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Filed Pursuant to
Rule 424(b)2
Registration No. 333-7883
PROSPECTUS
500,000 SHARES
REXALL SUNDOWN, INC.
1996 REXALL SHOWCASE INTERNATIONAL DISTRIBUTOR
STOCK OPTION PLAN
COMMON STOCK
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The Rexall Sundown, Inc. 1996 Rexall Showcase International Distributor
Stock Option Plan (the "Plan") described herein offers eligible independent
distributors of Rexall Showcase International, Inc. ("RSI"), a wholly-owned
subsidiary of Rexall Sundown, Inc. (the "Company"), an opportunity to acquire a
proprietary interest in the Company.
Shares of the common stock, par value $.01 per share (the "Common Stock"),
of the Company for the Plan will be made available by the Company on the terms
described herein and may be newly issued shares or previously issued shares
purchased in the open market.
The Common Stock is traded in the over-the-counter market and prices are
quoted on the Nasdaq National Market under the symbol "RXSD." On August 7,
1997, the last reported sale price of the Common Stock was $35.50.
This Prospectus relates to an aggregate of 500,000 shares of Common Stock
offered hereby and registered for sale under the Plan. It is recommended that
this Prospectus be retained for future reference.
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN EVALUATING AN
INVESTMENT IN THE SHARES, SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS AUGUST 8, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048; 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 3475 Lenox Road, N.E., Suite 1000, Atlanta,
Georgia 30326. In addition, such reports, proxy statements and other
information can be obtained from the Commission's web site at
http://www.sec.gov. Quotations relating to the Company's Common Stock appear
on the Nasdaq National Market. Such reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock offered
hereby. This Prospectus, which is a part of the Registration Statement, does
not contain all the information set forth in, or annexed as exhibits to, such
Registration Statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect
to the Company and the shares of Common Stock offered hereby, reference is
hereby made to such Registration Statement, including the exhibits thereto.
Copies of such Registration Statement, including exhibits, may be obtained from
the aforementioned public reference facilities of the Commission upon payment
of the prescribed fees, or may be examined without charge at such facilities.
Statements contained herein concerning any document filed as an exhibit are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act are incorporated in and made a part of this Prospectus by
reference:
(a) the Company's Annual Report on Form 10-K for the year ended August 31,
1996;
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended November 30, 1996, February 28, 1997 and May 30, 1997; and
(c) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A (Registration No. 0-21884).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any
other subsequently filed documents, which also are incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
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This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company hereby undertakes to
provide, without charge, to each person, including any beneficial owner, to
whom a copy of this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the information incorporated herein by
reference. Exhibits to any of such documents, however, will not be provided
unless such exhibits are specifically incorporated by reference into such
documents. The requests should be addressed to the Company's principal
executive offices: Attn: Secretary, 851 Broken Sound Parkway, NW, Boca Raton,
Florida 33487, telephone number (561) 241-9400.
THE COMPANY
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets and
sells vitamins, nutritional supplements and consumer health products through
three channels of distribution: sales to retailers, direct sales through
independent distributors and mail order. The Company offers a broad product line
of approximately 1,500 products consisting of approximately 1,900 stock keeping
units ("SKUs"), including vitamins in both multivitamin and single-entity
formulas, minerals, herbals, homeopathic remedies, weight management products,
skin care products and over-the-counter ("OTC") pharmaceuticals.
The Company was incorporated in the State of Florida in 1976. The
Company's principal executive offices are located at 851 Broken Sound Parkway,
NW, Boca Raton, Florida 33487, and its telephone number is (561) 241-9400. As
used herein, the "Company" means Rexall Sundown, Inc. and its subsidiaries,
except where the context indicates otherwise.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), WHICH REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS,
INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONCERNING INDUSTRY PERFORMANCE, THE
COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND
ACQUISITION STRATEGIES AND MARGINS AND GROWTH IN SALES OF THE COMPANY'S
PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE
NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL,"
"EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S
CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF
IMPORTANT FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THIS "RISK FACTORS"
SECTION AND ELSEWHERE IN THIS PROSPECTUS.
UNCERTAINTY RELATED TO ACQUISITIONS
The Company intends to pursue the acquisition of complementary products,
product lines or businesses. Acquisitions involve a number of risks that could
adversely affect the Company's operating results, including the diversion of
management's attention, the assimilation of operations and personnel of the
acquired companies, the amortization of acquired intangible assets and the
potential loss of key employees of the acquired companies. There can be no
assurance that the Company will consummate future acquisitions on satisfactory
terms, if at all, that adequate financing will be available on terms acceptable
to the Company, if at all, that any acquired products, product lines or
businesses will be successfully integrated or that such products, product lines
or businesses will ultimately have a positive impact on the Company, its
financial condition or results of operations.
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GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the United States Food and Drug Administration
("FDA"), the Federal Trade Commission ("FTC"), the Consumer Product Safety
Commission, the United States Department of Agriculture, the United States
Postal Service, the United States Environmental Protection Agency and the
Occupational Safety and Health Administration. These activities are also
regulated by various agencies of the states and localities in which the
Company's products are sold. In particular, the FDA regulates the safety,
labeling and distribution of dietary supplements, including vitamins, minerals
and herbs, food additives, food supplements, OTC and prescription drugs and
cosmetics. The regulations that are promulgated by the FDA relating to the
manufacturing process are known as Current Good Manufacturing Practices
("CGMPs"), and are different for drug and food products. In addition, the FTC
has overlapping jurisdiction with the FDA to regulate the labeling, promotion
and advertising of vitamins, OTC drugs, cosmetics and foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was
enacted on October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic
Act by defining dietary supplements which include vitamins, minerals,
nutritional supplements and herbs, as a new category of food separate from
conventional food. DSHEA provides a regulatory framework to ensure safe, quality
dietary supplements and the dissemination of accurate information about such
products. Under DSHEA, the FDA is generally prohibited from regulating the
active ingredients in dietary supplements as drugs unless product claims, such
as claims that a product may heal, mitigate, cure or prevent an illness, disease
or malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements effective January 1, 1997, although final regulations have not been
published and implementation will be delayed. DSHEA permits substantiated,
truthful and non-misleading statements of nutritional support to be made in
labeling, such as statements describing general well-being resulting from
consumption of a dietary ingredient or the role of a nutrient or dietary
ingredient in affecting or maintaining a structure or function of the body. The
Company anticipates that the FDA will finalize CGMPs which are specific to
dietary supplements and require at least some of the quality control provisions
contained in the CGMPs for drugs. The Company currently manufactures its
vitamins and nutritional supplement products in compliance with the applicable
food CGMPs.
The FDA has proposed but not finalized regulations to implement DSHEA,
including those relating to nutritional labeling requirements. The Company
cannot determine what effect such regulations, when promulgated, will have on
its business in the future. Such regulations are likely to require expanded or
different labeling for the Company's vitamin and nutritional products and could,
among other things, require the recall, reformulation or discontinuance of
certain products, additional recordkeeping, warnings, notification procedures
and expanded documentation of the properties of certain products and scientific
substantiation regarding ingredients, product claims, safety or efficacy.
Failure to comply with applicable FDA requirements can result in sanctions being
imposed on the Company or the manufacturers of its products, including,
depending on the product category, warning letters, fines, product recalls and
seizures.
Governmental regulations in foreign countries where the Company plans to
commence or expand sales may prevent or delay entry into a market or prevent or
delay the introduction, or require the reformulation, of certain of the
Company's products.
RSI is subject to regulation under various international, state and local
laws which include provisions regulating, among other things, the operation of
direct sales programs. In addition, many countries currently have laws that
would restrict or prohibit direct sales companies, such as RSI, from
conducting business therein.
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In addition, the Company cannot predict whether new domestic or foreign
legislation regulating its activities will be enacted. Such new legislation
could have a material adverse effect on the Company.
MANAGING GROWTH
The Company is currently experiencing a period of rapid growth and
expansion which has placed, and could continue to place, a significant strain on
the Company's management, customer service and support operations, sales and
administrative personnel and other resources. In order to serve the needs of its
existing and future customers, the Company has substantially increased and will
continue to increase its workforce, which requires the Company to attract,
train, motivate and manage qualified employees. The Company's ability to manage
its planned growth requires the Company to continue to expand its operating,
management, information and financial systems, all of which may significantly
increase its operating expenses. If the Company fails to achieve its growth as
planned or is unsuccessful in managing its anticipated growth, there could be a
material adverse effect on the Company. In addition, the loss of a significant
customer or a number of customers, or a significant reduction in purchase volume
by or financial difficulty of such customers, for any reason, could have a
material adverse effect on the Company.
EFFECT OF ADVERSE PUBLICITY
The Company's products consist of vitamins, minerals, herbs and other
ingredients that the Company regards as safe when taken as suggested by the
Company and that various scientific studies have suggested may involve health
benefits. While the Company conducts extensive quality control testing on its
products, the Company generally does not conduct or sponsor clinical studies
relating to the benefits of its products. The Company is highly dependent upon
consumers' perception of the overall integrity of its business, as well as the
safety and quality of its products and similar products distributed by other
companies which may not adhere to the same quality standards as the Company. The
Company could be adversely affected if any of the Company's products or any
similar products distributed by other companies should prove or be asserted to
be harmful to consumers or should scientific studies provide unfavorable
findings regarding the effectiveness of the Company's products. RSI's ability to
attract and retain independent distributors could be adversely affected by
negative publicity relating to it or to other direct sales organizations.
RELIANCE ON INDEPENDENT DISTRIBUTORS OF RSI
RSI's sales are directly dependent upon the efforts of its independent
distributors, and any growth in sales volume will require an increase in the
productivity or the number of such distributors. As is typical in the direct
sales industry, there is turnover in distributors from year to year, which
requires the sponsoring and training of new distributors by existing
distributors in order to maintain the size of the distributor network. The
Company experiences seasonal decreases in distributor sponsoring and product
sales due to summer and winter holiday periods. Other factors such as general
economic conditions and negative publicity relating to RSI or other direct sales
organizations could also adversely affect the ability of RSI to maintain or
expand its distributor network. The loss of a key distributor or group of
distributors could adversely affect sales of RSI products and impair RSI's
ability to attract new distributors.
CENTRALIZED LOCATION OF MANUFACTURING OPERATIONS; AVAILABILITY OF RAW MATERIALS
The Company currently manufactures and packages substantially all of its
products at its manufacturing facility in Boca Raton, Florida, and, until the
recent opening of its distribution facility in Sparks, Nevada, distributed all
of its products from its two distribution facilities in Boca Raton. Accordingly,
any event resulting in the slowdown or stoppage of the Company's manufacturing
operations or distribution facilities in Boca Raton could have a material
adverse effect on the Company. The Company maintains business interruption
insurance. There can be no assurance, however, that such insurance will
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continue to be available at a reasonable cost or, if available, will be adequate
to cover any losses that may be incurred from an interruption in the Company's
manufacturing and distribution operations.
Most of the raw materials in the Company's products are obtained from
third-party suppliers. Although the Company believes that all of its sources for
raw materials are reliable, any interruption of such supply could have a
material adverse effect on the Company.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
An element of the Company's future growth strategy is to increase the
distribution and sale of the Company's products into international markets. The
Company's existing and planned international operations are subject to political
and economic uncertainties, including, among other things, inflation, risk of
renegotiation or modification of existing agreements or arrangements with
governmental authorities, transportation, tariffs, export controls, government
regulation, currency exchange rate fluctuations, foreign exchange restrictions
which limit the repatriation of investments and earnings therefrom, changes in
taxation, hostilities or confiscation of property. Changes related to these
matters could have a material adverse effect on the Company.
COMPETITION
The market for the sale of vitamins and nutritional supplements is highly
competitive. There are numerous companies in the vitamin and nutritional
supplement industry selling products to retailers, including mass merchandisers,
drug store chains, independent drug stores, supermarkets and health food stores.
Most of these companies are privately held and the Company is unable to
precisely assess the size of its competitors or where it ranks in comparison to
such privately held competitors with respect to sales to retailers. No company
is believed to control more than 10% of this market.
The market for OTC pharmaceuticals and health and beauty care products is
also highly competitive. Competition is based principally upon price, quality of
products, customer service and marketing support. The Rexall brand competes with
nationally advertised brand name products and private label products.
Although RSI competes with other health and nutritional food companies, the
Company believes its primary competition stems from other direct sales
companies. The Company competes in the recruitment of independent sales people
with other direct sales organizations whose product lines may or may not compete
with the Company's products.
Certain of the Company's competitors are substantially larger than the
Company and have greater financial resources.
PRODUCT LIABILITY CLAIMS
As a marketer of vitamin and nutritional supplements and other products
that are ingested by consumers or applied to their bodies, the Company may be
subjected to various product liability claims, including, among others, that its
products contain contaminants or include inadequate instructions as to use or
inadequate warnings concerning side effects and interactions with other
substances. While such claims to date have not been material to the Company and
the Company maintains product liability insurance, there can be no assurance
that product liability claims and the resultant adverse publicity will not have
a material adverse effect on the Company.
CONCENTRATION OF OWNERSHIP; CERTAIN ANTI-TAKEOVER CONSIDERATIONS
The Company's directors and executive officers and certain of their
affiliates beneficially own approximately 54% of the outstanding Common Stock,
substantially all of which will be beneficially
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owned or controlled by Carl DeSantis, Dean DeSantis and Damon DeSantis.
Accordingly, these shareholders will continue to have the ability to elect all
of the directors of the Company and to thereby direct or substantially influence
the management, policies and business operations of the Company and will have
the power to control the outcome of any matters submitted to a vote of the
Company's shareholders. The Company's Board of Directors has the authority to
approve the issuance of 5,000,000 shares of preferred stock and to fix the
rights, preferences, privileges and restrictions, including voting rights, of
those shares without any further vote or action by the Company's shareholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Certain provisions of Florida law, as well as the issuance
of preferred stock, could delay or inhibit the removal of incumbent directors
and could delay, defer, make more difficult or prevent a merger, tender offer or
proxy contest, or any change in control involving the Company, as well as the
removal of management, even if such events would be beneficial to the interests
of the Company's shareholders, and may limit the price certain investors may be
willing to pay in the future for shares of Common Stock.
VOLATILITY OF STOCK PRICE
The Company's stock price has experienced significant volatility over the
past several years. Moreover, the stock market has from time to time experienced
extreme price and volume fluctuations which may be unrelated to the operating
performance of particular companies. Market conditions in the vitamin and
nutritional supplement industry and factors such as announcements of new
products by the Company, its competitors or third parties, and changes in
earnings estimates by analysts may have a significant effect on the price of the
Common Stock.
DESCRIPTION OF THE REXALL SUNDOWN, INC. 1996 REXALL SHOWCASE INTERNATIONAL
DISTRIBUTOR STOCK OPTION PLAN
The following is a description of the Plan offered to selected independent
distributors of RSI. The description of the Plan is subject to, and is
qualified in its entirety by, the full text of the Plan, a copy of which is
attached hereto as Exhibit I. The Plan was approved by the Company's Board of
Directors on February 6, 1996. All capitalized terms not otherwise defined in
this Prospectus shall have the meaning ascribed to them in the Plan.
PURPOSE AND ADVANTAGES OF THE PLAN
The purpose of the Plan is to provide an additional incentive to
participating distributors of RSI (each, a "Distributor") by enabling them to
acquire a stock ownership interest in the Company, to attract and retain
persons of ability as independent distributors of RSI and entice such persons
to exert their best efforts on behalf of RSI.
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PARTICIPATION
Any Distributor whose network marketing activities are exclusive to RSI
will be eligible to receive Options under the Plan. Any Options granted to a
Distributor whose network marketing activities become non-exclusive to RSI will
forfeit any Options previously granted. The number of Active Legs
that a Distributor has at the close of the July 1996 Commission Month will be
such Distributor's minimum qualification level for the qualification period
from July 1, 1996 to June 30, 1997 (the "Qualification Period"), i.e., a
Distributor with five Active Legs may only qualify for Options based on five
Active Legs and above and not for Options based on four Active Legs.
Distributors who have four Active Legs or less for the July 1996 Commission
Month will have the opportunity to qualify for Options based on Four Active
Legs or more. All qualification levels will be based upon a Distributor's
effective position within the RSI Compensation Plan.
The granting of any Options under the Plan does not confer on the
recipient any right to continuance of his or her status as a Distributor of RSI
and will not restrict or in any way interfere with the Company's right to
terminate its relationship with a Distributor. No Distributor has the right to
receive an Option except as described below and the grant of an Option does not
confer any right to receive future Options. No Option confers on the holder
thereof any right of a shareholder with respect to any shares of Common Stock
underlying the Option until the Option has been exercised and the shares of
Common Stock underlying such Option have been paid for in full.
CONDITIONS FOR GRANTS OF OPTIONS DURING QUALIFICATION PERIOD
The following sets forth the conditions for the grant of Options under the
Plan for the Qualification Period from July 1, 1996 to June 30, 1997 which
Options will be granted on July 1, 1997 which will be exercisable at the last
reported sale price of the Common Stock on July 1, 1997 and will be documented
by an Option Agreement to be furnished to Distributor on or about August 1,
1997.
Four Active Legs. A Distributor will receive an Option to purchase 1,000
Shares if either of the following requirements are met:
(a) Such Distributor has a minimum of four active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 3,000 in each of 2
Legs and at least 2,000 in 1 other Leg.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of four active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 50,000 with 10,000 in 1 leg
and at least 5,000 in each of 2 other legs and the two
non-qualifiying months, if any, cannot be consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of four active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are at least 3,000 in
each of 2 Legs and at least 2,000 in 1 other Leg.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Four Active Leg
level.
Five Active Legs. A Distributor will receive an Option to purchase 1,500
Shares if either of the following requirements are met:
(a) Such Distributor has a minimum of five active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 5,000 in each of 2
Legs and at least 2,000 in each of 2 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of five active Director legs for
all 12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 75,000 with 10,000 in
each of 2 legs and at least 5,000 in each of 2 other legs and the
two non-qualifiying months, if any, cannot be consecutive.
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Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of five active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are at least 5,000 in
each of 2 Legs and at least 2,000 in each of 2 other Legs.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Five Active Leg
level.
Six Active Legs. A Distributor will receive an Option to purchase 2,500
Shares if either of the following requirements are met:
(a) Such Distributor has a minimum of six active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 7,500 in each of 2
Legs and at least 5,000 in each of 2 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of six active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are at least 7,500 in
each of 2 Legs and at least 5,000 in each of 2 other Legs.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
Ten Active Legs. A Distributor will receive an Option to purchase 5,000
Shares if either of the following requirements are met:
(a) Such Distributor has a minimum of ten active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 10,000 in each of 2
Legs and at least 5,000 in each of 5 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of ten active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are at least 10,000 in
each of 2 Legs and at least 5,000 in each of 5 other Legs.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
Additional Options for Presidents Club Members. A Distributor who is a
member of the Presidents Club during either of the Bonus Pool periods during
the Qualification Period (July 1996 to December 1996 or January
9
<PAGE> 10
1997 to June 1997) will receive an Option to purchase 2,500 additional Shares
if either of the following requirements are met:
(a) Such Distributor has a minimum of six active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 50,000 in 1 Leg, at
least 30,000 in each of 2 other Legs and at least 5,000 in each of
3 additional Legs;
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive;
provided, however, a Distributor may only receive additional Options as a
member of the Presidents Club or the Chairmans Club, but not as a member of
both Clubs.
Such Option will become exercisable with respect to 20% of the Shares subject
to such Option on the initial grant date and 20% on the first, second, third
and fourth anniversary date of the initial grant date if either of the
following requirements are met:
(i) Such Distributor has a minimum of six active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are at least 50,000 in
1 Leg, at least 30,000 in each of 2 other Legs and at least 5,000
in each of 3 additional Legs.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
Additional Options for Chairmans Club Members. A Distributor who is a
member of the Chairman's Club during either of the Bonus Pool periods during
the Qualification Period (July 1996 to December 1996 or January 1997 to June
1997) will receive an Option to purchase 5,000 additional Shares if the
following three requirements are met:
(a) Such Distributor has a minimum of ten active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 100,000 in 1 Leg, at
least 50,000 in each of 2 other Legs and at least 5,000 in each of
5 additional Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares subject
to such Option on the initial grant date and 20% on the first, second, third
and fourth anniversary date of the initial grant date if the following three
requirements are met:
(i) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(ii) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(iii) Such Distributor's Organizational Points for 10 of the 12 months of
the Qualification Period are at least 150,000 with 25,000 in each of
3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other legs
and the two non-qualifiying months, if any, cannot be consecutive.
Additional Options for Ambassadors Club Members. A Distributor who is a
member of the Ambassadors Club during either of the Bonus Pool periods during
the Qualification Period (July 1996 to December 1996 or January 1997 to June
1997) will receive an Option to purchase 5,000 additional Shares if the
following three requirements are met:
10
<PAGE> 11
(a) Such Distributor has a minimum of ten active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 100,000 in each of
4 Legs, at least 50,000 in one other Leg and at least 5,000 in each
of 5 more Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares subject
to such Option on the initial grant date and 20% on the first, second, third
and fourth anniversary date of the initial grant date if the following three
requirements are met:
(i) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(ii) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(iii) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in
each of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2
other legs and the two non-qualifiying months, if any, cannot be
consecutive.
Additional Options for Distributors.
All Distributors who were Directors by the close of the March 1996
Commission Month will receive an Option to purchase an additional 200 Shares
on July 1, 1997 which will be exercisable at the last reported sale price of
the Common Stock on July 1, 1997 and will be documented by an Option Agreement
to be furnished to Distributor on or about August 1, 1997 if such Distributor
qualifies for Options during the Qualification Period.
All Distributors who became Distributors in March 1996 who were not
Directors by the close of the March 1996 Commission Month will receive an
Option to purchase an additional 200 Shares on July 1, 1997 which will be
exercisable at the last reported sale price of the Common Stock on July 1,
1997 and will be documented by an Option Agreement to be furnished to
Distributor on or about August 1, 1997 if (i) such Distributor qualifies for
Options during the Qualification Period and (ii) such Distributor had at least
1,000 P.P. in the March 1996 Commission Month and became a Director by the
close of the April 1996 Commission Month.
All Distributors who became Distributors in April 1996 or later will
receive an Option to purchase an additional 200 Shares on July 1, 1997 which
will be exercisable at the last reported sale price of the Common Stock on
July 1, 1997 and will be documented by an Option Agreement to be furnished to
Distributor on or about August 1, 1997 if (i) such Distributor qualifies for
Options during the Qualification Period, and (ii) such Distributor has at least
1,000 P.P. in the month such Distributor enrolls as such and becomes a Director
within the first two Commission Months of enrolling as a Distributor.
Duration. Options will be granted to Distributors for terms of five (5)
years.
ADMINISTRATION
The Plan will be administered by the Company's Compensation/Stock Option
Committee, which is appointed by the Board (the "Committee") and consists of
two or more of the Company's directors for a term of one year. Any member of
the Committee may be removed at any time, with or without cause, by resolution
of the Board and any vacancy occurring in the membership of the Committee may
be filled by appointment of the Board.
In granting options to Distributors, the Committee shall follow the
guidelines set forth in the Plan. The Committee may from time to time in
granting options prescribe such other terms and conditions concerning such
options as it deems appropriate, including, without limitation, (i) prescribing
the date or dates on which the Option becomes exercisable, (ii) providing that
the Options accrue or become exercisable in installments over a period of
years, or upon the attainment of stated goals or both, or (iii) relating an
Option to the continued service as a Distributor for a specified period of
time. The Committee may, from time to time, adopt such rules and regulations
as it deems appropriate to administer the Plan, and make determinations and
interpretations concerning the
11
<PAGE> 12
application of the Plan's provisions, which interpretations and determinations
will be final and conclusive. The present members of the Committee are Stanley
Leedy, Raymond Monteleone and Howard Yenke and their address is c/o the
Company, 851 Broken Sound Parkway, NW, Boca Raton, Florida 33487.
SHARES OF STOCK OFFERED UNDER THE PLAN
The Company has reserved 500,000 shares of Common Stock for issuance under
the Plan. The shares of Common Stock underlying the Options to be granted
pursuant to the Plan have been registered with the Commission. The shares of
Common Stock are quoted on the National Association of Securities Dealers
Automated Quotation National Market System, under the symbol "RXSD."
The number of Shares issuable under the Plan 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. The
Committee may make proportionate adjustments in the number of Shares which are
subject to purchase under outstanding Options and in the exercise price per
share upon the occurrence of such events. Notice of any adjustment in any
Shares or in any exercise price will be given by the Company to each holder of
an Option affected by the adjustment and such adjustment (whether or not notice
was received) will be binding on affected option holders.
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 Distributor 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 of Common Stock
at the time the Option is granted.
The purchase price of the shares of Common Stock purchased pursuant to the
Options granted under the Plan will be 100% of the Fair Market Value on the
date of grant of the Option and must be paid in full at the time the Option is
exercised. No Shares will be issued or transferred until full payment has been
received. Payment may be in cash, by certified or official bank check or by
money order; provided, further, however, that the Committee in its sole
discretion may accept a personal check in full or partial payment of any
Shares.
TERMINATION OF DISTRIBUTOR STATUS AND TRANSFERABILITY OF OPTIONS
Options are only transferable by will and the laws of descent and
distribution. Options may not be assigned, transferred, pledged, alienated or
hypothecated in any manner during the Distributor's lifetime except as
permitted by the Plan. Neither the Plan nor any Options granted under the Plan
shall confer upon any person any right to continuance of status as a
Distributor of RSI.
The unexercised portion of any Option shall automatically and without
notice terminate and become null and void at the time of the earliest to occur
of the following:
(a) immediately upon the termination of the Optionee's status as a
Distributor for any reason;
(b) immediately if Distributor's network marketing efforts are not
exclusive to RSI; or
(c) three months after the date of termination of the Optionee's status as
a Distributor by reason of death of the Optionee if the Optionee is an
individual.
12
<PAGE> 13
TERM MODIFICATION AND TERMINATION OF PLAN
The Plan became effective on February 6, 1996 and will continue in effect
until February 5, 2006, unless earlier terminated by the Committee. The Board
or the Committee may at any time and from time to time amend, modify suspend or
terminate the Plan or any Option.
FEDERAL INCOME TAX CONSEQUENCES
Under the Internal Revenue Code of 1986, as amended, a Distributor incurs
no tax liability on the grant of Options. Upon exercise of an Option, the
Distributor must recognize as income the difference, between the Fair Market
Value of the shares received upon exercise and the Option price.
No deduction will be allowed to the Company upon grant of an Option.
However, upon exercise of an Option, the Company will be entitled to a
compensation deduction equal to the amount the Distributor must recognize as
income.
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.
Each Distributor is advised to consult with a tax advisor to determine the
tax consequences of a particular transaction.
USE OF PROCEEDS
The Company is neither able to predict the number of Options granted to
Distributors nor the number of shares of Common Stock underlying such Options
that will ultimately be sold pursuant to the Plan or the prices at which such
shares will be sold. The net proceeds from the sale of shares of Common Stock
that are originally issued by the Company and offered pursuant to the Plan will
be used for general corporate purposes.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided for in such
statute. The Company's Amended and Restated Articles of Incorporation provide
that, to the extent permitted by Florida law, the Company shall indemnify and
shall advance expenses on behalf of its officers and directors. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers or persons controlling the Company, pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. The Company
also maintains directors' and officers' liability insurance.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby is being
passed upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131.
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended August
31, 1996, have been audited by Coopers & Lybrand L.L.P., independent auditors,
as stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
13
<PAGE> 14
Exhibit I
REXALL SUNDOWN, INC.
1996 REXALL SHOWCASE INTERNATIONAL
DISTRIBUTOR STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to provide an additional
incentive to participating Rexall Showcase International, Inc. ("RSI")
Distributors (as hereinafter defined) by enabling them to acquire a stock
ownership interest in Rexall Sundown, Inc., a Florida corporation (the
"Company"), of which RSI is a wholly-owned subsidiary, and to attract and
retain persons of ability as independent distributors of RSI and entice such
persons to exert their best efforts on behalf of RSI. All capitalized items
not otherwise defined herein shall have the definition ascribed to them in the
RSI Compensation Plan as currently in force and as amended from time to time.
2. Definitions. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the Compensation/Stock Option Committee
appointed by the Board or, if not appointed, the Board.
(c) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(d) "Distributor" shall mean an individual, partnership or corporation
whose completed Distributor Application has been received and accepted by RSI
and whose network marketing efforts are exclusive to RSI.
(e) "Fair Market Value" of a Share on any date of reference shall be
the "Closing Price" (as hereinafter defined) of the Common Stock on such date
(or, if such date is not a business day, on the immediately preceding business
day), unless the Committee in its sole discretion shall determine otherwise in
a fair and uniform manner. For the purpose of determining Fair Market Value,
the "Closing Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System (NASDAQ), or
any similar system of automated dissemination of quotations of securities
prices in common use, the last reported sale price of Common Stock for such day
on such system, or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on at
least five of the ten preceding days.
(f) "Option" shall mean any stock option granted under this Plan.
(g) "Optionee" shall mean a Distributor to whom an Option is granted
under this Plan or any person who succeeds to the rights of such Distributor
under this Plan by reason of the death of such person.
(h) "Plan" shall mean this Rexall Sundown, Inc. 1996 Rexall Showcase
International Distributor Stock Option Plan.
(i) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(j) "Share(s)" shall mean a share or shares of the Common Stock.
3. Shares and Options. The Company may grant to Optionees from time to
time Options to purchase an aggregate of up to Five Hundred Thousand (500,000)
Shares from authorized and unissued Shares. If any Option granted under the
Plan shall terminate, expire, or be canceled or surrendered as to any Shares,
new Options may thereafter be granted covering such Shares.
<PAGE> 15
4. Conditions for Grant of Options.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law.
(b) In granting Options to Distributors, the Committee shall follow
the guidelines set forth on Exhibit A attached hereto, as amended from time to
time. The Committee may from time to time in granting Options prescribe such
other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Options accrue or become
exercisable in installments over a period of years, or upon the attainment of
stated goals or both, or (iii) relating an Option to the continued service as a
Distributor for a specified period of time.
(c) Neither the Plan nor any Option granted under the Plan shall
confer upon any person any right to continuance of status as a Distributor with
RSI.
5. Option Price. The option price per Share of any Option shall be any
price determined by the Committee but shall not be less than the Fair Market
Value per Share.
6. Exercise of Options. An Option shall be deemed exercised when (a)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (b) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (c) arrangements
that are satisfactory to the Committee in its sole discretion have been made
for the Optionee's payment to the Company of the amount that is necessary for
the Company to withhold in accordance with applicable Federal or state tax
withholding requirements. Unless further limited by the Committee in any
Option, the option price of any Shares purchased shall be paid in cash, by
certified or official bank check or by money order; provided, further, however,
that the Committee in its sole discretion may accept a personal check in full
or partial payment of any Shares. No Optionee shall be deemed to be a holder
of any Shares subject to and unless and until a stock certificate or
certificates for such Shares are issued to such person(s) under the terms of
this Plan. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 9 hereof.
7. Exercisability of Options. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 7. The
expiration date of an Option shall be determined by the Committee at the time
of grant, but in no event shall an Option be exercisable after the expiration
of ten (10) years from the date of grant of the Option.
8. Termination of Option Period.
The unexercised portion of any Option shall automatically and without
notice terminate and become null and void at the time of the earliest to occur
of the following:
(a) immediately upon the termination of the Optionee's status as a
Distributor for any reason; or
(b) immediately if Distributor's network marketing efforts are not
exclusive to RSI; or
(c) three months after the date of termination of the Optionee's status as
a Distributor by reason of death of the Optionee if the Optionee is an
individual.
9. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised Options
are outstanding, there shall be any increase or decrease in the number of
issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Shares available for grant under the Plan, so that the same percentage of
the Company's issued and outstanding Shares shall continue to be subject
to being so optioned; and
<PAGE> 16
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued
and outstanding Shares shall remain subject to purchase at the same
aggregate exercise price.
(b) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a sale of
Shares, or shares of any other class of capital stock of the Company, or upon
the exercise of rights or warrants to subscribe therefor, or upon conversion of
Shares or obligations of the Company convertible into such Shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to the number of or exercise price of Shares then subject to
outstanding Options granted under the Plan.
(c) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation
of the Company; (iii) any issue by the Company of debt securities, or preferred
or preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. Transferability of Options. Each Option shall provide that such
Option shall not be transferable by the Optionee otherwise than by will or the
laws of descent and distribution, and each Option shall be exercisable during
the Optionee's lifetime only by the Optionee.
11. Issuance of Shares. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements
or undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation including, but not limited
to, the following:
(a) a representation and warranty by the Optionee to the Company, at the
time any Option is exercised, that he or she is acquiring the Shares to be
issued to him or her for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(b) a representation, warranty and/or agreement to be bound by any legends
that are, in the opinion of the Committee, necessary or appropriate to comply
with the provisions of any securities law deemed by the Committee to be
applicable to the issuance of the Shares and are endorsed upon the Share
certificates.
12. Administration of the Plan.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two members of the Board. The Committee shall have
all of the powers of the Board with respect to the Plan. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board and any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of the Plan. The Committee's determinations and
its interpretation and construction of any provision of the Plan shall be final
and conclusive.
(c) Any and all decisions or determinations of the Committee shall be
made either (i) by a majority vote of the members of the Committee at a meeting
or (ii) without a meeting by the unanimous written approval of the members of
the Committee.
13. Interpretation.
(a) If any provision of the Plan should be held invalid or illegal for
any reason, such determination shall not effect the remaining provisions
hereof, but instead the Plan shall be continued and enforced as if such
provision had never been included in the Plan.
<PAGE> 17
(b) This Plan shall be governed by the laws of the State of Florida.
(c) Headings contained in this Plan are for convenience only and shall
in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
14. Amendment of the Plan. Either the Board or the Committee may from
time to time amend the Plan or any Option.
15. Effective Date and Termination Date. The Plan shall be effective
on February 6, 1996, the date of the approval of the Board and shall terminate
on February 5, 2006, ten years thereafter.
16. Documents Available to Participants. Participants in the Plan may
obtain from the Company without charge, upon written or oral request, a copy of
any and all documents filed with the United States Securities and Exchange
Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act.
Such requests should be directed to the Company's Secretary, by writing to
Rexall Sundown, Inc., 851 Broken Sound Parkway, N.W., Boca Raton, Florida
33487, or by telephone to (561) 241-9400. In addition, the Company will
deliver or cause to be delivered to participants in the Plan who do not
otherwise receive such material, copies of all reports, proxy statements, and
other communications distributed to its security holders generally.
<PAGE> 18
Exhibit A
REXALL SUNDOWN, INC.
1996 REXALL SHOWCASE INTERNATIONAL
DISTRIBUTOR STOCK OPTION PLAN
Subject to each and every one of the conditions and limitations set forth
in the Plan, Options shall be granted for the Qualification Period (as
hereinafter defined) pursuant to the following criteria:
1. Definitions. As used herein, the following terms shall have the meaning
indicated:
(a) "Active Leg" shall mean a Leg that contains an Active Director.
(b) "Ambassadors Club" shall mean the definition contained in the RSI
Compensation Plan prior to March 1, 1997.
(c) "Chairmans Club" shall have the definition contained in the RSI
Compensation Plan prior to March 1, 1997.
(d) "Commissionable Volume (C.V.)" shall mean the basis of any commission
or override payment and is the applicable percentage of an override or
commission calculated against C.V. of all products as listed on the RSI product
order forms. C.V. fluctuates on international orders depending upon the
applicable foreign currency exchange rate.
(e) "Director" shall have the definition contained in the RSI Compensation
Plan.
(f) "Group Points (G.P.)" shall mean all Points earned from the purchase
of products from RSI for retail sale by Distributors (not yet Directors) in a
Distributor's downline who are not under another downline Director. This
includes all Personal Points (P.P.) of such Distributor. Sales Aid and
Distributor Kit purchases are not included as part of Group Point (G.P.)
earnings.
(g) "Leg" shall mean a line of Distributors which begins with someone a
Distributor personally sponsors and continues below that Distributor. Each
individual personally sponsored by Distributor starts a new and separate leg.
(h) "Organizational Points" shall mean the total Group Points (G.P.) of
all Directors in a Director downline on which such Director is eligible to be
paid overrides. It also includes the Group Points (G.P.) of the Director being
paid.
(i) "Personal Points (P.P.)" shall mean all Points earned from products
personally purchased from RSI for retail sale to others. Sales Aids and
Distributor Kit purchases are not included as part of Personal Points (P.P.).
(j) "Points" shall mean a unit of measure (equivalent to one U.S. C.V.
Dollar) earned through group and personal sales efforts.
(k) "Presidents Club" shall have the definition contained in the RSI
Compensation Plan prior to March 1, 1997.
(l) "Qualification Period" shall mean the July 1996 Commission Month
through the June 1997 Commission Month and for the vesting of Options, shall
mean the applicable July Commission Month through the next June Commission
Month.
(m) "RSI Compensation Plan" shall mean the Compensation Plan of RSI as
currently in force and as amended from time to time.
(n) All capitalized terms not otherwise defined herein shall have the
definition ascribed to them in the RSI Compensation Plan.
<PAGE> 19
2. Eligibility. Any Distributor whose network marketing activities are
exclusive to RSI will be eligible to receive Options under the Plan. Any
Options granted to a Distributor whose network marketing activities become
non-exclusive to RSI will forfeit any options previously granted. The
number of Active Legs that a Distributor has at the close of the June 1996
Commission Month will be such Distributor's minimum qualification level for the
Qualification Period, i.e., a Distributor with five Active Legs may only
qualify for Options based on five Active Legs and above and not for Options
based on four Active Legs. Distributors who have four Active Legs or less for
the June 1996 Commission Month will have the opportunity to qualify for Options
based on four Active Legs. All Qualification Levels are based upon a
Distributor's effective position within the RSI Compensation Plan.
3. Grant and Vesting of Options.
3.1 Four Active Legs. A Distributor will receive an Option to purchase 1,000
Shares on July 1, 1997 which will be exercisable at the last reported sale price
of the Common Stock on July 1, 1997 and will be documented by an Option
Agreement which shall be furnished to Distributor on or about August 1, 1997 if
either of the following requirements are met:
(a) Such Distributor has a minimum of four Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 3,000 in each of 2
Legs and at least 2,000 in 1 other Leg.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of four active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 50,000 with 10,000 in
1 leg and at least 5,000 in each of 2 other legs and the two
non-qualifiying months, if any, cannot be consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first, second,
third and fourth anniversary date of the initial grant date if either of the
following requirements are met:
(i) Such Distributor has a minimum of four Active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are as set forth in
Section 3.1(c) hereof.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Four Active Leg
level.
3.2 Five Active Legs. A Distributor will receive an Option to purchase 1,500
Shares on July 1, 1997 which will be exercisable at the last reported sale price
of the Common Stock on July 1, 1997 and will be documented by an Option
Agreement which shall be furnished to Distributor on or about August 1, 1997 if
either of the following requirements are met:
(a) Such Distributor has a minimum of five Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 5,000 in each of 2
Legs and at least 2,000 in each of 2 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of five active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 75,000 with 10,000 in each
of 2 legs and at least 5,000 in each of 2 other legs and the two
non-qualifiying months, if any, cannot be consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of five Active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are as set forth in
Section 3.2(c) hereof.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Five Active Leg
level.
3.3 Six Active Legs. A Distributor will receive an Option to purchase 2,500
Shares on July 1, 1997 which will be exercisable at the last reported sale price
of the Common Stock on July 1, 1997 and will be documented by an Option
Agreement which shall be furnished to Distributor on or about August 1, 1997 if
either of the following requirements are met:
(a) Such Distributor has a minimum of six Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 7,500 in each of 2
Legs and at least 5,000 in each of 2 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
<PAGE> 20
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
the following requirements are met:
(i) Such Distributor has a minimum of six active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are as set forth in
Section 3.3(c) hereof.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
3.4 Ten Active Legs. A Distributor will receive an Option to purchase 5,000
Shares on July 1, 1997 which will be exercisable at the last reported sale
price of the Common Stock on July 1, 1997 and will be documented by an
Option Agreement which shall be furnished to Distributor on or about
August 1, 1997 if either of the following requirements are met:
(a) Such Distributor has a minimum of ten Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 10,000 in each of 2
Legs and at least 5,000 in each of 5 other Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following requirements are met:
(i) Such Distributor has a minimum of ten active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are as set forth in
Section 3.4(c) hereof.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
3.5 Additional Options for Presidents Club Members. A Distributor who is a
member of the Presidents Club during either of the Bonus Pool periods
during the Qualification Period will receive an Option to purchase 2,500
additional Shares if either of the following requirements are met:
(a) Such Distributor has a minimum of six Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 50,000 in 1 Leg, at
least 30,000 in each of 2 other Legs and at least 5,000 in each of
3 additional Legs;
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive;
provided, however, a Distributor may only receive additional Options as a
member of the Presidents Club or the Chairmans Club, but not as a member
of both Clubs.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
either of the following three requirements are met:
(i) Such Distributor has a minimum of six Active Director Legs
for all 12 months of the applicable Qualification Period;
(ii) Such Distributor has at least 2,000 G.P. for 9 of the 12
months of the applicable Qualification Period; and
(iii) Such Distributor's Organizational Points in 6 of the 12
months of the applicable Qualification Period are as set forth in
Section 3.5(c) hereof.
or
(1) Such Distributor's active Director legs, G.P. and Organizational
Points are as described in (A) - (C) above for the Six Active Leg
level.
3.6 Additional Options for Chairmans Club Members. A Distributor who is a
member of the Chairmans Club during either of the Bonus Pool periods
during the Qualification Period (July 1996 to December 1996 or January
1997 to June 1997) will receive an Option to purchase 5,000 additional
Shares if the following three requirements are met:
<PAGE> 21
(a) Such Distributor has a minimum of ten Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 100,000 in 1 Leg, at
least 50,000 in each of 2 other Legs and at least 5,000 in each of 5
additional Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
the following three requirements are met:
(i) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(ii) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(iii) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other legs
and the two non-qualifiying months, if any, cannot be consecutive.
3.7 Additional Options for Ambassadors Club Members. A Distributor who is a
member of the Ambassadors Club during either of the Bonus Pool periods
during the Qualification Period (July 1996 to December 1996 or January
1997 to June 1997) will receive an Option to purchase 5,000 additional
Shares if the following three requirements are met:
(a) Such Distributor has a minimum of ten Active Director Legs
for all 12 months of the Qualification Period;
(b) Such Distributor has at least 2,000 G.P. for all 12 months of
the Qualification Period; and
(c) Such Distributor's Organizational Points for 9 of the 12
months of the Qualification Period are at least 100,000 in each of
4 Legs, at least 50,000 in one other Leg and at least 5,000 in each
of 5 more Legs.
or, as of March 1, 1997:
(A) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(B) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(C) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other
legs and the two non-qualifiying months, if any, cannot be
consecutive.
Such Option will become exercisable with respect to 20% of the Shares
subject to such Option on the initial grant date and 20% on the first,
second, third and fourth anniversary date of the initial grant date if
the following three requirements are met:
(i) Such Distributor has a minimum of six active Director legs for all
12 months of the Qualification Period;
(ii) Such Distributor has at least 1,000 G.P. for all 12 months of the
Qualification Period; and
(iii) Such Distributor's Organizational Points for 10 of the 12 months
of the Qualification Period are at least 150,000 with 25,000 in each
of 3 legs, 10,000 in 1 leg and at least 5,000 in each of 2 other legs
and the two non-qualifiying months, if any, cannot be consecutive.
3.8 Additional Options for Distributors.
(a) All Distributors who are Directors by the close of the March 1996
Commission Month will receive an Option to purchase an additional 200
Shares on July 1, 1997 which will be exercisable at the last reported sale
price of the Common Stock on July 1, 1997 and will be documented by an
Option Agreement which shall be furnished to Distributor on or about
August 1, 1997 if such Distributor qualifies for Options under Sections
3.1, 3.2, 3.3 or 3.4 hereof.
(b) All Distributors who became a Distributor in March 1996 who are not
Directors by the close of the March 1996 Commission Month will receive an
Option to purchase an additional 200 Shares on July 1, 1997 which will be
exercisable at the last reported sale price of the Common Stock on July 1,
1997 and will be documented by an Option Agreement which shall be
furnished to Distributor on or about August 1, 1997 if (i) such
Distributor qualifies for Options under Section 3.1, 3.2, 3.3 or 3.4
hereof and (ii) such Distributor has at least 1,000 P.P. in the March
1996 Commission Month and becomes a Director by the close of the April
1996 Commission Month.
(c) All Distributors who become a Distributor in April 1996 or later will
receive an Option to purchase an additional 200 Shares on July 1, 1997
which will be exercisable at the last reported sale price of the Common
Stock on July 1, 1997 and will be documented by an Option Agreement which
shall be furnished to Distributor on or about August 1, 1997 if (i) such
Distributor qualifies for Options under Section 3.1, 3.2, 3.3 or 3.4
hereof and (ii) such Distributor has at least 1,000 P.P. in the month such
Distributor enrolls as such and becomes a Director within the first two
Commission Months of enrolling as a Distributor.
<PAGE> 22
4. Price. The purchase price of the shares of Common Stock purchased
pursuant to the Options granted under the Plan will be 100% of the Fair
Market Value on the date of grant of the Option.
5. Duration. Options will be granted to Optionees for terms of five (5)
years.
<PAGE> 23
<TABLE>
<S> <C>
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No dealer, salesperson or any other person has been
authorized to give any information or to make any 500,000 SHARES
representation other than those contained in this
Prospectus in connection with the offering made hereby,
and, if given or made, such information or REXALL SUNDOWN, INC.
representations must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered 1996 REXALL SHOWCASE
securities to which it relates, or an offer to sell or INTERNATIONAL
solicitation of an offer to buy such securities in any DISTRIBUTOR STOCK
jurisdiction where, or to any person to whom, it is OPTION PLAN
unlawful to make such an offer or solicitation.
Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create
any implication that there has been no change in the
affairs of the Company since the date hereof or that
the information contained herein is correct as of any
time subsequent to the date of this Prospectus.
------------------------------
TABLE OF CONTENTS COMMON STOCK
Page
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AVAILABLE INFORMATION............................. 2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE...................................... 2
THE COMPANY....................................... 3 --------------------------
RISK FACTORS...................................... 3
DESCRIPTION OF THE REXALL SUNDOWN, PROSPECTUS
INC. 1996 REXALL SHOWCASE
INTERNATIONAL DISTRIBUTOR STOCK --------------------------
OPTION PLAN....................................... 7
USE OF PROCEEDS................................... 13
INDEMNIFICATION OF DIRECTORS AND
OFFICERS.......................................... 13
LEGAL MATTERS..................................... 13
EXPERTS........................................... 13
August 8, 1997
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</TABLE>
