<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement / / Confidential, For use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
REXALL SUNDOWN, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
REXALL SUNDOWN, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- ----------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- ----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------
/ / Fee paid previously with preliminary materials:
- ----------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- ------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
PRELIMINARY COPY
REXALL SUNDOWN, INC.
851 BROKEN SOUND PARKWAY, NW
BOCA RATON, FLORIDA 33487
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 4, 1998
To the Shareholders
of Rexall Sundown, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Rexall Sundown, Inc., a Florida corporation (the
"Company"), will be held at 10:00 a.m., local time, on Wednesday, February 4,
1998 at the Boca Raton Marriott, 5150 Town Center Circle, Boca Raton, Florida
33486, for the following purposes:
(1) To elect eight members to the Company's Board of Directors to
hold office until the Company's 1999 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To consider and vote upon a proposal to increase the number of
authorized shares of the Company's Common Stock from
100,000,000 to 200,000,000 shares by amending the Company's
Articles of Incorporation;
(3) To consider and vote upon a proposal to amend the Company's
Amended and Restated 1993 Stock Incentive Plan;
(4) To consider and vote upon a proposal to ratify the appointment
of Coopers & Lybrand L.L.P. as independent accountants of the
Company for the fiscal year ended August 31, 1998; and
(5) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on December 16,
1997 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof. A list of such shareholders will be available for examination at the
principal executive offices of the Company located at 851 Broken Sound Parkway,
NW, Boca Raton, Florida 33487, for a period commencing ten days prior to the
Annual Meeting.
Whether or not you expect to be present at the Annual Meeting, please
sign, date and return the enclosed proxy card in the enclosed, pre-addressed
envelope as promptly as possible. No postage is required if mailed in the United
States.
By Order of the Board of Directors
RICHARD WERBER
Secretary
Boca Raton, Florida
December 12, 1997
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE> 3
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
REXALL SUNDOWN, INC.
----------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Rexall Sundown, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$.01 per share (the "Common Stock"), for use at the 1998 Annual Meeting of
Shareholders of the Company to be held on Wednesday, February 4, 1998 or at any
adjournments or postponements thereof (the "Annual Meeting"), pursuant to the
foregoing Notice of Annual Meeting of Shareholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is December 23, 1997. Shareholders
should review the information provided herein in conjunction with the Company's
1997 Annual Report to Shareholders which accompanies this Proxy Statement. 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.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving their proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of eight members to the Company's Board of
Directors to serve until the Company's 1999 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) A proposal to increase the number of authorized shares of the
Company's Common Stock from 100,000,000 to 200,000,000 shares
by amending the Company's Articles of Incorporation;
(3) A proposal to amend the Company's Amended and Restated 1993
Stock Incentive Plan;
(4) A proposal to ratify the appointment of Coopers & Lybrand
L.L.P. as independent accountants of the Company for the
fiscal year ended August 31, 1998; and
<PAGE> 4
(5) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares of Common Stock represented by valid proxies received pursuant to this
solicitation (and which have not been revoked in accordance with the procedures
set forth above) will be voted (a) for the election of the eight nominees for
Director named below; (b) for the proposal to amend the Company's Articles of
Incorporation; (c) for the proposal to amend the Company's Amended and Restated
1993 Stock Incentive Plan; and (d) for the proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as independent accountants. If a shareholder specified
a different choice by means of the enclosed proxy, such shareholder's shares of
Common Stock will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on December 16,
1997 as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were [____________] shares of Common Stock issued and
outstanding, each of which is entitled to one vote on each matter submitted to
shareholders at the Annual Meeting. Shareholders do not have the right to
cumulate their votes for Directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The proposal to increase the number of authorized shares
of the Company's Common Stock from 100,000,000 to 200,000,000 shares by amending
the Company's Articles of Incorporation, the proposal to amend the Company's
Amended and Restated 1993 Stock Incentive Plan, the proposal to ratify the
appointment of Coopers & Lybrand L.L.P. as independent accountants, and any
other matter that may be submitted to a vote of the shareholders, will be
approved if a majority of votes cast by the shares of Common Stock represented
in person or by proxy at the Annual Meeting vote in favor of the matter, unless
such other matter is one for which a greater vote is required by law or by the
Company's Articles of Incorporation or Bylaws. If less than a majority of
outstanding shares entitled to vote are represented at the Annual Meeting, a
majority of the shares of Common Stock so represented may adjourn the Annual
Meeting to another date, time or place, and notice need not be given of the new
date, time or place if the new date, time or place is announced at the meeting
before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the Annual Meeting. Such inspector(s) shall determine
the number of shares of Common Stock represented at the Annual Meeting, the
existence of a quorum and the validity and effect of proxies, and shall receive,
count and tabulate ballots and votes and determine the results thereof.
Abstentions will be considered as shares present and entitled to vote at the
Annual Meeting and will be counted as votes cast at the Annual Meeting, but will
not be counted as votes cast for or against any given matter.
A broker or nominee holding shares of Common Stock registered in its
name, or in the name of its nominee, which are beneficially owned by another
person and for which it has not received instructions as to voting from the
beneficial owner, may have discretion to vote the beneficial owner's shares with
respect to the election of Directors and other matters addressed at the Annual
Meeting. Any such shares which are not represented at the Annual Meeting either
in person or by proxy will not be considered as shares present at the Annual
Meeting, and will not be considered to have cast votes on any matters addressed
at the Annual Meeting.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of the record
date concerning the beneficial ownership of the Common Stock by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, (ii) each director of the Company, (iii) each of the Executive Officers
named in the Summary Compensation Table, and (iv) all Directors and Executive
Officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF COMMON
COMMON STOCK STOCK
NAME BENEFICIALLY OWNED OUTSTANDING
- ---- ------------------ ------------
<S> <C> <C>
Carl DeSantis (1) 22,848,580(2)(3) 33.5%
Dean DeSantis (1) 4,357,158(3)(4) 6.4
Damon DeSantis (1) 6,503,108(3)(5) 9.5
Christian Nast 91,200(3) *
Nickolas Palin 111,668(3) *
Geary Cotton 544,928(3)(6) *
Stanley Leedy 56,500(3) *
Raymond Monteleone 20,333(3) *
Melvin Stith 5,000(3) *
CDD Partners, Ltd. (1) 19,168,972 28.2
Sylvia DeSantis 13,545,792(7) 20.0
All Executive Officers and Directors as a group (12 persons) 36,493,028(8) 52.5
</TABLE>
- --------------------
* Less than 1%.
(1) In June 1993, each of Carl DeSantis, Dean DeSantis and Damon DeSantis
contributed all shares of Common Stock then owned by them to CDD
Partners, Ltd. ("CDD"), a Texas limited partnership of which Carl
DeSantis, Dean DeSantis and Damon DeSantis are limited partners and to
CDD Management, Inc. ("CDDM"), a Texas corporation and the general
partner of CDD. Each of Carl DeSantis, Dean DeSantis and Damon DeSantis
has shared beneficial ownership and voting power with respect to all
such shares held by CDD and CDDM. CDD's address is 12770 Coit Road,
#850, Dallas, Texas 75251.
(2) Includes 13,545,792 shares owned by Sylvia DeSantis as to which Carl
DeSantis has sole voting power. Also includes 9,054,548 shares held by
CDD which represent Carl DeSantis' percentage interest in CDD. Does not
include 10,114,424 shares beneficially owned by Dean DeSantis and Damon
DeSantis indirectly through CDD.
(3) For each person, includes shares beneficially owned pursuant to
currently exercisable stock options or options which will become
exercisable within 60 days: Carl DeSantis--248,240 shares; Dean
DeSantis--270,416 shares; Damon DeSantis--270,416 shares; Christian
Nast--91,200 shares; Nickolas Palin--111,668 shares; Geary
Cotton--287,666 shares; Stanley Leedy--56,500 shares; Raymond
Monteleone--20,333 shares; and Melvin Stith --5,000 shares. See
"Executive Compensation."
(4) Includes 4,084,712 shares held by CDD which represent Dean DeSantis'
percentage interest in CDD. Does not include 15,084,260 shares
beneficially owned by Dean DeSantis that are held by CDD, which
represent the percentage interest of Carl DeSantis and Damon DeSantis
in CDD, and 1,050 shares beneficially owned by the wife of Dean
DeSantis. Mr. DeSantis disclaims beneficial ownership of his wife's
shares.
(5) Includes 6,029,712 shares held by CDD which represent Damon DeSantis'
percentage interest in CDD. Does not include 13,139,260 shares
beneficially owned by Damon DeSantis that are held by CDD, which
represent the percentage interest of Carl DeSantis and Dean DeSantis in
CDD, and 28,100 shares owned by the wife of Damon DeSantis. Mr.
DeSantis disclaims beneficial ownership of his wife's shares.
(6) Does not include 10,480 shares owned by the wife of Geary Cotton, as to
which shares Mr. Cotton disclaims beneficial ownership.
3
<PAGE> 6
(7) Ms. DeSantis' address is 851 Broken Sound Parkway, NW, Boca Raton,
Florida 33487. All of such shares are subject to an irrevocable proxy
granted to Carl DeSantis, and 13,158,042 of such shares are further
subject to a stock purchase agreement with an irrevocable life
insurance trust for the benefit of her children. Such stock purchase
agreement provides for significant restrictions on sales or transfers
of such shares during her life, and requires the sale of such shares to
such trust upon her death.
(8) Includes 1,616,271 shares beneficially owned by directors and executive
officers as a group pursuant to stock options under which such persons
have the right to acquire such shares within 60 days. See "Executive
Compensation."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's Directors and executive officers, and persons who
own more than ten percent of the Company's outstanding Common Stock, to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Common Stock. Such persons are
required by SEC regulation to furnish the Company with copies of all such
reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 31, 1997, all Section
16(a) filing requirements applicable to its Directors, executive officers, and
greater than ten percent beneficial owners have been complied with.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of Directors shall be
fixed from time to time by resolution of the Board of Directors. The Board of
Directors has fixed at eight the number of Directors that will constitute the
Board for the ensuing year. Each Director elected at the Annual Meeting will
serve for a term expiring at the Company's 1999 Annual Meeting of Shareholders
or until his successor has been duly elected and qualified.
Each of the current members of the Board of Directors, consisting of
Carl DeSantis, Christian Nast, Dean DeSantis, Damon DeSantis, Nickolas Palin,
Stanley Leedy, Raymond Monteleone and Melvin Stith, has been nominated by the
Company to be re-elected as a Director at the Annual Meeting. The Board of
Directors has no reason to believe that any nominee will refuse or be unable to
accept election; however, if one or more nominees are unable to accept election
or if any other unforeseen contingencies should arise, each proxy that does not
direct otherwise will be voted for the remaining nominees, if any, and for such
other persons as may be designated by the Board of Directors.
The following sets forth certain information concerning each Director
and nominee for election to the Board of Directors of the Company.
CARL DESANTIS, age 58, founded the Company in 1976 and has served as
Chairman of the Board of the Company since its inception, served as Chief
Executive Officer from the Company's inception to February 1997 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, age 66, has been Chief Executive Officer since February
1997, President of the Company since April 1995, and a Director of the Company
since October 1993. He served as Chief Operating Officer of the Company from
April 1995 to February 1997. From December 1989 to April 1995, Mr. Nast was
employed by Colgate Palmolive Company 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 Squibb Company, Chesebrough-Ponds,
Inc. and the Procter & Gamble Company.
4
<PAGE> 7
DEAN DESANTIS, age 35, has been Chief Operating Officer of the Company
since February 1997, Senior Vice President-Operations of the Company since June
1989, and 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, age 33, has been President of Rexall Showcase
International, Inc., the Company's network marketing subsidiary, 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, age 50, has been President-Sundown Vitamins since
September 1997, a Director of the Company since December 1995 and joined the
Company in 1984. He served as Senior Vice President-Sales and Marketing of the
Company from August 1989 to September 1997.
STANLEY LEEDY, age 63, has been a Director of the Company since March
1993. Since January 1985, Mr. Leedy has been the president and chief executive
officer of VanSan Corporation, a consulting firm for the pharmaceutical and
vitamin industry. Mr. Leedy has over 30 years experience in the pharmaceutical
and vitamin industry and has previously served as president and chief executive
officer of the Rexall Drug & Chemical Company, a division of Dart Industries,
Inc.
RAYMOND MONTELEONE, age 50, has been a Director of the Company since
April 1995. From July 1996 to November 1997, Mr. Monteleone served as president
and chief operating officer of First American Railways, Inc. From May 1988 until
January 1996, Mr. Monteleone was employed by Sensormatic Electronics Corporation
in various capacities, including vice president-corporate development, planning
and administration and acting chief financial officer. Mr. Monteleone is a
Certified Public Accountant.
MELVIN STITH, age 50, has been a Director of the Company since April
1997. Since July 1991, Mr. Stith has been Dean of the Florida State University
College of Business. From December 1989 to July 1991, Mr. Stith was Chairman of
the Marketing Department of the Florida State University College of Business
where he was also a Professor. Mr. Stith is also a director of Correctional
Services Corp.
There are no arrangements or understandings with respect to the
selection of officers or Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended August 31, 1997, the Company's
Board of Directors held three meetings and took certain actions by unanimous
written consent. During the 1997 fiscal year, no Director attended fewer than 75
percent of the aggregate of (i) the number of meetings of the Board of Directors
held during the period he served on the Board, and (ii) the number of meetings
of committees of the Board of Directors held during the period he served on such
committees.
The committees of the Board of Directors are the Audit Committee and
the Compensation/Stock Option Committee. The Board does not have a nominating or
similar committee.
The members of the Audit Committee are Messrs. Leedy, Monteleone and
Stith. During the 1997 fiscal year, the Audit Committee held two meetings. The
Audit Committee is responsible for (i) recommending the firm to be appointed as
independent accountants to audit the Company's financial statements, (ii)
discussing the scope and results of the audit with the independent accountants,
(iii) reviewing with management and the independent accountants the Company's
interim and year-end results, (iv) considering the adequacy of the internal
accounting controls and audit procedures of the Company and (v) reviewing the
non-audit services to be performed by the independent accountants.
The members of the Compensation/Stock Option Committee are Messrs.
Leedy, Monteleone and Stith. During the 1997 fiscal year, the Compensation/Stock
Option Committee held two meetings and took certain actions by unanimous written
consent. The Compensation/Stock Option Committee is responsible for setting
compensation of the executive officers of the Company and for the grant of any
stock options to purchase Common Stock.
5
<PAGE> 8
DIRECTOR COMPENSATION
Each non-employee Director of the Company receives a retainer fee of
$10,000 per year for Board membership. The Company reimburses all Directors for
expenses incurred in connection with their activities as Directors.
AMENDED AND RESTATED 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. The
Company's Amended and Restated 1993 Non-Employee Director Stock Option Plan (the
"1993 Director Plan") was designed to provide Directors of the Company who are
not employees of the Company or its subsidiaries ("Non-Employee Directors") with
incentive to promote the success of the Company's business and to enhance the
Company's ability to attract and retain the services of qualified persons to
serve as Directors. Each Non-Employee Director is entitled to a one-time grant
of options upon initial election to the Board of Directors with respect to
15,000 shares of Common Stock, which vest 33-1/3% per year commencing one year
from the date of grant (except for those stock options granted prior to February
1997 which shall continue to vest 20% per year commencing one year from the date
of grant) and have a term of ten years (except for those granted prior to
February 1996 which have a term of six years). The maximum number of shares of
Common Stock available for issuance under the 1993 Director Plan is 120,000
shares. The 1993 Director Plan will expire on, and no options may be granted
thereunder after March 14, 2003, subject to the right of the Board of Directors
to earlier terminate the 1993 Director Plan. Upon a "change of control" (defined
in the same manner as in the employment agreements discussed under "Executive
Compensation-Employment Agreements"), all options outstanding under the 1993
Director Plan will become immediately exercisable in full.
AMENDED AND RESTATED 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. The
Company's Amended and Restated 1994 Non-Employee Director Stock Option Plan (the
"1994 Director Plan") was designed to advance the interests of the Company and
its shareholders by enabling the Company to induce experienced persons to become
and remain Directors by providing those persons greater personal and financial
interest in the success of the Company and its subsidiaries through the grant of
options to purchase shares of Common Stock than provided by the 1993 Director
Plan. Under the 1994 Director Plan, each then Non-Employee Director was granted
stock options to purchase 15,000 shares of Common Stock on July 7, 1994. The
1994 Director Plan also provides for the grant of an annual option to purchase
15,000 shares of Common Stock at the first Annual Meeting of shareholders at
which the Non-Employee Director is re-elected, 20,000 shares at the second
Annual Meeting of shareholders at which the Non-Employee Director is re-elected,
25,000 shares at the third Annual Meeting of shareholders at which the
Non-Employee Director is re-elected, and 30,000 shares at every subsequent
Annual Meeting of shareholders at which the Non-Employee Director is re-elected,
which options vest 33-1/3% per year commencing one year from the date of grant
(except for those stock options granted prior to February 1997 which shall
continue to vest 20% per year commencing one year from the date of grant) and
have a term of ten years (except for those granted prior to February 1996, which
have a term of five years). The maximum number of shares of Common Stock
available for issuance under the 1994 Director Plan is 300,000 shares. The 1994
Director Plan will expire on, and no options may be granted thereunder after
July 6, 2003, subject to the right of the Board of Directors to earlier
terminate the 1994 Director Plan. Upon a "change of control" (defined in the
same manner as in the employment agreements discussed under "Executive
Compensation-Employment Agreements"), all options outstanding under the 1994
Director Plan will become immediately exercisable in full.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's Chief
Executive Officer and the other four most highly paid executive officers who
were serving as executive officers at the end of fiscal 1997 (collectively, the
"Named Executive Officers"), for the fiscal years ended August 31, 1997, 1996
and 1995.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION (1)
--------------------------------------------------------- ----------------
NUMBER
FISCAL OTHER ANNUAL OF OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2) GRANTED (3)
- --------------------------- ---- ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl DeSantis (4) 1997 $452,362 $217,880 $16,712 120,000
Chairman of the Board 1996 415,383 125,625 16,098 105,000
1995 321,205 10,000 9,958 75,000
Christian Nast (4)(5) 1997 $335,779 $157,508 $11,298 120,000
President and Chief 1996 308,158 113,500 8,269 105,000
Executive Officer 1995 113,077 --- 3,950 645,000
Nickolas Palin (4) 1997 $285,578 $102,266 $4,589 80,000
President - Sundown Vitamins 1996 234,635 114,401 4,890 225,000
1995 190,359 35,000 3,845 120,000
Dean DeSantis (4) 1997 $207,692 $ 63,771 $10,696 80,000
Senior Vice President - 1996 187,038 51,206 9,196 75,000
Operations and Chief 1995 173,524 35,000 7,687 150,000
Operating Officer
Geary Cotton (4) 1997 $197,885 $ 63,504 $15,468 80,000
Vice President-Finance 1996 184,500 48,706 11,502 75,000
Chief Financial Officer 1995 176,593 10,000 8,400 120,000
and Treasurer
</TABLE>
- ------------------------
(1) The columns for "Restricted Stock Awards," "LTIP Payouts" and "All
Other Compensation" have been omitted because there is no compensation
required to be reported in such columns.
(2) Represents that portion of the Company's automobile expense allowance
attributable to non-business utilization of such officer's automobile
and the Company's contributions to its 401(k) Plan for the benefit of
such officer.
(3) See "Option Grants in Last Fiscal Year Table" and "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year Option Value Table" for
additional information with respect to these options.
(4) See "--Employment Agreements" for information regarding current and
future compensation arrangements.
(5) Mr. Nast's employment with the Company commenced on April 24, 1995.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements on April 1, 1995
with each of Carl DeSantis, Nickolas Palin, Dean DeSantis and Geary Cotton
pursuant to which they currently receive base annual salaries of $475,000,
$350,000, $300,000 and $300,000, respectively. Each of such employment
agreements is for a term of three years commencing on April 1, 1995 and at the
end of each year is automatically extended for an additional year. The
7
<PAGE> 10
Company entered into an employment agreement with Christian Nast for a
three-year, four-month term commencing April 24, 1995, pursuant to which he
currently receives a base annual salary of $400,000. Each of such employment
agreements provides for annual increases of base salary of the greater of 5% or
the percentage increase in the consumer price index published by the United
States Department of Labor. In addition, each of such officers is entitled to
receive incentive bonuses upon the attainment by the Company of certain net
sales and net income targets. Such bonuses may not exceed 100% of base salary
for Carl DeSantis; 75% of base salary for Christian Nast; 62-1/2% of base salary
for Nickolas Palin, Dean DeSantis and Geary Cotton.
The employment agreements each provide that, if the employee terminates
his employment without good reason or is terminated for cause, such employee is
subject to a non-competition provision for a period of 18 months. In the event
of a change of control of the Company, the employee is entitled to terminate his
employment and receive a lump sum distribution of compensation in an amount
equal to three times such employee's then current effective yearly compensation,
including, but not limited to, salary and bonuses. If the employee elects to so
terminate, the non-competitive provisions contained in the employment agreement
will terminate. Similar provisions apply in the event an employee is terminated
without cause upon a change of control of the Company. Payments under the
agreements by the Company after a change of control are, however, limited to the
amount which would be deductible by the Company under the Internal Revenue Code
of 1986, as amended (the "Code"). A "change of control" is deemed to occur upon
(i) the acquisition of 30% or more of the Company's voting power by anyone other
than a current Director, executive officer of the Company or an affiliate
thereof, or (ii) the Incumbent Directors, as defined, becoming less than a
majority of the Board of Directors of the Company or its successor. A change of
control, as to any employee, may not result from a voluntary action of such
employee.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR TABLE
The following table sets forth certain information concerning grants of
options to purchase Common Stock made during the 1997 fiscal year to the Named
Executive Officers. All stock options were granted pursuant to the Company's
1993 Stock Incentive Plan.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS POTENTIAL REALIZABLE
GRANTED TO VALUE AT ASSUMED ANNUAL
NUMBER EMPLOYEES IN EXERCISE RATES OF STOCK PRICE
OF OPTIONS FISCAL YEAR PRICE PER EXPIRATION APPRECIATION FOR
NAME GRANTED 1997 SHARE (1) DATE OPTION TERM (2)
---- ---------- ------------ --------- ---------- ----------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Carl DeSantis 120,000(3) 7.0% $11.875 12/16/2006 $895,800 $2,271,000
Christian Nast 120,000(3) 7.0% 11.875 12/16/2006 895,800 2,271,000
Nickolas Palin 80,000(3) 4.7% 11.875 12/16/2006 597,200 1,514,000
Dean DeSantis 80,000(3) 4.7% 11.875 12/16/2006 597,200 1,514,000
Geary Cotton 80,000(3) 4.7% 11.875 12/16/2006 597,200 1,514,000
</TABLE>
- ----------------------------------
(1) The exercise price is the fair market value on the date of grant,
determined by calculating the average of the high and low prices of the
Common Stock on the date of such grant.
(2) The stock price appreciation is computed based on the exercise price
per share. The dollar amounts set forth under these columns are the
result of calculations at the 5% and 10% rates established by the SEC
and are not intended to forecast future appreciation in the price of
Common Stock.
(3) Such options become exercisable with respect to 33-1/3% of the covered
shares one year from the date of grant, 66-2/3% of the covered shares
two years from the date of grant and the remainder become exercisable
on December 17, 1999.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUE TABLE
The following table sets forth certain information concerning the
exercise in fiscal 1997 of options to purchase Common Stock by the Named
Executive Officers and the unexercised options to purchase Common Stock held by
such individuals at August 31, 1997.
<TABLE>
<CAPTION>
VALUE REALIZED
SHARES (MARKET PRICE AT NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON EXERCISE LESS OPTIONS IN-THE-MONEY OPTIONS
NAME EXERCISE EXERCISE PRICE) AT FISCAL YEAR END AT FISCAL YEAR-END(1)
- ---- ----------- --------------- --------------------- ---------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Carl DeSantis -- -- 189,748 275,252 $2,571,812 $1,914,176
Christian Nast 36,370 $328,447 200,000 404,000 2,800,000 3,729,964
Nickolas Palin 20,000 $210,643 162,000 247,000 1,892,189 2,406,101
Dean DeSantis -- -- 198,750 196.250 2,759,725 1,884,549
Geary Cotton -- -- 228,000 197,000 3,266,559 1,899,851
</TABLE>
- --------------------
(1) Based on a fiscal year-end value of $17.375 per share. Value is
calculated by multiplying (a) the difference between $17.375 and the
option exercise price by (b) the number of shares of Common Stock
underlying the option.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
REPORT ON EXECUTIVE COMPENSATION
As in prior years, the Company's executive compensation for fiscal 1997
consisted of three primary components: base salary, bonus and grants of stock
options under the Company's 1993 Stock Incentive Plan. Each officer's base
salary and bonus is set forth in such officer's employment agreement, which was
approved by the Company's Board of Directors in April 1995, and amended in March
1997. See "--Employment Agreements." The current members of the Board of
Directors are Carl DeSantis, Dean DeSantis, Damon DeSantis, Christian Nast,
Nickolas Palin, Stanley Leedy, Raymond Monteleone and Melvin Stith. Stock
options were approved and granted by the Company's Compensation/Stock Option
Committee (the "Committee"), whose current members are Stanley Leedy, Raymond
Monteleone and Melvin Stith, each of whom is an independent, non-employee
director.
The salary and bonus components of the Company's executive compensation
are designed to facilitate fulfillment of the following compensation objectives:
(i) attracting and retaining competent management; (ii) rewarding management for
short and long term accomplishments; (iii) aligning the interests of management
with those of the Company's shareholders; and (iv) relating management
compensation to the achievement of Company goals and the Company's performance.
In April 1995, the Company's Board of Directors approved three-year
employment agreements with each of the Company's executive officers. In
addition, in April 1995, the Company entered into a three-year, four-month
employment agreement with Christian Nast, who joined the Company on April 24,
1995 as the Company's President and Chief Operating Officer. As of March, 1997,
the employment agreements of Carl DeSantis, Christian Nast, Dean DeSantis, Damon
DeSantis, Nickolas Palin, Geary Cotton and Richard Werber were amended to
provide for a rolling three year term. As of September 1997, the employment
agreements of Carl DeSantis, Christian Nast, Nickolas Palin, Dean DeSantis and
Geary Cotton were amended to reflect salary increases to $475,000, $400,000,
$350,000, $300,000
10
<PAGE> 13
and $300,000, respectively. The Board's determination of fiscal 1997 salary for
the Company's executive officers set forth in their employment agreements was
made after reviewing and considering a number of factors, including each
officer's level of job responsibility, each officer's level of performance (with
respect to specific areas of responsibility and on an overall basis),
achievement of the Company's goals, the Company's performance during the 1997
fiscal year, compensation levels at competitive companies and the Company's
historical compensation levels. The Company's compensation program for its
executive officers is intended to link compensation in substantial part to
corporate performance. A significant portion of executive officer compensation
in the form of bonuses is tied directly to the attainment of net sales and net
income targets as well as the fulfillment of individual objectives. Each
officer's employment agreement also provides for an annual increase in base
salary of the greater of 5% or the increase in the cost of living each year.
Decisions about granting stock options to executive officers were made as
described below. The Company also makes contributions under the Company's 401(k)
Plan of up to $1,000 per employee, based on a 50% matching contribution.
In determining the fiscal 1997 salary and bonus for Christian Nast, the
Chief Executive Officer of the Company, the principal factors considered by the
Board included (i) an analysis of the compensation of chief executive officers
of public companies within the vitamin and nutritional supplement industry and
public companies similar in size to the Company and (ii) the Company's 1997
fiscal year earnings and other performance measures. One-half of Mr. Nast's'
compensation is tied directly to the attainment of net sales and net income
targets. As described above, the Board of Directors entered into a three-year,
four month employment agreement with Mr. Nast in April 1995, which was amended
in July 1995, March 1997 and September 1997.
The grants of stock options to executive officers in fiscal 1997 were
determined by the Committee based upon recommendations by the Company's Chairman
of the Board, Carl DeSantis, and President and Chief Executive Officer,
Christian Nast, and their assessment of each officer's contributions to the
Company's success, position with the Company, potential to contribute to the
Company's future performance and the overall level of responsibility and job
performance of each officer.
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company. Qualifying performance-based compensation is not subject to the
deduction limit if certain requirements are met. The Company's Amended and
Restated 1993 Stock Incentive Plan has been structured such that awards
thereunder may constitute qualifying performance-based compensation under
Section 162(m). However, the Committee recognizes that unanticipated future
events, such as a change of control of the Company or a change in executive
personnel, could result in a disallowance of compensation deductions under
Section 162(m). Moreover, the Committee may from time to time award compensation
that is non-deductible under Section 162(m) when in the exercise of the
Committee's business judgment such award would be in the best interest of the
Company.
COMPENSATION/STOCK OPTION
COMMITTEE
Stanley Leedy, Chairman
Raymond Monteleone
Melvin Stith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Common Stock with the cumulative total return on the Nasdaq Stock
Market-U.S. Index ("Nasdaq Stock Market-U.S.") and the Natural Business
Composite Index(TM) ("Natural Business Composite") from June 18, 1993 (the date
the Common Stock was first offered to the public) through August 31, 1997
(assuming the investment of $100 in the Common Stock, the NASDAQ Stock
Market-U.S. and the Natural Business Composite and reinvestment of dividends).
The Natural Business Composite is prepared by Montgomery Securities. The Company
did not pay any dividends during this period.
COMPARISON OF CUMULATIVE TOTAL
RETURN AMONG REXALL SUNDOWN, INC., THE
NASDAQ STOCK MARKET - U.S. INDEX, AND THE
NATURAL BUSINESS COMPOSITE INDEX
[Insert Graph]
<TABLE>
<CAPTION>
6/18/93 8/31/94 8/31/95 8/31/96 8/31/97
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Rexall Sundown, Inc. $100 $120.00 $192.31 $639.20 $641.50
Nasdaq Stock Market-U.S. $100 $111.03 $147.93 $165.53 $230.18
Natural Business Composite $100 $114.97 $130.59 $153.32 $208.18
</TABLE>
The comparisons in this table are required by the SEC and are not
intended to forecast or be indicative of possible future performance of the
Common Stock.
12
<PAGE> 15
PROPOSAL TO APPROVE THE INCREASE OF THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has proposed an amendment to Article
IV of the Company's Articles of Incorporation that would increase the number of
authorized shares of the Company's Common Stock from 100,000,000 to 200,000,000
shares. The adoption of the amendment requires approval by the Company's
shareholders.
The Board of Directors is empowered to authorize the issuance of Common
Stock. Of the 100,000,000 shares of Common Stock presently authorized for
issuance, [____________] shares were issued and outstanding as of the Record
Date, 9,000,000 shares are reserved for issuance pursuant to the Company's
Amended and Restated 1993 Stock Incentive Plan, [_____________] shares are
reserved for issuance upon exercise of non-qualified stock options, 120,000
shares are reserved for issuance pursuant to the Company's Amended and Restated
1993 Non-Employee Director Stock Option Plan, 300,000 shares are reserved for
issuance pursuant to the Company's Amended and Restated 1994 Non-Employee
Director Stock Option Plan, 1,500,000 shares are reserved for issuance pursuant
to the Company's Amended and Restated 1993 Stock Purchase Plan, 1,000,000 shares
are reserved for issuance under the Company's 1996 Rexall Showcase
International, Inc. Distributor Stock Option Plan and 1,000,000 shares are
reserved for issuance under the Company's 1996 Rexall Showcase International,
Inc. Distributor Stock Purchase Plan. Accordingly, assuming the issuance of all
shares currently reserved for future issuance, the Company will have issued
__________ of the 100,000,000 shares of Common Stock currently authorized for
issuance, leaving only ___________ shares authorized for subsequent issuance. If
this proposal is approved, approximately _______________ shares of Common Stock
will be available for future issuance, in addition to the shares currently
reserved for issuance pursuant to the Company's Amended and Restated 1993 Stock
Incentive Plan, non-qualified stock options, Amended and Restated 1993
Non-Employee Director Stock Option Plan, Amended and Restated 1994 Non-Employee
Director Stock Option Plan, Amended and Restated 1993 Employee Stock Purchase
Plan, 1996 Rexall Showcase International, Inc. Distributor Stock Option Plan and
1996 Rexall Showcase International, Inc. Distributor Stock Purchase Plan.
The Board of Directors believes that it is in the best interest of the
Company to increase the authorized number of shares of Common Stock to
200,000,000. Although no future transactions involving the issuance of Common
Stock are presently contemplated, the Board of Directors believes that the
increase in the authorized shares of the Company's Common Stock will give the
Company added flexibility to act in the future with respect to equity offerings,
acquisitions, financing programs, stock dividends or splits, corporate planning
and other corporate transactions without delay and expense of shareholder
action, except as may be required by applicable laws, rules and regulations,
each time an opportunity requiring the issuance of shares may arise. Any such
issuance of Common Stock would be subject to the rules of the National
Association of Securities Dealers National Market System (NASDAQ NMS), which
require shareholder approval for certain issuances of Common Stock, including
certain issuances relating to acquisitions and other transactions where the
present or potential issuance of Common Stock, or securities convertible or
exercisable for Common Stock, other than a public offering for cash, will be
equal to or in excess of 20% of the number of shares outstanding before the
issuance of such stock or securities. No holder of the Common Stock has any
preemptive right to subscribe for any securities of the Company. Future
issuances of Common Stock could result in dilution to existing shareholders.
In addition to such corporate purposes, an increase in the number of
authorized shares of Common Stock could be used to make a change in control of
the Company more difficult. Under certain circumstances, the Board of Directors
could create impediments to, or frustrate persons seeking to effect, a takeover
or transfer of control of the Company by causing such shares to be issued to a
holder or holders who might side with the Board in opposing a takeover bid that
the Board of Directors determines is not in the best interest of the Company and
its shareholders. Furthermore, the existence of such additional authorized
shares of Common Stock might have the effect of discouraging any attempt by a
person or entity through the acquisition of a substantial number of shares of
Common Stock, to acquire control of the Company since the issuance of such
additional shares could dilute the Common Stock ownership of such person or
entity. The Company is not aware of any such action that may be proposed or
pending.
13
<PAGE> 16
The Board recommends that the first paragraph of Article IV of the
Company's Articles of Incorporation be amended and restated to read as follows:
"THE AGGREGATE NUMBER OF SHARES WHICH THE COMPANY SHALL HAVE THE
AUTHORITY TO ISSUE IS TWO HUNDRED MILLION (200,000,000) SHARES OF
COMMON STOCK HAVING A PAR VALUE OF ONE CENT ($.01) PER SHARE AND FIVE
MILLION (5,000,000) SHARES OF PREFERRED STOCK HAVING A PAR VALUE OF ONE
CENT ($.01) PER SHARE."
A copy of the entire text of Article IV of the Articles of
Incorporation, as amended and restated as proposed herein, is provided herewith
as EXHIBIT A to this Proxy Statement. The bold face portions of the first
paragraph of Article IV, as set forth in EXHIBIT A, reflect the changes in the
Company's Articles of Incorporation that will result from the approval of this
proposed amendment at the Annual Meeting.
If the amendment to the Articles of Incorporation is approved at the
Annual Meeting, it will become effective upon the filing of the amendment with
the Secretary of State of the State of Florida, which is expected to be
accomplished as promptly as practicable after such approval is obtained.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL TO
INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK
PROPOSAL TO AMEND THE COMPANY'S
AMENDED AND RESTATED
1993 STOCK INCENTIVE PLAN
The Company currently maintains its Amended and Restated 1993 Stock
Incentive Plan (the "Plan"), which was approved by the Company's Board of
Directors and shareholders on March 15, 1993 and was amended on February 6, 1996
and February 6, 1997. The Board of Directors and the Company's
Compensation/Stock Option Committee (the "Committee") believe that in order to
continue the effectiveness of the Plan in achieving its objectives, it would be
desirable to have 15,000,000 shares of Common Stock available for issuance
thereunder. Therefore, subject to shareholder approval, on September 15, 1997,
the Committee and the Board of Directors each approved amendments to the Plan to
increase the number of shares of Common Stock which may be issued under the Plan
by 6,000,000 to a total of 15,000,000. The Company believes that the additional
shares of Common Stock will continue in the years ahead to permit the Company to
compete with other organizations offering similar plans in obtaining and
retaining the services of competent management. Since the Plan's inception
through December 16, 1997, the Company has granted 9,746,752 options to
approximately ___ of its employees, 746,752 of which were granted subject to the
approval of the proposed amendment to the Plan by the Company's shareholders. If
the proposed amendment to the Plan is not approved by the shareholders, the Plan
will remain in full force and effect and such 746,752 options will be null and
void.
The purpose of the Plan is to provide a means for the Company to
attract and retain highly qualified executives and other key employees and to
have such employees exert their best efforts on behalf of the Company and its
subsidiaries through the grant of incentive stock options ("Incentive Stock
Options") and non-statutory options ("Non-Statutory Options") (collectively,
"Options") and the grant of restricted stock awards ("Restricted Stock Awards")
to purchase the Company's Common Stock (the "Shares"). Stock Appreciation Rights
("SARs") and Reload Options may also be issued under the Plan to eligible
employees.
The following table summarizes the benefits, subject to shareholder
approval, under the Plan attributable to previously granted options.
14
<PAGE> 17
NEW PLAN BENEFITS
AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE (1) NUMBER OF OPTIONS (2)
----------------- ---------------- ---------------------
<S> <C> <C>
Nickolas Palin, President-Sundown Vitamins 810,621 106,752
All Executive Officers as Group (3 persons) 3,848,021 506,752
Non-Executive Officer Employee Group (4 persons) 1,454,960 240,000
</TABLE>
- ---------------------------
(1) The dollar value is calculated as the amount by which the average of
the high and low bid price of a share of Common Stock as reported by
the Nasdaq National Market System on December 9, 1997, exceeds the
exercise price of the indicated options.
(2) Includes only outstanding options. The receipt of additional options is
dependent on grants by the Committee.
The following is a summary of the other terms of the Plan. A copy of
the Plan, with the proposed amendments, is attached to this Proxy Statement as
EXHIBIT B and is incorporated herein by reference.
The Plan will remain in effect for ten years until March 14, 2003,
unless terminated by the Company's Board of Directors. The maximum number of
Shares issuable under the Plan will be 15,000,000 if the amendment proposed
herein is approved and is subject to appropriate adjustment in the event of a
stock split, reverse stock split, consolidation of Shares, capital adjustment,
payment of stock dividend or distribution, or other increase or decrease in the
Shares without receipt of consideration. All Options under the Plan must be
granted prior to March 14, 2003, ten years after the effective date of the Plan
and all Options that have been granted must be exercised prior to their
expiration date. No Option will be exercisable after ten years after the date
the Option is granted.
Options granted pursuant to the Plan will be evidenced by an agreement
consistent with the terms and conditions of the Plan and grant of the Option and
will be binding on the employee and the Company. The agreement will set forth
the price at which the Option can be exercised, but in no event will the Option
price be less than the fair market value of the Shares at the time the Option is
granted. The Committee, in its sound business judgment, may cancel outstanding
Options and reissue new Options at a lower exercise price in the event that the
fair market value of the Shares at any time prior to the date the Option is
exercised falls below the exercise price of the outstanding Options.
The Plan will continue to be administered by the Committee consisting
of two or more of the Company's Directors, two of whom must be Non-Employee
Directors as defined in Exchange Act Rule 16b-3(b)(3)(i). The Committee will
select the employees of the Company and its subsidiaries to receive (i)
Incentive Stock Options, (ii) Non-Statutory Options, (iii) Reload Options, (iv)
Restrictive Stock Awards, (v) SARs or (vi) a combination of the foregoing, and
the terms and conditions under which they will be granted. Such terms and
conditions may include, without limitation (a) when awards or Options shall be
granted, (b) the exercise price for the Options, (c) whether Options contain
SARs, (d) the time when the Option can be exercised and the duration of the
exercise period and (e) the time when Restricted Stock Awards will vest and when
the restrictions will lapse. The members of the Committee are Stanley Leedy,
Raymond Monteleone and Melvin Stith.
The plan provides that the Committee may, in its discretion, base the
granting, exercisability or vesting of awards under the Plan upon the attainment
of performance criteria specified by the Committees so as to result in the
awards constituting performance-based compensation under Section 162(m) of the
Code. Such awards (the "Performance-Based Awards"), or the exercisability or
vesting thereof, shall be based upon one or more of the following business
criteria, which may be determined by reference to the performance of the key
employee to whom the award is to be granted, or the performance of the Company
or a subsidiary, division or other operating unit of the Company, (or
comparative performance relative to other companies): revenues; market share;
costs; economic value added; increase in price per share; total shareholder
return; net income; pre-tax earnings; earnings before interest expense, taxes
and depreciation and amortization; operating margins; earnings per share; return
on equity, capital or investment; operating earnings; working capital or
inventory; the ratio of debt to shareholders' equity; or the attainment
15
<PAGE> 18
of quantitative targets related to the Company's business. The maximum number of
shares of stock of the Company with respect to which Options (including Reload
Options and Options issued in tandem with SARs), SARs issued independently of
Options and Restricted Stock Awards may be granted as to any key employee during
any calendar year shall not exceed 500,000 shares, subject to adjustments as
provided in the Plan.
Options and Restricted Stock Awards may only be granted to persons who
are key employees of the Company or a subsidiary of the Company. The term key
employee includes officers, directors, executives and supervisory personnel as
well as other employees who in the judgment of the Committee are considered
especially important to the future of the Company. No member of the Committee is
eligible to participate in the Plan.
The purchase price for Shares purchased by exercise of an Option must
be paid in full at the time the Option is exercised. No shares of Common Stock
will be issued or transferred until full payment has been received. Payment may
be in cash or in shares of Common Stock. If payment is in shares of Common
Stock, the employee must have held such shares of Common Stock for a minimum of
six months preceding the exercise of the Option. The value of the shares
delivered will be the fair market value of the Common Stock on the date
preceding the exercise date of the Option.
Any Options outstanding under the Plan that have not become
exercisable, will immediately become exercisable to their fullest extent (but in
the case of officers and directors, not before six months after the applicable
grant date) upon a "change of control" (defined in the same manner as the
employment agreements discussed under "Executive Compensation - Employment
Agreements.")
RELOAD OPTIONS. The Committee may grant to an employee additional
Options once an Option has been exercised. Reload Options may only be granted
with respect to the same number of Shares issued upon exercise of the Option.
The exercise price for the Reload Option will be the fair market value of the
Shares on the date of the grant of the Reload Option. Reload Options may not be
exercised after the date Options with respect to which Reload Options were
granted, expire or terminate. No Reload Options have been granted under the
Plan.
NON-STATUTORY OPTIONS. The Committee in its discretion may also grant
Non-Statutory Options to selected key employees of the Company or its
subsidiaries. Prior to the grant of such Options the Committee will determine
the number of Shares and the terms and conditions upon which such Options shall
be granted and exercised.
STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
provide the employee with the right to cancel all or any portion of an Option
and require the Company to pay to the employee an amount in cash equal to the
sum of the fair market value of the Shares subject to the Option at the time of
cancellation less the applicable purchase price for such Shares as set forth in
the Option agreement. Such right of cancellation will not be available unless
the cash amount owed to the employee at the time of cancellation is greater than
zero. The Company will withhold any federal, state and local taxes required by
law to be withheld if any cash payment made pursuant to cancellation of an
Option results in compensation to the employee. Any amounts payable by the
Company pursuant to a right of cancellation may in the Committee's discretion be
paid in cash, Shares or a combination thereof. The right of cancellation is only
exercisable by the employee during his lifetime, however, the right of
cancellation may be transferred by will or the laws of descent and distribution
but only to the extent the Option itself is transferable. No Stock Appreciation
Rights have been granted under the Plan.
RESTRICTED STOCK AWARDS. The Committee also has the discretion to grant
Restricted Stock Awards under the Plan. The Committee will determine (i) whether
and when Restricted Stock Awards shall be made, (ii) the number of Shares
covered by the Restricted Stock Award (provided that the aggregate fair market
value of Shares awarded to an employee in any one year may not exceed 20% of the
employee's then current base annual salary), (iii) the restrictions applicable
to the Shares awarded and (iv) the form of instrument evidencing the Restricted
Stock Award. Restricted Stock Awards may be made to the same person on more than
one occasion, but no Restricted Stock Award will entitle a person to future
awards. The aggregate market value of Shares granted as a Restricted Stock Award
during any fiscal year will be limited to 10% of the aggregate current base
yearly compensation of all of the Company's salaried employees. All certificates
evidencing Shares delivered pursuant to Restricted Stock Awards will bear an
appropriate legend referring to the terms, conditions and restrictions on the
Shares granted. All Shares issued pursuant to Restricted Stock Awards will,
together with stock powers, be held by the Company until all restrictions with
respect to the
16
<PAGE> 19
particular Shares have lapsed, at which point the Company shall deliver the
certificates for such Shares to the employee. In the event of a Change of
Control, all restrictions on the Shares awarded shall immediately lapse. No
Restricted Stock Awards have been granted under the Plan.
The Board has complete power and authority to terminate, amend or
modify the Plan. The Board may not, however, amend, modify or terminate the Plan
without the approval of a majority of the Company's shareholders, if (a) such
approval is required by (i) the Code, (ii) the insider trading rules of Section
16 of the Securities and Exchange Act of 1934 or (iii) any national securities
exchange or system on which the Shares are listed or reported or any regulatory
body having jurisdiction with respect thereto; or (b) if the amendment or
modification (i) increases the maximum number of Shares which may be issued
under the Plan or available for issuance as Incentive Stock Options under
Section 422 of the Code (except pursuant to certain changes in the Company's
capitalization), (ii) reduces the exercise price of Incentive Stock Options to
less than the fair market value of the Company's Common Stock at the time the
Option is granted, or (iii) changes the class of individuals eligible to receive
Options; provided, however, the Board may amend the Plan to make any changes
necessary to qualify options as Incentive Stock Options under the Code.
Additionally, no termination, modification or amendment of the Plan may
adversely affect the rights of an individual to exercise an Option, Restricted
Stock Award or any SARs issued under the Plan, without the employee's consent.
TAX TREATMENT UNDER THE PLAN. Under the Code, an employee incurs no tax
liability on the grant of Incentive Stock Options or Non-Statutory Options. In
the case of an Incentive Stock Option, the employee does not have any tax
consequences upon exercise of the Option. The employee is, however, required to
account for the spread at the time of exercise between the fair market value of
the stock and the option price as an item of tax preference for purposes of the
alternative minimum tax. Upon sale of the stock acquired by exercise of the
Incentive Stock Option, the employee must recognize the difference between the
amount paid for the stock and the option price as income. Upon exercise of a
Non-Statutory Stock Option, the employee must recognize the spread between the
option price and the fair market value of the stock received upon exercise as
income.
The issuance of a Restricted Stock Award to an employee will not
produce any tax consequences for the employee. When the stock is no longer
subject to a substantial risk of forfeiture or becomes transferable, the value
of the stock at that time, to the extent it exceeds any amount paid by the
employee, is income to the employee. The employee may elect to subject the
spread between the price paid for the restricted stock and the fair market value
of the stock to immediate taxation by electing to do so within 30 days of
receiving the restricted stock.
The grant of a Stock Appreciation Right is an unfunded and unsecured
promise of the employer to pay an unknown amount of money in the future and does
not have taxable consequences to the employee upon grant. Upon exercise of the
Stock Appreciation Right, the employee is required to recognize the amount of
income (or the value of stock received).
Deductions for federal income tax purposes will be allowed to the
Company at different times depending on the type of option or award granted. No
deduction will be allowed to the Company for federal income tax purposes at the
time of the grant or exercise of an Incentive Stock Option under the Plan. No
deduction will be allowed to the Company upon grant of a Non-Statutory Option.
However, upon exercise of a Non-Statutory Option, the Company will be entitled
to a compensation deduction equal to the amount the employee must recognize as
income. The timing and amount of the Company's compensation deduction for Stock
Appreciation Awards and Restricted Stock Options will correspond to the time and
amount that the employee recognizes income for regular federal income tax
purposes. The Company will deduct from any payment otherwise due, applicable
federal, state or local taxes of any kind required by law to be withheld with
respect to the issuance of Shares under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL TO AMEND THE
COMPANY'S AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has recommended the firm of
Coopers & Lybrand L.L.P. as the independent accountants of the Company for the
current fiscal year. Although the appointment of Coopers & Lybrand
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L.L.P. as the independent accountants of the Company does not require
ratification by the Company's shareholders, the Board of Directors considers it
appropriate to obtain such ratification. Accordingly, the vote of the Company's
shareholders on this matter is advisory in nature and has no effect upon the
Board of Directors' appointment of a firm of independent accountants, and the
Board of Directors may change the Company's auditor at any time without the
approval or consent of the shareholders. The Board proposes and unanimously
recommends that the shareholders ratify the selection of Coopers & Lybrand
L.L.P. by adopting the following resolution:
RESOLVED, that the appointment by the Board of Directors of the Company
of Coopers & Lybrand L.L.P. as the independent accountants of the
Company for the current fiscal year be, and such appointment hereby is,
ratified, confirmed and approved.
If the shareholders do not ratify the selection of Coopers & Lybrand
L.L.P. by the affirmative vote of the holders of a majority of votes cast by the
shares of Common Stock represented in person or by proxy at the Annual Meeting,
the selection of another independent accountant will be considered by the Board
of Directors.
Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the Annual Meeting and will be afforded the opportunity to make a statement
if they so desire and to respond to appropriate questions.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, a shareholder intending
to present a proposal to be included in the Company's Proxy Statement for the
Company's 1999 Annual Meeting of Shareholders must deliver a proposal in writing
to the Company's principal executive offices no later than September __, 1998.
By Order Of The Board of Directors
RICHARD WERBER
Secretary
Boca Raton, Florida
December 12, 1997
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EXHIBIT A
ARTICLE IV
CAPITAL
The aggregate number of shares which the Company shall have authority
to issue is TWO HUNDRED MILLION (200,000,000) shares of Common Stock having a
par value of one cent ($.01) per share and Five Million (5,000,000) shares of
Preferred Stock having a par value of one cent ($.01) per share.
PREFERRED STOCK. Shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby authorized to fix
the voting rights (but such voting rights, full or limited, shall not exceed one
vote per share of Preferred Stock), designations, powers, preferences and the
relative participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any wholly unissued
series of Preferred Stock, and to fix the number of shares constituting such
series, and to increase or decrease the number of shares of any such series (but
not below the number of share thereof outstanding).
<PAGE> 22
EXHIBIT B
REXALL SUNDOWN, INC.
AMENDED AND RESTATED
1993 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the Rexall Sundown, Inc. Amended and
Restated 1993 Stock Incentive Plan (the "Plan") is to provide a means whereby
Rexall Sundown, Inc. (the "Corporation") may, through the grant of incentive
stock options ("Incentive Stock Options") and non-statutory stock options
("Non-Statutory Options")(Non-Statutory Options and Incentive Stock Options
shall hereinafter collectively be referred to as, "Options") to purchase common
stock of the Corporation, stock appreciation rights ("SARs") and restricted
stock awards ("Restricted Stock Awards") to key employees of the Corporation and
of any subsidiary of the Corporation, attract and retain persons of ability as
key employees and entice said employees to exert their best efforts on behalf of
the Corporation and its subsidiaries.
2. ADMINISTRATION.
2.1 THE COMMITTEE. The Plan shall be administered by a
committee (the "Committee") which shall be appointed by the Board of Directors
(the "Board") consisting of two or more Directors each of whom is a Non-Employee
Director as that term is defined in Rule 16b-3(b)(3) of the General Rules and
Regulations under the Securities and Exchange Act of 1934 (the "Exchange Act").
2.2 AUTHORITY OF THE COMMITTEE. The Committee shall select the
key employees of the Corporation and its subsidiaries to whom Options, SARs and
Restricted Stock Awards may from time to time be granted, shall determine the
number of shares to be covered by each of the Options, SARs and Restricted Stock
Awards so granted and shall determine the terms and conditions (not inconsistent
with this Plan) of any Options, SARs and Restricted Stock Awards granted
hereunder. Such terms and conditions shall include, but not be limited to, the
determination of:
a. the key employees of the Corporation and its subsidiaries
from among the class of key employees eligible to receive awards or
options under the Plan, to whom awards or options should be granted;
b. the time or times at which awards or options shall be
granted;
c. the option price of the shares subject to each option;
d. whether the option shall contain stock appreciation
rights;
e. the time or times when each option shall become exercisable
and the duration of the exercise periods; and
f. the time or times when each Restricted Stock Award shall
vest and/or restrictions with respect to the same shall lapse.
The Committee is authorized to interpret the Plan and to prescribe,
amend and rescind rules and regulations relating to it.
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan, Options, SARs or
any Restricted Stock Awards granted in connection with it.
<PAGE> 23
3. ELIGIBILITY FOR INCENTIVE STOCK OPTIONS.
3.1 GENERAL RULE. Incentive Stock Options to purchase stock
in the Corporation may be granted only to persons who are key employees of the
Corporation or of a subsidiary corporation of the Corporation (the term
"Subsidiary" shall, for the purposes of this Plan, be defined in the same manner
as the term "Subsidiary Corporation" is defined in Section 425(f) of the
Internal Revenue Code). The term "key employees" shall include officers,
directors, executives and supervisory personnel, as well as other employees of
the Corporation or a Subsidiary who, in the judgment of the Committee, are
considered especially important to the future of the Corporation. No member of
the Committee, however, shall be eligible to participate in the Plan.
3.2 10-PERCENT SHAREHOLDER RULE.
3.2.1 IN GENERAL. Incentive Stock Options may not be
granted to any individual employed by the Corporation if such
individual, at the time the Option is granted, owns stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary.
3.2.2. EXCEPTION. Section 3.2.1 shall not apply if at
the time the Incentive Stock Option is granted the Option price is at
least 110% of the fair market value of the stock subject to the Option
and such Option by its terms is not exercisable after the expiration of
five years from the date such Option is granted.
4. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Options granted
pursuant to this Plan shall be evidenced by agreements which shall, inter alia,
contain the following terms and conditions:
4.1 PRICE. The Option price shall not be less than the fair
market value of the stock at the time such Option is granted, as determined by
the Committee.
4.1.1. FAIR MARKET VALUE. Any reasonable valuation method may
be used for the purpose of ensuring that the Option price at the time
the Incentive Stock Option is granted is not less than 100% of the fair
market value of the stock. For purposes of this Plan the fair market
value shall be determined without regard to any restriction other than
a restriction which, by its terms, will never lapse. Nothing contained
herein, however, shall prohibit the Committee, in the sound exercise of
business judgment, from canceling outstanding options and reissuing new
options at a lower exercise price in the event that the fair market
value per share of the Corporation's stock at any time prior to the
date of exercise falls below the exercise price of such outstanding
options.
4.1.2. PAYMENT WITH STOCK. The Option price shall be
paid in full at the time of the exercise. No shares shall be issued or
transferred until full payment has been received therefor. Payment may
be in cash or, unless otherwise provided by the Committee at any time,
by delivery of shares of Common Stock of the Corporation owned by the
employee in partial or full payment; provided, however, as a condition
to paying any part of the exercise price of the stock, the stock
tendered to the Corporation must have been held by the employee for a
minimum of six (6) months preceding the tender. If payment is made by
the delivery of stock, the value of the stock delivered shall be the
fair market value of the stock on the day preceding the date of
exercise of the Option.
4.2 EXERCISE. The terms and conditions relating to the
exercise of the Incentive Stock Option and the manner of exercise shall be
established by the Committee; provided, however, that:
4.2.1 Except as provided in Section 4.2.2 and 4.2.5
below, no employee shall have a right to exercise an Incentive Stock
Option after the termination of his employment unless the Committee, in
its discretion, authorizes the employee to exercise such Incentive
Stock Option at any time prior to the earlier of (i) the expiration of
the term of such Incentive Stock Option or (ii) three months following
the
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termination of the employment. The Incentive Stock Option must be
exercised only by such employee during his lifetime.
4.2.2 If an employee becomes disabled (within the
meaning of Section 22(e)(3) of the Internal Revenue Code) while he is
employed by the Corporation or a Subsidiary, all Incentive Stock
Options shall not be exercisable more than one year after the date of
such disability nor after the period of time provided in Section 4.2.4,
whichever is earlier. Upon the death of the employee, Options may no
longer be exercised except as otherwise provided herein.
4.2.3. All Incentive Stock Options granted hereunder
must be granted within ten (10) years after the earlier of the date
this Plan is adopted or the date this Plan is approved by the
shareholders of the Corporation, and must be exercised prior to their
respective expiration dates.
4.2.4. No Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date such Option is
granted.
4.2.5. In the event that the employee dies at any
time during his employment or within (3) months after retirement (which
shall be age 65 for normal retirement), Incentive Stock Options granted
to him under this Plan and not theretofore exercised by him or expired
shall be exercisable by the estate of the employee or by any person who
acquired such Incentive Stock Option by bequest or inheritance from the
employee to the extent that the employee was entitled to exercise the
Option, provided, however, that the Option must be exercised, if at
all, within six months after the death of the employee and within the
ten (10) year period provided in Section 4.2.4.
4.2.6. Incentive Stock Options are those options
qualifying pursuant to the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time.
4.2.7. Notwithstanding any other provision of this
Plan or any conditions imposed by the Committee upon the right of any
employee to exercise any Options granted under this Plan, all
outstanding Options shall become immediately exercisable (but in the
case of officers and directors of the Corporation, not before six
months after the applicable grant date) to their full extent upon a
Change of Control (as described in Section 4.2.8) of the Corporation
(if not approved by the Board within ten (10) days of such Change in
Control).
4.2.8. For purposes of this Plan, a "Change in
Control" of the Corporation shall mean:
a. If any person (including a "Group" which is
defined as any combination of persons knowingly participating in a
joint activity or interdependent consciously parallel action toward a
common goal, whether or not pursuant to an express contract; provided,
however, that the actions taken by a director of the Corporation acting
as such shall not alone constitute membership in a group), without the
approval of a majority of the Incumbent Directors ("Incumbent Director"
shall mean any director of the Corporation serving at April 1, 1993 or
one elected thereafter if nominated or approved by at least two-thirds
of the then Incumbent Directors), becoming the Beneficial Owner
("Beneficial Owner" shall have the meaning provided in Section
607.0901(i)(e) of the Florida Statutes) of, or acquiring the power to
direct the exercise of voting power with respect to, directly or
indirectly, securities which represent thirty percent (30%) or more of
the combined voting power of the Corporation's outstanding securities
thereafter, whether or not some portion of such securities was owned by
such person (or by any member of such Group) prior thereto or provided,
however, that this provision shall not apply to acquisitions by a
director, executive officer or their affiliates if such person had such
status on April 1, 1993; or
b. the Incumbent Directors cease at any time
to constitute a majority of the Board of Directors, whether of (A) the
Corporation or (B) after any cash tender offer or exchange offer,
merger, consolidation or other business combination, recapitalization
of the Corporation, sale, liquidation or dissolution (or adoption of a
plan for liquidation or dissolution), or any combination of any or all
of the forgoing
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transactions, including but not limited to a series of such
transactions, any successor to the Corporation.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to have occurred with respect to any person if the action of such
person was voluntary and would have been sufficient, without the
actions of others, to constitute a Change of Control.
5. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.
5.1 RESTRICTED STOCK AWARDS. Restricted Stock Awards are
awards of shares of Common Stock, par value $.01 of the Corporation, which
shares shall be subject to the terms, conditions and restrictions described in
this Plan and in the instruments evidencing the grant of the Restricted Stock
Awards.
5.2 MAXIMUM NUMBER OF SHARES THAT MAY BE AWARDED. Any of the
shares of Common Stock available under this Plan pursuant to Section 12 may be
granted as Restricted Stock Awards. If, on or before March 14, 2003, any shares
of Common Stock shall be returned to the Corporation pursuant to the termination
provisions described in Section 5.7 hereof or in the instruments evidencing the
grant of the Restricted Stock Awards, such shares may again be awarded under the
Plan (unless the Plan shall have been theretofore terminated).
5.3 LIMITATIONS ON GRANT OF RESTRICTED STOCK AWARDS. The
aggregate market value of shares granted (determined as of the dates of the
respective grants) as Restricted Stock Awards during any fiscal year of the
Corporation will be limited to 10% of the aggregate current basic yearly
compensation of all salaried employees (determined as of the dates of the
respective grants).
5.4. RIGHTS WITH RESPECT TO SHARES. An employee to whom a
Restricted Stock Award has been made shall have, after delivery to him or her
of, or after notification that there is being held in custody for him or her, a
certificate or certificates for the number of shares of Common Stock awarded,
absolute ownership of such shares including the right to vote the same and to
receive dividends thereon, subject however, to the terms, conditions and
restrictions described in this Plan and in the instrument evidencing the grant
of the Restricted Stock Award to such employee.
5.5 KEY EMPLOYEES. Restricted Stock Awards may be made only to
persons who are determined by the Committee to be key employees of the
Corporation or of a Subsidiary on the date the Restricted Stock Award is made.
Any employee may elect irrevocably not to be eligible, either for a period of
time or during the entire term of this Plan, for grant of Restricted Stock
Awards under this Plan by delivering to the Committee or the Board a written
notice to such effect. Upon receipt of such notice by the Committee or the
Board, such employee shall thereupon be ineligible to receive Restricted Stock
Awards under this Plan for such period of time or for the entire term of this
Plan, as the case may be.
5.6 GRANT OF RESTRICTED STOCK AWARDS. Subject to the terms,
conditions and restrictions of this Plan, the Committee shall, in its sole
discretion, select from among the key employees of the Corporation and its
Subsidiaries those employees to whom Restricted Stock Awards are to be granted.
The Committee shall also have exclusive power in respect of Restricted Stock
Awards including, but not limited to, the power (i) to determine whether
Restricted Stock Awards are to be made, (ii) to determine the number of shares
of Common Stock covered by each Restricted Stock Award, provided that the
aggregate fair market value of such shares awarded in any one year (determined
as of the dates of the respective grants) shall not exceed 20% of the employee's
current basic yearly compensation (determined as of the dates of the respective
grants), (iii) to determine the time or times when Restricted Stock Awards will
be made, (iv) to determine, in accordance with the Plan, the restrictions
applicable to shares of Common Stock awarded pursuant to Restricted Stock
Awards, and (v) to prescribe the form of the instruments evidencing the grant of
the Restricted Stock Awards under the Plan. Restricted Stock Awards may be made
to the same person on more than one occasion; provided, however, that the
Committee's designation of an employee in any year shall not require the
Committee to designate such person to receive a Restricted Stock Award in any
other year, or if so designated, to receive the same amount of award as in any
other year, or as may be received by any other employee in any year.
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<PAGE> 26
5.7 RESTRICTIONS. Shares of Common Stock awarded to an
employee pursuant to a Restricted Stock Award:
(i) shall not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, and
(ii) shall, if delivered to or to the order of the
employee, be returned to the Corporation forthwith, and all rights of
the employee to such shares shall immediately terminate without any
payment of consideration by the Corporation, if the employee's
continuous employment with the Corporation or any of its Subsidiaries
shall terminate for any reason, except as provided in Section 5.9;
provided, however, that the Committee shall have the right to waive
such forfeiture, in whole or in part, and in connection with such
waiver to impose any terms or restrictions on the continued ownership
of such shares by the employee under the Plan. If the employee's
interests in the shares of Common Stock awarded pursuant to a
Restricted Stock Award shall be terminated pursuant to this clause
(ii), he or she shall forthwith deliver to the Secretary or any
Assistant Secretary of the Corporation the certificates for shares of
Common Stock so terminated, accompanied by such instrument of transfer
as may be required by the Secretary or any Assistant Secretary of the
Corporation.
5.8 LAPSE OF RESTRICTIONS. Subject to Section 5.9, the
restrictions set forth in Section 5.7 shall lapse at such times as are
determined by the Committee. Notwithstanding the provisions of this Section 5.8,
all restrictions shall lapse immediately upon a Change in Control of the
Corporation as set forth in Section 4.2.8.
5.9 TERMINATION OF EMPLOYMENT BY REASON OF DEATH OR
DISABILITY; ATTAINMENT OF AGE 65. Any provision of Section 5.7 to the contrary
notwithstanding, if an employee who has been in the continuous employment of the
Corporation or of any Subsidiary since the date on which a Restricted Stock
Award was granted to him or her shall, while in such employment, die, terminate
employment by reason of disability, or attain age 65 and any of such events
shall occur more than one year after the date on which a Restricted Stock Award
is granted to him or her, then the restrictions set forth in Section 5.7 shall
lapse, as to all shares of Common Stock awarded to such employee pursuant to
such Restricted Stock Award, on the date of such event. As used in this Section
5.9, the term "disability" shall mean a condition within the meaning of Section
22(e)(3) of the Internal Revenue Code.
5.10 RESTRICTIVE LEGENDS; CERTIFICATES MAY BE HELD IN CUSTODY.
Certificates evidencing shares of Common Stock delivered pursuant to Restricted
Stock Awards shall bear an appropriate legend referring to the terms, conditions
and restrictions described in the Plan and in the instruments evidencing the
grant of the Restricted Stock Award. Any attempt to dispose of any such shares
of Common Stock in contravention of the terms, conditions and restrictions
described in the Plan or in the instruments evidencing the grant of the
Restricted Stock Awards shall be ineffective. The shares acquired, together with
stock powers (if required by the Corporation) or other instruments of transfer
appropriately endorsed in blank by the employee, shall be held by the
Corporation, for the use and benefit and subject to the rights of such employees
as owner thereof. After the lapse of all restrictions with respect to particular
shares, the Corporation shall deliver the certificates for such shares held by
the Corporation to the employee concerned.
6. NON-STATUTORY OPTIONS. The Committee may, in its discretion, grant
Non-Statutory Options to selected key employees of the Corporation or of a
Subsidiary. Prior to the grant of such Options the Committee shall determine the
number of shares and the terms and conditions of any Non-Statutory Options
granted under this Plan.
7. STOCK APPRECIATION RIGHTS.
7.1 Each option agreement may provide that the employee may,
from time to time, elect to cancel all or any portion of the Option then subject
to exercise, in which case, the Corporation's obligation in respect of such
Option may be discharged by the payment to the employee of an amount of cash
equal to the excess, if any, of the fair market value at the time of
cancellation of shares subject to the Option so canceled over the aggregate
purchase price for such shares as set forth in the option agreement. In the
event of cancellation, the number of shares as to which such Option was canceled
shall not become available for use under this Plan. Any right to elect
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<PAGE> 27
cancellation shall be transferable only by will or by the laws of descent and
distribution. During the lifetime of the employee, such right shall be
exercisable only by him.
7.2 The provisions of this Section 7 shall not be available
unless the cash amount calculated hereunder is a positive number.
7.3 To the extent that the election provided in this Section 7
results in compensation income to the employee; the Corporation shall withhold
from the amount due the employee an appropriate amount for Federal, state and
local taxes, if any, as then required by law.
7.4 The following additional rules are applicable:
7.4.1. The election herein shall expire no later than
the expiration of the Option to which the election relates;
7.4.2. The right under this Section 7 is transferable
only to the extent the Option to which the election relates is
transferable and on the same terms and conditions; and
7.4.3 The rights under this Section 7 may be
exercisable only when the underlying Option is eligible to be
exercised.
7.5 The Committee may, in its discretion, award SARs
independent of the grant of any Option. Upon exercise, the employee shall
receive the excess of the market value of the Corporation's stock at the date of
exercise over the price of the stock determined at the time of the grant of the
SAR.
7.6 Amounts payable pursuant to this Section 7 may, in the
Committee's discretion, be paid in cash, shares of the Corporation, or a
combination thereof.
8. PAYMENT OF OPTION PRICE. The employee or his successor in interest
shall pay the Option price by cash or check, except as may be permitted by
Section 4.1.2.
9. WITHHOLDING.
9.1 TAX WITHHOLDING. The Corporation shall deduct or withhold
an amount, otherwise payable, sufficient to satisfy Federal, state, and local
taxes required by law to be withheld with respect to any grant, exercise, or
payment made under or as a result of this Plan. The employee has no discretion
as to whether such amount will or will not be withheld by the Corporation.
9.2 SHARE WITHHOLDING. With respect to tax withholding
required upon the exercise of Options, the Corporation shall withhold such
number of shares, otherwise issuable, having a fair market value on the date the
tax is to be determined equal to an amount sufficient to satisfy Federal, state
and local taxes. The employee has no discretion as to whether such shares will
or will not be withheld by the Corporation.
10. RELOAD OPTIONS. The Committee may provide for the grant, to any
employee of additional Options upon the exercise of Options ("Reload Options"),
including the exercise of Reload Options, through the delivery of common stock
of the Corporation provided, however, the (i) Reload Options may be granted only
with respect to the same number of common shares as were surrendered to exercise
the Options, (ii) the exercise price of the Reload Options will be the fair
market value on the date of grant of the Reload Options, (iii) with respect to
employees who are subject to the reporting requirements of Section 16(a) of the
Exchange Act, the Reload Options may not be exercised after the date the Options
with respect to which such Reload Options were granted expire or terminate and
(iv) the provisions contained in this sentence may not be amended more than once
every six (6) months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.
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11. $100,000 ANNUAL LIMIT. The aggregate fair market value (determined
as of the times Options are granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by such individual
during any calendar year (under all such plans of the individual's employer
corporation and its parent and subsidiary corporations) shall not exceed
$100,000.
12. SHARES AVAILABLE. The maximum number of shares which may be issued
under this Plan shall be 15,000,000 shares of Common Stock of the Corporation.
13. NON-TRANSFERABILITY OF OPTIONS. Options shall be transferable only
by will, the laws of descent and distribution and qualified domestic relations
order. The Options shall not be assigned, transferred, pledged, alienated or
hypothecated in any manner during the employee's lifetime except as permitted in
this Plan. Any attempted assignment, transfer, pledge, alienation or
hypothecation of the Option or rights thereunder, otherwise than as permitted
herein, shall terminate the Option.
14. EFFECTIVE DATE. The Plan became effective as of March 15, 1993, and
the amendment to Section 12 hereof shall become effective as of September 15,
1997, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the shareholders held
on or before September 14, 1998. If the amendment to Section 12 hereof is not so
approved, such amendment shall not become effective.
15. TERM OF PLAN. Options must be granted within a period of 10 years
from the date the Plan is adopted (March 14, 2003).
16. ADJUSTMENTS. In the event that, and as often as, a stock dividend
or liquidating dividend shall be declared upon the outstanding shares of Common
Stock or the Common Stock shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the Corporation or
another corporation whether through reorganization, recapitalization, stock
split-up, combination of shares, merger, consolidation, or other change in
structure of the Corporation, through acquisition or otherwise, then the
aggregate number and kind of shares of stock covered by each outstanding Option,
the price per share thereof in each such Option, the maximum number of shares of
Common Stock that may be sold under the Plan and the options to be automatically
granted thereafter shall be proportionately adjusted in such manner as shall be
determined by the Committee.
In the event that a Special Dividend, hereinafter defined, shall be
paid on the Shares of Common Stock, outstanding options shall be amended to
reduce the price thereof by the fair value of the amount of the Special Dividend
but such reduction shall not result in such price being less than the par value
of the Common Stock provided, however, that if the total amount of the Special
Dividend is not reflected in such price adjustment, then the unapplied balance
of the Special Dividend shall be paid in cash to the holders of outstanding
Options to which this proviso applies at the time such Special Dividend is paid
on the outstanding Shares of Common Stock. "Special Dividend" shall mean a
dividend in cash and/or property the fair value of which shall be two or more
times the amount of regular cash dividends paid on the Common Stock during the
twelve month period preceding the declaration date of the Special Dividend;
provided, however, that if the Corporation has not previously paid a dividend on
its Common Stock, the first such dividend shall not be deemed a Special
Dividend. In the event there shall be any other change in the number or kind of
the outstanding shares of Common Stock, or of any stock or other securities into
which the Common Stock shall have been changed or for which it shall have been
exchanged, then if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in any Option theretofore granted
or which may be granted under the Plan, such adjustments shall be made in
accordance with such determination. Fractional shares resulting from any
adjustment in Options pursuant to this Section may be settled in cash or
otherwise as the Committee shall determine.
Notice of any adjustment shall be given by the Corporation to each
holder of an Option which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
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17. PERFORMANCE BASED AWARDS
17.1 PERFORMANCE CRITERIA. The Committee may, in its
discretion, base the granting, exercisability or vesting of awards under this
Plan upon the attainment of performance criteria specified by the Committee and
intended to result in the awards constituting performance-based compensation
under Section 162(m) ("Section 162(m)") of the Internal Revenue Code. Such
awards ("Performance-Based Awards"), or the exercisability or vesting thereof,
shall be based upon one or more of the following business criteria which may be
determined by reference to the performance of the key employee to whom the award
is to be granted or the performance of the Corporation or a subsidiary, division
or other operation unit of the Corporation (or based on comparative performance
relative to other companies): revenues; market shares; cost; economic value
added; increase in price per share; total shareholder return; net income;
pre-tax earnings; earnings before interest expense, taxes, depreciation, and
amortization; operating margins; earning per share; growth in earnings per
share; return on equity, capital, or investment; operating earnings; working
capital or inventory; ratio of debt to shareholder's equity; the attainment of
strategic and operational initiatives; or any individual performance objective
measured in term of attainment of quantitative targets related to the
Corporation's business.
17.2 ESTABLISHMENT OF CRITERIA. With respect to
Performance-Based Awards, (i) the Committee shall establish in writing the
objective performance goals applicable to a given period of service no later
than 90 days after the commencement of such period of service (but in no event
after 25% of such period of service had elapsed), and (ii) no awards shall be
granted, or become exerciseable or vested, as the case may be, to any key
employee for a given period of service until the Committee certifies in writing
that the objective performance goals (and any other material terms) applicable
to such period have been satisfied. Notwithstanding anything else contained in
this Plan to the contrary, if any award is intended, at the time of grant, to be
performance-based compensation under Section 162(m), the Committee shall not be
entitled to exercise any discretion otherwise authorized under this Plan with
respect to such award if the exercise of such discretion would cause such award
to fail to qualify as performance-based compensation under Section 162(m).
17.3 MAXIMUM AWARDS. In no event shall the maximum aggregate
number of Options (including Reload Options and Options issued in tandem with
SARs), SARs issued independently of Options and Restricted Stock Awards granted
to any key employee under this Plan in any calendar year exceed 500,000 shares,
subject to adjustment as provided in Section 16 of this Plan.
18. AMENDMENT OR TERMINATION OF PLAN.
18.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board may
at any time and from time to time, terminate, amend, or modify this Plan.
However, no such amendment, modification or termination of this Plan may be made
without the approval of shareholders of the Corporation, if such approval is
required by the Internal Revenue Code, by the insider trading rules of Section
16 of the Exchange Act, by any national securities exchange or system on which
the shares of the Corporation's Common Stock are then listed or reported, or by
a regulatory body having jurisdiction with respect hereto.
18.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of this Plan shall in any material manner adversely affect any
Option, SAR or Restricted Stock Award previously granted under this Plan,
without the written consent of the employee holding such Option, SAR or
Restricted Stock Award.
19. SECURITIES ACT REQUIREMENTS. No Option granted pursuant to the Plan
shall be exercisable in whole or in part, and the Corporation shall not be
obligated to sell any Shares subject to any such Option, if such exercise and
sale would, in the opinion of counsel for the Corporation, violate the
Securities Act of 1933, as amended (or other Federal or state statutes having
similar requirements). Each Option shall be subject to the further requirement
that, if at any time the Committee shall determine in its discretion that the
listing or qualification of the Shares subject to such option under any
securities exchange requirements or system on which the Corporation's Common
Stock is then listed or reported or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option or the issue of
Shares thereunder, such Option may not be exercised in whole or in part unless
such
8
<PAGE> 30
listing, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
20. REQUIREMENTS OF LAW. If any law, regulation of the Securities and
Exchange Commission, or any regulation of any other commission or agency having
jurisdiction shall require the Company or the exercising Optionee to take any
action with respect to the shares of stock acquired by the exercise of an
Option, then the date upon which the Company shall deliver or cause to be
delivered the certificate or certificates for the shares of stock shall be
postponed until full compliance shall have been made with all such requirements.
21. LIQUIDATION OF THE CORPORATION. In the event of the complete
liquidation or dissolution of the Corporation, other than as an incident to a
merger, reorganization, or other adjustment referred to in Section 16 above, any
Options granted pursuant to this Plan and remaining unexercised and any non
vested Restricted Stock Awards shall be deemed canceled, without regard to or
limitation by any other provisions of this Plan.
22. MISCELLANEOUS. The granting of an Option or Restricted Stock Award
shall not constitute or be evidence of any agreement or understanding, expressed
or implied, on the part of the Corporation to employ the holder thereof for any
period. No holder of an Option or Restricted Stock Award shall be entitled to
any rights of a shareholder of the Corporation with respect to any of the shares
of stock subject thereto until such shares of stock have been paid for in full
and/or otherwise issued to such person. Each Option shall be evidenced by an
agreement or certificate in such form and substance which is not inconsistent
with this Plan and as shall be determined by the Board or the Committee. No
employee shall have the right to be selected to receive an Option under this
Plan, or, having been so selected, to be selected to receive a future Option.
All obligations of the Corporation under this Plan shall be binding on any
successor to the Corporation, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the Corporation.
23. GOVERNING LAW. This Plan shall be governed by the laws of the State
of Florida and, with respect to Incentive Stock Options, shall be construed in a
manner to qualify as an Incentive Stock Option Plan pursuant to the requirements
of Section 422 of the Internal Revenue Code. In the event this Plan does not
meet such requirements, any provision herein which conflicts with such
requirements shall be omitted, and any required provisions which were omitted
shall be included, as necessary, so as to qualify this Plan as an Incentive
Stock Option Plan.
9
<PAGE> 31
APPENDIX A
REXALL SUNDOWN, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS FEBRUARY 4, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Carl DeSantis and Christian Nast, as
Proxies, each with the power to appoint his substitute, and hereby authorized
them to represent and to vote as designated on the reverse side of this card,
all the shares of Common Stock of Rexall Sundown, Inc. held of record by the
undersigned on December 16, 1997, at the Annual Meeting of Shareholders to be
held on February 4, 1998, or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSALS 2, 3 AND
4 AND AS OTHERWISE DETERMINED BY THE PROXYHOLDERS IN THEIR DISCRETION.
(continued, and to be signed, on other side)
A [ ] Please mark your votes as in this example
<TABLE>
<CAPTION>
FOR all
nominees WITHHOLD
listed at right AUTHORITY
(except as marked to the to vote for all nominees
contrary in the list at right) listed at right
<S> <C> <C> <C> <C>
1. ELECTION OF Nominees: Carl DeSantis
DIRECTORS [ ] [ ] Christian Nast
Dean DeSantis
Damon DeSantis
Nickolas Palin
Stanley Leedy
Raymond Monteleone
Melvin Stith
FOR AGAINST ABSTAIN
2. PROPOSAL TO INCREASE THE NUMBER OF [ ] [ ] [ ]
AUTHORIZED SHARES OF THE COMPANY'S
COMMON STOCK FROM 100,000,000 TO
200,000,000 SHARES BY AMENDING THE
COMPANY'S ARTICLES OF INCORPORATION
3. PROPOSAL TO AMEND THE COMPANY'S [ ] [ ] [ ]
AMENDED AND RESTATED 1993 STOCK
INCENTIVE PLAN
4. RATIFICATION OF SELECTION OF COOPERS & [ ] [ ] [ ]
LYBRAND LLP.
5. In their discretion, the Proxies are authorized to vote upon such other
business at may properly come before the meeting.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
SIGNATURE _____________________________ ______________________________ DATED ________ , 1998
SIGNATURE, IF HELD JOINTLY
</TABLE>
<PAGE> 32
Note: Please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
administrator, executor, trustee or guardian, please give full title as
such. If a corporation, please sign full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person
2
