<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-21884
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REXALL SUNDOWN, INC.
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1688986
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
851 Broken Sound Parkway, NW, Boca Raton, Florida 33487
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (561) 241-9400
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Indicate by check mark whether Registrant has (1) filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. X Yes No
---- ----
As of January 10, 1997, the number of shares outstanding of the Registrant's
Common Stock was 33,207,611.
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REXALL SUNDOWN, INC.
TABLE OF CONTENTS
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
November 30, 1996 and August 31, 1996 ......................................... 3
Consolidated Statements of Operations
Three Months Ended November 30, 1996 and 1995 .................................. 4
Consolidated Statements of Cash Flows
Three Months Ended November 30, 1996 and 1995 .................................. 5
Notes to Consolidated Financial Statements ..................................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ............................... 8
PART II. OTHER INFORMATION .............................................................. 10
SIGNATURES .............................................................................. 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
November 30, August 31,
1996 1996
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 77,084 $ 13,450
Restricted cash 92 278
Marketable securities 2,000 7,988
Trade accounts receivable, net 15,998 11,410
Inventory 27,683 28,179
Prepaid expenses and other current assets 5,769 5,018
Net current assets of discontinued operations 3,927 3,855
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Total current assets 132,553 70,178
Property, plant and equipment, net 25,020 24,078
Other assets 9,013 8,839
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Total assets $ 166,586 $ 103,095
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,087 $ 5,599
Accrued expenses and other current liabilities 13,600 10,100
Current portion of long-term debt 352 346
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Total current liabilities 19,039 16,045
Long-term debt 27 105
Other liabilities 232 253
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Total liabilities 19,298 16,403
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Shareholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000
shares, no shares outstanding - -
Common stock, $.01 par value; authorized 100,000,000 shares,
shares issued: 32,764,521 and 30,660,128, respectively 328 307
Capital in excess of par value 106,991 53,563
Retained earnings 40,185 32,943
Cumulative translation adjustment (216) (121)
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Total shareholders' equity 147,288 86,692
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Total liabilities and shareholders' equity $ 166,586 $ 103,095
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</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
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1996 1995
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Net sales $ 56,070 $ 40,679
Cost of sales 20,679 16,383
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Gross profit 35,391 24,296
Selling, general and administrative expenses 24,455 18,756
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Operating income 10,936 5,540
Other income (expense):
Interest income 569 94
Other income - 10
Interest expense (9) (5)
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Income before income tax provision 11,496 5,639
Income tax provision 4,254 2,083
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Net income $ 7,242 $ 3,556
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Income per common share $ 0.22 $ 0.12
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Weighted average common shares outstanding 32,422,107 30,025,115
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</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
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1996 1995
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<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 7,242 $ 3,556
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 754 610
Amortization 482 40
Gain on sale of property and equipment - (10)
Deferred income taxes 44 1,802
Foreign exchange translation adjustment (95) (16)
Changes in assets and liabilities:
Trade accounts receivable (4,588) (3,000)
Inventory 496 1,040
Prepaid expenses and other current assets (751) (2,282)
Other assets (656) 1,770
Accounts payable (512) (815)
Accrued expenses and other current liabilities 4,436 2,190
Other liabilities (21) 100
Discontinued operations - non cash charges
and changes in assets and liabilities (72) 1,679
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Net cash provided by operating activities 6,759 6,664
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Cash flows provided by (used in) investing activities:
Acquisition of property, plant and equipment (1,712) (736)
Proceeds from sale of marketable securities 5,988 -
Proceeds from sale of fixed assets 16 13
Other 186 -
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Net cash provided by (used in) investing activities 4,478 (723)
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Cash flows provided by (used in) financing activities:
Net proceeds from offering 51,870 -
Principal payments on long-term debt (72) (81)
Exercise of options to purchase common stock 599 2,612
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Net cash provided by financing activities 52,397 2,531
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Net increase in cash and cash equivalents 63,634 8,472
Cash and cash equivalents at beginning of period 13,450 1,154
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Cash and cash equivalents at end of period $ 77,084 $ 9,626
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</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. BASIS OF PRESENTATION AND OTHER MATTERS
The accompanying unaudited consolidated financial statements, which
are for interim periods, do not include all disclosures provided in the
annual consolidated financial statements. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Rexall
Sundown, Inc. (the "Company") Annual Report on Form 10-K for the year
ended August 31, 1996, as filed with the Securities and Exchange
Commission. The August 31, 1996 balance sheet was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (which are of a
normal recurring nature) necessary for a fair presentation of the
financial statements. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full
year.
Certain prior period amounts have been reclassified to conform with
the fiscal 1997 presentation.
2. NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income by
weighted average shares outstanding, giving effect to common stock
equivalents (common stock options).
3. INVENTORY
The components of inventory as of November 30, 1996 and August 31, 1996
are as follows:
<TABLE>
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NOVEMBER 30, 1996 AUGUST 31, 1996
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(Audited)
<S> <C> <C>
Raw materials $13,782 $11,609
Work in process 794 1,732
Finished products 13,107 14,838
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$27,683 $28,179
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</TABLE>
4. SALES TO A MAJOR CUSTOMER
The Company had sales to a national retailer which represented
approximately 13% and 3% of net sales for the three months ended November
30, 1996 and 1995, respectively. Trade accounts receivable from this
customer amounted to approximately $2,083 and $615 at November 30, 1996
and August 31, 1996, respectively.
5. CONTINGENCIES
The Company believes that it is not presently a party to any
litigation the outcome of which would have a material adverse effect on
the Company.
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollars in thousands)
(Unaudited)
6. SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
The Company realized a tax benefit related to the exercise of stock
options of $981 and $980 for the three months ended November 30, 1996 and
1995, respectively.
7. COMMON STOCK TRANSACTIONS
On November 5, 1996, the Company consummated a public offering of
4,000,000 shares of common stock. Of those shares, 2,000,000 were sold by
the Company and 2,000,000 were sold by certain shareholders of the
Company. On December 3, 1996, the underwriters' over-allotment option to
purchase an additional 600,000 shares was exercised. Of those 600,000
shares, 400,000 were sold by the Company and 200,000 were sold by a
shareholder of the Company. The Company intends to use the net proceeds
of approximately $62.3 million (of which $51.9 million is reflected in
this quarter) primarily to acquire complementary products, product lines
or businesses, to provide working capital and for general corporate
purposes.
8. EVENTS SUBSEQUENT TO FISCAL YEAR END
In December 1996, the Company entered into a new line of credit with
a financial institution with a borrowing amount of $20 million, subject to
annual extensions. Borrowings under the line of credit bear interest at
LIBOR plus 1.5 percent. The line of credit is collateralized by accounts
receivable and inventory and is subject to compliance with certain
financial covenants and ratios.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets and
sells vitamins, nutritional supplements and consumer health products. The
Company distributes its products using three channels of distribution: sales to
retailers; direct sales through independent distributors; and mail order.
On November 5, 1996, the Company consummated a public offering (the
"Offering") of 4,000,000 shares of Common Stock. Of those shares, 2,000,000
were sold by the Company and 2,000,000 were sold by certain shareholders of the
Company. On December 3, 1996, the underwriters' over-allotment option to
purchase an additional 600,000 shares was exercised. Of those 600,000 shares,
400,000 were sold by the Company and 200,000 were sold by a shareholder of the
Company. The Company intends to use the net proceeds of approximately $62.3
million (of which $51.9 million is reflected in this quarter) primarily to
acquire complementary products, product lines or businesses, to provide working
capital and for general corporate purposes.
RESULTS OF CONTINUING OPERATIONS
Three Months Ended November 30, 1996 Compared to Three Months Ended November
30, 1995
Net sales for the three months ended November 30, 1996 were $56.1 million,
an increase of $15.4 million or 37.8% over the comparable period in fiscal
1996. Of the $15.4 million increase, sales to retailers accounted for $10.6
million, an increase of 55.3% over the comparable period in fiscal 1996. The
gain in sales to retailers was attributable to the benefit from re-orders from
new customers added in the second half of fiscal 1996 as well as an increase in
the Company's base business. Net sales of the Company's direct sales
subsidiary, Rexall Showcase International, Inc. ("Rexall Showcase"), increased
by $4.9 million, an increase of 27.8% over the comparable period in fiscal
1996. 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, decreased by
$100,000 or 2.5% over the comparable period in fiscal 1996. The increase in
net sales to retailers and for Rexall Showcase was primarily due to increased
unit sales.
Gross profit for the three months ended November 30, 1996 was $35.4
million, an increase of $11.1 million or 45.7% over the comparable period in
fiscal 1996. As a percentage of net sales, gross profit increased from 59.7%
for the three months ended November 30, 1995 to 63.1% for the three months
ended November 30, 1996. The increase in gross margin was due, in part, to
improved margins as a result of manufacturing efficiencies achieved from higher
volume at the Company's vitamin manufacturing facility as well as a favorable
product mix.
Selling, general and administrative expenses for the three months ended
November 30, 1996 were $24.5 million, an increase of $5.7 million or 30.4% over
the comparable period in fiscal 1996. As a percentage of net sales, such
expenses decreased from 46.1% for the three months ended November 30, 1995 to
43.6% for the comparable period in fiscal 1997, primarily as a result of
increased net sales and the relatively fixed nature of such expenses except for
the commission expense of Rexall Showcase, which is variable and comprises the
majority of Rexall Showcase's selling, general and administrative expenses.
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Interest income for the three months ended November 30, 1996 was $569,000,
as compared to $94,000 for the comparable period in fiscal 1996. Such increase
was primarily a result of investment of the Company's available cash balances,
which were higher in the first quarter of fiscal 1997 than the comparable
period in fiscal 1996 primarily due to the investment of the net proceeds of
$51.8 million received in November 1996 from the Offering.
Income before income tax provision was $11.5 million for the three months
ended November 30, 1996, an increase of $5.9 million or 103.9% over the
comparable period in fiscal 1996. As a percentage of net sales, income before
income tax provision increased from 13.9% for the three months ended November
30, 1995 to 20.5% for the comparable period in fiscal 1997. Net income was $7.2
million for the current fiscal quarter, an increase of $3.7 million or 103.7%
from the prior year's comparable quarter due to the reasons described above.
SEASONALITY
The Company believes that its business is not subject to significant
seasonality based on historical trends, with the exception of Rexall Showcase,
which typically experiences lower revenues in the second and fourth fiscal
quarters due to winter and summer holiday seasons, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $113.5 million as of November 30, 1996,
compared to $54.1 million as of August 31, 1996. This increase was principally
the result of increased cash and cash equivalents from the Offering.
Net cash provided by operating activities for the three months ended
November 30, 1996 was $6.8 million compared to $6.7 million for the comparable
period in fiscal 1996. Net cash provided by investing activities was $4.5
million for the three months ended November 30, 1996 compared to net cash used
in investing activities of $723,000 for the comparable period in fiscal 1996.
Net cash provided by investing activities increased primarily due to the sale
of marketable securities in the three months ended November 30, 1996. Net cash
provided by financing activities was $52.4 million for the three months ended
November 30, 1996 compared to $2.5 million for the comparable period in fiscal
1996 reflecting $51.9 million of net proceeds received from the Offering in the
fiscal 1997 quarter.
The Company believes that its existing cash balances, internally generated
funds from operations and its available bank line of credit will provide the
liquidity necessary to satisfy the Company's working capital needs, including
the purchase and maintenance of inventory and the financing of the Company's
accounts receivable, as well as to finance anticipated capital expenditures.
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.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Business Loan Agreement dated December 13,
1996 between the Company and Barnett Bank, N.A.
11 Earnings Per Share Computation
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REXALL SUNDOWN, INC.
Date: January 13, 1997 By: /s/ Carl DeSantis
------------------------------------------
Carl DeSantis, Chairman of the Board and
Chief Executive Officer
Date: January 13, 1997 By: /s/ Geary Cotton
------------------------------------------
Geary Cotton, Vice President-Finance,
Chief Financial Officer, Treasurer and
Chief Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ------------------------------ ------------
<S> <C> <C>
10.1 Business Loan Agreement dated
December 13, 1996 between the
Company and Barnett Bank, N.A.
11 Earnings Per Share Computation
27 Financial Data Schedule
(for SEC use only).
</TABLE>
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<PAGE> 1
EXHIBIT 10.1
Barnett Bank
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C>
$20,000,000.00 12-13-96 01-31-1998 00900077249 A100 34 601
</TABLE>
References in the shaded area (above) are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
BORROWER: REXALL SUNDOWN, INC.
851 NW BROKEN SOUND PARKWAY
BOCA RATON, FL 33487~3676
LENDER: BARNETT BANK, N.A.
P.O. BOX 40329
JACKSONVILLE, FL 32203~0329
THIS BUSINESS LOAN AGREEMENT BETWEEN REXALL SUNDOWN, INC. ("BORROWER") AND
BARNETT BANK, N.A. ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND
CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS OR OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN"
AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN
GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE
SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL
BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.
TERM. This Agreement shall be effective as of December 13, 1996, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
BORROWER. The word "Borrower" means Rexall Sundown, Inc..
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and the regulations and published
interpretations thereof.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
GAAP. The word "GAAP" means generally accepted accounting principles
consistently applied.
GRANTOR. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them, whether now existing, contemporaneously
with or hereafter incurred or created and any renewals, modifications,
extensions, substitutions or consolidations thereof, voluntary or involuntary
incurred, secured or unsecured, absolute or contingent, liquidated or
unliquidated; determined or undetermined, whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor, surety, or otherwise, whether recovery upon the Indebtedness may be
or hereafter may become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BARNETT BANK, N.A., its successors and assigns.
LOAN. The word "Loan" or "Loans" means and includes any and all loans, advances,
interest, costs, fees, documentary stamp tax and/or intangible taxes, debts,
overdraft indebtedness, leases, drafts, letters of credit, credit cards, and
business services from Lender to
<PAGE> 2
Borrower whether now existing, contemporaneously with, or hereafter incurred or
created and any renewals, modification, extensions, substitutions or
consolidations thereof, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.
NOTE. The word "Note" means Borrower's promissory note or notes, if any,
evidencing Borrower's Loan obligations in favor of Lender, as well as any
renewal, extension, modification, consolidation, substitute, replacement or
refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sate, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of
1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and In the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d) evidence of insurance as
required below; and (e) any other documents required under this Agreement or by
Lender or its counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the failure
to so qualify would have a material adverse effect on its businesses or
financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower and each
information, exhibit or report supplied to Lender by Borrower, its agents or
accountants truly and completely disclosed Borrower's financial condition as of
the date of the statement in accordance with
<PAGE> 3
GAAP, and there has been no material adverse change in Borrower's financial or
business condition or operations subsequent to the date of the most recent
financial statement supplied to Lender and none are imminent or threatened.
Borrower has no material contingent obligations except as disclosed in such
financial statements. Borrower acknowledges and agrees that Lender is relying on
all such financial information in entering into, continuing, renewing or
extending any Loan.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years. Additionally, Borrower and Borrower's real and personal properties comply
fully with all laws, ordinances, statutes, codes and requirements of the
Americans with Disabilities Act of 1990.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership, lease or use of any real or personal properties and the Collateral,
there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous waste or substance by any person
on, under, or about any of the properties. (b) Borrower has no knowledge of, or
reason to believe that there has been (i) any use, generation, manufacture,
storage, treatment, disposal, release, or threatened release of any hazardous
waste or substance by any prior owners or occupants of any of the properties or
the Collateral, or (ii) any actual or threatened litigation or claims of any
kind by any person relating to such matters. (c) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the properties or
the Collateral shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, or about any of the
properties or the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation those laws, regulations and ordinances
described above. Borrower authorizes Lender and its agents to enter upon the
properties to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the Collateral and the properties for hazardous
wastes and substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to fully
and promptly pay, perform, discharge and defend, indemnify and hold harmless
Lender against any and all claims, orders, demands, causes of action,
proceedings, judgments, losses, liabilities, damages, penalties, and expenses
which Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties or the
Collateral whether or not the same was or should have been known to Borrower.
The provisions of this section of the Agreement, including the obligation to
indemnify, shall survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's acquisition
of any interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note and all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note are binding upon
Borrower as well as upon Borrower's successors, representatives and assigns, and
are legally enforceable in accordance with their respective terms.
PERMITS. Borrower possesses and will continue to possess all permits, licenses,
copyrights, trademarks, trade names, patents and rights thereto to conduct its
business and its business does not conflict or violate any valid rights of
others with respect to the foregoing.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes and will not purchase or carry margin
stock (within the meaning of Regulations G, T and U of the Board of Governors of
the Federal Reserve System).
<PAGE> 4
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, (iii) no steps
have been taken to terminate any such plan, and (iv) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of business of
Borrower and the office or offices where Borrower keeps its records concerning
the Collateral is located at 851 NW Broken Sound Parkway, Boca Raton, FL
33487-3676.
INFORMATION. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
DEPOSIT ACCOUNTS. Maintain its primary banking accounts with Lender.
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all litigation and claims and
all threatened litigation and claims affecting Borrower or any Guarantor which
could materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
UPDATES. Promptly inform Lender in writing of details of all litigation, legal
or administrative proceedings, investigation or other action of similar nature,
pending or threatened against Borrower, at any time during the term of this
Agreement, which in part or in whole may or will render any of the above
representations and warranties no longer true, accurate and correct in each and
every respect. Borrower will bring such details to Lender's attention, in
writing, within thirty (30) days from the date Borrower acquires knowledge of
same.
FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no event
later than one hundred twenty (120) days after the end of each fiscal year,
Borrower's balance sheet and income statement, statement of cash flow and notes
to statements for the year ended, audited by a certified public accountant
satisfactory to Lender, and, as soon as available, but in no event later than
forty five (45) days after the end of each fiscal quarter, Borrower's balance
sheet and profit and loss statement for the period ended, prepared and certified
as correct to the best knowledge and belief by Borrower's chief financial
officer or other officer or person acceptable to Lender. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with GAAP and certified by Borrower as being true and correct, Provide to Lender
annually for each individual Borrower and Guarantor, if any, signed and dated
personal financial statements on Lender's forms and, immediately after filing,
the personal income tax return filed for the past calendar year. Simultaneously
with the financial information required herein of Borrower, the same information
of all corporate or partnership guarantors, if any, prepared in accordance with
GAAP.
Promptly after the furnishing thereof, provide Lender with copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan, credit, or similar agreement and not otherwise required to be
furnished to Lender pursuant to any other section of this Agreement.
Promptly after the sending or filing thereof, provide Lender with copies of all
proxy statements, financial statements and reports which Borrower sends to its
stockholders, and copies of all regular, periodic, special reports, and all
registration statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not less than:
PERIOD AMOUNT
AT ALL TIMES $40,000,000.00
LEVERAGE RATIO. Maintain a ratio of Total Liabilities to Tangible Net Worth of
less than:
PERIOD RATIO
AT ALL TIMES 1.00 TO 1.00
<PAGE> 5
CURRENT RATIO. Maintain a ratio of Current Assets to Current Liabilities in
excess of:
PERIOD RATIO
AT ALL TIMES 1.50 TO 1.00
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets determined in accordance with GAAP
(i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and
similar intangible items, but including leaseholds and leasehold improvements at
book value) of Borrower less total Debt. The term "Debt" shall be determined in
accordance with GAAP. The term "Subordinated Debt" shall mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender. The term "Working Capital" shall mean Borrower's current assets at lower
of cost or current market value less amounts due from any officer, director,
shareholder or any entity related by common control or ownership, excluding
prepaid expenses, less Borrower's current liabilities. The term "Liquid Assets"
shall mean Borrower's cash on hand, marketable securities, bank deposits and
Borrower's receivables. The term "Cash Flow" shall mean net income after taxes,
and exclusive of extraordinary gains and income, plus depreciation and
amortization. The term "Senior Debt" shall mean Debt less Subordinated Debt. The
term "Capital Funds" shall mean Tangible Net Worth plus Subordinated Debt.
Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with GAAP
and certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, business interruption, theft,
public liability insurance, and such other insurance in such amounts and
covering such risks as are usually covered by businesses engaged in the same or
a similar business and similarly situated with respect to Borrower's properties
and operations, in form, coverages and with insurance companies reasonably
acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be canceled or
diminished without at least thirty (30) days' prior written notice to Lender. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
OPERATIONS. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent manner and
in compliance with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans With
Disabilities Act and with all minimum funding standards and other requirements
of ERISA and other laws applicable to Borrower's employee benefit plans, and
continue to engage in an efficient and economical manner in a business of the
same general type as now conducted by it, provided, however, that nothing
contained in this Agreement shall prevent Borrower from discontinuing any part
of Borrower's business, if in Borrower's opinion, this discontinuance is in the
best interests of Borrower and not disadvantageous to Lender.
MAINTENANCE. Maintain, keep and preserve Borrower's buildings and properties and
every part thereof in good repair, working order, and condition and from time to
time make all needful and proper repairs, renewals, replacements, additions,
betterments and improvements thereto, so that at all times the efficiency
thereof shall be fully preserved and maintained, ordinary wear and tear
excepted.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all collateraI for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts and records and to
make copies and memoranda of Borrower's books, accounts and records. If Borrower
now or at any time hereafter maintains any records (including without limitation
computer generated records and computer software programs for the generation of
such records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such records at
all reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense, and discuss the affairs, finances and
accounts of Borrower with Lender.
<PAGE> 6
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender UPON
LENDER'S REQUEST a compliance certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying that that
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the certificate, no default or Event of Default has occurred, or has occurred
and is continuing under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course
of business, and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
sell, transfer, mortgage, assign, pledge, lease, grant a security interest in or
encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's
accounts, except to Lender and except for Borrower's accounts as allowed as a
permitted lien.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, wind up, liquidate, merge, reorganize, transfer, acquire or
consolidate with any other entity, change ownership, dissolve, transfer or sell
or acquire Collateral or assets out of the ordinary course of business, or (c)
pay, declare, set aside, or allocate any dividends in cash or other property, on
Borrower's stock (however, if Borrower is a Subchapter S corporation, Borrower
may make distributions to each shareholder which is necessary to pay for any
personal income tax liability incurred by that shareholder as a direct result of
profits generated by the Subchapter S corporation) or purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) assume, endorse, be liable for or incur any agreement or
obligation as surety or guarantor.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower whether under this Agreement or under any other agreement, Lender shall
have no obligation to make Loan Advances or to disburse Loan proceeds if: (a)
Borrower or any Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender, (b) Borrower or any Guarantor becomes insolvent, files a
petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c)
there occurs a material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any Collateral securing
any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify
or revoke such Guarantor's guaranty of the Loan or any other loan with Lender;
or (e) Lender in good faith deems itself insecure even though no Event of
Default shall have occurred.
RIGHT OF SETOFF. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge, withdraw or setoff all sums owing on this Agreement
against any and all the accounts set forth below in the Accounts section without
prior demand or notice to Borrower,
ACCOUNTS. Borrower grants to Lender a contractual possessory security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
of Borrower's right, title and interest in and to, Borrower's deposits, accounts
(whether checking, savings, or some other account), or securities now or
hereafter in the possession of or on deposit with Lender or with any Barnett
Banks, Inc. affiliate or subsidiary including without limitation all accounts
held jointly with someone else and all accounts Borrower may open in the future,
excluding however all IRA, Keogh, and trust accounts.
EVENTS OF DEFAULT. If any of the following events shall occur each shall
constitute an Event of Default under this Agreement:
DEFAULT ON INDEBTEDNESS. An event of default as defined in any Loan or Note or
demand for full payment of any Loan or Note.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower. If any Affirmative Covenant
herein is breached, and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar breach within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such failure: (a) cures the failure within thirty (30) days;
or (b) if the cure requires more than thirty (30) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the failure and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
<PAGE> 7
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement. in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or furnished
to Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect, either now or
at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, insolvency, appointment of a receiver for any part of Borrower's
property, any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR PROCEEDINGS Commencement of foreclosure proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any
creditor of Borrower, any creditor of any grantor of collateral for the Loan.
This includes a garnishment, attachment, or levy on or of any of Borrower's
deposit accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may be, as to
the validity or reasonableness of the claim which is the basis of the creditor
proceeding, and if Borrower or Grantor gives Lender written notice of the
creditor proceeding and furnishes reserves or a security bond for the creditor
proceeding satisfactory to Lender.
FORFEITURE. The filing of formal charges under any federal or state law against
any Borrower which forfeiture is the penalty. However, this Event of Default
shall not apply if there is a good faith dispute by Borrower as to the validity
or reasonableness of the claim which is the basis of the proceeding, and if
Borrower gives Lender written notice of the proceeding and furnishes reserves or
a surety bond for the proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising under
the guaranty in a manner satisfactory to Lender, and, in doing so, cure the
Event of Default.
INSECURITY. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement Immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement and supersedes ail prior understandings and correspondence, oral
or written, with respect to the subject matter hereof. No alteration of or
amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONTINUING AGREEMENT. This Agreement is a continuing agreement and shall
continue in effect notwithstanding that from time to time, no Indebtedness may
exist.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later
<PAGE> 8
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or insolvency
of any holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including reasonable attorneys' fees, incurred in
connection with the preparation, execution, enforcement and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's reasonable attorneys' fees and Lender's
legal expenses, whether or not there is a lawsuit, including reasonable
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be given in
writing and shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier or deposited in the United States
registered or certified mail, first class, postage prepaid, return receipt
requested, addressed to the party to whom the notice is to be given at the
address shown above; notification by facsimile is specifically not allowed. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower agrees to keep Lender informed
at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
funding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
TIME. Time is of the essence in the performance of this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
DECEMBER 13,1996.
SEE ATTACHED RIDER TO THE BUSINESS LOAN AGREEMENT
BORROWER:
REXALL SUNDOWN, INC.
BY:
GEARY COTTON, VICE PRESIDENT
LENDER:
BARNETT BANK, N.A.
BY:
AUTHORIZED OFFICER
<PAGE> 9
RIDER TO THE BUSINESS LOAN
AGREEMENT
DATED: DECEMBER 13, 1996
BY AND BETWEEN REXALL SUNDOWN, INC., a Florida Corporation ("BORROWER") AND
BARNETT BANK, N.A. ("LENDER")
The following is added to the terms and conditions of the Business Loan
Agreement referenced above and are incorporated therein as if fully set forth:
1. The paragraph entitled "NEGATIVE COVENANTS" is hereby amended as follows:
a) Subparagraph entitled "Indebtedness and Liens" is hereby deleted in its
entirety. b) Subparagraph entitled "Continuity of Operations" is hereby
amended to read as follows: "(a) Engage in any business activities
substantially different than those in which Borrower is presently engaged;
(b) cease operations, wind up, liquidate, merge, reorganize, transfer or
sell Collateral or assets out of the ordinary course of business." The
remainder of said subparagraph is hereby deleted in its entirety. c)
Subparagraph entitled "Loans, Acquisitions and Guaranties" is hereby
deleted in its entirety.
2. The paragraph entitled "EVENTS OF DEFAULT" is hereby amended as follows:
a) Subparagraph entitled "Default on Indebtedness" is hereby amended by
adding the following at the end thereof: "within five (5) days following
notice from Lender." b) All other subparagraphs under this paragraph are
hereby amended by adding the following at the end of each subparagraph:
"within fifteen (15) days following notice from Lender." In all other
respects, said Paragraph shall remain unchanged.
3. The paragraph entitled "EFFECT OF AN EVENT OF DEFAULT" shall be amended by
inserting the words "and be continuing", so that the same shall read as
follows: "If any Event of Default shall occur, and be continuing, all
commitments and obligations...." In all other respects, said paragraph
shall remain unchanged. All of the foregoing changes shall apply to this
Business Loan Agreement, the Note, the Security Agreements and Related
Documents.
REXALL SUNDOWN, INC.
By:
Geary Cotton, Vice President
BARNETT BANK, N.A.
By:
William H. Kilburg, Vice President
<PAGE> 1
EXHIBIT 11
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NET INCOME PER COMMON SHARE CALCULATION
<TABLE>
<CAPTION>
Three Months Ended
November 30,
--------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Net income $ 7,242,441 $ 3,556,152
============== ==============
PRIMARY
Weighted average common shares outstanding(1) 31,213,563 29,714,708
Common stock equivalents(2) 1,208,544 310,407
-------------- --------------
Primary weighted average common shares outstanding 32,422,107 30,025,115
============== ==============
Primary net income per common share $ 0.22 $ 0.12
============== ==============
FULLY DILUTED(3)
Weighted average common shares outstanding(1) 31,213,563 29,714,708
Common stock equivalents(2) 1,113,587 371,086
-------------- --------------
Fully diluted weighted average common shares outstanding 32,327,150 30,085,794
============== ==============
Fully diluted net income per common share $ 0.22 $ 0.12
============== ==============
</TABLE>
- ----------------
(1) Represents weighted average common shares outstanding for the periods
indicated.
(2) Common stock equivalents associated with stock options calculated pursuant
to the treasury stock method.
(3) All share data in the financial statements are stated using the primary
earnings per share calculation as the above fully diluted calculation is
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 77,176,207
<SECURITIES> 2,000,000
<RECEIVABLES> 15,997,595<F1>
<ALLOWANCES> 0
<INVENTORY> 27,683,370
<CURRENT-ASSETS> 132,553,138
<PP&E> 25,020,047<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 166,586,072
<CURRENT-LIABILITIES> 19,039,541
<BONDS> 26,459<F3>
0
0
<COMMON> 327,645
<OTHER-SE> 146,960,222
<TOTAL-LIABILITY-AND-EQUITY> 96,858,461
<SALES> 56,069,538
<TOTAL-REVENUES> 56,069,538
<CGS> 20,679,302
<TOTAL-COSTS> 20,679,302
<OTHER-EXPENSES> 24,454,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,357
<INCOME-PRETAX> 11,495,956
<INCOME-TAX> 4,253,515
<INCOME-CONTINUING> 7,242,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,242,441
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0
<FN>
<F1>NET OF ALLOWANCE
<F2>NET OF DEPRECIATION
<F3>INCLUDES LONG-TERM OBLIGATIONS
</FN>
</TABLE>
