $ 4,362 $ 20,293
========== ========== ==========
Income (loss) per share:
Continuing operations.................................... $ .29 $ .42 $ .66
Discontinued operations.................................. (.08) (.15) --
Disposal of discontinued operations...................... -- (.12) --
---------- ---------- ----------
Net income per share............................. $ .21 $ .15 $ .66
========== ========== ==========
Weighted average common shares outstanding................. 29,268,633 29,497,166 30,726,232
</TABLE>
See accompanying notes
F-4
<PAGE> 25
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL
IN CUMULATIVE
NUMBER OF COMMON EXCESS OF RETAINED TRANSLATION
SHARES STOCK PAR VALUE EARNINGS ADJUSTMENT
---------- ------ --------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1993............. 19,312,000 $193 $ 39,428 $ 2,093 $ --
Net income........................... -- -- -- 6,195 --
Exercise of stock options............ 118,000 1 653 -- --
Tax benefit from exercise of
options........................... -- -- 399 -- --
---------- ---- -------- ------- -------
Balance at August 31, 1994............. 19,430,000 194 40,480 8,288 --
Net income........................... -- -- -- 4,362 --
Exercise of stock options............ 80,500 1 428 -- --
Tax benefit from exercise of
options........................... -- -- 285 -- --
Issuance of shares for non-compete
agreement......................... 100,200 1 999 -- --
---------- ---- -------- ------- -------
Balance at August 31, 1995............. 19,610,700 196 42,192 12,650 --
Net income........................... -- -- -- 20,293 --
Exercise of stock options............ 1,244,078 13 6,469 -- --
Tax benefit from exercise of
options........................... -- -- 5,000 -- --
Three-for-two common stock split..... 9,805,350 98 (98) -- --
Cumulative translation adjustment.... -- -- -- -- (121)
---------- ---- -------- ------- -------
Balance at August 31, 1996............. 30,660,128 $307 $ 53,563 $32,943 $ (121)
========== ==== ======== ======= =======
</TABLE>
See accompanying notes
F-5
<PAGE> 26
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income............................................................. $ 6,195 $ 4,362 $ 20,293
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation......................................................... 1,161 2,400 2,797
Amortization......................................................... 346 400 1,202
Loss (gain) on sale of property and equipment........................ 93 158 (18)
Minority interest.................................................... 21 45 --
Deferred income taxes................................................ (75) (1,789) 2,076
Foreign exchange translation adjustment.............................. -- -- (121)
Changes in assets and liabilities:
Trade accounts receivable.......................................... (307) (1,276) (4,453)
Inventory.......................................................... (5,641) (3,063) (7,667)
Prepaid expenses and other current assets.......................... (986) 102 (2,546)
Other assets....................................................... 1,043 85 (5,501)
Accounts payable................................................... 2,338 (2,523) 7
Accrued expenses and other current liabilities..................... (86) 2,493 9,137
Income taxes payable............................................... (918) -- --
Other liabilities.................................................. 22 (22) 253
Discontinued operations -- non-cash charges and changes in assets
and liabilities................................................... (4,199) 2,923 4,153
-------- -------- --------
Net cash provided by (used in) operating activities............. (993) 4,295 19,612
-------- -------- --------
Cash flows provided by (used in) investing activities:
Acquisition of assets of Pennex Products Co., Inc...................... (4,324) -- --
Purchase of marketable securities...................................... (23,335) -- (5,988)
Proceeds from sale of marketable securities............................ 41,443 12 --
Acquisition of property, plant and equipment........................... (10,491) (3,590) (5,391)
Acquisition of computer software....................................... -- (409) (1,835)
Proceeds from sale of property, plant and equipment.................... 32 5 23
Investing activities of discontinued operations........................ (1,247) (1,160) --
Other.................................................................. -- -- (278)
-------- -------- --------
Net cash provided by (used in) investing activities............. 2,078 (5,142) (13,469)
-------- -------- --------
Cash flows provided by (used in) financing activities:
Proceeds from bank line of credit...................................... -- 10,500 --
Payments on bank line of credit........................................ -- (10,500) --
Principal payments on long-term debt................................... (380) (306) (329)
Principal payments under capital lease obligations..................... (95) -- --
Exercise of options to purchase common stock........................... 655 429 6,482
-------- -------- --------
Net cash provided by financing activities....................... 180 123 6,153
-------- -------- --------
Net increase (decrease) in cash and cash equivalents................... 1,265 (724) 12,296
Cash and cash equivalents at beginning of period....................... 613 1,878 1,154
-------- -------- --------
Cash and cash equivalents at end of period............................. $ 1,878 $ 1,154 $ 13,450
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................................... $ 109 $ 403 $ 42
======== ======== ========
Income taxes........................................................... $ 4,838 $ 3,495 $ 3,725
======== ======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY:
On September 30, 1993, the Company acquired substantially all of the assets and
assumed certain liabilities of Pennex Products Co., Inc. (see Note 14) as
follows:
<TABLE>
<S> <C>
Assets acquired.................................. $ 7,372
Cash paid (including advances under debtor-
in-possession financing in fiscal 1993)......... (5,115)
--------
Liabilities assumed.............................. $ 2,257
========
</TABLE>
See accompanying notes
F-6
<PAGE> 27
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF BUSINESS
BUSINESS
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets and
sells vitamins, nutritional supplements and consumer health products through
three channels of distribution: sales to retailers; direct sales through
independent distributors; and mail order sales.
The Company's wholly-owned operating subsidiary, Rexall Showcase
International, Inc. ("Rexall Showcase") markets and distributes health and
wellness products under the Rexall Showcase tradename through a sales force of
independent distributors. On August 31, 1995, the Company purchased the 1%
minority interest of Rexall Showcase, which was owned by the Company's Chairman
of the Board and Chief Executive Officer. Rexall Showcase formed two foreign
subsidiaries located in Mexico and South Korea in order to conduct business
operations in such foreign countries. The Company still owns the stock of
Pennex Laboratories, Inc., now known as RSL Holdings, Inc. ("Pennex"), for
which operations have been discontinued. Pennex manufactured and distributed
over-the-counter ("OTC") pharmaceuticals and health and beauty care products and
is presented as discontinued operations (see Note 14).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. Certain prior period amounts have been
reclassified to conform with the 1996 presentation.
MARKETABLE SECURITIES
As of August 31, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." In accordance with SFAS No. 115, marketable
securities are classified in three categories and accounted for as follows: (1)
held-to-maturity securities are debt securities, which the Company has the
positive intent and ability to hold to maturity, and are reported at amortized
cost; (2) trading securities are debt and equity securities that are bought and
held principally for the purpose of selling them in the near term and are
reported at fair value, with unrealized gains and losses included in current
earnings; and (3) available-for-sale securities are debt and equity securities
not classified as either held-to-maturity securities or trading securities and
are reported at fair value, with unrealized gains and losses excluded from
current earnings and reported in a separate component of shareholders' equity.
Marketable securities consist primarily of government debt instruments and
are classified as available-for-sale securities. Gains and losses realized on
the sale of marketable securities are determined using the specific
identification method. At August 31, 1995 and 1996 the fair value of the
securities approximated cost.
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is charged to expense over the estimated useful lives
of the assets and is computed principally using accelerated methods. Maintenance
and repairs are charged to expense when incurred and betterments are
capitalized. Upon
F-7
<PAGE> 28
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
retirement or sale, the cost and accumulated depreciation are eliminated from
the accounts and the gain or loss, if any, is included in the determination of
net income.
INTANGIBLE ASSETS
Intangible assets, which are included in other assets (non-current), are
stated at cost less accumulated amortization. Intangible assets are amortized on
a straight-line basis over their estimated useful lives which range from three
to fourteen years.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less at the date of purchase to be cash equivalents.
RESTRICTED CASH
Restricted cash consists of funds held in South Korea by the local
government to ensure that funds are available to satisfy customer demands for
refunds. Deposits of 10% of sales are made monthly and monies are refunded
three months after the date of deposit.
INCOME TAXES
The Company utilizes the liability method of accounting for deferred income
taxes. This method requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statement or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial and
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. Deferred tax assets are
also established for the future tax benefits of loss and credit carryovers.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment, and such revenue is recorded
net of estimated sales returns, discounts and allowances.
PREPAID CUSTOMER ALLOWANCES
Costs associated with acquiring sales agreements with certain customers are
amortized over the terms of the agreements. These costs consist of the cost of
inventory provided at no charge and other allowances and are included in other
assets (both current and non-current). The amortization of these costs is
recorded as a reduction of net sales.
ADVERTISING AND CATALOG COSTS
Advertising and mail order catalog costs are expensed as incurred.
RESERVE FOR ESTIMATED CHARGEBACKS
The Company's Rexall Managed Care division, which began operations in
fiscal 1995, markets and distributes vitamins, nutritional supplements and OTC
pharmaceuticals to the managed care market. The Company enters into contracts to
provide such products to various managed care providers who purchase the
F-8
<PAGE> 29
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
products through wholesalers. The difference between the Company's price to the
wholesaler and the Company's contract price to the providers is charged back to
the Company by the wholesaler. Upon sale to the wholesaler, the Company provides
for a reserve of estimated future chargebacks.
FOREIGN CURRENCY TRANSLATION
The financial statements and transactions of the Company's foreign
operations (which began operations in February 1996) are maintained in their
functional currency and translated into United States dollars in accordance with
SFAS No. 52. Assets and liabilities are translated at current exchange rates in
effect at the balance sheet date. Revenues and expenses are translated at the
average exchange rate for each period. Translation adjustments, which result
from the process of translating financial statements into United States dollars,
are accumulated in a separate component of shareholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NET INCOME PER SHARE
Net income per share of common stock (the "Common Stock"), $.01 par value,
of the Company is calculated by dividing net income by weighted average shares
of Common Stock outstanding, giving effect to Common Stock equivalents (Common
Stock options).
NEW ACCOUNTING STANDARDS
Recent pronouncements of the Financial Accounting Standards Board, which
are not required to be adopted by the Company until fiscal 1997, include SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of " and SFAS No. 123, "Accounting for Stock Based
Compensation."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This pronouncement is not expected to have a material impact on the
financial statements of the Company.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. It encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on new fair value accounting
rules. Companies that choose not to adopt the new fair value accounting rules
will be required to disclose pro forma net income and earnings per share under
the new method. The Company anticipates adopting the disclosure provisions of
SFAS No. 123, although the impact of such disclosure has not been determined.
F-9
<PAGE> 30
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INVENTORY
The components of inventory are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Raw materials........................................ $ 8,376 $11,609
Work in process...................................... 1,117 1,732
Finished products.................................... 11,019 14,838
------- -------
Total inventory............................ $20,512 $28,179
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Land................................................. $ 2,022 $ 2,022
Buildings and improvements........................... 13,894 14,064
Machinery and equipment.............................. 10,112 14,479
Leasehold improvements............................... 251 506
Furniture and fixtures............................... 1,128 1,508
Other assets......................................... 21 212
------- -------
27,428 32,791
Less accumulated depreciation and amortization..... (5,939) (8,713)
------- -------
Property, plant and equipment, net......... $21,489 $24,078
======= =======
</TABLE>
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ USEFUL
1995 1996 LIVES
------ ------- ------------
<S> <C> <C> <C>
Intangible assets:
Non-compete agreement..................... $ 1,000 $ 1,000 5 years
License and registration fees............. 170 170 5 years
Organizational costs...................... -- 450 3 years
Computer software......................... 622 2,457 5 years
Trademarks................................ 224 224 10-14 years
Purchased technology...................... 500 --
Patents................................... -- 1,500 10.5 years
Other securities............................ 2,000 150
Prepaid customer allowances................. 573 3,121
Other....................................... 184 1,042
------ -------
5,273 10,114
Less accumulated amortization............. (568) (1,275)
------ ------
Total other assets................ $ 4,705 $ 8,839
======= =======
</TABLE>
F-10
<PAGE> 31
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities is comprised of the
following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1995 1996
------ -------
<S> <C> <C>
Accrued customer rebates.......................................... $ 542 $ 2,166
Reserve for estimated chargebacks................................. 894 460
Accrued commissions............................................... 2,461 2,823
Accrued salaries and bonuses...................................... 844 2,099
Income taxes...................................................... -- 823
Other............................................................. 1,200 1,729
------ -------
Total accrued expenses and other current liabilities.... $5,941 $10,100
====== =======
</TABLE>
7. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1995 1996
------ -------
<S> <C> <C>
Non-compete agreement, non-interest bearing net of discount
imputed at 8%, of $67 and $23 at August 31, 1995 and 1996,
respectively, maturing in January 1998, guaranteed by the
Company's Chief Executive Officer............................... $ 650 $ 403
$650 promissory note, interest at 9%, maturing in April 1997...... 130 48
---- ----
780 451
Less current portion......................................... 332 346
---- ----
Total long-term debt.................................... $ 448 $ 105
====== =======
</TABLE>
On September 7, 1994, the Company entered into a revolving line of credit
with a financial institution that provides for borrowings up to $10 million,
subject to annual extensions. The revolving line of credit was renewed on
September 7, 1995 and was extended for ninety days on September 7, 1996.
Borrowings under the line of credit bear interest at the prime rate. The line of
credit is collateralized by accounts receivable and inventory and is subject to
compliance with certain financial covenants and ratios, including a minimum
tangible net worth. There were no amounts outstanding under this revolving line
of credit at August 31, 1996.
8. LEASE OBLIGATIONS
The Company leases certain equipment, automobiles and warehouse and
distribution facilities under noncancelable operating leases. The leases provide
for monthly payments over terms of one to five years and certain of the leases
provide for renewal options. Total rent expense on all operating leases amounted
to approximately $651, $552 and $905 for the years ended August 31, 1994, 1995
and 1996, respectively.
F-11
<PAGE> 32
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. LEASE OBLIGATIONS, CONTINUED
The future minimum lease payments under noncancelable operating leases at
August 31, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997.............................................................. $1,179
1998.............................................................. 677
1999.............................................................. 353
-----
Total................................................... $2,209
=====
</TABLE>
9. BENEFIT PLANS
The Company offers a 401(k) employee benefit plan (the "Plan"), which
provides for voluntary contributions by employees of up to 20% of their base
compensation (as defined in the Plan), subject to a maximum annual contribution.
The Company may, at the discretion of the Board of Directors, make a
contribution to the Plan. The Company contributed approximately $128, $158 and
$159 during fiscal 1994, 1995 and 1996, respectively.
In March 1993, the Board of Directors and shareholders adopted the
Company's 1993 Employee Stock Purchase Plan (the "1993 Stock Purchase Plan").
The 1993 Stock Purchase Plan enables participants to contribute cash in an
amount not to exceed 10% of salary per relevant pay period. Such funds are used
to periodically purchase shares of Common Stock for the account of each of the
participants in the 1993 Stock Purchase Plan at 90% of the market price of the
Common Stock. The Company has reserved 750,000 shares of Common Stock for
issuance under the 1993 Stock Purchase Plan and may issue such shares or
purchase additional shares of Common Stock in the open market. For the years
ended August 31, 1995 and 1996, participants purchased 11,064 and 4,431 shares
in the open market at an average purchase price of $7.40 and $18.14 per share,
respectively.
In February 1996, the Board of Directors adopted the Company's 1996 Rexall
Showcase International Distributor Stock Purchase Plan (the "1996 Distributor
Stock Purchase Plan"). The 1996 Distributor Stock Purchase Plan enables
participants to contribute cash in an amount not to exceed 10% of a
participant's monthly commission check. Such funds are used to periodically
purchase shares of Common Stock for the account of each of the participants in
the 1996 Distributor Stock Purchase Plan at either 95% or 100% of the market
price of the Common Stock, depending on a participant's level of achievement in
Rexall Showcase. The Company has reserved 750,000 shares of Common Stock for
issuance under the 1996 Distributor Stock Purchase Plan and may issue such
shares or purchase additional shares of Common Stock in the open market for
participants. For the year ended August 31, 1996, participants purchased 1,157
shares of Common Stock in the open market at an average purchase price of $32.50
per share.
10. COMMON STOCK TRANSACTIONS
On October 5, 1993, the Board of Directors declared a 2-for-1 split of the
Common Stock which was effected in the form of a stock dividend. The stock
dividend was paid on October 28, 1993 to shareholders of record as of October
18, 1993.
On March 14, 1996, the Board of Directors declared a 3-for-2 split of the
Common Stock which was effected in the form of a stock dividend. The stock
dividend was paid on April 4, 1996 to shareholders of record as of March 25,
1996.
F-12
<PAGE> 33
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. COMMON STOCK TRANSACTIONS, CONTINUED
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 splits on a retroactive basis.
11. STOCK OPTIONS
In March 1993, the Board of Directors and shareholders adopted the
Company's 1993 Stock Incentive Plan (the "1993 Plan") for executives and other
key personnel. The 1993 Plan is administered by the Compensation/Stock Option
Committee of the Board of Directors of the Company. Under the 1993 Plan, all
options are to have an exercise price equal to the fair market value at the date
of grant. In February 1995, the Board of Directors amended the 1993 Plan to
increase the number of shares of Common Stock of the Company available
thereunder to a total of 4,500,000 shares, which amendment was approved by the
Company's shareholders in February 1996. Of the stock options granted,
substantially all are for a term of five to ten years. During fiscal 1995 and
1996, the Company realized a tax benefit of $286 and $5,000, respectively,
related to the exercise of stock options.
In March 1993, the Board of Directors and shareholders adopted the
Company's 1993 Non-Employee Director Stock Option Plan (the "1993 Director
Plan"). The maximum number of shares of Common Stock available for issuance
under the 1993 Director Plan is 60,000 shares.
In July 1994, the Board of Directors adopted the Company's 1994
Non-Employee Director Stock Option Plan (the "1994 Director Plan"), which was
approved by the Company's shareholders in February 1995. The maximum number of
shares of Common Stock available for issuance under the 1994 Director Plan is
150,000 shares.
As of August 31, 1996, stock options to purchase 927,900 shares of Common
Stock had been granted outside of any Company plan and have an exercise price
equal to fair market value at date of grant. Substantially all of these options
are for a term of five to seven years.
In February 1996, the Board of Directors adopted the Company's 1996 Rexall
Showcase International Distributor Stock Option Plan (the "1996 Distributor
Plan"). The 1996 Distributor Plan provides for the granting of stock options to
eligible distributors upon attainment of specified conditions at an exercise
price not less than the fair market value on the date of grant. The maximum
number of shares of Common Stock available under the 1996 Distributor Plan is
750,000 shares. Options granted under the 1996 Distributor Plan will be for a
term of five years. As of August 31, 1996, no options have been granted under
the 1996 Distributor Plan.
F-13
<PAGE> 34
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. STOCK OPTIONS, CONTINUED
Information with regard to the stock options is as follows:
<TABLE>
<CAPTION>
SHARES
-----------------------------------------------------------
1993 1994
1993 DIRECTOR DIRECTOR OTHER OPTION PRICE
PLAN PLAN PLAN OPTIONS RANGE
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Outstanding at August 31,
1993.......................... 1,134,000 15,000 -- 441,000
Granted....................... 595,800 -- 15,000 419,400 $5.42-$14.17
Cancelled..................... (7,200) -- -- -- $3.17-$4.67
Exercised..................... (135,000) -- -- (42,000) $3.17-$4.67
--------- -------- ------ ------
Outstanding at August 31,
1994.......................... 1,587,600 15,000 15,000 818,400
Granted....................... 1,246,875 -- 22,500 101,250 $5.67-$8.25
Cancelled..................... (352,800) (7,500) (6,000) -- $3.17-$14.17
Exercised..................... (59,250) -- (1,500) (60,000) $3.17-$6.33
--------- -------- ------ ------
Outstanding at August 31,
1995.......................... 2,422,425 7,500 30,000 859,650
Granted....................... 936,451 -- 22,500 112,500 $9.50-$30.00
Cancelled..................... (262,650) -- -- (146,250) $3.17-$14.50
Exercised..................... (722,678) (1,000) -- (520,400) $3.17-$11.42
--------- -------- ------ ------
Outstanding at August 31,
1996.......................... 2,373,548 6,500 52,500 305,500 $3.17-$30.00
========= ======== ====== ======
Options currently exercisable... 678,318 3,500 9,000 184,300
========= ======== ====== ======
Options available for grant at
August 31, 1996............... 1,206,524 52,500 96,000 --
========= ======== ====== ======
</TABLE>
12. SALES TO A MAJOR CUSTOMER AND CONCENTRATION OF CREDIT RISK
The Company had sales to Phar-Mor, Inc., a national retailer, which
represented approximately 17%, 11% and 5% of net sales for the years ended
August 31, 1994, 1995 and 1996, respectively. Trade accounts receivable from
this customer amounted to approximately $63 and $975 at August 31, 1995 and
1996, respectively.
The Company sells products to a large number of customers, which are
primarily in the United States. The Company continuously evaluates the
creditworthiness of each customer's financial condition and generally does not
require collateral.
Financial instruments that potentially subject the Company to concentration
of credit risk are cash, marketable securities and trade accounts receivable.
The Company places its temporary cash investments with high credit quality
financial institutions.
Marketable securities consist primarily of United States Government
securities with high credit quality financial institutions.
13. INCOME TAXES
The Company files a consolidated United States income tax return with its
domestic subsidiaries. For state income tax purposes the Company and its
subsidiaries file on both a consolidated and separate return basis in the states
in which they do business. Rexall Showcase's subsidiaries in Mexico and South
Korea file income tax returns in their respective countries of incorporation.
F-14
<PAGE> 35
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
13. INCOME TAXES, CONTINUED
Deferred income taxes as of August 31, 1996 relate primarily to the reserve
for loss on disposition of discontinued operations which is deductible when
realized, amortization of a non-compete agreement which is deductible when paid,
inventory and accounts receivable reserves and book depreciation versus tax
depreciation.
The following reflects the income tax provision (benefit) the Company
incurred for the fiscal years ended August 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31,
----------------------------
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Current:
Federal.......................................................... $3,588 $ 3,866 $ 8,871
State............................................................ 332 307 776
Foreign.......................................................... -- -- 60
------ ------- -------
3,920 4,173 9,707
------ ------- -------
Deferred:
Federal.......................................................... (54) (1,657) 1,921
State............................................................ (21) (132) 153
Foreign.......................................................... -- -- 17
------ ------- -------
(75) (1,789) 2,091
------ ------- -------
Total income tax provision............................... $3,845 $ 2,384 $11,798
====== ======= =======
</TABLE>
The following summarizes the total income tax provisions for each of the
years ended August 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Continuing operations............................................. $ 5,147 $ 6,866 $11,798
Discontinued operations........................................... (1,302) (2,425) --
Loss on disposal of discontinued operations....................... -- (2,057) --
------ ------ -------
$ 3,845 $ 2,384 $11,798
====== ====== =======
</TABLE>
The following table summarizes the differences between the Company's
effective tax rate for financial statement purposes and the Federal statutory
rate as of August 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Income tax provision, at 35%....................................... $3,514 $ 2,360 $11,288
Statutory federal surtax exemption................................. (100) (66) --
State income tax, net of federal benefit........................... 275 177 624
Non-deductible expenses............................................ 30 54 83
Other, net......................................................... 126 (141) (197)
------ ------ -------
Total income tax provision............................... $3,845 $ 2,384 $11,798
====== ====== =======
</TABLE>
F-15
<PAGE> 36
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
13. INCOME TAXES, CONTINUED
The significant components of the deferred tax assets and liabilities at
August 31, 1994, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ------ -----
<S> <C> <C> <C>
Deferred income tax assets:
Loss on disposition of discontinued operations............... $ -- $2,057 $ 185
Non-compete amortization..................................... 302 238 149
Accounts receivable reserves................................. 112 135 66
Net operating losses......................................... -- -- 269
Other........................................................ 38 11 102
Valuation allowance.......................................... -- -- (269)
----- ------ ------
- -
452 2,441 502
----- ------ ------
- -
Deferred income tax liabilities:
Depreciation................................................. -- 387 527
Foreign...................................................... -- -- 17
----- ------ ------
- -
-- 387 544
----- ------ ------
- -
$452 $2,054 $ (42)
====== ====== =======
</TABLE>
The financial reporting bases of investments in certain foreign
subsidiaries is less than their tax bases. In accordance with SFAS No. 109, a
deferred tax liability is not recorded for the difference because the
investments are essentially permanent. A reversal of the Company's plans to
permanently invest in these operations would cause the excess to become
deductible. On August 31, 1996, these temporary differences were approximately
$161. A determination of the amount of unrecognized deferred tax asset related
to these investments is not practicable.
On August 31, 1996, the Company had state and foreign net operating losses
of $3,679 and $469, respectively, expiring in 1998 and 2006, respectively.
14. DISCONTINUED OPERATIONS
On August 31, 1995, the Company's Board of Directors approved a plan to
divest Pennex. Accordingly, the Company recorded a reserve in its fiscal 1995
fourth quarter in the amount of $3,698, net of tax benefit of $2,057, to provide
for the loss on disposition of the related assets and liabilities of Pennex and
other expenses related to the closing of the business. The $3,698 reserve
included approximately $964 (net of tax benefit), for estimated operating losses
during the phase-out period subsequent to August 31, 1995. On November 17, 1995,
Pennex ceased operations.
The consolidated financial statements and related footnotes of the Company
have been reclassified to report separately the net assets and operating results
of Pennex as discontinued operations for all periods since the Company acquired
Pennex on September 30, 1993.
F-16
<PAGE> 37
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
14. DISCONTINUED OPERATIONS, CONTINUED
Net assets of Pennex, which are presented as net amounts in the Company's
consolidated balance sheets at August 31, 1995 and 1996, were as follows:
<TABLE>
<CAPTION>
1995 1996
------- ------
<S> <C> <C>
Current assets.................................................... $10,570 $ 76
Property, plant and equipment, net (under contract for sale in
1996)........................................................... 4,324 3,948
Other assets...................................................... 1,005 133
-------- -------
Total assets............................................ 15,899 4,157
-------- -------
Current liabilities............................................... 2,137 39
Reserve for loss on disposition................................... 5,754 263
Other liabilities................................................. -- --
-------- -------
Total liabilities....................................... 7,891 302
-------- -------
Net assets of discontinued operations............................. $ 8,008 $3,855
======== =======
</TABLE>
The results of discontinued operations for the fiscal year ended August 31,
1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Net sales........................................................ $12,307 $18,933
======= =======
Loss from discontinued operations before income tax.............. $(3,679) $(6,704)
Income tax benefit............................................... 1,302 2,425
------- -------
Net loss from discontinued operations............................ $(2,377) $(4,279)
======= =======
Loss on disposal, net of tax benefit of $2,057................... $ -- $(3,698)
======= =======
</TABLE>
On February 1, 1996, substantially all the remaining assets of Pennex were
sold for $6,495. The Company received a $500 deposit and a collateralized note
for the balance. The terms of such note provide for interest at 12%, payable
monthly through March 29, 1996. The rate of interest increased to 18% on April
1, 1996, although interest is being paid at 12% with the balance accruing until
February 28, 1997, when the note is due in full. The note was assigned from
Pennex to the Company as partial consideration for amounts owed to the Company
by Pennex. The Company has been recording interest income on the 12% interest
paid to the Company.
Assuming full collection of the balance of the collateralized note, the
Company expects to record a reduction to the estimated loss on disposition of
approximately $1,400 (net of tax), or $.04 per share, which would be reflected
as an adjustment to discontinued operations.
15. COMMITMENTS AND CONTINGENCIES
In fiscal 1995, the Company renewed employment contracts with certain
Company executives all of which are for three-year terms and entered into an
employment contract with its new President which has a three year, four month
term. The agreements provide for current minimum annual salaries in the
aggregate of $1.6 million, adjusted annually for cost-of-living changes.
The Company has been named in 27 lawsuits, of which 25 have been settled or
discontinued, relating to the manufacture of L-tryptophan. These lawsuits seek
or have sought compensation and damages for alleged personal injury from
ingestion of products containing allegedly contaminated L-tryptophan. The
Company has entered into an agreement with the apparent supplier of all the
alleged contaminated
F-17
<PAGE> 38
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. COMMITMENTS AND CONTINGENCIES, CONTINUED
L-tryptophan products pursuant to which such supplier has agreed to indemnify
the Company against any judgment and to fund settlements arising out of those
claims in certain circumstances, as well as to pay the legal fees and expenses
of the defense. Based upon such indemnification arrangements, the Company's
product liability insurance and the product liability insurance of the Company's
supplier, the Company does not believe that any adverse decision will have a
material adverse effect on the Company and, accordingly, no provision has been
made in the financial statements for any loss that may result to the Company as
a result of these actions.
The Company is also involved in litigation relating to claims arising out
of its operations in the normal course of business. The Company is not currently
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on the Company.
16. SUBSEQUENT EVENT
On October 3, 1996 the Company filed a registration statement with the
Securities and Exchange Commission in connection with a proposed public offering
of 4,000,000 shares of Common Stock. Of those shares, 2,000,000 are being
offered by the Company and 2,000,000 are being offered by certain shareholders
of the Company. The Company intends to use the net proceeds received from the
offering primarily to acquire complementary products, product lines or
businesses, to provide working capital and for general corporate purposes.
17. CONDENSED INTERIM FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
Net sales................................................. $32,105 $37,868 $38,291 $41,209
Gross profit.............................................. 17,776 20,554 22,725 23,387
Income before taxes and discontinued operations........... 4,466 5,533 4,303 4,902
Income from continuing operations......................... 2,750 3,488 2,965 3,135
Loss from discontinued operations......................... (770) (1,139) (1,032) (1,337)
Loss on disposal of discontinued operations............... -- -- -- (3,698)
Net income (loss)......................................... $ 1,980 $ 2,349 $ 1,933 $(1,900)
Income (loss) per common share:
Continuing operations................................... $ .09 $ .12 $ .10 $ .11
Discontinued operations................................. (.02) (.04) (.04) (.05)
Disposal of discontinued operations..................... -- -- -- (.12)
------- ------- ------- -------
Net income per common share........................... $ .07 $ .08 $ .06 $ (.06)
======= ======= ======= =======
1996
Net sales................................................. $40,867 $40,560 $54,781 $51,636
Gross profit.............................................. 24,379 24,510 34,441 32,832
Income before taxes....................................... 5,639 6,437 9,691 10,324
Income from continuing operations......................... 3,556 4,074 6,134 6,529
Net income................................................ $ 3,556 $ 4,074 $ 6,134 $ 6,529
Net income per common share........................... $ .12 $ .13 $ .20 $ .21
======= ======= ======= =======
</TABLE>
F-18
<PAGE> 39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Directors of the Company.
See the Company's Proxy Statement, incorporated by reference in Part
III of this Form 10-K, under the heading "Election of Directors."
(b) Executive Officers of the Company.
See Part I of this Form 10-K at Page 12.
ITEM 11. EXECUTIVE COMPENSATION.
See the Company's Proxy Statement, incorporated by reference in Part III
of this Form 10-K, under the headings "Executive Compensation" and
"Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the Company's Proxy Statement, incorporated by reference in Part III
of this Form 10-K, under the heading "Security Ownership of Certain
Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the Company's Proxy Statement, incorporated by reference in Part III
of this Form 10-K, under the heading "Certain Relationships and Related
Transactions."
-21-
<PAGE> 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS
See "Item 8. Financial Statements and Supplementary Data" for Financial
Statements included with this Annual Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required, not
applicable, or the information is otherwise set forth in the financial
statements or notes thereto.
(3) EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amended and Restated By-Laws (1)
10.1 Redemption Agreement dated January 7, 1988 between the
Company, Carl DeSantis, Sylvia DeSantis, Lorraine Hoffman and Joseph
Greene (1)
10.2 Agreement for Employment and Consulting and Covenant Not to
Compete dated July 1, 1988 between the Company, Joseph Greene and
Carl DeSantis (1)
10.3 Agreement dated December 15, 1992 between the Company and
Herbert V. Shuster, Inc. (1)
10.4 Letter Agreement dated January 25, 1993 between the Company
and Phar-Mor, Inc. together with Agreement for Merchandising
Services and Side Letter of even date therewith (1)(2)
10.5 Amended and Restated Indemnification Agreement dated March 15,
1993 between the Company and Showa Denko America, Inc. (1)
10.6 Guaranty Agreement dated March 15, 1993 between the Company
and Showa Denko K.K. (1)
10.7 Amended and Restated 1993 Employee Stock Purchase Plan (1)
10.8 Form of Non-Qualified Stock Option Agreement (1)
10.9 Amended and Restated 1993 Stock Incentive Plan (3)
10.10 Amended and Restated 1993 Non-Employee Director Stock Option Plan (3)
10.11 Amended and Restated 1994 Non-Employee Director Stock Option Plan (3)
10.12 Employment Agreement dated April 1, 1995 between Carl DeSantis and
the Company, as amended on October 9, 1995 (4)
</TABLE>
-22-
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C>
10.13 Employment Agreement dated April 1, 1995 between Dean DeSantis and
the Company, as amended on April 1, 1996 (4)
10.14 Employment Agreement dated April 1, 1995 between Damon DeSantis and
the Company, as amended on April 1, 1996 (4)
10.15 Employment Agreement dated April 1, 1995 between Nickolas Palin and
the Company, as amended on April 1, 1996 (4)
10.16 Employment Agreement dated April 1, 1995 between Geary Cotton and
the Company (5)
10.17 Employment Agreement dated April 1, 1995 between Richard Werber and the Company (5)
10.18 Employment Agreement dated April 24, 1995 between Christian Nast and the Company
and Amendment thereto dated July 21, 1995 (6)
10.19 Business Loan Agreement dated September 19, 1995 between the Company, Rexall Showcase International, Inc.,
Pennex Laboratories, Inc. (now known Bank of Broward as RSL Holdings, Inc.) and Barnett County, N.A. (7)
10.20 Agreement dated October 13, 1991 between Pennex Products Co., Inc. and The United Steel Workers of America,
the Memorandum thereto dated September 3, 1993 of Understanding with respect and Extension thereto dated
October 10, 1995 (8)
10.21 Agreement dated December 29, 1995 by and between Pennex Laboratories, Inc. (now known as RSL Holdings, Inc.)
and Oakmont Pharmaceuticals, Inc. (9)
10.22 Forbearance Agreement dated April 29, 1996 by and between Oakmont Pharmaceuticals, Inc. and the Company (9)
10.23 Second Forbearance Agreement dated September 23, 1996 by and between Oakmont Pharmaceuticals, Inc. and the
Company (9)
10.24 Industrial Lease dated March 3, 1995 by and between WRC Properties, Inc. and Network Marketing, L.C.
(now known as Rexall Showcase International, Inc.) (9)
10.25 Industrial Lease dated April 17, 1996 by and between WRC Properties, Inc. and the Company (9)
10.26 Standard Industrial Lease dated May 16, 1996 between the Company and Dermody Properties (9)
11 Earnings Per Share Computation (9)
21 Subsidiaries of Registrant (9)
23 Consent of Coopers & Lybrand L.L.P. (9)
27 Financial Data Schedule (for SEC use only) (9)
</TABLE>
____________________
-23-
<PAGE> 42
(1) Filed as an Exhibit to the Company's Registration Statement
on Form S-1 (File No. 33-61382) and incorporated herein by
reference.
(2) Confidential treatment has been granted by the Securities and
Exchange Commission for the redacted portions of these exhibits, and
such confidential portions have been filed with the Securities and
Exchange Commission.
(3) Plan is filed as an Exhibit to the Company's Proxy Statement
dated January 2, 1996 and is incorporated herein by reference.
(4) Employment Agreement is filed as an Exhibit to the Company's Annual
Report on Form 10-K for the Year Ended August 31, 1995 and is
incorporated herein by reference and the amendment thereto is filed
herewith.
(5) Employment Agreement is filed as an Exhibit to the Company's Annual
Report on Form 10-K for the Year Ended August 31, 1995 and is
incorporated herein by reference.
(6) Employment Agreement is filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended May 31, 1995 and
is incorporated herein by reference and the Amendment thereto is
filed as an Exhibit to the Company's Annual Report on Form 10-K for
the Year Ended August 31, 1995 and is incorporated herein by
reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form
10-K for the Year Ended August 31, 1994 and is incorporated herein
by reference.
(8) Agreement and Memorandum of Understanding are filed as an
Exhibit to the Company's Annual Report on Form 10-K for the Year
Ended August 31, 1993 and are incorporated herein by reference and
the Extension is filed as an Exhibit to the Company's Annual Report
on Form 10-K for the Year Ended August 31, 1995.
(9) Filed herewith.
(B) REPORTS ON FORM 8-K
No Report on Form 8-K was filed during the three-month period ended
August 31, 1996.
(C) ITEM 601 EXHIBITS
The exhibits required by Item 601 of Regulation S-K are set forth in
(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES
The financial statement schedules required by Regulation S-K are set
forth in (a)(2) above.
-24-
<PAGE> 43
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.
Dated: October 10, 1996 By: /s/ Carl DeSantis
-------------------
Carl DeSantis,
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Carl Desantis Chairman of the Board and October 10, 1996
- -----------------------
Carl DeSantis Chief Executive Officer
/s/ Christian Nast Director, President and Chief October 10, 1996
- -----------------------
Christian Nast Operating Officer
/s/ Dean DeSantis Director and Senior Vice President-- October 10, 1996
- -----------------------
Dean DeSantis Operations
/s/Damon DeSantis Director and Executive Vice President October 10, 1996
- -----------------------
Damon DeSantis
/s/ Geary Cotton Vice President - Finance, Chief October 10, 1996
- -----------------------
Geary Cotton Financial Officer, Treasurer and
Chief Accounting Officer
/s/ Nickolas Palin Director and Senior Vice President October 10, 1996
- -----------------------
Nickolas Palin Sales and Marketing
/s/ Stanley Leedy Director October 10, 1996
- -----------------------
Stanley Leedy
/s/ Raymond Monteleone Director October 10, 1996
- -----------------------
Raymond Monteleone
/s/ Howard Yenke Director October 10, 1996
- -----------------------
Howard Yenke
</TABLE>
-25-
<PAGE> 44
SCHEDULE II
REXALL SUNDOWN, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
Description of Year Expenses Accounts Deductions End of Year
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994
Allowance for doubtful accounts.............. $78,000 $ 44,446 $ -- $ 44,446 $78,000
Year ended August 31, 1995
Allowance for doubtful accounts.............. $78,000 $154,280 $ -- $154,280 $78,000
Year ended August 31, 1996
Allowance for doubtful accounts.............. $78,000 $112,990 $ -- $112,990 $78,000
</TABLE>
<PAGE> 1
Exhibit 10.12
October 9, 1995
Mr. Carl DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, N.W.
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 Carl DeSantis (the
"Employee"). Effective the date hereof, the Company and the Employee have
agreed to amend Section 3.1 of the Agreement by deleting Section 3.1 in its
entirety and inserting the following provision in lieu thereof:
"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 Thirty Five
Thousand Dollars ($435,000) in cash commencing October 9, 1995 and (ii) for
each succeeding year during the Term commencing April 1, 1997, a salary equal
to that of the previous year increased by the greater of (A) 5% or (B) the
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 April 1,1995 as the base
month."
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 October 1995.
/s/ Carl DeSantis
- -----------------------------
Carl DeSantis
<PAGE> 1
Exhibit 10.13
April 1, 1996
Mr. Dean DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, N.W.
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 Dean DeSantis (the
"Employee"). Effective the date hereof, the Company and the Employee have
agreed to amend Section 3.1 of the Agreement by deleting Section 3.1 in its
entirety and insertign the following provision in lieu thereof:
"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 One Hundred Ninety Thousand
Dollars ($190,000) in cash commencing April 1, 1996 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 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 April 1995 as the base month."
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 April 1996.
/s/ Dean DeSantis
- -----------------------------
Dean DeSantis
<PAGE> 1
Exhibit 10.14
April 1, 1996
Mr. Damon DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, N.W.
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 Damon DeSantis (the
"Employee"). Effective the date hereof, the Company and the Employee have
agreed to amend Section 3.1 of the Agreement by deleting Section 3.1 in its
entirety and inserting the following provision in lieu thereof:
"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 One Hundred Ninety Thousand
Dollars ($190,000) in cash commencing April 1, 1996 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 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 April 1995 as the base month."
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 April 1996.
/s/ Damon DeSantis
- ----------------------------
Damon DeSantis
<PAGE> 1
Exhibit 10.15
April 1, 1996
Mr. Nickolas Palin
Rexall Sundown, Inc.
851 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Dear Nick:
Reference is hereby made to the Employment Agreement (the "Agreement") dated
April 1, 1995 between Rexall Sundown, Inc. (the "Company") and Nickolas Palin
(the "Employee"). Effective the date hereof, the Company and the Employee have
agreed to amend Section 3.1 of the Agreement by deleting Section 3.1 in its
entirety and including the following provision in lieu thereof:
"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 Seventy Five
Thousand Dollars ($275,000) in cash commencing April 1, 1996 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 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 April 1995 as the base month."
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 April 1996.
/s/ Nickolas Palin
- -------------------------------
Nickolas Palin
<PAGE> 1
EXHIBIT 10.21
AGREEMENT dated as of December___, 1995 (the "Agreement") by and between
PENNEX LABORATORIES, INC., a Pennsylvania corporation ("Pennex"), and OAKMONT
PHARMACEUTICALS, INC., a Delaware corporation ("Buyer").
Seller desires to sell and Buyer purchase certain of the assets of Seller,
all as more fully described herein, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby and the representations, warranties, covenants and agreements herein
contained, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE
1.1 Transfer. Upon the terms and subject to the conditions hereinafter
set forth, Seller shall sell, deliver, transfer, assign and convey to Buyer, at
the Closing (as hereinafter defined) and Buyer shall purchase from Seller, free
and clear of all liens, pledges, charges and encumbrances, whether legal or
equitable, except for the purchase money liens reserved by Seller as provided
in Section 1.5 hereof, the assets of Seller set forth on Schedule 1.1 attached
hereto and made a part hereof (the "Assets").
1.2 No Assumed Liabilities. Seller and Buyer acknowledge and agree that
Buyer does not assume and shall not have any obligation, responsibility or
liability for any of Seller's debts, obligations or liabilities of any kind or
nature whatsoever, known or unknown, matured or unmatured, liquid or
contingent, including, without limitation, any which relates in any way to the
Seller's conduct of its business or the ownership of its Assets, all of which
shall remain with and be paid, satisfied or discharged by Seller.
1.3 Instruments of Transfer. At the Closing, Seller shall deliver to
Buyer deeds, bills of sale, endorsements, assignments, certificates of title
and other good and sufficient instruments of transfer as shall be effective to
vest in Buyer good and marketable title to the Assets, free and clear of all
liens, pledges, charges and encumbrances, except for the purchase money liens
reserved by Seller as provided in Section 1.5 hereof. Simultaneously
therewith, Seller shall put Buyer in possession and operating control of the
Assets.
1.4 Instruments Giving Certain Additional Powers and Rights; Further
Assurances; Etc. Seller further agrees that, at any time and from time to time
after the Closing, Seller will, upon the request of Buyer and at Seller's
expense, do, execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged or delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be reasonably
required in order to further transfer, assign, convey, grant, assure and
confirm to Buyer, or to aid and assist in the collection of or the reduction to
possession by Buyer, any of the Assets or to vest in Buyer good and marketable
title to such Assets, free and clear of all liens, pledges, charges and
encumbrances, except for the purchase money liens reserved by Seller in
accordance with Section 1.5 hereof. If Buyer receives any amounts owed to
Seller after the Closing Date, Buyer will immediately remit any such amounts to
Seller. Seller also will reasonably cooperate with Buyer, at Buyer's sole cost
and expense, with Buyer's application for the transfer or renewal of any
permits or licenses held by Seller.
1.5 Purchase Price. The purchase price for the Assets (the "Purchase
Price") which Buyer shall pay and deliver to Seller at the Closing or as
otherwise provided, shall be Six Million Four Hundred Ninety-Five Thousand
Dollars ($6,495,000.00), payable as follows: (a) Five Hundred Thousand Dollars
($500,000.00) payable on or before January 15,1996 in cash or other immediately
available funds and
1
<PAGE> 2
(b) the balance shall be payable as follows: (i) Three
Million Dollars ($3,000,000.00) on or before March 29, 1996 and (ii) Two
Million Nine Hundred Ninety-Five Thousand Dollars ($2,995,000.00) on the
earlier to occur of June 30, 1996 or the date of the closing of the financing
from the Commonwealth of Pennsylvania. Such balance shall be evidenced by a
secured promissory note (the "Promissory Note"), which shall bear interest at
the rate of 12% per annum, payable on the last day of each month commencing
March 31, 1996, provided, however, that if the $3,000,000.00 payment, with all
accrued interest, is not made in full on March 29, 1996, the outstanding
obligation shall bear interest at the rate of 18% per annum from March 29, 1996
until such obligation is paid in full, and which shall be secured by all of the
real and personal property constituting the Assets (the "Mortgage and Security
Agreement"), the forms of which are attached hereto as Schedule 1.5.
1.6 Formulations. Buyer acknowledges that the formulations set forth in
Schedule 1.1 hereof are being transferred to Buyer on a non-exclusive basis and
Seller has sold, or may in the future sell, such formulations to other parties.
1.7 Operational and Other Expenses. Buyer will reimburse Seller for all
of its expenses from January 1, 1996 through the Closing Date relating to its
building and equipment located at One Pennex Drive, Verona, Pennsylvania,
including, without limitation, salaries and expenses of Buyer's employees and
consultants, taxes, insurance, utility costs, secuity, maintainence and repairs
to the building and equipment.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer:
2.1 Valid Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Pennsylvania and Seller has the corporate power to carry on its business as
now conducted and to own its assets. The copies of Seller's Articles of
Incorporation and By-Laws, as amended to date, which have heretofore been
delivered to Buyer, are true and complete copies of those documents as now in
effect.
2.2 Corporate Authority; Binding Nature of Agreement. Seller has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. This Agreement constitutes the valid and binding obligation of
Seller and is enforceable in accordance with its terms.
2.3 Consents. No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties is required to be received by or on
the part of Seller to enable it to enter into and carry out this Agreement and
the transactions contemplated hereby.
2.4 Taxes. All taxes, including, without limitation, income, property,
sales, use, franchise, capital stock, excise, added value, employees' income
withholding, social security and unemployment taxes imposed by the United
States, any state or any foreign country, or by any other taxing authority,
which have or may become due or payable by Seller and all interest and
penalties thereon, whether disputed or not, have been paid in full or
adequately provided for by reserves shown in its books of account; all deposits
required by law to be made by Seller or with respect to estimated income,
franchise and employees withholding taxes have been duly made; and all tax
returns, including estimated tax returns, required to be filed have been duly
filed. No extension of time for the assessment of deficiencies for any year is
in effect and no deficiency is proposed, or to the knowledge of Seller, after
reasonable inquiry, threatened against Seller.
2
<PAGE> 3
2.5 Ownership of Assets. Except as set forth on Schedule 2.5 attached
hereto and made a part hereof, Seller owns outright, and has good and
marketable title to all of the Assets, free and clear of all liens, mortgages,
pledges, claims, conditional sales agreements, restrictions on transfer or
other encumbrances or charges whatsoever.
2.6 Litigation. Except as set forth on Schedule 2.6 attached hereto and
made a part hereof, there are no actions, suits, proceedings or governmental
investigations relating to Seller or the Assets pending or, to the knowledge of
Seller, after reasonable inquiry, threatened, or any order, injunction, award
or decree outstanding, against Seller or against or relating to its properties,
assets or business; and Seller, after reasonable inquiry, does not know of any
basis for any such action, suit, proceeding, governmental investigation, order,
injunction or decree.
2.7 Environmental Matters. Except as provided in the Phase I
environmental site assessment report of Killam Associates dated November 1993
as to the conditions reported as of such date:
(a) Seller has operated its business and each parcel of real
property in the Assets (the "Real Property") in material compliance with all
federal, state and local environmental laws ("environmental laws").
(b) No notice of violation, citation, summons or order has been issued
by any governmental body; no claim or complaint has been filed by any person;
no penalty has been proposed or assessed by any governmental body; and no
inquiry, investigation, enforcement action or review is pending or, to the best
knowledge of Seller, threatened by any person, in each case: (i) with respect
to any violation or alleged violation by Seller of any environmental law, (ii)
with respect to any alleged failure by Seller to have or properly maintain any
permit required in connection with the property or Business, (iii) with respect
to any generation, treatment, storage, recycling, transportation or disposal of
any hazardous substances or wastes, as defined by environmental laws and
including petroleum and related materials ("hazardous substances"), or (iv)
with respect to any release or alleged release on or with respect to the
property.
(c) There have ben no past and there are not pending or contemplated
claims by Seller under any environmental laws based on actions of others that
may have impacted on the Real Property, and Seller has not entered into any
agreement with any person regarding any environmental law, remedial action or
other environmental liability or expense (including contingent liabilities).
(d) To the best of Seller's knowledge, Seller has obtained all material
permits, licenses and other authorizations which are required by environmental
laws and Seller is in compliance in all material respects with such permits,
licenses and authorizations
2.8 Disclaimer of Warranties. Except for the specific representations
and warranties set forth in this Article II, the Assets are being sold "AS IS,"
"WHERE IS" with no warranty made to Buyer, and all warranties, express or
implied, including, but not limited to, the implied warranties of
merchantability and fitness for a particular purpose are disclaimed. In
executing this Agreement and in purchasing Assets, Buyer has not relied upon or
been induced by any statements or representations of any person in respect of
the physical condition of the Assets, Seller's business or the operation
thereof, or any other matter affecting the Assets which might be pertinent in
considering the purchase of the Assets or the execution of this Agreement.
Seller makes no warranty or representation about the Assets, about its present
state of repair, about its condition or maintenance or about its ability to
function in any
3
<PAGE> 4
respect. Buyer expressly acknowledges that no such representations have been
made. Buyer has, on the contrary, relied solely on its inspection, as Buyer
has chosen to make or has made.
2.9 Brokers. Neither Seller nor any of its affiliates has engaged,
consented to, or authorized any broker, finder, investment banker or other
third party to act on its behalf, directly or indirectly, as a broker or finder
in connection with the transactions contemplated by this Agreement. Seller
agrees to indemnify Buyer against, and to hold it harmless from, any claim for
brokerage or similar commission or other compensation which may be made against
Buyer by any third party in connection with the any transactions contemplated
hereby which claim is based upon any action by Seller or any of its affiliates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller:
3.1 Valid Corporate Existence. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has the corporate power to carry on its business as now conducted and to
own its assets. The copies of Buyer's Articles of Incorporation and By-Laws,
as amended to date, which have heretofore been delivered to Seller, are true
and complete copies of those documents as now in effect.
3.2 Corporate Authority; Binding Nature of Agreement. Buyer has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. This Agreement constitutes the valid and binding obligation of
Buyer and is enforceable in accordance with its terms.
3.3 Consents. No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties is required to be received by or on
the part of Buyer to enable it to enter into and carry out this Agreement and
the transactions contemplated hereby.
3.4 Brokers. Buyer has not engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement, and Buyer agrees to indemnify
Seller against, and to hold it harmless from, any claim for brokerage or other
similar commission or other compensation which may be made against Buyer by any
third party in connection with the transactions contemplated hereby which claim
is based upon any action by Buyer.
ARTICLE IV
COVENANTS
4.1 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to carry out the purposes of this Agreement.
4.2 Access; Conduct of Business; No Negotiations. Unless otherwise
provided herein, Seller hereby covenants that from and after the date hereof
and until the Closing or earlier termination of this Agreement:
4
<PAGE> 5
(a) Access. Seller shall afford to the officers, attorneys,
accountants and other authorized representatives of Buyer free and full access,
during regular business hours and upon reasonable notice, to all of its books,
records, personnel and properties so that Buyer, at its own expense, may have
full opportunity to make such review, examination and investigation as Buyer
may desire of the Assets. Seller will cause its employees, accountants and
attorneys to cooperate fully with said review, examination and investigation.
(b) Conduct of Business. Seller's business will be conducted in such
manner to insure continued compliance with the Good Manufacturing Practices
("CGMPs") as promulgated by the United States Food and Drug Administration (the
"FDA") and such other regulations pertaining to the operations of a
pharmaceutical facility and the formulations which have been approved by the
FDA; provided, however, Buyer understands that Seller has ceased operations and
nothing herein shall require Seller to do anything other than maintain its
facility in a maintenance mode.
(c) No Negotiations. Until December 31, 1995 or the termination of
this Agreement, whichever shall occur first, Seller shall not enter into or
conduct any discussions or negotiations, or enter into any agreement or
understanding, for the sale or possible sale of Seller's securities or business
or all or substantially all of its assets with anyone other than Buyer.
4.3 Payment, Release and Assumption of Liabilities. Seller agrees to pay
and satisfy in full on a timely basis all obligations and liabilities, of any
nature whatsoever, including without limitation any liabilities with respect to
taxes, owed or incurred by it at any time which are due and payable after the
Closing Date. Seller hereby acknowledges and agrees that Buyer does not and
will not assume, and will not otherwise be liable for, any liabilities,
obligations or commitments of Seller, whether accrued, absolute, contingent,
due or to become due, or yet unassessed or unknown.
4.4 Bulk Sales Laws. The parties waive compliance with the applicable
Bulk Sales laws, if any, and Seller will indemnify and hold Buyer harmless from
such non-compliance.
4.5 Limitation of Liability. It is understood and agreed that Seller's
liability, whether in contract, in tort, under any warranty, in negligence or
otherwise, will not exceed the amount of the Purchase Price paid by Buyer and
under no circumstances will Seller be liable for special, indirect or
consequential damages.
4.6 Records Maintenance; Access.
(a) After the Closing Date, Buyer will store and maintain all current
and historical information relating to products manufactured, assembled, sold
or serviced by Seller including all sales literature, sales data and other
information (including correspondence and recorded knowledge) relating to the
foregoing and all other current and historical information relating to the
Assets, including employee records, accounting information and the medial in
which or on which any such information, knowledge, data or records may be found
or otherwise stored. Without limiting the generality of the foregoing, the
materials to be stored and maintained by Buyer shall include reserve samples of
each lot or batch of drug product manufactured by Seller, any production,
control or distribution records, components, drug product containers, closures
and labeling, complaint files and any other records or reports, ingredients,
components or Product samples to be kept by Seller in accordance with CGMPs.
Such materials required to be maintained under CGMPs shall be maintained by
Buyer and its successors in interest for a sufficient period of time and under
sufficient conditions of storage, practice and use as to comply with CGMPs.
5
<PAGE> 6
(b) At Seller's expense, upon reasonable notice and request and during
the normal business hours, Buyer shall for a period of at least five (5) years
after the Closing Date (i) afford Seller free and full access to Seller's tax
and accounting records, for all purposes relating to its tax returns or to its
obligations under this Agreement relating to periods prior to the Closing; and
(ii) permit Seller to make extracts from and copies of such records.
(c) At Seller's expense, upon reasonable notice and request and during
normal business hours, Buyer shall for a period of at least five (5) years
after the Closing Date (i) afford Seller free and full access to all such
information and materials maintained by Buyer as set forth in Section 4.6 (a)
hereof, for all purposes relating to the safety and efficacy of any product of
any product manufactured by Seller or the propriety and legality of any action
or forbearance from action by Seller in the conduct of its business operation;
and (ii) permit Seller to make extracts from and copies of such records, and to
take such reserve samples of ingredients, products, components, containers,
closures and labeling as may be required by Seller.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to close hereunder is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any one or
more of which may be waived by Buyer (except when the fulfillment of such
condition is a requirement of law);
5.1 Representations and Warranties. All representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as at the Closing Date as if made at the Closing Date and as of the
Closing Date.
5.2 Covenants. Seller shall have performed and complied in all material
respect with all covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing.
5.3 Certificate. Buyer shall have received a certificate dated the
Closing Date, signed by the President or Vice President and Treasurer or
Secretary of Seller as to the satisfaction of the conditions contained in
Section 5.1 and 5.2 hereof.
5.4 No Injunction, etc. There shall not be in effect any injunction,
order or other decree by any court or governmental body prohibiting,
restraining or otherwise preventing the consummation of the transactions
contemplated hereby.
5.5 Instruments of Conveyance. Seller shall have executed and delivered
such bills of sale, deeds and other conveyance documents necessary to convey
the Assets to Buyer in accordance with the terms hereof.
5.6 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by Seller and the consummation of
the transactions contemplated hereby shall have been duly and validly taken and
Seller shall have full power and right to consummate the transactions
contemplated by this Agreement.
6
<PAGE> 7
5.7 Name Change. Within five (5) days after the Closing, Seller shall
change its name to a name that does not contain the words "Pennex."
5.7 Additional Documents. Seller shall have delivered all such other
certificates and documents as Buyer or its counsel may have reasonably
requested.
5.8 Approval of Counsel. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto, and all
other related legal matters, shall have been approved as to form and substance
by counsel to Buyer, which approval shall not be unreasonably withheld or
delayed.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to close hereunder is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any one or
more of which may be waived by Seller (except when the fulfillment of such
condition is a requirement of law).
6.1 Representations and Warranties. All representations and warranties of
Buyer contained in this Agreement shall be true and correct in all material
respects as at the Closing Date, as if made at the Closing and as of the
Closing Date.
6.2 Covenants. Buyer shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing.
6.3 Certificate. Seller shall have received a certificate dated the
Closing Date, signed by the President or Vice President and Treasurer or
Secretary of Buyer as to the satisfaction of the conditions contained in
Section 6.1 and 6.2 hereof.
6.4 No Injunction, etc. There shall not be in effect any injunction, order
or other decree by any court or governmental body prohibiting, restraining or
otherwise preventing the consummation of the transactions contemplated hereby.
6.5 Consideration. Seller shall have received the Purchase Price
consisting of (a) $500,000.00; (b) the Promissory Note; and (c) the Mortgage
and Security Agreement. In addition, Buyer shall pay to Seller the expenses
required by Section 1.7 hereof.
6.6 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and
Buyer shall have full power and right to consummate the transactions
contemplated by this Agreement.
6.7 Additional Documents. Buyer shall have delivered all such certified
resolutions, certificates and documents with respect to Buyer as Seller or its
counsel may have reasonably requested.
6.8 Approval of Counsel. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto, and all
other related legal matters, shall have been
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<PAGE> 8
approved as to form and substance by counsel to Seller, which approval
shall not be unreasonably withheld or delayed.
ARTICLE VII
CLOSING
7.1 Location. The closing (the "Closing") provided for herein shall take
place at the offices of Seller at 10:00 A.M. on January 15, 1996 at such time
and place as may be mutually agreed to by the parties. Such date is referred
to in this Agreement as the "Closing Date."
7.2 Items to be Delivered by Seller. At the Closing, Seller will deliver
or cause to be delivered to Buyer:
(a) executed bills of sale, deeds and other conveyance documents that
serve to convey the Assets to Buyer in accordance with the terms hereof;
(b) certified copies of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions hereby shall been duly and validly taken and
Seller shall have full power and right to consummate the transactions
contemplated by this Agreement;
(c) such other certified resolutions, documents and certificates as are
required to be delivered by Seller pursuant to the provisions of this
Agreement;
(d) such other certificates and documents as Buyer may have reasonably
requested; and
(e) all actions, proceedings, instruments and documents required to
carry out this Agreement, or incidental thereto, and all the related legal
matters shall have been approved as to the form and substance by counsel to
Buyer, which approval shall not be unreasonably withheld.
7.3 Items to be Delivered by Buyer. At the Closing, Buyer will deliver or
cause to be delivered to the Seller:
(a) the cash portions of the Purchase Price shall be delivered to
Seller in accordance with Section 1.2 hereof and the expense reimbursement
shall be declared to Seller in accordance with Section 1.7 hereof.
(b) the executed Promissory Note shall be delivered to Seller in
accordance with Section 1.2 hereof;
(c) the executed Mortgage and Security Agreement shall be delivered in
accordance with Section 1.2 hereof;
(d) certified copies of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions hereby shall been duly and validly taken and
Buyer shall have full power and right to consummate the transactions
contemplated by this Agreement;
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<PAGE> 9
(e) such other certified resolutions, documents and certificates as are
required to be delivered by Buyer pursuant to the provisions of this Agreement;
(f) such other certificates and documents as Seller may have reasonably
requested; and
(g) all actions, proceedings, instruments and documents required to
carry out this Agreement, or incidental thereto, and all the related legal
matters shall have been approved as to the form and substance by counsel to
Seller, which approval shall not be unreasonably withheld.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 Survival. The parties agree that their respective representations,
warranties, covenants and agreements contained in this Agreement shall survive
the Closing for a period of six (6) months.
8.2 Indemnification.
(a) Seller agrees to save, defend and indemnify Buyer against and hold
it harmless from any and all liabilities, of every kind, nature and
description, fixed or contingent (including, without limitation, counsel fees
and expenses in connection with any action, claim or proceeding relating to
such liabilities) arising out of any transaction or event commencing or
occurring on or prior to the Closing Date, or by reason of any breach or
failure of observance or performance of any representation, warranty, covenant,
agreement or commitment made by Seller hereunder or as a result of any such
representation, warranty, covenant, agreement or commitment being untrue or
incorrect in any respect.
(b) Buyer agrees to indemnify Seller and hold it harmless from and
against any and all obligations or liabilities, of every kind, nature and
description, fixed or contingent (including, without limitation, counsel fees
and expenses in connection with any action or proceeding relating to such
liabilities), arising out of Buyer's operations of the Assets after the Closing
Date, or by reason of any breach or failure of observance or performance of any
representation, warranty, covenant, agreement or commitment made by Buyer
hereunder or relating hereto or as a result of any such representation,
warranty, covenant, agreement or commitment being untrue or incorrect in any
respect.
8.3 Defense of Claims. A party entitled to indemnification hereunder (an
"Indemnified Party") agrees to notify each party required to indemnify
hereunder (an "Indemnifying Party") with reasonable promptness of any claim
asserted against it in respect of which any Indemnifying Party may be liable
under this Agreement, which notification shall be accompanied by a written
statement setting forth the basis of such claim and the manner of calculation
thereof. An Indemnifying Party shall have the right to defend any such claim
at its or his own expense and with counsel of its or his choice; provided,
however, that such counsel shall have been approved by the Indemnified Party
prior to engagement, which approval shall not be unreasonably withheld or
delayed; and provided further, that the Indemnified Party may participate in
such defense, if it so chooses, with its own counsel and at its own expense.
8.4 Rights Without Prejudice. The rights of the parties under this
Article VIII are without prejudice to any other right or remedies that it may
have by reason of this Agreement or as otherwise provided by law.
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<PAGE> 10
ARTICLE IX
TERMINATION AND WAIVER
9.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing Date:
(a) By mutual consent of the Boards of Directors of Buyer and Seller;
(b) By Buyer if any of the conditions set forth in Article V hereof
shall not have been fulfilled on or prior to January 15, 1996, or shall have
become incapable of fulfillment, and shall not have been waived; or
(c) By Seller if any of the conditions set forth in Article VI hereof
shall not have been fulfilled on or prior to January 15, 1996 or shall become
incapable of fulfillment, and shall not have been waived.
(d) If this Agreement is terminated pursuant to this Section 9.1, this
Agreement shall be void and of no force and effect, without any liability or
obligation on the part of any of the parties.
9.2 Waiver. Any condition to the performance of the parties which legally
may be waived on or prior to the Closing Date may be waived at any time by the
Party entitled to the benefit thereof by action taken or authorized by an
instrument in writing executed by the relevant party or parties. The failure
of any party at any time or times to require performance of any provision
hereof shall in no manner affect the right of such party at a later time to
enforce the same. No waiver by any party of the breach of any term, covenant,
representation or warranty contained in this Agreement, as a condition to such
party's obligations hereunder shall, release or affect any liability resulting
from such breach, and no waiver of any nature, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or of any breach of any other term,
covenant, representation or warranty of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
10.1 Expenses. Each of the parties shall bear its own expenses in
connection herewith, including all accounting, legal and appraisal fees and
settlement charges. Buyer will pay all recording and documentary stamp fees,
if any, in connection with the deed, bill of sale, Promissory Note and Mortgage
and Security Interest and the cost of title insurance.
10.2 Publicity. The parties agree that no publicity, releases or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of both the form
and substance of the same by the other party and its counsel, which approval,
in the case of any publicity, release or other public announcement required by
applicable law, shall not be unreasonably withheld or delayed.
10.3 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set
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<PAGE> 11
forth in this Agreement and in the schedules or exhibits delivered pursuant
hereto constitute all the representations, warranties, covenants and
agreements of the parties and upon which the parties have relied and except as
may be specifically provided herein, no change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
10.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made for all purposes
if sent by certified or registered mail, return receipt requested and postage
prepaid, Federal Express, Express Mail, hand delivered or sent by telefax as
follows:
If to Seller, at:
One Pennex Drive.
Verona, Pennsylvania 15147
Attention: Geary Cotton, Vice President
Fax No. 412-826-4709
With a copy to:
Richard S. Werber, Esq.
851 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Fax No. 407-995-0085
If to Buyer:
110 West Lancaster Avenue
Wayne, Pennslvania 19087
Fax No. 610-293-0550
With a copy to:
Arthur P. Hartel, Jr., Esq.
110 West Lancaster Avenue
Wayne, Pennsylvania 19087
Fax No. 610-293-0550
or at such other address as any party may specify by notice given to other
party in accordance with this Section 10.4. The date of giving of any such
notice shall be the date of the actual receipt thereof.
10.5 Time of Essence. Time is of the essence in this Agreement.
10.6 Choice of Law; Arbitration; Prevailing Party. This Agreement shall be
governed, interpreted and construed in accordance with the laws of the
Commonwealth of Pennsylvania, except that body of law relating to choice of
law. Should any clause, section or part of this Agreement be held or declared
to be void or illegal for any reason, all other clauses, sections or parts of
this Agreement which can be effected without such illegal clause, section or
part shall nevertheless continue in full force and effect. All disputes arising
out of or under this Agreement shall be submitted to the American Arbitration
Association (AAA) to be heard in Allegheny County, Pennsylvania, under
the rules then in
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force, such determination of the AAA shall be enforceable through
collateral proceedings to enforce arbitration awards in the state courts of
Florida which shall have the authority to enjoin any violation of this
Agreement. The prevailing party in any dispute shall be reimbursed all of its
costs, including attorney's fees and costs, by the other party.
10.7 No Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided,
however, that no party may assign any of its rights or delegate any of its
duties under this Agreement without the prior written consent of the other
party except that Buyer may assign all of its rights hereunder to an
affiliate, and Seller may assign the Promissory Note, the Mortgage and the
Security Agreement to an affiliate.
10.9 No Third Party Beneficiaries. This Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
10.10 Headings. The headings or captions under sections of this Agreement
are for convenience and reference only and do not in any modify, interpret or
construe the intent of the parties or effect any of the provisions of this
Agreement.
WITNESS the execution of this Agreement as of the date first above
written.
PENNEX LABORATORIES, INC.
By: _____________________________
OAKMONT PHARMACEUTICALS, INC.
By: _____________________________
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<PAGE> 1
Exhibit 10.22
FORBEARANCE AGREEMENT
THIS AGREEMENT is made as of April 29, 1996, by and between
OAKMONT PHARMACEUTICALS, INC., a Delaware corporation ("Oakmont"), and REXALL
SUNDOWN, INC., a Florida corporation ("Rexall-Sundown"), as assignee of RSL
Holdings, Inc. (formerly known as Pennex Laboratories, Inc. and, before that,
RS Acquisition, Inc.), a Pennsylvania corporation ("RSL").
Pursuant to an Agreement of Purchase and Sale dated as of
December 29, 1995, by and between RSL as Seller and Oakmont as Buyer (the
"Agreement"), RSL sold to Oakmont various assets formerly used in RSL's
pharmaceutical manufacturing business (collectively, the "Assets"), including
(i) certain real estate in Plum Borough, Allegheny County, Pennsylvania (the
"Real Property"), wherein RSL conducted its pharmaceutical manufacturing
operations, and (ii) various items of personal property (collectively, the
"Personal Property") including equipment used by RSL in the conduct of its
operations conducted at the Real Property and inventory located at the Real
Property. RSL retained a mortgage lien on the Real Property and a security
interest in the Personal Property to secure Oakmont's payment of the unpaid
balance of the purchase price of the Assets and various other obligations owed
by Oakmont to RSL (collectively, the "Obligations") pursuant to a promissory
note dated January 31, 1996 (the "Note") and a mortgage dated February 1, 1996
and a security agreement dated January 31, 1996
<PAGE> 2
(such mortgage and security agreement are together hereinafter referred to as
the "Security Documents"). RSL has transferred all of its rights in respect of
the Obligations and in and under the Note and the Security Documents to
Rexall-Sundown. Oakmont has defaulted in the timely payment of the
Obligations. The amount necessary to bring Oakmont current on the Obligations
as of June 30, 1996 (the "Cure Amount"), including interest accrued through
that date at a per annum rate of 12%, will be $454,069.34, comprising interest
in the amount of $301,748.33 accrued on the Note, and reimbursable costs
(together with interest thereon) of $152,321.01. Rexall-Sundown is willing to
forbear from the enforcement of its right to payment on the outstanding balance
of the Obligations on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and
the mutual promises herein contained, Oakmont and Rexall-Sundown, each
intending to be legally bound hereby, agree as follows:
1. Rexall-Sundown waives any right to accelerate the
maturity of the outstanding balance of the Obligations or to exercise any other
right or remedy under the Agreement, the Note, or the Security Documents
available by reason of any payment default thereunder occurring prior to the
date of this Agreement, and if such acceleration shall be deemed to have
occurred prior to the date hereof by reason of any such default, such
acceleration shall be deemed nullified and rescinded. Rexall-Sundown further
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<PAGE> 3
agrees not to accelerate the maturity of the Obligations or take any other
action to enforce payment of the Obligations unless an Event of Default (as
defined below in paragraph 6 below) shall have occurred and be continuing.
2. Oakmont will pay Rexall-Sundown the Cure Amount in
three successive installments as follows:
$250,000.00 will be paid on or before May 25, 1996
$125,000.00 will be paid on or before June 15, 1996
$79,069.34 will be paid on or before June 30, 1996
3. Oakmont will pay the following additional amounts,
representing interest accrued on the outstanding principal due under the Note
at a rate of 12% per annum, on the following dates:
$61,948.33 on or before July 31, 1996
$61,948.33 on or before August 31, 1996
$59,950.00 on or before September 30, 1996
$61,948.33 on or before October 31, 1996
4. Oakmont will pay RSL the following additional amounts
on or before October 31, 1996:
$213,821.67 (representing additional interest accrued at a
rate of 6% per annum from April 1, 1996 through October 31,
1996 on the outstanding principal balance of the Note)
$5,995,000.00 (representing the current unpaid principal
balance due under the Note)
$100,000.00 (representing an agreed upon forbearance fee)
Accordingly, the total amount due and payable by Oakmont to Rexall-Sundown on
October 31, 1996, including the items enumerated in this paragraph 4 and the
interest payment due on October 31, 1996 as provided in paragraph 3, is
$6,370,770.00.
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<PAGE> 4
5. Simultaneously with the execution and delivery of
this Agreement, Oakmont will deliver to Kirkpatrick & Lockhart LLP ("K&L"),
counsel to Rexall-Sundown, at its office at 1500 Oliver Building, Pittsburgh,
PA 15222, the following items: (i) an executed and acknowledged Deed of
Conveyance, conveying the Real Property to a person or persons to be designated
by Rexall-Sundown (such Deed to be prepared in such fashion that the name and
address of the transferee may be inserted by Rexall-Sundown); and (ii) a Bill
of Sale, also prepared in such fashion that the name of the transferee can be
inserted by Rexall-Sundown. The Deed and the Bill of Sale shall be in the
forms annexed hereto as Exhibits A and B, and shall hereinafter be together
referred to as the "Transfer Documents". K&L shall hold the Transfer Documents
in escrow, until directed by Rexall-Sundown to deliver them in accordance with
paragraphs 7 or 9 below.
6. Any of the following events shall constitute an
"Event of Default" for purposes of this Forbearance Agreement: (i) Any of the
installment payments required to be made in respect of the Cure Amount as
provided in paragraph 2 above shall not be made in full on or before its
respective due date; or (ii) Oakmont shall have defaulted in the payment or
performance of any other duty or obligation under this Forbearance Agreement or
the Agreement, the Note or the Security Documents as modified by this
Forbearance Agreement (other than any default waived by Rexall-Sundown pursuant
to paragraph 1 above) and any applicable grace or cure period shall have
expired.
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<PAGE> 5
7. If any Event of Default shall have occurred and be
continuing, then, in any such event, Rexall-Sundown may accelerate the
maturity of all the remaining Obligations and, in addition, may do any or all
of the following: (a) cause K&L to deliver the Transfer Documents to
Rexall-Sundown; cause such Transfer Documents to be completed by the insertion
of the name of the transferee or transferees of the Real Property and the
Personal Property; and cause any or all of the Transfer Documents to be filed
or recorded in the appropriate public records; (b) cause judgment to be entered
in favor of Rexall-Sundown (or its assignee) and against Oakmont for all or any
part of the outstanding balance of the Obligations pursuant to the warrant of
attorney hereinafter set forth; and (c) exercise any and all other rights and
remedies provided by law.
8. If Rexall-Sundown elects to cause K&L to deliver to
Rexall-Sundown the Transfer Documents, then Oakmont shall be released and
discharged from any and all further liability in respect of the Obligations;
provided, however, that nothing in this Forbearance Agreement shall impair
Rexall-Sundown's right to enforce its lien and security interest in the Assets.
9. If all the Obligations are timely paid in full in
accordance with this Forbearance Agreement, the Agreement, the Note, and the
Security Documents as modified by this Forbearance Agreement, and no Event of
Default shall have occurred and be continuing, then upon receipt of such
payment, Rexall-Sundown shall
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release its lien and security interest in the Assets and shall cause K&L to
return the Transfer Documents to Oakmont.
10. OAKMONT HEREBY AUTHORIZES ANY ATTORNEY OF ANY COURT
IN THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR OAKMONT AT ANY TIME AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER, AND CONFESS A JUDGMENT OR
JUDGMENTS AGAINST OAKMONT AND IN FAVOR OF REXALL-SUNDOWN OR ITS ASSIGNS, AS
MANY TIMES AS SHALL BE NECESSARY OR EXPEDIENT, FOR ALL OR ANY PART OF THE THEN
OUTSTANDING BALANCE OF THE OBLIGATIONS, TOGETHER WITH AN ATTORNEY'S FEES OF 15%
OF SUCH AMOUNT, WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
the day and year first above written.
OAKMONT PHARMACEUTICALS, INC.
By:
-------------------------------
Title:
----------------------------
REXALL SUNDOWN, INC.
By:
-------------------------------
Title:
----------------------------
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<PAGE> 1
Exhibit 10.23
SECOND FORBEARANCE AGREEMENT
THIS AGREEMENT (the "Second Forbearance Agreement") is made as
of September 23, 1996, by and between OAKMONT PHARMACEUTICALS, INC., a
Delaware corporation ("Oakmont"), and REXALL SUNDOWN, INC., a Florida
corporation ("Rexall Sundown"), as assignee of RSL Holdings, Inc. (formerly
known as Pennex Laboratories, Inc. and, before that, RS Acquisition, Inc.), a
Pennsylvania corporation ("RSL"), for the purpose of amending the payment terms
under an agreement made as of April 29, 1996, by and between Oakmont and Rexall
Sundown (the "First Forbearance Agreement").
Pursuant to an Agreement of Purchase and Sale dated as of
December 29, 1995, by and between RSL as Seller and Oakmont as Buyer (the
"Purchase Agreement"), RSL sold to Oakmont various assets formerly used in
RSL's pharmaceutical manufacturing business (collectively, the "Assets"),
including (i) certain real estate in Plum Borough, Allegheny County,
Pennsylvania (the "Real Property"), wherein RSL conducted its pharmaceutical
manufacturing operations, and (ii) various items of personal property
(collectively, the "Personal Property") including equipment used by RSL in the
conduct of its operations conducted at the Real Property and inventory located
at the Real Property. RSL retained a mortgage lien on the Real Property and a
security interest in the Personal Property to secure Oakmont's payment of the
unpaid balance of the purchase
<PAGE> 2
price of the Assets and various other obligations owed by Oakmont to RSL
(collectively, the "Obligations") pursuant to a promissory note dated January
31, 1996 (the "Note") and a mortgage dated February 1, 1996 and a security
agreement dated January 31, 1996 (such mortgage and security agreement are
together hereinafter referred to as the "Security Documents"). Thereafter, RSL
transferred all of its rights in respect of the Obligations and in and under
the Note and the Security Documents to Rexall Sundown.
Oakmont defaulted in the timely payment of the Obligations.
Thereafter, Rexall Sundown and Oakmont entered into the First Forbearance
Agreement, whereby Rexall Sundown agreed to forbear from the enforcement of its
right to payment on the outstanding balance of the Obligations on the terms and
conditions set forth therein.
Simultaneously with the execution and delivery of the First
Forbearance Agreement, Oakmont delivered to Kirkpatrick & Lockhart LLP ("K&L"),
counsel to Rexall Sundown, at its office at 1500 Oliver Building, Pittsburgh,
PA 15222, the following items: (i) an executed and acknowledged Deed of
Conveyance, conveying the Real Property to a person or persons to be designated
by Rexall Sundown; and (ii) an executed Bill of Sale, conveying the Personal
Property to a person or persons to be designed by Rexall Sundown. The Deed and
the Bill of Sale are hereinafter together referred to as the "Transfer
Documents". K&L has been holding the Transfer
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Documents in escrow pursuant to the terms of the First Forbearance Agreement.
Oakmont has defaulted in the timely payment of the amounts due
under the First Forbearance Agreement (the "Modified Obligations"). Rexall
Sundown is willing to forbear from the enforcement of its rights and remedies
in respect of such default, on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and
the mutual promises herein contained, Oakmont and Rexall Sundown, each
intending to be legally bound hereby, agree as follows:
1. The effectiveness of this Second Forbearance
Agreement is conditioned on Rexall Sundown's receipt, on or before the date of
this Second Forbearance Agreement, of the sum of $182,966.00, which sum shall
be credited against the payments that became due on June 30, July 31, and
August 31, 1996, under paragraphs 2 and 3 of the First Forbearance Agreement.
2. Subject to the fulfillment of the condition specified
in paragraph 1 above, Rexall Sundown waives any right to accelerate the
maturity of the outstanding balance of the Modified Obligations or to exercise
any other right or remedy under the Purchase Agreement, the Note, the Security
Documents, or the First Forbearance Agreement available by reason of any
payment default thereunder occurring prior to the date of this Second
Forbearance
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<PAGE> 4
Agreement, and if such acceleration shall be deemed to have occurred prior to
the date hereof by reason of any such default, such acceleration shall be
deemed nullified and rescinded. Likewise subject to the fulfillment of the
condition set forth in paragraph 1 above, Rexall Sundown further agrees not to
accelerate the maturity of the Modified Obligations or take any other action to
enforce payment of the Modified Obligations unless an Event of Default (as
defined below in paragraph 8 below) shall have occurred and be continuing.
3. Oakmont will pay Rexall Sundown the sum of $59,950.00
on or before September 30, 1996. This sum shall be credited against the
payment coming due on September 30, 1996, under paragraph 3 of the First
Forbearance Agreement.
4. On or before October 31, 1996, Oakmont will pay
Rexall Sundown the sum of $561,948.33. The payment made pursuant to this
paragraph shall be applied first to accrued and unpaid interest on the Modified
Obligations (including the additional interest accrued at the rate of 6% from
April 1, 1996 through October 31, 1996, as provided in the Note), next to the
$100,000.00 forbearance fee provided for in paragraph 4 of the First
Forbearance Agreement, and the balance to the unpaid principal amount of the
Modified Obligations.
5. Oakmont will pay RSL the following additional amounts
on or before the following dates:
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<PAGE> 5
November 30, 1996 $60,000.00
December 31, 1996 $60,000.00
January 31, 1997 $60,000.00
Payments made pursuant to this paragraph shall be applied first to accrued and
unpaid interest on the Modified Obligations, and next to the unpaid principal
balance of the Modified Obligations.
6. On or before February 28, 1997, Oakmont shall pay the
outstanding balance due under the Purchase Agreement, the Note, and the
Security Documents as modified by the First Forbearance Agreement and this
Second Forbearance Agreement (collectively, the "Modified Documents").
7. If Oakmont shall pay all other amounts due and owing
under the Modified Documents on or before December 31, 1996, then, at the time
such amounts are paid in full, Oakmont shall pay Rexall Sundown an additional
sum of $50,000.00 as an additional forbearance fee; or in the alternative, if
Oakmont shall fail to pay in full all other amounts due and owing under the
Modified Documents on or before December 31, 1996, then, at the time such other
amounts are paid in full, Oakmont shall pay Rexall Sundown an additional sum of
$100,000.00 as an additional forbearance fee.
8. Any of the following events shall constitute an
"Event of Default" for purposes of this Second Forbearance Agreement: (i) Any
of the payments required to be made pursuant to this Second Forbearance
Agreement shall not be made in full on or before its respective due date; or
(ii) Oakmont shall have defaulted in the payment or performance of any other
duty or
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<PAGE> 6
obligation under the Modified Documents (other than any default waived by
Rexall Sundown pursuant to paragraph 2 above) and any applicable grace or cure
period shall have expired.
9. If any Event of Default shall have occurred and be
continuing, then, in any such event, Rexall Sundown may accelerate the maturity
of all the remaining amounts payable hereunder, and, in addition, may do any or
all of the following: (a) cause K&L to deliver the Transfer Documents to
Rexall Sundown; cause such Transfer Documents to be completed by the insertion
of the name of the transferee or transferees of the Real Property and the
Personal Property; and cause any or all of the Transfer Documents to be filed
or recorded in the appropriate public records; (b) cause judgment to be entered
in favor of Rexall Sundown (or its assignee) and against Oakmont for all or any
part of the outstanding balance of such amounts pursuant to the warrant of
attorney hereinafter set forth; and (c) exercise any and all other rights and
remedies provided by law.
10. If, in accordance with this Second Forbearance
Agreement, Rexall Sundown elects to cause K&L to deliver to Rexall Sundown the
Transfer Documents, then Oakmont shall be released and discharged from any and
all further liability in respect of the amounts payable hereunder; provided,
however, that nothing in this Second Forbearance Agreement shall impair Rexall
Sundown's right to enforce its lien and security interest in the Assets.
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<PAGE> 7
11. If all the amounts payable to Rexall Sundown under
the Modified Documents are paid in full, then upon receipt of such payment,
Rexall Sundown shall release its lien and security interest in the Assets and
shall cause K&L to return the Transfer Documents to Oakmont.
12. This Second Forbearance Agreement may be executed in
multiple counterparts and by different parties on different counterparts, each
of which shall be deemed an original, but all of which shall be deemed one and
the same instrument.
13. OAKMONT HEREBY AUTHORIZES ANY ATTORNEY OF ANY COURT
IN THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR OAKMONT AT ANY TIME AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER, AND CONFESS A JUDGMENT OR
JUDGMENTS AGAINST OAKMONT AND IN FAVOR OF REXALL SUNDOWN OR ITS ASSIGNS, AS
MANY TIMES AS SHALL BE NECESSARY OR EXPEDIENT, FOR ALL OR ANY PART OF THE THEN
OUTSTANDING BALANCE DUE AND PAYABLE HEREUNDER, TOGETHER WITH AN ATTORNEY'S FEE
OF 15% OF SUCH AMOUNT, WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF
EXECUTION.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
on or as of the day and year first above written.
OAKMONT PHARMACEUTICALS, INC.
By:
-------------------------------
Title:
----------------------------
- 7 -
<PAGE> 8
REXALL SUNDOWN, INC.
By:
-------------------------------
Title:
----------------------------
- 8 -
<PAGE> 1
Exhibit 10.24
LEASE AGREEMENT
BETWEEN
Network Marketing, L.C.
d.b.a. Rexall Showcase International ("Tenant")
AND
WRC Properties, Inc. ("Landlord")
<PAGE> 2
INDUSTRIAL LEASE
INDEX
<TABLE>
<CAPTION>
TITLE
PAGE PARAGRAPH
<S> <C> <C>
Acceptance of Premises 5 9
Access, Changes in Building
Facilities Name 13 27
Additional Rent 9 15
Alterations 6 11
Assignment 3 6
Broker(s) 11 20
Broker Acknowledgment 17
Common Areas 15 31
Condemnation 12 25
Construction, Applicable Laws 5 7
Default 7 14
Delay of Possession 6 12
Destruction or Damage 6 13
Entire Agreement 16 36
Exhibit "A" - Site Location 18
Exhibit "B" - Rules and Regulations 19
Exhibit "C" - Sign Requirements 21
Hazardous Waste 15 34
Indemnification 10 17
Insurance 11
Liens 12 23
Notices 11 21
Option to Renew 3 3
Peaceful Possession 13 26
Preparation of Premises 5 8
Radon Gas 16 35
Relocation of Tenant 15 32
Rent 1 2
Repairs and Maintenance 5 10
Rules and Regulations 12 22
Security 3 4
Security Systems 14 30
Signs 15 33
Sign Placement Plan 22
Subordination 10 16
Surrender, Holding Over 14 28
Term 1 1
Transfer by Landlord 12 24
Use 3 5
Utilities 14 29
Waiver 11 19
Exhibit "D" - Tenant Improvements 23
Rider No. "1" - Addendum 24
</TABLE>
<PAGE> 3
INDUSTRIAL LEASE
THIS LEASE AGREEMENT, dated as of the 3rd day of March 1995 by and between WRC
Properties, Inc. referred to as "LANDLORD", and Network Marketing, L.C.
hereinafter referred to as "TENANT": d.b.a. Rexall Showcase International
WITNESSETH:
LANDLORD hereby leases to TENANT and TENANT hereby hires from LANDLORD:
Space located at: 7656-7686 N.W. 77th Street (Bldg. 204)
-----------------------------------------
Boca Raton, FL 33487
-----------------------------------------
of Boca Industrial Park
-----------------------------------------
hereinafter referred to as the "Premises" or "Demised Premises", for the term
hereinafter stated, for the rents hereinafter reserved, and upon and subject to
the terms, conditions, and covenants hereinafter provided.
1. TERM:
The term of this Lease shall commence on April 1, 1995 and end at midnight on
March 31, 1998.
2. RENT:
The rent reserved under this Lease for the term hereof shall be and consist of:
A. Base Rent of $ See Page 1A per year, which shall be payable
in advance, in equal monthly installments, without deduction or setoffs and
without prior demand therefore, on the first day of each and every calendar
month during the term of this Lease except that TENANT shall pay, upon
execution and delivery of this Lease by TENANT, the sum of $20,000.00, together
with $9,750.00, representing the first month's portion of the estimated share
of expenses per section 15 of this Lease entitled "Additional Rent", plus
applicable sales tax, to be applied against the first installment of Base Rent
becoming due under this lease.
B. All taxes in the nature of sales, use or similar taxes, now
or hereinafter assessed or levied by any taxing authority upon the payment of
fixed rent or Additional Rent as hereinafter defined, and which the LANDLORD is
required or permitted to collect from TENANT, shall be payable simultaneously
with the payment of Base Rent or Additional Rent.
C. TENANT covenants and agrees to pay a late charge for any
payment of Base Rent not received by LANDLORD on or before the tenth (10th) day
of each month and for any other payment, such as Additional Rent, not received
by LANDLORD on or before the date when same is due. Said late charge shall be
computed from the first day of the month in the case of Rent and from the date
when same is due in case of Additional Rent. The amount of the late charge
shall be an amount equal to the interest commencing on the dates aforesaid,
ending on the date of receipt of the sum(s) by LANDLORD and having a rate equal
to eighteen percent (18%) per annum. In the event any late charge is due to
LANDLORD, LANDLORD shall advise TENANT in writing and TENANT shall pay said
late charge to LANDLORD not later than the date when the next payment of Rent
is due.
1
<PAGE> 4
NETWORK MARKETING, L.C.
D.B.A. REXALL SHOWCASE INTERNATIONAL
RENT SCHEDULE
BASE RENT
Base Rent shall be increased as follows:
<TABLE>
<CAPTION>
Year $/SF ANNUAL RENT MONTHLY RENT
---- ---- ----------- ------------
<S> <C> <C> <C> <C>
1. 04/01/95 - 03/31/96 $4.00 $240,000.00 $20,000.00
2. 04/01/96 - 03/31/97 4.20 252,000.00 21,000.00
3. 04/01/97 - 03/31/98 4.41 264,600.00 22,050.00
</TABLE>
OPERATING EXPENSES
1995 Operating Expenses are estimated at $1.95 per square foot. Operating
Expenses are adjusted annually based on a calendar year.
NETWORK MARKETING, L.C.
D.B.A. REXALL SHOWCASE INTERNATIONAL
60,000 SF @ $1.95/SF = $117,000.00/year
or $9,750.00 per month
1A
<PAGE> 5
E. Additional Rent consisting of all such other sums of money as shall
become due from and payable by TENANT to LANDLORD hereunder (for default in
payment of which LANDLORD shall have the same remedies as for a default in
payment of fixed rent); all to be paid to LANDLORD without demand, deduction,
or set off at its office, or such agent or such other place as Landlord may
designate by notice to TENANT, in lawful money of the United States of America.
Rent and Additional Rent shall be made payable to:
WRC Properties, Inc.
----------------------------
c/o McCoy/PM Realty Group
----------------------------
6301 N.W. 5th Way
----------------------------
Ft. Lauderdale, FL 33309
----------------------------
2
<PAGE> 6
3. OPTION TO RENEW:
A. The TENANT is hereby granted an option to renew/extend this
Lease for an additional three (3) year term, commencing 04/01/98 through
03/31/01, subject to the terms of this Lease as well as the following terms and
conditions:
(1) To exercise this option, the TENANT shall give 180
days written notice prior to the termination date of this lease of its
intention to renew. In the absence of such timely notification, the option to
renew shall be null and void.
(2) TENANT must not be in default of any of the
conditions or covenants of this Lease.
(3) The rental rate during the initial year of the
option period shall be the current market rate. Landlord shall notify Tenant
of the current market rate upon Tenant's written notice of its intention to
renew. Notwithstanding contrary provisions hereof, in no event shall the
renewal rate herein be less than $4.41/SF plus additional rent (operating
expenses). Should Tenant exercise this option, the demised premises shall be
leased in "as-is" condition.
(4) Rental adjustments to the new Base Rent during the
option period shall be made annually in the same manner as adjustments were made
for the initial Lease Term.
4. SECURITY:
TENANT simultaneously with the execution and delivery of this Lease has
deposited with LANDLORD, the sum of $29,750.00 receipt of which is hereby
acknowledged, which sum shall be retained by LANDLORD as security for the
payment by TENANT of the rents herein agreed to be paid by TENANT and for the
faithful performance by TENANT of the terms, conditions, and covenants of this
Lease. It is agreed that LANDLORD, at LANDLORD's option, may at any time apply
said sum or any part thereof toward the payment of the rents and any other sum
payable by TENANT under this Lease, and/or toward the performance of each and
every of TENANT's covenants under this Lease and TENANT's liability under this
Lease shall thereby be reduced pro tanto; that TENANT shall remain liable for
any amounts that such sum shall be insufficient to pay; that LANDLORD may
exhaust and or all rights and remedies against TENANT before resorting to said
sum, but nothing herein contained shall require or be deemed to require
LANDLORD to do so; that, in the event this deposit shall not be utilized for
any of such purposes, then such deposit shall be returned by LANDLORD to TENANT
promptly after the expiration of the term of the Lease. LANDLORD shall not be
required to pay TENANT any interest on said security deposit. Promptly upon
demand by LANDLORD, TENANT shall deposit with LANDLORD such additional sum as
may be necessary to replace any amounts expended therefrom by LANDLORD pursuant
to the provisions hereof, so that there shall always be a security deposit in
the sum first set forth above. Landlord shall provide written notice should
Tenant's security deposit be applied in any manner as described herein. Any
amount of security deposit remaining at lease expiration shall be refunded to
Tenant within 45 days of the expiration date of the Lease.
5. USE:
The TENANT will use and occupy the Premises for _________________ distribution,
warehouse, packaging and ancillary office and for no other use or purpose.
The TENANT will not create nor allow to be created any form of pollution
whether noise, smoke, or otherwise within or without the Demised Premises.
The Tenant shall at its own cost and expense obtain any and all licenses and
permits necessary for any such use.
6. ASSIGNMENT:
TENANT may not assign, sublet, transfer, or dispose of this Lease during the
term hereof, or underlet the Demised Premises or any part thereof or permit the
Premises to be occupied by any other persons without the written consent of
LANDLORD first obtained in each case. If this Lease be assigned, or if the
Demised Premises or any part thereof be underlet or occupied by anybody other
than the TENANT, the LANDLORD may, at LANDLORD's option, after default by the
TENANT, collect rent from the assignee, under tenant, or occupant, and apply
the net amount collected to the rent herein reserved, but no such collection
shall be deemed a waiver of this covenant, or the acceptance of the assignee,
under tenant or occupant as TENANT or a
3
<PAGE> 7
release of the TENANT from the further observance and performance by the TENANT
of the convenants herein contained.
Notwithstanding the foregoing provisions of this paragraph, this Lease may be
assigned, sublet, or transferred to, or the Demised Premises may be underlet
to, or occupied by, in whole or in part, (i) any corporation into or with which
TENANT may be merged or consolidated, or (ii) any corporation which now or
hereafter is an affiliate, subsidiary, parent, or successor of TENANT, or (iii)
any corporation which acquires all or a substantial portion of the stock or
assets of TENANT, or (iv) any partnership, the majority or controlling interest
in which shall be owned by TENANT, or an affiliate, subsidiary, parent, or
successor of TENANT, or by stockholders of TENANT or of an affiliate,
subsidiary, parent, or successor of TENANT, without the written consent of
LANDLORD.
If TENANT shall desire to make interior alterations in connection with an
assignment or subletting which is permitted hereunder, LANDLORD shall not
unreasonably withhold or delay its consent thereto.
For the purpose of this paragraph, a "subsidiary" or "affiliate" or a
"successor" of TENANT shall mean the following:
A. An "Affiliate" shall mean any corporation which, directly
or indirectly controls or is controlled by or is under common control with
TENANT. For this purpose "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities or by contract or otherwise;
B. A "subsidiary" shall mean any corporation not less than
fifty percent (50%) of whose outstanding stock shall, at the time, be owned
directly or indirectly by TENANT;
C. A "successor" of TENANT shall mean:
(1) A corporation in which or with which TENANT, its
corporate successors, or assigns, is merged or consolidated, in accordance with
applicable statutory provisions for merger or consolidation of corporations,
provided that by operation of law or by the effective provisions contained in
the instruments of merger or consolidation, the liabilities of the corporations
participating in such merger or consolidation are assumed by the surviving such
merger or created by such consolidation; or
(2) A corporation or partnership acquiring this Lease
and the term hereby demised and a substantial portion of the property and assets
or the stock of TENANT, its corporate successors, or assigns or;
(3) A corporate or other entity resulting from a
reorganization of TENANT (not a reorganization under the Bankruptcy laws); or
(4) A corporate successor to a successor corporation
becoming such by any of the methods described in (1), (2) or (3), provided that
on the completion of such merger, consolidation, acquisition, or assumption,
the successor shall have a net worth no less than Tenant's net worth
immediately prior to such merger, consolidation acquisition, or assumption.
Acquisition, reorganization, or assumption by TENANT, its corporate successors
or assigns, of a substantial portion of the assets, together with the
assumption of all or substantially all of the obligations and liabilities of
any corporation, shall be deemed a merger of such corporation into TENANT for
the purpose of this paragraph.
Anything to the contrary notwithstanding, where the consent of the LANDLORD is
necessary to a proposed assignment or subletting, TENANT agrees to notify the
LANDLORD in writing of the name, address, terms of the proposed sublease or
assignment, proposed use, and such other data concerning the assignee or
sublessee as TENANT shall have obtained. LANDLORD shall have thirty (30) days
from such notice within which to (a) give its written consent to such
assignment or sublease with TENANT remaining fully liable for its obligations
under the Lease;
4
<PAGE> 8
(b) acquiesce to such assignment or sublease, but terminate TENANT's obligations
under the Lease (provided LANDLORD and assignee or sublessee enter into a new
Lease upon the same terms as set forth in the proposed assignment or sublease);
or (c) give written notice that it is withholding its consent to the proposed
assignment or subletting in accordance with the applicable provisions of this
Lease.
In the event of the transfer and assignment by Landlord of its interest in this
Lease and/or in the building containing the Leased Premises to a person
expressly assuming Landlord's obligations under this Lease, Landlord shall
thereby be released from any further obligations thereunder, and Tenant agrees
to look solely to such successor in interest of the Landlord for performance of
such obligations. Any security given by Tenant to secure performance of
Tenant's obligations hereunder may be assigned and transferred by Landlord to
such successor in interest, and Landlord shall thereby be discharged of any
further obligation relating thereto.
7. CONSTRUCTION, APPLICABLE LAW:
The words "LANDLORD" and "TENANT" as used herein shall include plural as well
as the singular. Words used in masculine gender include the feminine and
neuter. If there be more than one LANDLORD or TENANT, the obligations imposed
hereunder upon the LANDLORD and TENANT shall be joint or several. The section
headings or titles in this Lease are not a part hereof and shall have no effect
upon the construction of interpretation of any part hereof. This Lease shall
be construed and enforced under the laws of the State of Florida. Should any
provisions of this Lease be illegal or unenforceable under such laws, it or
they shall be considered severable and this Lease and its conditions shall
remain in force and be binding upon the parties hereto just as though the
illegal or unenforceable provisions has never been included herein.
8. PREPARATION OF THE PREMISES: "AS IS"
Landlord shall provide tenant improvements as outlined on Exhibit "D", attached
hereto.
9. ACCEPTANCE OF THE PREMISES:
TENANT's failure to give written notice to LANDLORD at any time during the
thirty (30) day period after TENANT has taken possession of the Demised
Premises shall be conclusive evidence that the Demised Premises were in good
order and satisfactory condition on the day TENANT took possession. No promise
of the LANDLORD to alter, remodel, or improve the Demised Premises and no
representation respecting the condition of the Demised Premises have been made
by the LANDLORD to the TENANT, unless the same is contained herein or made a
part hereof, and the TENANT will make no claim on Account of any representations
whatsoever, whether made by any renting agent, broker, officer, or other
representatives of LANDLORD or which may be contained in any circular,
prospectus, or advertisement relating to the Demised Premises, unless the same
is specifically set forth or referenced in this Lease. The LANDLORD agrees
that it will promptly correct any of the work to be performed by the LANDLORD
under the terms of this Lease which defects, inconsistencies or work are set
forth in the above referenced written notice to LANDLORD.
10. REPAIRS AND MAINTENANCE:
The TENANT will, at TENANT's sole cost and expense, keep the Demised Premises
in good repair and tenantable condition during the term of this Lease. The
repair and maintenance of the whole of the Demised Premises, including without
limitation, the nonstructural interior portions of the Demised Premises;
including storefronts, windows, doors, floor covering, plumbing, ventilation,
heating and air conditioning systems, shall be the sole responsibility of the
TENANT at the TENANT's expense.
The TENANT will, at the termination of this Lease, by lapse of time or
otherwise, surrender the Premises in the same condition as when received,
reasonable wear and tear excepted, and shall surrender all keys for the
Premises to LANDLORD. TENANT shall remove all its trade fixtures, leased
equipment and any alterations or improvements which LANDLORD requests to be
removed before surrendering the Premises as aforesaid and shall repair any
damage to the
5
<PAGE> 9
Premises caused thereby. TENANT's obligation to observe or perform this
covenant shall survive the expiration or other termination of the term of the
Lease.
The TENANT shall at its own cost and expense, enter into an annual contract
for regularly scheduled preventive maintenance and repair, with a licensed
maintenance contractor approved by the LANDLORD, for servicing and repair of
all heating and air conditioning systems and equipment serving the Premises.
Not later than thirty (30) days following the commencement of this Lease and
annually thereafter, TENANT shall furnish to LANDLORD a copy of the air
conditioning maintenance contract described above and proof that the annual
premium for the maintenance has been paid. Provided Tenant enter into the
above referenced contract, Landlord shall replace any existing compressors that
will not function.
The service contract must include all services suggested by the equipment
manufacturer. The maintenance contractor shall keep a detailed record of all
services performed on the Premises and prepare a yearly service report to be
furnished to the TENANT and the LANDLORD at the end of each calendar year. The
LANDLORD may, but shall not be required to, upon notice to the TENANT, elect to
enter into such maintenance/service contract on behalf of the TENANT or perform
the work itself, and in either case, charge TENANT therefore, together with a
reasonable charge of overhead.
The LANDLORD agrees to repair and maintain in good order and condition the
roof, roof drains, exterior walls, parking lots, landscaping, exterior
lighting and the structural integrity of the interior and exterior of the
Premises.
11. ALTERATIONS:
TENANT shall make no alterations, additions, installations, improvements, or
decorations in or to the Premises without the written consent of LANDLORD,
which consent shall be subject to the foregoing and upon such terms and
conditions as LANDLORD may require and stipulate in such consent, including
without limitations, (a) physical and spatial limitations, (b) governmental
approvals, (c) payment, (d) bonding to guarantee the payment of contractor's
fees, (e) indemnification, (f) liens, (g) designations of approved contractors
and subcontractors and (h) LANDLORD's insurer's requirements. This clause
shall not be construed to mean that the LANDLORD shall allow any mechanics'
liens upon the Premises based upon work ordered by the TENANT.
12. DELAY OF POSSESSION:
If the Landlord is unable to give possession of the Demised Premises on the
date stipulated in Paragraph 1 hereof as the commencement of the term hereof,
by reason of the LANDLORD not having fully completed construction of the
Demised Premises or the holding over of any prior tenant or tenants or for any
other reason; an abatement or diminution of the rent to be paid hereunder shall
be allowed. TENANT under such circumstances, but noting herein shall operate
to extend the term of this Lease beyond the expiration date; and said abatement
in rent shall be in the full extent of LANDLORD's liability to TENANT for any
loss or damage to TENANT on account of said delay in obtaining possession of
the Premises. In the event Landlord is unable to deliver the leased premises
by May 1, 1995, Tenant may terminate the Lease.
13. DESTRUCTION OR DAMAGE:
A. In the event that the Demised Premises shall be destroyed
or damaged or injured by fire or casualty during the term of this Lease, whereby
all or a part thereof shall be rendered untenantable, then the LANDLORD shall
have the right, to be exercised by notice to TENANT within thirty (30) days
after casualty, to render such premises tenantable by repairs within 180 days
therefrom subject to extension for delays faced by LANDLORD due to adjustment
of insurance proceeds, labor trouble, governmental controls, so-called acts of
God, or any other cause beyond LANDLORD's reasonable control. If said Premises
are not rendered tenantable within said time, it shall, be optional with either
party hereto cancel this Lease, by written notice to the other, and in the
event of such cancellation the rent shall be paid only to the date of such fire
or casualty and paid rent refunded. During any time that the Demised Premises
are untenantable due to causes set forth in this paragraph, the rent or a just
and fair proportion thereof shall be abated.
6
<PAGE> 10
B. If the Demised Premises shall suffer damage to an extent that less
than fifteen percent (15%) of the building in which the Demised Premises are
located are rendered untenantable, then LANDLORD agrees to proceed promptly and
without expense to TENANT to repair the damage and restore the improvement
installed by LANDLORD, and TENANT shall be entitled to an abatement of a fair
and just portion of the rent and other payment required under this Lease
according to TENANT'S ability to use the Premises from the date of such damage
until said Premises are completely reinstated or restored. If damage to the
Demised Premises in excess of $100,000.00 shall occur within the last year of
the initial term or the option extension period provided for herein, the
obligation of the LANDLORD to restore the Premises shall not arise unless
TENANT shall give notice to LANDLORD within thirty (30) days after such damage
of its desire to extend the term of this Lease for an additional option term if
such option term is still available. Upon such notice, LANDLORD agrees with
all due diligence to repair and restore the Demised Premises and the Lease
shall continue. Failing such notice to exercise in available option to extend,
LANDLORD, at its option, shall have the right to terminate this Lease or to
restore the Premises and the Lease shall continue for the remainder of the then
unexpired term and any options which are thereafter exercised. TENANT shall be
entitled to an abatement of a fair and just portion of the rent and other
payments required under this Lease according to the TENANT's ability to use the
Premises from the date of such damage until the Premises are completely
reinstated and restored.
C. No damages, compensation, or claim shall be payable by LANDLORD for
inconvenience, loss of business, or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the building pursuant
to this paragraph. If the LANDLORD is required to, or exercises its rights to,
restore the Premises, then LANDLORD shall use its best efforts not to
unreasonably interfere with the TENANT's use and occupancy. Notwithstanding
anything to the contrary the LANDLORD shall not be liable for damages or claims
if it is unable to obtain insurance.
D. Notwithstanding any of the provisions of the foregoing, if the
LANDLORD or the holder of any superior mortgage, as defined hereafter is unable
to collect all of the insurance proceeds, if any, applicable to the damage or
destruction of the Demised Premises or of the building by fire or some other
casualty or cause, by reason of some action or inaction on the part of the
TENANT, its agents, employees, or contractors then without prejudice to any
other of LANDLORD's remedies available against TENANT, there shall be no
abatement of the rent due from TENANT to the extent of the uncollected
insurance proceeds, if any.
E. LANDLORD will not carry separate insurance of any kind covering
TENANT's property. Except by reason of LANDLORD's breach of any of its
obligations hereunder or by operation of law the LANDLORD shall not be liable
for the repair of any damage or the replacement of TENANT's property.
14. DEFAULT: LANDLORD'S REMEDIES
All rights and remedies of the LANDLORD herein enumerated shall be cumulative,
and none shall exclude another or any other right or remedy provided by law.
A. If TENANT or any guarantor of this Lease shall become bankrupt or
insolvent or unable to pay its debts as such become due, or file any debtor
proceedings or if TENANT or any guarantor shall take or have taken against
either party in any court pursuant to any statute either of the United States
or of any State, a petition in bankruptcy or insolvency or for reorganization
or for the appointment of a receiver or trustee of all or a portion of TENANT's
or any such guarantor's property, or if TENANT or any such guarantor makes an
assignment for the benefit of creditors, or petitions for or enters into an
arrangement, then this Lease shall terminate and LANDLORD, in addition to any
other rights or remedies it may have, shall have the immediate right of
re-entry and may remove all persons and property from the leased Premises and
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of TENANT, all without service of notice or
resort to legal process and without being deemed guilty of trespass, or
becoming liable for any loss or damage which may be occasioned thereby.
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<PAGE> 11
B. If the TENANT defaults in the payment of rent or in the
prompt and full performance of any provisions of this Lease, or if the
leasehold interest or the TENANT's business or fixtures of TENANT are levied
upon under execution or attached by process of law, or if the TENANT makes an
assignment for the benefit of creditors, the TENANT abandons the Premises, then
and in any such event the LANDLORD may, if the LANDLORD so elects, but not
otherwise, and after three (3) days written notice thereof to TENANT, forthwith
terminate this Lease and the TENANT's right to possession of the Demised
Premises, or terminate only TENANT's right to possession hereunder. In the
event Tenant vacates the leased premises yet continues to pay all rent when
due, this shall not be deemed default.
C. Upon any termination of this Lease, whether by lapse of
time or otherwise, the TENANT shall surrender possession and vacate the Premises
immediately, and deliver possession thereof to the LANDLORD, and hereby grants
to the LANDLORD full and free license to enter into and upon the Premises in
such event with or without process of law and to expel or remove the TENANT and
any others who may be occupying or within the Premises and to remove any and
all property therefrom, using such force as may be necessary, without being
deemed in any manner guilty of trespass, eviction, or forcible entry or
detainer, and without relinquishing the LANDLORD's rights to rent or any other
right given to LANDLORD hereunder or by operation of law. The TENANT expressly
waives the service of any demand for the payment of rent or for possession and
the service of any notice of the LANDLORD'S election to terminate this Lease or
to re-enter the Premises, except as provided for in subparagraph (b) of this
paragraph, and agree that the simple breach of any covenants or provisions of
this Lease by the TENANT shall, of itself, without the service of any notice or
demand whatsoever, constitute an unlawful detainer by TENANT of the Premises
within the meaning of the Statutes of the State of Florida.
D. If the TENANT abandons the Premises or otherwise entitles
the LANDLORD so to elect and the LANDLORD does elect to terminate the TENANT's
right to possession only, without terminating the Lease, the LANDLORD may, at
the LANDLORD's option, enter into the Premises, remove the TENANT's signs and
other evidence of tenancy, and take and hold possession thereof without such
entry and possession terminating the Lease or releasing the TENANT, in whole or
in part from the TENANT'S obligation to pay the rent hereunder for the full
term, and in any such case the TENANT shall pay forthwith to the LANDLORD, a
sum equal to the entire amount of the rent reserved under Paragraph 2 of this
Lease for the residue of the stated term plus any other sums then due
hereunder. Upon and after entry into possession without termination of the
Lease, the LANDLORD may, but need not, relet the Premises or any part thereof
for the account of the TENANT to any person, firm, or corporation other than
the TENANT for such rent, for such time, and upon such terms as the LANDLORD in
the LANDLORD's sole discretion shall determine; and the LANDLORD shall not be
required to accept any tenant offered by the TENANT. In any such case, the
LANDLORD may make repairs, alterations, and additions in or to the Premises and
redecorate the same to the extent deemed by the LANDLORD necessary or
desirable, and the TENANT shall, upon demand, pay the cost thereof, together
with the LANDLORD's expenses of the reletting. If the consideration collected
by the LANDLORD upon any such reletting for the TENANT's account is not
sufficient to pay monthly the full amount of the rent reserved in this Lease,
together with the costs of repairs, alterations, additions, redecorating, and
the LANDLORD's expenses, the TENANT shall pay to the LANDLORD the amount of
each monthly deficiency upon demand; and if the consideration so collected from
any such reletting is more than sufficient to pay the full amount of the rent
reserved herein, together with the costs and expenses of the LANDLORD, the
LANDLORD, at the end of stated term of the Lease, shall account for the surplus
to the TENANT.
E. Landlord shall use all remedies available under Florida
state law as it relates to Tenant default. Any and all property which may be
removed for the Premises by the LANDLORD pursuant to the authority of law, to
which the TENANT is or may be entitled, may be handled, removed, or stored by
LANDLORD at the risk, cost, and expense of TENANT, and LANDLORD shall in no
event be responsible for the value, preservation, or safekeeping thereof.
TENANT shall pay to LANDLORD, upon demand, all expenses incurred in such
removal and all storage charges against such property so long as the same shall
be in LANDLORD's possession or under LANDLORD's control. LANDLORD may place
such property after it has been stored for a period of ninety (90) days or more,
LANDLORD may sell any or all of such property in such manner and at such times
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<PAGE> 12
and places as LANDLORD in its sole discretion may deem proper, without notice
to or demand upon TENANT for the payment of any part of such charges or the
removal of any of such property and shall apply the proceeds of such sale first
to the cost of expenses of such sale, including reasonable attorneys' fees;
second, to the payment of the costs and charges of storing any property; third,
to the payment of any other sum of money which may then or thereafter be due to
LANDLORD from TENANT under any of the terms hereof; and fourth, the balance, if
any, to TENANT. The removal and storage of TENANT's property as above
provided shall not constitute a waiver of LANDLORD's lien thereon.
F. TENANT shall pay upon demand all of LANDLORD's costs, charges, and
expenses, including the fees of counsel, agents, and others retained by
LANDLORD, incurred in enforcing TENANT's obligations hereunder or incurred by
LANDLORD in any litigation, negotiations, or transaction in which TENANT causes
LANDLORD, without LANDLORD'S fault, to become involved or concerned.
Attorneys' fees shall be awardable for all phases of litigation, trial, as well
as appellate. To perfect and assist in the implementation of certain of
LANDLORD's rights in and to the TENANT's personal property, TENANT hereby
pledges and assigns to LANDLORD and grants unto LANDLORD a lien upon all
furniture, fixtures, goods, and chattels of TENANT which shall or may be
brought or put on the Premises as further security for the faithful performance
of the terms, provisions, conditions, and covenants of this Lease, and TENANT
specifically agrees that said lien may be enforced by distress, foreclosure, or
otherwise at the election of the LANDLORD. TENANT hereby expressly waives and
renounces for himself and family, any and all homestead exemption right he may
have now or hereafter, under or by virtue of the Constitution or laws of the
State of Florida, or of any other State, or of the United States, as against
the payment of rent, Additional Rent, or any other charges payable by TENANT
hereunder or any other obligation or damage that may accrue under the terms of
the Agreement.
15. ADDITIONAL RENT:
A. Definitions:
"Building" means Buildings 204 in which the Demised Premises are located.
"Parcel" means Tract II, Boca Commerce Center, according to the Plat thereof,
recorded in Plat Book 46, at Page(s) 44-46 of the Public Records of Palm Beach
County, Florida.
"TENANT's Building Share" means the proportion that the square footage of the
Demised Premises bears to the total square footage of the rentable area in the
building. For calculation purposes, TENANT's Proportional Building Share is
estimated to be 43.10 percent. The total rentable area of Building 204 is
139,200 SF.
"TENANT's Parcel Share" means the proportion that the square footage of the
Demised Premises bears to the total square footage of the rentable area of
building located on the Parcel, which the square footage is 386,046. Tenant's
proportionate share of the parcel is estimated to be 15.54 percent.
"TENANT's Share" shall, in reference to any item which applies to the entire
Parcel, mean TENANT's Parcel Share and, as to any item for which there is a
separate meter of bill for the building (i.e., water and sewer fees), shall
mean TENANT's Building Share.
B. In addition to the Base Rent and adjustments thereto, TENANT shall pay
to LANDLORD as Additional Rent, its prorated share of all taxes, assessments,
insurance premiums, utility services, operating expenses, maintenance charges,
and any other charges, costs, and expenses which arise from the ownership,
occupancy or use of the Parcel, or any part thereof.
The TENANT's prorated share of these Additional Assessments shall be calculated
by multiplying the cost of these items to the LANDLORD by the TENANT's
Percentage as set forth in Section (A) hereof.
The TENANT agrees to pay the Additional Assessments, as set forth above, in
monthly payments in advance during the Term of this Lease, as may be estimated
by the LANDLORD. At the end of each calendar year, the LANDLORD shall advise
the TENANT of the actual TENANT's share of the Additional Assessments payable
for such calendar year as computed based upon the cost thereof to the LANDLORD.
If there shall have been an underpayment by the TENANT, the TENANT shall pay
the difference within ten (10) days; if there shall have been an
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<PAGE> 13
overpayment by the TENANT, the TENANT shall be given a credit towards the next
due payment of its share of the Additional Assessment.
At the end of each calendar year, the TENANT shall have the right to require
LANDLORD to substantiate, by written itemization, LANDLORD's computation of
TENANT's Additional Assessments. LANDLORD shall furnish such an itemization to
TENANT within thirty (30) days from receipt of TENANT's written request for
such itemization.
16. SUBORDINATION:
This Lease, and all rights of TENANT hereunder, are and shall be subject and
subordinate to all ground leases, overriding leases, and underlying leases
affecting the Demised Premises now or hereafter existing and to all mortgages
which may now or hereafter affect the Demised Premises and to each and every
advance made or hereafter to be made under such mortgages, and to all renewals,
modifications, replacements, and extensions of such leases and mortgages and
spreaders and consolidations of such mortgages (which leases and mortgages are
sometimes collectively referred to herein for convenience is the "Superior
Lease" and "Superior Mortgage"). This paragraph shall be self-operative and no
further instrument of subordination shall be required to make it effective;
however, TENANT shall promptly execute and deliver any instrument reasonably
requested to evidence such subordination.
A. TENANT agrees that in the event of any act or omission by
the LANDLORD which would give TENANT the right to terminate this Lease, or to
claim a partial or total eviction, TENANT shall not exercise any such right
until he has notified in writing the holder of any such mortgage which at the
time shall be a lien on the Demised Premises or the underlying lessor, if any,
of such act or omission.
B. If the lessor of any such Lease or the holder of any such
mortgage shall succeed to the rights of LANDLORD under this Lease, then at the
request of such party of succeeding to LANDLORD's rights and upon such
successor written agreement to accept TENANT's attornment, TENANT shall attorn
to such successor LANDLORD and will execute such instruments as may be
necessary or appropriate to evidence such attornment. Upon such attornment,
this Lease shall continue in full force and effect as, or as if it were a
direct Lease between the successor LANDLORD and TENANT upon all the terms,
conditions, and covenants as are set forth in this Lease and shall be
applicable after such attornment except that the successor LANDLORD shall not
(i) be liable for any previous act or omission of LANDLORD under this Lease;
(ii) be subject to any offset, not expressly provided for in this Lease, which
shall have theretofore accrued to TENANT against LANDLORD; and (iii) be bound by
any previous modification of this Lease, not expressly provided for in this
Lease, or by any previous prepayment of more than one month's fixed rent
unless such modification or prepayment shall have been expressly approved in
writing by such LANDLORD or such holder through or by reason of which the
successor LANDLORD shall have succeeded to the rights of LANDLORD under this
Lease.
C. TENANT shall deliver to LANDLORD or to its mortgagee or
auditors, or prospective purchaser of the owner of the fee, when requested by
LANDLORD, a certificate to the effect that this Lease is in full force and that
Lessor is not in default therein, or stating specifically any exceptions
thereto. Failure to give such a certificate within ten (10) business days after
written request shall be conclusive evidence that the Lease is in full force
and effect and LANDLORD is not in default and in such event, TENANT shall be
stopped from asserting any defaults known to TENANT at that time.
17. INDEMNIFICATION:
Neither LANDLORD nor any agent or employee of LANDLORD shall be liable to
TENANT for any injury or damage to TENANT or to any other person or for any
damage to, or loss (by other person, irrespective of the cause of such injury,
damage, or loss), unless caused by or due to the negligence of LANDLORD, its
agents, or employees with contributory negligence of TENANT, its agents or
employees, subject to the comparative negligence doctrine, it being understood
that no property, other than such as might normally be brought upon or kept
in the
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<PAGE> 14
Premises as an incident to the reasonable use of the Premises for the purposes
herein permitted, will be brought upon or be kept in the Premises.
TENANT shall indemnify and save harmless LANDLORD and its agents against and
from (a) any and all claims (i) arising from (x) the conduct or management of
the Demised Premises or of any business therein, or (y) any work or thing
whatsoever done, or any condition created or permitted to exist (other than by
LANDLORD for LANDLORD's or TENANT's account) in or about the Demised Premises
during the term of this Lease, or during the period of time, if any, prior to
the commencement of the term hereof that TENANT may have been given access to
the Demised Premises, or (ii) arising from any negligent or otherwise wrongful
act or omission of TENANT or any of its subtenants or its or their employees,
agents, or contractors; and (b) all costs, expenses, and liabilities incurred
in or in connection with each such claim or action or proceeding brought
thereon. In case any action or proceeding be brought against LANDLORD, TENANT
shall resist and defend such action or proceeding.
18. INSURANCE:
TENANT shall carry public liability insurance, in amounts of $500,000.00 in
respect of injuries to any one person, and $1,000,000.00 in respect of any one
accident or disaster, with companies and on forms acceptable to LANDLORD,
naming both LANDLORD and TENANT as parties insured thereby, insuring the
parties against any such claim. All such policies of insurance shall provide
for not less than thirty (30) days notice to LANDLORD as a condition precedent
to cancellation. Such policy shall be delivered to LANDLORD. TENANT shall
provide LANDLORD with evidence of payment of renewal premiums or replacement of
policy and payment of renewal premiums or replacement of policy and payment of
premiums not later than thirty (30) days prior to the expiration of any such
policy. The public liability policy shall include Premises and operations.
19. WAIVER:
The failure of either the LANDLORD or TENANT to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any right or election herein contained, shall not be
construed as a waiver or relinquishment for the future of the performance of
such or more obligations of this Lease or of the right to exercise such
election, but the same shall both continue and remain in full force and effect
with respect to any subsequent breach, act, or omission.
20. BROKER(S):
The broker(s) in this transactions (are) Commercial Florida Realty Partners,
Inc. McCoy/PM Realty Group. TENANT covenants, warrants, and represents that
no other broker was instrumental in consummating this Lease, and that no
conversations or negotiations were had with any other broker concerning the
renting of the Demised Premises or rental space at Boca Commerce Center.
TENANT agrees to hold LANDLORD harmless from any and all claims, and agrees to
defend at its own expense, any and all claims for brokerage commission
asserted by third parties other than the broker(s) stated above. *LANDLORD shall
be responsible for payment of commission to above broker(s).
21. NOTICES:
Any notice, statement, demand, or other communication required or permitted to
be given or made by either party to the other, pursuant to this Lease or
pursuant to any applicable law, shall be deemed to have been properly given and
made if sent by registered or certified mail, return receipt requested,
addressed to the other party at the address hereinabove set forth or at such
other address as may hereafter be designated by either party by notice to the
other and shall be deemed to have been given or made on the day so mailed.
Either party may, by notice given as aforesaid, designate a different address
or addresses for notices, statements, demands, or other communications intended
for it.
*Tenant shall not be responsible for any claims for brokerage commissions
asserted by third parties other than the broker(s) stated above regarding
claims of brokers representing the Landlord.
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<PAGE> 15
For LANDLORD: For TENANT:
WRC Properties, Inc. Network Marketing, Inc.
c/o McCoy/PM Realty Group d.b.a. Rexall Showcase International
6301 N.W. 5th Way 851 Broken Sound Parkway NW
Ft. Lauderdale, FL 33309 Boca Raton, FL 33487
ATTN: Property Manager ATTN: Dean DeSantis
Richard Werber
with a copy to:
WRC Properties, Inc.
730 Third Avenue, 7th Fl.
New York, NY 10017
22. RULES AND REGULATIONS:
It is mutually agreed that all the rules and regulations included with this
instrument attached hereto marked as Exhibit "B" shall be and are hereby made a
part of this Lease, and TENANT covenants and agrees that it and its employees,
servants, and agents will at all times observe, perform, and abide by said
rules and regulations as they exist and as they may be amended hereafter from
time to time.
23. LIENS:
TENANT further agrees that TENANT will pay all of TENANT'S contractors,
subcontractors, laborers, materialmen, and all others, and will indemnify
LANDLORD against all legal costs and charges, bond premiums for release of
liens, and counsel fees reasonably incurred in the commencement of defense of
any suit by the LANDLORD to discharge any liens, judgments, or encumbrances
against the Premises caused or suffered by TENANT. It is understood and agreed
between the parties hereto that the costs and charges above referred to shall be
considered as rent due under this Lease payable upon demand.
The TENANT herein shall not have any authority to create any liens for labor or
material on the LANDLORD'S interest in the above described property, and all
persons contracting with the TENANT for the doing of any work or the
furnishing of any materials on or to the Premises, and all materialmen,
contractors, mechanics, and laborers, are hereby charged with notice that they
must look to the TENANT only to secure the payments of any bill or work done or
material furnished during the term of this Lease.
24. TRANSFER BY LANDLORD:
In the event that the interest or estate of LANDLORD in the Premises shall
terminate by operation of law or by bonafide sale of the Premises or by
execution or foreclosure sale, or for any other reason, then and in any such
event LANDLORD shall be released and relieved from all future liability and
responsibility as to obligations to be performed by LANDLORD hereunder or
otherwise. A voluntary conveyance of the Demised Premises shall not terminate
this Lease and LANDLORD'S successor, by TENANT tendering payment of rent
hereunder to such successor, shall become liable and responsible to TENANT in
respect to all such obligations of LANDLORD under this Lease.
This Lease may be assigned by the LANDLORD, in which case, the TENANT, upon
request by the LANDLORD, shall issue a letter stating that the Lease is in full
force and effect* and that there are no setoffs or claims or other defenses to
rent.
25. CONDEMNATION:
In the event any portion of the Demised Premises is taken by any condemnation
or eminent domain proceeding or should the Demised Premises by conveyed in lieu
of such a taking and this Lease continues in force as to any part of the
Demised Premises, as hereinafter provided, the base
*,if true,
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monthly rental herein specified to be paid shall be ratably reduced according
to the area of the Demised Premises which is actually taken, as of the date of
such taking, and TENANT shall be entitled to no other consideration by reason
of such a taking and any damages whatsoever suffered by TENANT and occasioned
by such taking shall not entitle TENANT to share to any extent in any and all
income, rent, awards, or any interest therein whatsoever which may be made in
connection with such a taking and TENANT does hereby relinquish and assign to
LANDLORD all TENANT's rights and equities in and to any such income, rent,
awards, or any interest therein.
In the event of a partial taking of the building, either by condemnation,
eminent domain, or conveyance in lieu thereof, LANDLORD may elect to terminate
this Lease if the remaining area of the building shall not be reasonably
sufficient for LANDLORD to continue feasible and economical operation of the
remaining portion of the building, in the LANDLORD's sole discretion. Upon the
giving of such notice this Lease shall terminate on the date of service of such
notice, and the rents apportioned to the part of the Demised Premises so taken
shall be prorated and adjusted as of the date of the taking and the rents
apportioned to the remainder of the Demised Premises shall be prorated and
adjusted as of such termination date.
Should all the Demised Premises be so taken, this Lease shall terminate as of
the date of such a taking and in the event TENANT shall be entitled to no
damages or any consideration by reason of such taking, except the cancellation
and termination of this Lease as of the date of said taking.
26. PEACEFUL POSSESSION:
LANDLORD warrants and represents that it is the owner of the Demised Premises
and has full right, power, and authority to enter into this Lease Agreement.
So long as TENANT pays all of the fixed rent and Additional Rent and charges due
hereunder and performs all of TENANT's other obligations hereunder, TENANT
shall peaceably and quietly have, hold, and enjoy the Demised Premises
throughout the term of this Lease, without interference or hindrance by
LANDLORD or any person claiming by, through, or under LANDLORD.
27. ACCESS, CHANGES IN BUILDING FACILITIES NAME:
Except for the inside surfaces of all walls, windows, and doors bounding the
Demised Premises, all of the building, including exterior building walls, core
corridor walls and doors, and any core corridor entrance, any terraces or roofs
adjacent to the Demised Premises, and any space in or adjacent to the Demised
Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric,
or other utilities, sinks, or other building facilities, and the use thereof,
as well as access thereto through the Demised Premises for the purposes of
operation, maintenance, decoration, and repair, are reserved to LANDLORD.
TENANT shall permit LANDLORD to install, use, and maintain pipes, ducts, and
conduits within the demising walls, bearing columns, ceilings of the Demised
Premises. LANDLORD shall be responsible for repairing, at its own expense, any
damages caused by such installation or maintenance.
LANDLORD or LANDLORD's agents shall have the right, upon request, to enter
and/or pass through the Demised Premises or any part thereof, at reasonable
times during reasonable hours (i) to examine the Demised Premises and to show
them to the fee owners, holders of superior mortgages, or prospective
purchasers, mortgagees of lessees of the building as an entirety, and (ii) for
the purpose of making such repairs or changes or doing such repainting in or to
the Demised Premises or in or to the building or its facilities as may be
provided for by this Lease or as may be mutually agreed upon by the parties or
as LANDLORD may be required to make by law or in order to repair and maintain
the building or its fixtures or facilities. LANDLORD shall be allowed to take
all materials into and upon the Demised Premises that may be required for such
repairs, changes, repainting, or maintenance. LANDLORD shall also have the
right to enter on and/or pass through the Demised Promises, or any part
thereof, at such times as such entry shall be required by circumstances of
emergency affecting the Demised Premises or the building.
During the period commencing six (6) months prior to the end of the term
hereof, LANDLORD may exhibit the Demised Premises to prospective tenants at
reasonable times and during reasonable hours upon advance and proper
notification to TENANT.
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LANDLORD reserves the right, at any time after completion of the building, to
make such reasonable changes in or to the building and the fixtures and
equipment thereof, as well as in or to the street entrances, halls, passages,
elevators, escalators, and stairways thereof, as it may deem necessary or
desirable.
LANDLORD may adopt any name for the building. LANDLORD reserves the right to
change the name or address of the building at any time.
28. SURRENDER, HOLDING OVER:
On the last day of the term of this Lease, or upon any earlier termination of
this Lease, or upon any re-entry by LANDLORD upon the Demised Premises, TENANT
shall peaceably and without notice of any sort, quit and surrender the Demised
Premises to LANDLORD in good order, condition, and repair, except for ordinary
wear and tear and such damage or destruction as LANDLORD is required to repair
or restore under the terms of this Lease, and TENANT shall remove all of
TENANT's property therefrom. TENANT specifically agrees that in the event
TENANT retains possession and does not so quit and Surrender the Demised
Premises to LANDLORD, then TENANT shall pay LANDLORD (i) all damages that
LANDLORD may suffer on account of TENANT's failure to so surrender and quit the
Demised Premises, including but not limited to any and all claims made by
succeeding tenant of the Demised Premises against LANDLORD based on delay of
LANDLORD in delivering possession of the Demised Premises to said succeeding
tenant to the extent such delay is occasioned by the failure of TENANT to so
quit and surrender said Premises, and (ii) rent for each month or any
applicable portion of a month of such holding over at the amount payable for the
month immediately preceding the termination of this Lease, during the time the
TENANT thus remains in possession. The provisions of this paragraph do not
waive any of the LANDLORD's rights of re-entry or any other right under the
terms of this lease or the laws of Florida. If TENANT shall fail to surrender
the Premises as herein provided, no new tenancy shall be created and TENANT
shall be guilty of unlawful detainer. No surrender of this Lease or of the
Premises shall be binding on the LANDLORD unless acknowledged by LANDLORD in
writing.
* 175%
29. UTILITIES:
The TENANT agrees to pay promptly for all utilities used and consumed on the
Premises which are separately metered to the Demised Premises. TENANT agrees
that TENANT will pay its proportionate TENANT's Share (as defined in Paragraph
15 above) of the electric, water, and sewage bills which are not separately
metered. If the TENANT uses water and sewage or extraordinary electrical power
for commercial purposes, a separate meter will be installed at TENANT's
expenses and TENANT will pay separately for such electric, water, and sewage
services. In this context, water and sewage for commercial purposes shall mean
that the TENANT is utilizing the water, sewer, and electric power for the
purpose of production of a product for the preparation of a product for
shipping or the integration of the use of water and the disposition of the
sewage in connection with a business as opposed to the usage for light and
for the benefit of employees, bathroom facilities, and the like.
30. SECURITY SYSTEMS:
The LANDLORD, at its sole discretion, determination, and option may enter into
a contract or otherwise provide or make arrangement for the providing of a
security system which may include security guards and/or electronic devices
and/or a security guard gate and gate house. In the event that the LANDLORD
elects to obtain such security system or systems, then the TENANT shall pay its
proportionate share of the expense. The TENANT's proportionate share of the
expense shall be determined by taking the total square footage of the TENANT's
Demised Premises as a numerator and dividing that by the total square footage
of the rentable area in the building served by that security system as the
denominator, and then multiplying that by the annual cost of the service or
system. The TENANT shall pay its proportionate share on a monthly basis
together with its rental payment.
The LANDLORD shall in no way be responsible for the performance of the
obligations of the security guards, and the TENANT hereby releases the LANDLORD
from any claims of any nature whatsoever in connection with the furnishing of
security guard services. The TENANT
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further acknowledges that should said services by provided on a negligent
basis, that its sole and exclusive remedy shall be to seek recovery against the
security service company.
31. COMMON AREAS:
With the exception of the use of the parking lot for the parking of vehicles
and waling to and from the Demised Premises, the TENANT, the TENANT's employees,
guests, and invitees shall not use the parking lot and areas not contained
within the Demised Premises.*
32. RELOCATION OF TENANT:
LANDLORD expressly reserves the right at LANDLORD's sole cost and expense to
remove TENANT from the Leased Premises and to relocate TENANT in some other
space of LANDLORD's choosing of approximately the same dimensions and size,
which other space shall be improved and decorated by LANDLORD at LANDLORD's
expense. LANDLORD shall have the right, in LANDLORD's sole discretion, to use
such decorations and materials from the existing Leased Premises, or other
materials so that the space in which TENANT is relocated shall be comparable in
its interior design and decoration to the Leased Premises from which TENANT is
removed. Nothing herein contained shall be construed to relieve TENANT or
imply that TENANT is relieved of the liability for or obligation to pay any
Additional Rent due by reason of the provisions of Paragraph 15 of this Lease,
the provisions of which paragraph shall be applied to the space in which TENANT
is relocated on the same basis as said provisions were applied to the Leased
Premises from which TENANT is removed. TENANT agrees that LANDLORD's exercise
of its election to remove and relocate TENANT shall not terminate this Lease or
release TENANT, in whole or in part, from TENANT's obligations to pay Rent and
perform the covenants and agreements hereunder for the full Lease Term.
33. SIGNS:
Attached hereto marked as Exhibit "C" and made a part hereof is the LANDLORD's
sign standard. The TENANT must, prior to installing a sign, receive LANDLORD's
prior written approval of the proposed sign. The TENANT will submit a "permit
ready" set of sign plans for LANDLORD's approval. Notwithstanding the fact
that LANDLORD shall have approved the plans the TENANT must comply with all
applicable governmental rules and laws concerning signs and their installation.
In no event will a sign be approved by LANDLORD which does not comply with the
standard attached hereto.
34. HAZARDOUS WASTE:
The TENANT agrees not to store in, on, or outside of the Premises any hazardous
materials of any type, as defined by any local, state, or federal agency, or
any other toxic, corrosive, reactive, or ignitable material.
The TENANT agrees to document all hazardous waste disposal, if any, and to keep
the same on file for five years and to document the same by one of the
following types of documentation: A hazardous waste manifest; a bill of lading
from a bonded hazardous substance transporter showing shipment of a licensed
hazardous waste facility; or a confirmation of receipt of materials from a
recycler, a waste exchange operation, or other permitted hazardous waste
management facility.
TENANT agrees not to generate hazard effluents.
TENANT agrees to allow reasonable access to facilities for monitoring of the
above by LANDLORD, Palm Beach County, ERM, and the Florida DER to assure
compliance with the above as well as any other condition relating to the use of
the subject property.
Violation of any of the above shall be deemed to be a default on the part of
the TENANT of the terms of the Lease at the option of the LANDLORD.
*Tenant shall be granted the use of up to 1.2 parking spaces per 1,000 square
feet leased (72 spaces). Five (5) out of these 72 spaces shall be marked
"Visitor Parking". Parking at Boca Industrial Park is unreserved and in common
with all tenants;
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<PAGE> 19
35. RADON GAS:
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public
health unit.
36. ENTIRE AGREEMENT:
This Lease along with the attached Exhibits contain the entire agreement
between the parties hereto and all previous negotiations leading hereto and it
may be modified only by an agreement in writing signed and sealed by the
LANDLORD and TENANT.
IN WITNESS WHEREOF, the LANDLORD and TENANT have duly signed and executed these
presents at Palm Beach County, on this 3rd day of March 1995.
Signed, Sealed And Delivered "LANDLORD"
In the Presence Of: WRC Properties, Inc.
By: /s/ Harry St. Clair
- ---------------------------------- --------------------------
HARRY ST. CLAIR
ASSISTANT SECRETARY
- ----------------------------------
As To LANDLORD
"TENANT"
Network Marketing, L.C.
d.b.a. Rexall Showcase International
/s/ Joan Struck
- ---------------------------------- By: /s/ Richard Werber
/s/ Rachelle F. Schindle ------------------------
- ----------------------------------
As To TENANT
16
<PAGE> 20
I/we hereby acknowledge and agree to be bound by the terms and conditions of
Paragraph 20 of this Lease, and the balance of this Lease as it relates to
Paragraphs 19 and 20. There are no other agreements or understandings or
representations made by the LANDLORD or TENANT other than those contained in
this Lease.
Broker:
Commercial Florida Realty Partners, Inc.
----------------------------------------
By:/s/
----------------------------------------
/s/ Rosanne DeBernardo
- ----------------------------
As to Broker
Broker:
McCoy/PM Realty Group
-----------------------------------------
By:/s/
-------------------------------------
- ----------------------------
As to Broker
17
<PAGE> 21
EXHIBIT "A"
SITE PLAN
TRACT II
[MAP]
18
<PAGE> 22
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, vestibules, or stairways shall
not be obstructed or encumbered by any TENANT or used for any purpose other
than ingress and egress to and from the demised premises.
2. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of the LANDLORD and the
City of Boca Raton.
3. No sign, advertisement, notice, or other letting shall be exhibited,
inscribed, painted, or affixed by any TENANT on any part of the outside or
inside of the demised premises or building without the prior written
consent of the LANDLORD and the City of Boca Raton. In the event of the
violation of the foregoing by any TENANT, the LANDLORD may remove same
without any liability, and may charge the expense incurred by such
removal to the TENANT or TENANTS violating this rule.
4. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways, and other public places
in the building shall not be covered or obstructed by any TENANT, nor
shall any bottles, parcels, or other articles be placed on the windowsills.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
All damage resulting from any misuse of the fixture shall be borne by the
TENANT who, or whose servants, employees, agents, visitors, or licensees
shall have caused the same.
6. No TENANT shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No
boring, cutting, or stringing of wires shall be permitted, except with
the prior written consent of the LANDLORD and as it may direct.
7. No TENANT shall make, or permit to be made, any unseemingly or disturbing
noises or disturb or interfere with occupants of this or neighboring
buildings or premises of those having business with them, whether by the
use of any musical instruments, radio talking machine, unmusical noise,
whistling, singing, or in any other way. No TENANT shall throw anything
out of the doors, windows, or skylights, or down the passageways.
8. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by TENANT, nor shall any change be made in existing locks
or the mechanism thereof. Each TENANT must, upon the termination of
his tenancy, restore to the LANDLORD all keys of offices and toilet rooms,
either furnished to, or otherwise procured by, such TENANT, and in the
event of the loss of any keys so furnished, such TENANT shall pay to the
LANDLORD the cost thereof.
9. No TENANT shall occupy or permit any portion of the premises demised to
him to be used for the possession, storage, manufacture, or sale of
liquor. No TENANT shall engage or pay any employees of the demised
premises, except those actually working for such TENANT on said premises
nor advertise for laborers giving an address at said premises.
10. The premises shall not be used for gambling, lodging, or sleeping or for
any immoral or illegal purpose.
11. The requirements of TENANTS will be attended to only upon application at
the office of the building. Employees shall not perform any work or do
anything outside of the regular duties unless under special instruction
from the LANDLORD.
19
<PAGE> 23
12. Canvassing, soliciting and peddling in the building is prohibited and such
TENANT shall cooperate to prevent the same.
13. The LANDLORD specifically reserves the right to refuse admittance
to the building after 7:00 p.m. daily, or on Sundays or on legal holidays,
to any person or persons who cannot furnish satisfactory identification, or
to any person or persons who for any other reason in the LANDLORDS
judgment, should be denied access to the premises. The LANDLORD, for the
protection of the TENANTS and their effects may prescribe hours and
intervals during the night, on Sunday, and holidays, when all persons
entering and departing the building shall be required to enter their names,
the offices to which they are going or from which they are leaving, and the
time of entrance or departure in a Register provided for that purpose by
the LANDLORD.
14. The LANDLORD may retain a pass key to the leased premises, and be
allowed admittance thereof at all times to enable its representatives to
examine the demised premises.
15. The LANDLORD reserves the right to make such other and further reasonable
rules and regulate in its judgment may from time to time be needed for the
safety, care, and cleanliness of the premises, and for the preservation of
good order therein, and any such other or further rules and regulations
shall be binding upon the parties hereto with the same force and effect as
if they had been inserted herein at the time of the execution hereof.
16. Except as otherwise approved in writing by the LANDLORD's insurer, no
TENANT, nor any of the TENANT's servants, employees, agents, visitors, or
licensees, shall at any time bring or keep upon the demised premises any
inflammable, combustible, or explosive-fluid, chemical, or substance.
17. Notwithstanding anything contained to the contrary, the TENANT shall be
entitled to park its' vehicles in the rear of the building during the
nighttime hours.
20
<PAGE> 24
EXHIBIT "C"
SIGN REQUIREMENTS
FOR
BOCA INDUSTRIAL PARK
1. All signs must be submitted to the office of WRC Properties, Inc.
c/o McCoy/PM Realty, at 6301 N.W. 5th Way, Ft. Lauderdale, FL 33309 for
approval. Signs "not approved" will not be permitted to be erected.
Submit three (3) sets of prints for approval. Approval given by WRC
Properties, Inc. will not relieve any tenant from compliance with all
acceptable sign codes set forth by the governing authority.
2. Signs projecting perpendicular from the face of the building, or
above the roof, and/or parapet coping, will not be permitted.
3. Signs must be constructed of reverse channel aluminum fabricated
individual letters 12" high and 2" deep, Microgramma Bold Style mounted to
masonry using 1/8" brass stand offs. Color to match Sherwin Williams
Mosaic Blue BM-33.7.
4. Box or Plaque type signs will not be permitted.
5. Insignias or trademarks might be permitted if in the Landlord's
opinion, proper relationship is achieved with overall design concept.
Landlord's decision will be final.
6. Flashing or moving lights will not be permitted, nor will flood lighting be
allowed.
7. Placement of signs to be in accordance with attached plan.
21
<PAGE> 25
[MAP]
22
<PAGE> 26
EXHIBIT "D"
TENANT IMPROVEMENTS
Landlord shall provide Tenant with a tenant improvement allowance equal to
Thirty Thousand Dollars and No Cents ($30,000.00). The payment of the
allowance shall be subject to the following conditions:
1) Landlord's receipt of paid invoices for the improvements made to the
leased premises.
2) Landlord's receipt of Lien Waivers from all contractors.
3) Landlord's receipt of Tenant's Certificate of Occupancy.
Upon receipt of the above stated items, Landlord shall reimburse up to
$30,000.00 to Tenant.
Said tenant improvement allowance shall be provided in lieu of Landlord making
any improvements to the leased premises. Tenant shall accept space in "as-is"
condition.
Tenant may take early possession of the leased premises for initiating
construction. All terms and conditions of the Lease shall be in full force and
effect during this early occupancy period, with exception that rent shall not
be due until the commencement date of the Lease. Landlord must have a copy of
all Tenant's contractors certificates of insurance and licenses prior to any
work being performed.
Any Landlord approved improvements made by Tenant shall remain the property of
Tenant upon lease expiration. However, said improvements shall be removed at
Tenant's expense upon expiration or sooner termination of the term of this
Lease and Tenant, at its expense, shall also repair any damage to the Premises
caused by such removal and restore the Premises to Building Standard.
23
<PAGE> 27
RIDER NO. 1 ANNEXED TO AND MADE A PART OF LEASE
BETWEEN
WRC PROPERTIES, INC.
AS LESSOR
AND NETWORK MARKETING, L.C.
D.B.A. REXALL SHOWCASE INTERNATIONAL
AS LESSEE
DATED MARCH 3RD, 1995
ADDENDUM
CONSENTS AND APPROVALS
Whenever this lease requires landlord's consent or approval, landlord will not
withhold its approval or consent unreasonably or in bad faith, and landlord
will not unreasonably delay its response to tenant's request for its approval
or consent. Landlord will be deemed to have given its consent or approval to
any request made by tenant in writing if landlord does not respond to tenant in
writing within sixty (60) days after landlord's receipt of the request. If
landlord withholds its consent or approval, its response will explain its
reasons for doing so.
RIGHT OF FIRST OFFERING
Tenant shall be granted the Right of First Offering on any vacant space that
becomes available throughout the term of this Lease in building number 204.
Landlord shall use best efforts to notify Tenant of the availability of vacant
space in building 204 when Landlord becomes aware of said space. Tenant shall
have seven (7) business days in which to exercise their right of first
offering. In the event Tenant exercises said right, the lease on the
additional space shall commence within thirty (30) days from the date Tenant
exercised their right of first offering. Lease terms shall be negotiated at
the time the additional space is requested by Tenant.
LANDLORD ACCESS
Whenever this lease requires landlord's access to the leased premises, Landlord
shall enter the premises at reasonable times with reasonable notice, except in
the case of an emergency.
PREVAILING PARTY
To the extent that there are any conflicts between the provision as contained
in this Addendum and the provisions of the Lease, the following provision of
this Addendum shall govern:
Should suit be brought for the recovery of possession of the Premises, or for
rent or any other sum due Lessor under this Lease, or because of the default of
any of the covenants of the parties under this Lease, the prevailing party
shall be entitled to recover all expenses of such suit and any appeal thereof,
including reasonable attorney's fees.
EARLY ACCESS
Tenant shall be granted access to the leased premises as soon as the existing
tenant has vacated the premises. Tenant may use this period prior to the
commencement date of the lease in order to install phone equipment, alarms,
racks, etc., but in no event shall Tenant be permitted to hinder the Landlord
from completing the improvements as outlined in this Lease on Exhibit "D"
Tenant Improvements, attached hereto.
24
<PAGE> 28
EXHIBIT "D"
TENANT IMPROVEMENTS
Landlord shall provide Tenant with a tenant improvement allowance equal to
Thirty Thousand Dollars and No Cents ($30,000.00). The payment of the
allowance shall be subject to the following conditions:
1) Landlord's receipt of paid invoices for the improvements made to the
leased premises.
2) Landlord's receipt of Lien Waivers from all contractors.
3) Landlord's receipt of Tenant's Certificate of Occupancy.
Upon receipt of the above stated items, Landlord shall reimburse up to
$30,000.00 to Tenant.
Said tenant improvement allowance shall be provided in lieu of Landlord making
any improvements to the leased premises. Tenant shall accept space in "as-is"
condition.
Tenant may take early possession of the leased premises for initiating
construction. All terms and conditions of the Lease shall be in full force and
effect during this early occupancy period, with exception that rent shall not
be due until the commencement date of the Lease. Landlord must have a copy of
all Tenant's contractors certificates of insurance and licenses prior to any
work being performed.
Any Landlord approved improvements made by Tenant shall remain the property of
Tenant upon lease expiration. However, said improvements shall be removed at
Tenant's expense upon expiration or sooner termination of the term of this
Lease and Tenant, at its expense, shall also repair any damage to the Premises
caused by such removal and restore the Premises to Building Standard.
25
<PAGE> 1
Exhibit 10.25
BOCA INDUSTRIAL PARK
INDUSTRIAL LEASE AGREEMENT
LANDLORD: WRC PROPERTIES, INC.
--------------------
TENANT: REXALL SUNDOWN, INC.
--------------------
--------------------
DATE: APRIL 17, 1996
--------------------
<PAGE> 2
INDUSTRIAL LEASE
INDEX
TITLE PAGE PARAGRAPH
Term 1 1
Rent 1 2
Security 3 3
Use 3 4
Assignment 3 5
Construction, Applicable Law 5 6
Preparation of the Premises:
"As is" 5 7
Acceptance of the Premises 5 8
Repairs and Maintenance 5 9
Alterations 6 10
Delay or Possession 6 11
Destruction or Damage 6 12
Default: Landlord's Remedies 8 13
Additional Rent 10 14
Subordination 10 15
Indemnification 11 16
Insurance 12 17
Waiver 12 18
Broker(s) 12 18
Notices 12 19
Rules and Regulations 13 20
Liens 13 21
Transfer of Landlord 13 22
Condemnation 14 23
Peaceful Possession 14 24
Access, Changes in Building
Facilities Name 14 25
Surrender, Holding Over 15 26
Utilities 15 27
Security Systems 16 28
Common Areas 16 29
Relocation of Tenant 16 30
Signs 17 31
Hazardous Waste 17 32
Radon Gas 17 33
Entire Agreement 17 34
Code Compliance 18 35
Waiver of Jury Trial 18 36
Exhibit "A" - Site Plan 19 37
Exhibit "B" - Rules and Regulations 20
Exhibit "C" - Sign Requirements 22
<PAGE> 3
INDUSTRIAL LEASE
THIS LEASE AGREEMENT, dated as of the ______ day of ________, 19 __ by
and between WRC Properties, Inc., a Delaware corporation referred to as
"LANDLORD", and Rexall Sundown, Inc., a Florida corporation hereinafter
referred to as "Tenant":
W I T N E S S E T H:
LANDLORD hereby leases to TENANT and TENANT hereby hires from LANDLORD:
Space located at: 7674-7684 N.W. 6th Avenue (Bldg. 204)
------------------------------------
Boca Raton, FL 33487
------------------------------------
of Boca Industrial Park
------------------------------------
hereinafter referred to as the "Premises" or "Demised Premises", for the term
hereinafter stated, for the rents hereinafter reserved, and upon and subject to
the terms, conditions and covenants hereinafter provided.
1. TERM:
The term of this Lease shall commence on May 1, 1996 and end at
midnight on April 30, 1997.
2. RENT:
The rent reserved under this Lease for the term hereof shall be and
consist of:
A. Base Rent of $See Page 1A per year, shall be payable in advance,
in equal monthly installments, without deduction or set-offs and without prior
demand therefore, on the first day of each and every calendar month during the
term of this Lease except that TENANT shall pay, upon execution and delivery of
this Lease by TENANT, the sum of $11,925.00*, together with $5,167.50*,
representing the first month's portion of the estimated share of expenses per
section 14 of this Lease entitled "Additional Rent" plus applicable sales tax,
to be applied against the first installment of Base Rent becoming due under
this lease.
* include sales tax
B. All taxes in the nature of sales, use, or similar taxes, now or
hereinafter assessed or levied by any taxing authority upon the payment of
fixed rent or Additional Rent as permitted to collect from TENANT, shall be
payable simultaneously with the payment of Base Rent or Additional Rent.
C. TENANT covenants and agrees to pay a late charge for any payment of
Base Rent not received by LANDLORD on or before the tenth (10th) day of each
month and for any other payment, such as Additional Rent, not received by
LANDLORD on or before the date when same is due. Said late charge shall be
computed from the first day of the month in the case of Rent and from the date
when same is due in case of Additional Rent. The amount of the late charge
shall be an amount equal to the interest commencing on the dates aforesaid,
ending on the date of receipt of the sum(s) by annum. In the event any late
charge is due to LANDLORD, LANDLORD shall advise TENANT in writing and TENANT
shall pay said late charge to LANDLORD not later than the date when the next
payment of Rent is due.
<PAGE> 4
REXALL SUNDOWN, INC.
RENT SCHEDULE
BASE RENT
Base Rent shall be as follows:
MONTHS $/SF ANNUAL RENT MONTHLY RENT
----- --- ----------- ------------
01-12 $4.50 $135,000.00 $11,250.00
OPERATING EXPENSES (Section 14 "Additional Rent")
1996 Operating Expenses are estimated at $1.95 per square foot. Operating
expenses are adjusted annually based on a calendar year.
30,000 SF @ $1.95 = $58,500.00 or $4,875.00 per month.
SALES TAX
The state of Florida requires sales tax be charged on all rent and operating
expenses. The state sales tax is currently six percent (6%).
1A
<PAGE> 5
E. Additional Rent consisting of all such other sums of money as shall
become due from and payable by TENANT to LANDLORD hereunder (for default in
payment of which LANDLORD shall have the same remedies as for a default in
payment of fixed rent); all to be paid to LANDLORD without demand, deduction,
or set off at its office, or such agent or such other place as Landlord may
designate by notice to TENANT, in lawful money of the United States of America.
Rent and Additional Rent shall be made payable to:
-2-
<PAGE> 6
WRC Properties, Inc.
c/o McCoy Realty Group
1815 Griffin Road, Suite 103
Dania, FL 33004
3. SECURITY:
TENANT simultaneously with the execution and delivery of this Lease has
deposited with LANDLORD, the sum of $16,125.00 receipt of which is hereby
acknowledged, which sum shall be retained by LANDLORD as security
for the payment by TENANT of the rents herein agreed to be paid by TENANT and
for the faithful performance by TENANT of the terms, conditions, and covenants
of this Lease. It is agreed that LANDLORD, at LANDLORD's option, may at any
time apply said sum or any part thereof toward the payment of the rents and any
other sum payable by TENANT under this lease, and/or toward the performance of
each and every of TENANT's covenants under this Lease and TENANT's liability
under this Lease shall thereby be reduced pro tanto; that TENANT shall remain
liable for any amounts that such sum shall be insufficient to pay; that
LANDLORD may exhaust any or all rights and remedies against TENANT before
resorting to said sum, but nothing herein contained shall require or be deemed
to require LANDLORD to do so; that, in the event this deposit shall not be
utilized for any of such purposes, then such deposit shall be returned by
LANDLORD to TENANT promptly after the expiration of the term of this Lease.
LANDLORD shall not be required to pay TENANT any interest on said security
deposit. Promptly upon demand by LANDLORD, TENANT shall deposit with LANDLORD
such additional sum as may be necessary to replace any amounts expended
therefrom by LANDLORD pursuant to the provisions hereof, so that there shall
always be a security deposit in the sum first set forth above.* * Landlord
shall provide written notice should Tenant's security deposit be applied in any
manner as described herein. Any amount of security deposit remaining at lease
expiration shall be refunded to Tenant within 45 days of the expiration date of
the Lease.
4. USE:
The TENANT will use and occupy the Premises for * and for no other use
or purpose. The TENANT will not create nor allow to be created any form of
pollution whether noise, smoke, or otherwise within or without the Demised
Premises. The Tenant shall at its own cost and expense obtain any and all
licenses and permits necessary for any such use.
*distribution, warehouse, packaging, and ancillary office
5. ASSIGNMENT:
TENANT may not assign, sublet, transfer, or dispose of this Lease
during the term hereof, or underlet the Demised Premises or any part thereof or
permit the Premises to be occupied by any other persons without the written
consent of LANDLORD first obtained in each case. If this Lease be assigned, or
if the Demised Premises or any part thereof be underlet or occupied by anybody
other than the TENANT, the LANDLORD may, at LANDLORD's option, after default by
the TENANT, collect rent from the assignee, under tenant, or occupant, and
apply the net amount collected to the rent herein reserved, but no such
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under tenant or occupant as TENANT or a release of the TENANT from
the further observance and performance by the TENANT of the covenants herein
contained.
Notwithstanding the foregoing provisions of this paragraph, this Lease
may be assigned, sublet, or transferred to, or the Demised Premises may be
underlet to, or occupied by, in whole or in or part, (i) any corporation into
or with which TENANT may be merged or consolidated, or (ii) any corporation
which now or hereafter is an affiliate, subsidiary, parent, or successor of
TENANT, or (iii) any corporation which acquires all or a substantial portion of
the
-3-
<PAGE> 7
stock or assets of TENANT, or (iv) any partnership, the majority or controlling
interest in which shall be owned by TENANT, or an affiliate, subsidiary,
parent, or successor of TENANT, or by stockholders of TENANT or of an
affiliate, subsidiary, parent, or successor of TENANT, without the written
consent of LANDLORD.
If TENANT shall desire to make interior alterations in connection with
an assignment or subletting which is permitted hereunder, LANDLORD shall not
unreasonably withhold or delay its consent thereto.
For the purpose of this paragraph, a "subsidiary" or "affiliate" or a
"successor" of TENANT shall mean the following:
A. An "Affiliate" shall mean any corporation which, directly or
indirectly controls or is controlled by or is under common control with TENANT.
For this purpose "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such corporation, whether through the ownership of voting securities or by
contract or otherwise;
B. A "subsidiary" shall mean any corporation not less than fifty
percent (50%) of whose outstanding stock shall, at the time, be owned directly
or indirectly by TENANT;
C. A "successor" of TENANT shall mean:
(1) A corporation in which or with which TENANT, its corporate
successors, or assigns, is merged or consolidated, in accordance with
applicable statutory provisions for merger or consolidation of corporations,
provided that by operation of law or by the effective provisions contained in
the instruments of merger or consolidation, the liabilities of the corporations
participating in such merger or consolidation are assumed by the surviving such
merger or created by such consolidation; or
(2) A corporation or partnership acquiring this Lease and the term
hereby demised and a substantial portion of the property and assets or the
stock of TENANT, its corporate successors, or assigns or;
(3) A corporate or other entity resulting from a reorganization of
TENANT (not a reorganization under the Bankruptcy laws); or
(4) A corporate successor to a successor corporation becoming such
by any of the methods described in (1), (2), or (3), provided that on the
completion of such merger, consolidation, acquisition, or assumption, the
successor shall have a net worth no less than Tenant's net worth immediately
prior to such merger, consolidation acquisition, or assumption.
Acquisition, reorganization, or assumption by TENANT, its corporate
successors or assigns, of a substantial portion of the assets, together with
the assumption of all or substantially all of the obligations and liabilities
of any corporation, shall be deemed a merger of such corporation into TENANT
for the purpose of this paragraph.
Anything to the contrary notwithstanding, where the consent of the
LANDLORD is necessary to a proposed assignment or subletting, TENANT agrees to
notify the LANDLORD in writing of the name, address, terms of the proposed
sublease or assignment, proposed use, and such other data concerning the
assignee or sublessee as TENANT shall have obtained. LANDLORD shall have
thirty (30) days from such notice within which to (a) give its written consent
to such assignment or sublease with TENANT remaining fully liable for its
obligations under the Lease; (b) acquiesce to such assignment or sublease, but
terminate TENANT'S obligations under the Lease
-4-
<PAGE> 8
(provided LANDLORD and assignee or sublessee enter into a new Lease upon the
same terms as set forth in the proposed assignment or sublease); or (c) give
written notice that it is withholding its consent to the proposed assignment or
subletting in accordance with the applicable provisions of this Lease.
In the event of the transfer and assignment by Landlord of its interest in
this Lease and/or in the building containing the Leased Premises to a person
expressly assuming Landlord's obligations under this Lease, Landlord shall
thereby be released from any further obligations thereunder, and Tenant agrees
to look solely to such successor in interest of the Landlord for performance of
such obligations. Any security given by Tenant to secure performance of
Tenant's obligations hereunder may be assigned and transferred by Landlord to
such successor in interest, and Landlord shall thereby be discharged of any
further obligation relating thereto.
6. CONSTRUCTION, APPLICABLE LAW:
The words "LANDLORD" and "TENANT" as used herein shall include plural as
well as the singular. Words used in masculine gender include the feminine and
neuter. If there be more than one LANDLORD or TENANT, the obligations imposed
hereunder upon the LANDLORD and TENANT, shall be joint or several. The section
headings or titles in this Lease are not a part hereof and shall have no effect
upon the construction of interpretation of any part hereof. This Lease shall
be construed and enforced under the laws of the State of Florida. Should any
provisions of this Lease be illegal or unenforceable under such laws, it or
they shall be considered severable and this Lease and its conditions shall
remain in force and be binding upon the parties hereto just as though the
illegal or unenforceable provisions had never been included herein.
7. PREPARATION OF THE PREMISES: "AS IS"
Tenant shall accept space in "as-is" condition except Landlord will repair
overhead doors.
8. ACCEPTANCE OF THE PREMISES:
TENANT's failure to give written notice to LANDLORD at any time during the
thirty (30) day period after TENANT has taken possession of the Demised
Premises shall be conclusive evidence that the Demised Premises were in good
order and satisfactory condition on the day TENANT took possession. No promise
of the LANDLORD to alter, remodel, or improve the Demised Premises and no
representation respecting the condition of the Demised Premises have been made
by the LANDLORD to the TENANT, unless the same is contained herein or made a
part hereof, and the TENANT will make no claim on Account of any
representations whatsoever, whether made by any renting agent, broker, officer,
or other representatives of LANDLORD or which may be contained in any circular,
prospectus, or advertisement relating to the Demised Premises, unless the same
is specifically set forth or referenced in this Lease. The LANDLORD agrees
that it will promptly correct any of the work to be performed by the LANDLORD
under the terms of this lease which defects, inconsistencies or work are set
forth in the above referenced written notice to LANDLORD.
9. REPAIRS AND MAINTENANCE:
The TENANT will, at TENANT's sole cost and expense, keep the Demised
Premises in good repair and tenantable condition during the term of this Lease.
The repair and maintenance of the whole of the Demised Premises, including
without limitation, the nonstructural interior portions of the Demised
Premises; including storefronts, windows, doors, floor covering, plumbing,
ventilation, heating and air conditioning systems, shall be the sole
responsibility of the TENANT at the TENANT's expense.
- 5 -
<PAGE> 9
The TENANT will, at the termination of this Lease, by lapse of time or
otherwise, surrender the Premises in the same condition as when received,
reasonable wear and tear excepted, and shall surrender all keys for the
Premises to LANDLORD. TENANT shall remove all its trade fixtures leased
equipment and any alterations or improvements which LANDLORD requests to be
removed before surrendering the Premises as aforesaid and shall repair any
damage to the Premises caused thereby. TENANT's obligation to observe or
perform this covenant shall survive the expiration or other termination of the
term of the Lease.
The TENANT shall at its own cost and expense, enter into an annual
contract for regularly scheduled preventive maintenance and repair, with a
licensed maintenance contractor approved by the LANDLORD, for servicing and
repair of all heating and air conditioning systems and equipment serving the
Premises. Not later than thirty (30) days following the commencement of this
Lease and annually thereafter, TENANT shall furnish to LANDLORD a copy of the
air conditioning maintenance contract described above and proof that the annual
premium for the maintenance has been paid. Provided, if the Tenant enters into
the above referenced contract, Landlord shall replace any existing compressors
that will not function.
The service contract must include all services suggested by the equipment
manufacturer. The maintenance contractor shall keep a detailed record of all
services performed on the Premises and prepare a yearly service report to be
furnished to the TENANT and the LANDLORD at the end of each calendar year. The
LANDLORD may, but shall not be required to, upon notice to the TENANT, elect to
enter into such maintenance/service contract on behalf of the TENANT or perform
the work itself, and in either case, charge TENANT therefore, together with a
reasonable charge of overhead.
The LANDLORD agrees to repair and maintain in good order and condition the
roof, roof drains, exterior walls, parking lots, landscaping, exterior lighting
and the structural integrity of the interior and exterior of the Premises.
10. ALTERATIONS:
TENANT shall make no alterations, additions, installations, improvements,
or decorations in or to the Premises without the written consent of LANDLORD,
which consent shall be subject to the foregoing and upon such terms and
conditions as LANDLORD may require and stipulate in such consent, including
without limitations, (a) physical and spatial limitations, (b) governmental
approvals, (c) payment, (d) bonding to guarantee the payment of contractor's
fees, (e) indemnification, (f) liens, (g) designation of approved contractors
and subcontractors and (h) LANDLORD's insurer's requirements. This clause
shall not be construed to mean that the LANDLORD shall allow any mechanics'
liens upon the Premises based upon work ordered by the TENANT.
11. DELAY OR POSSESSION:
If the LANDLORD is unable to give possession of the Demised Premises on
the date stipulated in Paragraph I hereof as the commencement of the term
hereof, by reason of the LANDLORD not having fully completed construction of
the Demised Premises or the holding over of any prior tenant or tenants or for
any other reason; an abatement or diminution of the rent to be paid hereunder
shall be allowed. TENANT under such circumstances, but nothing herein shall
operate to extend the term of this Lease beyond the expiration date; and said
abatement in rent shall be in the full extent of LANDLORD's liability to TENANT
for any loss or damage to TENANT on account of said delay in obtaining
possession of the Premises.
12. DESTRUCTION OR DAMAGE:
A. In the event that the Demised Premises shall be destroyed or
damaged or injured by fire or casualty during the term
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<PAGE> 10
of this Lease, whereby all or a part thereof shall be rendered untenantable,
then the LANDLORD shall have the right, to be exercised by notice to TENANT
within thirty (30) days after casualty, to render such premises tenantable by
repairs within 180 days therefrom subject to extension for delays faced by
LANDLORD due to adjustment of insurance proceeds, labor trouble, governmental
controls, so-called acts of God, or any other cause beyond LANDLORD's
reasonable control. If said Premises are not rendered tenantable within said
time, it shall, be optional with either party hereto cancel this Lease, by
written notice to the other, and in any event of such cancellation the rent
shall be paid only to the date of such fire or casualty and paid rent refunded.
During any time that the Demised Premises are untenantable due to causes set
forth in this paragraph, the rent or a just and fair proportion thereof shall
be abated.
B. If the Demised Premises shall suffer damage to an extent that less
than fifteen percent (15%) of the building in which the Demised Premises are
located are rendered untenantable, then LANDLORD agrees to proceed promptly and
without expense to TENANT to repair the damage and restore the improvement
installed by LANDLORD, and TENANT shall be entitled to an abatement of a fair
and just portion of the rent and other payment required under this Lease
according to TENANT's ability to use the Premises from the date of such damage
until said Premises are completely reinstated or restored. If damage to the
Demised Premised in excess of $100,000 shall occur within the last year of
the initial term or the option extension period provided for herein, the
obligation of the LANDLORD to restore the Premises shall not arise unless
TENANT shall give notice to LANDLORD within thirty (30) days after such damage
of its desire to extend the term of this Lease for an additional option term if
such option term is still available. Upon such notice, LANDLORD agrees with
all due diligence to repair and restore the Demised Premises and the Lease
shall continue. Failing such notice to exercise in available option to
extend, LANDLORD, at its option, shall have the right to terminate this Lease
or to restore the Premises and the Lease shall continue for the remainder of
the then unexpired term and any options which are thereafter exercised.
TENANT shall be entitled to an abatement of a fair and just portion of the
rent and other payments required under this Lease according to the TENANT's
ability to use the Premises from the date of such damage until the Premises
are completely reinstated and restored.
C. No damages, compensation, or claim shall be payable by LANDLORD for
inconvenience, loss of business, or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the building pursuant
to this paragraph. If the LANDLORD is required to, or exercises its rights to,
restore the Premises, then LANDLORD shall use its best efforts not to
unreasonably interfere with the TENANT's use and occupancy. Notwithstanding
anything to the contrary the LANDLORD shall not be liable for damages or claims
if it is unable to obtain insurance.
D. Notwithstanding any of the provisions of the foregoing, if the
LANDLORD or the holder of any superior mortgage, as defined hereafter is unable
to collect all of the insurance proceeds, if any, applicable to the damage or
destruction of the Demised Premises or of the building by fire or some other
casualty or cause, by reason of some action or inaction on the part of the
TENANT, its agents, employees, or contractors then without prejudice to any
other of LANDLORD's remedies available against TENANT, there shall be no
abatement of the rent due from TENANT to the extent of the uncollected
insurance proceeds, if any.
E. LANDLORD will not carry separate insurance of any kind covering
TENANT's property. Except by reason of LANDLORD's breach of any of its
obligations hereunder or by operation of law the LANDLORD shall not be liable
for the repair of any damage or the replacement of TENANT's property.
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<PAGE> 11
13. DEFAULT: LANDLORD'S REMEDIES:
All rights and remedies of the LANDLORD herein enumerated shall be
cumulative, and none shall exclude another or any other right or remedy
provided by law.
A. If TENANT or any guarantor of this Lease shall become
bankrupt or insolvent or unable to pay its debts as such become due, or file
any debtor proceedings or if TENANT or any guarantor shall take or have taken
against either party in any court pursuant to any statute either of the United
States or of any State, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of TENANT's or any such guarantor's property, or if TENANT or any such
guarantor makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, then this Lease shall terminate and LANDLORD, in
addition to any other rights or remedies it may have, shall have the immediate
right of re-entry and may remove all persons and property from the leased
Promises and such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of TENANT, all without service of
notice or resort to legal process and without being deemed guilty of trespass,
or becoming liable for any loss or damage which may be occasioned thereby.
B. If the TENANT defaults in the payment of rent or in the
prompt and full performance of any provisions of this Lease,
or if the leasehold interest or the TENANT's business or fixtures of TENANT are
levied upon under execution or attached by process of law, or if the TENANT
makes an assignment for the benefit of creditors, the TENANT abandons Premises,
then and in any such event the LANDLORD may, if the LANDLORD so elects, but not
otherwise, and after three (3) days written notice thereof to TENANT, forthwith
terminate this Lease and the TENANT's right to possession of the Demised
Premises, or terminate only TENANT's right to possession hereunder. In the
event Tenant vacates the leased premises yet continues to pay all rent when
due, this shall not be deemed default.
C. Upon any termination of this Lease, whether by lapse of
time or otherwise, the TENANT shall surrender possession and vacate the
Premises immediately, and deliver possession thereof to the LANDLORD, and
hereby grants to the LANDLORD full and free license to enter into and upon the
Premises in such event with or without process of law and to expel or remove
the TENANT and any others who may be occupying or within the Premises and to
remove any and all property therefrom, using such force as may be necessary,
without being deemed in any manner guilty of trespass, eviction or forcible
entry or detainer, and without relinquishing the LANDLORD's rights to rent or
any other right given to LANDLORD hereunder or by operation of law. The TENANT
expressly waives the service of any demand for the payment of rent or for
possession and the service of any notice of the LANDLORD'S election to
terminate this Lease or to re-enter the Premises, except as provided for in
subparagraph (b) of this paragraph, and agree that the simple breach of any
covenants or provisions of this Lease by the TENANT shall, of itself, without
the service of any notice or demand whatsoever, constitute an unlawful detainer
by TENANT of the Premises within the meaning of the Statutes of the State of
Florida.
D. If the TENANT abandons the Premises or otherwise
entitles the LANDLORD so to elect and the LANDLORD does elect to terminate the
TENANT's right to possession only, without terminating the Lease, the LANDLORD
may, at the LANDLORD's option, enter the Premises, remove the TENANT's signs
and other evidence of tenancy, and take and hold possession thereof without
such entry and possession terminating the Lease or releasing the TENANT, in
whole or in part from the TENANT's obligation to pay the rent hereunder for the
full term, and in any such case the TENANT shall pay forthwith to the LANDLORD,
a sum equal to the entire amount of the rent reserved under Paragraph 2 of this
Lease for the
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<PAGE> 12
residue of the stated term plus any other sums then due hereunder. Upon and
after entry into possession without termination of the Lease, the LANDLORD may,
but need not, relet the Premises or any part thereof for the account of the
TENANT to any person, firm, or corporation other than the TENANT for such
rent, for such time, and upon such terms as the LANDLORD in the LANDLORD's sole
discretion shall determine; and the LANDLORD shall not be required to accept
any tenant offered by the TENANT. In any such case, the LANDLORD may make
repairs, alterations, and additions in or to the Premises and redecorate the
same to the extent deemed by the LANDLORD necessary or desirable, and the
TENANT shall, upon demand, pay the cost thereof, together with the LANDLORD's
expenses of the reletting. If the consideration collected by the LANDLORD upon
any such reletting for the TENANT's account is not sufficient to pay monthly
the full amount of the rent reserved in this Lease, together with the costs of
repairs, alterations, additions, redecorating, and the LANDLORD's expenses, the
TENANT shall pay to the LANDLORD the amount of each monthly deficiency upon
demand; and if the consideration so collected from any such reletting is more
than sufficient to pay the full amount of the rent reserved herein, together
with the costs and expenses of the LANDLORD, the LANDLORD, at the end of stated
term of the Lease, shall account for the surplus to the TENANT.
E. LANDLORD shall use all remedies available under Florida
state law as it relates to default. Any and all property which may be removed
from the Premises by the LANDLORD pursuant to the authority of law, to which
the TENANT is or may be entitled, may be handled, removed, or stored by LANDLORD
at the risk, cost, and expense of TENANT, and LANDLORD shall in no event be
responsible for the value, preservation, or safekeeping thereof. TENANT shall
pay to LANDLORD, upon demand, all expenses incurred in such removal and all
storage charges against such property so long as the same shall be in
LANDLORD's possession or under LANDLORD's control. LANDLORD may place such
property after it has been stored for a period of ninety (90) days or more,
LANDLORD may sell any or all of such property in such manner and at such times
and places as LANDLORD in its sole discretion may deem proper, without notice
to or demand upon TENANT for the payment of any part of such charges or the
removal of any of such property and shall apply the proceeds of such sale first
to the cost of expenses of such sale, including reasonable attorneys' fees;
second, to the payment of the costs and charges of storing any property; third,
to the payment of any other sum of money which may then or thereafter be due to
LANDLORD from TENANT under any of the terms hereof; and fourth, the balance, if
any, to TENANT. The removal and storage of TENANT's property as above provided
shall not constitute a waiver of LANDLORD's lien thereon.
F. TENANT shall pay upon demand all of LANDLORD's costs,
charges, and expenses, including the fees of counsel, agents; and others
retained by LANDLORD, incurred in enforcing TENANT's obligations hereunder or
incurred by LANDLORD in any litigation, negotiations, or transaction in which
TENANT causes LANDLORD, without LANDLORD's fault, to become involved or
concerned. Attorneys' fees shall be awardable for all phases of litigation,
trial, as well as appellate. To perfect and assist in the implementation of
certain of LANDLORD's right in and to the TENANT's personal property, TENANT
hereby pledges and assigns to LANDLORD and grants unto LANDLORD a lien upon all
furniture, fixtures, goods, and chattels of TENANT which shall or may be
brought or put on the Premises as further security for the faithful performance
of the terms, provisions, conditions, and covenants of this Lease, and TENANT
specifically agrees that said lien may be enforced by distress, foreclosure, or
otherwise at the election of the LANDLORD. TENANT hereby expressly waives and
renounces for himself and family, any and all homestead and exemption right he
may have now or hereafter, under or by virtue of the Constitution
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<PAGE> 13
or laws of the State of Florida, or of any other State, or of the United
States, as against the payment of rent, Additional Rent, or any other charges
payable by TENANT hereunder or any other obligation or damage that may accrue
under the terms of the Agreement.*
14. ADDITIONAL RENT:
A. Definitions:
"Building" means Buildings 204 in which the Demised Premises are
located. "Parcel" means Tract II, Boca Commerce Center, according to the Plat
thereof, recorded in Plat Book 46, at Page(s) 44-46 of the Public Records of
Palm Beach County, Florida.
"TENANT's Building Share" means the proportion that the square footage
of the Demised Premises bears to the total square footage of the rentable area
in the building. For calculation purposes, TENANT's Proportional Building
Share is estimated to be 21.55 percent. The total rentable areas of Building
204 is 139,200.
"TENANT's Parcel Share" means the proportion that the square footage of
the Demised Premises bears to the total square footage of the rentable area of
building located on the Parcel, which the square footage is 386,046. Tenant's
proportionate share of the parcel is estimated to be 7.77 percent.
"TENANT's Share" shall, in reference to any item which applies to the
entire Parcel, mean TENANT's Parcel Share and, as to any item for which there
is a separate meter of bill for the building (i.e., water and sewer fees),
shall mean TENANT's Building Share.
B. In addition to the Base Rent and adjustments thereto, TENANT shall
pay to LANDLORD as Additional Rent, its prorated share of all taxes,
assessments, insurance premiums, utility services, operating expenses,
maintenance charges, and any other charges, costs, and expenses which arise
from the ownership, occupancy or use of the Parcel, or any part thereof.
The TENANT's prorated share of these Additional Assessments shall be
calculated by multiplying the cost of these items to the LANDLORD by the
TENANT's Percentage as set forth in Section (A) hereof.
The TENANT agrees to pay the Additional Assessments, as set forth
above, in monthly payments in advance during the Term of this Lease, as may be
estimated by the LANDLORD. At the end of each calendar year, the LANDLORD
shall advise the TENANT of the actual TENANT's share of the Additional
Assessments payable for such calendar year as computed based upon the cost
thereof to the LANDLORD. If there shall have been an underpayment by the
TENANT, the tenant shall pay the difference within ten (10) days; if there
shall have been an overpayment by the TENANT, the TENANT shall be given a credit
towards the next due payment of its share of the Additional Assessment.
At the end of each calendar year, the TENANT shall have the right to
require LANDLORD to substantiate, by written itemization, LANDLORD's
computation of TENANT's Additional Assessments. LANDLORD shall furnish such an
itemization to TENANT within thirty (30) days from receipt of TENANT's written
request for such itemization.
15. SUBORDINATION:
This Lease, and all rights of TENANT hereunder, are and shall be
subject and subordinate to all ground leases, overriding leases, and underlying
leases affecting the Demised Promises now or hereafter existing and to all
mortgages which may now or hereafter affect the Demised Premises and to each
and every advance made or hereafter to be made under such mortgages, and to all
renewals,
*Any default under that certain lease dated March 3, 1995 between Landlord and
Tenant shall constitute and Event of Default hereunder and shall entitle
Landlord to all remedies available under this lease.
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<PAGE> 14
modifications, replacements, and extensions of such leases and mortgages and
spreaders and consolidations of such mortgages (which leases and mortgages are
sometimes collectively referred to herein for convenience is the "Superior
Lease" and "Superior Mortgage"). This paragraph shall be self-operative and no
further instrument of subordination shall be required to make it effective;
however, TENANT shall promptly execute and deliver any instrument reasonably
requested to evidence such subordination.
A. TENANT agrees that in the event of any act or omission by the
LANDLORD which would give TENANT the right to terminate this Lease, or to claim
a partial or total eviction, TENANT shall not exercise any such right until he
has notified in writing the holder of any such mortgage which at the time shall
be a lien on the Demised Premises or the underlying lessor, if any, or such act
or omission.
B. If the lessor of any such Lease or the holder of any such mortgage
shall succeed to the rights of LANDLORD under this Lease, then at the request
of such party of succeeding to LANDLORD's rights and upon such successor
written agreement to accept TENANT'S attornment, TENANT shall attorn to such
successor LANDLORD and will execute such instruments as may be necessary or
appropriate to evidence such attornment. Upon such attornment, this Lease
shall continue in full force and effect as, or as if it were a direct Lease
between the successor LANDLORD and TENANT upon all the terms, conditions, and
covenants as are set forth in this Lease and shall be applicable after such
attornment except that the successor LANDLORD shall not (i) be liable for any
previous act or omission of LANDLORD under this Lease; (ii) be subject to any
offset, not expressly provided for in this Lease, which shall have theretofore
accrued to TENANT against LANDLORD; and (iii) be bound by any previous
modification of this Lease, not expressly provided for in this Lease, or by any
previous prepayment of more than one month's fixed rent unless such
modification or prepayment shall have been expressly approved in writing by
such LANDLORD or such holder through or by reason of which the successor
LANDLORD shall have succeeded to the rights of LANDLORD under this Lease.
C. TENANT shall deliver to LANDLORD or to its mortgagee or auditors,
or prospective purchaser of the owner of the fee, when requested by LANDLORD, a
certificate to the effect that this Lease is in full force and that Lessor is
not in default therein, or stating specifically any exceptions thereto.
Failure to give such a certificate within ten (10) business days after written
request shall be conclusive evidence that the Lease is in full force and effect
and LANDLORD is not in default and in such event, TENANT shall be estopped from
asserting any defaults known to TENANT at that time.
16. INDEMNIFICATION:
Neither LANDLORD nor any agent or employee of LANDLORD shall be liable
to TENANT for any injury or damage to TENANT or to any other person or for any
damage to, or loss (by other person, irrespective of the cause of such injury,
damage, or loss), unless caused by or due to the negligence of LANDLORD, its
agents, or employees without contributory negligence of TENANT, its agents or
employees, subject to the comparative negligence doctrine, it being understood
that no property, other than such as might normally be brought upon or kept in
the Premises as an incident to the reasonable use of the Premises for the
purposes herein permitted, will be brought upon or be kept in the Premises.
TENANT shall indemnify and save harmless LANDLORD and its agents
against and from (a) any and all claims (i) arising from (x) the conduct or
management of the Demised Premises or of any business therein, or (y) any work
or thing whatsoever done, or any condition created or permitted to exist (other
than by LANDLORD for LANDLORD's or TENANT's account) in or about the Demised
Premises
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<PAGE> 15
during the term of this Lease, or during the period of time, if any, prior to
the commencement of the term hereof that TENANT may have been given access to
the Demised Premises, or (ii) arising from any negligent or otherwise wrongful
act or omission of TENANT or any of its subtenants or its or their employees,
agents, or contractors; and (b) all costs, expenses, and liabilities incurred
in or in connection with each such claim or action or proceeding brought
thereon. In case any action or proceeding be brought against LANDLORD, TENANT
shall resist and defend such action or proceeding.
17. INSURANCE:
TENANT shall carry public liability insurance, in amounts of $500,000.00 in
respect of injuries to any one person, and $1,000,000.00 in respect of any one
accident or disaster, with companies and on forms acceptable to LANDLORD,
naming both LANDLORD and TENANT as parties insured thereby, insuring the
parties against any such claim. All insurance required to be carried by TENANT
pursuant to the terms of this Lease shall be effected under policies issued by
insurers permitted to do business in the State of Florida and rated in Best's
Insurance Guide, or any successor thereto (or, if there be none, an
organization having national reputation) as having a general policyholder
rating of "A" and a financial rating of at least "13". All such policies of
insurance shall provide for not less than thirty (30) days notice to LANDLORD
as a condition precedent to cancellation. Such policy shall be delivered to
LANDLORD. TENANT shall provide LANDLORD with evidence of payment of renewal
premiums or replacement of policy and payment of renewal premiums not later
than thirty (30) days prior to the expiration of any such policy. The public
liability policy shall include Premises and operations.
18. WAIVER:
The failure of either the LANDLORD or TENANT to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any right or election herein contained, shall not be
construed as a waiver or relinquishment for the future of the performance of
such or more obligations of this Lease or of the right to exercise such
election, but the same shall both continue and remain in full force and effect
with respect to any subsequent breach, act, or omission.
19. BROKER(S):
The broker(s) in this transactions (are) Commercial Florida Realty
Partners/McCoy Realty Group. TENANT covenants, warrants, and represents that
no other broker was instrumental in consummating this Lease, and that no
conversations or negotiations were had with any other broker concerning the
renting of the Demised Premises or rental space at Boca Commerce Center.
TENANT agrees to hold LANDLORD harmless from any and all claims, and agrees to
defend at its own expense, any and all claims for brokerage commission asserted
by third parties other than the broker(s) stated above.* LANDLORD shall be
responsible for payment of commission to above broker(s).
*Tenant shall not be responsible for any claims for
brokerage commissions asserted by third parties other than
brokers stated above regarding claims of brokers
representing the Landlord.
20. NOTICES:
Any notice, statement, demand, or other communication required or
permitted to be given or made by either party to the other, pursuant to this
Lease or pursuant to any applicable law, shall be deemed to have been properly
given and made if sent by registered or certified mail, return receipt
requested, addressed to the other party at the address hereinabove set forth or
at such other address as may hereafter be designated by either party by notice
to the other and shall be deemed to have been given or made on the day so
mailed. Either party may, by notice given as aforesaid, designate
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<PAGE> 16
a different address or addresses for notices, statements, demands, or other
communications intended for it.
For LANDLORD: For TENANT:
WRC Properties, Inc. Rexall Sundown, Inc.
c/o McCoy Realty Group 851 Broken Sound Parkway NW
1815 Griffin Road, Suite 103 Boca Raton, FL 33487
Dania, FL 33004 Attn: Dean DeSantis
ATTN: Property Manager Richard Werber
with a copy to:
WRC Properties, Inc.
730 Third Avenue, 7th Floor
New York, NY 10017
Attn: David Bengel
21. RULES AND REGULATIONS:
It is mutually agreed that all the rules and regulations included with
this instrument attached hereto marked as Exhibit "B" shall be and are hereby
made a part of this Lease, and TENANT covenants and agrees that it and its
employees, servants, and agents will at all times observe, perform, and abide
by said rules and regulations as they exist and as they may be amended
hereafter from time to time.
22. LIENS:
TENANT further agrees that TENANT will pay all of TENANT'S contractors,
subcontractors, laborers, materialmen, and all others, and will indemnify
LANDLORD against all legal costs and charges, bond premiums for release of
liens, and counsel fees reasonably incurred in the commencement of defense of
any suit by the LANDLORD to discharge any liens, judgments, or encumbrances
against the Premises caused or suffered by TENANT. It is understood and
agreed between the parties hereto that the cost and charges above referred to
shall be considered as rent due under this Lease payable upon demand.
The TENANT herein shall not have any authority to create any liens for
labor or material on the LANDLORD'S interest in the above-described property,
and all persons contracting with the TENANT for the doing of any work or the
furnishing of any materials on or to the Premises, and all materialmen,
contractors, mechanics, and laborers, are hereby charged with notice that they
must look to the TENANT only to secure the payments of any bill or work done or
material furnished during the term of this Lease.
23. TRANSFER BY LANDLORD:
In the event that the interest or estate of LANDLORD in the Premises shall
terminate by operation of law or by bona fide sale of the Premises or by
execution or foreclosure sale, or for any other reason, then and in any such
event LANDLORD shall be released and relieved from all future liability and
responsibility as to obligations to be performed by LANDLORD hereunder or
otherwise. A voluntary conveyance of the Demised Premises shall not terminate
this Lease and LANDLORD's successor, by TENANT tendering payment of rent
hereunder to such successor, shall become liable and responsible to TENANT in
respect to all such obligations of LANDLORD under this Lease.
This Lease may be assigned by the LANDLORD, in which case, the TENANT,
upon request by the LANDLORD, shall issue a letter stating that the Lease is in
full force and effect *and that there are no set-offs or claims or other
defenses to rent.
*,if true,
--------
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<PAGE> 17
24. CONDEMNATION:
In the event any portion of the Demised Premises is taken by any
condemnation or eminent domain proceeding or should the Demised Premises by
conveyed in lieu of such a taking and this Lease continues in force as to any
part of the Demised Premises, as hereinafter provided, the base monthly rental
herein specified to be paid shall be ratably reduced according to the area of
the Demised Premises which is actually taken, as of the date of such taking,
and TENANT shall be entitled to no other consideration by reason of such a
taking and any damages whatsoever suffered by TENANT and occasioned by such
taking shall not entitle TENANT to share to any extent in any and all income,
rent, awards, or any interest therein whatsoever which may be made in connection
with such a taking and TENANT does hereby relinquish and assign to LANDLORD all
TENANT's rights and equities in and to any such income, rent, awards, or any
interest therein.
In the event of a partial taking of the building, either by condemnation,
eminent domain, or conveyance in lieu thereof, LANDLORD may elect to terminate
this Lease if the remaining area of the building shall not be reasonably
sufficient for LANDLORD to continue feasible and economical operation of the
remaining portion of the building, in the LANDLORD's sole discretion. Upon the
giving of such notice this Lease shall terminate on the date of service of such
notice, and the rents apportioned to the part of the Demised Premises so taken
shall be prorated and adjusted as of the date of the taking and the rents
apportioned to the remainder of the Demised Premises shall be prorated and
adjusted as of such termination date.
Should all the Demised Premises be so taken, this Lease shall terminate as
of the date of such a taking and in the event TENANT shall be entitled to no
damages or any consideration by reason of such taking, except the cancellation
and termination of this Lease as of the date of said taking.
25. PEACEFUL POSSESSION:
LANDLORD warrants and represents that it is the owner of the Demised
Premises and has full right, power, and authority to enter into this Lease
Agreement. So long as TENANT pays all of the fixed rent and Additional Rent
and charges due hereunder and performs all of TENANT's other obligations
hereunder, TENANT shall peaceably and quietly have, hold, and enjoy the
Demised Premises throughout the term of this Lease, without interference or
hindrance by LANDLORD or any person claiming by, through, or under LANDLORD.
26. ACCESS, CHANGES IN BUILDING FACILITIES NAME:
Except for the inside surfaces of all walls, windows, and doors bounding
the Demised Premises, all of the building, including exterior building walls,
core corridor walls and doors, and any core corridor entrance, any terraces or
roofs adjacent to the Demised Premises, and any space in or adjacent to the
Demised Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric, or other utilities, sinks, or other building facilities, and the use
thereof, as well as access thereto through the Demised Premises for the purpose
of operation, maintenance, decoration, and repair, are reserved to LANDLORD.
TENANT shall permit LANDLORD to install, use, and maintain pipes, ducts,
and conduits within the demising walls, bearing columns, and ceilings of the
Demised Premises. LANDLORD shall be responsible for repairing, at its own
expense, any damages caused by such installation or maintenance.
LANDLORD or LANDLORD's agents shall have the right, upon request, to enter
and/or pass through the Demised Premises or any part thereof, at reasonable
times during reasonable hours (i) to
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<PAGE> 18
examine the Demised Premises and to show them to the fee owners, holders of
superior mortgages, or prospective purchasers, mortgagees of lessees of the
building as an entirety, and (ii) for the purpose of making such repairs or
changes or doing such repainting in or to the Demised Premises or in or to the
building or its facilities as may be provided for by this Lease or as may be
mutually agreed upon by the parties or as LANDLORD may be required to make by
law or in order to repair and maintain the building or its fixtures or
facilities. LANDLORD shall be allowed to take all materials into and upon the
Demised Premises that may be required for such repairs, changes, repainting,
or maintenance. LANDLORD shall also have the right to enter on and/or pass
through the Demised Premises, or any part thereof, at such times as such entry
shall be required by circumstances of emergency affecting the Demised Premises
or the building.
During the period commencing six (6) months prior to the end of the term
hereof, LANDLORD may exhibit the Demised Premises to prospective tenants at
reasonable times and during reasonable hours upon advance and proper
notification to TENANT.
LANDLORD reserves the right, at any time after completion of the building,
to make such reasonable changes in or to the building and the fixtures and
equipment thereof, as well as in or to the street entrances, halls, passages,
elevators, escalators, and stairways thereof, as it may deem necessary or
desirable.
LANDLORD may adopt any name for the building. LANDLORD reserves the right
to change the name or address of the building at any time.
27. SURRENDER, HOLDING OVER:
On the last day of the term of this Lease, or upon any earlier termination
of this Lease, or upon any re-entry by LANDLORD upon the Demised Premises,
TENANT shall peaceably and without notice of any sort, quit and surrender the
Demised Premises to LANDLORD in good order, condition, and repair, except for
ordinary wear and tear and such damage or destruction as LANDLORD is required
to repair or restore under the terms of this Lease, and TENANT shall remove all
of TENANT's property therefrom. TENANT specifically agrees that in the event
TENANT retains possession and does not so quit and Surrender the Demised
Premises to LANDLORD, then TENANT shall pay LANDLORD (i) all damages that
LANDLORD may suffer on account of TENANT's failure to so surrender and quit the
Demised Premises, including but not limited to any and all claims made by
succeeding tenant of the Demised Premises against LANDLORD based on delay of
LANDLORD in delivering possession of the Demised Premises to said succeeding
tenant to the extent such delay is occasioned by the failure of TENANT to so
quit and surrender said Premises, and (ii) rent for each month or any
applicable portion of a month of such holding over at 175% the amount payable
for the month immediately preceding the termination of this Lease, during the
time the TENANT thus remains in possession. The provisions of this paragraph
do not waive any of the LANDLORD's rights of re-entry or any other right under
the terms of this lease or the laws of Florida. If TENANT shall fail to
surrender the Premises as herein provided, no new tenancy shall be created and
TENANT shall be guilty of unlawful detainer. No surrender of this Lease or of
the Premises shall be binding on the LANDLORD unless acknowledged by LANDLORD
in writing.
28. UTILITIES:
The TENANT agrees to pay promptly for all utilities used and consumed on
the Premises which are separately metered to the Demised Premises. TENANT
agrees that TENANT will pay its proportionate TENANT's Share (as defined in
Paragraph 14 above) of the electric, water, and sewage bills which are not
separately metered. If the TENANT uses water and sewage or extraordinary
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<PAGE> 19
electrical power for commercial purposes, a separate meter will be installed at
TENANT's expenses and TENANT will pay separately for such electric, water, and
sewage services. In this context, water and sewage for commercial purposes
shall mean that the TENANT is utilizing the water, sewer, and electric power
for the purpose of production of a product for the preparation of a product for
shipping or the integration of the use of water and the disposition of the
sewage in connection with a business as opposed to the usage for light and for
the benefit of employees, bathroom facilities, and the like.
29. SECURITY SYSTEMS:
The LANDLORD, at its sole discretion, determination, and option may enter
into a contract or otherwise provide or make arrangement for the providing of a
security system which may include security guards and/or electronic devices
and/or a security guard gate and gate house. In the event that the LANDLORD
elects to obtain such security system or systems, then the TENANT shall pay its
proportionate share of the expense. The TENANT's proportionate share of the
expense shall be determined by taking the total square footage of the TENANT's
Demised Premises as a numerator and dividing that by the total square footage
of the rentable area in the building served by that security system as the
denominator, and then multiplying that by the annual cost of the service of
system. The TENANT shall pay its proportionate share on a monthly basis
together with its rental payment.
The LANDLORD shall in no way be responsible for the performance of the
obligations of the security guards, and the TENANT hereby releases the LANDLORD
from any claims of any nature whatsoever in connection with the furnishings of
security guard services. The TENANT further acknowledges that should said
services by provided on a negligent basis, that its sole and exclusive remedy
shall be to seek recovery against the security service company.
30. COMMON AREAS:
With the exception of the use of the parking lot for the parking of
vehicles and walking to and from the Demised Premises, the TENANT, the TENANT's
employees, guests, and invitees shall not use the parking lot and areas not
contained within the Demised Premises.*
31. RELOCATION OF TENANT:
LANDLORD expressly reserves the right at LANDLORD's sole cost and expense
to remove TENANT from the Leased Premises and to relocate TENANT in some other
space of LANDLORD's choosing of approximately the same dimensions and size,
which other space shall be improved and decorated by LANDLORD at LANDLORD's
expense. LANDLORD shall have the right, in LANDLORD's sole discretion, to use
such decorations and materials from the existing Leased Premises, or other
materials so that the space in which TENANT is relocated shall be comparable in
its interior design and decoration to the Leased Premises from which TENANT is
removed. Nothing herein contained shall be construed to relieve TENANT or
imply that TENANT is relieved of the liability for or obligation to pay any
Additional Rent due by reason of the provisions of Paragraph 14 of this Lease,
the provisions of which paragraph shall be applied to the space in which TENANT
is relocated on the same basis as said provisions were applied to the Leased
Premises from which TENANT is removed. TENANT agrees that LANDLORD's exercise
of its election to remove and relocate TENANT shall not terminate this Lease or
release TENANT, in whole or in part, from TENANT's obligations to pay Rent and
perform the covenants and agreements hereunder for the full Lease Term.
* Tenant shall be granted the use of up to 1.2 parking spaces per 1,000 square
feet leased (36 spaces). Parking at Boca Industrial Park is unreserved and in
common with all tenants.
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<PAGE> 20
32. SIGNS:
Attached hereto marked as Exhibit "C" and made a part hereof is the
LANDLORD's sign standard. The TENANT must, prior to installing a sign, receive
LANDLORD'S prior written approval of the proposed sign. The TENANT will
submit a "permit ready" set of sign plans for LANDLORD's approval.
Notwithstanding the fact that LANDLORD shall have approved the plans the
TENANT must comply with all applicable governmental rules and laws concerning
signs and their installation. In no event will a sign be approved by LANDLORD
which does not comply with the standard attached hereto.
33. HAZARDOUS WASTE:
The TENANT agrees not to store in, on, or outside of the Premises any
hazardous materials of any type, as defined by any local, state, or federal
agency, or any other toxic, corrosive, reactive, or ignitable material.
The TENANT agrees to document all hazardous waste disposal, if any, and
to keep the same on file for five years and to document the same by one of the
following types of documentation: A hazardous waste manifest; a bill of lading
from a bonded hazardous substance transporter showing shipment of a licensed
hazardous waste facility; or a confirmation of receipt of materials from a
recycler, a waste exchange operation, or other permitted hazardous waste
management facility.
TENANT agrees not to generate hazard effluents.
TENANT agrees to allow reasonable access to facilities for monitoring
of the above by LANDLORD, Palm Beach County, ERM, and the Florida DER to assure
compliance with the above as well as any other condition relating to the use of
the subject property.
Violation of any of the above shall be deemed to be a default on the
part of the TENANT of the terms of the Lease at the option of the LANDLORD.
34. RADON GAS:
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
35. ENTIRE AGREEMENT:
This Lease along with the attached Exhibits contain the entire agreement
between the parties hereto and all previous negotiations leading hereto and it
may be modified only by an agreement in writing signed and sealed by the
LANDLORD and TENANT.
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<PAGE> 21
36. CODE COMPLIANCE:
Tenant shall not do, and shall not permit persons within Tenant's
control to do, any act or thing in or upon the Premises or the Building
which will invalidate or be in conflict with the certificate of occupancy
for the Premises or the Building or violate any other zoning ordinances,
and rules and regulations of governmental or quasi-governmental authorities
having jurisdiction over the Premises or the Building (the "Requirements").
Tenant shall, at Tenant's sole cost and expense, take all action, including
any required Alterations necessary to comply with requirements (including,
but not limited to, applicable terms of the Palm Beach County Building Code
and the Americans With Disabilities Act of 1990 (the "ADA"), each as
modified and supplemented from time to time) which shall impose any
violation, order or duty upon Landlord or Tenant arising from, or in
connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner
of use that constitutes a "place of public accommodation" under the ADA),
or any installations in the Premises, or required by reason of a breach of
any Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and
whether or not any work required shall be ordinary or extraordinary or
foreseen or unforeseen at the date hereof. Notwithstanding the preceding
sentence, Tenant shall not be obligated to perform any Alterations
necessary to comply with any Requirements, unless compliance shall be
required by reason of (i) any cause or condition arising out of any
Alterations or installations in the Premises (whether made by Tenant or by
Landlord on behalf of Tenant), or (ii) Tenant's particular use, manner or
use or occupancy on behalf or Tenant of the Premises, or (iii) any breach
of any Tenant's covenants or agreements under this Lease, or (iv) any
wrongful act or omission by Tenant or persons within Tenant's control, or
(v) Tenant's use or manner of use or occupancy of the Premises as a "place
of public accommodation" within the meaning of the ADA.
37. WAIVER OF JURY TRIAL:
Landlord and Tenant hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other on
any matters whatsoever arising out of or in any way connected with the
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of the Premises, whether during or after the Term, or for the enforcement
of any remedy under any statute, emergency or otherwise. If Landlord
shall commence any summary procedure against Tenant, Tenant will not
interpose any counterclaim or whatever nature or description in any such
procedure (unless failure to separate action the claim which is the subject
of such counterclaim), and will not seek to consolidate such procedure with
any other action which may have been or will be brought in any other court
by Tenant or Landlord.
IN WITNESS WHEREOF, the LANDLORD and TENANT have duly signed and executed these
presents at Palm Beach County, on this 25th day of April, 1996.
Signed, Sealed And Delivered "LANDLORD"
In the Presence Of: WRC Properties, Inc.
/s/
- -----------------------
/s/ Loretta Monahan By: /s/ Harry St. Clair
- ----------------------- ----------------------
As To LANDLORD
"TENANT"
Rexall Sundown, Inc.
/s/ Deborah Shur Trinker By: /s/ Richard Werber
- ------------------------ -----------------------
/s/ Rachelle F. Schindle
- ------------------------
As To TENANT
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<PAGE> 22
EXHIBIT "A"
Site Plan Tract II
[MAP]
19
<PAGE> 23
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, vestibules, or stairways shall
not be obstructed or encumbered by any TENANT or used for any purpose other
than ingress and egress to and from the demised premises.
2. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of the LANDLORD and the
City of Boca Raton.
3. No sign, advertisement, notice, or other letting shall be exhibited,
inscribed, painted, or affixed by any TENANT on any part of the outside or
inside of the demised premises or building without the prior written
consent of the LANDLORD and the City of Boca Raton. In the event of the
violation of the foregoing by any TENANT, the LANDLORD may remove same
without any liability, and may charge the expense incurred by such removal
to the TENANT or TENANTS violating this rule.
4. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways, and other public places in
the building shall not be covered or obstructed by any TENANT, nor shall
any bottles, parcels, or other articles be placed on the windowsills.
5. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed and
no sweepings, rubbish, rags, or other substances shall be thrown therein.
All damage resulting from any misuse of the fixture shall be borne by the
TENANT who, or whose servants, employees, agents, visitors, or licensees
shall have caused the same.
6. No TENANT shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No
boring, cutting, or stringing of wires shall be permitted, except with the
prior written consent of the LANDLORD and as it may direct.
7. No TENANT shall make, or permit to be made, any unseemingly or
disturbing noises or disturb or interfere with occupants of this or
neighboring buildings or premises of those having business with them,
whether by the use of any musical instruments, radio talking machine,
unmusical noise, whistling, singing, or in any other way. No TENANT shall
throw anything out of the doors, windows, or skylights, or down the
passageways.
8. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by TENANT, no shall any change be made in existing
locks or the mechanism thereof. Each TENANT must, upon the termination
of his tenancy, restore to the LANDLORD all keys of offices and toilet
rooms, either furnished to, or otherwise procured by, such TENANT, and it
the event of the loss of any keys so furnished, such TENANT shall pay to
the LANDLORD the cost thereof.
9. No TENANT shall occupy or permit any portion of the premises demised to
him to be used for the possession, storage, manufacture, or sale of liquor.
No TENANT shall engage or pay any employees of the demised premises, except
those actually working for such TENANT on said premises nor advertise for
laborers giving an address at said premises.
10. The premises shall not be used for gambling, lodging, or sleeping or
for any immoral or illegal purpose.
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<PAGE> 24
11. The requirements of TENANTS will be attended to only upon application
at the office of the building. Employees shall not perform any work or do
anything outside of the regular duties unless under special instruction
from the LANDLORD.
12. Canvassing, soliciting and peddling in the building is prohibited and
such TENANT shall cooperate to prevent the same.
13. The LANDLORD specifically reserves the right to refuse admittance to the
building after 7:00 p.m. daily, or on Sundays or on legal holidays, to any
person or persons who cannot furnish satisfactory identification, or to any
person or persons who for any other reason in the LANDLORDS judgment,
should be denied access to the premises. The LANDLORD, for the protection
of the TENANTS and their effects may prescribe hours and intervals during
the night, on Sunday, and holidays, when all persons entering and departing
the building shall be required to enter their Dames, the offices to which
they are going or from which they are leaving, and the time of entrance or
departure in a Register provided for that purpose by the LANDLORD.
14. The LANDLORD may retain a pass key to the leased premises, and be
allowed admittance thereof at all times to enable its representatives to
examine the demised premises.
15. The LANDLORD reserves the right to make such other and further
reasonable rules and regulate in its judgment may from time to time be
needed for the safety, care, and cleanliness of the premises, and for the
preservation of good order therein, and any such other or further rules and
regulations shall be binding upon the parties hereto with the same force
and effect as if they had been inserted herein at the time of the execution
hereof.
16. Except as otherwise approved in writing by the LANDLORD'S insurer,
no TENANT, nor any of the TENANT'S servants, employees, agents, visitors,
or licensees, shall at any time bring or keep upon the demised premises
any inflammable, combustible, or explosive-fluid, chemical, or substance.
17. Notwithstanding anything contained to the contrary, the TENANT
shall be entitled to park its' vehicles in the rear of the building during
the nighttime hours.
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<PAGE> 25
EXHIBIT "C"
SIGN REQUIREMENTS
FOR
BOCA INDUSTRIAL PARK
1. All signs must be submitted to the office of WRC Properties, Inc. c/o McCoy
Realty Group, at 1815 Griffin Rd., Dania, FL 33004 for approval. Signs
"not approved" will not be permitted to be erected. Submit three (3) sets
of prints for approval. Approval given by WRC Properties, Inc. will not
relieve any tenant from compliance with all acceptable sign codes set forth
by the governing authority.
2. Signs projecting perpendicular from the face of the building, or above the
roof, and/or parapet coping, will not be permitted.
3. Signs must be constructed of reverse channel aluminum fabricated individual
letters 12" high and 2" deep, Microgramma Bold Style mounted to masonry
using 1/8" brass standoffs. Color to match Sherwin Williams Mosaic
Blue BM-33.7.
4. Box or Plaque type signs will not be permitted.
5. Insignias or trademarks might be permitted if in the Landlord's opinion,
proper relationship is achieved with overall design concept. Landlord's
decision will be final.
6. Flashing or moving lights will not be permitted, nor will flood lighting be
allowed.
7. Placement of signs to be in accordance with attached plan.
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<PAGE> 26
[MAP]
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<PAGE> 27
RIDER NO. 1 ANNEXED TO AND MADE A PART OF LEASE
BETWEEN
WRC PROPERTIES, INC.
AS LANDLORD
AND REXALL SUNDOWN, INC.
AS TENANT
DATED APRIL 25, 1995
ADDENDUM
OPTION TO EXTEND
The Tenant is hereby granted an option to extend the term of this Lease for an
additional one (1) year; commencing upon the expiration date of the term of
this Lease, subject to the terms of this Lease as well as the following terms
and conditions:
1. To exercise this option, the Tenant shall give one hundred and twenty
(120) days written notice prior to the termination date of the current Lease
Term of its intention to extend. In the absence of such timely notification,
the option to extent shall be null and void.
2. Tenant must not be in default of any of the conditions or covenants of
this Lease at the time of the written notification of intention to extend this
Lease.
3. This option to extend is non-transferable.
4. The rental rate for the option period shall be the current market rate per
square foot at Boca Industrial Park, however, in no event shall the rental rate
for the option period be less than $4.50 per square foot, NNN.
5. The premises shall be leased in "as-is" condition in the event Tenant
exercises their option to extend.
CONSENTS AND APPROVALS
Whenever this lease requires landlord's consent or approval, landlord will not
withhold its approval or consent unreasonably or in bad faith, and landlord
will not unreasonably delay its response to tenant's request for its approval
or consent. Landlord will be deemed to have given its consent or approval to
any request made by tenant in writing if landlord does not respond to tenant in
writing within sixty (60) days after landlord's receipt of the request. If
landlord withholds its consent or approval, its response will explain its
reasons for doing so.
LANDLORD ACCESS
Whenever this requires landlord's access to the leased premises, Landlord shall
enter the premises at reasonable times with reasonable notice, except in the
case of an emergency.
PREVAILING PARTY
To the extent that there are any conflicts between the provision as contained
in this Addendum and the provisions of this Lease, then the following provision
of this Addendum shall govern:
Should suit be brought for the recovery of possession of the Premises, or for
rent or any other sum due Landlord under this Lease, or because of the default
of any of the covenants of the parties under this Lease, the prevailing party
shall be entitled to recover all expenses of such suit and any appeal thereof,
including reasonable attorney's fees.
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<PAGE> 28
WITNESS: "LANDLORD"
WRC PROPERTIES, INC.
/s/ Loretta Monahan
- ----------------------------
/s/ By: /s/ Harry St. Clair
- ---------------------------- -----------------------------------
"TENANT"
REXALL SUNDOWN, INC.
/s/ Deborah Shur Trinker
- ----------------------------
/s/ Rachelle F. Schindle By: /s/ Richard Werber
- ---------------------------- ----------------------------------
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<PAGE> 1
Exhibit 10.26
DERMODY
PROPERTIES
STANDARD INDUSTRIAL LEASE For Landlord Use Only:
(NET-NET-NET) Building #: 228A
L/A: EGZ
Lease Preparation Date: May 16, 1996
Landlord: Dermody Properties, a Nevada Corporation, located at 1200 Financial
Boulevard, P.O. Box 7098, Reno, Nevada 89510
Tenant: Rexall Sundown, Inc., a Florida Corporation
Trade Name (dba): Rexall Sundown, Inc.
1. LEASE TERMS
1.01 Premises: The Premises referred to in this Lease contain
approximately 65,108 square feet as shown on Exhibit "A" attached. The address
of the Leased Premises is: 1430 East Greg Street, Suite 101, Sparks, Nevada
89431.
1.02 Project: The Project in which the Premises are located consist
of approximately 201,295 square feet as shown in Exhibit A.
1.03 Tenant's Notice Address: Tenant's Notice Address is the address
of the Leased Premises as defined in Section 1.01 unless otherwise specified
here: 851 Broken Sound Parkway NW, Boca Raton, Florida 33487
1.04 Landlord's Notice Address: P.O. Box 7098, Reno, Nevada 89510
1.05 Tenant's Permitted Use: Warehousing, production and distribution
of vitamins and consumer health products.
1.06 Lease Term: The Lease Term is for three (3) years and commences
on October 1, 1996, and expires September 30, 1999.
1.07 Base Monthly Rent: TWENTY-ONE THOUSAND, FOUR HUNDRED EIGHTY-FIVE
AND 64/100 DOLLARS ($21,485.64) in lawful money of the United States of America.
Adjustments to the Base Monthly Rent shall be made N/A.
1.08 Security Deposit: TWENTY-FOUR THOUSAND, SEVEN HUNDRED FORTY-ONE
AND 04/100 DOLLARS ($24,741.04) in lawful money of the United States of America.
1.09 Proportionate Share: Tenant's Proportionate Share is 32.34%
based upon the total square footage of the Project and the square footage of the
Premises.
1.10 Index: The Index for calculating cost of living adjustments in
the Consumer Price Index shall be the All Urban Consumers, U.S. City Average
(1982/84=100).
1.11 Tenant is entitled to common vehicle parking spaces subject to
the provisions of Section 8 of the Lease.
1.12 Tenant Improvements: Tenant Improvements to be performed in the
Premises, if any, will be performed in accordance with the terms and provisions
entitled "Landlord's Work" contained in Exhibit "B" attached if applicable.
Thereafter during the Lease Term, Landlord will be under no obligation to alter,
change, decorate or improve the Premises.
2. DEMISE AND POSSESSION
2.01 Landlord leases to Tenant and Tenant leases from Landlord the
Premises described in 1.01. By entering the Premises, Tenant acknowledges that
it has examined the Premises and accepts the Premises in their present condition
subject to any additional work Landlord has agreed to do as stated on Exhibit B
if applicable. Landlord expressly reserves its right to lease any other space
available in the Project to whom ever it wishes, further Tenant hereby
acknowledges that it did not rely on any other tenant remaining a tenant in the
Project as a consideration for entering into this Lease.
2.02 If for any reason Landlord cannot deliver possession of the
Premises on the date the Lease commences, Landlord shall not be subject to
any liability nor shall the validity of this Lease be affected. If Tenant has
not caused such delay there shall be a proportionate reduction of the Base
Monthly Rent covering the period between the commencement of the Lease Term and
the date when Landlord can deliver possession. However, Tenant, unless it is
the cause of the delay, has the right to cancel this Lease by written
notification if possession of the Premises is not delivered within ninety (90)
days of the date the Lease Term commences. Landlord may terminate this Lease by
giving written notice to Tenant if possession of the Premises is not delivered
within one hundred eighty (180) days of the date the lease is to commence.
3. BASE MONTHLY RENT
3.01 Base Monthly Rent: On the first day of every calendar month of
the Lease Term commencing October 1, 1996, Tenant will pay, without deduction or
offset, prior notice or demand, Base Monthly Rent at the place designated by
Landlord. However, the first month's rent is due and payable upon execution of
this Lease. In the event, that the Term of this Lease commences or ends on a
day other than the first day of a calendar month, a prorated amount of Base
Monthly Rent shall be due upon execution and it will be calculated using a
thirty (30) day month. In the event this Lease is to commence upon a date not
ascertained on execution, both parties agree to complete and execute a
Commencement Date Certificate in the form of Exhibit "E" within ten (10) days of
the Commencement Date, if applicable.
<PAGE> 2
3.03 Any installment of rent or any other charge payable which is
not paid within ten (10) days after it becomes due will be considered past due
and Tenant will pay to Landlord as Additional Rent a late charge equal to the
product of the variable Prime Rate "Prime", plus six percent (6%) per annum as
charged by Bank of America, Nevada; times the amount of such installment amount
due, or eighteen percent (18%) per annum of such installment or the sum of
twenty-five dollars ($25.00), whichever is greater, for each month or
fractional month transpiring from the date due until paid. A twenty-five
dollar ($25.00) handling charge will be paid by Tenant to Landlord for each
returned check and, thereafter, Tenant will pay all future payments of rent or
other charges due by money order or cashier's check. In the event a late
charge is assessed for three (3) consecutive rental periods, whether or not it
is collected, the rent shall without further notice become due and payable
quarterly in advance notwithstanding any provision this Lease to the contrary.
If Tenant shall be served with a demand for the payment of past due rent, any
payments tendered thereafter to cure any default by Tenant shall be made
only by cashier's check.
3.04 The amount of the Base Monthly Rent includes projected
construction of Tenant's improvements as indicated on Exhibit "B" attached. In
the event that Tenant requests Landlord to construct additional improvements
and/or final construction costs exceed original estimates, such costs or
expenses upon itemized notice by Landlord, shall be paid by Tenant to Landlord,
or Landlord may increase the Base Monthly Rent according to the terms and
conditions outlined on Exhibit "B", or elsewhere in this Lease.
4. COMMON AREAS
4.01 Definitions: "Common Areas: "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project that are provided and designated by Landlord for the
non-exclusive use of Landlord, Tenant and other lessees of the Project and
their respective employees, agents, customers and invitees. Common Areas
include, but are not limited to: all parking areas, loading and unloading
areas, trash areas, roadways, sidewalks, walkways, parkways, driveways,
corridors, landscaped areas and any restrooms used in common by lessees.
4.02 Tenant, its employees, agents, customers and invitees have the
non-exclusive right (in common with other Tenants, Landlord, and any other
person granted use by Landlord) to use of the Common Areas. Tenant agrees to
abide by and conform to, and to cause its employees, agents, customers and
invitees to abide by and conform to all rules and regulations established by
Landlord subject to provisions of paragraph 24.
4.03 Landlord has the right, in its sole discretion, from time to
time, to: 1) make changes to the Common Areas, including without limitation,
changes in the location, size, shape and number of driveways, entrances,
parking spaces, parking areas, ingress, egress, direction of driveways,
entrances, corridors parking areas and walkways; 2) close temporarily any of
the Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available; 3) add additional buildings and improvements to the
Common Areas; 4) use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project or any portion thereof; do
and perform any other acts or make any other changes in, to or with respect to
the Common Areas and Project as Landlord may, in the exercise of sound business
judgement, deem to be appropriate.
5. ADDITIONAL RENT
5.01 All charges payable by Tenant other than Base Monthly Rent are
called "Additional Rent". Unless this lease provides otherwise, Additional
Rent is to be paid with the next monthly installment of Base Monthly Rent and
is subject to the provisions of 3.03. The term "rent" whenever used in this
Lease means Base Monthly Rent and Additional Rent.
5.02 Operating Costs
A. "Operating Costs" are all costs and expenses of ownership,
operation, maintenance, management, repair and insurance incurred by Landlord
for the Project including, bit not limited to the following: all supplies,
materials, labor and equipment, used in or related to the operation and
maintenance of the Common Areas; all utilities, including but not limited to:
water, electricity, gas, heating, lighting, sewer, waste disposal related to
the maintenance or operation of the Common Areas; all air-conditioning and
ventilating costs related to the maintenance or operation of the Project; all
Landlord's costs in managing, maintaining, repairing, operating and insuring
the Project, including, for example, clerical, supervisory, and janitorial
staff; all maintenance, management and service agreements, including but not
limited to, janitorial, security, trash removal related to the maintenance or
operation of the Project; all legal and accounting costs and fees for licenses
and permits related to the ownership and operation of the Project; all
insurance premiums and costs of fire, casualty, and liability coverage, rent
abatement and earthquake insurance and any other type of insurance related to
the Entire Project, including any deductible for a loss attributable to the
Premises; all operation, maintenance and repair costs to the Common Areas,
including but not limited to, sidewalks, walkways, parkways, parking areas,
loading and unloading areas, trash areas, roadways, driveways, corridors, and
landscaped area, including for example, costs of resurfacing and restriping
parking areas; all maintenance and repair costs of building exteriors
(including painting, asphalt repair and replacement and roof maintenance,
repair and replacement), restrooms used in common by Tenants and signs and
directories of the Project; amortization (along with reasonable financing
charges) of capital improvements made to the Common Areas which may be required
by any government authority or which will improve the operating efficiency of
the Project; a reasonable reserve for repairs and replacement; a five percent
(5%) fee for Landlord's supervision of the Common Areas (five percent (5%) of
the total above mentioned costs and expenses incurred in a calender year).
Operating Costs will not include depreciation of the Project.
B. Tenant shall pay to Landlord Tenant's Proportionate Share of the
Operating Costs as indicated in 1.09. If there is a change in the square
footage of either the Project or the Premises during the term of this Lease the
Proportionate Share of the Tenant shall be adjusted accordingly. Such payment
shall be paid by Tenant with and in addition to the monthly payment of Base
Monthly Rent. Tenant shall, if Landlord so elects, pay to Landlord on a
monthly basis, in advance, the amount which Landlord reasonably estimates to be
Tenant's Proportionate Share of the Operating Costs. In the event of such
election by Landlord, Landlord shall periodically determine Tenant's share of
the actual Operating Costs, and in the event that the amount which Tenant
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has paid to Landlord on account of the estimated Operating Costs is less than
his share of such actual Operating Costs, Tenant shall pay such difference to
Landlord on the next rent payment date. In the event that Tenant has paid to
Landlord more than his share of such actual Operating Costs, the amount of such
difference shall be credited against Tenant's payments of Operating Costs next
due or if such period is at the end of the Lease term the amount of any
overpayment shall be promptly refunded to Tenant.
C. Failure by Landlord to provide Tenant with a statement by April
1st of each year shall not constitute a waiver by Landlord of its right to
collect Tenant's share of Operating Costs or estimates for a particular calendar
year, Landlord's right to charge Tenant for such expenses in subsequent years
is not waived.
5.03 Taxes
A. "Real Project Taxes" are: (i) any fee, license fee, license
tax, business license fee, commercial rental tax, levy, charge, assessment,
penalty or tax imposed by any taxing authority against the Project; (ii) any
tax or fee on Landlord's right to receive, or the receipt of, rent or income
from the Project or against Landlord's business of leasing the Project, (iii)
any tax or charge for fire protection, streets, sidewalks, road maintenance,
refuse or other services provided to the Project by any governmental agency;
(iv) any tax imposed upon this transaction, or based upon a re-assessment of
the Project due to a change in ownership or transfer of all of part or
Landlord's interest in the Project; (v) any charge or fee replacing,
substituting for, or in addition to any tax previously included within the
definition on real property tax; and (vi) the Landlord's cost of any tax
protest relating to any of the above. Real Project Taxes do not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.
B. Tenant shall pay to Landlord Tenant's Proportionate Share of
the Real Project Taxes as indicated in 1.09. Such payment shall be paid by
Tenant annually upon being invoiced for such taxes in addition to the monthly
payment of Base Monthly Rent. Tenant shall, if Landlord so elects, pay to
Landlord on a monthly basis, in advance, the amount which Landlord reasonably
estimates to be Tenant's Proportionate Share of the Real Project Taxes. In
the event of such election by Landlord, Landlord shall periodically determine
Tenant's share of the actual Real Project Taxes, and in the event that the
amount which Tenant has paid to Landlord on account of the Real Project Taxes
is less than his share of such actual Real Project Taxes, Tenant shall pay such
difference to Landlord on the next rent payment date. In the event that Tenant
has paid to Landlord more than his share of such actual Real Project Taxes, the
amount of such difference shall be credited against Tenant's payment of Real
Project Taxes next due. If the Lease term is expired then Landlord shall
promptly refund any overpayment to Tenant.
C. Personal Property Taxes: Tenant will pay all taxes charged
against trade fixtures, furnishing, equipment or any other personal property
belonging to Tenant. Tenant will have personal property taxes billed
separately from the Project. If any of Tenant's personal property is taxed
with the Project, Tenant will pay Landlord the taxes for the personal property
upon demand by Landlord.
5.04 Based on Tenant's Proportionate Share defined in 1.09, Tenant
agrees to pay as Additional Rent to Landlord its share of any parking charges,
utility surcharges, occupancy taxes, or any other costs resulting from the
statutes or regulations, or interpretations thereof, enacted by any governmental
authority in connection with the use or occupancy of the Project or the parking
facilities serving the Project, or any part thereof.
5.05 Landlord by completing this paragraph may elect to have Tenant
pay a monthly estimate of the Additional Rent due from Tenant of 5 cents per
square foot, i.e. THREE THOUSAND TWO HUNDRED FIFTY-FIVE AND 40/100 DOLLARS
($3,255.40). Landlord shall make adjustments to this estimate based upon
actual costs and projected future costs. Landlord shall periodically determine
the balance between actual Additional Rent and Additional Rent paid by Tenant
and make adjustments in accordance with 5.02 and 5.03 above.
6. SECURITY DEPOSIT
6.01 If Tenant defaults with respect to any provision of this Lease,
Landlord may retain, use or apply all or any part of the Security Deposit to
compensate Landlord for any loss or damage suffered by Tenant's default
including but not limited to, the payment of Base Monthly Rent, Additional Rent
or other rental sums due, and for payment of amounts Landlord is obligated to
spend by reason of Tenant's default. If any portion is so retained, used or
applied, Tenant, upon demand, will deposit with Landlord an amount sufficient
to restore the deposit to its original amount, as adjusted per 3.02, except as
otherwise provided by law. Landlord will not be required to keep the Security
Deposit separate from its general funds, and Tenant will not be entitled to
interest on it. If Tenant fully and faithfully performs every provision of
this Lease, the Security Deposit or a balance thereof will be returned to
Tenant within 30 days after the expiration of this Lease or any renewals of
this Lease. In no event will Tenant have the right to apply any part of the
Security Deposit to any rents payable under this Lease.
7. USE OF PREMISES; QUIET CONDUCT
7.01 The Premises may be used and occupied only for Tenant's
Permitted Use as shown in 1.05 and for no other purpose, without obtaining
Landlord's prior written consent. Tenant will comply with all laws,
ordinances, orders and regulations affecting the Premises. Tenant will not
perform any act or carry on any practices that may injure the Project or the
Premises or be a nuisance or menace, or disturb the quiet enjoyment of other
lessees in the Project including but not limited to equipment which causes
vibration, use or storage of chemicals, or heat or noise which is not properly
insulated. Tenant will not cause, maintain or permit any outside storage on or
about the Premises. In addition, Tenant will not allow any condition or thing
to remain on or about the Premises which diminishes the appearance or aesthetic
qualities of the Premises and/or the Project or the surrounding property. The
keeping of a dog or other animal on or about the Premises is expressly
prohibited.
7.02 As used in this section, the term "Hazardous Waste" means:
A. Those substances defined as "hazardous substances", "hazardous
materials", "toxic substances", "regulated substances", or "solid waste" in the
Toxic Substance Control Act, 15 U.S.C. Section 2601 et. seq., as now existing
or hereafter amended ("TSCA"), the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C Section 9601 et. seq., as
now existing or hereafter amended ("CERCLA"), the Resource, Conservation and
Recovery Act of 1976, 42 U.S.C. Section 6901 et. seq., as now existing or
hereafter amended ("RCRA"), the Federal Hazardous Substances Act, 15 U.S.C.
Section 1261 et. seq., as now existing or hereafter amended ("FHSA"), the
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et. seq., as
now existing or hereafter amended ("OSHA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et. seq., as now existing or
hereafter amended ("HMTA"), and the rules and regulations now in effect or
promulgated hereafter pursuant to each law referenced above;
B. Those substances defined as "hazardous waste", hazardous
material", or "regulated substances" in Nev. Rev. Stat. ch 459, 1989 Nev. Stat.
ch. 598 and 1989 Nev. Stat. ch 363, or in the regulations now existing or
hereafter promulgated pursuant thereto or in the Uniform Fire Code, 1988
edition;
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C. Those substances listed in the United States Department of
Transportation table (49 CFR Section 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
D. Such other substances, mixtures, materials and waste which are
regulated under applicable local, state, or federal law, or which are
classified as hazardous or toxic under federal, state or local laws or
regulations(all laws, rules and regulations referenced in paragraphs (a), (b),
(c) and (d) are collectively referred to as "Environmental Laws").
7.03 Tenant's Covenants. Tenant does not intend to and Tenant will
not, nor will Tenant allow any other person (including partnerships,
corporations and joint ventures), during the term of this Lease to manufacture,
process, store, distribute, use, discharge or dispose of any Hazardous Waste
in, under or on the Project, the Common Areas, or any property adjacent
thereto.
A. Tenant shall notify Landlord promptly in the event of any spill or
release of Hazardous Waste into, on, or onto the Project regardless of the
source of spill or release, whenever Tenant knows or suspects that such a
release occurred.
B. Tenant will not be involved in operations at or near the Project
which could lead to the imposition on the Tenant or the Landlord of liability
or the creation of a lien on the Project, under the Environmental Laws.
C. Tenant shall, upon twenty-four (24) hour prior notice by Landlord,
permit Landlord or Landlord's agent access to the Project to conduct an
environmental site assessment with respect to the Project.
7.04 Indemnity. Tenant for itself and its successors and assigns
undertakes to protect, indemnify, save and defend Landlord, its agents,
employees, directors, officers, shareholders, affiliates, consultants,
independent contractors, successors and assigns (collectively the
"Indemnitees") harmless from any and all liability, loss, damage and expense,
including reasonable attorneys' fees, claims, suits and judgments that
Landlord or any other Indemnitee, whether as Landlord or otherwise, may suffer
as a result of, or with respect to:
A. The violation by Tenant to Tenant's agents, employees, invitees,
licensees or contractors of any Environmental Law, including the assertion of
any lien thereunder and any suit brought or judgment rendered regardless of
whether the action was commenced by a citizen (as authorized under the
Environmental Laws) or by a government agency;
B. To the extent caused, directly or indirectly by Tenant or Tenant's
agents, employees, invitees, licensees or contractors any spill or release of or
the presence of any Hazardous Waste affecting the Project whether or not the
same originates or emanates from the Project or any contiguous real estate,
including any loss of value of the Project as a result of a spill or release
of or the presence of any Hazardous Waste;
C. To the extent caused, directly or indirectly by Tenant or Tenant's
agents, employees, invitees, licensees or contractors any other matter affecting
the Project within the jurisdiction of the United States Environmental
Protection Agency, the Nevada State Environmental Commission, the Nevada
Department of Conservation and Natural Resources, or the Nevada Department of
Commerce, including costs of investigations, remedial action, or other response
costs whether such costs are incurred by the United States Government, the
State of Nevada, or any Indemnitee;
D. To the extent caused, directly or indirectly by Tenant or Tenant's
agents, employees, invitees, licensees or contractors liability for clean-up
costs, fines, damages or penalties incurred pursuant to the provisions of any
applicable Environmental Law; and
E. To the extent caused, directly or indirectly by Tenant or Tenant's
agents, employees, invitees, licensees or contractors liability for personal
injury or property damage arising under any statutory or common-law tort
theory, including, without limitation, damages assessed for the maintenance of
a public or private nuisance, or for the carrying of an abnormally dangerous
activity, and response costs.
7.05 Remedial Acts. In the event of any spill or release of or the
presence of any Hazardous Waste affecting the Project, caused by Tenant, its
employees, agents, invitees, licensees, or contractors, whether or not the same
originates or emanates from the Project or any contiguous real estate, and/or
if Tenant shall fail to comply with any of the requirements of any
Environmental Law, Landlord may, without notice to Tenant, at its election, but
without obligation so to do, gives such notices and/or cause such work to be
performed at the Project and/or take any and all other actions as Landlord
shall deem necessary or advisable in order to remedy said spill or release of
Hazardous Waste or cure said failure of compliance and any amounts paid as a
result thereof, together with interest at the rate equal to the product of the
variable Prime Rate "Prime", plus six percent (6%) per annum as charged by Bank
of America, Nevada; times the amount of such installment amount due, or
eighteen percent (18%) per annum of such installment or the sum of twenty-five
dollars ($25.00), whichever is greater, for each month or fractional month
transpiring from the date due until paid.
7.06 Settlement. Landlord upon giving Tenant ten (10) days prior
notice, shall have the right in good faith to pay, settle or compromise, or
litigate any claim, demand, loss, liability, cost, charge, suit, order,
judgment or adjudication under the belief that it is liable therefor, whether
liable or not, without the consent or approval of Tenant unless Tenant within
said ten (10) day period shall protest in writing and simultaneously with such
protest deposit with Landlord collateral satisfactory to Landlord sufficient to
pay and satisfy any penalty and/or interest which may accrue as a result of
such protest and any judgment or judgments as may result, together with
attorney's fees and expenses, including, but not limited to, environmental
consultants.
8. PARKING
8.01 Tenant and Tenant's customers, suppliers, employees, and
invitees have the non-exclusive right to park in common with other lessees in
the parking facilities as designated by Landlord. Tenant agrees not to
overburden the parking facilities and agrees to cooperate with Landlord and
other lessees in the use of the parking facilities. Landlord reserves the
right to, on an equitable basis, assign specific spaces with or without charge
to Tenant as Additional Rent, make changes in the parking layout from time to
time, and to establish reasonable time limits on parking.
9. UTILITIES
9.01 Tenant will be responsible for and shall pay for all water,
gas, heat, light, power, sewer, electricity, or other services metered,
chargeable to or provided to the Premises separate from and in addition to the
costs outlined in Section 5.02 dealing with the utility costs for Common Area
Maintenance. Landlord reserves the right to install separate meters from any
such utility.
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9.02 Landlord will not be liable or deemed in default to Tenant nor
will there be any abatement of rent for any interruption or reduction of
utilities or services not caused by any act of Landlord or any act reasonably
beyond Landlord's control. Tenant agrees to comply with energy conservation
programs implemented by Landlord by reason of enacted laws or ordinances.
9.03 Tenant will contract and pay for all telephone and such other
services for the Premises subject to the provisions of 10.03.
10. ALTERATIONS, MECHANIC'S LIENS
10.01 Tenant will not make any alterations to the Premises without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Landlord's consent shall be contingent upon Tenant providing
Landlord with the following items or information, all subject to Landlord's
approval: (i) Tenant's contractor, (ii) certificates of insurance by Tenant's
contractor for commercial general liability insurance with limits not less
than $2,000,000 General Aggregate, $1,000,000 Products/Complete Operations
Aggregate, $1,000,000 Personal & Advertising Injury, $1,000,000 Each Occurrence,
$50,000 Fire Damage, $5,000 Medical Expense, $1,000,000 Auto Liability (Combined
Single Limit, including Hired/Non-Owned Auto Liability), Workers Compensation,
including Employer's Liability, as required by state statute endorsed to show
Landlord as an additional insured and for worker's compensation as required and
(iii) detailed plans and specifications for such work. Tenant agrees that it
will have its contractor execute a waiver of mechanic's lien and that Tenant
will remove any mechanic's lien placed against the Project within ten (10) hays
of receipt of notice of lien. In addition, before alterations may begin, valid
building permits or other permits or licenses required must be furnished to
Landlord, and, once the alterations begin, Tenant will diligently and
continuously pursue their completion. At Landlord's option, any alterations
may become part of the realty and belong to Landlord. If requested by
Landlord, Tenant will pay, prior to the commencement of the construction, an
amount determined by Landlord necessary to cover the costs of demolishing such
alterations and/or the cost of returning the Premises to its condition prior to
such alterations. As a further condition to giving such consent, Landlord may
require Tenant to provide Landlord, at Tenant's sole cost and expense, a payment
and performance bond in form acceptable to Landlord, in a principal amount not
less than one and one-half times the estimated costs of such alterations, to
ensure Landlord against any liability for mechanic's and materialmen's liens and
to ensure completion of work. Tenant, at Landlord's option, shall at Tenant's
expense remove all alterations and repair all damage to the Premises.
10.02 Notwithstanding anything in 10.01, Tenant may, with written
consent of Landlord, install trade fixtures, equipment, and machinery in
conformance with the ordinances of the applicable city and county, and they may
be removed upon termination of its Lease provided the Premises are not damaged
by their removal.
10.03 Any private telephone systems and/or other related
telecommunications equipment and lines must be installed within Tenant's
Premises and, upon termination of this Lease removed and the Premises restored
to the same condition as before such installation.
10.04 Tenant will pay all costs for alterations and will keep the
Premises, the Project and the underlying property free from any liens arising
out of work performed for, materials furnished to or obligation incurred by
Tenant.
10.05 Landlord will have the right to construct or permit
construction of tenant improvements in or about the Project for existing and
new Tenants and to alter any public areas in and around the Project.
Notwithstanding anything which may be contained in this Lease, Tenant
understands this right of Landlord and agrees that such construction will not
be deemed to constitute a breach of this Lease by Landlord and Tenant waives any
such claim which it might have arising from such construction.
11. FIRE INSURANCE: HAZARD AND LIABILITY INSURANCE
11.01 Except as expressly provided as Tenant's Permitted Use, or as
otherwise consented to by landlord in writing, Tenant shall not do or permit
anything to be done within or about the Premises which will increase the
existing rate of insurance on the Project and shall, at its sole cost and
expense, comply with any requirements, pertaining to Premises, of any insurance
organization insuring the Project and Project-related apparatus. Tenant agrees
to pay to Landlord, as Additional Rent, any increases in premiums on policies
resulting from Tenant's Permitted Use or other use consented to by Landlord
which increases Landlord's premiums or requires extended coverage by Landlord
to insure the Premises.
11.02 Tenant, at all times during the term of this Lease and at
Tenant's sole expense, will maintain a policy of standard fire and extended
coverage insurance with "all risk" coverage on all Tenant's improvements and
alterations in or about the Premises and on all personal property and equipment
to the extent of at least ninety percent (90%) of their full replacement value.
The proceeds from this policy will be used by Tenant for the replacement of
personal property and equipment and the restoration of Tenant's improvements
and/or alterations. This policy will contain an express waiver, in favor of
Landlord, of any right of subrogation by the insurer.
11.03 Tenant, at all times during the term on this Lease and at
Tenant's sole expense, will maintain a policy of commercial general liability
coverage with limits of not less than $2,000,000 combined single limit for
bodily injury and property damage insuring against all liability of Tenant and
its authorized representatives arising out of or in connection with Tenant's
use or occupancy of the Premises.
11.04 All insurance will name Landlord and/or Landlord's designated
partners and affiliates as an additional insured and will include an express
waiver of subrogation by the insurer in favor of Landlord and Tenant and will
release Landlord from any claims for damage to any person, to the Premises,
and to the Project, and to Tenant's personal property, equipment, improvements
and alterations in or on the Premises of the Project, caused by or resulting
from risks which are to be insured against by Tenant under this Lease. All
insurance required to be provided by Tenant under this Lease will (a) be issued
by an insurance company authorized to do business in the state in which the
Premises are located and which has and maintains a rating of A/X in the Best's
Insurance Reports or the equivalent, (b) be primary and noncontributing with
any insurance carried by Landlord, and (c) contain an endorsement requiring at
least thirty (30) days prior written notice of cancellation to Landlord before
cancellation or change in coverage, scope or limit of any policy. Tenant will
deliver a certificate of insurance or a copy of the policy to Landlord with
thirty (30) days of execution of this Lease and will provide evidence of
renewed insurance coverage at each anniversary, and prior to the expiration of
any current policies; however, in no event will Tenant be allowed to occupy
the Premises before providing adequate and acceptable proof of insurance as
stated above. Tenant's failure to provide evidence of this coverage to
Landlord may, in Landlord's sole discretion, constitute a default under this
Lease.
12. INDEMNIFICATION AND WAIVER OF CLAIMS
12.01 Tenant waives all claims against Landlord for damage to any
property in or about the Premises and for injury to any persons, including
death resulting therefrom, regardless of cause or time of occurrence, except to
the extent caused by the gross negligence or willful misconduct of Landlord.
Tenant will defend, indemnify and hold Landlord harmless from and against any
and all claims, actions, proceedings, expenses, damages and liabilities,
including attorney's fees, arising out of,
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without limitation, any failure of Tenant to comply fully with all of the terms
and conditions of this Lease except for any damage or injury which is the direct
result of gross negligence or intentional misconduct by Landlord, its
employees, agents, visitors, or licensees.
13. REPAIRS
13.01 Tenant shall, at its sole expense, keep and maintain the
Premises and every part thereof (excepting common use equipment, which Landlord
agrees to repair or replace pursuant to Section 5.02 unless damages are due to
the neglect or intentional acts of Tenant or its agents, employees, visitors, or
licensees), including interior windows, skylights, doors, plate glass, any store
fronts and the interior of the Premises, in good and sanitary order, condition
and repair. Tenant will, also, at its sole cost keep and maintain all
utilities, fixtures, plumbing and mechanical equipment used by Tenant in good
order and repair and furnish all expendables (light bulbs, paper goods, soaps,
etc.) used in the Premises. The standard for comparison and need of repair
will be the condition of the Premises at the time of commencement of this
Lease and all repairs will be made by a licensed and bonded contractor
approved by Landlord.
13.02 Tenant will not make repairs to the Premises at the cost of
Landlord whether by deductions of rent or otherwise, or vacate the Premises or
terminate the Lease if repairs are not made. If during the Term, any
alteration, addition or change to the Premises is required by legal authorities,
Tenant, at its sole expense, shall promptly make the same. The cost of any
such capital improvements made by landlord shall be amortized over the useful
life thereof in accordance with generally accepted accounting principles and
included within the Operating Costs. In such case, Tenant shall reimburse
Landlord for its Proportionate Share of the current monthly portion of such
amortized costs pursuant to Section 5.02. Landlord reserves the right to make
any such repairs or to otherwise maintain the Premises if such repairs or
maintenance are required to be performed by Tenant hereunder and if such
repairs are not made or the Premises are not maintained in good condition by
Tenant and Tenant shall reimburse Landlord for all such costs upon demand.
13.03 If repairs deemed necessary by Landlord or any government
authority are not made by Tenant within the prescribed time frame as requested
in writing, Tenant shall be in default of this Lease.
13.04 Tenant shall, at its own expense, within thirty days of lease
commencement, contract with a vendor acceptable to Landlord for the maintenance
service of the HVAC which will be furnished to the Landlord upon request. If
Tenant fails to obtain and maintain such a maintenance service contract
Landlord shall have the right to obtain such a maintenance service contract at
the expense of Tenant.
14. AUCTIONS, SIGNS, AND LANDSCAPING
14.01 Tenant will not conduct or permit to be conducted any sale by
auction on the Premises. Landlord will have the right to control landscaping
and approve the placement, size, and quality of signs. Tenant will not make
alterations or additions to the landscaping and will not place any signs nor
allow the placement of any signs, which are visible from the outside, on or
about any building of the Project, nor in any landscape area, without the prior
written consent of Landlord. Landlord will have the right in its sole
discretion to withhold its consent. Any signs not in conformity with this
Lease may be removed by Landlord at Tenant's expense.
15. ENTRY BY LANDLORD
15.01 Tenant will permit Landlord and Landlord's agents to enter the
Premises at all reasonable times for the purpose of inspecting the same, or for
the purpose of maintaining the Project, or for the purpose of making repairs,
alterations or additions to any portion of the Project, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, or for the purpose of posting notices of nonresponsibility for
alterations, additions or repairs, or for the purpose of showing the Premises
to prospective tenants during the last six months of the Lease Term, or placing
upon the Project any usual or ordinary "for sale" signs, without any rebate of
rents and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned. Tenant will permit Landlord at
any time within sixty (60) days prior to the expiration of this Lease, to place
upon the Premises any usual or ordinary "to let" or "to lease" signs. Tenant
will not install a new or additional lock or any bolt on any door of the
Premises without the prior written consent of Landlord, which will not be
unreasonably withheld. If Landlord gives its consent, such work shall be
undertaken by a locksmith approved by Landlord, at Tenant's sole cost.
Landlord retains the right to charge Tenant for restoring any altered doors to
their condition prior to the installation of the new or additional locks.
17. DESTRUCTION
17.01 In the case of total destruction of the Premises, or any
portion thereof substantially interfering with Tenant's use of the Premises,
whether by fire or other casualty, not caused by the fault or negligence of
Tenant, its agents, employees, servants, contractors, subtenants, licensees,
customers or business invitees, this Lease shall terminate except as herein
provided. If Landlord notifies Tenant in writing within forty-five (45) days
of such destruction of Landlord's election to repair said damage, and if
Landlord proceeds to and does repair such damage with reasonable dispatch, this
Lease shall not terminate, but shall continue in full force and effect, except
that Tenant shall be entitled to a reduction in the minimum rent in an amount
equal to that proportion of the minimum rent which the number of square feet of
floor space in the unusable portion bears to the total number of square feet of
floor space in the Premises. Said reduction shall be prorated so that the rent
shall only be reduced for those days any given area is actually unusable. In
determining what constitutes reasonable dispatch, consideration shall be given
to delays caused by labor disputes, civil commotion, war, warlike operations,
invasion, rebellion, hostilities, military or usurped power, sabotage,
governmental regulations or control, fire or other casualty, inability to obtain
any materials or services, acts of God and other causes beyond Landlord's
control. If this Lease is terminated pursuant to this Section 17 and if
Tenant is not in default hereunder, rent shall be prorated as of the date of
termination, any security deposited with Landlord shall be returned to Tenant,
less any reasonable offsets and all rights and obligations hereunder shall
cease and terminate.
17.02 Notwithstanding the foregoing provisions, in the event the
Premises, or any portion thereof, shall be damaged by fire or other casualty due
to the fault or negligence of Tenant, its agents, employees, servants,
contractors, subtenants, licensees, customers or business invitees, then,
without prejudice to any other rights and remedies of Landlord, this Lease
shall not terminate, the damage shall be repaired at Tenant's cost, and there
shall be no apportionment or abatement of any rent.
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17.03 In the event of any damage not limited to, or not including, the
Premises, such that the building of which the Premises is a part is damaged to
the extent of twenty-five (25%) percent of more of the cost of replacement, or
the buildings (taken in the aggregate) of the Project owned by Landlord shall be
damaged to the extent of more than twenty-five (25%) of the aggregate cost of
replacement, Landlord may elect to terminate this Lease upon giving notice of
such election in writing to Tenant with ninety (90) days after the occurrence
of the event causing the damage.
17.04 The provisions of this Section 17 with respect to Landlord
shall be limited to such repair as is necessary to place the Premises in the
condition specified for Landlord's work by Exhibit B (if applicable) and when
placed in such condition the Leased Property shall be deemed restored and
rendered tenantable promptly following which time Tenant, at Tenant's expense
shall perform Tenant's work required by Exhibit B (if applicable) and Tenant
shall also repair or replace its stock in trade, fixtures, furniture,
furnishings, floor coverings and equipment, and if Tenant has closed, Tenant
shall promptly reopen for business.
17.05 All insurance proceeds payable under Landlord's policy any
fire, and/or rental insurance shall be payable solely to Landlord and Tenant
shall have no interest therein. Tenant shall in no case be entitled to
compensation for damages on account of any annoyance or inconvenience in making
repairs under any provision of this Lease. Except to the extent provided for
in this Section 17, neither the rent payable by Tenant nor any of Tenant's other
obligations under any provision of this Lease shall be affected by any damage
to or destruction of the Premises or any portion thereof by any cause
whatsoever.
18. ASSIGNMENT, SUBLETTING AND TRANSFERS OF OWNERSHIP
18.01 Tenant will not, without Landlord's prior written consent
(which consent shall not be unreasonably withheld or delayed), assign, sell,
mortgage, encumber, convey or otherwise transfer all or any part of Tenant's
leasehold estate, or permit the Premises to be occupied by anyone other than
Tenant and Tenant's employees or sublet the premises or any portion thereof
(collectively called "Transfer"). Tenant must supply Landlord with any and all
documents deemed necessary by Landlord to evaluate any proposed Transfer at
least sixty (60) days in advance of Tenant's proposed Transfer date.
18.02 Landlord need not consent to any Transfer for reasons
including, but not limited to, whether or not: (a) in the reasonable judgment
of Landlord the transferee is of a character or is engaged in a business which
is not in keeping with the standard of Landlord for the Project; (b) in the
reasonable judgment of Landlord any purpose for which the transferee intends to
use the Premises is not in keeping with standards of Landlord for the Project;
provided in no event may any purpose for which transferee intends to use the
Premises be in violation of this Lease; (c) the portion of the Premises subject
to the transfer is not regular in shape with appropriate means of entering and
exiting, including adherence to any local, county or other governmental codes,
or is not otherwise suitable for the normal purposes associated with such a
Transfer; or (d) Tenant is in default under this Lease or any other Lease with
Landlord.
18.03 In the event Landlord consents to a Transfer, Tenant will pay
Landlord the excess, if any, of the rent and other charges reserved in the
Transfer over the allocable portion of the rent and other charges hereunder for
that portion of the Premises subject to the Transfer. For the purpose of this
section, the rent reserved in the Transfer will be deemed to include any lump
sum payment or other consideration given to Tenant in consideration for the
Transfer. Tenant will pay or cause the transferee to pay to Landlord this
additional rent together with the monthly installments of rent due.
18.04 Any consent to any Transfer which may be given by Landlord, or
the acceptance of any rent, charges or other consideration by Landlord from
Tenant or any third party, will not constitute a waiver by Landlord of the
provisions of this Lease or a release of Tenant from the full performance by it
of the covenants stated herein; and any consent given by Landlord to any
Transfer will not relieve Tenant (or any transferee of Tenant) from the above
requirements for obtaining the written consent of Landlord to any subsequent
Transfer.
18.05 If a default under this Lease should occur while the Premises
or any part of the Premises are assigned, sublet or otherwise transferred,
Landlord, in addition to any other remedies provided for within this Lease or
by law, may at its option collect directly from the transferee all rent or
other consideration becoming due to Tenant under the Transfer and apply these
monies against any sums due to Landlord by Tenant; and Tenant authorizes and
directs any transferee to make payments of rent or other consideration direct
to Landlord upon receipt of notice from Landlord. No direct collection by
Landlord from any transferee should be construed to constitute a novation or a
release of Tenant or any guarantor of Tenant from the further performance of
its obligations in connection with this Lease.
18.06 If Tenant is a corporation or a partnership, the issuances of
any additional stock or equity interest and/or the transfer, assignment or
hypothecation of any stock or interest in such corporation or partnership in
the aggregate in excess of Twenty-five (25%) of such interests, as the same may
be constituted as of the date of this lease, whether directly or indirectly,
shall be deemed to be a Transfer within the meaning of this Section 18.
18.07 In the event Tenant requests Landlord's consent to an
Assignment, Sub-Let or Transfer of Tenant's interest in the leased Premises,
Tenant agrees to pay Landlord all reasonable attorney's fees incurred by
Landlord for any legal services for document review of any and all documents
reasonably deemed necessary by Landlord and Tenant to Assign, Sub-let or
Transfer Tenant's interest in the leased Premises.
19. BREACH BY TENANT
19.01 Tenant will be in breach of this Lease if at any time during the
term of this Lease (and regardless of the pendency of any bankruptcy,
reorganization, receivership, insolvency or other proceedings in law, in equity
or before any administrative tribunal which have or might have the effect of
preventing Tenant from complying with the terms of this Lease):
A. Tenant fails to make payments of any installment of Base Monthly
Rent, Additional Rent, or of any other sum herein specified to be paid by
Tenant, within ten days following written Notice that the same is past due; or
B. Tenant fails to observe or perform any of its other covenants,
agreements or obligations hereunder, and such failure is not cured within ten
(10) days after Landlord's written notice to Tenant of such failure; provided,
however, that if the nature of Tenant's obligation is such that more than ten
(10) days are required for performance, then Tenant will not be in breach if
Tenant commences performance within such 10 day period and thereafter
diligently prosecutes the same to completion; or
C. Tenant, Tenant's assignee, subtenant, guarantor, or occupant of the
Premises becomes insolvent, makes a transfer in fraud of its creditors, makes a
transfer for the benefit of its creditors, is the subject of a bankruptcy
petition, is adjudged bankrupt or insolvent in proceedings filed against
Tenant, a receiver, trustee, or custodian is appointed for all or substantially
all of Tenant's assets, fails to pay its debts as they become due, convenes a
meeting of all or a portion of its creditors, or performs any acts of
bankruptcy or insolvency, including the selling of its assets to pay creditors;
or
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E. Tenant fails to take possession of the Premises within ninety (90)
days of receiving notice by Landlord that the Premises are available.
20. REMEDIES OF LANDLORD
20.01 Nothing contained herein shall constitute a waiver of Landlord's
right to recover damages by reason of Landlord's efforts to mitigate the damage
to it by Tenant's default; nor shall anything in this Section adversely affect
Landlord's right, as in this Lease elsewhere provided, to indemnification
against liability for injury or damages to persons or property occurring prior
to a termination of this Lease.
20.02 All cure periods provided herein shall run concurrently with any
periods provided by law.
20.03 In the event of default which has occurred and is continuing, as
designated herein above, in addition to any other rights or remedies provided
for herein or at law or in equity, Landlord, at its sole option, shall have the
following rights:
A. The right to declare the term of this Lease ended and reenter the
Premises and take possession thereof, and to terminate all of the rights of
Tenant in and to the Premises.
B. The right, without declaring the term of this Lease ended, to reenter
the Premises and to occupy the same, or any portion thereof, for and on account
of the Tenant as hereinafter provided, and Tenant shall be liable for and pay to
Landlord on demand all such expenses as Landlord may have paid, assumed or
incurred in recovering possession of the Premises, including reasonable costs,
expenses, attorney's fees and expenditures placing the same in good order, or
preparing or altering the same for reletting, and all other expenses,
commissions and charges paid by the Landlord in connection with reletting the
Premises. Any such reletting may be for the remainder of the term of this Lease
or for a longer or shorter period. Such reletting shall be for such rent and on
such other terms and conditions as Landlord, in its sole discretion, deems
appropriate. Landlord may execute any lease made pursuant to the terms hereof
either in the Landlord's own name or in the name of Tenant or assume Tenant's
interest in any existing subleases to any tenant of the Premises, as Landlord
may see fit, and Tenant shall have no right or authority whatsoever to collect
any rent from such tenants, subtenants, of the Premises. In any case, and
whether or not the Premises or any part thereof is relet, Tenant, until the end
of the Lease term shall be liable to Landlord for an amount equal to the amount
due as Rent hereunder, less net proceeds, if any of any reletting effected for
the account of Tenant. Landlord reserves the right to bring such actions for
the recovery of any deficits remaining unpaid by the Tenant to the Landlord
hereunder as Landlord may deem advisable from time to time without being
obligated to await the end of the term of the Lease. Commencement of
maintenance of one or more actions by the Landlord in this connection shall not
bar the Landlord from bringing any subsequent actions for further accruals.
In no event shall Tenant be entitled to any excess rent received by Landlord
over and above that which Tenant is obligated to pay hereunder; or
C. The right, even though it may have relet all or any portion of the
Premises in accordance with the provisions of subsection B, above, to thereafter
at any time elect to terminate this Lease for such previous default on the part
of the Tenant, and to terminate all the rights of Tenant in and to the Premises.
20.04 Pursuant to the rights of re-entry provided above, Landlord may
remove all persons from the Premises and may, but shall not be obligated to,
remove all property therefrom, and may, but shall not be obligated to, enforce
any rights Landlord may have against said property or store the same in any
public or private warehouse or elsewhere at the cost and for the account of
Tenant or the owner or owners thereof. Tenant agrees to hold Landlord free and
harmless from any liability whatsoever for the removal and/or storage of any
such property, whether of Tenant or any third party whomsoever. Such action by
the Landlord shall not be deemed to have terminated this Lease.
20.05 If Tenant breaches this Lease and abandons the Premises before the
end of the term, or if its right of possession is terminated by Landlord because
of Tenant's breach of this Lease, then this Lease may be terminated by Landlord
at its option. On such Termination Landlord may recover from Tenant, in
addition to the remedies permitted at law:
A. The worth, at the time of the award, of the unpaid Base Monthly Rents
and Additional Rents which had been earned at the time this Lease is terminated.
B. The worth, at the time of the award, of the amount by which the
unpaid Base Monthly Rents and Additional Rents which would have been earned
after the date of termination of this Lease until the time of award exceeds the
amount of the loss of rents that Tenant proves could be reasonably avoided;
C. The worth, at the time of the award, of the amount by which the
unpaid Base Monthly Rent and Additional Rents for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss for such period
as the Tenant proves could have been reasonably avoided; and
D. Any other amount, and court costs, necessary to compensate Landlord
for all detriment proximately caused by Tenant's breach of its obligations under
this Lease, or which in the ordinary course of events would be likely to result
therefrom. The detriment proximately caused by Tenant's breach will include,
without limitation, (i) expenses for cleaning, repairing or restoring the
Premises, (ii) expenses for altering, remodeling or otherwise improving the
Premises for the purpose of reletting the Premises, (iii) brokers' fees and
commissions, advertising costs and other expenses of reletting the Premises,
(iv) costs of carrying the Premises such as taxes, insurance premiums, utilities
and security precautions, (v) expenses of retaking possession of the Premises,
(vi) reasonable attorney's fees and court costs, (vii) any unearned brokerage
commissions paid in connection with this Lease, (viii) reimbursement of any
previously waived Base Rent, Additional Rent, free rent or reduced rental rate,
and (ix) any concession made or paid by Landlord to the benefit of Tenant in
consideration of this Lease including, but not limited to, any moving
allowances, contributions or payments by Landlord for tenant improvements or
build-out allowances or assumptions by Landlord of any of the Tenant's previous
lease obligations.
20.06 In any action brought by the Landlord to enforce any of its rights
under or arising from this Lease, the prevailing party shall be entitled to
receive its costs and legal expenses including reasonable attorneys' fees,
whether or not such action is prosecuted to judgment.
20.07 The waiver by Landlord of any breach or default of Tenant
hereunder shall not be a waiver of any preceding or subsequent breach of the
same or any other term. Acceptance of any Rent payment shall not be construed
to be a waiver of the Landlord of any preceding breach of the Tenant.
20.08 All past due amounts owned by Tenant under the terms of this Lease
shall bear interest at twelve percent per annum unless otherwise stated.
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21. SURRENDER OF LEASE NOT MERGER
21.01 The voluntary or other surrender of this Lease by Tenant, or
mutual cancellation thereof, will not work a merger and will, at the option of
Landlord, terminate all or any existing transfers, or may, at the option of
Landlord, operate as an assignment to it of any or all of such transfers.
22. ATTORNEYS FEES/COLLECTION CHARGES
22.01 In the event of any legal action or proceeding between the parties
hereto, reasonable attorneys' fees and expenses of the prevailing party in any
such action or proceeding will be added to the judgment therein. Should
Landlord be named as defendant in any suit brought against Tenant in connection
with or arising out of Tenant's occupancy hereunder, Tenant will pay to Landlord
its costs and expenses incurred in such suit, including reasonable attorney's
fees.
22.02 If Landlord utilizes the services of any attorney at law for the
purpose of collecting any rent due and unpaid by Tenant after five (5) days
written notice to Tenant of such nonpayment of rent or in connection with any
other breach of this Lease by Tenant, Tenant agrees to pay Landlord reasonable
attorneys' fees as determined by Landlord for such services, regardless of the
fact that no legal action may be commenced or filed by Landlord.
23. CONDEMNATION
23.01 If twenty-five percent (25%) or more of the square footage of the
Premises is taken for any public or quasi-public purpose by any lawful
government power or authority, by exercise of the right of appropriation,
reverse condemnation, condemnation or eminent domain, or sold to prevent such
taking, and if the remaining portion of the Premises will not be reasonably
adequate for the operation of Tenant's business after Landlord completes such
repairs or alterations as Landlord elects to make, either Tenant or the
Landlord may at its option terminate this Lease by notifying the other party
hereto of such election in writing within twenty (20) days after such taking.
Tenant will not because of such taking assert any claim against the Landlord or
the taking authority for any compensation because of such taking, and Landlord
will be entitled to receive the entire amount of any award without deduction for
any estate of interest of Tenant. If less than twenty-five percent (25%) of the
Premises is taken, Landlord at its option may terminate this Lease. If Landlord
does not so elect, Landlord will promptly proceed to restore the Premises to
substantially its same condition prior to such partial taking, allowing for any
reasonable effects of such taking, and a proportionate allowance based on the
loss of square footage will be made to Tenant for the rent corresponding to the
time during which, and to the part of the Premises, which, Tenant is deprived on
account of such taking and restoration.
24. RULES AND REGULATIONS
24.01 Tenant will faithfully observe and comply with any Rules and
Regulations promulgated by Landlord for the Project and Landlord reserves the
right to modify and amend them as it deems necessary. Landlord will not be
responsible to Tenant for the nonperformance by any other Tenant or occupant of
the Project of any of said Rules and Regulations.
24.02 In the event that Tenant fails to cure any violations of such
Rules and Regulations following ten (10) days written notice by Landlord, such
failure to cure shall be deemed a material breach of this Lease by Tenant.
25. ESTOPPEL CERTIFICATE
25.01 Tenant will execute and deliver to Landlord, within ten (10)
business days of Landlords written demand, a statement in writing certifying
that this Lease is in full force and effect, and that the Base Monthly Rent and
Additional Rent payable hereunder is unmodified and in full force and effect
(or, if modified, stating the nature of such modification) and the date to which
rent and other charges are paid, if any, and acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder or
specifying such defaults if they are claimed and such other matters as Landlord
may reasonably request. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises. Tenant's failure to
deliver such statement within such time shall be conclusive upon Tenant that (1)
this Lease is in full force and effect, without modification except as may be
represented by Landlord; (2) there are no uncured defaults in Landlord's
performance and (3) not more than one (1) month's rents has been paid in
advance.
26. SALE BY LANDLORD
26.01 In the event of a sale or conveyance by Landlord of the Project
the same shall operate to release Landlord from any liability upon any of the
covenants or conditions, expressed or implied, herein contained in favor of
Tenant, and in such event Tenant agrees to look solely to the responsibility of
the successor in interest of Landlord in and to this Lease. This Lease will not
be affected by any such sale, and Tenant agrees to attorn to the purchaser or
assignee.
27. NOTICES
27.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments, or designations under this
Lease by either party to the other will be in writing and will be considered
sufficiently given and served upon the other party if sent by certified or
registered mail, return receipt requested, postage prepaid, delivered
personally, or by a national overnight delivery service and addressed as
indicated in 1.03 and 1.04.
28. WAIVER
28.01 The failure of Landlord to insist in any one or more cases upon
the strict performance of any term, covenant or condition of the Lease will not
be construed as a waiver of a subsequent breach of the same or any other
covenant, term or condition; nor shall any delay or omission by Landlord to seek
a remedy for any breach of this Lease be deemed a waiver by Landlord of its
remedies or rights with respect to such a breach.
29. HOLDOVER
29.01 If Tenant remains in the Premises after the Lease Expiration date
with the consent of the Landlord, and has not given prior written notice to
Landlord, such continuance of possession by Tenant will be deemed to be a
month-to-month tenancy at the sufferance of Landlord terminable on thirty (30)
day notice at any time by either party. All provisions of this Lease, except
those pertaining to term and rent, will apply to the month-to-month tenancy.
Tenant will pay a new Base Monthly Rent in an amount equal to 150% of the base
monthly rent payable for the last full calendar month during the regular term of
this Lease.
30. DEFAULT OF LANDLORD/LIMITATION OF ABILITY
30.01 In the event of any default by Landlord hereunder, Tenant agrees
to give notice of such default, by registered mail, to Landlord at Landlord's
Notice Address as stated in 1.04 and to offer Landlord a reasonable opportunity
to cure the
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default. In the event of any actual or alleged failure, breach or default
hereunder by Landlord, Tenant's sole and exclusive remedy will be against
Landlord's interest in the Project, and Landlord, its directors, officers,
employees and any partner of Landlord will not be sued, be subject to service or
process, or have a judgement obtained against him in connection with any alleged
breach or default, and no writ of execution will be levied against the assets of
any partner, shareholder or officer of Landlord. The covenants and agreements
are enforceable by Landlord and also by any partner, shareholder or officer of
Landlord.
31. SUBORDINATION
31.01 Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease will be subject and subordinate at all times
to (a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Project, and (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Project, ground leases or underlying leases, or Landlord's interest or estate in
any of said items is specified as security. In the event that any ground lease
or underlying lease terminates for any reason or any mortgage or deed of trust
is foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Tenant will, notwithstanding any subordination, attorn to and become the Tenant
of the successor in interest to Landlord, at the option of such successor in
interest. Tenant covenants and agrees to execute and deliver to Landlord any
document or instrument reasonably requested by Landlord or its ground lessor,
mortgagee or beneficiary under a deed of trust evidencing such subordination of
this Lease with respect to any such ground lease or underlying leases or the
lien of any such mortgage or deed of trust. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact of Tenant to execute, deliver and record any such
document in the name and on behalf of Tenant.
32. DEPOSIT AGREEMENT
32.01 Landlord and Tenant hereby agree that Landlord will be entitled to
immediately endorse and cash Tenant's good faith rent and the Security Deposit
check(s) accompanying this Lease. It is further agreed and understood that such
action will not guarantee acceptance of this Lease by Landlord, but, in the
event Landlord does not accept this Lease, such deposits will be promptly
refunded in full to Tenant. This Lease will be effective only after Tenant has
received a copy fully executed by both Landlord and Tenant.
33. GOVERNING LAW
33.01 This Lease is governed by and construed in accordance with the
laws of the State of Nevada, and venue of any suit will be in the county where
the Premises are located unless the Premises are not located in Nevada in which
case the venue will be Washoe County in the State of Nevada.
34. NEGOTIATED TERMS
34.01 This Lease is the result of the negotiations of the parties and
has been agreed to by both Landlord and Tenant after prolonged discussion.
35. SEVERABILITY
35.01 If any provision of this Lease is found to be unenforceable, all
other provisions shall remain in full force and effect.
36. BROKERS
36.01 Tenant warrants that it has had no dealings with any broker or
agent in connection with this Lease, except -NONE- and covenants to pay, hold
harmless and indemnify Landlord from and against any and all cost, expense or
liability for any compensation, commissions and charges claimed by any broker or
agent, other than any identified above, with respect to this Lease or its
negotiation.
37. QUIET POSSESSION
37.01 Tenant, upon paying the rentals and other payments herein required
from Tenant, and upon Tenant's performance of all of the terms, covenants and
conditions of this Lease on its part to be kept and performed, may quietly have,
hold and enjoy the Premises during the Term of this Lease without disturbance
from Landlord or from any other person claiming through Landlord.
38. MISCELLANEOUS PROVISIONS
38.01 Whenever the singular number is used in this Lease and when
required by the context, the same will include the plural, and the masculine
gender will include the feminine and neuter genders, and the word "person" will
include corporation, firm, partnership, or association. If there is more than
one Tenant, the obligations imposed upon Tenant under this Lease will be joint
and several.
38.02 The headings or titles to paragraphs of this Lease are not a part
of this Lease and will have no effect upon the construction or interpretation of
any part of this Lease.
38.03 This instrument contains all of the agreements and conditions made
between the parties to this Lease. Tenant acknowledges that neither Landlord
nor Landlord's agents have made any representation or warranty as to the
suitability of the Premises to the conduct of Tenant's business. Any
agreements, warranties or representations not expressly contained herein will in
no way bind either Landlord or Tenant, and Landlord and Tenant expressly waive
all claims for damages by reason of any statement, representation, warranty,
promise or agreement, if any, not contained in this Lease.
38.04 Time is of the essence of each term and provision of this Lease.
38.05 Except as otherwise expressly stated, each payment required to be
made by Tenant is in addition to and not in substitution for other payments to
be made by Tenant.
38.06 Subject to Article 18, the terms and provisions of this Lease are
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of Landlord and Tenant.
38.07 All covenants and agreements to be performed by Tenant under any
of the terms of this Lease will be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
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38.08 In consideration of Landlord's covenants and agreements hereunder,
Tenant hereby covenants and agrees not to disclose any terms, covenants or
conditions of this Lease to any other party without the prior written consent of
Landlord.
38.09 Tenant agrees it will provide to Landlord such financial
information as Landlord may reasonably request for the purpose of obtaining
construction and/or permanent financing for the Premises.
38.10 If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent; Tenant's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold its consent or where as a matter of law Landlord may
not unreasonably withhold its consent.
38.11 Whenever a day is appointed herein on which, or a period of time
is appointed in which, either party is required to do or complete any act,
matter or thing, the time for the doing or completion thereof shall be extended
by a period of time equal to the number of days on or during which such party is
prevented from, or is reasonably interfered with, the doing or completion of
such act, matter or thing because of labor disputes, civil commotion, war,
warlike operation, sabotage, governmental regulations or control, fire or other
casualty, inability to obtain materials, or to obtain fuel or energy, weather or
other acts of God, or other causes beyond such party's reasonable control
(financial inability excepted); provided, however, that nothing contained herein
shall excuse Tenant from the prompt payment of any Rent or charge required of
Tenant hereunder.
38.12 No slot machine or other gambling game shall be permitted on the
Premises without the prior written consent of Landlord. The Premises shall not
be used for any "adult bookstore" or "adult motion picture theater" as said
terms are defined in NRS 278.0221, or any similar use, notwithstanding any local
zoning codes or ordinances or any other provisions of law to the contrary
permitting such use.
39. CHANGE ORDERS. In the event Tenant requests and/or approves changes in the
scope the work being provided by or through Landlord Tenant agrees to pay all
the direct and indirect costs of additional work at the time it gives such
approval. In the event that the aggregate cost of additional work provided
under this Lease is ten thousand dollars ($10,000.00) or more, or in excess of
two months rent, whichever is less, then Landlord may accept payment of one half
of the cost of additional work at the time of approval of said change order by
the Tenant, and payment of the balance to be paid at the time the additional
work is substantially completed.
40. SPECIAL PROVISIONS
40.01 Special provision of this Lease numbers 41; and Exhibits "A", "B",
"C", and "D" are attached hereto and made a part hereof. If none, so state in
the following space:
41. OPTION TO EXTEND
41.01 Tenant is hereby granted one (1) option (the "Option") to extend
the Lease Term for an additional term of three (3) years (the "Extension"),
beginning on October 1, 1999, and expiring on September 30, 2002, (unless
terminated sooner pursuant to any other terms or provisions of the Lease), on
all of the same terms and conditions as set forth in the Lease, but at an
adjusted rent as set forth in Section 41.02 below (and without any additional
option to extend the Lease Term after the expiration of the Extension). The
Option may be exercised by Tenant only by delivery of written notice to
Landlord, which notice must be received by Landlord at least one hundred twenty
(120) days before the expiration of the original Lease Term set forth in Section
1.06 above. If Tenant fails to timely deliver such written notice, or if this
Lease is terminated pursuant to any other terms or provision of this Lease prior
to the expiration of the original Lease Term, the Option shall lapse, and Tenant
shall have no right to extend the Lease Term. The Option shall be exercisable
by Tenant on the express conditions that (i) at the time of delivery of Tenant's
notice of its election to exercise the Option, and at all times prior to the
commencement of the Extension, Tenant shall not be in default under this Lease,
(ii) Tenant has not previously been in default (whether or not any such default
has been timely cured) under this Lease on more than three (3) occasions during
the Lease Term, and (iii) Tenant has not assigned this Lease nor sublet all or
any part of the Premises, it being understood that the Option is personal to the
original named Tenant under this Lease. In the event of any such assignment or
sublease, the Option shall lapse and shall be null and void and of no further
force or effect.
41.02 The rental during this Option period shall be adjusted by an
increase in the Consumer Price Index, hereafter called CPI, over the preceding
three year period. The CPI shall mean the average for "all items" shown on the
U.S. City Average for Urban Wage Earners and Clerical Workers (including Single
Workers), all items, groups, sub-groups and special groups of items as
promulgated by the Bureau of Labor Statistics of the U.S. Department of Labor.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year indicated by Landlord's execution date as written below.
Individuals signing on behalf of a Tenant warrant that they have the
authority to bind their principals. In the event that Tenant is a corporation,
Tenant shall deliver to Landlord, concurrently with the execution and delivery
of this Lease, a certified copy of corporate resolutions adopted by Tenant
authorizing said corporation to enter into and perform the Lease and authorizing
the execution and delivery of the Lease on behalf of the corporation by the
parties executing and delivering this Lease. THIS LEASE, WHETHER OR NOT
EXECUTED BY TENANT, IS SUBJECT TO ACCEPTANCE AND EXECUTION BY LANDLORD, ACTING
ITSELF OR BY ITS AGENT ACTING THROUGH ITS PRESIDENT, VICE PRESIDENT, OR ITS
DIRECTOR OF LEASING AND MARKETING.
Landlord: Dermody Properties, a Nevada Corporation
-------------------------------------------------
By: /s/ Michael C. Dermody
--------------------------------------------------------
Michael C. Dermody
Its: President
------------------------------------------------------
Date: 6-4-96
------------------------------------------------------
(Execution date)
Tenant: Rexall Sundown, Inc., a Florida Corporation
---------------------------------------------------
By: /s/ Dean DeSantis
--------------------------------------------------------
Its: Senior Vice President
------------------------------------------------------
Date: May 17, 1996
------------------------------------------------------
(Execution date)
-11-
<PAGE> 12
Exhibit C
(Tenant Questionnaire)
TENANT QUESTIONNAIRE REGARDING USE OF
PREMISES AT 1430 EAST GREG STREET, UNIT A, SPARKS, NEVADA 89431
<TABLE>
<CAPTION>
Yes No
<S> <C> <C> <C>
1. Will any manufacturing process be done on the subject premises? [ ] [X]
2. Do you or your company intend to use any internal combustion
engines greater than 50 hp at the subject premises? [ ] [X]
3. Do you or your company intend to use processes that involve
mixing, blending, or processing any solvents, adhesives, paints
or coatings? [ ] [X]
4. Will your operation at the premises create any dusts or smoke? [ ] [X]
5. At the subject premises, will you or your company refine any
liquids or solids? Reclaim any metals? [ ] [X]
6. Will you or your company plate or coat anything at the subject
premises? [ ] [X]
7. Will any process be used on the Premises which requires equipment
for the heating of materials (i.e., boilers, furnaces, broilers,
baking ovens, etc.)? [ ] [X]
8. Will you handle or store solvents or motor fuels on the premises? [ ] [X]
9. Will you use or store any acids at the premises? [ ] [X]
10. Will you or your company use any chemical processes at the
premises? [ ] [X]
11. Will you or your company use any solvents for clean up? [ ] [X]
12. Is your business a dry cleaner, restaurant, body shop, gasoline
station, printer or part coater? [ ] [X]
13. Will you or your company use any process which requires lead or
melting or soldering with lead or lead alloys? [ ] [X]
14. Do you or your company have a Hazardous Materials Management plan? [ ] [X]
</TABLE>
If you have marked "Yes" to any of the questions as to processes, chemicals,
including types and quantities, to be used on the Premises, please give a more
detailed explanation below and on a second page if necessary.
N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------
Name of person completing form: Dean DeSantis
-------------------------------------------
Company name and address: Rexall Sundown, Inc.
-------------------------------------------------
- ---------------------------------------------------------------------------
Exhibit "C" to lease dated May 16, 1996,
by and between Dermody Properties
and Rexall Sundown, Inc.
/s/ ?
- ----------------------------------------
Dermody Properties
/s/ Dean DeSantis, Sr. V.P.
- ----------------------------------------
Rexall Sundown, Inc.
-12-
<PAGE> 13
EXHIBIT "D"
RULES AND REGULATIONS
It is further agreed that the following rules and regulations shall be and are
hereby made a part of this Lease, and the Tenant agrees that its employees and
agents, or any others permitted by the Tenant to occupy or enter said Premises,
will at all times abide by said rules and regulations and that a default in the
performance and observance thereof shall operate the same as any other defaults
herein:
1. The sidewalks, entries, and driveways shall not be obstructed by the
Tenant, or its agents, or used by them for any purpose other than
ingress and egress to and from their Premises. Landlord may remove any
such obstruction or thing (unauthorized by Landlord) without notice or
obligation to Tenant.
2. Tenant shall not place any movable objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped area or other areas
outside of said Premises, or on the roof of said Premises.
3. No person shall disturb the occupants of this or adjoining Building or
Premises by the use of any radio or musical instrument or by the making
of loud or improper noises.
4. Parking any type of recreational vehicles is specifically prohibited.
No vehicle of any type shall be stored in the parking areas at any
time. In the event that a vehicle is disabled, it shall be removed
within 48 hours. There shall be no "For Sale" or other advertising
signs on or about any parked vehicle. All vehicles shall be parked in
the designated parking areas in conformation with all signs and other
markings.
5. Lessee shall not use, keep or permit to be used or to be kept any foul
or noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in a manner offensive or objectionable
to Lessor or other occupants of the Building by reason of noise, odors
and/or vibrations, or interfere in any way with other Lessees or those
having business therein. Lessee shall maintain the leased Premises
free from mice, bugs, and ants attracted by food, water or storage
materials.
6. Lessor reserves the right to exclude or expel from the complex any
person who in the judgment of the Lessor, is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in
violation of the Rules and Regulations of the said project.
7. Lessee shall give Lessor prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures,
heating apparatus, or any other service equipment or any dangerous or
hazardous condition existing on the property.
8. No outside storage of pallets, boxes, cartons, drums or any other
containers or materials used in shipping or transport of goods is
allowed. Tenant shall place all refuse in proper receptacles provided
by Tenant at Tenant's expense on the Premises or inside enclosures (if
any) provided by Landlord for the Building, and shall keep sidewalks
and driveways outside the Building and lobbies, corridor stairwells,
ducts or shafts of the Building free of all refuse.
9. All moveable trash receptacles provided by the trash disposal firm must
be kept in the trash enclosure areas where provided for that purpose.
10. The Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to
time be needful and desirable for the safety, care and cleanliness of
the Premises and for the preservation of good order therein.
11. Lessee shall not use any method of heating or air conditioning other
than that supplied by Lessor without the consent of Lessor.
-13-
<PAGE> 14
RULES AND REGULATIONS
Page 2.
12. No person shall go on the roof without Lessor's permission.
13. All goods, including material used to store goods, delivered to the
Premises of Lessee shall be immediately moved into the Premises and
shall not be left in parking or receiving areas overnight.
14. Tenants shall not do or permit anything to be done in their Premises or
bring or keep anything therein which will in any way obstruct or
interfere with the rights of other Tenants, or do, or permit anything
to be done in their Premises which shall, in the judgement of the
Landlord or its manager, in any way injure or annoy them, or conflict
with the laws relating to fire, or with the regulations of the fire
department or with any insurance policy upon the Building or any part
thereof of any contents therein or conflict with any of the Rules and
Ordinances of the public Building or health authorities.
15. All electrical equipment used by Tenants shall be U.L. approved.
Nothing shall be done or permitted in Tenant's Premises, and nothing
shall be brought into or kept in the Premises which would impair or
interfere with any of the Building services or the proper and economic
heating, cooling, cleaning or other servicing of the Building or the
Premises. Tenant's computers and other equipment are hereby expressly
allowed.
16. Tenants shall not install or operate any steam or gas engine or boiler,
or carry on any mechanical business in the Building. The use of oil,
gas or inflammable liquids for heating, lighting or any other purpose
is expressly prohibited. Explosives or other articles deemed extra
hazardous shall not be brought into the Building. Tenants shall not
use any other method of heating than that supplied by Landlord.
17. Tenants shall not remove any carpet, or wall coverings, window blinds,
or window draperies in their Premises without the prior written
approval from Landlord.
18. No animals, birds or pets (other than seeing-eye dogs) of any kind
shall be allowed in Tenant's Premises of Building.
19. The water closets, urinals, waste lines, vents or flues of the Building
shall not be used for any purpose other than those for which they were
constructed, and no rubbish, acids, vapors, newspapers or other such
substances of any kind shall be thrown into them. The expense caused
by any breakage, stoppage or damage resulting from a violation of this
rule by any Tenant, its employees, visitors, guests or licensees, shall
be paid by Tenant.
20. All decorating, carpentry work, or any labor required for the
installation of Tenant's (a) equipment, such as an alarm system,
computer, telephone/telegraph equipment, lines, cables or other
electrical devices; or (b) furnishings or other property shall be
performed at Tenants expense, and will not require Landlord's prior
verbal or written approval. Should any such work require alterations
that affect the heating, ventilation, air conditioning, plumbing,
electrical or mechanical systems of the Building, the roof, or the
structure of the Building, Landlord's prior written approval will be
required. Structural changes are defined as changes that affect a
vital and substantial portion of the Premises, changing its
characteristic appearance, fundamental purpose of its erection or uses,
or a change of such a nature as to affect the very realty itself,
extraordinary in scope and effect, or unusual in expenditure.
21. The Premises shall not be used or permitted to be used for residential,
lodging or sleeping purposes.
22. Except as permitted by landlord, Tenant shall not mark upon, paint
signs upon, cut, drill into, drive nails or screws into, or in any way
deface the walls, ceilings, partitions or floors of their Premises or
of the Building, and the repair cost of any defacement, damage, or
injury caused by Tenant, its agents or employees shall be paid for by
the Tenant.
-14-
<PAGE> 15
RULES AND REGULATIONS
Page 3.
23. The cost of repairing any damage to the public partitions of the
Building or the public facilities, or to any facilities used in common
with other tenants, caused by any Tenant or the employees, licensees,
agents or invitees of the Tenant, shall be paid by such Tenant.
24. Landlord reserves the right to restrict or prohibit canvassing,
soliciting or peddling in the Building.
Exhibit "D" to lease dated May 16, 1996,
by and between Dermody Properties
and Rexall Sundown, Inc.
/s/
- ----------------------------
Dermody Properties
/s/ Dean DeSantis
- ----------------------------
Rexall Sundown, Inc.
-15-
<PAGE> 16
EXHIBIT "E"
COMMENCEMENT DATE CERTIFICATE
THIS COMMENCEMENT DATE CERTIFICATE is made as of the ____ day of
______, 199_, by and between Dermody Industrial Group, a Nevada Joint Venture,
hereinafter called "Landlord" and _______________________ (hereinafter called
"Tenant").
RECITALS:
A. Landlord and Tenant have entered into a Lease Agreement (the
"Lease") dated as of ______, 19__, whereby Landlord leased to Tenant, and
Tenant leased from Landlord, certain real property located in the County of
________________, State of ____________________, which real property is
commonly known as ______________________.
B. In accordance with Section ___ of the Lease, Landlord and
Tenant desire to set forth herein the date that the Term of the Lease had
commenced (the "Commencement Date"), and the date of expiration of the Initial
Term of the Lease.
NOW THEREFORE, Landlord and Tenant certify and agree as follows:
1. The Commencement Date of the Lease defined in Section ___ of
the Lease is herby established as _________, 199_.
2. The Initial Term of this Lease shall be years ending upon
_______________.
3. The rental adjustment date(s) shall be _________, __________,
____________, and ____________.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Commencement
Date Certificate to be executed as of the day and year first above written.
LANDLORD: TENANT:
Dermody Industrial Group, a Nevada Joint Venture REXALL SUNDOWN, INC.
By: Dermody Properties, a Nevada Corporation
Managing Venturer
By: Michael C. Dermody By:
/s/ Michael C. Dermody /s/ Dean DeSantis
- --------------------------- -------------------------
Michael C. Dermody Signature
President Sr. Vp. Ops.
- --------------------------- -------------------------
Title
Exhibit "E" to lease dated May 16, 1996,
by and between Dermody Properties
and Rexall Sundown, Inc.
/s/ Michael C. Dermody
- --------------------------
Dermody Properties
/s/ Dean DeSantis
- --------------------------
Rexall Sundown, Inc.
-16-
<PAGE> 17
<TABLE>
<S> <C>
[UNITED CONSTRUCTION COMPANY LETTERHEAD] Exhibit "B" to lease dated May 16, 1996,
by and between Dermody Properties
and Rexall Sundown, Inc.
</TABLE>
May 8, 1996
------------------------------
Dermody Properties Dermody Properties
1200 Financial Boulevard
Reno, Nevada 89502
ATTN: GORDON ZACK /s/ Dean DeSantis
------------------------------
Rexall Sundown, Inc.
RE: REVISED REXALL PROPOSED TENANT IMPROVER
SOUTH END OF GREG STREET 200 B
Dear Gordon:
We respectfully submit our proposal to provide the labor, materials and
equipment required to perform the proposed tenant improvements. The proposed
improvement is in accordance with your request for proposal, study plan dated
5/8/96, tenant improvement specifications dated January 1996 and the following
scope of work.
This proposal is in strict conformity with the following scope of work and is
predicated upon approvals from the city building and fire departments as well
as agencies applicable to tenant usage. This proposal is based upon a B
occupancy.
SUMMARY OF WORK: base bid includes a 3,613 square foot office with back to
back handicap accessible multi fixture rest rooms, conference room, lunch room
open office, will call, computer room, private offices and a full height wall.
The warehouse area includes temperature control at 78 degrees round at ground
level and an additional 400 AMP electrical service to provide sufficient power
for added HVAC equipment in the warehouse. Alternate "A" includes a 10 lineal
foot base cabinet and double kitchen sink in the lunch room.
BASE BID SCOPE OF WORK:
1. GENERAL CONDITIONS; temporary facilities, small tools and equipment.
2. PROTECTION; none provided.
3. CLEANING; daily and final
4. INSURANCE; Project Liability and Worker's Compensation coverage.
Installation Floater by owner.
5. SUPERVISION; estimates and buy out, project management, project
superintendent, general superintendent, quality control.
6. SECURITY; none provided.
7. PERMITS; building permit, includes fee for 33 fixture units and
asbestos assessment allowance on behalf of Dermody Properties
consisting of a short form and two bulk samples.
<PAGE> 18
[UNITED CONSTRUCTION COMPANY LETTERHEAD]
8. ENGINEERING; drafting and blueprint costs. Includes an allowance for
structural review of support for roof top mounted HVAC units.
9. TESTING; none provided.
10. WARRANTY; two year guarantee on workmanship and materials.
11. DEMOLITION; sawcut and remove concrete slab on grade as required for
waste line extension, remove roof materials for new roof top HVAC units
in the office and warehouse areas.
12. EXCAVATION; hand excavation and backfill as required for waste line
extension.
13. CONCRETE AND REINFORCING; replace slab on grade as required for waste
line extension including dowels installed at two foot centers between
the existing and replaced slab on grade. Also includes a 3' x 6'
concrete switchgear pad for the additional service included in the
base bid.
14. ROUGH CARPENTRY; 2 x interior wall framing to accommodate a nine foot
finish ceiling height in all areas except the rest rooms or as
otherwise noted. Rest room framing height accommodates an eight foot
finish ceiling height. Ceiling framing is included for support the
acoustical ceiling system only. Includes an allowance for additional
roof support for the HVAC units in the warehouse. This allowance may
change based on the findings of the structural review. Please note
that ceiling framing is included in the hall area for the required one
hour rated corridor, joists to be placed 2' oc with rock applied
top and bottom.
15. FINISH CARPENTRY; none provided in base bid. See Alternate "A".
16. INSULATION; R-11 unfaced batt insulation in rest room walls, tenant
dividing walls and walls between office and warehouse, metal "z"
furring with 1-1/2" rigid insulation is provided on all concrete walls
within the limit of the office construction. R-19 unfaced batt
insulation is provided in the office ceiling.
17. ROOFING; patch penetrations for new construction.
18. SHEET METAL; none provided.
19. DOORS, FRAMES AND HARDWARE; Twelve (12) interior openings. All lock and
latch sets are equal to Schlage "AL" series lever. Rest room doors and
doors between office and warehouse are to receive a closer. Openings
between the office and warehouse are to include a keyed lock set and
threshold. Balance of openings to receive a passage latch set, hinges
and wall stop. Frames are prefinished brown metal, doors are to be
3'-0" x 7'-0" solid core paint grade. Hardware finish to be dull
chrome. All doors off of the corridor are to include a one hour fire
rating and a door closer.
20. GLASS AND GLAZING; provide 18" x 30" mirror over each wall hung lav in
rest rooms and end caps on walls which intersect with the storefront.
21. GYPSUM WALLBOARD SYSTEMS; new office walls and rest room ceilings.
Rest room walls to include moisture resistant wall board. Rest room
ceiling height is eight feet. Warehouse side of office walls are to be
textured, ready for paint. Standard texture is light skip trowel.
Also includes a full height tenant dividing wall. The ceiling in the
corridor is to be sheetrocked top and bottom for a one hour rated
corridor.
22. ACOUSTICAL CEILING SYSTEM; new office ceilings except rest rooms.
Ceiling height is 9'.
<PAGE> 19
[UNITED CONSTRUCTION COMPANY LETTERHEAD]
23. VINYL COMPOSITION TILE WITH 4" RUBBER BASE; Azrock Standard Patterns.
None provided.
24. SHEET VINYL WITH A MINIMUM OF 5-1/2" SELF COVING BASE; Mannington
Commercial Fine Fields inlaid sheet vinyl provided in the rest rooms.
One color through out.
25. CARPETING WITH 4" RUBBER BASE; Wellco Producer IV 26 ounce direct glue
down carpet with Burke 4" topset rubber base. One color through out.
Provided in office areas except rest room.
26. PAINTING; new office walls to receive two coats flat latex paint. Rest
room walls and ceilings to receive two coats semi-gloss latex paint.
Doors to receive three coats oil case enamel. One color through out.
Warehouse side of office walls and tenant dividing walls within office
area to be painted. Warehouse walls are "as-is".
27. SIGNAGE; plastic international symbols of accessibility on handicap
accessible rest room doors, six inch pressure sensitive vinyl address
numbers above entrance doors.
28. FIRE EXTINGUISHERS; none provided but will be required.
29. TOILET ACCESSORIES; Sea Chrome 631 roll type dispenser at each water
closet, one Bobrick B-262 surface mounted paper towel dispenser and
B-2112 surface mounted soap dispenses in each rest room. 36" and 42"
stainless steel grab bars at handicap accessible water closets. Six (6)
baked enamel, overhead braced toilet partitions and two urinal screens
are included, one color throughout.
30. DOCK EQUIPMENT; none provided.
31. PLUMBING; back to back multi fixture handicap accessible rest rooms to
include water saver fixtures, handicap water closet, handicap accessible
faucet, floor drains and double kitchen sink. Gas piping and regulators
provided for HVAC equipment in the office and warehouse areas.
32. FIRE PROTECTION; forty three (43) pendant fire sprinkler heads with
chrome or white canopy in new office area. Provide reproducible
"as-built" drawings of heads provided for office improvement. Fire
lines to be drained, through a hose, to either a drain or to a gutter
in order not to disturb or damage existing construction.
33. HEATING, VENTILATION AND AIR CONDITIONING; provide nine (9) tons of
standard HVAC equipment for the office areas, and an exhaust fan in
each rest room and the breakroom. Includes four 25 ton HVAC roof top
units for the warehouse area to maintain 78 degrees year round at the
ground level. Placement and support of units per the structural
engineer's design review.
34. ELECTRICAL; standard office electrical, connection for HVAC equipment
in the office and warehouse areas, includes emergency and exit lighting
in office areas. Includes exit lights over the man doors in the
warehouse area. The warehouse space includes connection of four 25 ton
HVAC units, furnishing fourteen (14) circulating fans, an additional
400 AMP electrical service to provide power for the warehouse HVAC
equipment, and a panel and transformer for office area.
ALTERNATE PROPOSALS:
ALTERNATE A: includes a 10 lineal foot base cabinet and double kitchen sink in
the lunch room.
<PAGE> 20
[UNITED CONSTRUCTION COMPANY LETTERHEAD]
SPECIAL PROJECT CONDITIONS:
1. Structural review allowance of roof top HVAC equipment is included.
2. Parking for tenant occupancy is not addressed.
3. Construction Schedule, commencing upon receipt of a fully executed
contract is as follows:
a) One (1) week for plan preparation and permit submission
b) Three (3) weeks for permit issuance from building department
(average duration)
c) Eight (8) weeks for construction, (upon receipt of building
permit and approved construction documents from tenant).
d) Schedule to be adjusted in the event of excessive work load
Schedule may be adjusted due to lead time of HVAC units
e) additional time will be required if an engineering and permit
purchase order is issued to expedite the permit process and
the change order for the construction costs is not issued in a
timely manner, (up to three weeks as per item b).
4. Asbestos assessment allowance is included based upon the test report
cost of 125 and bulk sampling cost of $25.00 each on behalf of Dermody
Properties.
5. No fire department or code compliance of proposed facility except as
specifically stated above has been addressed.
6. No alarm or security systems are included.
7. No emergency or exit requirements have been addressed, except for those
specifically stated above.
8. Special use permit, as required, by others is not included.
9. Upright fire sprinkler coverage in warehouse is "as-is".
10. The warehouse lighting is "as-is".
11. Accessibility is addressed within tenant improvement area only.
12. No roof screen is provided for roof top equipment.
13. No work will commence without the required permits for construction.
14. An allowance for additional support at the new HVAC units is included,
upon completion of the structural review it it will be adjusted.
15. This proposal will need to be revisited after completion of core and
shell construction.
16. This proposal does not address draft curtains or smoke vents.
We look forward to a mutually beneficial relationship on this project. If you
have any questions or require further information, please call.
UNITED CONSTRUCTION
/s/ Debbie Edwards
- ------------------------------
Debbie Edwards
Tenant Improvements Division
cc: Paul Slocum
<PAGE> 1
EXHIBIT 11
REXALL SUNDOWN, INC.
NET INCOME PER COMMON SHARE CALCULATION
For the years ended August 31, 1996, 1995 and 1994
(Adjusted to give retroactive effect to April 4, 1996
three-for-two stock split)
<TABLE>
<CAPTION>
Fiscal Year Ended
August 31,
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income ............................... $ 6,195,239 $ 4,361,596 $20,292,781
=========== =========== ===========
Primary
- -------
Weighted average shares outstanding(1).... 29,071,161 29,336,510 30,511,575
Common stock equivalents(2)............... 197,472 160,656 214,657
----------- ----------- -----------
Primary weighted average common shares
outstanding............................. 29,268,633 29,497,166 30,726,232
=========== =========== ===========
Primary net income per common share....... $ .21 $ .15 $ .66
=========== =========== ===========
Fully Diluted
- -------------
Weighted average shares outstanding(1).... 29,071,161 29,336,510 30,511,575
Common stock equivalents(2)............... 215,670 207,264 269,512
----------- ----------- -----------
Fully diluted weighted average common
shares outstanding...................... 29,286,831 29,543,774 30,781,087
=========== =========== ===========
Fully diluted net income per common
share................................... $ .21 $ .15 $ .66
=========== =========== ===========
</TABLE>
- -----------------
Above reflects the calculation of pro forma net income per common share
retroactively adjusted for the two-for-one stock split effected on October 28,
1993.
(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 taking into consideration the tax benefit
available to the Company upon the assumed exercise of qualified options.
<PAGE> 1
EXHIBIT 21
Rexall Sundown, Inc.
Subsidiaries
1. Rexall Showcase International, Inc.
2. Rexall Showcase International de Mexico, S.A. de C.V.
3. Importadora Rexall Showcase International de Mexico, S.A. de C.V.
4. Servicios Rexall Showcase International de Mexico, S.A. de C.V.
5. Asociacion de Vendedores Independientes en Rexall, A.C.
6. Rexall Korea Limited
7. RSL Holdings, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Rexall Sundown, Inc. on Form S-8 (Registration Statement Nos. 33-66282,
33-96906 and 333-34684) of our report dated October 4, 1996, on our audits of
the consolidated financial statements and financial statement schedule of Rexall
Sundown, Inc. as of August 31, 1995 and 1996, and for each of the three years
in the period ended August 31, 1996 appearing in the Form 10-K of Rexall
Sundown, Inc. filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1934.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
October 4, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
REXALL SUNDOWN, INC. AND SUBSIDIARIES FINANCIAL DATA SCHEDULE FOR THE TWELVE
MONTHS ENDED AUGUST 31, 1996 (THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 13,450
<SECURITIES> 7,988
<RECEIVABLES> 11,410<F1>
<ALLOWANCES> 0
<INVENTORY> 28,179
<CURRENT-ASSETS> 70,178
<PP&E> 24,078<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 103,095
<CURRENT-LIABILITIES> 16,045
<BONDS> 105<F3>
0
0
<COMMON> 307
<OTHER-SE> 86,385
<TOTAL-LIABILITY-AND-EQUITY> 103,095
<SALES> 187,844
<TOTAL-REVENUES> 187,844
<CGS> 71,682
<TOTAL-COSTS> 71,682
<OTHER-EXPENSES> 86,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 32,091
<INCOME-TAX> 11,798
<INCOME-CONTINUING> 20,293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,293
<EPS-PRIMARY> .66
<EPS-DILUTED> 0
<FN>
<F1>NET OF ALLOWANCE.
<F2>NET OF DEPRECIATION.
<F3>INCLUDES LONG-TERM OBLIGATIONS.
</FN>
</TABLE>
