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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number:0-21884
REXALL SUNDOWN, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-1688986
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
6111 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
------------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required 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. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
The aggregate market value of the voting stock of the Registrant held
by non-affiliates based on the closing sale price of the common stock on
November 22, 1999 was $350,319,822.00
As of November 22, 1999, the Registrant had 64,419,335 shares of common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The following table sets forth certain information concerning the
Directors and executive officers of Rexall Sundown, Inc. (the "Company"):
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
- ---- --- --------
Carl DeSantis.................... 60 Chairman of the Board
Christian Nast................... 68 Vice Chairman
Damon DeSantis................... 35 President, Chief Executive Officer and Director;
Chief Executive Officer of Rexall Showcase
Nickolas Palin................... 52 Senior Executive Vice President and Director
Geary Cotton..................... 48 Vice President, Chief Financial Officer and Treasurer
Richard Werber................... 47 Vice President, General Counsel and Secretary
Gerald Holly..................... 57 Executive Vice President-Operations
Dean DeSantis.................... 37 Director
Stanley Leedy.................... 65 Director
Melvin Stith..................... 52 Director
</TABLE>
Carl DeSantis, age 60, founded the Company in 1976 and has been the
Chairman of the Board of the Company since its inception. He served as Chief
Executive Officer of the Company from its inception to February 1997 and
President of the Company from 1976 to April 1995. Mr. DeSantis has had 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, the
President, Chief Executive Officer and a Director of the Company, and Dean
DeSantis, a Director of the Company.
Christian Nast, age 68, has been Vice Chairman of the Company since
February 1999 and a Director of the Company since October 1993. Mr. Nast served
as Chief Executive Officer of the Company from February 1997 to February 1999,
President of the Company from April 1995 to February 1998 and 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. Mr. Nast is also a
Director of Q.E.P. Co., Inc.
Damon DeSantis, age 35, has been Chief Executive Officer of the Company
since February 1999, President of the Company and Chief Executive Officer of
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 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, the Chairman of the Board of the Company, and the
brother of Dean DeSantis, a Director of the Company.
Nickolas Palin, age 52, has been Senior Executive Vice President of the
Company since July 1998 and a Director of the Company since December 1995. Mr.
Palin served as President of the Company's Sundown Vitamins division from
September 1997 to January 1999, Senior Vice President-Sales and Marketing of the
Company from August 1989 to September 1997 and joined the Company in 1984.
Geary Cotton, age 48, has been Vice President and Chief Financial
Officer of the Company since August 1989, Treasurer of the Company since March
1993 and joined the Company in 1986. Mr. Cotton is a Certified Public
Accountant.
<PAGE>
Richard Werber, age 47, has been Vice President and General Counsel of
the Company since joining the Company in August 1991 and Secretary of the
Company since March 1993. Prior to that, Mr. Werber was a partner in the law
firm of Holland & Knight.
Gerald Holly, age 57, has been Executive Vice President-Operations of
the Company since joining the Company in November 1997. For the prior 25 years,
Mr. Holly served in various capacities for Pharmavite Corp., a subsidiary of
Otsuka Pharmaceutical Company, Ltd. of Japan, including Executive Vice
President-Operations since 1992.
Dean DeSantis, age 37, 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, 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, the
Chairman of the Board of the Company and the brother of Damon DeSantis, the
President, Chief Executive Officer and a Director of the Company.
Stanley Leedy, age 65, has been a Director of the Company since March
1993. Since January 1985, Mr. Leedy has been the President and Chief Executive
Officer of Van San 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 52, 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., Keebler Foods Company, Palmetto Hospital Trust, Inc., Synovous
Financial Corp. and Tallahassee State Bank.
There are no arrangements or understandings with respect to the
selection of officers or Directors.
<PAGE>
Item 11. 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 1999 (collectively, the
"Named Executive Officers"), for the fiscal years ended August 31, 1999, 1998
and 1997.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation (1)
-------------------------------------------------------- ----------------
Number
Fiscal Other Annual of Options
Name and Principal Position Year Salary Bonus Compensation (2) Granted (3)
- --------------------------- ---- ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl DeSantis (4) 1999 $502,586 $ -- $17,025 197,500
Chairman of the Board 1998 491,761 237,500 10,892 300,000
1997 452,362 217,880 16,712 120,000
Damon DeSantis (4) 1999 $396,769 $ -- $13,775 227,000
President and Chief 1998 331,717 109,575 7,715 270,000
Executive Officer 1997 197,885 47,297 9,182 80,000
Nickolas Palin (4) 1999 $377,899 $165,931 $6,337 335,000
Senior Executive 1998 360,135 168,750 4,076 280,000
Vice President 1997 285,578 102,266 4,589 80,000
Christian Nast (4) 1999 $349,615 $ -- $13,012 174,000
Vice Chairman 1998 416,278 280,000 11,500 300,000
1997 335,779 157,508 11,298 120,000
Geary Cotton (4) 1999 $323,925 $ -- $17,223 177,500
Vice President, Chief 1998 314,117 100,000 12,126 260,000
Financial Officer and Treasurer 1997 197,885 63,504 15,468 80,000
- --------------------------------
</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,
the Company's contributions to its 401(k) Plan for the benefit of such
officer and executive long-term disability expenses.
(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, $425,000,
$385,900 and $330,800, 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 $275,000.
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
<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, Christian Nast and Damon DeSantis and
62-1/2% of base salary for Nickolas Palin and Geary Cotton. Effective January 1,
2000, the annual base salaries of Carl DeSantis and Christian Nast will be
$275,000 and $100,000, respectively, and neither of such officers will be
entitled to an annual bonus.
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 (3) 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.
Director Compensation
Each non-employee Director of the Company receives a retainer fee of
$30,000 per year for Board and Committee 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 10 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 10 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 600,000 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
<PAGE>
Compensation-Employment Agreements"), all options outstanding under the 1994
Director Plan will become immediately exercisable in full.
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 1999 fiscal year to the Named
Executive Officers. All stock options were granted pursuant to the Company's
Amended and Restated 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 1999 Share (2) Date Term (3)
---- ----------- ---------------- --------- ---- --------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl DeSantis 147,500 (4) 3.1% $11.375 12/06/08 $1,055,167 $2,674,001
50,000 (5) 1.0% 11.560 06/14/09 363,501 921,183
Damon DeSantis 127,000 (4) 2.6% 11.375 12/06/08 908,517 2,302,360
100,000 (5) 2.1% 11.560 06/14/09 727,002 1,842,366
Nickolas Palin 185,000 (4) 3.9% 11.375 12/06/08 1,323,430 3,353,832
50,000 (6) 1.0% 14.190 02/28/09 446,201 1,130,760
100,000 (5) 2.1% 11.560 06/14/09 727,002 1,842,366
Christian Nast 124,000 (4) 2.6% 11.375 12/06/08 887,056 2,247,974
50,000 (5) 1.0% 11.560 06/14/09 363,501 921,183
Geary Cotton 92,500 (4) 1.9% 11.375 12/06/08 661,715 1,676,916
85,000 (5) 1.8% 11.560 06/14/09 617,952 1,566,011
- ----------------------------------
</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, except for the 50,000 options
granted to Nickolas Palin on March 1, 1999, which were exercisable
immediately.
(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
Securities and Exchange Commission (the "SEC") and are not intended to
forecast future appreciation in the price of the Common Stock.
(4) Such options were granted on December 7, 1998.
(5) Such options were granted on June 15, 1999.
(6) Such options were granted on March 1, 1999.
<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 1999 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, 1999.
<TABLE>
<CAPTION>
Value Realized
Shares (Market Price at Value of Unexercised
Acquired on Exercise Less Number of Unexercised Options In-the-Money Options
Name Exercise Exercise Price) At Fiscal Year End at Fiscal Year-End (1)
- ---- -------- --------------- ------------------ ----------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl DeSantis 165,000 $1,692,958 360,000 437,500 $1,388,135 $237,938
Damon DeSantis 90,000 897,486 368,333 433,667 1,910,433 253,542
Nickolas Palin 40,000 566,828 199,002 507,332 300,322 401,285
Christian Nast - - 203,000 414,000 415,348 211,500
Geary Cotton 15,000 150,308 446,000 386,500 2,686,014 283,123
- --------------------
</TABLE>
(1) Based on a fiscal year-end value of $12.50 per share. Value is
calculated by multiplying (a) the difference between $12.50 and the
in-the-money option exercise price by (b) the number of shares of
Common Stock underlying the in-the-money option.
Long-Term Incentive and Pension Plans
The Company does not have any long-term incentive or pension plans.
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 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, 1999, all Section
16(a) filing requirements applicable to its directors, executive officers, and
greater than 10% beneficial owners have been complied with.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth certain information as of December 15,
1999 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.
Shares of Percentage of
Common Stock Common Stock
Name Beneficially Owned Outstanding
- ---- ------------------ -----------
Carl DeSantis (1) 22,045,814 (2)(3) 33.9%
Damon DeSantis (1) 6,759,222 (3)(4) 10.4
Christian Nast 406,229 (3) *
Nickolas Palin 381,334 (3) *
Geary Cotton 723,811 (3)(5) 1.1
Dean DeSantis (1) 4,602,042 (3)(6) 7.1
Stanley Leedy 91,000 (3)(7) *
Melvin Stith 26,667 (3) *
CDD Partners, Ltd. (1) 17,958,613 27.9
Sylvia DeSantis 13,495,792 (8) 21.0
All directors and executive officers
as a group (10 persons) 35,693,838 (9) 52.6
- --------------------
* Less than 1%.
(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 7,844,189 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--540,833 shares; Damon
DeSantis--519,000 shares; Dean DeSantis--435,000 shares; Christian
Nast--376,000 shares; Nickolas Palin--381,334 shares; Geary
Cotton--594,167 shares; Stanley Leedy--90,000 shares; and
Melvin Stith--26,667 shares. See "Executive Compensation."
(4) Includes 6,029,712 shares held by CDD which represent Damon DeSantis'
percentage interest in CDD. Does not include 11,928,901 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 13,873,901 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) Does not include 8,900 shares owned by the wife of Stanley Leedy, as to
which shares Mr. Leedy disclaims beneficial ownership.
(8) 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
<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.
(9) Includes 3,487,820 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."
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
None.
<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.
Dated: December 28, 1999 By: /s/ Carl DeSantis
-----------------------
Carl DeSantis,
Chairman of the Board
