<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-21884
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REXALL SUNDOWN, INC.
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1688986
- ------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
851 Broken Sound Parkway, NW, Boca Raton, Florida 33487
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (561) 241-9400
--------------
Indicate by check mark whether Registrant (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. X Yes No
--- ---
As of July 11, 1997, the number of shares outstanding of the Registrant's Common
Stock was 33,546,459.
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REXALL SUNDOWN, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
May 31, 1997 and August 31, 1996 .............................................3
Consolidated Statements of Operations for the
Three and Nine Months Ended May 31, 1997 and 1996 ............................4
Consolidated Statements of Cash Flows for the
Nine Months Ended May 31, 1997 and 1996 ......................................5
Notes to Consolidated Financial Statements ...................................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations .............................9
PART II. OTHER INFORMATION............................................................13
SIGNATURES.....................................................................................15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 39,844 $ 13,450
Restricted cash -- 278
Marketable securities 60,718 7,988
Trade accounts receivable, net 18,726 11,410
Inventory 34,052 28,179
Prepaid expenses and other current assets 5,877 5,018
Net current assets of discontinued operations 3,958 3,855
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Total current assets 163,175 70,178
Property, plant and equipment, net 32,551 24,078
Other assets 10,211 8,839
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Total assets $ 205,937 $ 103,095
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,781 $ 5,599
Accrued expenses and other current liabilities 16,358 10,100
Current portion of long-term debt 181 346
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Total current liabilities 27,320 16,045
Long-term debt -- 105
Other liabilities 265 253
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Total liabilities 27,585 16,403
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Shareholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000
shares, no shares outstanding -- --
Common stock, $.01 par value; authorized 100,000,000 shares,
shares issued: 33,413,909 and 30,660,128, respectively 334 307
Capital in excess of par value 120,419 53,563
Retained earnings 58,016 32,943
Cumulative translation adjustment (417) (121)
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Total shareholders' equity 178,352 86,692
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Total liabilities and shareholders' equity $ 205,937 $ 103,095
========= =========
</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 69,613 $ 54,568 $ 184,217 $ 135,618
Cost of sales 25,375 20,131 68,071 52,418
------------ ------------ ------------ ------------
Gross profit 44,238 34,437 116,146 83,200
Selling, general and administrative expenses 31,124 25,240 80,017 62,217
------------ ------------ ------------ ------------
Operating income 13,114 9,197 36,129 20,983
Other income (expense):
Interest income 1,027 505 2,979 794
Other income 21 -- 52 20
Interest expense (20) (11) (35) (30)
------------ ------------ ------------ ------------
Income before income tax provision 14,142 9,691 39,125 21,767
Income tax provision 4,862 3,557 14,052 8,003
------------ ------------ ------------ ------------
Net income $ 9,280 $ 6,134 $ 25,073 $ 13,764
============ ============ ============ ============
Net income per common share $ 0.27 $ 0.20 $ 0.74 $ 0.45
============ ============ ============ ============
Weighted average common shares outstanding 34,336,453 30,753,274 33,709,825 30,387,857
============ ============ ============ ============
</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
---------------------
1997 1996
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<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 25,073 $ 13,764
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,538 1,978
Amortization 1,139 894
Gain on sale of property and equipment (5) (20)
Deferred income taxes 132 2,025
Foreign exchange translation adjustment (296) (7)
Changes in assets and liabilities:
Trade accounts receivable (7,316) (7,200)
Inventory (5,873) (6,118)
Prepaid expenses and other current assets (859) (2,979)
Other assets (2,511) (2,815)
Accounts payable 5,182 4,752
Accrued expenses and other current liabilities 8,579 6,670
Other liabilities 12 --
Discontinued operations - non cash charges
and changes in assets and liabilities (103) 4,167
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Net cash provided by (used in) operating activities 25,692 15,111
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Cash flows provided by (used in) investing activities:
Acquisition of property, plant and equipment (11,012) (3,177)
Purchase of marketable securities (58,718) (5,909)
Proceeds from sale of marketable securities 5,988 --
Proceeds from sale of fixed assets 6 22
Other 278 (89)
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Net cash used in investing activities (63,458) (9,153)
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Cash flows provided by (used in) financing activities:
Net proceeds from offering 62,287 --
Principal payments on long-term debt (270) (260)
Exercise of options to purchase common stock 2,143 4,588
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Net cash provided by financing activities 64,160 4,328
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Net increase (decrease) in cash and cash equivalents 26,394 10,286
Cash and cash equivalents at beginning of period 13,450 1,154
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Cash and cash equivalents at end of period $ 39,844 $ 11,440
======== ========
</TABLE>
See accompanying notes
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. BASIS OF PRESENTATION AND OTHER MATTERS
The accompanying unaudited consolidated financial statements,
which are for interim periods, do not include all disclosures provided
in the annual consolidated financial statements. These unaudited
consolidated financial statements should be read in conjunction with
the consolidated financial statements and the footnotes thereto
contained in the Rexall Sundown, Inc. (the "Company") Annual Report on
Form 10-K for the year ended August 31, 1996, as filed with the
Securities and Exchange Commission. The August 31, 1996 balance sheet
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (which are of
a normal recurring nature) necessary for a fair presentation of the
financial statements. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the
full year.
Certain prior period amounts have been reclassified to conform
with the fiscal 1997 presentation.
2. NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net
income by weighted average shares outstanding, giving effect to common
stock equivalents (common stock options).
3. INVENTORY
The components of inventory as of May 31, 1997 and August 31,
1996 are as follows:
<TABLE>
<CAPTION>
May 31, 1997 August 31, 1996
------------ ---------------
(Audited)
<S> <C> <C>
Raw materials $16,131 $11,609
Work in process 1,011 1,732
Finished products 16,910 14,838
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$34,052 $28,179
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</TABLE>
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollars in thousands)
(Unaudited)
4. SALES TO A MAJOR CUSTOMER
The Company had sales to a national retailer which represented
approximately 15.3% and 11.9% of net sales for the three months ended
May 31, 1997 and 1996, respectively, and 15.6% and 7.5% of net sales
for the nine months ended May 31, 1997 and 1996, respectively. Trade
accounts receivable from this customer amounted to approximately $6,480
and $615 at May 31, 1997 and August 31, 1996, respectively.
5. CONTINGENCIES
The Company believes that it is not presently a party to any
litigation, the outcome of which would have a material adverse impact
on the Company.
6. SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
The Company recognized a reduction of income taxes payable and
a corresponding increase in additional paid-in capital related to the
exercise of stock options of $144 and $1,436 for the three months ended
May 31, 1997 and 1996, respectively, and $2,453 and $3,065 for the nine
months ended May 31, 1997 and 1996, respectively.
7. COMMON STOCK TRANSACTIONS
On November 5, 1996, the Company consummated a public offering
of 4,000,000 shares of common stock. Of those shares, 2,000,000 were
sold by the Company and 2,000,000 were sold by certain shareholders of
the Company. On December 3, 1996, the underwriters' over-allotment
option to purchase an additional 600,000 shares was exercised. Of those
600,000 shares, 400,000 were sold by the Company and 200,000 were sold
by a shareholder of the Company. The Company intends to use the net
proceeds of approximately $62.3 million primarily to acquire
complementary products, product lines or businesses, to provide working
capital and for general corporate purposes.
8. EVENTS SUBSEQUENT TO FISCAL YEAR END
In December 1996, the Company entered into a revolving line of
credit with a financial institution with a borrowing amount of $20
million, which line of credit is subject to annual extensions.
Borrowings under the line of credit will bear interest at LIBOR plus
1.5 percent. The line of credit is collateralized by accounts
receivable and inventory and is subject to compliance with certain
financial covenants and ratios. There were no amounts outstanding under
this revolving line of credit at May 31, 1997.
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollars in thousands)
(Unaudited)
8. EVENTS SUBSEQUENT TO FISCAL YEAR END, CONTINUED
As of April 1, 1997, the Company extended the maturity of the
collateralized note related to the sale of the assets of Pennex
Laboratories, Inc. to July 31, 1997. Interest continues to accrue and
is payable in accordance with the previous terms. Assuming full
collection of the balance of the collateralized note, the Company
expects to record in the fourth quarter of fiscal 1997 a reduction to
the estimated loss on disposition of approximately $1,400 (net of tax),
or $.04 per share, which would be reflected as an adjustment to
discontinued operations.
On July 1, 1997, the Company announced that it is engaged in
substantive discussions relating to a potential merger with Twinlab
Corporation, which would contemplate that the Company would issue 0.74
shares of its common stock for each outstanding share of Twinlab common
stock. Any agreement would be subject to a number of conditions,
including satisfactory completion of due diligence by each party,
appropriate confirmation of the applicability of pooling of interests
accounting, negotiation of a definitive merger agreement, Board and
shareholder approval of each party, receipt of a satisfactory fairness
opinion by each party's Board of Directors and regulatory approval.
There can be no assurance that a definitive agreement will be reached.
-8-
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets
and sells vitamins, nutritional supplements and consumer health products. The
Company distributes its products using three channels of distribution: sales to
retailers; direct sales through independent distributors; and mail order.
On November 5, 1996, the Company consummated a public offering (the
"Offering") of 4,000,000 shares of Common Stock. Of those shares, 2,000,000 were
sold by the Company and 2,000,000 were sold by certain shareholders of the
Company. On December 3, 1996, the underwriters' over-allotment option to
purchase an additional 600,000 shares was exercised. Of those 600,000 shares,
400,000 were sold by the Company and 200,000 were sold by a shareholder of the
Company. The Company intends to use the net proceeds of approximately $62.3
million primarily to acquire complementary products, product lines or
businesses, to provide working capital and for general corporate purposes.
RESULTS OF CONTINUING OPERATIONS
Three Months Ended May 31, 1997 Compared to Three Months Ended May 31, 1996
Net sales for the three months ended May 31, 1997 were $69.6 million,
an increase of $15.0 million or 27.6% over the comparable period in fiscal 1996.
Of the $15.0 million increase, sales to retailers accounted for $7.5 million, an
increase of 27.9% over the comparable period in fiscal 1996. The gain in sales
to retailers was primarily attributable to increased distribution as well as an
increase in the Company's base business. Net sales of the Company's direct sales
subsidiary, Rexall Showcase International, Inc. ("Rexall Showcase"), increased
by $7.6 million, an increase of 32.3% over the comparable period in fiscal 1996.
Net sales of the Company's mail order division, SDV, decreased by $100,000 or
2.4% over the comparable period in fiscal 1996. The increase in net sales to
retailers and for Rexall Showcase was also due to increased unit sales.
Gross profit for the three months ended May 31, 1997 was $44.2 million,
an increase of $9.8 million or 28.5% over the comparable period in fiscal 1996.
As a percentage of net sales, gross profit increased from 63.1% for the three
months ended May 31, 1996 to 63.5% for the three months ended May 31, 1997. The
increase in gross margin was due, in part, to improved margins as a result of
manufacturing efficiencies achieved from higher volume at the Company's vitamin
manufacturing facility as well as a favorable product mix. The increase was also
due, in part, to an increase in net sales of products with higher margins,
related principally to the increased net sales of Rexall Showcase as a
percentage of the Company's net sales.
Selling, general and administrative expenses for the three months ended
May 31, 1997 were $31.1 million, an increase of $5.9 million or 23.3% over the
comparable period in fiscal 1996. As a percentage of net sales, such expenses
decreased from 46.3% for the three months ended May 31, 1996 to 44.7% for the
comparable period in fiscal 1997, primarily as a result of increased net sales
and
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the relatively fixed nature of such expenses, except for the commission expense
of Rexall Showcase, which is variable and comprises the majority of Rexall
Showcase's selling, general and administrative expenses.
Interest income for the three months ended May 31, 1997 was $1.0
million, as compared to $505,000 for the comparable period in fiscal 1996. Such
increase was primarily a result of investment of the Company's available cash
balances, which were higher in the third quarter of fiscal 1997 than the
comparable period in fiscal 1996 primarily due to the net proceeds of $62.3
million received from the Offering.
Income before income tax provision was $14.1 million for the three
months ended May 31, 1997, an increase of $4.5 million or 45.9% over the
comparable period in fiscal 1996. As a percentage of net sales, income before
income tax provision increased from 17.8% for the three months ended May 31,
1996 to 20.3% for the comparable period in fiscal 1997. Net income was $9.3
million for the current fiscal quarter, an increase of $3.1 million or 51.3%
from the prior year's comparable quarter, due to the reasons described above.
Nine Months Ended May 31, 1997 Compared to Nine Months Ended May 31, 1996
Net sales for the nine months ended May 31, 1997 were $184.2 million,
an increase of $48.6 million or 35.8% over the comparable period in fiscal 1996.
Of the $48.6 million increase, sales to retailers accounted for $30.0 million,
an increase of 44.8% over the comparable period in fiscal 1996. The gain in
sales to retailers was primarily attributable to new customers added in the
second half of fiscal 1996, increased distribution and an increase in the
Company's base business. Net sales of the Company's direct sales subsidiary,
Rexall Showcase, increased by $18.3 million, an increase of 32.6% over the
comparable period in fiscal 1996. The increase in direct sales was partially due
to the nine months ended May 31, 1997 reflecting a full period of operations
for Rexall Showcase in Mexico and Korea. Net sales of the Company's mail order
division, SDV, increased by $300,000 or 2.2% over the comparable period in
fiscal 1996. The increase in net sales in each division was also due to
increased unit sales.
Gross profit for the nine months ended May 31, 1997 was $116.1 million,
an increase of $32.9 million or 39.6% over the comparable period in fiscal 1996.
As a percentage of net sales, gross profit increased from 61.3% for the nine
months ended May 31, 1996 to 63.0% for the nine months ended May 31, 1997. The
increase in gross margin was due, in part, to improved margins as a result of
manufacturing efficiencies achieved from higher volume at the Company's vitamin
manufacturing facility as well as a favorable product mix.
Selling, general and administrative expenses for the nine months ended
May 31, 1997 were $80.0 million, an increase of $17.8 million or 28.6% over the
comparable period in fiscal 1996. As a percentage of net sales, such expenses
decreased from 45.9% for the nine months ended May 31, 1996 to 43.4% for the
comparable period in fiscal 1997, primarily as a result of increased net sales
and the relatively fixed nature of such expenses except for the commission
expense of Rexall Showcase, which is variable and comprises the majority of
Rexall Showcase's selling, general and administrative expenses.
Interest income for the nine months ended May 31, 1997 was $3.0
million, as compared to $794,000 for the comparable period in fiscal 1996. Such
increase was primarily a result of investment of
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the Company's available cash balances, which were higher in the first nine
months of fiscal 1997 than the comparable period in fiscal 1996 primarily due to
the net proceeds of $62.3 million received from the Offering.
Income before income tax provision was $39.1 million for the nine
months ended May 31, 1997, an increase of $17.4 million or 79.7% over the
comparable period in fiscal 1996. As a percentage of net sales, income before
income tax provision increased from 16.1% for the nine months ended May 31, 1996
to 21.2% for the comparable period in fiscal 1997. Net income was $25.1 million
for the first nine months of the current fiscal year, an increase of $11.3
million or 82.2% from the first nine months of the prior fiscal year due to the
reasons described above.
SEASONALITY
The Company believes that its business is not subject to significant
seasonality based on historical trends, with the exception of Rexall Showcase,
which typically experiences lower revenues in the second and fourth fiscal
quarters due to winter and summer holiday seasons, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $135.9 million as of May 31, 1997,
compared to $54.1 million as of August 31, 1996. This increase was principally
the result of increased cash and cash equivalents and marketable securities as a
result of the net proceeds from the Offering.
Net cash provided by operating activities for the nine months ended May
31, 1997 was $25.7 million compared to $15.1 million for the comparable period
in fiscal 1996. Net cash provided by operating activities increased primarily
due to increased net income. Net cash used in investing activities was $63.5
million for the nine months ended May 31, 1997 compared to $9.2 million for the
comparable period in fiscal 1996. Net cash used in investing activities
increased primarily due to the purchase of marketable securities in the nine
months ended May 31, 1997, which primarily represents investment of the net
proceeds from the Offering. Net cash provided by financing activities was $64.2
million for the nine months ended May 31, 1997 compared to $4.3 million for the
comparable period in fiscal 1996 reflecting $62.3 million of net proceeds
received from the Offering in the first nine months of fiscal 1997.
The Company believes that its existing cash balances, internally
generated funds from operations and its available bank line of credit will
provide the liquidity necessary to satisfy the Company's working capital needs,
including the purchase and maintenance of inventory, the financing of the
Company's accounts receivable, as well as the financing of anticipated capital
expenditures.
INFLATION
Inflation has not had a significant impact on the Company in the past
three years nor is it expected to have a significant impact in the foreseeable
future.
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FORWARD LOOKING STATEMENTS
This report contains certain "forward-looking statements" within the
meaning of Section 21E of the Securities Act of 1934, which represent the
Company's expectations or beliefs. For this purpose, any statements contained in
this Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
certain of which are beyond the Company's control, and actual results may differ
materially depending on a variety of important factors described in the
Company's filings with the SEC.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 - Letter Agreement dated March 27, 1997 between the
Company and Carl DeSantis amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Carl DeSantis.
10.2 - Letter Agreement dated March 27, 1997 between the
Company and Christian Nast amending that certain
Employment Agreement dated April 24, 1995 between
the Company and Christian Nast.
10.3 - Letter Agreement dated March 27, 1997 between the
Company and Dean DeSantis amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Dean DeSantis.
10.4 - Letter Agreement dated March 27, 1997 between the
Company and Damon DeSantis amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Damon DeSantis.
10.5 - Letter Agreement dated March 27, 1997 between the
Company and Nickolas Palin amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Nickolas Palin.
10.6 - Letter Agreement dated March 27, 1997 between the
Company and Geary Cotton amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Geary Cotton.
10.7 - Letter Agreement dated March 27, 1997 between the
Company and Richard Werber amending that certain
Employment Agreement dated April 1, 1995 between
the Company and Richard Werber.
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PART II - OTHER INFORMATION, CONTINUED
10.8 - Third Forbearance Agreement dated April 1,
1997 between Oakmont Pharmaceuticals, Inc. and
the Company.
11 - Earnings Per Share Computation.
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REXALL SUNDOWN, INC.
Date: July 11, 1997 By: /s/ Carl DeSantis
------------------------------------
Carl DeSantis, Chairman of the Board
Date: July 11, 1997 By: /s/ Geary Cotton
------------------------------------
Geary Cotton, Vice President-Finance,
Chief Financial Officer, Treasurer and
Chief Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
10.1 Letter Agreement dated March 27, 1997 between the Company and
Carl DeSantis amending that certain Employment Agreement dated
April 1, 1995 between the Company and Carl DeSantis.
10.2 Letter Agreement dated March 27, 1997 between the Company and
Christian Nast amending that certain Employment Agreement
dated April 24, 1995 between the Company and Christian Nast.
10.3 Letter Agreement dated March 27, 1997 between the Company and
Dean DeSantis amending that certain Employment Agreement dated
April 1, 1995 between the Company and Dean DeSantis.
10.4 Letter Agreement dated March 27, 1997 between the Company and
Damon DeSantis amending that certain Employment Agreement
dated April 1, 1995 between the Company and Damon DeSantis.
10.5 Letter Agreement dated March 27, 1997 between the Company and
Nickolas Palin amending that certain Employment Agreement
dated April 1, 1995 between the Company and Nickolas Palin.
10.6 Letter Agreement dated March 27, 1997 between the Company and
Geary Cotton amending that certain Employment Agreement dated
April 1, 1995 between the Company and Geary Cotton.
10.7 Letter Agreement dated March 27, 1997 between the Company and
Richard Werber amending that certain Employment Agreement
dated April 1, 1995 between the Company and Richard Werber.
10.8 Third Forbearance Agreement dated April 1, 1997 between
Oakmont Pharmaceuticals, Inc. and the Company.
11 Earnings Per Share Computation.
27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10.1
March 27, 1997
Mr. Carl DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Carl:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Carl DeSantis (the
"Employee"), as amended on October 9, 1995. Effective as of April 1, 1997, the
Company and the Employee have agreed to make the following amendments to the
Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Four Hundred Seventy-Five Thousand Dollars ($475,000) in cash
<PAGE> 2
for the year commencing April 1, 1997 and (ii) for each succeeding year
during the Term, a salary equal to that of the previous year increaseed
by the greater of (a) 5% or (b) the increase in the cost of living
based upon the Revised Consumer Price Index (1982-84=100) published by
the Bureau of Labor for Boca Raton, Florida utilizing April 1997 as the
base month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
-----------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Carl DeSantis
- ----------------------------
Carl DeSantis
2
<PAGE> 1
EXHIBIT 10.2
March 27, 1997
Mr. Christian Nast
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Chris:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
24, 1995 between Rexall Sundown, Inc. (the "Company") and Christian Nast (the
"Employee"). Effective as of April 1, 1997, the Company and the Employee have
agreed to make the following amendments to the Agreement:
1. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Three Hundred Forty-Five Thousand Dollars ($345,000) in cash
for the year commencing April 1, 1997 and (ii) for each succeeding year
during the Term, a salary equal to that of the previous year increaseed
by the greater of (a) 5% or (b) the increase in the cost of living
based upon the Revised Consumer Price Index (1982-84=100) published by
the Bureau of Labor for Boca Raton, Florida utilizing April 1997 as the
base month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Carl DeSantis
--------------------------------------
Carl DeSantis, Chairman of the Board
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Christian Nast
- ----------------------------
Christian Nast
<PAGE> 1
EXHIBIT 10.3
March 27, 1997
Mr. Dean DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Dean:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Dean DeSantis (the
"Employee"), as amended on April 1, 1996. Effective as of April 1, 1997, the
Company and the Employee have agreed to make the following amendments to the
Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Two Hundred Twenty-Five Thousand Dollars ($225,000) in cash
<PAGE> 2
for the year commencing April 1, 1997 and (ii) for each succeeding year
during the Term, a salary equal to that of the previous year increaseed
by the greater of (a) 5% or (b) the increase in the cost of living
based upon the Revised Consumer Price Index (1982-84=100) published by
the Bureau of Labor for Boca Raton, Florida utilizing April 1997 as the
base month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
------------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Dean DeSantis
- ----------------------------
Dean DeSantis
2
<PAGE> 1
EXHIBIT 10.4
March 27, 1997
Mr. Damon DeSantis
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Damon:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Damon DeSantis (the
"Employee"), as amended on April 1, 1996. Effective as of April 1, 1997, the
Company and the Employee have agreed to make the following amendments to the
Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Two Hundred Ten Thousand Dollars ($210,000) in cash for the
<PAGE> 2
year commencing April 1, 1997 and (ii) for each succeeding year during
the Term, a salary equal to that of the previous year increaseed by the
greater of (a) 5% or (b) the increase in the cost of living based upon
the Revised Consumer Price Index (1982-84=100) published by the Bureau
of Labor for Boca Raton, Florida utilizing April 1997 as the base
month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
----------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Damon DeSantis
- ----------------------------
Damon DeSantis
2
<PAGE> 1
EXHIBIT 10.5
March 27, 1997
Mr. Nickolas Palin
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Nick:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Nickolas Palin (the
"Employee"), as amended on April 1, 1996. Effective as of April 1, 1997, the
Company and the Employee have agreed to make the following amendments to the
Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Three Hundred Thousand Dollars ($300,000) in cash for the
year
<PAGE> 2
commencing April 1, 1997 and (ii) for each succeeding year during
the Term, a salary equal to that of the previous year increaseed by the
greater of (a) 5% or (b) the increase in the cost of living based upon
the Revised Consumer Price Index (1982-84=100) published by the Bureau
of Labor for Boca Raton, Florida utilizing April 1997 as the base
month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
----------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Nickolas Palin
- ----------------------------
Nickolas Palin
2
<PAGE> 1
EXHIBIT 10.6
March 27, 1997
Mr. Geary Cotton
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Geary:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Geary Cotton (the
"Employee"). Effective as of April 1, 1997, the Company and the Employee have
agreed to make the following amendments to the Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of Two Hundred Ten Thousand Dollars ($210,000) in cash for the
<PAGE> 2
year commencing April 1, 1997 and (ii) for each succeeding year during
the Term, a salary equal to that of the previous year increaseed by the
greater of (a) 5% or (b) the increase in the cost of living based upon
the Revised Consumer Price Index (1982-84=100) published by the Bureau
of Labor for Boca Raton, Florida utilizing April 1997 as the base
month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
----------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Geary Cotton
- ----------------------------
Geary Cotton
2
<PAGE> 1
EXHIBIT 10.7
March 27, 1997
Mr. Richard Werber
Rexall Sundown, Inc.
851 Broken Sound Parkway, NW
Boca Raton, Florida 33487
Dear Rick:
Reference is hereby made to the Employment Agreement ("Agreement") dated April
1, 1995 between Rexall Sundown, Inc. (the "Company") and Richard Werber (the
"Employee"). Effective as of April 1, 1997, the Company and the Employee have
agreed to make the following amendments to the Agreement:
1. Article II, Section 2.1 of the Agreement is hereby amended by
deleting Article II, Section 2.1 in its entirety and inserting the following
provision in lieu thereof:
"II. TERM
2.1 Subject to the provisions of Article 5 below, the term of this
Agreement shall be for the period commencing on April 1, 1995 and shall
terminate as provided below (the "Term"). The Term shall be a
continuous three (3) year period such that on each Anniversary Date (as
hereinafter defined), one (1) additional year shall automatically be
added to the Term. Not later than ninety (90) days prior to any
Anniversary Date, either party may provide written notice to the other
of its intention not to extend the Term of this Agreement beyond the
number of years then remaining in the Term. Such written notice shall
be deemed proper notice to terminate this Agreement at the end of the
three (3) year Term then in effect. It is the intention of the parties
that the Term of each Anniversary Date automatically shall be three (3)
years, unless such notice shall have been properly given. The
"Anniversary Date" as used herein shall be the first day of the second
year of the Term and the anniversary of such date in each subsequent
year."
2. Article III, Section 3.1 of the Agreement is hereby amended by
deleting Article III, Section 3.1 in its entirety and inserting the following
provision in lieu thereof:
"III. COMPENSATION
3.1 Salary. In payment for the obligations to be performed by the
Employee during the Term, the Company shall pay to the Employee
(subject to any applicable payroll and/or taxes required to be
withheld) annual compensation ("Annual Compensation") equal to (i) a
salary of One Hundred Eighty Five Thousand Dollars ($185,000) in cash
<PAGE> 2
for the year commencing April 1, 1997 and (ii) for each succeeding year
during the Term, a salary equal to that of the previous year increaseed
by the greater of (a) 5% or (b) the increase in the cost of living
based upon the Revised Consumer Price Index (1982-84=100) published by
the Bureau of Labor for Boca Raton, Florida utilizing April 1997 as the
base month."
If the foregoing is in accordance with our understanding, please execute the
enclosed copy of this letter and return to the undersigned.
Very truly yours,
REXALL SUNDOWN, INC.
By: /s/ Christian Nast
----------------------------
Christian Nast, President
AGREED TO AND ACCEPTED
this 27th day of March 1997.
/s/ Richard Werber
- ----------------------------
Richard Werber
2
<PAGE> 1
EXHIBIT 10.8
THIRD FORBEARANCE AGREEMENT
THIS THIRD FORBEARANCE AGREEMENT (the "Third Forbearance Agreement") is
made as of April 1, 1997, by and between OAKMONT PHARMACEUTICALS, INC., a
Delaware corporation ("Oakmont"), and REXALL SUNDOWN, INC., a Florida
corporation ("Rexall Sundown"), as assignee of RSL Holdings, Inc. (formerly
known as Pennex Laboratories, Inc. and, before that, RS Acquisition, Inc.), a
Pennsylvania corporation ("RSL"), for the purpose of amending the payment terms
under that certain Forbearance Agreement dated April 29, 1996 by and between
Oakmont and Rexall Sundown (the "First Forbearance Agreement"), and that certain
Second Forbearance Agreement dated September 23, 1996 by and between Oakmont and
Rexall Sundown (the "Second Forbearance Agreement").
Pursuant to an Agreement of Purchase and Sale dated as of December 29,
1995, by and between RSL as Seller and Oakmont as Buyer (the "Purchase
Agreement"), RSL sold to Oakmont various assets formerly used in RSL's
pharmaceutical manufacturing business (collectively, the "Assets"), including
(i) certain real estate in Plum Borough, Allegheny County, Pennsylvania (the
"Real Property"), wherein RSL conducted its pharmaceutical manufacturing
operations, and (ii) various items of personal property (collectively, the
"Personal Property") including equipment used by RSL in the conduct of its
operations conducted at the Real Property and inventory located at the Real
Property. RSL retained a mortgage lien on the Real Property and a security
interest in the Personal Property to secure Oakmont's payment of the unpaid
balance of the purchase price of the Assets and various other obligations owed
by Oakmont to RSL (collectively, the "Obligations") pursuant to a promissory
note dated January 31, 1996 (the "Note") and a mortgage dated February 1, 1996
and a security agreement dated January 31, 1996 (such mortgage and security
agreement are together hereinafter referred to as the "Security Documents").
Thereafter, RSL transferred all of its rights in respect of the Obligations and
in and under the Note and Security Documents to Rexall Sundown.
Oakmont defaulted in the timely payment of the Obligations. Thereafter,
Rexall Sundown and Oakmont entered into the First Forbearance Agreement and the
Second Forbearance Agreement, whereby Rexall Sundown agreed to forbear from the
enforcement of its right to payment on the outstanding balance of the
Obligations on the terms and conditions set forth therein.
Simultaneously with the execution and delivery of the First Forbearance
Agreement, Oakmont delivered to Kirkpatrick & Lockhart LLP ("K&L"), counsel to
Rexall Sundown, at its office at 1500 Oliver Building, Pittsburgh, PA 15222, the
following items: (i) an executed and acknowledged Deed of Conveyance, conveying
the Real Property to a person or persons to be designated by Rexall Sundown; and
(ii) an executed Bill of Sale, conveying the Personal Property to a person or
persons to be designated by Rexall Sundown (the Deed and the Bill of Sale are
hereinafter collectively referred to as the "Transfer Documents"). K&L has been
holding the Transfer Documents in escrow pursuant to the terms of the First
Forbearance Agreement.
Oakmont has also defaulted in the timely payment of the amounts due
under the First Forbearance Agreement and the Second Forbearance Agreement (the
"Modified Obligations").
<PAGE> 2
Rexall Sundown is willing to forbear from the enforcement of its rights and
remedies in respect of such default, on the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises herein contained, Oakmont and Rexall Sundown, each intending to
be legally bound, hereby, agree as follows:
1. Rexall Sundown waives any right to accelerate the maturity of the
outstanding balance of the Modified Obligations or to exercise any other right
or remedy under the Purchase Agreement, the Note, the Security Documents, the
First Forbearance Agreement or the Second Forbearance Agreement available by
reason of any payment default thereunder occurring prior to the date of this
Third Forbearance Agreement, and if such acceleration shall be deemed to have
occurred prior to the date hereof by reason of any such default, such
acceleration shall be deemed nullified and rescinded. Rexall Sundown further
agrees not to accelerate the maturity of the Modified Obligations or take any
other action to enforce payment of the Modified Obligations unless an Event of
Default (as defined below in paragraph 5 below) shall have occurred and be
continuing.
2. Oakmont will pay Rexall Sundown the following amounts on or before
the following dates:
<TABLE>
<S> <C>
April 30, 1997: $60,000.00
May 31, 1997: $60,000.00
June 30, 1997: $60,000.00
</TABLE>
Payments made pursuant to this paragraph shall be applied first to accrued and
unpaid interest on the Modified Obligations, and next to the unpaid principal
balance of the Modified Obligations.
3. On or before July 31, 1997, Oakmont shall pay Rexall Sundown the
outstanding balance due under the Purchase Agreement, the Note, and the Security
Documents as modified by the First Forbearance Agreement, the Second Forbearance
Agreement and this Third Forbearance Agreement (collectively, the "Modified
Documents"), as specifically set forth on Exhibit A attached hereto.
4. In addition to the amounts due to Rexall Sundown pursuant to Section
3 hereof, Oakmont shall pay to Rexall Sundown an additional forbearance fee of
$250,000 not later than July 31, 1997.
5. Any of the following events shall constitute an "Event of Default"
for purposes of this Third Forbearance Agreement: (i) Any of the payments
required to be made pursuant to this Third Forbearance Agreement shall not be
made in full on or before its respective due date; or (ii) Oakmont shall have
defaulted in the payment or performance of any other duty or obligation under
the Modified Documents (other than any default waived by Rexall Sundown pursuant
to paragraph 1 above) and any applicable grace or cure period shall have
expired.
6. If any Event of Default shall have occurred and be continuing, then,
in any such event, Rexall Sundown may accelerate the maturity of all the
remaining amounts payable hereunder, and, in addition, may do any or all of the
following: (a) cause K&L to deliver the
2
<PAGE> 3
Transfer Documents to Rexall Sundown; cause such Transfer Documents to be
completed by the insertion of the name of the transferee or transferees of the
Real Property and the Personal Property; and cause any or all of the Transfer
Documents to be filed or recorded in the appropriate public records; (b) cause
judgment to be entered in favor of Rexall sundown (or its assignee) and against
Oakmont for all or any part of the outstanding balance of such amounts pursuant
to the warrant of attorney hereinafter set forth; and (c) exercise any and all
other rights and remedies provided by law.
7. If, in accordance with this Third Forbearance Agreement, Rexall
Sundown elects to cause K&L to deliver to Rexall Sundown the Transfer Documents,
then Oakmont shall be released and discharged from any and all further liability
in respect of the amounts payable hereunder; provided, however, that nothing in
this Third Forbearance Agreement shall impair Rexall Sundown's right to enforce
its lien and security interest in the Assets.
8. If all the amounts payable to Rexall Sundown under the Modified
Documents are paid in full, then upon receipt of such payment, Rexall Sundown
shall release its lien and security interest in the Assets and shall cause K&L
to return the Transfer Documents to Oakmont.
9. This Third Forbearance Agreement may be executed in multiple
counterparts by different parties on different counterparts, each of which shall
be deemed an original, but all of which shall be deemed one and the same
instrument.
10. OAKMONT HEREBY AUTHORIZES ANY ATTORNEY OF ANY COURT IN THE
COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR OAKMONT AT ANY TIME AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER, AND CONFESS A JUDGMENT OR JUDGMENTS
AGAINST OAKMONT AND IN FAVOR OF REXALL SUNDOWN OR ITS ASSIGNS, AS MANY TIMES AS
SHALL BE NECESSARY OR EXPEDIENT, FOR ALL OR ANY PART OF THE THEN OUTSTANDING
BALANCE DUE AND PAYABLE HEREUNDER, TOGETHER WITH AN ATTORNEY'S FEE OF 15% OF
SUCH AMOUNT, WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION.
IN WITNESS WHEREOF, we have hereunto set our hands and seals on or as
of the day and year first above written.
OAKMONT PHARMACEUTICALS, INC.
By: /s/ Arthur Michaelis
------------------------------
Name: Arthur F. Michaelis
Title: CEO
REXALL SUNDOWN, INC.
By: /s/ Geary Cotton
------------------------------
Name: Geary Cotton
Title: CFO
3
<PAGE> 4
Exhibit A
OAKMONT PHARMACEUTICALS
BALANCES DUE @ 7/31/97
<TABLE>
<CAPTION>
Int @ 12% Int @ 6% Total
-------------------------------------------
<S> <C> <C> <C>
Nov 29,975.00 29,975.00
Dec 30,974.17 30,974.17
Jan 30,974.17 30,974.17
Feb 27,976.67 27,976.67
March 61,948.33 30,974.17 92,922.50
April 59,950.00 29,975.00 89,925.00
May 61,948.33 30,974.17 92,922.50
June 59,950.00 29,975.00 89,925.00
July 59,950.00 29,975.00 89,925.00
-------------------------------------------
303,746.67 271,773.33 575,520.00
</TABLE>
<TABLE>
<S> <C>
Past due interest @ 6% (4/96-10/96) 213,821.68
Principal Balance 5,995,000.00
First forebearance fee 100,000.00
Second forebearance fee 100,000.00
------------
Total 6,984,941.68
Payment due April 30, 1997 (60,000.00)
Payment due May 31, 1997 (60,000.00)
Payment due June 30, 1997 (60,000.00)
------------
Balance due July 31, 1997 6,804,341.68
============
</TABLE>
<PAGE> 1
EXHIBIT 11
REXALL SUNDOWN, INC. AND SUBSIDIARIES
NET INCOME PER COMMON SHARE CALCULATION
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 9,279,968 $ 6,133,930 $25,073,339 $13,764,170
=========== =========== =========== ===========
PRIMARY
Weighted average common shares outstanding(1) 33,376,676 30,222,521 32,607,601 29,978,221
Common stock equivalents(2) 959,777 530,753 1,102,224 409,636
----------- ----------- ----------- -----------
Primary weighted average common shares outstanding 34,336,453 30,753,274 33,709,825 30,387,857
=========== =========== =========== ===========
Primary net income per common share $ 0.27 $ 0.20 $ 0.74 $ 0.45
=========== =========== =========== ===========
FULLY DILUTED
Weighted average common shares outstanding(1) 33,376,676 30,222,521 32,607,601 29,978,221
Common stock equivalents(2) 1,062,314 539,601 1,083,825 454,860
----------- ----------- ----------- -----------
Fully diluted weighted average common shares outstanding 34,438,990 30,762,122 33,691,426 30,433,081
=========== =========== =========== ===========
Fully diluted net income per common share $ 0.27 $ 0.20 $ 0.74 $ 0.45
=========== =========== =========== ===========
</TABLE>
- ----------------
(1) Represents weighted average common shares outstanding for the periods
indicated.
(2) Common stock equivalents associated with stock options calculated
pursuant to the treasury stock method taking into consideration the tax
benefit available to the Company upon the assumed exercise of qualified
options.
(3) All share data in the financial statements are stated using the primary
earnings per share calculation as the above fully diluted calculation
is anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 39,844,256
<SECURITIES> 60,717,871
<RECEIVABLES> 18,726,495<F1>
<ALLOWANCES> 0
<INVENTORY> 34,051,495
<CURRENT-ASSETS> 163,174,530
<PP&E> 32,551,356<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 205,936,764
<CURRENT-LIABILITIES> 27,320,172
<BONDS> 0<F3>
0
0
<COMMON> 334,139
<OTHER-SE> 178,017,453
<TOTAL-LIABILITY-AND-EQUITY> 205,936,764
<SALES> 184,217,715
<TOTAL-REVENUES> 184,217,715
<CGS> 68,071,758
<TOTAL-COSTS> 68,071,758
<OTHER-EXPENSES> 80,017,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,446
<INCOME-PRETAX> 39,125,024
<INCOME-TAX> 14,051,685
<INCOME-CONTINUING> 25,073,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,073,339
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0
<FN>
<F1>NET OF ALLOWANCE.
<F2>NET OF DEPRECIATION.
<F3>INCLUDES LONG-TERM OBLIGATIONS.
</FN>
</TABLE>
