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 February 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to_______
Commission File Number 0-21884
REXALL SUNDOWN, INC.
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1688986
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
851 Broken Sound Parkway, NW, Boca Raton, Florida 33487
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (561) 241-9400
Indicate by check mark whether Registrant has (1) filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that 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 April 13, 1998, the number of shares outstanding of the Registrant's
Common Stock was 71,363,162.
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REXALL SUNDOWN, INC.
TABLE OF CONTENTS
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Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of February 28, 1998 and August
31, 1997 ........................................................... 3
Consolidated Statements of Operations for the
Three and Six Months Ended February 28, 1998 and 1997 .............. 4
Consolidated Statements of Cash Flows for the Six Months Ended
February 28, 1998 and 1997 ......................................... 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
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<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)
February 28, 1998 August 31, 1997
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 64,027 $ 81,943
Marketable securities 27,650 24,829
Trade accounts receivable, net 48,058 28,494
Inventory 73,136 42,739
Prepaid expenses and other current assets 9,190 7,221
Net current assets of discontinued operations 4,076 4,076
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Total current assets 226,137 189,302
Property, plant and equipment, net 49,946 34,372
Other assets 13,680 12,620
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Total assets $ 289,763 $ 236,294
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,901 $ 14,509
Accrued expenses and other current liabilities 22,714 21,158
Current portion of long-term debt - 3,476
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Total current liabilities 51,615 39,143
Other liabilities 480 449
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Total liabilities 52,095 39,592
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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 200,000,000 shares,
shares issued: 71,321,925 and 70,144,634, respectively 713 702
Capital in excess of par value 137,351 124,002
Retained earnings 100,182 72,488
Cumulative translation adjustment (578) (490)
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Total shareholders' equity 237,668 196,702
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Total liabilities and shareholders' equity $ 289,763 $ 236,294
==================== ====================
</TABLE>
See accompanying notes
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<PAGE>
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28,
----------------------------------- -------------------------------------
1998 1997 1998 1997
----------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C>
Net sales $ 115,489 $ 64,948 $ 226,209 $ 127,026
Cost of sales 48,159 25,690 92,354 49,801
----------------- --------------- --------------- -------------------
Gross profit 67,330 39,258 133,855 77,225
Selling, general and administrative 44,939 26,736 89,568 53,353
expenses ----------------- --------------- --------------- -------------------
Operating income 22,391 12,522 44,287 23,872
Other income (expense):
Interest income 1,056 1,390 2,270 1,971
Other income (11) 31 22 31
Interest expense (84) (74) (216) (120)
----------------- --------------- --------------- -------------------
Income before income tax provision 23,352 13,869 46,363 25,754
Income tax provision 8,384 4,936 16,190 9,190
----------------- --------------- --------------- -------------------
Net income $ 14,968 $ 8,933 $ 30,173 $ 16,564
================= =============== =============== ===================
Pro forma net income $ 14,688 $ 8,780 $ 29,231 $ 16,255
================= =============== =============== ===================
Net income per common share:
Basic $ 0.21 $ 0.13 $ 0.43 $ 0.25
================= =============== =============== ===================
Diluted $ 0.20 $ 0.13 $ 0.41 $ 0.24
================= =============== =============== ===================
Pro forma net income per common share:
Basic $ 0.21 $ 0.13 $ 0.41 $ 0.24
================= =============== =============== ===================
Diluted $ 0.20 $ 0.12 $ 0.40 $ 0.23
================= =============== =============== ===================
Weighted average common shares
outstanding:
Basic 71,046,098 69,349,742 70,738,237 67,330,742
================= =============== =============== ===================
Diluted 73,887,728 71,626,444 73,341,881 69,677,638
================= =============== =============== ===================
</TABLE>
See accompanying notes
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<TABLE>
<CAPTION>
REXALL SUNDOWN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
February 28,
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1998 1997
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<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 30,173 $ 16,564
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,291 1,754
Amortization 863 804
Deferred income taxes (744) 88
Foreign exchange translation adjustment (88) (300)
Compensatory stock options issued 588 -
Adjustment to conform fiscal years (2,479) -
Changes in assets and liabilities:
Trade accounts receivable (19,564) (6,108)
Inventory (30,397) 143
Prepaid expenses and other current assets (1,969) (1,721)
Other assets (1,130) (1,978)
Accounts payable 14,392 5,334
Accrued expenses and other current liabilities 8,960 2,255
Other liabilities 31 (152)
Discontinued operations - non cash charges
and changes in assets and liabilities - (62)
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Net cash provided by operating activities 927 16,621
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Cash flows provided by (used in) investing activities:
Acquisition of property, plant and equipment (17,865) (3,496)
Purchase of marketable securities (34,465) (58,145)
Proceeds from sale of marketable securities 31,644 5,988
Other - 190
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Net cash used in investing activities (20,686) (55,463)
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Cash flows provided by (used in) financing activities:
Net proceeds from offering - 62,287
Proceeds from bank line of credit - 403
Principal payments on long-term debt (3,476) (144)
S Corporation distributions to members - (347)
Exercise of options to purchase common stock 5,319 1,812
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Net cash provided by financing activities 1,843 64,011
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Net increase (decrease) in cash and cash equivalents (17,916) 25,169
Cash and cash equivalents at beginning of period 81,943 13,450
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Cash and cash equivalents at end of period $ 64,027 $ 38,619
================== ==================
See accompanying notes
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</TABLE>
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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 of Rexall Sundown, Inc.
(the "Company"). These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Company's Annual
Report on Form 10-K for the year ended August 31, 1997, as filed with
the Securities and Exchange Commission.
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.
2. Pro Forma Net Income Per Diluted Common Share
Pro forma net income per diluted common share is calculated by
dividing pro forma net income, net income after giving effect to the
pro forma tax adjustment for the Richardson Labs, Inc. ("Richardson")
acquisition (See Note 8.), by weighted average shares outstanding,
giving effect to common stock equivalents (common stock options). Pro
forma net income per share of common stock is presented in the
accompanying consolidated statements of income on an adjusted basis,
which gives retroactive effect to a two-for-one stock split paid in the
form of a stock dividend on October 23, 1997 to shareholders of record
on October 7, 1997. All references to the number of shares of common
stock, except shares authorized, and to per share data in the
consolidated financial statements have been adjusted to reflect the
stock split on a retroactive basis.
3. Recent Accounting Standards
During the second quarter of fiscal 1998, the Company adopted
SFAS No. 128, "Earnings Per Share." SFAS No. 128 establishes new
standards for computing and presenting earnings per share ("EPS"). This
statement replaces the presentation of primary and fully diluted EPS
and requires a dual presentation of basic and diluted EPS. Basic EPS is
computed using the weighted average number of common shares. Diluted
EPS is computed using the weighted average number of common shares and
potentially dilutive common shares outstanding during the period.
Potentially dilutive common shares consist of common stock options.
Earnings per share amounts for all periods have been restated to
conform to the requirements of SFAS No. 128.
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
(Unaudited)
3. Recent Accounting Standards, continued
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" establishes standards for the way that public
companies report selected information about operating segments in
annual financial statements and requires that those companies report
selected information about segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS
No. 131 is effective for the Company's financial statements for the
year ending August 31, 1999. Although management has not completed its
assessment of SFAS No. 131, it is contemplated that the pronouncement
will require certain segregated financial disclosures related to the
Company's channels of distribution.
4. Inventory
The components of inventory as of February 28, 1998 and August
31, 1997 are as follows:
<TABLE>
<CAPTION>
February 28, 1998 August 31, 1997
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<S> <C> <C> <C>
Raw materials, bulk tablets
and capsules $ 33,835 $ 22,275
Work in process 8,544 2,807
Finished products 30,757 17,657
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$ 73,136 $ 42,739
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</TABLE>
5. Sales to a Major Customer
The Company had sales to a national retailer which represented
approximately 29% and 19% of net sales for the three months ended
February 28, 1998 and 1997, respectively, and 29% and 16% of net sales
for the six months ended February 28, 1998 and 1997, respectively.
6. 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.
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REXALL SUNDOWN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
(Unaudited)
7. 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 $3,986 and $1,328 for the three months
ended February 28, 1998 and 1997, respectively, and $7,453 and $2,309
for the six months ended February 28, 1998 and 1997, respectively.
8. Business Combination
On January 29, 1998, the Company exchanged 2,884,616 shares of
the Company's common stock for all of the common stock of Richardson.
Richardson develops, markets and sells diet and weight management
nutritional supplements. The transaction was accounted for as a pooling
of interests and, accordingly, the Company's historical financial
statements have been restated to include the financial position and
results of operations of Richardson for all prior periods presented.
Richardson was an S corporation for federal income tax
purposes and, accordingly, did not pay U.S. Federal income taxes.
Richardson will be included in the Company's U.S. federal income tax
return effective January 29, 1998. Richardson's fiscal year end has
been changed to conform to the Company's fiscal year end.
Net sales and pro forma net income (including a pro forma
adjustment for income taxes related to the Subchapter S status of
Richardson) of the separate companies are as follows:
<TABLE>
<CAPTION>
Rexall
Sundown Richardson Combined
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<S> <C> <C> <C>
Six months ended February 28, 1997
Net sales $114,604 $12,422 $127,026
Pro forma net income 15,793 462 16,255
Six months ended February 28, 1998
Net sales $209,122 $17,087 $226,209
Pro forma net income 28,318 913 29,231
</TABLE>
In connection with the merger, approximately $2.5 million of
merger costs and expenses were incurred in the second quarter of fiscal
1998, of which approximately $1.2 million and $1.3 million was charged
to Richardson and the Company, respectively.
-8-
<PAGE>
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 distributors; and mail order.
Revenue from the sale of the Company's products is recognized at the
time products are shipped to customers. Net sales are net of all discounts,
allowances, returns and credits. Initial costs associated with acquiring sales
agreements with certain retail customers are amortized over the expected term of
the relevant agreement and the amortization of such costs is recorded as a
reduction in net sales.
Gross margins are impacted by changes in the relative sales mix among
the Company's channels of distribution. In particular, gross margin is
positively impacted if sales of the Company's direct sales subsidiary, Rexall
Showcase International, Inc. ("Rexall Showcase"), increase as a percentage of
net sales because such products command a higher gross margin. In a related
manner, selling, general and administrative expenses as a percentage of net
sales are typically higher if sales of Rexall Showcase increase as a percentage
of net sales because of the commissions paid to Rexall Showcase's independent
distributors. Conversely, if Rexall Showcase's sales as a percentage of net
sales decrease, gross margins will decrease as a percentage of net sales and
selling, general and administrative expenses will decrease as a percentage of
net sales. Historically, operating margins from sales to retailers and mail
order have been higher than operating margins from the Rexall Showcase division.
Results of Operations
Three Months Ended February 28, 1998 Compared to Three Months Ended February
28, 1997
Net sales for the three months ended February 28, 1998 were $115.5
million, an increase of $50.5 million or 77.8% over the comparable period in
fiscal 1997. Of the $50.5 million increase, sales to retailers accounted for
$37.0 million, an increase of 95.3% over the comparable period in fiscal 1997.
The increase in sales to retailers was primarily attributable to increased sales
and distribution to the Company's existing customer base business, new product
introductions and new account distribution. Net sales of Rexall Showcase
increased by $12.9 million, an increase of 60.8% over the comparable period in
fiscal 1997. Net sales of the Company's mail order division, SDV, increased by
$580,000 or 12% over the comparable period in fiscal 1997. The increase in net
sales in each division was associated with increased unit sales as pricing has
remained essentially flat.
Gross profit for the three months ended February 28, 1998 was $67.3
million, an increase of $28.1 million or 71.5% over the comparable period in
fiscal 1997. As a percentage of net sales, gross profit decreased from 60.4% for
the three months ended February 28, 1997 to 58.3% for the three months ended
February 28, 1998. The decrease in gross margin was related principally to the
decreased net sales of Rexall Showcase as a percentage of the Company's net
sales and also due to increased costs associated with the start-up of the
Company's new packaging facility which commenced operations in December 1997.
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<PAGE>
Selling, general and administrative expenses for the three months ended
February 28, 1998 were $44.9 million, an increase of $18.2 million or 68.1% over
the comparable period in fiscal 1997. As a percentage of net sales, such
expenses decreased to 38.9% for the three months ended February 28, 1998 from
41.2% 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. Such
commission expense increased by $6.0 million over the comparable period in
fiscal 1997. The Company also had approximately $1.7 million in additional
expenses related to national television advertising over the comparable period
in fiscal 1997 and approximately $2.5 million in pooling of interest expenses
related to the acquisition of Richardson for which there was no corresponding
expense in the same period last year.
Interest income for the three months ended February 28, 1998 was $1.1
million, as compared to $1.4 million for the comparable period in fiscal 1997.
Income before income tax provision was $23.4 million for the three
months ended February 28, 1998, an increase of $9.5 million or 68.4% over the
comparable period in fiscal 1997. As a percentage of net sales, income before
income tax provision decreased from 21.4% for the three months ended February
28, 1997 to 20.2% for the comparable period in fiscal 1998. Pro forma net income
was $14.7 million for the current fiscal quarter, an increase of $5.9 million or
67.3% from the prior year's comparable quarter, due to the reasons described
above.
Six Months Ended February 28, 1998 Compared to Six Months Ended
February 28, 1997
Net sales for the six months ended February 28, 1998 were $226.2
million, an increase of $99.2 million or 78.1% over the comparable period in
fiscal 1997. Of the $99.2 million increase, sales to retailers accounted for
$71.3 million, an increase of 95.3% over the comparable period in fiscal 1997.
The increase in sales to retailers was primarily attributable to increased sales
and distribution to the Company's existing customer base business, new product
introductions and new account distribution. Net sales of the Company's direct
sales subsidiary, Rexall Showcase, increased by $27.0 million, an increase of
62.1% over the comparable period in fiscal 1997. Net sales of the Company's mail
order division, SDV, increased by $901,000 or 10.3% over the comparable period
in fiscal 1997. The increase in net sales in each division was associated with
increased unit sales as pricing has remained essentially flat.
Gross profit for the six months ended February 28, 1998 was $133.9
million, an increase of $56.6 million or 73.3% over the comparable period in
fiscal 1997. As a percentage of net sales, gross profit decreased from 60.8% for
the six months ended February 28, 1997 to 59.2% for the six months ended
February 28, 1998. The decrease in gross margin was related principally to the
decreased net sales of Rexall Showcase as a percentage of the Company's net
sales and also due to increased costs related to start-up costs associated with
the Company's new packaging facility which commenced operations in December
1997.
Selling, general and administrative expenses for the six months ended
February 28, 1998 were $89.6 million, an increase of $36.2 million or 67.9% over
the comparable period in fiscal 1997. As a percentage of net sales, such
expenses decreased from 42.0% for the six months ended February 28, 1997 to
39.6% for the comparable period in fiscal 1998, 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. Such commission expense
increased by $13.7 million over the comparable period in fiscal 1997.
Additionally, the Company had approximately $5.0 million in incremental expenses
related to national television advertising over the comparable period in fiscal
1997 and approximately $2.5 million in pooling of interest expenses related to
the Richardson acquisition for which there was no corresponding expense in the
same period last year.
Interest income for the six months ended February 28, 1998 was $2.3
million, as compared to $2.0 million for the comparable period in fiscal 1997.
Income before income tax provision was $46.4 million for the six months
ended February 28, 1998, an increase of $20.6 million or 80.0% over the
comparable period in fiscal 1997. As a percentage of net sales, income before
income tax provision increased from 20.3% for the six months ended February 28,
1997 to 20.5% for the comparable period in fiscal 1998. Pro forma net income was
$29.2 million for the first six months of the current fiscal year, an increase
of $13.0 million or 79.8% from the first six 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 $174.5 million as of February 28,
1998, compared to $150.2 million as of August 31, 1997. This increase was
principally the result of increased trade accounts receivable due to higher
sales in the six months of fiscal 1998 and higher inventory levels to support
the Company's anticipated future sales growth.
Net cash provided by operating activities for the six months ended
February 28, 1998 was $927,000 compared to $16.3 million for the comparable
period in fiscal 1997. Net cash provided by operating activities decreased
primarily due to increased accounts receivable and inventory, partially offset
by increases in net income, accounts payable and accrued expenses, all of which
were necessary to support increased sales in the first half of fiscal 1998 and
anticipated future growth. Net cash used in investing activities was $20.7
million for the six months ended February 28, 1998 compared to $55.4 million for
the comparable period in fiscal 1997. Net cash used in investing activities
decreased primarily due to decreased marketable securities purchased in the
first half of fiscal 1998, partially offset by increased capital expenditures of
$14.4 million. Net cash provided by financing activities was $1.8 million for
the six months ended February 28, 1998 compared to $64 million for the
comparable period in fiscal 1997 reflecting $62.3 million of net proceeds
received from the public offering in the first quarter of fiscal 1997.
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<PAGE>
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 and acquisitions.
Year 2000
The Company has reviewed its critical information systems for Year 2000
compliance and has initiated plans to remedy any deficiencies in a timely
manner. As a result of the review and action plan, the Company believes the cost
of such remedial corrective actions are not material to the Company's financial
position, results of operations or cashflows.
Recent Accounting Standards
SFAS No. 131 establishes standards for the way that public companies
report selected information about operating segments in annual financial
statements and requires that those companies report selected information about
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for the
Company's financial statements for the year ended August 31, 1999. Although
management has not completed its assessment of SFAS No. 131, it is contemplated
that the pronouncement will require certain segregated financial disclosures
related to the Company's channels of distribution.
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.
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 Securities and Exchange Commission.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
On January 29, 1998, the Company consummated a merger with
Richardson whereby the Company issued 2,884,616 shares of common stock, par
value $.01 per share, of the Company to Richardson's stockholders in exchange
for all of the outstanding shares of common stock of Richardson. The transaction
was not a public offering of securities and, accordingly, is exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Shareholders was held on February 4,
1998. The holders of 67,891,911 shares of common stock were entitled to vote at
the Annual Meeting and there were present, in person or by proxy, holders of
67,269,069 shares of common stock (99.1% of the shares entitled to vote).
The following individuals were elected as Directors of the Company to
serve until the 1999 Annual Meeting by the following votes (the numbers in
parentheses represent the percent of the shares of Common Stock voted at the
Annual Meeting):
FOR WITHHELD AUTHORITY
---------------------------------------------------
Carl DeSantis 67,114,884 (99.8%) 154,185 (.2%)
Christian Nast 67,118,868 (99.8%) 150,201 (.2%)
Dean DeSantis 67,113,178 (99.8%) 155,891 (.2%)
Damon DeSantis 67,113,178 (99.8%) 155,891 (.2%)
Nickolas Palin 67,113,188 (99.8%) 155,881 (.2%)
Stanley Leedy 67,118,868 (99.8%) 150,201 (.2%)
Raymond Monteleone 67,119,278 (99.8%) 149,791 (.2%)
Melvin T. Stith 67,119,248 (99.8%) 149,821 (.2%)
The proposal to increase the number of authorized shares of the
Company's Common Stock from 100,000,000 to 200,000,000 shares by amending the
Company's Articles of Incorporation was approved as follows: 66,674,124 (99.1%)
shares were cast for the proposal; 505,898 (.8%) shares were cast against the
proposal; and 89,047 (.1%) shares abstained.
The proposal to amend the Company's Amended and Restated 1993 Stock
Incentive Plan was approved as follows: 41,779,071 (62.1%) shares were cast for
the proposal; 18,138,590 (27.0%) shares were cast against the proposal; 161,821
(.2%) shares abstained; and 7,189,587 (10.7%) were broker non-votes.
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<PAGE>
The proposal to ratify the appointment of Coopers & Lybrand LLP as the
Company's independent accountants for the fiscal year ending August 31, 1998 was
approved as follows: 67,132,337 (99.8%) shares were cast for the proposal;
36,160 (.1%) shares were cast against the proposal; and 90,572 (.1%) shares
abstained.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Employment Agreement dated January 29, 1998
by and between the Company and John Priddy.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
A report on Form 8-K was filed on February 11, 1998 to
report the merger of Richardson with the Company.
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<PAGE>
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: April 13, 1998
By: /s/ Carl DeSantis
------------------------------------------
Carl DeSantis, Chairman of the Board
Date: April 13, 1998
By: /s/ Geary Cotton
------------------------------------------
Geary Cotton, Chief Financial Officer,
Treasurer and Chief Accounting Officer
-15-
Exhibit 10.1
------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of January 29, 1998 by and
between REXALL SUNDOWN, INC., a Florida corporation (the "Company"), and JOHN
PRIDDY (the "Employee").
R E C I T A L S
The Company desires to employ the Employee, and the Employee desires to
be employed by the Company, in accordance with the provisions contained in this
Employment Agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of each of the Company and the Employee contained in
this Agreement, each of the Company and the Employee agrees as follows:
I. EMPLOYMENT
-------------
1.1 The Company employs the Employee and the Employee accepts such
employment. Subject to the direction of the Board of Directors of the Company,
the Employee shall serve as the Vice President of the Company and President of
Richardson Labs, Inc. The Employee shall have such responsibilities, perform
such duties and exercise such power and authority as are inherent in, or
incident to, such offices. The Employee shall devote his full business time and
attention and his best efforts to the performance of his duties as an employee
of the Company. The foregoing however shall not preclude the Employee from
engaging in appropriate civil, religious or charitable activities or from
devoting a reasonable amount of time to private investments that do not
interfere or conflict with his responsibilities to the Company.
1.2 During the Term, the Employee, if elected, shall serve as a
Director of the Company and/or a Director or officer of any subsidiary of the
Company without any additional compensation for such services other than the
compensation provided for hereunder.
II. TERM
--------
2.1 Subject to the provisions of Article 5 hereof, the term of this
Agreement shall be for the period commencing on January 29, 1998, and
terminating on January 28, 2001 (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
<PAGE>
be the first day of the second year of the Term and the anniversary of such date
in each subsequent year."
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 Fifty Thousand
Dollars ($250,000.00) in cash for the year commencing January 29, 1998; (ii) a
salary of Two Hundred Seventy Five Thousand Dollars ($275,000.00) in cash for
the term commencing January 29, 1999 and (iii) for each succeeding year during
the Term, a salary equal to that of the previous year increased by the greater
of (A) 5% or (B) the increase in the cost of living based upon the Revised
Consumer Price Index (1982-84=100) published by the Bureau of Labor Statistics
of the United States Department of Labor for Boise, Idaho utilizing April 1995
as the base month, or such other higher amount as the Company may determine from
time to time.
3.2 Payment of Salary. Payments of salary shall be made to the
Employee in installments from time to time on the same dates that payments of
salary are generally made to all senior management employees of the Company.
3.3 Incentive Compensation. The Company shall pay the Employee
an incentive compensation bonus in an amount up to forty-three and three
quarters percent (43.75%) of Employee's Annual Compensation for each of the
Company's fiscal years during the Term hereof pursuant to the Company's
Management Incentive Plan in force from time to time. Such incentive
compensation shall be paid within 60 days of each fiscal year end. Any
termination under Section 5.5(b) of this Agreement prior to any fiscal year end,
shall entitle Employee to a prorated amount of such incentive compensation
earned through the date of any such termination.
IV. CERTAIN FRINGE BENEFITS
---------------------------
4.1 Generally. The Employee shall be entitled to reimbursement
for reasonable business expenses incurred in connection with his employment
including customer entertainment. The Company shall provide the Employee with an
automobile allowance or an automobile of the type currently provided to senior
executives of the Company at the Company's expense and the Company shall provide
at its expense insurance, gas and maintenance for such automobile. The Company
will also provide the Employee with a car or cellular telephone and a company
credit card for business travel and entertainment. The Employee shall further be
entitled to receive such benefits and to participate in such benefit plans as
are generally provided from time to time by the Company to its senior management
employees; provided, however, that nothing contained in this Section 4.1 shall
be construed to obligate the Company to provide any specific benefits to its
employees generally.
4.2 Vacations. The Employee shall be entitled to such vacation
time on an annual basis as is provided in accordance with the policies as are
from time to time in force for the Company's employees, but in no event shall
such vacation time be less than four (4) weeks per year. As provided in Article
5, upon termination of this Agreement, the Employee shall be paid for all
accrued vacation time received and not taken prior to his termination date up to
a maximum of the amount of vacation time accrued in the last year of employment.
2
<PAGE>
V. TERMINATION OF EMPLOYMENT
----------------------------
5.1 Certain Definitions. The following terms shall have the
following respective meanings when utilized in this Agreement:
(a) "Acquisition of Control" shall mean:
(i) any person (including a Group), without
the approval of a majority of the Incumbent Directors, becoming the Beneficial
Owner of, or acquiring the power to direct the exercise of voting power with
respect to, directly or indirectly, securities which represent thirty percent
(30%) or more of the combined voting power of the Company's outstanding
securities thereafter, whether or not some portion of such securities was owned
by such person (or by any member of such Group) prior thereto; provided,
however, that this provision shall not apply to acquisitions by a director,
executive officer or their affiliates if such person had such status on January
29, 1998; or
(ii) the Incumbent Directors cease at any
time to constitute a majority of the Board of Directors, whether of (A) the
Company or (B) after any cash tender offer or exchange offer, merger,
consolidation or other business combination, recapitalization of the Company,
sale, liquidation or dissolution (or adoption of a plan for liquidation or
dissolution), or any combination of any or all of the foregoing transactions,
including but not limited to a series of such transactions, any successor to the
Company; provided, however, an Acquisition of Control shall not be deemed to
have occurred with respect to the Employee if the action of the Employee was
voluntary and would have been sufficient, without the action of others, to
constitute an Acquisition of Control.
(b) "Beneficial Owner" shall have the meaning
provided in Section 607.0901(1)(e) of the Florida Statutes.
(c) "Cause" shall mean any action by the Employee or
any inaction by the Employee which is reasonably believed by the Company to
constitute:
(i) fraud, embezzlement, misappropriation,
dishonesty or breach of trust;
(ii) a felony or moral turpitude;
(iii) material breach or violation of any or
all of the covenants, agreements and obligations of the Employee set forth in
this Agreement, other than as the result of the Employee's death or Disability;
(iv) a willful or knowing failure or refusal
by the Employee to perform any or all of his material duties and
responsibilities as an officer of the Company, other than as the result of the
Employee's death or Disability; or
(v) gross negligence by the Employee in the
performance of any or all of his material duties and responsibilities as an
officer of the Company, other than as the result of the Employee's death or
Disability; provided, however, that if the basis for any
3
<PAGE>
termination of the Employee's employment by the Company as set forth in the
Termination Notice delivered by the Company to the Employee is any or all of the
definitions of Cause set forth in Section 5.1(c)(iii), Section 5.1.(c)(iv) or
Section 5.1 (i)(v) of this Agreement, then, in such event, the Employee shall
have thirty (30) days from and after the date of his receipt of such Termination
Notice to cure the action or inaction specified therein to the reasonable
satisfaction of the Company.
(d) "Compensation" shall mean the cash
payment to which Employee is entitled under the provisions of Sections 3.1 and
3.3 hereof and the accrued vacation payment to which the Employee is entitled
under the provisions of Section 4.2 hereof.
(e) "Disability" shall mean any mental or physical
illness, condition, disability or incapacity which prevents the Employee from
reasonably discharging his duties and responsibilities as an officer of the
Company. If any disagreement or dispute shall arise between the Company and the
Employee as to whether the Employee suffers from any Disability, then, in any
such event, the Employee shall submit to the physical or mental examination of a
physician licensed under the laws of the State of Florida, who shall be mutually
selected by the Company and the Employee, and such physician shall make the
determination of whether the Employee suffers from any Disability. In the
absence of fraud or bad faith, the determination of such physician shall be
final and binding upon each of the Company and the Employee. The entire cost of
any such examination shall be borne solely by the Employee.
(f) "Group" shall mean any combination of persons
knowingly participating in a joint activity or interdependent consciously
parallel action toward a common goal, whether or not pursuant to an express
contract; provided, however, that actions taken by a director of the Company
acting as such shall not alone constitute membership in a Group.
(g) "Incumbent Director" shall mean any director of
the Company serving at April 1, 1995 or one elected thereafter if nominated or
approved by at least two-thirds of the then Incumbent Directors.
(h) "Protracted Disability" shall mean any Disability
which prevents the Employee from reasonably discharging his duties and
responsibilities as an officer of the Company for a period of six (6)
consecutive months.
(i) "Termination Date" shall mean a specific date not
less than ten (10) nor more than thirty (30) days from and after the date of any
Termination Notice upon which the Employee's employment by the Company shall be
terminated in accordance with the provisions of this Agreement.
(j) "Termination Notice" shall mean a written notice
which (i) sets forth the specific provision of this Agreement relied upon to
terminate the Employee's employment by the Company, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide the basis for
the termination of the Employee's employment by the Company pursuant to the
specific provision of this Agreement relied upon therein and (iii) sets forth a
Termination Date.
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<PAGE>
5.2 Termination of Employment.
(a) Notwithstanding the provisions of Article 2
hereof, this Agreement (i) shall be automatically terminated upon the death of
the Employee pursuant to the provisions of Section 5.3 hereof, (ii) may be
terminated at any time by the Company pursuant to the provisions of Section 5.4
or 5.5 hereof and (iii) may be terminated by the Employee pursuant to the
provisions of Section 5.6 hereof.
(b) If either the Company or the Employee shall
desire to terminate the Employee's employment by the Company pursuant to any of
the provisions of Sections 5.4, 5.5 or 5.6 hereof, then the party causing any
such termination shall give to the other party a Termination Notice.
(c) If this Agreement shall be terminated pursuant to
any of the provisions of this Article 5, the Company shall be discharged from
all of its obligations to the Employee hereunder upon its payment to the
Employee of the required amount set forth in the section of this Article 5
pursuant to which such termination shall occur.
5.3 Death of Employee. If at any time during the Term the
Employee shall die, then the employment of the Employee by the Company shall
automatically terminate on the date of the Employee's death. In such event, not
more than thirty (30) days from and after the date of the Employee's death, the
Company shall pay to the Employee's estate or heirs, as the case may be, an
amount in cash equal to the Employee's Compensation (subject to any applicable
payroll and/or other taxes required by law to be withheld) determined as of the
date of the Employee's death.
5.4 Disability of Employee.
(a) If at any time during the Term the Employee shall
suffer any Disability, then the Company shall be obligated to continue to pay in
the ordinary and normal course of its business to the Employee or his legal
representatives, as the case may be, the Employee's Compensation (subject to any
applicable payroll and/or other taxes required by law to be withheld) from the
date that the Employee shall first suffer any such Disability to the date that
the Employee's employment by the Company shall be terminated pursuant to any of
the provisions of this Agreement.
(b) If the Employee shall suffer any Protracted
Disability during the Term, then the Company may terminate this Agreement. In
such event, in addition to any other benefits which may have been provided by
the Company to the Employee or his legal representatives, as the case may be,
pursuant to the provisions of Section 5.4(a) hereof, not later than thirty (30)
days after the Termination Date specified in the Termination Notice, the Company
shall pay to the Employee or his legal representatives, as the case may be, an
amount in cash equal to the Employee's Compensation (subject to any applicable
payroll and/or other taxes required by law to be withheld) determined as of the
Termination Date. Subsequent to such Termination Date, the Employee or his legal
representatives, as the case may be, shall also be entitled to receive any
benefits which may be payable under any disability insurance policy or
disability plan provided by the Company.
5
<PAGE>
5.5 Termination of Employment by Company.
(a) The Company may terminate this Agreement at any
time with Cause and Employee may terminate this Agreement at any time for any
reason. In such event, the Company shall be obligated to continue to pay in the
ordinary and normal course of its business to the Employee his Compensation
(subject to any applicable payroll and/or other taxes required by law to be
withheld) until the Termination Date.
(b) The Company may terminate this Agreement at any
time without Cause. If the Company shall terminate the employment of the
Employee by the Company without Cause, and not pursuant to any other provision
of this Agreement, the Company shall continue to pay to the Employee the
Employee's Compensation (subject to any applicable payroll and/or other taxes
required by law to be withheld) for the balance of the Term as provided for in
Section 3.2 hereof if the balance of the Term is greater than one (1) year, and
if the balance of the Term is less than one (1) year, such Compensation shall be
paid for one (1) year from the Termination Date as provided above. If the
Employee is terminated without cause, the provisions of Section 6.1(b) hereof
shall be of no further force and effect. The Company shall be deemed to have
terminated the Agreement without cause if it (i) materially reduces the salary
and benefits of Employee; (ii) materially changes Employee's responsibilities or
(iv) requires Employee to relocate.
5.6 Change in Control. Notwithstanding any other provisions of
Sections 5.1 through 5.5 hereof, if (i) there is an Acquisition of Control and,
(ii) at any time within three (3) months prior to such Acquisition of Control or
at any time within one (1) year thereafter, either (A) the Employee for any
reason terminates his employment with the Company, or (B) the Employee's
employment is terminated without Cause, then the Employee shall have the option,
but not the obligation, of being paid in cash an amount equal to three (3) times
his Compensation for the then current fiscal year of the Company (amounts due
under this Section 5.6 are referred to as the "Payment"). If the Employee opts
to receive the Payment under this Section 5.6, whether his employment is
terminated by the Company or by himself, the provisions of Section 6.1(b) hereof
shall be of no further force or effect. Subject to the provisions of Section 5.7
hereof, the Payment shall be made not later than three (3) months after the
Employee gives notice to the Company in the form of a Termination Notice of his
election under this Section 5.6.
5.7 Payments. Notwithstanding anything in the foregoing to the
contrary, if any of the payments provided for in this Agreement, together with
any other payments which the Employee has the right to receive from the Company,
would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code), the payments pursuant to this Agreement shall be reduced
to the largest amount as will result in no portion of such payments being
subject to the excise tax imposed in Section 4999 of the Internal Revenue Code;
provided, however, that the Employee shall have the absolute discretion to
direct the Company to pay any amount which shall be payable to him pursuant to
Section 5.6 hereof in such equal annual installments as the Employee may direct,
with the first such installment payable when such amount would otherwise have
been payable; and further provided that the Employee shall have the absolute
discretion to allocate any reductions required by this Section 5.7 from amounts
due him under Section 5.6 hereof. The Company shall be obligated to comply with
any directions given to it by the Employee pursuant to the preceding sentence.
6
<PAGE>
5.8 No Mitigation. The Employees shall not be required to
mitigate the amount of any payment or benefit contemplated by this Section 5 nor
shall any payment or benefit be reduced by any earnings or benefits the Employee
may receive from any other source.
VI. CERTAIN RESTRICTIONS ON THE EMPLOYEE
----------------------------------------
6.1 Certain Restrictions. The Employee covenants and agrees
with the Company as follows:
(a) He shall not during the term of this Agreement,
and for a period equal to three (3) years from and after the date of termination
of this Agreement if such termination occurs within five (5) years of the date
hereof, and for a period of two (2) years from and after the date of termination
of this Agreement if such Termination occurs after five (5) years from the date
hereof, directly and indirectly, for himself or any other person, firm,
corporation, partnership, association or other entity which competes in any
manner with the Company or any of its subsidiaries or affiliates in the United
States of America or its territories or possessions (collectively, the
"Territory"), attempt to employ, employ or enter into any contractual
arrangement for employment with, any employee or former employee of the Company
or any of its subsidiaries or affiliates, unless such former employee shall not
have been employed by the Company or any of its subsidiaries or affiliates for a
period of at least one year.
(b) He shall not, during the term of this Agreement,
and for a period equal to three (3) years from and after the date of termination
of this Agreement if such termination occurs within five (5) years of the date
hereof, and for a period of two (2) years from and after the date of termination
of this Agreement if such Termination occurs after five (5) years from the date
hereof, (i) acquire or own in any manner any interest in, or loan any amount to,
any person, firm, partnership, corporation, association or other entity which
competes in any manner with the Company or any of its subsidiaries or affiliates
in the Territory, (ii) be employed by or serve as an employee, agent, officer,
director of, or as a consultant to, any person, firm, partnership, corporation,
association or other entity, other than the Company and its subsidiaries and
affiliates, which competes in any manner with any of the Company or its
subsidiaries or affiliates in the Territory, or (iii) compete in any manner with
the Company or its subsidiaries or affiliates in the Territory. The foregoing
provisions of this Section 6.1(b) shall not prevent the Employee from acquiring
or owning not more than five percent (5%) of the equity securities of any entity
whose securities are listed for trading on a national securities exchange or are
regularly traded in the over-the-counter securities market.
(c) He shall not (except as appropriate in the
performance of his duties hereunder), at any time disclose, directly or
indirectly, to any person, firm, corporation, partnership, association or other
entity, any confidential information relating to the Company or any of its
subsidiaries or affiliates, including, without limitation, any information
concerning the financial condition, assets, personnel, procedures, techniques,
products, customers, sources of leads and methods of obtaining new business or
the methods generally of doing and operating the respective businesses of the
Company and its subsidiaries and affiliates, trade secrets, product ideas,
processes, techniques, formulas, know-how, marketing plans and strategies,
except to the extent that such information is a matter of public knowledge, is
required to be disclosed by law or judicial or administrative process, or is
required to be disclosed.
7
<PAGE>
(d) He shall return all Company documents to the
Company at upon the termination of his employment by the Company.
(e) For purposes of Sections 6.1(a) and (b) hereof
"competes in any manner with the Company or any of its subsidiaries or
affiliates" shall relate to (i) all of the Company's businesses as conducted on
the date hereof and (ii) all of Richardson Labs, Inc. or its successor's
businesses on the date hereof and all of its businesses as conducted after the
date hereof through the date of the termination of the Employee's employment
hereunder.
6.2 Injunction. It is recognized and acknowledged by each of
the Company and the Employee that a breach or violation by the Employee of any
or all of his covenants and agreements contained in Section 6.1 hereof will
cause irreparable harm and damage to the Company and its subsidiaries and
affiliates in a monetary amount which would be virtually impossible to
ascertain. As a result, the Employee recognizes and acknowledges that the
Company and its subsidiaries and affiliates shall be entitled to a temporary
restraining order and/or injunction from any court of competent jurisdiction
enjoining and restraining any breach or violation by the Employee and/or his
affiliates, employees, associates, partners or agents, either directly or
indirectly, of any or all of the Employee's covenants and agreements contained
in Section 6.1 hereof. Such right to a temporary restraining order and/or
injunction shall be cumulative and in addition to whatever other rights or
remedies the Company and its subsidiaries and affiliates may possess hereunder,
at law or in equity. Nothing contained in this Agreement shall be construed to
prevent the Company and its subsidiaries and affiliates from seeking and
recovering from the Employee damages suffered by any or all of them as a result
of any breach or violation by the Employee and/or his affiliates, employees,
associates, partners or agents of any or all of the Employee's covenants and
agreements contained in this Agreement.
6.3 Reduction in Scope. In the event that any of the covenants
and agreements of the Employee contained in Section 6.1 hereof shall be held
invalid or unenforceable by a court of competent jurisdiction because of its
duration or geographic area, then, in any such event, such covenant or agreement
shall be reduced by such court in duration or geographical area or both to such
extent as to make it valid and enforceable in the jurisdiction where such court
is located, and in all other respects it shall remain in full force and effect.
VII. ATTORNEYS' FEES
--------------------
7.1 Prevailing Party. If any litigation shall arise between
the Company and the Employee based, in whole or in part, upon this Agreement or
any or all of the provisions contained herein, the prevailing party in any such
litigation shall be entitled to recover from the non-prevailing party, and shall
be awarded by a court of competent jurisdiction, any and all reasonable fees and
disbursements of trial and appellate counsel paid, incurred or suffered by such
prevailing party as the result of, arising from, or in connection with, any such
litigation.
VIII. MISCELLANEOUS
-------------------
8.1 No Set-Off. The Company shall have no rights whatsoever to
set-off, off set or make any deductions from any amount payable to Employee
under this Agreement.
8
<PAGE>
8.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without
application of any conflicts of laws principles. The Employee agrees that any
litigation or action directly or indirectly connected with this Agreement,
shall, be subject to binding arbitration administered by the American
Arbitration Association.
8.3 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Employee with respect to the subject
matter hereof and supersedes all prior negotiations, agreements, understandings
and arrangements, both oral and written, between the Company and the Employee
with respect to such subject matter other than agreements relating to option
plans or indemnification agreements. This Agreement may not be modified in any
way, except by a written instrument executed by each of the Company and the
Employee.
8.4 Notices. Any and all notices required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have been
duly given when delivered by hand, sent by a recognized overnight carrier such
as Federal Express or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, as follows:
If to the Company: Rexall Sundown, Inc.
851 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Attn: Richard Werber
If to the Employee: John Priddy
Richardson Labs, Inc.
3475 Commercial Court
Meridian, ID 83642
or to such other address as either party may from time to time give written
notice of to the other.
8.5 Benefits; Binding Effect. This Agreement shall be for the
benefit of, and shall be binding upon, each of the Company and the Employee and
their respective heirs, personal representatives, legal representatives,
successors and assigns.
8.6 Severability. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law. Except as is otherwise provided in Section 6.3 hereof, if any one or more
of the words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid by a court of competent jurisdiction, then,
in any such event, this Agreement shall be construed as if such invalid word or
words, phrase or phrases, sentence or sentences, clause or clauses, or section
or sections had not been inserted.
8.7 Waivers. The waiver by either party of a breach or
violation of any term or provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach or violation
of any provision of this Agreement nor of any other right or remedy.
9
<PAGE>
8.8 Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of any or all of the provisions of this Agreement.
8.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the separate parties hereto in separate counterparts,
each of which shall be deemed to constitute an original and all of which shall
be deemed to be the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and
delivered this Agreement as of January 29, 1998.
REXALL SUNDOWN, INC.
By: /s/ Carl DeSantis
------------------------------------
Carl DeSantis, Chairman of the Board
/s/ John Priddy
------------------------------------
JOHN PRIDDY
10
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Aug-31-1998
<PERIOD-END> Feb-28-1998
<CASH> 64,027,544
<SECURITIES> 27,649,651
<RECEIVABLES> 48,057,618<F1>
<ALLOWANCES> 0
<INVENTORY> 73,136,329
<CURRENT-ASSETS> 226,137,431
<PP&E> 49,946,387<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 289,763,547
<CURRENT-LIABILITIES> 51,615,502
<BONDS> 0<F3>
0
0
<COMMON> 713,219
<OTHER-SE> 236,955,124
<TOTAL-LIABILITY-AND-EQUITY> 289,763,547
<SALES> 226,209,562
<TOTAL-REVENUES> 226,209,562
<CGS> 92,355,087
<TOTAL-COSTS> 92,355,087
<OTHER-EXPENSES> 89,567,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,642
<INCOME-PRETAX> 46,362,807
<INCOME-TAX> 16,190,280
<INCOME-CONTINUING> 30,172,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,172,527
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.41
<FN>
F1 - Net of allowance.
F2 - Net of depreciation.
F3 - Includes Long-term obligations.
</FN>
</TABLE>
