SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, For use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
REXALL SUNDOWN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
REXALL SUNDOWN, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date Filed:
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<PAGE>
[LOGO]
REXALL SUNDOWN, INC.
6111 Broken Sound Parkway, NW
Boca Raton, Florida 33487
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on February 23, 1999
To the Shareholders
of Rexall Sundown, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of Rexall Sundown, Inc., a Florida corporation (the
"Company"), will be held at 10:00 a.m., local time, on Tuesday, February 23,
1999 at the Boca Raton Marriott, 5150 Town Center Circle, Boca Raton, Florida
33486, for the following purposes:
(1) To elect seven members to the Company's Board of Directors
to hold office until the Company's 2000 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To consider and vote upon a proposal to ratify the
appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending August
31, 1999; and
(3) To transact such other business as may properly come
before the Annual Meeting and any adjournments or
postponements thereof.
The Board of Directors has fixed the close of business on December 28,
1998 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof. A list of such shareholders will be available for examination at the
principal executive offices of the Company located at 6111 Broken Sound Parkway,
NW, Boca Raton, Florida 33487, for a period commencing ten days prior to the
Annual Meeting.
Whether or not you expect to be present at the Annual Meeting, please
sign, date and return the enclosed proxy card in the enclosed, pre-addressed
envelope as promptly as possible. No postage is required if mailed in the United
States.
By Order of the Board of Directors
RICHARD WERBER
Secretary
Boca Raton, Florida
December 29, 1998
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE>
1999 ANNUAL MEETING OF SHAREHOLDERS
OF
REXALL SUNDOWN, INC.
----------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Rexall Sundown, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$.01 per share (the "Common Stock"), for use at the 1999 Annual Meeting of
Shareholders of the Company to be held on Tuesday, February 23, 1999 or at any
adjournments or postponements thereof (the "Annual Meeting"), pursuant to the
foregoing Notice of Annual Meeting of Shareholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is January 15, 1999. Shareholders
should review the information provided herein in conjunction with the Company's
1998 Annual Report which accompanies this Proxy Statement. The Company's
principal executive offices are located at 6111 Broken Sound Parkway, NW, Boca
Raton, Florida 33487, and its telephone number is (561) 241-9400.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving their proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of seven members to the Company's Board of
Directors to serve until the Company's 2000 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) A proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants of the
Company for the fiscal year ending August 31, 1999; and
(3) To transact such other business as may properly come
before the Annual Meeting and any adjournments or
postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares of Common Stock represented by valid proxies received pursuant to this
solicitation (and which have not been revoked in accordance with the procedures
<PAGE>
set forth above) will be voted (a) for the election of the seven nominees for
Director named below and (b) for the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants. If a shareholder
specifies a different choice by means of the enclosed proxy, such shareholder's
shares of Common Stock will be voted in accordance with the specification so
made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on December 28,
1998 as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 68,538,399 shares of Common Stock outstanding, each of
which is entitled to one vote on each matter submitted to shareholders at the
Annual Meeting. Shareholders do not have the right to cumulate their votes.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants, and any other matter that
may be submitted to a vote of the shareholders, will be approved if a majority
of votes cast by the shares of Common Stock represented in person or by proxy at
the Annual Meeting vote in favor of the matter, unless such other matter is one
for which a greater vote is required by law or by the Company's Articles of
Incorporation or Bylaws. If less than a majority of outstanding shares entitled
to vote are represented at the Annual Meeting, a majority of the shares of
Common Stock so represented may adjourn the Annual Meeting to another date, time
or place, and notice need not be given of the new date, time or place if the new
date, time or place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the Annual Meeting. Such inspector(s) shall determine
the number of shares of Common Stock represented at the Annual Meeting, the
existence of a quorum and the validity and effect of proxies, and shall receive,
count and tabulate ballots and votes and determine the results thereof.
Abstentions will be considered as shares present and entitled to vote at the
Annual Meeting and will be counted as votes cast at the Annual Meeting, but will
not be counted as votes cast for or against any given matter.
A broker or nominee holding shares of Common Stock registered in its
name, or in the name of its nominee, which are beneficially owned by another
person and for which it has not received instructions as to voting from the
beneficial owner, may have discretion to vote the beneficial owner's shares with
respect to the election of Directors and other matters addressed at the Annual
Meeting. Any such shares which are not represented at the Annual Meeting either
in person or by proxy will not be considered as shares present at the Annual
Meeting, and will not be considered to have cast votes on any matters addressed
at the Annual Meeting.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record
Date concerning the beneficial ownership of the Common Stock by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Common Stock
Name Beneficially Owned Outstanding
- ---- ------------------ -----------
<S> <C> <C>
Carl DeSantis (1) 22,288,752 (2)(3) 32.3%
Damon DeSantis (1) 6,638,555 (3)(4) 9.6
Christian Nast 182,896 (3) *
Nickolas Palin 153,666 (3) *
Geary Cotton 572,976 (3)(5) *
Dean DeSantis (1) 4,570,374 (3)(6) 6.6
Stanley Leedy 61,300 (3) *
Melvin Stith 15,000 (3) *
CDD Partners, Ltd. (1) 18,432,717 26.8
Sylvia DeSantis 13,495,792 (7) 19.7
All directors and executive officers as a group (11 persons) 37,112,347 (8) 52.4
- --------------------
* Less than 1%.
</TABLE>
(1) In June 1993, each of Carl DeSantis, Damon DeSantis and Dean DeSantis
contributed all shares of Common Stock then owned by them to CDD
Partners, Ltd. ("CDD"), a Texas limited partnership of which Carl
DeSantis, Damon DeSantis and Dean DeSantis are limited partners and to
CDD Management, Inc. ("CDDM"), a Texas corporation and the general
partner of CDD. Each of Carl DeSantis, Damon DeSantis and Dean DeSantis
has shared beneficial ownership and voting power with respect to all
such shares held by CDD. CDD's address is 12770 Coit Road, #850,
Dallas, Texas 75251.
(2) Includes 13,495,792 shares owned by Sylvia DeSantis as to which Carl
DeSantis has sole voting power. Also includes 8,318,293 shares held by
CDD, which represent Carl DeSantis' percentage interest in CDD. Does
not include 10,114,424 shares beneficially owned by Dean DeSantis and
Damon DeSantis indirectly through CDD.
(3) For each person, includes shares beneficially owned pursuant to
currently exercisable stock options or options which will become
exercisable within 60 days: Carl DeSantis--399,667 shares; Damon
DeSantis--374,998 shares; Dean DeSantis--403,332 shares; Christian
Nast--152,667 shares; Nickolas Palin--153,666 shares; Geary
Cotton--419,998 shares; Stanley Leedy--61,300 shares; and Melvin Stith
-15,000 shares. See "Executive Compensation."
(4) Includes 6,029,712 shares held by CDD which represent Damon DeSantis'
percentage interest in CDD. Does not include 12,403,005 shares
beneficially owned by Damon DeSantis that are held by CDD, which
represent the percentage interest of Carl DeSantis and Dean DeSantis in
CDD, and 28,100 shares owned by the wife of Damon DeSantis. Mr.
DeSantis disclaims beneficial ownership of his wife's shares.
(5) Does not include 11,194 shares owned by the wife of Geary Cotton, as to
which shares Mr. Cotton disclaims beneficial ownership.
(6) Includes 4,084,712 shares held by CDD which represent Dean DeSantis'
percentage interest in CDD. Does not include 14,348,005 shares
beneficially owned by Dean DeSantis that are held by CDD which
represent the percentage interest of Carl DeSantis and Damon DeSantis
in CDD, and 19,066 shares beneficially owned by the wife of Dean
DeSantis. Mr. DeSantis disclaims beneficial ownership of his wife's
shares.
(7) Ms. DeSantis' address is 6111 Broken Sound Parkway, NW, Boca Raton,
Florida 33487. All of such shares are subject to an irrevocable proxy
granted to Carl DeSantis, and 13,158,042 of such shares are further
subject
3
<PAGE>
to a stock purchase agreement with an irrevocable life insurance trust
for the benefit of her children. Such stock purchase agreement provides
for significant restrictions on sales or transfers of such shares
during her life, and requires the sale of such shares to such trust
upon her death.
(8) Includes 2,235,778 shares beneficially owned by directors and executive
officers as a group pursuant to currently exercisable stock options or
options which will become exercisable within 60 days. See "Executive
Compensation."
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's outstanding Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. Such persons are required by SEC regulation to
furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 31, 1998, all Section
16(a) filing requirements applicable to its directors, executive officers, and
greater than 10% beneficial owners have been complied with.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors shall be
fixed from time to time by resolution of the Board of Directors. The Board of
Directors has fixed at seven the number of Directors that will constitute the
Board for the ensuing year. Each director elected at the Annual Meeting will
serve for a term expiring at the Company's 2000 Annual Meeting of Shareholders
or until his successor has been duly elected and qualified.
Each of the current members of the Board of Directors, consisting of
Carl DeSantis, Christian Nast, Damon DeSantis, Nickolas Palin, Dean DeSantis,
Stanley Leedy and Melvin Stith, has been nominated by the Company to be
re-elected as a director at the Annual Meeting. The Board of Directors has no
reason to believe that any nominee will refuse or be unable to accept election;
however, if one or more nominees are unable to accept election or if any other
unforeseen contingencies should arise, each proxy that does not direct otherwise
will be voted for the remaining nominees, if any, and for such other persons as
may be designated by the Board of Directors.
The following sets forth certain information concerning each director
and nominee for election to the Board of Directors of the Company.
Carl DeSantis, age 59, founded the Company in 1976 and has served as
Chairman of the Board of the Company since its inception. Mr. DeSantis served as
the Company's Chief Executive Officer from the Company's inception to February
1997 and served as its President from 1976 to April 1995. Mr. DeSantis has over
18 years of experience with retail drug store companies, including Super-X Drug
Stores and Walgreen Drug Stores. He is the father of Damon DeSantis and Dean
DeSantis.
Christian Nast, age 67, has been Chief Executive Officer of the Company
since February 1997 and a Director of the Company since October 1993. Mr. Nast
served as President of the Company from April 1995 to 1998 and as Chief
Operating Officer of the Company from April 1995 to February 1997. From December
1989 to April 1995, Mr. Nast was employed by Colgate Palmolive Company as its
Executive Vice President--North America. Mr. Nast has over 40 years of
experience in the consumer products industry with companies such as
Bristol-Myers Squibb Company, Chesebrough-Ponds, Inc. and the Procter & Gamble
Company.
Damon DeSantis, age 34, has been President of the Company and Chief
Executive Officer of Rexall Showcase International, Inc. ("Rexall Showcase"),
the Company's network marketing subsidiary, since February 1998 and a Director
of the Company since July 1988. He served as President of Rexall Showcase from
January 1993 to February 1998 and as Executive Vice President of the Company
from July 1988 to February 1998. He was
4
<PAGE>
a Vice President of the Company from when he joined the Company in September
1983 until July 1988. He is the son of Carl DeSantis and the brother of Dean
DeSantis.
Nickolas Palin, age 51, has been Senior Executive Vice President of the
Company since July 1998, President of the Company's Sundown Vitamins division
since September 1997 and a Director of the Company since December 1995. He
served as Senior Vice President-Sales and Marketing of the Company from August
1989 to September 1997 and joined the Company in 1984.
Dean DeSantis, age 36, has been a Director of the Company since March
1990. He served as Chief Operating Officer of the Company from February 1997 to
March 1998, and Senior Vice President-Operations of the Company from June 1989
to March 1998 and joined the Company in 1985. He is the son of Carl DeSantis and
the brother of Damon DeSantis.
Stanley Leedy, age 64, has been a Director of the Company since March
1993. Since January 1985, Mr. Leedy has been the president and chief executive
officer of VanSan Corporation, a consulting firm for the pharmaceutical and
vitamin industry. Mr. Leedy has over 30 years experience in the pharmaceutical
and vitamin industry and has previously served as president and chief executive
officer of the Rexall Drug & Chemical Company, a division of Dart Industries,
Inc.
Melvin Stith, age 51, has been a Director of the Company since April
1997. Since July 1991, Mr. Stith has been Dean of the Florida State University
College of Business. From December 1989 to July 1991, Mr. Stith was Chairman of
the Marketing Department of the Florida State University College of Business
where he was also a Professor. Mr. Stith is also a Director of Correctional
Services Corp., Synovous Financial Corp., Tallahassee State Bank and Palmetto
Hospital Trust, Inc.
Except as described below, there are no arrangements or understandings
with respect to the selection of officers or directors.
Meetings and Committees of the Board of Directors
During the Company's fiscal year ended August 31, 1998, the Company's
Board of Directors held seven meetings and took certain actions by unanimous
written consent. During the 1998 fiscal year, no Director attended fewer than 75
percent of the aggregate of (i) the number of meetings of the Board of Directors
held during the period he served on the Board, and (ii) the number of meetings
of committees of the Board of Directors held during the period he served on such
committees.
The committees of the Board of Directors are the Audit Committee and
the Compensation/Stock Option Committee. The Board does not have a nominating or
similar committee.
The members of the Audit Committee are Messrs. Leedy and Stith and Mr.
Leedy serves as Chairman of the Committee. During the 1998 fiscal year, the
Audit Committee held three meetings. The Audit Committee is responsible for (i)
recommending the firm to be appointed as independent accountants to audit the
Company's financial statements, (ii) discussing the scope and results of the
audit with the independent accountants, (iii) reviewing with management and the
independent accountants the Company's interim and year-end results, (iv)
considering the adequacy of the internal accounting controls and audit
procedures of the Company and (v) reviewing the non-audit services to be
performed by the independent accountants.
The members of the Compensation/Stock Option Committee are Messrs.
Leedy and Stith and Mr. Leedy serves as Chairman of the Commitee. During the
1998 fiscal year, the Compensation/Stock Option Committee held three meetings
and took certain actions by unanimous written consent. The Compensation/Stock
Option Committee is responsible for setting compensation of the executive
officers of the Company and for the grant of stock options to purchase Common
Stock.
5
<PAGE>
Director Compensation
Each non-employee Director of the Company receives a retainer fee of
$30,000 per year for Board membership. The Company reimburses all directors for
expenses incurred in connection with their activities as directors.
1993 Non-Employee Director Stock Option Plan. Under the Amended and
Restated 1993 Non-Employee Director Stock Option Plan (the "1993 Director
Plan"), each director who is not an employee of the Company or its subsidiaries
("Non-Employee Directors") is entitled to a one-time grant of options upon
initial election to the Board of Directors with respect to 15,000 shares of
Common Stock, which vest 33-1/3% per year commencing one year from the date of
grant (except for those stock options granted prior to February 1997 which shall
continue to vest 20% per year commencing one year from the date of grant) and
have a term of ten years (except for those granted prior to February 1996 which
have a term of six years). The maximum number of shares of Common Stock
available for issuance under the 1993 Director Plan is 120,000 shares. The 1993
Director Plan will expire on, and no options may be granted thereunder after
March 14, 2003, subject to the right of the Board of Directors to earlier
terminate the 1993 Director Plan. Upon a "change of control" (defined in the
same manner as in the employment agreements discussed under "Executive
Compensation-Employment Agreements"), all options outstanding under the 1993
Director Plan will become immediately exercisable in full.
1994 Non-Employee Director Stock Option Plan. Under the Amended and
Restated 1994 Non-Employee Director Stock Option Plan (the "1994 Director
Plan"), each then Non-Employee Director was granted stock options to purchase
15,000 shares of Common Stock on July 7, 1994. The 1994 Director Plan also
provides for the grant of an annual option to purchase 15,000 shares of Common
Stock at the first Annual Meeting of Shareholders at which the Non-Employee
Director is re-elected, 20,000 shares at the second Annual Meeting of
Shareholders at which the Non-Employee Director is re-elected, 25,000 shares at
the third Annual Meeting of Shareholders at which the Non-Employee Director is
re-elected, and 30,000 shares at every subsequent Annual Meeting of Shareholders
at which the Non-Employee Director is re-elected, which options vest 33-1/3% per
year commencing one year from the date of grant (except for those stock options
granted prior to February 1997, which shall continue to vest 20% per year
commencing one year from the date of grant) and have a term of ten years (except
for those granted prior to February 1996, which have a term of five years). The
maximum number of shares of Common Stock available for issuance under the 1994
Director Plan is 300,000 shares. The 1994 Director Plan will expire on, and no
options may be granted thereunder after July 6, 2003, subject to the right of
the Board of Directors to earlier terminate the 1994 Director Plan. Upon a
"change of control" (defined in the same manner as in the employment agreements
discussed under "Executive Compensation-Employment Agreements"), all options
outstanding under the 1994 Director Plan will become immediately exercisable in
full.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation of the Company's Chief
Executive Officer and the other four most highly paid executive officers who
were serving as executive officers at the end of fiscal 1998 (collectively, the
"Named Executive Officers"), for the fiscal years ended August 31, 1998, 1997
and 1996.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation (1)
---------------------------------------------------------- ---------------
Fiscal Number
------ Other Annual of Options
Name and Principal Position Year Salary Bonus Compensation (2) Granted (3)
- --------------------------- ---- ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl DeSantis (4) 1998 $491,761 $237,500 $10,892 300,000
Chairman of the Board 1997 452,362 217,880 16,712 120,000
1996 415,383 125,625 16,098 105,000
Christian Nast (4) 1998 416,278 280,000 11,500 300,000
Chief Executive Officer 1997 335,779 157,508 11,298 120,000
1996 308,158 113,500 8,269 105,000
Nickolas Palin (4) 1998 360,135 168,750 4,076 280,000
Senior Executive Vice 1997 285,578 102,266 4,589 80,000
President and President of 1996 234,635 114,401 4,890 225,000
Sundown Vitamins
Damon DeSantis (4) 1998 331,717 109,575 7,715 270,000
President 1997 197,885 47,297 9,182 80,000
1996 181,434 44,250 8,263 75,000
Geary Cotton (4) 1998 314,117 100,000 12,126 260,000
Vice President, Chief Financial 1997 197,885 63,504 15,468 80,000
Officer and Treasurer 1996 184,500 48,706 11,502 75,000
</TABLE>
- --------------------------------
(1) The columns for "Restricted Stock Awards," "LTIP Payouts" and "All
Other Compensation" have been omitted because there is no compensation
required to be reported in such columns.
(2) Represents that portion of the Company's automobile expense allowance
attributable to non-business utilization of such officer's automobile
and the Company's contributions to its 401(k) Plan for the benefit of
such officer.
(3) See "Individual Option Grants in Last Fiscal Year-End Table" and
"Aggregated Option Exercises in Last Fiscal Year and Fiscal Year Option
Value Table" for additional information with respect to these options.
(4) See "--Employment Agreements" for information regarding current and
future compensation arrangements.
Employment Agreements
The Company entered into employment agreements on April 1, 1995 with
each of Carl DeSantis, Damon DeSantis, Nickolas Palin, and Geary Cotton pursuant
to which they currently receive base annual salaries of $498,750 $362,000,
$367,500 and $315,000, respectively. Each of such employment agreements is for a
rolling term of three years except for Mr. Palin's employment agreement which is
for a rolling term of four years. The Company entered into an employment
agreement with Christian Nast for a three-year term commencing September 1,
1998, pursuant to which he currently receives a base annual salary of $420,000.
Each of such employment agreements provides for annual increases of base salary
of the greater of 5% or the percentage increase in the consumer price index
published by
7
<PAGE>
the United States Department of Labor. In addition, each of such officers is
entitled to receive incentive bonuses upon the attainment by the Company of
certain net sales and net income targets. Such bonuses may not exceed 100% of
base salary for each of Carl DeSantis and Christian Nast; and 62-1/2% of base
salary for Damon DeSantis, Nickolas Palin and Geary Cotton.
The employment agreements each provide that, if the employee terminates
his employment without good reason or is terminated for cause, such employee is
subject to a non-competition provision for a period of 18 months except for Mr.
Palin's employment agreement which makes him subject to a non-competition
provision for a period of three years. In the event of a change of control of
the Company, the employee is entitled to terminate his employment and receive a
lump sum distribution of compensation in an amount equal to three times such
employee's then current effective yearly compensation, including, but not
limited to, salary and bonuses. If the employee elects to so terminate, the
non-competitive provisions contained in the employment agreement will terminate.
Similar provisions apply in the event an employee is terminated without cause
upon a change of control of the Company. Payments under the agreements by the
Company after a change of control are, however, limited to the amount which
would be deductible by the Company under the Internal Revenue Code of 1986, as
amended (the "Code"). A "change of control" is deemed to occur upon (i) the
acquisition of 30% or more of the Company's voting power by anyone other than a
current director, executive officer of the Company or an affiliate thereof, or
(ii) the Incumbent Directors, as defined therein, becoming less than a majority
of the Board of Directors of the Company or its successor. A change of control,
as to any employee, may not result from a voluntary action of such employee.
8
<PAGE>
Option Grants in Last Fiscal Year Table
The following table sets forth certain information concerning grants of
options to purchase Common Stock made during the 1998 fiscal year to the Named
Executive Officers. All stock options were granted pursuant to the Company's
1993 Stock Incentive Plan.
<TABLE>
<CAPTION>
Individual Option Grants in Last Fiscal Year
- ---------------------------------------------------------------------------------------------------------------
% of Total Options Potential Realizable Value at
Number Granted to Exercise Assumed Annual Rates of Stock
of Options Employees in Price Per Expiration Price Appreciation for Option
Name Granted(1) Fiscal Year 1998 Share (2) Date Term (3)
---- ---------- ---------------- --------- ---- --------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl DeSantis 200,000 (4) 6.2% $17.344 9/14/07 $2,181,500 $5,528,000
75,000 (5) 2.3 25.25 12/14/07 1,191,000 3,018,100
25,000 (6) 0.8 31.063 3/26/08 488,400 1,237,700
Christian Nast 200,000 (4) 6.2 17.344 9/14/07 2,181,500 5,528,400
75,000 (5) 2.3 25.25 12/14/07 1,191,000 3,018,100
25,000 (6) 0.8 31.063 3/26/08 488,400 1,237,700
Nickolas Palin 200,000 (4) 6.2 17.344 9/14/07 2,181,500 5,528,400
55,000 (5) 1.7 25.25 12/14/07 873,400 2,213,300
25,000 (6) 0.8 31.063 3/26/08 488,400 1,237,700
Damon DeSantis 200,000 (4) 6.2 17.344 9/14/07 2,181,509.68 5,528,400
45,000 (5) 1.4 25.25 12/14/07 714,600 1,810,900
25,000 (6) 0.8 31.063 3/26/08 488,400 1,237,700
Geary Cotton 200,000 (4) 6.2 17.344 9/14/07 2,181,500 5,528,400
45,000 (5) 1.4 25.25 12/14/07 714,600 1,810,900
15,000 (6) 0.5 31.063 3/26/08 293,000 742,600
</TABLE>
- ----------------------------------
(1) Such options become exercisable with respect to 33-1/3% of the covered
shares one year from the date of grant, 66-2/3% of the covered shares
two years from the date of grant, and the remainder become exercisable
three years from the date of grant.
(2) The exercise price is the fair market value on the date of grant,
determined by calculating the average of the high and low prices of the
Common Stock on the date of such grant.
(3) The stock price appreciation is computed based on the exercise price
per share. The dollar amounts set forth under these columns are the
result of calculations at the 5% and 10% rates established by the SEC
and are not intended to forecast future appreciation in the price of
Common Stock.
(4) Such options were granted on September 15, 1997.
(5) Such options were granted on December 15, 1997.
(6) Such options were granted on March 27, 1998.
9
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth certain information concerning the
exercise in fiscal 1998 of options to purchase Common Stock by the Named
Executive Officers and the unexercised options to purchase Common Stock held by
such individuals at August 31, 1998.
<TABLE>
<CAPTION>
Value Realized Value of Unexercised
Shares (Market Price at Number of Unexercised Options In-the-Money Options
Acquired on Exercise Less At Fiscal Year End at Fiscal Year-End (1)
Name Exercise Exercise Price) ------------------ ----------------------
- ---- ----------- ---------------- Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Carl DeSantis - - 303,250 461,750 $4,010,590 $878,148
Christian Nast 461,000 $11,564,926 - 443,000 - 598,473
Nickolas Palin 277,666 5,600,974 - 411,334 - 843,304
Damon DeSantis - - 277,916 387,083 3,832,650 703,118
Geary Cotton 15,000 526,553 278,666 391,334 3,920,866 1,041,434
</TABLE>
- --------------------
(1) Based on a fiscal year-end value of $ 18.25 per share. Value is
calculated by multiplying (a) the difference between $18.25 and the
option exercise price by (b) the number of shares of Common Stock
underlying the option.
Long-Term Incentive and Pension Plans
The Company does not have any long-term incentive or pension plans.
Report on Executive Compensation
As in prior years, the Company's executive compensation for fiscal 1998
consisted of three primary components: base salary, bonus and grants of stock
options under the Company's 1993 Stock Incentive Plan. Each officer's base
salary and bonus is set forth in such officer's employment agreement.
The salary and bonus components of the Company's executive compensation
are designed to facilitate fulfillment of the following compensation objectives:
(i) attracting and retaining competent management; (ii) rewarding management for
short and long term accomplishments; (iii) aligning the interests of management
with those of the Company's shareholders; and (iv) relating management
compensation to the achievement of Company goals and the Company's performance.
In April 1995, the Company's Board of Directors approved three-year
employment agreements with each of the Company's executive officers. In
addition, in September 1998, the Company entered into a three year employment
agreement with the Company's Chief Executive Officer, Christian Nast, which was
a renewal of his prior employment agreement that expired on August 31, 1998. As
of March 1997, the employment agreements of certain executive officers of the
Company were amended to provide for a rolling three year term and in September
1998, the employment agreement of Nickolas Palin, the Company's Senior Executive
Vice President and President of Sundown Vitamins, was amended to provide for a
rolling four year term. Under such employment agreements, the current base
salaries of Carl DeSantis, Christian Nast, Nickolas Palin, Damon DeSantis and
Geary Cotton were $498,750, $420,000, $367,500, $362,000, and $315,000,
respectively. See "--Employment Agreements." The Board's determination of fiscal
1998 salary for the Company's executive officers set forth in their employment
agreements was made after reviewing and considering a number of factors,
including each officer's level of job responsibility, each officer's level of
performance (with respect to specific areas of responsibility and on an overall
basis), achievement of the Company's goals, the
10
<PAGE>
Company's performance during the 1998 fiscal year, compensation levels at
competitive companies and the Company's historical compensation levels. The
Company's compensation program for its executive officers is intended to link
compensation in substantial part to corporate performance. A significant portion
of executive officer compensation in the form of bonuses is tied directly to the
attainment of net sales and net income targets as well as the fulfillment of
individual objectives. Each officer's employment agreement also provides for an
annual increase in base salary of the greater of 5% or the increase in the cost
of living each year. Decisions about granting stock options to executive
officers were made as described below. The Company also makes contributions
under the Company's 401(k) Plan of up to $1,000 per employee, based on a 50%
matching contribution.
In determining the fiscal 1998 salary and bonus for Christian Nast, the
Chief Executive Officer of the Company, the principal factors considered by the
Board included (i) an analysis of the compensation of chief executive officers
of public companies within the vitamin and nutritional supplement industry and
public companies similar in size to the Company and (ii) the Company's 1998
fiscal year earnings and other performance measures. One-half of Mr. Nast's'
compensation is tied directly to the attainment of net sales and net income
targets. As described above, the Board of Directors entered into a new
three-year employment agreement with Mr. Nast in September 1998.
The grants of stock options to executive officers in fiscal 1998 were
determined by the Committee based upon recommendations by the Company's Chairman
of the Board, Carl DeSantis, and the Company's Chief Executive Officer,
Christian Nast, and their assessment of each officer's contributions to the
Company's success, position with the Company, potential to contribute to the
Company's future performance and the overall level of responsibility and job
performance of each officer.
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company. Qualifying performance-based compensation is not subject to the
deduction limit if certain requirements are met. The Company's 1993 Stock
Incentive Plan has been structured such that awards thereunder may constitute
qualifying performance-based compensation under Section 162(m). However, the
Committee recognizes that unanticipated future events, such as a change of
control of the Company or a change in executive personnel, could result in a
disallowance of compensation deductions under Section 162(m). Moreover, the
Committee may from time to time award compensation that is non-deductible under
Section 162(m) when in the exercise of the Committee's business judgment such
award would be in the best interest of the Company.
COMPENSATION/STOCK OPTION
COMMITTEE
Stanley Leedy, Chairman
Melvin Stith
Compensation Committee Interlocks and Insider Participation
None.
11
<PAGE>
Performance Graph
The following graph compares the cumulative total shareholder return on
the Common Stock with the cumulative total return on the Nasdaq Stock
Market-U.S. Index ("Nasdaq Stock Market-U.S.") and the Natural Business
Composite Index(TM) ("Natural Business Composite") from June 18, 1993 (the date
the Common Stock was first offered to the public) through August 31, 1998
(assuming the investment of $100 in the Common Stock, the Nasdaq Stock
Market-U.S. and the Natural Business Composite and reinvestment of dividends).
The Natural Business Composite is prepared by Nationsbanc Montgomery Securities,
Inc. The Company did not pay any dividends during this period.
COMPARISON OF CUMULATIVE TOTAL
RETURN AMONG REXALL SUNDOWN, INC., THE
NASDAQ STOCK MARKET - U.S. INDEX, AND THE
NATURAL BUSINESS COMPOSITE INDEX
<TABLE>
<CAPTION>
6/18/93 8/31/95 8/31/96 8/31/97 8/31/98
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Rexall Sundown, Inc. $100 $192.31 $639.20 $641.50 $673.85
Nasdaq Stock Market-U.S. $100 $147.93 $165.53 $230.18 $217.41
Natural Business Composite $100 $110.66 $125.05 $154.95 $172.07
</TABLE>
The comparisons in this table are required by the SEC and are not
intended to forecast or be indicative of possible future performance of the
Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
12
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has recommended the firm of
PricewaterhouseCoopers LLP as the independent accountants of the Company for the
current fiscal year. Although the appointment of PricewaterhouseCoopers LLP as
the independent accountants of the Company does not require ratification by the
Company's shareholders, the Board of Directors considers it appropriate to
obtain such ratification. Accordingly, the vote of the Company's shareholders on
this matter is advisory in nature and has no effect upon the Board of Directors'
appointment of a firm of independent accountants, and the Board of Directors may
change the Company's auditor at any time without the approval or consent of the
shareholders. The Board proposes and unanimously recommends that the
shareholders ratify the selection of PricewaterhouseCoopers LLP by adopting the
following resolution:
RESOLVED, that the appointment by the Board of Directors of the Company
of PricewaterhouseCoopers LLP as the independent accountants of the
Company for the current fiscal year be, and such appointment hereby is,
ratified, confirmed and approved.
If the shareholders do not ratify the selection of
PricewaterhouseCoopers LLP by the affirmative vote of the holders of a majority
of votes cast by the shares of Common Stock represented in person or by proxy at
the Annual Meeting, the selection of another independent accountant will be
considered by the Board of Directors.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Annual Meeting and will be afforded the opportunity to make a
statement if they so desire and to respond to appropriate questions.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, a shareholder intending
to present a proposal to be included in the Company's Proxy Statement for the
Company's 2000 Annual Meeting of Shareholders must deliver a proposal in writing
to the Company's principal executive offices no later than September 17, 1999.
By Order Of The Board of Directors
RICHARD WERBER
Secretary
Boca Raton, Florida
December 29, 1998
13
<PAGE>
Appendix A
REXALL SUNDOWN, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Carl DeSantis and Christian Nast, as
Proxies, each with the power to appoint his substitute, and hereby authorized
them to represent and to vote as designated on the reverse side of this card,
all the shares of Common Stock of Rexall Sundown, Inc. held of record by the
undersigned on December 28, 1998, at the Annual Meeting of Shareholders to be
held on February 23, 1999, or any adjournment or postponement thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSAL 2 AND AS
OTHERWISE DETERMINED BY THE PROXYHOLDERS IN THEIR DISCRETION.
(continued, and to be signed, on other side)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
A [ ] Please mark your votes as in this example
FOR all
nominees WITHHOLD
listed at right AUTHORITY
(except as marked to the to vote for all nominees
contrary in the list at right) listed at right
1. Election of Nominees: Carl DeSantis
Directors [ ] [ ] Christian Nast
Damon DeSantis
Nickolas Palin
Dean DeSantis
Stanley Leedy
Melvin Stith
2. Ratification of selection of PricewaterhouseCoopers LLP
[ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other business at may properly come before
the meeting.
Please mark, sign, date and return the proxy card promptly using the enclosed envelope.
SIGNATURE _____________________________ ______________________________________________________ DATED ________ , 1999
SIGNATURE, IF HELD JOINTLY
</TABLE>
Note: Please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
administrator, executor, trustee or guardian, please give full title as
such. If a corporation, please sign full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
