April 30, 2000
Mr. Damon DeSantis
President and Chief Executive Officer
Rexall Sundown, Inc.
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Dear Damon:
This will confirm our agreement as to certain matters affecting the
executive officers and employees of Rexall Sundown, Inc. and its subsidiaries
(collectively, "Company" and, after the Merger, the "Surviving Corporation") on
or after the Merger contemplated by the Agreement and Plan of Merger, dated as
of the date hereof, by and among Royal Numico N.V. ("Parent"), Nutricia
Investment Corp. and Rexall Sundown, Inc. (the "Merger Agreement"). Capitalized
terms not defined herein shall have the meaning ascribed to them in the Merger
Agreement. This letter (the "Benefits Letter") is the letter described in
Section 5.5 of the Merger Agreement.
I. COMPANY BENEFIT PLANS
A. Parent shall cause the Surviving Corporation to assume and honor in
accordance with their terms all Company Benefit Plans listed on
Schedule 3.1(l)(i) of the Company Disclosure Schedule, subject to any
modifications or amendments contemplated by the Merger Agreement or in Paragraph
I.B. of this letter. Notwithstanding the foregoing, except as expressly
provided in the Agreement or Paragraph I.B. of this letter, no provision
hereunder shall be construed to in any way limit or restrict the ability of
Parent or the Surviving Corporation following the Effective Time to modify,
amend or terminate any Company Benefit Plan in accordance with the terms of such
Company Benefit Plan. No provision hereunder shall be construed to limit or
restrict the ability of Parent or the Surviving Corporation to terminate the
employment of any officer or employee of Company.
B. For the period commencing on the Effective Date and ending no earlier
than the current plan year of the respective plan, Parent shall, or shall cause
the Surviving Corporation, to provide employee pension benefit plan and welfare
plan benefits to employees of the Surviving Corporation and its subsidiaries
that, when taken as a whole, are not less favorable in the aggregate than such
respective benefits provided to such employees immediately prior to the
Effective Time; provided, however that nothing herein shall restrict or limit
the liability of parent or the Surviving Corporation to alter such benefits
where such alternation has been made with the prior written consent of Damon
DeSantis.
II. PAYMENTS UNDER COMPANY MANAGEMENT INCENTIVE PLAN AND COMPANY EQUITY PLANS
A. Parent confirms that for the period ending August 31, 2000, each
participant under any Company annual incentive plan, program or arrangement,
including, without limitation, the Company's Management Incentive Plan (the
"Existing Bonus Plans") in effect immediately prior to the Effective Time, under
which the bonus payable thereunder is based upon the achievement of annual
Company and/or individual performance objectives, shall be paid after August 31,
2000, in accordance with such Plans.
B. Parent shall cause the Surviving Corporation to make the payments to
holders of Company Stock Options contemplated by Section 5.11 of the Merger
Agreement. The Company confirms that as of the date hereof, the Company Equity
Plans have been amended as contemplated by the Merger Agreement.
III. ANNUAL INCENTIVE PLAN
Parent confirms that it maintains (or causes its subsidiaries to maintain)
an annual bonus plan for eligible senior officers. The specifics of these the
bonus programs are determined by Parent on the basis of a variety of factors
applicable to the particular officer and our goal in this regard is to provide
the opportunity to earn performance-based incentive compensation that is
appropriate in light of the circumstances. Parent confirms to you that Parent
will, or will cause the Surviving Corporation to, establish an incentive program
for the Level I and Level II officers identified on Appendix C similar to that
offered to senior executives elsewhere in Parent's organization. A general
description of this program is set forth on Appendix A hereto. Parent confirms
that the Surviving Corporation may establish annual incentive bonus programs for
officers and key employees below Levels I and II as described on Appendix A.
Parent confirms that these bonus programs will be established effective
September 1, 2000 and provide for a PRO RATA payout for 2000 with respect to the
period from September 1, 2000 through December 31, 2000.
IV. EXECUTIVE EMPLOYMENT AND CONSULTING AGREEMENTS
Parent confirms that it will comply and/or will cause the Surviving
Corporation to comply with the Employment Agreements and Consulting Agreements
of even date herewith entered into by Parent, the Company and the senior
officers of Company listed on Appendix B hereof.
V. PARENT EQUITY INCENTIVE PROGRAMS
Parent agrees to establish or cause the Surviving Corporation to establish
the Parent Management Stock Purchase Plan and Parent Stock Option Program as
described on Appendices C and D, respectively.
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VI. FURTHER ASSURANCES; ABILITY TO AMEND PLANS
Parent and Company shall use all reasonable efforts and will cause their
respective subsidiaries to use all reasonable efforts to amend plans and take
such other actions contemplated by this letter and the Merger Agreement. Except
as otherwise provided in this letter, the power of Parent or any of its
subsidiaries to amend or terminate any plan or program after the Effective Time,
shall not be altered by this letter.
VII. COUNTERPARTS
This Benefits Letter may be executed in one or more counterparts, which
shall together constitute a valid and binding agreement.
Please confirm your agreement with the foregoing by signing and returning
to me the enclosed copy of this letter.
Very truly yours,
ROYAL NUMICO N.V.
By: /s/ Julitte van der Ven
-------------------------------
Its: Attorney-in-Fact
------------------------------
ACCEPTED AND AGREED TO this
30th day of April, 2000.
REXALL SUNDOWN, INC.
By: /s/ Damon DeSantis
----------------------
Its: CEO
---------------------
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APPENDIX A TO BENEFITS LETTER
INCENTIVE PLANS
PARENT ANNUAL INCENTIVE PLAN APPLICABLE TO LEVEL I AND II
Annual performance bonus opportunity range equal to 40% to 140% of annual
base salary.
Performance criteria to include year-to-year increase in sales, increase in
operating profit (after provision for bonuses) and reductions in working
capital.
Annual performance goals to be developed by CEO of Company and approved by
Saturn.
Bonus for 2000 to be pro-rated for four months, based on four- month
performance.
COMPANY ANNUAL INCENTIVE PLAN: LEVELS III AND IV
Annual performance bonus opportunity 35% of annual base salary, for
Level III; annual performance bonus opportunity ranges of 25% to 35% of annual
base salary for Level IV.
Performance targets to be set by CEO of Company.
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APPENDIX B TO BENEFITS LETTER
PARTIES TO EMPLOYMENT AGREEMENTS
DeSantis, Damon
Cotton, Geary
Frabitore, Steve
Goudis, Richard
Holly, Gerald
Werber, Richard
Schofield, David
Richerson, Timothy
Desimone, John
Michols, J. Kelly
DeSantis, Debbie
Alsina, Jose
Trinker, Deborah
Kronrad, David
Settler, Andy
Todd, Michael (Stu)
Thompson, Keith N.
PARTIES TO CONSULTING AGREEMENTS
DeSantis, Carl
Nast, Christian
Palin, Nickolas
B-1
APPENDIX C
Summary of Principal Terms
NUMICO/REXALL SHOWCASE MANAGEMENT STOCK PURCHASE PLAN
The opportunity to purchase shares of Numico under the new management stock
purchase plan would be subject to the terms and conditions described below. The
new management stock purchase plan is not intended to qualify as an "employee
stock purchase plan" under Section 423 of the U.S. Internal Revenue Code.
ELIGIBLE EMPLOYEES Officers and key employees of the Company (and its
subsidiaries) specified on the attached schedule.
PURCHASE PRICE The purchase price per share will be equal to the
average closing share price for the 15 trading
days preceding the closing date of the Merger
contemplated by the Merger Agreement. Such
purchase price will be expressed in U.S. dollars
based on the U.S. dollars-to-Euro exchange rate as
of the last day of such 15-trading day period.
EMPLOYEE PURCHASE OF The opportunity to purchase shares will be
SHARES extended to the eligible employees as promptly as
practicable after the Closing Date. Those
electing to participate will be required to pay
for such shares no earlier than the date on which
the Non-Compete Payment is paid by the Company
pursuant to the Employment Agreements. The
maximum value of shares purchased will be as
follows:
Participant Maximum Value
----------- -------------
Level I 200% of base salary
Level II 100% of base salary
MATCHING LOAN For each share purchased, the Company will make a
loan in U.S. dollars to finance the participant's
purchase of up to 2 additional shares. The
Company will retain a security interest in all the
initial purchased shares and any additional
purchased shares. The loan will be due 36 full
months after the Closing Date (the "Maturity
Date"). The interest on the loan will be at the
appropriate applicable federal rate at the time of
the loan, payable at the Maturity Date.
TIME-VESTING 50% of the loan (including interest thereon) will
be forgiven upon completion of continuous
employment with the Company (or its subsidiaries)
from the Closing Date until the
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Maturity Date. If the participant incurs an
Involuntary Termination Without Cause prior to the
loan forgiveness date, 1/3 of the loan will be
forgiven for each full year of employment with the
Company (or its subsidiaries) following the
Closing Date. An "Involuntary Termination Without
Cause" means a termination of employment by the
Company and its subsidiaries (including a
termination by reason of death or disability) for
reasons other than continuing misconduct, a
continuing failure to substantially perform
assigned duties, or other material violation of
Company policy as applied in a manner consistent
with past practices of the Company prior to the
Effective Time, in each case after notice and a
reasonable opportunity to cure such action shall
have been provided to the employee.
PERFORMANCE-VESTING 50% of the loan (including interest thereon) will
be forgiven as of the Maturity Date if the Company
has attained its cumulative "Operating EBITA" goal
as determined under Dutch GAAP for such period,
which goal shall reflect a 15% annual increase in
Operating EBITA during the three-year period from
a starting base equal to the Company's Operating
EBITA for the twelve months ended June 30, 2000,
as determined by Numico and the CEO of the Company
based on the models presented to Numico prior to
the date of the Merger Agreement. If a
participant is involuntarily terminated without
Cause prior to the Maturity Date, 1/3 of the loan
(including interest thereon) will be forgiven for
each annual Operating EBITA goal attained during
such period.
SHARE ACCOUNTS All shares purchased under this plan will be held
in an account by Numico until the Maturity Date
or, if earlier, the date of termination of
employment. Participants will have voting (if
any), dividend and any other shareholder rights
with respect to such shares during such period.
Immediately after the Maturity Date, shares held
in such account will be delivered to participants
(or their nominees) and may be freely sold or
transferred.
SECURITIES LAWS If the purchase of shares of Numico under this
plan by eligible employees of the Company (or its
subsidiaries) is not permissible by reason of the
application of U.S. securities laws or compliance
with such laws or other applicable laws would be
unduly burdensome, such employees will be granted
substitute awards substantially equivalent to the
economic benefit under this plan.
C-2
MISCELLANEOUS In addition to any limitations on transfer or sale
described above or upon the lifting of such
limitations, the sale of shares of Numico acquired
under this plan will be subject to applicable law
and the policies of Numico generally applicable to
holders of shares of Numico. For purposes of this
plan, "shares" shall mean the depositary receipts
exchangeable into ordinary shares on a restricted
scale which are directly traded on the Amsterdam
Stock Exchange, or to the extent established,
American Depositary Shares representing such
depositary receipts.
C-3
APPENDIX D
Summary of Principal Terms
NUMICO/REXALL SHOWCASE STOCK OPTION PROGRAM
VIII. NUMBER OF OPTIONS
Options to purchase 400,000 shares of Numico will be available for grant to
key employees of the Company (and its subsidiaries) immediately following the
Closing Date. Additional options to purchase at least 200,000 shares of Numico
will be available for grant annually following the first, second and third
anniversaries of the Closing Date.
2. TERMS OF OPTION
The options granted under the new stock option plan will be on the terms
and conditions provided below.
ELIGIBLE EMPLOYEES Employees of the Company (including its subsidiaries).
GRANTS Option grants as determined by CEO of the Company and
approved by the Supervisory Board of Numico. With regard
to the initial grants of options to purchase 400,000
ordinary shares of Numico as soon as practicable
following Closing.
TYPE OF OPTIONS Nonqualified options to purchase ordinary shares of
Numico.
EXERCISE PRICE Initial grants of options to purchase 400,000 ordinary
shares of Numico as soon as practicable following Closing
Date have an exercise price equal to the average closing
share price for the 15 trading days preceding the Closing
Date. Subsequent grants of options shall have an
exercise price equal to the fair market value of an
ordinary share of Numico on the date of grant. The
exercise price will be expressed in Euros. Initial
grants fully vest upon completion of 3 years of
employment with the Company (or its subsidiaries)
following the Closing Date. Subsequent grants fully vest
upon completion of 3 years of employment following the
date of grant. If option holder incurs an Involuntary
Termination Without Cause prior to the vesting date, 1/3
of such option will be exercisable on the date of such
termination for each full year of employment with the
Company (or its subsidiaries) following the date of
grant. An "Involuntary Termination Without Cause" means
a termination of employment by the Company and its
subsidiaries (including a termination by reason of death
or disability) for reasons other than continuing
misconduct, continuing failure to substantially perform
assigned duties, or other material violation of
D-1
Company policy as applied in a manner consistent with
past practices of the Company prior to the Effective
Time, in each case after notice and a reasonable
opportunity to cure such action shall have been provided
to the employee.
OPTION TERM Options expire after 5 years.
SECURITIES LAW If option grants to purchase ordinary shares of Numico to
eligible employees of the Company (or its subsidiaries)
are not permissible by reason of the application of U.S.
securities laws or compliance with such laws or other
applicable laws would be unduly burdensome, such
employees will be granted substitute cash awards
substantially equivalent to such option grants.
MISCELLANEOUS Exercise of options and the sale of shares of Numico
acquired upon exercise of options will be subject to
applicable law and the policies of Numico generally
applicable to its world-wide option holders to purchase
shares of Numico.
For purposes of this program, "shares" shall mean the
depositary receipts exchangeable into ordinary shares on
a restricted scale which are directly traded on the
Amsterdam Stock Exchange, or to the extent established,
American Depositary Shares representing such depositary
receipts.
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