DECS TRUST III, N-2/A, 1998-03-23

DECS TRUST III
N-2/A, 1998-03-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1998

SECURITIES ACT FILE NO. 333-44807
INVESTMENT COMPANY ACT FILE NO. 811-08615
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
------------------------

DECS TRUST III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

C/O PUGLISI & ASSOCIATES

850 LIBRARY AVENUE, SUITE 204

NEWARK, DELAWARE 19715

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 816-6000

DONALD J. PUGLISI

C/O PUGLISI & ASSOCIATES

850 LIBRARY AVENUE, SUITE 204

NEWARK, DELAWARE 19715

(NAME AND ADDRESS OF AGENT FOR SERVICE)

With copies to:
RAYMOND B. CHECK, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006
(212) 225-2000

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<S> <C> <C> <C> <C>
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES BEING AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER DECS(2) PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
DECS representing shares of
beneficial interest.......... 5,750,000 $23 9/32 $133,867,188 $39,491(3)
=======================================================================================================================
</TABLE>

(1) Includes an aggregate of 750,000 DECS that (i) may be issued in connection
with the exercise of an over-allotment option and (ii) were subscribed for
and purchased by Smith Barney Inc. in connection with the formation of the
DECS Trust III.

(2) Estimated solely for the purpose of calculating the registration fee.

(3) Previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
================================================================================
<PAGE> 2

DECS TRUST III

CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*

<TABLE>
<CAPTION>
ITEM NO. CAPTION PROSPECTUS CAPTION
- -------- ------- ------------------
<C> <S> <C>
1. Outside Front Cover................................ Front Cover Page
2. Inside Front and Outside Back Cover Page........... Front Cover Page; Inside Front Cover
Page
3. Fee Table and Synopsis............................. Prospectus Summary; Fees and
Expenses
4. Financial Highlights............................... Not Applicable
5. Plan of Distribution............................... Front Cover Page; Prospectus
Summary; Underwriting
6. Selling Shareholders............................... Not Applicable
7. Use of Proceeds.................................... Use of Proceeds; Investment
Objectives and Policies
8. General Description of the Registrant.............. Front Cover Page; Prospectus
Summary; The Trust; Investment
Restrictions; Investment Objectives
and Policies; Risk Factors Relating
to DECS
9. Management......................................... Management and Administration of the
Trust
10. Capital Stock, Long-Term Debt and Other Securities; Description of DECS
Federal Income Tax Considerations..................
11. Defaults and Arrears on Senior Securities.......... Not Applicable
12. Legal Proceedings.................................. Not Applicable
13. Table of Contents of the Statement of Additional Not Applicable
Information........................................
14. Cover Page......................................... Not Applicable
15. Table of Contents.................................. Not Applicable
16. General Information and History.................... The Trust
17. Investment Objective and Policies.................. Investment Objectives and Policies;
Investment Restrictions
18. Management......................................... Management and Administration of the
Trust
19. Control Persons and Principal Holders of Management and Administration of the
Securities......................................... Trust
20. Investment Advisory and Other Services............. Management and Administration of the
Trust
21. Brokerage Allocation and Other Practices........... Investment Objectives and Policies
22. Tax Status......................................... Certain United States Federal Income
Tax Considerations
23. Financial Statements............................... Statement of Assets and Liabilities
</TABLE>

- ---------------

* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus. Information required to be included in Part C is
set forth under the appropriate item, so numbered, in Part C of the N-2
Registration Statement.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MARCH 23, 1998

PROSPECTUS
5,000,000 DECS(SM)

DECS TRUST III
(SUBJECT TO EXCHANGE INTO SHARES OF CLASS B COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF HERBALIFE INTERNATIONAL, INC.)
------------------

The issue price (the "Initial Price") of each of the DECS (each, a "DECS")
of the DECS Trust III (the "Trust") being offered hereby will be $ (the
last sale price of the Class B Common Stock, par value $.01 per share (the
"Class B Stock") of Herbalife International, Inc. (the "Company") on ,
1998, as reported on the Nasdaq National Market System). Each of the DECS
represents the right to receive (a) an annual distribution of $ ,
payable quarterly on each February 15, May 15, August 15 and November 15, during
the term of the Trust, beginning , 1998 and (b) upon the conclusion of
the term of the Trust on , 2001 (the "Exchange Date"), between and
1.0 shares of Class B Stock or cash with an equivalent value. The DECS are not
subject to redemption prior to the Exchange Date or the earlier termination of
the Trust.

The Trust is a newly organized Delaware business trust that is registered
as a closed-end investment company and was established to purchase and hold (a)
a series of zero-coupon U.S. Treasury securities maturing on a quarterly basis
during the term of the Trust (the "Treasury Securities") and (b) one or more
forward purchase contracts (each, a "Contract" and collectively, the
"Contracts") with certain stockholders (individually, a "Seller" and
collectively, the "Sellers") of the Company relating to the Class B Stock.

The investment objectives of the Trust are to provide holders of DECS with
a quarterly distribution of $ per DECS over the term of the Trust and
to provide holders of DECS, at the Exchange Date, a number of shares of Class B
Stock (or, if some or all of the Sellers exercise their cash settlement option
in the Contracts under the circumstances described herein, the cash equivalent
of all or part thereof or a combination of Class B Stock and cash) at the
Exchange Rate (as defined herein). The Exchange Rate is equal to, subject to
certain adjustments, (a) if the Exchange Price (as defined herein) is greater
than $ per share of Class B Stock (the "Threshold Appreciation Price"),
shares of Class B Stock per DECS, (b) if the Exchange Price is less
than or equal to the Threshold Appreciation Price but is greater than the
Initial Price, a fraction equal to the Initial Price divided by the Exchange
Price of one share of Class B Stock per DECS such that the value (determined at
the Exchange Price) of the Class B Stock delivered at the Exchange Date equals
the Initial Price and (c) if the Exchange Price is less than or equal to the
Initial Price, one share of Class B Stock per DECS. The "Exchange Price" means
the average Closing Price (as defined herein) per share of Class B Stock on the
20 Trading Days (as defined herein) immediately prior to the Exchange Date,
except as otherwise described herein. Accordingly, the value of the Class B
Stock to be received by holders of the DECS at the Exchange Date will not
necessarily equal the Initial Price. If the Exchange Price is less than the
Initial Price, the value of the Class B Stock to be received at the Exchange
Date will generally be less than the price paid for the DECS. See "Investment
Objectives and Policies."

SEE "RISK FACTORS RELATING TO DECS" BEGINNING ON PAGE 19 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS.
(Cover continued on next page)
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
=============================================================================================================================
PRICE TO PUBLIC SALES LOAD PROCEEDS TO THE TRUST(2)
- -----------------------------------------------------------------------------------------------------------------------------
Per DECS $ $ (3) $
- -----------------------------------------------------------------------------------------------------------------------------
Total (1) $ $ (3) $
=============================================================================================================================
</TABLE>

(1) The Trust has granted to the Underwriters an option, exercisable within
30 days from the date hereof, to purchase up to an additional
DECS to cover over-allotments, if any. If the Underwriters exercise such
option in full, the total Price to Public, Sales Load and Proceeds to
the Trust will be $ , $ and $ , respectively. See
"Underwriting."

(2) Before deducting estimated expenses of $443,300, payable by Smith Barney
Inc., which will be reimbursed by the Mark Hughes Entities (as defined
herein).

(3) In light of the fact that the proceeds of the sale of the DECS will be
used in part by the Trust to purchase the Contracts from the Sellers,
the Underwriting Agreement (as defined herein) provides that the Mark
Hughes Entities will pay to the Underwriters as compensation
$ per DECS. See "Underwriting."
------------------------

The DECS are offered subject to receipt and acceptance by the Underwriters,
to prior sales and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Smith Barney,
333 West 34th Street, New York, New York, or through the facilities of The
Depository Trust Company on or about , 1998.
------------------------

SALOMON SMITH BARNEY

PRUDENTIAL SECURITIES INCORPORATED

March , 1998
<PAGE> 4

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A STOCK (AS
DEFINED BELOW), THE CLASS B STOCK OR THE DECS, INCLUDING PURCHASES OF THE DECS
OR THE CLASS B STOCK TO STABILIZE THEIR MARKET PRICES AND PURCHASES OF THE DECS
OR THE CLASS B STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE DECS OR THE
CLASS B STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING."

IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS B STOCK,
THE CLASS A STOCK OR THE DECS ON THE NASDAQ NATIONAL MARKET SYSTEM IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
------------------------

(Continued from previous page)

In the event of certain Adjustment Events (as defined herein), holders may
receive property other than (or in addition to) Class B Stock or a combination
of such property and cash. See "Investment Objectives and Policies -- The
Contracts -- Dilution Adjustments; Adjustment Events." In addition, holders
otherwise entitled to receive fractional shares in respect of their aggregate
holdings of DECS will receive cash in lieu thereof.

The Trust has adopted a policy that the Contracts may not be disposed of
during the term of the Trust. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Class B Stock or
adverse changes in the financial condition of the Company.

This Prospectus sets forth information about the Trust that a prospective
investor ought to know before investing. Potential investors are advised to read
this Prospectus and to retain it for future reference.

DECS may be a suitable investment for those investors who are capable of
evaluating the risks involved in making an investment in the Class B Stock of
the Company and the advantages and disadvantages of doing so in a manner which
will give investors in the DECS a potentially higher yield but a lesser
opportunity for equity appreciation than would be afforded by a direct
investment in the Class B Stock. There is no assurance that the yield on the
DECS will be higher than the dividend yield on the Class B Stock over the term
of the Trust. See "Investment Objectives and Policies."

Attached hereto for convenience of reference is a prospectus of the Company
relating to the shares of Class B Stock that may be received by holders of DECS
at the Exchange Date. The Company is not affiliated with the Trust, will not
receive any of the proceeds from the sale of the DECS and will have no
obligations with respect to the DECS or the Contracts. The Class B Stock is
listed on the Nasdaq National Market System under the symbol "HERBB."

The Trust will be a grantor trust owned solely by the present and future
holders of DECS for U.S. federal income tax purposes and each holder will be
treated as the owner of its pro rata portion of the Treasury Securities and the
Contracts. The Treasury Securities will be treated as having "original issue
discount" which holders must recognize currently as income as it accrues.
Holders will not recognize income, gain or loss upon the Trust's entry into the
Contracts nor will the delivery of Class B Stock pursuant to the Contracts be
taxable to holders. Holders should not recognize income, gain or loss with
respect to the Contracts over their term. See "Certain United States Federal
Income Tax Considerations."

THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. THE DECS HAVE BEEN APPROVED FOR QUOTATION ON
THE NASDAQ NATIONAL MARKET SYSTEM UNDER THE SYMBOL "HERBL." TYPICAL CLOSED-END
FUND SHARES FREQUENTLY TRADE AT A DISCOUNT FROM NET ASSET VALUE. THIS
CHARACTERISTIC OF INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY IS A RISK
SEPARATE AND DISTINCT FROM THE RISK THAT THE TRUST'S NET ASSET VALUE WILL
DECREASE. THE TRUST CANNOT PREDICT WHETHER THE DECS WILL TRADE AT, BELOW OR
ABOVE NET ASSET VALUE. THE RISK OF PURCHASING INVESTMENTS IN A CLOSED-END
COMPANY THAT MIGHT TRADE AT A DISCOUNT IS MORE PRONOUNCED FOR INVESTORS WHO WISH
TO SELL THEIR INVESTMENTS SOON AFTER COMPLETION OF AN INITIAL PUBLIC OFFERING.

The address of the Trust is c/o Puglisi & Associates, 850 Library Avenue,
Suite 204, Newark, Delaware 19715, and the Trust's telephone number is (302)
738-6680. Investors are advised to read this Prospectus and to retain it for
future reference.

"DECS(SM)" is a service mark of Salomon Brothers Inc.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus.

THE TRUST

DECS Trust III (the "Trust") is a newly organized Delaware business trust
that is registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). The term of the Trust will expire on or shortly after
, 2001 (the "Exchange Date"), except that the Trust may be
dissolved prior to such date under certain limited circumstances. The Trust will
be treated as a grantor trust owned solely by the present and future holders of
DECS for U.S. federal income tax purposes.

THE OFFERING

5,000,000 DECS representing shares of beneficial interest in the Trust are
being offered for sale by Smith Barney Inc. and Prudential Securities
Incorporated (the "Underwriters") to the public at a purchase price of $ per
DECS (the "Initial Price") (which is equal to the last sale price of the Class B
Common Stock, par value $.01 per share (the "Class B Stock"), of Herbalife
International, Inc. (the "Company") on March , 1998, as reported on the Nasdaq
National Market System). In addition, the Underwriters have been granted an
option to purchase up to an additional 750,000 DECS (subject to decrease as a
result of the issuance and sale of DECS in connection with the formation of the
Trust) to cover over-allotments, if any. See "Underwriting."

PURPOSE OF THE TRUST

The DECS are designed to provide investors (the "Holders") with a higher
yield than the current dividend yield paid on the Class B Stock, while also
providing the opportunity for Holders to share in the appreciation, if any, of
the Class B Stock above the Threshold Appreciation Price. The annual calendar
year distribution on the DECS is $ per DECS. The dividend paid per share of
Company common stock in the Company's fiscal year ended December 31, 1997 was
$0.60.

The yield on the DECS is higher than the current dividend yield on the
Class B Stock. However, there is no assurance that the yield on the DECS will be
higher than the dividend yield on the Class B Stock over the term of the Trust.
In addition, the opportunity for equity appreciation afforded by an investment
in the DECS is less than the opportunity for equity appreciation afforded by a
direct investment in the Class B Stock because the value of the Class B Stock to
be received by Holders of the DECS at the Exchange Date (the "Amount Receivable
at the Exchange Date") will generally exceed the Initial Price only if the
Exchange Price (as defined herein) exceeds $ per share of Class B Stock (the
"Threshold Appreciation Price," which represents an appreciation of % over
the Initial Price) and because Holders will be entitled to receive at the
Exchange Date only % of any appreciation of the value of the Class B Stock
in excess of the Threshold Appreciation Price. Moreover, if the Exchange Price
is less than the Initial Price, the value of the Class B Stock to be received at
the Exchange Date will generally be less than the price paid for the DECS.

DISTRIBUTIONS PRIOR TO EXCHANGE DATE

The Holders are entitled to receive distributions at the rate per DECS of
$ per annum or $ per quarter, payable quarterly on each February 15, May
15, August 15 and November 15 or, if any such date is not a Business Day (as
defined herein), on the next succeeding Business Day (each a "Distribution
Date"), to Holders of record as of each February 1, May 1, August 1 and November
1, respectively. The first distribution will be payable on , 1998 to
Holders of record as of , 1998. See "Investment Objectives and Policies
Trust Assets."

3
<PAGE> 6

DISTRIBUTIONS ON EXCHANGE DATE

At the Exchange Date, in respect of each outstanding DECS, Holders will
have the right to receive between and 1.0 shares of Class B Stock, subject
to adjustment in the event of certain dividends or distributions, subdivisions,
splits, combinations, issuances of certain rights or warrants or distributions
of certain assets with respect to the Class B Stock. In the event of a merger of
the Company into another entity, or the liquidation of the Company, or in
certain related events, Holders would receive consideration in the form of cash,
Reported Securities (as defined under "Investment Objectives and Policies -- The
Contracts Dilution Adjustments; Adjustment Events") or a combination thereof,
rather than (or in addition to) shares of Class B Stock. If some or all of the
Sellers exercise their cash settlement option, Holders would receive cash in
lieu of all or part of the Class B Stock or Reported Securities that would
otherwise be deliverable. See "Investment Objectives and Policies -- The
Contracts -- General." Additionally, the occurrence of certain defaults by a
Seller (or by any Mark Hughes Entity (as defined below))under its Contract or
the related collateral arrangements would cause the acceleration of such
Contract and the distribution to the Trust for distribution pro rata to Holders
of all or a portion of the Class B Stock, Reported Securities, cash or a
combination thereof subject to such Contract and of a portion of the Treasury
Securities (as defined below) then held by the Trust. See "Investment Objectives
and Policies -- The Contracts -- Collateral Requirements of the Contracts;
Acceleration" and "-- The Treasury Securities."

VOTING RIGHTS

Holders will not have voting rights with respect to the Class B Stock
unless and until the Sellers have delivered shares of Class B Stock to the Trust
pursuant to the Contracts and the Trust has distributed such shares to the
Holders. See "Investment Objectives and Policies -- The Company." Currently, the
holders of Class B Stock are entitled to vote separately as a class only with
respect to (i) amendments to the Company's Amended and Restated Articles of
Incorporation that alter or change the relative or other rights given to the
holders of Class B Stock, and (ii) such other matters as may require separate
class voting under the Company's Amended and Restated Articles of Incorporation
or by law. Holders of Class B Stock are not entitled to any other voting rights.
The Holders have the right to vote on matters affecting the Trust, as described
under "Description of DECS."

ASSETS OF THE TRUST; INVESTMENT OBJECTIVES AND POLICIES

The Trust will purchase and hold (i) a series of zero-coupon U.S. Treasury
securities (the "Treasury Securities") maturing on a quarterly basis during the
term of the Trust and representing in the aggregate approximately % of the
initial assets of the Trust and (ii) one or more forward purchase contracts
(each, a "Contract" and collectively, the "Contracts") with certain existing
stockholders (individually, a "Seller" and collectively, the "Sellers") of the
Company relating to the Class B Stock and representing approximately % of
the initial assets of the Trust. The Trust's investment objective is to provide
each Holder with a quarterly distribution of $ per DECS over the term of the
Trust, equal to the pro rata portion of the quarterly cash distributions from
the Treasury Securities. It is also the Trust's investment objective to provide
each Holder, at the Exchange Date, a number of shares of Class B Stock (or, if
any Seller exercises its cash settlement option in the Contracts under the
circumstances described herein, the cash equivalent of all or part thereof) at
the Exchange Rate. The Exchange Rate is equal to, subject to certain
adjustments, (a) if the Exchange Price (as defined herein) is greater than the
Threshold Appreciation Price, shares of Class B Stock per DECS, (b) if
the Exchange Price is less than or equal to the Threshold Appreciation Price but
is greater than the Initial Price, a fraction equal to the Initial Price divided
by the Exchange Price of one share of Class B Stock per DECS such that the value
(determined at the Exchange Price) of the Class B Stock delivered at the
Exchange Date equals the Initial Price and (c) if the Exchange Price is less
than or equal to the Initial Price, one share of Class B Stock per DECS. Holders
otherwise entitled to receive fractional shares of Class B Stock or Reported
Securities in respect of their aggregate holdings of DECS will receive cash in
lieu thereof. See "Investment Objectives and Policies -- The Contracts" and
"-- Delivery of Class B Stock and Reported Securities; No Fractional Shares of
Class B Stock or Reported Securities."

4
<PAGE> 7

The Trust will enter into Contracts with the Sellers and the Mark Hughes
Control Entities (as defined below) obligating the Sellers, severally and not
jointly, at the Exchange Date, to deliver to the Trust 5,000,000 shares of Class
B Stock in the aggregate (excluding shares required to be delivered in respect
of DECS issued to cover the Underwriters' over-allotment option and DECS issued
in connection with the formation of the Trust), except that (i) if the Exchange
Price per share of Class B Stock is greater than the Threshold Appreciation
Price, each Seller will be obligated to deliver under its Contract a number of
shares of Class B Stock equal to the product of times the
initial number of shares of Class B Stock subject to such Contract, (ii) if the
Exchange Price per share of Class B Stock is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, each Seller will be
obligated to deliver under its Contract a number of shares of Class B Stock
equal to the product of (A) the Initial Price divided by the Exchange Price
multiplied by (B) the initial number of shares of Class B Stock subject to such
Contract and (iii) if the Exchange Price per share of Class B Stock is less than
or equal to the Initial Price, each Seller will be obligated to deliver under
its contract a number of shares of Class B Stock equal to the initial number of
shares of Class B Stock subject to such Contract. This provides the Trust with
the opportunity to share in the appreciation, if any, of the Class B Stock above
the Threshold Appreciation Price. Each Seller has the right to deliver cash in
lieu of all (but not part) of its Class B Stock delivery obligation. The
purchase price under the Contracts is equal to $ per share of Class B Stock
and $ in the aggregate and is payable to the Sellers by the Trust on
the closing of this offering.

The obligations of each Seller under its Contract will be secured by a
pledge of one share of Class B Stock for each share subject to the Contract or,
at the election of such Seller, by substitute collateral consisting of U.S.
Government securities. See "Investment Objectives and Policies -- The
Contracts -- Collateral Requirements of the Contracts; Acceleration." Each Mark
Hughes Control Entity has guaranteed the performance and payment by each Seller
under each Contract and Collateral Agreement (as defined below) to which such
Seller is a party.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the DECS. The Trust intends to treat a DECS
for U.S. federal income tax purposes as a beneficial interest in a grantor trust
owned solely by the present and future holders of DECS that holds the Treasury
Securities and Contracts, and to report Holders' income to the Internal Revenue
Service in accordance with this treatment. Under this approach, the tax
consequences of holding a DECS will be as described below and as described in
"Certain United States Federal Income Tax Considerations." Prospective investors
in the DECS should be aware that the Internal Revenue Service might take a
different view as to the proper characterization of the DECS and of the tax
consequences to a Holder.

The Treasury Securities held by the Trust will be treated for U.S. federal
income tax purposes as having "original issue discount" that will accrue over
the term of the Treasury Securities. It is currently anticipated that a
substantial portion of each quarterly cash distribution to the Holders will be
treated as a tax-free return of the Holders' costs of the Treasury Securities
and therefore will not be considered current income for U.S. federal income tax
purposes. However, a Holder (whether on the cash or accrual method of tax
accounting) must recognize currently as income original issue discount on the
Treasury Securities as it accrues.

A Holder will not recognize income, gain or loss upon the Trust's entry
into the Contracts and should not recognize income, gain or loss with respect to
the Contracts over their term. Prospective investors in the DECS should be aware
that it is possible that the Internal Revenue Service will assert that a Holder
should include in income over the term of the Contracts additional amounts which
together with the original issue discount on such Holder's pro rata portion of
the Treasury Securities may exceed the aggregate amount of the quarterly cash
distributions to such Holder. See "Certain United States Federal Income Tax
Considerations."

The delivery of Class B Stock to the Trust pursuant to the Contracts will
not be taxable to the Holders. The distribution of Class B Stock upon the
termination of the Trust will not be taxable to the Holders. A Holder will have
taxable gain or loss upon receipt of cash in lieu of fractional shares of Class
B Stock

5
<PAGE> 8

distributed upon termination of the Trust. Each Holder's aggregate basis in its
shares of Class B Stock will be equal to its basis in its pro rata portion of
the Contracts less the portion of such basis allocable to pay any fractional
shares of Class B Stock for which cash is received. A Holder will have taxable
gain or loss upon receipt of cash, if any, upon dissolution of the Trust or if a
Seller elects to exercise the Cash Delivery Option and satisfy its obligations
under the Contract with cash.

THE COMPANY

The Company is a network marketing company that sells a wide range of
weight management products, food and dietary supplements and personal care
products worldwide. The Company's products are marketed exclusively through a
network marketing system. This system enables the Company's independent
distributors to earn profits by selling Company products to retail consumers or
other distributors. Distributors may also develop their own distributor downline
organizations by sponsoring other distributors to do business in any market
where the Company operates, entitling the sponsors to receive royalty overrides
(cash incentives, including royalties and bonuses) on product sales within their
downline organizations.

In December 1997, the Company's common stock, par value $.01 per share (the
"Old Common Stock"), was reclassified into voting Class A Common Stock, par
value $.01 per share (the "Class A Stock," and together with the Class B Stock,
the "Common Stock"), of the Company and non-voting Class B Stock (the
"Recapitalization"). As a result of the Recapitalization (including a related
Class B Stock dividend), as of December 12, 1997, the Old Common Stock was
effectively split into the Class A Stock and the Class B Stock.

Attached hereto is a prospectus of the Company which describes the Company
and the Class B Stock that may be delivered to the Trust by the Sellers, and by
the Trust to the Holders, at the Exchange Date or upon earlier acceleration of a
Contract. The Company is not affiliated with the Trust, will not receive any of
the proceeds from the sale of the DECS and will have no obligations with respect
to the DECS or the Contracts. The prospectus of the Company is being attached
hereto and delivered to prospective purchasers of DECS together with this
Prospectus for convenience of reference only. The prospectus of the Company does
not constitute a part of this Prospectus, nor is it incorporated by reference
herein.

MANAGEMENT AND ADMINISTRATION OF THE TRUST

The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust will be overseen by three Trustees. The
day-to-day administration of the Trust will be carried out by The Bank of New
York (or its successor) as trust administrator (the "Administrator"). The Bank
of New York (or its successor) will also act as custodian for the Trust's assets
(the "Custodian") and as paying agent, registrar and transfer agent (the "Paying
Agent") with respect to the DECS. Except as aforesaid, and except for its role
as Collateral Agent under the collateral agreements (each, a "Collateral
Agreement" and collectively, the "Collateral Agreements") among each Seller,
each Mark Hughes Control Entity, the Trust and the Collateral Agent (see
"Investment Objectives and Policies -- The Contracts -- Collateral Requirements
of the Contracts; Acceleration"), The Bank of New York has no other affiliation
with, and is not engaged in any other transaction with, the Trust.

TERM OF THE TRUST

The Trust will terminate automatically on or shortly after the Exchange
Date, except that the Trust may expire prior to such date under certain limited
circumstances. Promptly after the Exchange Date the shares of Class B Stock
delivered under the Contracts (or the equivalent amount of cash, to the extent
that any Seller exercises its cash settlement option) and other remaining Trust
assets, if any, will be distributed pro rata to Holders. See "Investment
Objectives and Policies -- Trust Termination."

RISK FACTORS

The Trust has adopted a policy that the Contracts may not be disposed of
during the term of the Trust and that the Treasury Securities held by the Trust
may not be disposed of prior to the earlier of their respective maturities and
the termination of the Trust except upon the acceleration of one or more
Contracts

6
<PAGE> 9

as described herein. The Trust will continue to hold the Contracts despite any
significant decline in the market price of the Class B Stock or adverse changes
in the financial condition of the Company.

The Amount Receivable at the Exchange Date is not fixed, but is based on
the market price of the Class B Stock as reflected in the Exchange Rate. There
can be no assurance that the Amount Receivable at the Exchange Date will be
equal to or greater than the Initial Price of the DECS. If the Exchange Price is
less than the Initial Price, the Amount Receivable at the Exchange Date will
generally be less than the amount paid for the DECS, in which case an investment
in DECS will result in a loss and, if the Company became insolvent or bankrupt,
could result in a total loss. Holders of the DECS, therefore, bear the full risk
of a decline in the value of the Class B Stock prior to the Exchange Date.

In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Class B Stock because the Amount
Receivable at the Exchange Date will generally exceed the Initial Price only if
the Exchange Price exceeds the Threshold Appreciation Price, which represents an
appreciation of % over the Initial Price. Moreover, Holders will be
entitled to receive at the Exchange Date only % of any appreciation of the
value of the Class B Stock in excess of the Threshold Appreciation Price.
Because the market price of the Class B Stock is subject to market fluctuations,
the Amount Receivable at the Exchange Date may be more or less than the Initial
Price of the DECS. Additionally, because the Exchange Price is generally
determined based on a 20 Trading Day average, the value of a share of Class B
Stock distributed on the Exchange Date may be more or less than the Exchange
Price used to determine the Amount Receivable at the Exchange Date.

The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the Treasury Securities and the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.

The trading prices of the DECS in the secondary market will be directly
affected by the trading prices of the Class B Stock in the secondary market.
Trading prices of the Class B Stock will be influenced by the Company's
operating results and prospects and by economic, financial and other factors and
market conditions.

Holders of the DECS will not be entitled to any rights with respect to the
Class B Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Sellers deliver shares of Class B Stock to the
Trust pursuant to the Contracts and the Trust has distributed such shares to the
Holders.

Each of the Sellers is a Delaware limited liability company. Two other
Delaware limited liability companies controlled by the Mark Hughes Family Trust
own all of the interests in each of the Sellers. The Mark Hughes Family Trust is
controlled by Mark Hughes (the Company's principal stockholder, Chairman of the
Board, Chief Executive Officer and President), as trustee. Each of the two
intermediate Delaware limited liability companies that own all of the interests
in the Sellers, the Mark Hughes Family Trust and Mark Hughes are collectively
referred to herein as the "Mark Hughes Control Entities," and each of the Mark
Hughes Control Entities and the Sellers are collectively referred to herein as
the "Mark Hughes Entities." A bankruptcy of a Seller (or of any Mark Hughes
Entity) could adversely affect the timing of settlement and, as a result, the
amount received by the Holders in respect of the DECS.

LISTING

The DECS have been approved for quotation on the Nasdaq National Market
System under the symbol "HERBL."

7
<PAGE> 10

FEES AND EXPENSES

In light of the fact that proceeds from the sale of the DECS will be used
by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Mark Hughes Entities will pay to the Underwriters as
compensation $ per DECS. See "Underwriting." Estimated organization
costs of the Trust in the amount of $10,800 and estimated costs of the Trust in
connection with the initial registration and public offering of the DECS in the
amount of $97,000 will be paid by Smith Barney Inc. ("Smith Barney") at the
closing of this offering. In addition, each of the Administrator, the Custodian
and the Paying Agent, and each Trustee will be paid by Smith Barney at the
closing of this offering a one-time, up-front amount in respect of its ongoing
fees and, in the case of the Administrator, anticipated expenses of the Trust
(estimated to be $296,500 in the aggregate) over the term of the Trust. Smith
Barney has agreed to pay any on-going expenses of the Trust in excess of these
estimated amounts and to reimburse the Trust for any amounts it may be required
to pay as indemnification to any Trustee, the Administrator, the Custodian or
the Paying Agent. Smith Barney will be reimbursed by the Mark Hughes Entities
for all expenses of the Trust and reimbursements of indemnifications paid by it.
See "Management and Administration of the Trust -- Estimated Expenses."

Regulations of the Securities and Exchange Commission (the "Commission")
applicable to closed-end investment companies designed to assist investors in
understanding the costs and expenses that an investor will bear directly or
indirectly require the presentation of Trust expenses in the following format.
Because the Trust will not bear any ongoing fees or expenses, investors will not
bear any direct expenses. The only expenses that an investor might be considered
to be bearing indirectly are (a) the Underwriters' compensation payable by the
Mark Hughes Entities with respect to such investor's DECS and (b) the ongoing
expenses of the Trust (including fees of the Administrator, Custodian, Paying
Agent and Trustees), estimated at $ per year in the aggregate, payable by
Smith Barney at the closing of the offering.

<TABLE>
<S> <C>
Investor transaction expenses
Sales load (as a percentage of offering price)............ %
====
Annual Expenses
Management Fees........................................... 0%
Other Expenses (after reimbursement by the Mark Hughes
Entities)*............................................. 0%
----
Total Annual Expenses*............................ 0%
====
</TABLE>

- ---------------

* Absent the reimbursement, the Trust's "total annual expenses" would be equal
to approximately % of the Trust's average net assets.

Commission regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that an
investor would bear. The example is required to factor in the applicable Sales
Load and to assume, in addition to a 5% annual return, the reinvestment of all
distributions at net asset value. Investors should note that the assumption of a
5% annual return does not accurately reflect the financial terms of the Trust.
See "Investment Objectives and Policies -- Trust Assets." Additionally, the
Trust does not permit the reinvestment of distributions.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
You would pay the following expenses (i.e., the applicable
sales load and allocable portion of ongoing expenses paid
by Smith Barney and the Mark Hughes Entities) on a $1,000
investment, assuming a 5% annual return................... $ $
</TABLE>

THE TRUST

DECS Trust III is a newly organized Delaware business trust that is
registered as a closed-end management investment company under the Investment
Company Act. The Trust was formed on January 22, 1998 pursuant to a Declaration
of Trust dated as of January 22, 1998, as amended and restated in its entirety

8
<PAGE> 11

by the Amended and Restated Declaration of Trust, dated as of March 23, 1998,
among the Trustees, Smith Barney Inc., the initial trustee and the initial
sponsor (as so amended and restated, the "Declaration of Trust"). The term of
the Trust will expire on or shortly after , 2001, except
that the Trust may be dissolved prior to such date under certain limited
circumstances. The address of the Trust is c/o Puglisi & Associates, 805 Library
Avenue, Suite 204, Newark, Delaware 19715 (telephone number: (302) 738-6680).

USE OF PROCEEDS

The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed to purchase a fixed portfolio comprised of a
series of zero-coupon U.S. Treasury securities maturing quarterly during the
term of the Trust and to pay the purchase price under the Contracts to the
Sellers.

INVESTMENT OBJECTIVES AND POLICIES

TRUST ASSETS

The Trust's investment objectives are to provide Holders with a quarterly
distribution of $ per DECS on each Distribution Date during the term of
the Trust (representing the pro rata portion of the quarterly distributions in
respect of the maturing Treasury Securities held by the Trust) and to provide
Holders, at the Exchange Date, a number of shares of Class B Stock at the
Exchange Rate (as defined below) or, to the extent that some or all of the
Sellers elect the Cash Delivery Option (as defined below), an amount in cash
equal to the Exchange Price (as defined below) of all or part thereof. On or
prior to the 25th Business Day prior to the Exchange Date, each of the Sellers
will be obligated to notify the Trust concerning its exercise of the Cash
Delivery Option, and the Trust in turn will notify The Depository Trust Company
and publish a notice in a daily newspaper of national circulation stating
whether Holders of DECS will receive shares of Class B Stock, cash or a
combination thereof and, if a combination of Class B Stock and cash, the
relative proportion of each. See "-- The Contracts -- General" below. "Business
Day" means any day that is not a Saturday, a Sunday or a day on which the NYSE
or banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.

The "Exchange Rate" is equal to, subject to certain adjustments, (a) if the
Exchange Price (as defined below) is greater than the Threshold Appreciation
Price, shares of Class B Stock per DECS, (b) if the Exchange Price is
less than the Threshold Appreciation Price but is greater than or equal to the
Initial Price, a fraction, equal to the Initial Price divided by the Exchange
Price, of one share of Class B Stock per DECS and (c) if the Exchange Price is
less than or equal to the Initial Price, one share of Class B Stock per DECS.
Accordingly, the value of the Class B Stock to be received by Holders of the
DECS (or, as discussed below, the cash equivalent to be received in lieu of such
Class B Stock) at the Exchange Date will not necessarily equal the initial price
of the DECS. The numbers of shares of Class B Stock per DECS specified in
clauses (a), (b) and (c) of the Exchange Rate are hereinafter referred to as the
"Share Components." Any shares of Class B Stock delivered by the Trust to the
Holders of the DECS that are not affiliated with the Company will be free of any
transfer restrictions and the Holders of the DECS will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of such shares.
Holders otherwise entitled to receive fractional shares in respect of their
aggregate holdings of DECS will receive cash in lieu thereof. See " -- Delivery
of Class B Stock and Reported Securities; No Fractional Shares of Class B Stock
or Reported Securities" below. Notwithstanding the foregoing, (i) in the case of
certain dilution events, the Exchange Rate will be subject to adjustment and
(ii) in the case of certain adjustment events, the consideration received by
Holders at the Exchange Date will be cash or Reported Securities (as defined
herein) or a combination thereof, rather than (or in addition to) shares of
Class B Stock. See "-- The Contracts -- Dilution Adjustments; Adjustment Events"
below.

The Trust has adopted a fundamental policy to invest at least 65% of its
portfolio in the Contracts. The Contracts will comprise approximately % of
the Trust's initial assets. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that the
9
<PAGE> 12

Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust except
for the partial liquidation of Treasury Securities following acceleration of any
Contract as described below under "-- The Treasury Securities." The foregoing
fundamental policies of the Trust may not be changed without the vote of a
majority in interest of the Holders. A "majority in interest of the Holders"
means the lesser of (i) 67% of the DECS represented at a meeting at which more
than 50% of the outstanding DECS are represented and (ii) more than 50% of the
outstanding DECS.

The "Exchange Price" means the average Closing Price per share of Class B
Stock on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Class B Stock occurring later than the 60th calendar day immediately prior to,
but not including, the Exchange Date, the Exchange Price shall be defined as the
market value per share of the Class B Stock as of the Exchange Date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator. The "Closing Price" of any
security on any date of determination means (i) the closing sale price (or, if
no closing price is reported, the last reported sale price) of such security
(regular way) on the NYSE on such date, (ii) if such security is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States national securities exchange on which such
security is so listed, (iii) if such security is not so listed on a United
States national securities exchange, as reported by The Nasdaq Stock Market,
(iv) if such security is not so reported, as reported in the composite
transactions for the principal United States regional securities exchange on
which such security is so listed, (v) if such security is not so listed on a
United States regional securities exchange, the last quoted bid price for such
security in the over-the-counter market as reported by the National Quotation
Bureau or similar organization or (vi) if such security is not so quoted, the
average of the mid-point of the last bid and ask prices for such security from
at least three nationally recognized investment banking firms selected by the
Administrator for such purpose. A "Trading Day" is defined as a day on which the
security the Closing Price of which is being determined (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or over-the-
counter market that is the primary market for the trading of such security.

For illustrative purposes only, the following chart shows the number of
shares of Class B Stock or the amount of cash that a Holder would receive for
each DECS at various Exchange Prices. The chart assumes that there would be no
adjustments to the Exchange Rate by reason of the occurrence of any of the
events described under "-- The Contracts -- Dilution Adjustments; Adjustment
Events" below, that no Contracts will be accelerated and that either no Sellers
exercise the Cash Delivery Option or all Sellers do. There can be no assurance
that the Exchange Price will be within the range set forth below. Given the
Initial Price of $ per DECS and the Threshold Appreciation Price of $ ,
a Holder would receive at the Exchange Date the following number of shares of
Class B Stock or amount of cash (if all Sellers exercise the Cash Delivery
Option) per DECS:

<TABLE>
<CAPTION>
EXCHANGE PRICE OF NUMBER OF SHARES OF
CLASS B STOCK CLASS B STOCK AMOUNT OF CASH
- ----------------- ------------------- --------------
<S> <C> <C>
</TABLE>

As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than $ , the Trust will be obligated to deliver
shares of Class B Stock per DECS, resulting in the DECS Holder receiving only
percent of the appreciation in market value above $ . If at the
Exchange Date, the Exchange Price is greater than $ and less than or equal
to $ , the Trust will be obligated to deliver only a fraction of a share of
Class B Stock having a value at the Exchange Price equal to $ , resulting in
the DECS Holder receiving none of the appreciation in market value. If at the
Exchange Date, the Exchange Price is less than or equal to $ , the Trust
will be obligated to deliver one share of Class B Stock per DECS, regardless of
the market price of such share, resulting in the DECS Holder realizing the
entire loss on the decline in market value of the Class B Stock.

The following table sets forth information regarding the distributions to
be received on the Treasury Securities held by the Trust, the portion of each
year's distributions that will constitute a return of capital for U.S. federal
income tax purposes and the amount of original issue discount accruing on the
Treasury

10
<PAGE> 13

Securities with respect to a Holder who acquires its DECS at the issue price
from the Underwriters in the original offering. See "Certain United States
Federal Income Tax Considerations."

<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL CASH DISTRIBUTIONS ANNUAL
ANNUAL GROSS DISTRIBUTIONS FROM IN EXCESS OF ORIGINAL INCLUSION OF ORIGINAL ISSUE
DISTRIBUTIONS FROM TREASURY SECURITIES ISSUE DISCOUNT INCLUSION DISCOUNT IN INCOME
YEAR TREASURY SECURITIES PER DECS PER DECS PER DECS
---- ------------------- ------------------- ------------------------- ---------------------------
<S> <C> <C> <C> <C>
1998................. $ $ $ $
1999.................
2000.................
2001.................
</TABLE>

The annual distribution of $ per DECS is payable quarterly on each
February 15, May 15, August 15 and November 15 (or, if any such date is not a
Business Day, on the next succeeding Business Day), commencing
, 1998. Quarterly distributions on the DECS will consist
solely of the cash received from the Treasury Securities. The Trust will not be
entitled to any dividends that may be declared on the Class B Stock.

ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN CLASS B STOCK; NO
DEPRECIATION PROTECTION

The yield on the DECS is higher than the current dividend yield on the
Class B Stock. However, there is no assurance that the yield on the DECS will be
higher than the dividend yield on the Class B Stock over the term of the Trust.
In addition, the opportunity for equity appreciation afforded by an investment
in the DECS is less than the opportunity for equity appreciation afforded by a
direct investment in the Class B Stock because the Amount Receivable at the
Exchange Date will generally exceed the Initial Price only if the Exchange Price
exceeds the Threshold Appreciation Price (which represents an appreciation of
% over the Initial Price) and because Holders will be entitled to receive
at the Exchange Date only % (the percentage equal to the Initial Price
divided by the Threshold Appreciation Price) of any appreciation of the value of
the Class B Stock in excess of the Threshold Appreciation Price. Moreover,
Holders of DECS will realize the entire decline in value if the Exchange Price
on the Exchange Date is less than the Initial Price. Additionally, because the
Exchange Price is generally determined based on a 20 Trading Day average, the
value of a share of Class B Stock distributed on the Exchange Date may be more
or less than the Exchange Price used to determine the Amount Receivable at the
Exchange Date.

THE COMPANY

Holders will not be entitled to rights with respect to the Class B Stock
(including, without limitation, voting rights and rights to receive dividends or
other distributions in respect thereof) unless and until such time, if any, as
the Sellers deliver shares of Class B Stock to the Trust pursuant to the
Contracts and the Trust has distributed such shares to the Holders. Currently,
the holders of Class B Stock are entitled to vote separately as a class only
with respect to (i) amendments to the Company's Amended and Restated Articles of
Incorporation that alter or change the relative or other rights given to the
holders of Class B Stock, and (ii) such other matters as may require separate
class voting under the Company's Amended and Restated Articles of Incorporation
or by law. Holders of Class B Stock are not entitled to any other voting rights.

11
<PAGE> 14

In December 1997, the Company's common stock, par value $.01 per share (the
"Old Common Stock") was reclassified into voting Class A Stock and non-voting
Class B Stock (the "Recapitalization"). As a result of the Recapitalization
(including a related Class B Stock dividend), as of December 12, 1997, the Old
Common Stock was effectively split into the Class A Stock and the Class B Stock.
The Old Common Stock was quoted on the Nasdaq National Market System under the
symbol "HERB" from April 21, 1992 through December 12, 1997. The Class A Stock
and the Class B Stock have been quoted on the Nasdaq National Market System
under the symbols "HERBA" and "HERBB," respectively, since December 15, 1997.
The following table sets forth, for the indicated periods, the high and low
sales prices of the Old Common Stock, and, commencing December 15, 1997, the
Class A Stock and the Class B Stock, in each case, as reported on the Nasdaq
National Market System, and the quarterly cash dividends per share of the
Company's common stock. The sales prices in the table were taken from a written
summary provided to the Company by Nasdaq. Prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions. As of February 23, 1998, there were 1,010 and 1,011 record holders
of the Class A Stock and Class B Stock, respectively, including, in each case,
The Depository Trust Company, which holds shares of Class A Stock and Class B
Stock on behalf of an indeterminate number of beneficial owners.

<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
1996
First Quarter............................................. $12 1/8 $ 8 5/8 $ .15
Second Quarter............................................ 16 3/8 10 1/8 .15
Third Quarter............................................. 15 7/8 12 1/3 .15
Fourth Quarter............................................ 32 5/8 15 1/2 .15
1997
First Quarter............................................. $37 3/4 $14 3/4 .15
Second Quarter............................................ 21 1/8 15 3/4 .15
Third Quarter............................................. 26 1/4 14 7/8 .15
Fourth Quarter through December 12, 1997*................. 27 7/8 19 1/4
Fourth Quarter commencing December 15, 1997
Class A Stock*......................................... $24 $20 1/2 .15
Class B Stock*......................................... 23 20 .15
1998
First Quarter
Class A Stock**........................................ $25 $19 7/16
Class B Stock**........................................ 24 1/2 17 3/4
</TABLE>

- ---------------

* The Recapitalization became effective December 12, 1997. Beginning December
15, 1997, the Old Common Stock commenced trading as the Class A Stock and
the Class B Stock as a result of the Recapitalization. Accordingly, the
prices set forth above relate to the Old Common Stock through December 12,
1997, and the Class A Stock and Class B Stock, as indicated, commencing on
December 15, 1997.

** Reflects high and low sales prices through March 3, 1998.

The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the DECS and will have no obligations with respect to
the DECS or the Contracts. This Prospectus relates only to the DECS offered
hereby and does not relate to the Company or the Class B Stock. The Company has
filed a registration statement on Form S-3 with the Commission with respect to
the shares of Class B Stock that may be delivered to the Trust by the Sellers,
and by the Trust to the Holders of DECS, at the Exchange Date or upon earlier
acceleration of a Contract. The prospectus of the Company constituting a part of
such registration statement includes information relating to the Company and
Class B Stock, including certain risk factors relevant to an investment in Class
B Stock. THE PROSPECTUS OF THE COMPANY IS BEING ATTACHED HERETO AND DELIVERED TO
PROSPECTIVE PURCHASERS OF DECS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF
REFERENCE ONLY.

12
<PAGE> 15

THE PROSPECTUS OF THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR
IS IT INCORPORATED BY REFERENCE HEREIN.

THE CONTRACTS

General. The Trust will enter into one or more Contracts with the Sellers
and the Mark Hughes Control Entities obligating each Seller, severally and not
jointly, at the Exchange Date to deliver to the Trust a number of shares of
Class B Stock equal to the initial number of shares of Class B Stock subject to
such Seller's Contract multiplied by the Exchange Rate. Each of the Mark Hughes
Control Entities has guaranteed the performance and payment by each Seller under
each Contract and Collateral Agreement to which such Seller is a party. The
Exchange Rate is equal to, subject to adjustment as described in " -- Dilution
Adjustments; Adjustment Events" below, (i) if the Exchange Price per share of
Class B Stock is greater than the Threshold Appreciation Price,
, (ii) if the Exchange Price per share of Class B Stock is
less than or equal to the Threshold Appreciation Price but greater than the
Initial Price, the Initial Price divided by the Exchange Price and (iii) if the
Exchange Price per share of Class B Stock is less than or equal to the Initial
Price, one. The purchase price under the Contracts is equal to $ per share
of Class B Stock and $ in the aggregate and is payable to the Sellers
by the Trust on the closing of this offering. The purchase price of the
Contracts was arrived at by arm's length negotiations between the Trust and the
Sellers taking into consideration factors including the price, expected dividend
level and volatility of the Class B Stock, current interest rates, the term of
the Contracts, current market volatility generally, the collateral security
pledged by the Sellers, the value of other similar instruments and the costs and
anticipated proceeds of the offering of the DECS. All matters relating to the
administration of the Contracts will be the responsibility of either the Trust's
Administrator or Custodian.

Although it is the Sellers' current intention to deliver shares of Class B
Stock at the Exchange Date, each Seller may, at its option, deliver cash in lieu
of delivering all, but not less than all, of the shares of Class B Stock
otherwise deliverable by it on the Exchange Date (the "Cash Delivery Option"),
except where such delivery would violate applicable state law. The amount of
cash deliverable by a Seller upon the exercise of the Cash Delivery Option will
be equal to the product of the number of shares of Class B Stock otherwise
deliverable by such Seller on the Exchange Date multiplied by the Exchange
Price. On or prior to the 25th Business Day prior to the Exchange Date, each of
the Sellers will be obligated to notify the Trust concerning its exercise of the
Cash Delivery Option, and the Trust in turn will notify The Depository Trust
Company and publish a notice in a daily newspaper of national circulation
stating whether the Holders of DECS will receive shares of Class B Stock, cash
or a combination thereof and, if a combination of Class B Stock and cash, the
relative proportion of each.

Dilution Adjustments; Adjustment Events. The Exchange Rate is subject to
adjustment if the Company shall (i) pay a stock dividend or make a distribution,
in either case, with respect to Class B Stock in shares of such stock, (ii)
subdivide or split its outstanding shares of Class B Stock into a greater number
of shares, (iii) combine its outstanding shares of Class B Stock into a smaller
number of shares, (iv) issue by reclassification (other than a reclassification
pursuant to clause (ii), (iii), (iv) or (v) of the definition of Adjustment
Event below) of its shares of Class B Stock any other equity securities of the
Company or (v) issue rights or warrants (other than rights to purchase Class B
Stock pursuant to a plan for the reinvestment of dividends or interest) to all
holders of Class B Stock entitling them to subscribe for or purchase shares of
Class B Stock at a price per share less than the Market Price (as defined below)
of the Class B Stock on the Business Day next following the record date for the
determination of holders of Class B Stock entitled to receive such rights or
warrants.

In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate shall be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that the Trust will be entitled to receive at the Exchange Date, with respect to
each Contract, the number of shares of Class B Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of other equity
securities of the Company issued pursuant thereto) which it would have owned or
been entitled to receive immediately following such event had the Exchange Date
occurred immediately prior to such event or any record date with respect
thereto. In the case of the event referred to in clause (v) above, the

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Exchange Rate shall be adjusted by multiplying each of the Share Components of
the Exchange Rate in effect on the record date for the issuance of the rights or
warrants referred to in clause (v) above, by a fraction, of which the numerator
shall be (A) the number of shares of Class B Stock outstanding on the record
date for the issuance of such rights or warrants plus (B) the number of
additional shares of Class B Stock offered for subscription or purchase pursuant
to such rights or warrants, and of which the denominator shall be (x) the number
of shares of Class B Stock outstanding on the record date for the issuance of
such rights or warrants plus (y) the number specified in clause (B) above
multiplied by the quotient of the exercise price of such rights or warrants
divided by the Market Price of the Class B Stock on the Business Day next
following the record date for the determination of holders of Class B Stock
entitled to receive such rights or warrants. To the extent that such rights or
warrants expire prior to the Exchange Date of the DECS and shares of Class B
Stock are not delivered pursuant to such rights or warrants prior to such
expiration, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Class B Stock actually delivered pursuant to such rights or warrants. For
purposes of this paragraph, dividends will be deemed to be paid as of the record
date for such dividend. "Market Price" means, as of any date of determination,
the average Closing Price per share of Class B Stock on the 20 Trading Days
immediately prior to (but not including) the date of determination; provided,
however, that if there are not 20 Trading Days for the Class B Stock occurring
later than the 60th calendar day immediately prior to, but not including, such
date, the Market Price shall be determined as the market value per share of
Class B Stock as of such date as determined by a nationally recognized
investment banking firm retained for such purpose by the Administrator. All
adjustments to the Exchange Rate will be calculated to the nearest 1/10,000th of
a share of Class B Stock (or, if there is not a nearest 1/10,000th of a share,
to the next higher 1/10,000th of a share). No adjustment in the Exchange Rate
shall be required unless such adjustment would require an increase or decrease
of at least one percent therein; provided, however, that any adjustments which
by reason of the foregoing are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. If an adjustment is made to
the Exchange Rate pursuant to clauses (i), (ii), (iii), (iv) or (v) above, an
adjustment will also be made to the Exchange Price as such term is used
throughout the definition of Exchange Rate. The required adjustment to the
Exchange Price shall be made at the Exchange Date by multiplying the Exchange
Price by the cumulative number or fraction determined pursuant to the Exchange
Rate adjustment procedure described above. In the case of the reclassification
of any shares of Class B Stock in to any equity securities of the Company other
than the Class B Stock, such equity securities shall be deemed shares of Class B
Stock for all purposes. Each such adjustment to the Exchange Rate and the
Exchange Price shall be made successively.

In the event of (i) any dividend or distribution by the Company to all
holders of Class B Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in clause (i) of the first
paragraph under the caption "-- Dilution Adjustments; Adjustment Events," any
equity securities issued pursuant to a reclassification referred to in clause
(iv) of such paragraph and any Ordinary Cash Dividends (as defined below)) or
any issuance by the Company to all holders of Class B Stock of rights or
warrants to subscribe for or purchase any of its securities (other than rights
or warrants referred to in clause (v) of the first paragraph under the caption
"-- Dilution Adjustments; Adjustment Events"), (ii) any consolidation or merger
of the Company with or into another entity (other than a merger or consolidation
in which the Company is the continuing corporation and in which the Class B
Stock outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of the Company or another
corporation), (iii) any sale, transfer, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, (iv) any statutory exchange of securities of the Company with another
corporation (other than in connection with a merger or acquisition) or (v) any
liquidation, dissolution or winding up of the Company (any such event, an
"Adjustment Event"), each Seller will be obligated to deliver at the Exchange
Date, in lieu of or (in the case of an Adjustment Event described in clause (i)
above) in addition to, shares of Class B Stock as described above, cash in an
amount equal to (A) if the Exchange Price is greater than the Threshold
Appreciation Price, multiplied by the Transaction Value (as defined below),
(B) if the Exchange Price is less than or equal to the Threshold Appreciation
Price but is greater than the Initial Price, the product of (x) the Initial
Price divided by the

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<PAGE> 17

Exchange Price multiplied by (y) the Transaction Value and (C) if the Exchange
Price is less than or equal to the Initial Price, the Transaction Value.
Following an Adjustment Event, the Exchange Price, as such term is used in this
paragraph and throughout the definition of Exchange Rate, shall be deemed to
equal (A) if shares of Class B Stock are outstanding at the Exchange Date, the
Exchange Price of the Class B Stock, as adjusted pursuant to the method set
forth in the preceding paragraph, otherwise zero, plus (B) the Transaction
Value.

Notwithstanding the foregoing, with respect to any securities received by
holders of Class B Stock in an Adjustment Event that (A) are (i) listed on a
United States national securities exchange, (ii) reported on a United States
national securities system subject to last sale reporting, (iii) traded in the
over-the-counter market and reported on the National Quotation Bureau or similar
organization or (iv) for which bid and ask prices are available from at least
three nationally recognized investment banking firms and (B) are either (x)
perpetual equity securities or (y) non-perpetual equity or debt securities with
a stated maturity after the Exchange Date of the DECS ("Reported Securities"),
each Seller is obligated, in lieu of delivering cash in respect of such Reported
Securities received in an Adjustment Event, to deliver a number of such Reported
Securities with a value equal to all cash amounts that would otherwise be
deliverable in respect of Reported Securities received in such Adjustment Event,
as determined in accordance with clause (ii) of the definition of Transaction
Value, unless such Seller has made an election to exercise the Cash Delivery
Option or such Reported Securities have not yet been delivered to the holders
entitled thereto following such Adjustment Event or any record date with respect
thereto. If a Seller delivers any Reported Securities, upon distribution thereof
by the Trust to Holders of DECS, each Holder of a DECS will be responsible for
the payment of any and all brokerage and other transaction costs upon the sale
of such Reported Securities. If, following any Adjustment Event, any Reported
Security ceases to qualify as a Reported Security, then (x) the Sellers shall
not deliver such Reported Security but instead shall deliver an equivalent
amount of cash and (y) notwithstanding clause (ii) of the definition of
Transaction Value, the Transaction Value of such Reported Security shall mean
the fair market value of such Reported Security on the date such security ceases
to qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Administrator.

Because each DECS represents a Holder's right to receive a pro rata portion
of the Class B Stock or other assets delivered by the Sellers pursuant to the
Contracts, the amount of cash and/or the kind and number of securities which the
Holders of DECS are entitled to receive after an Adjustment Event shall be
subject to adjustment following the date of such Adjustment Event in the same
manner and upon the occurrence of the same type of events as described under
this caption "-- Dilution Adjustments; Adjustment Events" with respect to Class
B Stock and the Company.

For purposes of the foregoing, the term "Ordinary Cash Dividend" means,
with respect to any consecutive 365 day period, any dividend with respect to
Class B Stock paid in cash to the extent that the amount of such dividend,
together with the aggregate amount of all other dividends on the Class B Stock
paid in cash during such 365 day period, does not exceed on a per share basis
10% of the average of the Closing Prices of the Class B Stock over such 365 day
period.

The term "Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of Class B Stock, (ii)
for any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as adjusted pursuant
to the second preceding paragraph) received per share of Class B Stock and (iii)
for any property received in any Adjustment Event other than cash or such
Reported Securities, an amount equal to the fair market value of the property
received per share of Class B Stock on the date such property is received, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Administrator; provided, however, that in the case of clause
(ii), (x) with respect to securities that are Reported Securities by virtue of
only clause (iv) of the definition of Reported Securities above, Transaction
Value with respect to any such Reported Security means the average of the
mid-point of the last bid and ask prices for such Reported Security as of the
Exchange Date from each of at least three nationally recognized investment
banking firms retained for such purpose by the Administrator multiplied by

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<PAGE> 18

the number of such Reported Securities (as adjusted pursuant to the method set
forth in the third preceding paragraph) received per share of Class B Stock and
(y) with respect to all other Reported Securities, if there are not 20 Trading
Days for any particular Reported Security occurring after the 60th calendar day
immediately prior to, but not including, the Exchange Date, Transaction Value
with respect to such Reported Security means the market value per security of
such Reported Security as of the Exchange Date as determined by a nationally
recognized investment banking firm retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the method set forth in the third preceding paragraph) received per
share of Class B Stock. For purposes of calculating the Transaction Value, any
cash, Reported Securities or other property receivable in an Adjustment Event
shall be deemed to have been received immediately prior to the close of business
on the record date for such Adjustment Event or, if there is no record date for
such Adjustment Event, immediately prior to the close of business on the
effective date of such Adjustment Event.

No adjustments will be made for certain other events, such as offerings of
Class B Stock or Class A Stock by the Company for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of Class B
Stock or Class A Stock by any of the Mark Hughes Entities.

Each Seller is required under its Contract to notify the Trust promptly
upon becoming aware that an event that requires an adjustment to the Exchange
Rate or an Adjustment Event is pending or has occurred. The Trust is required,
within ten Business Days following the occurrence of an event that requires an
adjustment to the Exchange Rate or the occurrence of an Adjustment Event (or, in
either case, if the Trust is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to each Holder
of DECS of the occurrence of such event including a statement in reasonable
detail setting forth the method by which the adjustment to the Exchange Rate or
change in the consideration to be received by Holders of DECS following the
Adjustment Event was determined and setting forth the revised Exchange Rate or
consideration, as the case may be; provided, however, that, in respect of any
adjustment to the Exchange Price, such notice will only disclose the factor by
which the Exchange Price is to be multiplied in order to determine which clause
of the Exchange Rate definition will apply at the Exchange Date.

Collateral Requirements of the Contracts; Acceleration. Each Seller's
obligations under its Contract will be secured by a security interest in one
share of Class B Stock for each share of Class B Stock subject to such Contract
(subject to adjustment in accordance with the dilution provisions of such
Contract), pursuant to a Collateral Agreement among such Seller, each Mark
Hughes Control Entity, the Trust and The Bank of New York, as collateral agent
(the "Collateral Agent"). Unless a Seller is in default in its obligations under
the Collateral Agreement, the Seller will be permitted to substitute for the
pledged shares of Class B Stock collateral consisting of short-term, direct
obligations of the U.S. Government. Any U.S. Government obligations pledged as
substitute collateral for shares of Class B Stock will be required to have an
aggregate market value at the time of substitution and at daily mark-to-market
valuations thereafter of not less than 150% (or, from and after any
Insufficiency Determination that shall not be cured by the close of business on
the next business day thereafter, as described below, 200%) of the product of
the market price of the Class B Stock at the time of each valuation times the
number of shares of Class B Stock for which such obligations are being
substituted. Each Collateral Agreement will provide that, in the event of an
Adjustment Event, the relevant Seller will pledge as alternative collateral any
Reported Securities, plus cash in an amount at least equal to the Transaction
Value of any consideration other than Reported Securities, received by it in
respect of the maximum number of shares of Class B Stock subject to such
Seller's Contract at the time of the Adjustment Event. The number of Reported
Securities required to be pledged shall be subject to adjustment if any event
requiring a dilution adjustment under the Contracts shall occur. Each Seller
will be permitted to substitute U.S. Government obligations for Reported
Securities or cash pledged after any Adjustment Event. Any U.S. Government
obligations so substituted will be required to have an aggregate market value at
the time of substitution and at daily mark-to-market valuations thereafter of:
(A) in the case of obligations substituted for pledged Reported Securities, not
less than 150% (or, from and after any Insufficiency Determination that shall
not be cured by the close of business on the next business day thereafter, as
described below, 200%) of the product of the market price per security of
Reported Securities at the time of each valuation times the number of Reported
Securities for which such obligations are being substituted; and

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<PAGE> 19

(B) in the case of obligations substituted for pledged cash, not less than 105%
of the amount of cash for which such obligations are being substituted. The
Collateral Agent will promptly pay over to each Seller any dividends, interest,
principal or other payments received by the Collateral Agent in respect of any
collateral, including any substitute collateral, unless the relevant Seller is
in default of its obligations under its Collateral Agreement, or unless the
payment of such amount to the relevant Seller would cause the collateral to
become insufficient under the Collateral Agreement.

If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
fail to meet the foregoing requirements at any valuation, or that such Seller
has failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Class B Stock or Reported
Securities subject to such Contract, and such failure shall not be cured by the
close of business on the next business day after such determination, then,
unless a Collateral Event of Default (as defined below) under such Collateral
Agreement shall have occurred and be continuing, the Collateral Agent shall
commence (i) sales of the collateral consisting of U.S. Government obligations
and (ii) purchases, using the proceeds of such sales, of shares of Class B Stock
or Reported Securities, in an amount sufficient to cause the collateral to meet
the requirements under such Collateral Agreement. The Collateral Agent shall
discontinue such sales and purchases if at any time a Collateral Event of
Default under such Collateral Agreement shall have occurred and be continuing.

The occurrence of a Collateral Event of Default (as defined below) under
any Collateral Agreement, or the bankruptcy or insolvency of any Seller (or of
any Mark Hughes Entity), will cause an automatic acceleration of each Seller's
obligations under its Contract. A "Collateral Event of Default" under any
Collateral Agreement shall mean, at any time, (A) if no U.S. Government
obligations shall be pledged as substitute collateral at such time, failure of
the collateral to consist of at least the maximum number of shares of Class B
Stock subject to the relevant Seller's Contract at such time (or, if an
Adjustment Event shall have occurred at or prior to such time, failure of the
collateral to include the amount of cash and the maximum number of any Reported
Securities required to be pledged as described above); (B) if any U.S.
Government obligations shall be pledged as substitute collateral for shares of
Class B Stock (or Reported Securities) at such time, failure of such U.S.
Government obligations to have a market value at such time of at least 105% of
the market price of the Class B Stock (or the then-current market price per
security of Reported Securities, as the case may be) times the difference
between (x) the maximum number of shares of Class B Stock (or Reported
Securities) subject to the relevant Seller's Contract at such time and (y) the
number of shares of Class B Stock (or Reported Securities) pledged as collateral
at such time; and (C) if any U.S. Government obligations shall be pledged as
substitute collateral for any cash at such time, failure of such U.S. Government
obligations to have a market value at such time of at least 105% of such cash,
if such failure shall not be cured within one Business Day after notice thereof
is delivered to the relevant Seller.

Except as described below, upon acceleration of any Seller's Contract, the
Collateral Agent will to the extent permitted by law distribute to the Trust for
distribution pro rata to the Holders, with respect to such Seller's Contract,
the maximum number of shares of Class B Stock subject to such Contract, in the
form of the shares of Class B Stock then pledged by that Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged by
that Seller, or a combination thereof (or, after an Adjustment Event, in the
form of Reported Securities then pledged, cash then pledged, cash generated from
the liquidation of U.S. Government obligations then pledged, or a combination
thereof). In addition, in the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Class B Stock (or, after an
Adjustment Event, cash or Reported Securities) sufficient to meet the
obligations under any Contract, the Collateral Agent will distribute to the
Trust for distribution pro rata to the Holders, with respect to such Contract,
the market value of the shares of Class B Stock required to be delivered
thereunder, in the form of any shares of Class B Stock then pledged by the
relevant Seller plus cash generated from the liquidation of U.S. Government
obligations then pledged by such Seller (or, after an Adjustment Event, the
market value of the alternative consideration required to be delivered
thereunder, in the form of any Reported Securities then pledged, plus any cash
then pledged, plus cash generated from the liquidation of U.S. Government
obligations then pledged).

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<PAGE> 20

If upon acceleration of a Seller's Contract, such Seller (or any Mark
Hughes Entity) is subject to a Bankruptcy Code or similar proceeding, the
Collateral Agent will to the extent permitted by law distribute to the Trust for
distribution pro rata to the Holders, with respect to such Seller's Contract, a
number of shares of Class B Stock, in the form of the shares of Class B Stock
then pledged by that Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by that Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof), with an aggregate value
equal to such Seller's "Acceleration Value." The Acceleration Value will be
determined by the Administrator on the basis of quotations from independent
dealers. Each quotation will be for an amount that would be paid to the relevant
dealer in consideration of an agreement that would have the effect of preserving
the Trust's rights to receive the number of shares of Class B Stock (or, after
an Adjustment Event, Reported Securities, cash or a combination thereof) subject
to such Seller's Contract on the Exchange Date. The Administrator will request
quotations from four nationally recognized independent dealers on or as soon as
reasonably practicable following the date of acceleration. If four quotations
are provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. If
two or three quotations are provided, the Acceleration Value will be the
arithmetic mean of such quotations. If one quotation is provided, the
Acceleration Value will be such quotation. If no quotations are provided, the
Acceleration Value will be the aggregate value of the number of shares of Class
B Stock (or, after an Adjustment Event, Reported Securities, cash or a
combination thereof) that would be required to be delivered under such Seller's
Contract on the date of acceleration if the Exchange Date were redefined to be
the date of acceleration.

Description of Sellers. Each of the Sellers is a Delaware limited liability
company. Two other Delaware limited liability companies controlled by the Mark
Hughes Family Trust own all of the interests in each of the Sellers. The Mark
Hughes Family Trust is controlled by Mark Hughes (the Company's principal
stockholder, Chairman of the Board, Chief Executive Officer and President),as
trustee. Each of the two intermediate Delaware limited liability companies that
own all of the interests in the Sellers, the Mark Hughes Family Trust and Mark
Hughes are collectively referred to herein as the "Mark Hughes Control
Entities," and each of the Mark Hughes Control Entities and the Sellers are
collectively referred to herein as the "Mark Hughes Entities." Specific
information on the holdings of Mark Hughes is included in the prospectus of the
Company attached hereto.

THE TREASURY SECURITIES

The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with such face amounts and maturities as will provide
Holders with a quarterly distribution of $ per DECS on each
Distribution Date during the term of the Trust. Up to % of the Trust's
total assets may be invested in these Treasury Securities. If any Contract is
accelerated, a proportionate amount of the Treasury Securities of each maturity
then held in the Trust will be liquidated by the Administrator and the proceeds
thereof distributed pro rata to the Holders, together with proceeds from the
acceleration of such Contract. See "--The Contracts -- Collateral Requirements
of the Contracts; Acceleration" above and "-- Trust Termination" below.

TEMPORARY INVESTMENTS

For cash management purposes, the Trust may invest the proceeds of the
Treasury Securities held by the Trust and any other cash held by the Trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next following Distribution Date.

TRUST TERMINATION

The Trust will terminate automatically on or shortly after the Exchange
Date or following the distribution of all Trust assets to the Holders, if
earlier.

In the event that all of the Contracts remaining in effect at any time are
accelerated, then any Treasury Securities then held by the Trust will be
liquidated by the Administrator and the proceeds thereof distributed pro rata to
the Holders, together with all shares of Class B Stock subject to each Seller's
Contract that are

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pledged by each Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by each Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof) or in certain cases, the
Acceleration Value of a Seller's Contract, and the term of the Trust will
expire. See "-- The Contracts -- Collateral Requirements of the Contracts;
Acceleration" above.

DELIVERY OF CLASS B STOCK AND REPORTED SECURITIES; NO FRACTIONAL SHARES OF CLASS
B STOCK OR REPORTED SECURITIES

Class B Stock and Reported Securities delivered under the Contracts at the
Exchange Date are expected to be distributed by the Trust to the Holders pro
rata shortly after the Exchange Date, except that no fractional shares of Class
B Stock or Reported Securities will be distributed. If more than one DECS shall
be surrendered at one time by the same Holder, the number of full shares of
Class B Stock or Reported Securities which shall be delivered upon termination
of the Trust, in whole or in part, as the case may be, shall be computed on the
basis of the aggregate number of DECS so surrendered at the Exchange Date. In
lieu of delivering any fractional share or security, the Trust will sell a
number of shares or securities equal to the total of all fractional shares or
securities that would otherwise be delivered to Holders of all DECS, and each
such Holder will be entitled to receive an amount in cash equal to the pro rata
portion of the proceeds of such sale (which may be at a price lower than the
Exchange Price).

INVESTMENT RESTRICTIONS

The Trust has adopted a fundamental policy that the Trust may not purchase
any securities or instruments other than the Treasury Securities, the Contracts
and the Class B Stock or other assets received pursuant to the Contracts and,
for cash management purposes, short-term obligations of the U.S. Government;
issue any securities or instruments except for the DECS; make short sales or
purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts; or make loans. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that
(except for a partial liquidation of Treasury Securities following acceleration
of any Contract as described above under "Investment Objectives and
Policies -- The Treasury Securities") the Treasury Securities may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust.

RISK FACTORS RELATING TO DECS

INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT

The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contracts may not be disposed of during the term of the Trust and that the
Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust, except
for a partial liquidation of Treasury Securities following acceleration of any
Contract. As a result, the Trust will continue to hold the Contracts despite any
significant decline in the market price of the Class B Stock or adverse changes
in the financial condition of the Company (or, after an Adjustment Event,
comparable developments affecting any Reported Securities or the issuer
thereof). The Trust will not be managed like a typical closed-end investment
company.

RELATIONSHIP TO CLASS B STOCK; LIMITATIONS ON OPPORTUNITY FOR EQUITY
APPRECIATION; POTENTIAL LOSSES

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than the Initial Price, the Amount Receivable at the Exchange Date will
generally be less than the amount paid for the DECS, in which case an investment
in DECS will result in a loss and, if the Company became insolvent or bankrupt,
could result in a total loss. Holders of the DECS, therefore, bear the full risk
of a decline in the value of the Class B Stock prior to the Exchange Date.

In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Class B Stock because the Amount
Receivable at the Exchange Date will generally exceed the Initial Price only if
the Exchange Price exceeds the Threshold Appreciation Price (which represents an
appreciation of % over the Initial Price) and because Holders will be
entitled to receive at the Exchange Date only % of any appreciation of the
value of the Class B Stock in excess of the Threshold Appreciation Price. See
"Investment Objectives and Policies -- Trust Assets" for an illustration of the
Amount Receivable at the Exchange Date that a DECS Holder would receive at
various Exchange Prices. Because the market price of the Class B Stock is
subject to market fluctuations, the Amount Receivable at the Exchange Date may
be more or less than the Initial Price of the DECS. Additionally, because the
Exchange Price is generally determined based on a 20 Trading Day average, the
value of a share of Class B Stock distributed on the Exchange Date may be less
than the Exchange Price used to determine the Amount Receivable at the Exchange
Date.

The market price of the DECS at any time will be affected primarily by
changes in the price of Class B Stock. It is impossible to predict whether the
price of the Class B Stock will rise or fall. Trading prices of Class B Stock
will be influenced by the Company's operational results and by complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally, the stock exchange or quotation system on which
Class B Stock is traded or listed and the market segment of which the Company is
a part. See the prospectus relating to the Company and to the Class B Stock
attached hereto. Trading prices of the Class B Stock also may be influenced if
any of the Mark Hughes Entities or another principal shareholder of the Company
hereafter issues securities with terms similar to those of the DECS or otherwise
transfers shares of the Class B Stock or of the Class A Stock. As of February
23, 1998, Mark Hughes beneficially owned 5,666,932 shares of Class A Stock and
11,333,866 shares of Class B Stock (which amounts include 183,333 shares of
Class A Stock and 366,666 shares of Class B Stock held by a charitable
foundation of which Mark Hughes is a director but with respect to which Mark
Hughes has no pecuniary interest), of which 5,750,000 shares of Class B Stock
(assuming the Underwriters' over-allotment option is exercised in full) may be
delivered by the Sellers to the Trust at the Exchange Date.

IMPACT OF THE DECS ON THE MARKET FOR THE COMMON STOCK

It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
the Class A Stock and the Class B Stock. For example, the price of the Class A
Stock and/or Class B Stock could become more volatile and could be depressed by
investors' anticipation of the potential distribution into the market of
substantial additional amounts of Class B Stock at the termination of the Trust,
by possible sales of the Class A Stock or Class B Stock by investors who view
the DECS as a more attractive means of equity participation in the Company and
by hedging or arbitrage trading activity that may develop involving the DECS and
the Class B Stock.

DILUTION ADJUSTMENTS; STOCKHOLDER RIGHTS

The number of shares of Class B Stock that Holders are entitled to receive
at the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objectives and Policies -- The Contracts -- Dilution Adjustments; Adjustment
Events." Such number of shares to be received by Holders may not be adjusted for
other events, such as offerings of Class B Stock or Class A Stock for cash or in
connection with acquisitions, that may adversely affect the price of the Class B
Stock and, because of the relationship of the number of shares of Class B Stock
to be received pursuant to the Contracts to the price of the Class B Stock, such
other events may adversely affect the trading price of the DECS. There can be no
assurance that the Company will not take any of the foregoing actions, or that
it will not make
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<PAGE> 23

offerings of, or that major shareholders will not sell any, Class B Stock or
Class A Stock in the future, or as to the amount of any such offerings or sales.
In addition, until the receipt of the Class B Stock by Holders upon a
distribution thereof by the Trust, Holders will not be entitled to any rights
with respect to the Class B Stock (including without limitation voting rights
and the rights to receive any dividends or other distributions in respect
thereof).

NO OBLIGATION ON THE PART OF THE COMPANY WITH RESPECT TO THE DECS OR THE
CONTRACTS

The Company has no obligations with respect to the DECS, the Contracts or
the Amount Receivable at the Exchange Date, including any obligation to take the
needs of the Trust or of Holders of the DECS into consideration for any reason.
The Company will not receive any of the proceeds of the offering of the DECS
made hereby and is not responsible for, and has not participated in, the
determination of the time of sale of, quantities of or prices for the DECS to be
issued or the determination or calculation of the Amount Receivable at the
Exchange Date. The Company is not involved with the administration or trading of
the DECS.

TRADING VALUE; LISTING

The DECS are innovative securities and have no trading history, and it is
not possible to predict how they will trade in the secondary market. The trading
price of the DECS may vary considerably prior to the Exchange Date due to, among
other things, fluctuations in the price of the Class B Stock (which may occur
due to changes in the Company's financial condition, results of operations or
prospects, or because of complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally, the stock
exchanges or quotation systems on which the Class B Stock is traded or listed
and the market segment of which the Company is a part) and fluctuations in
interest rates and other factors that are difficult to predict and beyond the
Trust's control.

Each Underwriter currently intends, but is not obligated, to make a market
in the DECS and any such market-making may be discontinued at any time in the
sole discretion of such Underwriter without notice. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the Holders of the DECS with liquidity of investment or
that it will continue for the life of the DECS.

Application has been made to quote the DECS on the Nasdaq National Market
System. There is no guarantee that such application will be approved. Assuming
the acceptance of such application, there can be no assurance that the DECS will
not later be delisted or that trading in the DECS on the Nasdaq National Market
System will not be suspended. In the event of a delisting or suspension of
trading on such trading market, the Trust will apply for listing of the DECS on
another national securities exchange or for quotation on another trading market.
If the DECS are not listed or traded on any securities exchange or trading
market, or if trading of the DECS is suspended, pricing information for the DECS
may be more difficult to obtain, and the price and liquidity of the DECS may be
adversely affected.

NET ASSET VALUE

The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the DECS will trade at, below or above their net asset
value. The risk of purchasing investments that might trade at a discount is more
pronounced for investors who wish to sell their investments in a relatively
short period of time after completion of the Trust's initial public offering
because for those investors realization of a gain or loss on their investments
is likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The DECS are not subject to redemption prior to the
Exchange Date or the earlier termination of the Trust.

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<PAGE> 24

NON-DIVERSIFIED STATUS

The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Because the only
securities held or received by the Trust will be the Treasury Securities and the
Contracts or other assets subject to the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.

UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES

No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service with respect to the DECS and
no assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."

RISK FACTORS RELATING TO THE COMPANY

Investors in the DECS should carefully consider the information in the
prospectus of the Company attached hereto, including the information contained
therein under "Risk Factors."

RISK RELATING TO BANKRUPTCY OF THE MARK HUGHES ENTITIES

The Trust believes that the Contracts constitute "securities contracts" for
purposes of the Bankruptcy Code, liquidation of which would not be subject to
the automatic stay provisions of the Bankruptcy Code in the event of the
bankruptcy of a Seller (or of any Mark Hughes Entity). It is, however, possible
that the Contracts will be determined not to qualify as "securities contracts"
for this purpose, in which case a Seller's (or any Mark Hughes Entity's)
bankruptcy may cause a delay in settlement of such Seller's Contract, or
otherwise subject such Contract to bankruptcy proceedings, which could adversely
affect the timing of settlement and could impair the Trust's ability to
distribute the Class B Stock or other assets subject to such Contract and the
related Collateral Agreement to the Holders on a timely basis and, as a result,
could adversely affect the amount received by the Holders in respect of the DECS
and/or the timing of such receipt. It is also possible, even if the Contracts
are "securities contracts", that a Bankruptcy court could exercise its equitable
powers to stay the Trust's exercise of its remedies, which could similarly
adversely affect the amount received by the Holders in respect of the DECS
and/or the timing of such receipt.

NET ASSET VALUE

The net asset value of the portfolio will be calculated by the
Administrator no less frequently than quarterly by dividing the value of the net
assets of the Trust (the value of its assets less its liabilities) by the total
number of DECS outstanding. The Trust's net asset value will be published
semi-annually as part of the Trust's semi-annual report to Holders and at such
other times as the Trustees may determine. The Treasury Securities held by the
Trust will be valued at the mean between the last current bid and asked prices
or, if quotations are not available, as determined in good faith by the
Trustees. Short-term investments having a maturity of 60 days or less will be
valued at cost with accrued interest or discount earned included in interest to
be received. The Contracts will be valued at the mean of the bid prices received
by the Trust from at least three independent broker-dealer firms unaffiliated
with the Trust who are in the business of making bids on financial instruments
similar to the Contracts and with terms comparable thereto. In the event that
the Trust (acting through the Administrator) is unable to obtain valuations from
three independent broker-dealer firms, as required by the preceding sentence, on
a timely basis or without unreasonable effort or expense, the Contracts shall be
valued at the median of bid prices received from two such broker-dealer firms.
In the event that the Trust (acting through the Administrator) is unable to
obtain a valuation for the Contracts that it believes to be reasonable through
the above method, valuation shall be established at a level deemed to be fair
and reflective of the market value for the Contracts based on all appropriate
factors relevant to the value of the Contracts as set forth in pricing
guidelines adopted by the Trustees.

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<PAGE> 25

DESCRIPTION OF THE DECS

Each DECS represents an equal proportional interest in the Trust. Upon
liquidation of the Trust, Holders are entitled to share pro rata in the net
assets of the Trust available for distribution. DECS have no preemptive,
redemption or conversion rights. The DECS, when issued and outstanding, will be
fully paid and nonassessable. The only securities that the Trust is authorized
to issue are the DECS offered hereby and those sold to the initial Holder
referred to below. See "Underwriting."

Holders are entitled to one vote for each DECS held on all matters to be
voted on by Holders and are not able to cumulate their votes in the election of
Trustees. The Trustees of the Trust have been selected initially by Smith Barney
as the initial Holder of the Trust. The Trust intends to hold annual meetings as
required by the rules of the NYSE. The Trustees may call special meetings of
Holders for action by Holder vote as may be required by either the Investment
Company Act or the Declaration of Trust. The Holders have the right, upon the
declaration in writing or vote of more than two-thirds of the outstanding DECS,
to remove a Trustee. The Trustees will call a meeting of Holders to vote on the
removal of a Trustee upon the written request of the record Holders of 10% of
the DECS or to vote on other matters upon the written request of the record
Holders of 51% of the DECS (unless substantially the same matter was voted on
during the preceding 12 months). The Trustees shall establish, and notify the
Holders in writing of, the record date for each such meeting, which shall be not
less than 10 nor more than 50 days before the meeting date. Holders at the close
of business on the record date will be entitled to vote at the meeting. The
Trust will also assist in communications with other Holders as required by the
Investment Company Act.

BOOK-ENTRY SYSTEM

The DECS will be issued in the form of one or more global securities (the
"Global Securities") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.

The Depositary has advised the Trust and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.

Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in such Global Securities will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.

So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS. Except
as set forth below, owners of beneficial interests in such Global Securities
will not be

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<PAGE> 26

entitled to have the DECS registered in their names and will not receive or be
entitled to receive physical delivery of the DECS in definitive form and will
not be considered the owners or holders thereof.

Shares of Class B Stock or other assets deliverable in respect of, and any
quarterly distributions on, DECS registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of the Trust, any Trustee, the Paying Agent, the Administrator or the Custodian
for the DECS will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.

The Trust expects that the Depositary, upon receipt of any payment in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary. The Trust also expects that payments by participants
to owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.

A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Trust within 90 days, the Trust will issue
DECS in definitive registered form in exchange for the Global Security
representing such DECS. In that event, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of DECS
represented by such Global Security equal in number to that represented by such
beneficial interest and to have such DECS registered in its name.

MANAGEMENT AND ADMINISTRATION OF THE TRUST

TRUSTEES

The Trust will be internally managed by three Trustees, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act, and
will not have an investment adviser. Under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to grantor trusts, the
Trustees will not have the power to vary the investments held by the Trust. It
is a fundamental policy of the Trust that the Contracts may not be disposed of
during the term of the Trust and that the Treasury Securities held by the Trust
may not be disposed of prior to the earlier of their respective maturities and
the termination of the Trust, except for a partial liquidation of Treasury
Securities following acceleration of any Contract.

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<PAGE> 27

The names of the persons who will be elected by Smith Barney, the initial
Holder of the Trust, to serve as the Trustees are set forth below. The positions
and the principal occupations of the individual Trustees during the past five
years are also set forth below.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
--------------------- ----- -----------------------
<S> <C> <C>
Donald J. Puglisi, 52.................. Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53.............. Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58................... Trustee Professor of Economics
Center for Economic Education University of Delaware
& Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>

Each Trustee who is not a director, officer or employee of either
Underwriter or the Administrator, or of any affiliate thereof, will be paid by
Smith Barney (which will be reimbursed by the Mark Hughes Entities), in respect
of its annual fee and anticipated out-of-pocket expenses, a one-time, up-front
fee of $10,800. The Trust's Managing Trustee will also receive an additional
up-front fee of $3,600 for serving in that capacity. The Trustees will not
receive, either directly or indirectly, any compensation, including any pension
or retirement benefits, from the Trust. None of the Trustees receives any
compensation for serving as a trustee or director of any other affiliated
investment company.

ADMINISTRATOR

The day-to-day affairs of the Trust will be managed by The Bank of New
York, as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for and pay, or cause to be paid, all expenses incurred by the
Trust; (ii) with the approval of the Trustees, engage legal and other
professional advisors (other than the independent public accountants for the
Trust); (iii) instruct the Paying Agent to pay distributions on DECS as
described herein; (iv) prepare and mail, file or publish all notices, proxies,
reports, tax returns and other communications and documents, and keep all books
and records, for the Trust; (v) at the direction of the Trustees, institute and
prosecute legal and other appropriate proceedings to enforce the rights and
remedies of the Trust; and (vi) make all necessary arrangements with respect to
meetings of Trustees and any meetings of holders of DECS. The Administrator will
not, however, select the independent public accountants for the Trust or sell or
otherwise dispose of the Trust assets (except in connection with an acceleration
of the Contracts, or the settlement of the Contracts at the Exchange Date, and
upon termination of the Trust).

The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.

Except for its roles as Administrator, custodian, paying agent, registrar
and transfer agent of the Trust, and except for its role as Collateral Agent
under the Collateral Agreements, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the Trust.

The address of the Administrator is 101 Barclay Street, New York, New York
10286.

CUSTODIAN

The Trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or

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<PAGE> 28

the resignation of the Custodian, the Trust must engage a new Custodian to carry
out the duties of the Custodian as set forth in the Custodian Agreement.
Pursuant to the Custodian Agreement, all net cash received by the Trust will be
invested by the Custodian in short-term U.S. Government securities maturing on
or shortly before the next quarterly distribution date. The Custodian will also
act as Collateral Agent under the Collateral Agreement and will hold a perfected
security interest in the Class B Stock and U.S. Government obligations or other
assets consistent with the terms of the Contracts.

PAYING AGENT

The transfer agent, registrar and paying agent (the "Paying Agent") for the
DECS is The Bank of New York pursuant to a paying agent agreement (the "Paying
Agent Agreement"). In the event of any termination of the Paying Agent Agreement
by the Trust or the resignation of the Paying Agent, the Trust will use its best
efforts to engage a new Paying Agent to carry out the duties of the Paying
Agent.

INDEMNIFICATION

The Trust will indemnify each Trustee, the Administrator, the Custodian and
the Paying Agent with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
which it may incur in acting as Trustee, Administrator, Custodian or Paying
Agent, as the case may be, except in the case of willful misfeasance, bad faith,
gross negligence or reckless disregard of their respective duties or where
applicable law prohibits such indemnification. Smith Barney has agreed to
reimburse the Trust for any amounts it may be required to pay as indemnification
to any Trustee, the Administrator, the Custodian or the Paying Agent. Smith
Barney will in turn be reimbursed by the Mark Hughes Entities for all such
reimbursements paid by it.

DISTRIBUTIONS

The Trust intends to distribute to Holders on a quarterly basis the
proceeds of the Treasury Securities held by the Trust. The first distribution,
reflecting the Trust's operations from the date of the offering, will be made on
, 1998 to Holders of record as of , 1998. Thereafter,
distributions will be made on February 15, May 15, August 15 and November 15 or,
if any such date is not a Business Day, on the next succeeding Business Day, of
each year to Holders of record as of each February 1, May 1, August 1 and
November 1, respectively. A portion of each such distribution should be treated
as a tax-free return of the Holder's investment. See "Investment Objective and
Policies -- Trust Assets" and "Certain United States Federal Income Tax
Considerations." If any Contract is accelerated as described in "Investment
Objectives and Policies -- The Contracts -- Collateral Requirements of the
Contracts; Acceleration," each Holder will receive its pro rata share of the
proceeds from the acceleration of such Contract and from the liquidation of a
proportionate amount of the Treasury Securities then held in the Trust. Upon
termination of the Trust as described in "Investment Objectives and
Policies -- Trust Termination," each Holder will receive its pro rata share of
any remaining net assets of the Trust.

The Trust does not permit the reinvestment of distributions.

ESTIMATED EXPENSES

At the closing of this offering Smith Barney will pay to each of the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, DECS certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the DECS for sale in the various states. The aggregate of the
one-time, up-front payments described above will be in the amount of $260,500.
Smith Barney will also pay estimated organization costs of the Trust in the
amount of $10,800 and estimated costs of the Trust in connection with the
initial registration and public offering of the DECS in the amount of

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<PAGE> 29

$136,000 at the closing of the offering. Smith Barney will be reimbursed by the
Mark Hughes Entities for such payments.

The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Smith Barney or, in the event of its failure
to pay such amounts, the Mark Hughes Entities, or, in the event of the failure
of either Smith Barney or the Mark Hughes Entities to pay such amounts, the
Trust. Smith Barney will be reimbursed by the Mark Hughes Entities for all
expenses of the Trust paid by it.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the principal U.S. federal income tax
consequences that may be relevant to a holder of a DECS that is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized under the laws of the United States, an estate the income
of which is subject to U.S. federal income taxation regardless of its source, or
a trust if (i) a U.S. court is able to exercise primary supervision over the
trust's administration and (ii) one or more United States persons have the
authority to control all of the trust's substantial decisions (a "U.S. person")
or a holder that is otherwise subject to U.S. federal income taxation on a net
income basis in respect of a DECS (such a holder and any U.S. person, a "U.S.
Holder"). The discussion below is based on the advice of Cleary, Gottlieb, Steen
& Hamilton.

This summary is based on the U.S. federal income tax laws, regulations,
rulings and decisions now in effect, all of which are subject to change. Except
to the extent discussed below under "Non-United States Persons," this summary
deals only with U.S. Holders that will hold DECS as capital assets. This summary
deals only with initial Holders and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as banks,
insurance companies, dealers in securities, persons that will hold DECS as a
position in a "straddle" for tax purposes or as a part of a "synthetic security"
or a "conversion transaction" or other integrated investment comprised of a DECS
and one or more other investments, or persons that have a functional currency
other than the U.S. dollar. It does not include any description of the tax laws
of any state or local governments or of any foreign government that may be
applicable to the DECS or to the Holders thereof. It also does not discuss the
tax consequences of the ownership of the Class B Stock or Reported Securities.
Prospective purchasers of DECS are urged to review the discussion under
"Taxation" in the accompanying prospectus of the Company concerning the federal
income tax consequences of an investment in the Class B Stock. INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX CONSEQUENCES TO THEM OF
HOLDING DECS, INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE
U.S. FEDERAL INCOME TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS.

There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the DECS. The Trust intends to treat a DECS
for U.S. federal income tax purposes as a beneficial interest in a trust that
holds zero-coupon U.S. Treasury securities and Contracts, and to report Holders'
income to the Internal Revenue Service in accordance with this treatment. Under
this approach, the tax consequences of holding a DECS will be as described
below. However, prospective investors in the DECS should be aware that the
Internal Revenue Service might take a different view as to the proper
characterization of the DECS and of the tax consequences to a Holder.

TAX STATUS OF THE TRUST

The Trust will be taxable as a grantor trust owned solely by the present
and future holders of DECS for federal income tax purposes, and income received
by the Trust will be treated as income of the Holders in the manner set forth
below.

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<PAGE> 30

TAX CONSEQUENCES TO UNITED STATES HOLDERS

Tax Basis of the Treasury Securities and the Contracts. Each Holder will be
considered the owner of its pro rata portion of the Treasury Securities and the
Contracts in the Trust. The cost to the Holder of its DECS will be allocated
among the Holder's pro rata portion of the Treasury Securities and the Contracts
(in proportion to the fair market values thereof on the date on which the Holder
acquires its DECS) in order to determine the Holder's tax bases. It is currently
anticipated that % and % of the net proceeds of the offering will be used by
the Trust to purchase the Treasury Securities and as payments under the
Contracts, respectively.

Recognition of Original Issue Discount on the Treasury Securities. The
Treasury Securities in the Trust will consist of zero-coupon U.S. Treasury
securities. A Holder will be required to treat its pro rata portion of each
Treasury Security in the Trust as a bond that was originally issued on the date
the Holder purchased its DECS and at an original issue discount equal to the
excess of the Holder's pro rata portion of the amounts payable on such Treasury
Security over the Holder's tax basis therefor as discussed above. The Holder
(whether on the cash or accrual method of tax accounting) is required to include
original issue discount (other than original issue discount on short-term
Treasury Securities as described below) in income for federal income tax
purposes as it accrues, in accordance with a constant yield method, prior to the
receipt of cash attributable to such income. Because it is expected that more
than 20% of the Holders will be accrual basis taxpayers, original issue discount
on any short-term Treasury Security (i.e., any Treasury Security with a maturity
of one year or less from the date it is purchased) held by the Trust will also
be required to be included in income by the Holders as it is accrued. Unless a
Holder elects to accrue the original issue discount on a short-term Treasury
Security according to a constant yield method based on daily compounding, such
original issue discount will be accrued on a straight-line basis. The Holder's
tax basis in a Treasury Security will be increased by the amount of any original
issue discount included in income by the Holder with respect to such Treasury
Security.

Treatment of the Contracts. Each Holder will be treated as having entered
into a pro rata portion of the Contracts and, at the Exchange Date, as having
received a pro rata portion of the Class B Stock (or cash, Reported Securities
or combination thereof) delivered to the Trust. Under existing law, a Holder
will not recognize income, gain or loss upon entry into the Contracts. A Holder
should not be required under existing law to include in income additional
amounts over the term of the Contracts.

The Internal Revenue Service may contend that a DECS should be
characterized for federal income tax purposes in a manner different from the
approach described above. For example, the Internal Revenue Service might assert
that the Contracts should be treated as contingent debt obligations of the
Sellers that are subject to Treasury regulations promulgated in June 1996
governing contingent payment debt instruments. If the Internal Revenue Service
were to prevail in making such an assertion, original issue discount would
accrue with respect to each Contract at a "comparable yield" for the Seller
under that Contract, determined at the time the Contract is entered into. A
Holder's pro rata portion of original issue discount in respect of the Contracts
and original issue discount in respect of the Treasury Securities might exceed
the aggregate amount of the quarterly cash distributions to a Holder. In
addition, under this treatment, a Holder would be required to treat any gain
realized on the sale, exchange or redemption of the DECS as ordinary income to
the extent that such gain is allocable to the Contracts. Any loss realized on
such sale, exchange or redemption that is allocable to the Contracts would be
treated as an ordinary loss to the extent of the Holder's original issue
discount inclusions with respect to the Contracts, and as capital loss to the
extent of loss in excess of such inclusions. It is also possible that the
Internal Revenue Service could take the view that a Holder should include in
income the amount of cash actually received each year in respect of the DECS, or
that the DECS as a whole constitute a contingent payment debt instrument subject
to the rules described above.

Sale of the DECS. Upon a sale of all or some of a Holder's DECS, a Holder
will be treated as having sold its pro rata portion of the Treasury Securities
and Contracts underlying the DECS. The selling Holder will recognize gain or
loss equal to the difference between the amount realized and the Holder's
aggregate tax bases in its pro rata portion of the Treasury Securities and the
Contracts. Any gain or loss will be long-term capital gain or loss if the Holder
has held the DECS for more than one year. The distinction between capital

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<PAGE> 31

gain or loss and ordinary income or loss is important for purposes of the
limitations on a Holder's ability to offset capital losses against ordinary
income. In addition, certain individuals are subject to taxation at a reduced
rate on long-term capital gains. The Taxpayer Relief Act of 1997 further reduces
tax rates on capital gains recognized by individuals in respect of assets held
for more than 18 months. Holders are advised to consult their own tax advisers
as to the consequences of the Taxpayer Relief Act of 1997 in their particular
circumstances.

Distribution of the Class B Stock. The delivery of Class B Stock to the
Trust pursuant to the Contracts will not be taxable to the Holders. The
distribution of Class B Stock upon the termination of the Trust will not be
taxable to the Holders. A Holder will have taxable gain or loss (which will be
short-term capital gain or loss) upon receipt of cash in lieu of fractional
shares of Class B Stock distributed upon termination of the Trust, in an amount
equal to the difference between the cash received and the portion of the basis
of the Contracts allocable to fractional shares (based on the relative number of
fractional shares and full shares delivered to the Holder). Each Holder's
aggregate basis in its shares of Class B Stock will be equal to its basis in its
pro rata portion of the Contracts less the portion of such basis allocable to
any fractional shares of Class B Stock for which cash is received.

Distribution of Cash. If a Holder receives cash upon dissolution of the
Trust or as a result of a Seller's election to deliver cash under the Cash
Delivery Option, a Holder will recognize capital gain or loss equal to any
difference between the amount of cash received from the Sellers and the Holder's
tax basis in the DECS at that time. Such gain or loss generally will be
long-term capital gain or loss if the Holder has held the DECS for more than one
year at the Exchange Date.

Distribution of Cash or Reported Securities as a Result of an Adjustment
Event. If as a result of an Adjustment Event, cash, Reported Securities, or a
combination of cash and Reported Securities is delivered pursuant to the
Contracts, a Holder will have taxable gain or loss upon receipt equal to the
difference between the amount of cash received, including cash received in lieu
of fractional Reported Securities, and its basis in its pro rata portion of the
Contracts allocable to any shares of Class B Stock for which such cash or
fractional Reported Securities were received. Any gain or loss will be capital
gain or loss, and if the Holder has held the DECS for more than one year, such
gain or loss will be long-term capital gain or loss. A Holder's basis in any
Reported Securities received will be equal to its basis in its pro rata portion
of the Contracts less the portion of such basis allocable to any shares of Class
B Stock for which cash or fractional Reported Securities were received. See
"Investment Objectives and Policies -- The Contracts."

Fees and Expenses of the Trust. A Holder's pro rata portion of the expenses
in connection with the organization of the Trust, underwriting discounts and
commissions and other offering expenses should be includable in the cost to the
Holder of the DECS. However, there can be no assurance that the Internal Revenue
Service will not take a contrary view. If the Internal Revenue Service were to
prevail in treating such expenses as excludable from the Holder's cost of the
DECS, such expenses would not be includable in the basis of the assets of the
Trust and should instead be amortizable and deductible over the term of the
Trust. If such expenses were treated as amortizable and deductible, an
individual Holder who itemizes deductions would be entitled to amortize and
deduct (subject to any other applicable limitations on itemized deductions) such
expenses over the term of the Trust only to the extent that such amortized
annual expenses together with such Holder's other miscellaneous deductions
exceed 2% of such Holder's adjusted gross income.

Proposed Legislation. A bill recently introduced in Congress by a member of
the House of Representatives (H.R. 3170) would treat some or all of the net
long-term capital gain arising from "constructive ownership" transactions
involving certain derivative financial instruments as short-term capital gain,
and would impose an interest charge on such short-term capital gain. The
proposed legislation would be effective with respect to gain recognized after
the date the legislation is enacted into law, without regard to when the
constructive ownership transaction was entered into. If enacted in its current
form, the legislation would not apply to the DECS transaction (and, even if the
legislation in its current form were extended to cover the DECS transaction,
would have no material effect on the DECS transaction). It is not possible to
predict whether legislation addressing constructive ownership transactions will
be enacted, or what form any such legislation might take (including with respect
to effective dates).

29
<PAGE> 32

NON-UNITED STATES PERSONS

In the case of a Holder of the DECS that is not a U.S. person, payments
made with respect to the DECS will not be subject to U.S. withholding tax,
provided that such Holder complies with applicable certification requirements
(including in general the furnishing of an Internal Revenue Service Form W-8 or
a substitute form). Any capital gain realized upon the sale or other disposition
of the DECS by a Holder that is not a U.S. person will generally not be subject
to U.S. federal income tax if (i) such gain is not effectively connected with a
U.S. trade or business of such Holder and (ii) in the case of an individual,
such individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition or the gain is not attributable to
a fixed place of business maintained by such individual in the United States.

BACKUP WITHHOLDING AND INFORMATION REPORTING

A Holder of a DECS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the Holder unless
such Holder (a) is a corporation or comes within certain other exempt categories
and, when required, provides proof of such exemption or (b) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Information reporting and backup withholding do not apply to
payments made to a Holder of a DECS that is not a U.S. person if the beneficial
owner of the DECS certifies as to its non-U.S. status or otherwise establishes
an exemption, provided that the Trust or its agent does not have actual
knowledge that the Holder is a U.S. person.

Payment of the proceeds from the sale of a DECS to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is (i) a U.S. person, (ii) a controlled
foreign corporation for U.S. tax purposes, (iii) a foreign person 50 percent or
more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was effectively
connected with a U.S. trade or business or (iv) with respect to payments made
after December 31, 1998, a foreign partnership that, at any time during its
taxable year is 50% or more (by income or capital interest) owned by U.S.
persons or is engaged in the conduct of U.S. trade or business, information
reporting may apply to such payments. Payment of the proceeds from a sale of a
DECS to or through the U.S. office of a broker is subject to information
reporting and backup withholding unless the Holder or beneficial owner certifies
as to its non-U.S. status or otherwise establishes an exemption from information
reporting and backup withholding.

Any amounts withheld under the backup withholding rules are not an
additional tax and may be credited against the U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the
Internal Revenue Service.

30
<PAGE> 33

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Trust, the Company, each of the
Sellers, certain other parties thereto and the Underwriters named below, the
Trust has agreed to sell to each of the Underwriters, and each of the
Underwriters severally has agreed to purchase, the number of DECS set forth
opposite its name below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF DECS
----------- --------------
<S> <C>
Smith Barney Inc. ..........................................
Prudential Securities Incorporated..........................
----------
Total............................................. 5,000,000
==========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the DECS offered hereby if any of the DECS are
purchased.

The Underwriters propose to offer the DECS directly to the public initially
at the public offering price set forth on the cover of this Prospectus and to
certain dealers at such prices less a concession not in excess of $ per
DECS. The Underwriters may allow, and such dealers may reallow, a concession not
in excess of $ per DECS to other dealers. After the initial public
offering, such public offering price and such concession and reallowance may be
changed. The sales load of $ per DECS is equal to % of the initial
public offering price.

The Company, its directors and executive officers, and the Mark Hughes
Entities have each agreed not to (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for shares of Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise, for a period of 90 days, in the case of the Company and its directors
and executive officers (other than the Selling Stockholder), and one year, in
the case of the Mark Hughes Entities, from the date of this Prospectus without
the prior written consent of Smith Barney; provided, however, that (x) Herbalife
may issue, or grant options for, Common Stock pursuant to any stock plan for
employees or directors, or any employee benefit plan, in effect on the date of
this Prospectus, or pursuant to any stock options outstanding on the date of
this Prospectus and (y) such agreements will not restrict the ability of the
Mark Hughes Entities to engage in any of the transactions described in clause
(i) or (ii) above in connection with (a) the offering by the Trust of the DECS
or any delivery of shares of Class B Stock pursuant to the terms of the DECS,
(b) the loaning of shares of Class B Stock pursuant to the Securities Loan
Agreement (as defined below), or (c) sales by the Herbalife Family Foundation, a
charitable trust of which Mark Hughes is a director but with respect to which
Mark Hughes has no pecuniary interest. If any such consent were given it would
not necessarily be preceded or followed by a public announcement thereof.

The Trust has granted to the Underwriters an option, exercisable for the 30
day period after the date of this Prospectus, to purchase up to an additional
750,000 DECS from the Trust, at the same price per DECS as the initial DECS to
be purchased by the Underwriters. The Underwriters may exercise such option only
for the purpose of covering over-allotments, if any, incurred in connection with
the sale of DECS offered hereby. To the extent that the Underwriters exercise
such option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the same proportion of the DECS as the number of DECS to
be purchased and offered by such Underwriter in the above table bears to the
total number of initial DECS to be purchased by the Underwriters.

31
<PAGE> 34

The DECS will be a new issue of securities with no established trading
market. The DECS have been approved for quotation on the Nasdaq National Market
System under the symbol "HERBL." The Underwriters intend to make a market in the
DECS, subject to applicable laws and regulations. However, the Underwriters are
not obligated to do so and any such market-making may be discontinued at any
time at the sole discretion of the Underwriters without notice. Accordingly, no
assurance can be given as to the liquidity of such market.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respect thereof, and that the Mark Hughes Entities (including the Mark
Hughes Family Trust) will guarantee the indemnity and contribution obligations
of the Company.

In connection with the formation of the Trust, Smith Barney subscribed for
and purchased DECS for a purchase price of $100. Under the Contracts,
the Sellers will be obligated to deliver to the Trust Class B Stock in respect
of such DECS on the same terms as the DECS offered hereby. Smith Barney
sponsored the formation of the Trust for purposes of this offering, including
selecting its initial Trustee.

Pursuant to the Contracts, the Trust has agreed, subject to the terms and
conditions set forth therein, to purchase from the Sellers an aggregate number
of shares of the Class B Stock equal to the aggregate number of DECS to be
purchased by the Underwriters from the Trust pursuant to the Underwriting
Agreement (including the DECS to be purchased by the Underwriters upon exercise
of the over-allotment option plus the number of DECS purchased by Smith Barney
in connection with the organization of the Trust). Pursuant to the terms of the
Contracts, the Sellers will be obligated to deliver to the Trust at the Exchange
Date of the DECS a number of shares of the Class B Stock (or, at the Sellers'
option, the cash equivalent) and/or such other consideration as permitted or
required by the terms of the Contract, that are expected to have the same value
as the shares of the Class B Stock delivered pursuant to the DECS. The closing
of the offering of the DECS is conditioned upon the closing of the purchase of
the Class B Stock pursuant to the Contract.

In connection with this offering, the Underwriters and certain selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the DECS, the Class
A Stock or the Class B Stock. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such persons may bid for or purchase DECS or the Class B Stock for
purposes of stabilizing their market prices. The Underwriters also may create
short positions for the account of the Underwriters by selling more DECS in
connection with this offering than they are committed to purchase from the
Trust, and in such case may purchase DECS in the open market following the
completion of this offering to cover all or a portion of such short positions.
The Underwriters may also cover all or a portion of such short positions by
exercising the Underwriters' over-allotment options in this offering. In
addition, Smith Barney, on behalf of the Underwriters, may impose "penalty bids"
under contractual arrangements whereby it may reclaim from a dealer
participating in this offering the selling concession with respect to DECS that
are distributed in this offering but subsequently purchased of the account of
either Underwriter in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the DECS, the Class A
Stock or the Class B Stock at a level above that which might otherwise prevail
in the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.

In connection with this offering, certain Underwriters and selling group
members who are qualifying registered market makers on the Nasdaq National
Market System may engage in passive market making transactions in the Class B
Stock, the Class A Stock or the DECS on the Nasdaq National Market System in
accordance with Rule 103 of Regulation M. Passive market making transactions
must comply with certain volume and price limitations and be identified as such.
In general, a passive market maker may display its bid at a price not in excess
of the highest independent bid for the security, and if all independent bids are
lowered below the passive market maker's bid, then such bid must be lowered when
certain purchase limits are exceeded.

32
<PAGE> 35

In connection with this offering, certain affiliates of Mark Hughes (the
"Lender") and Smith Barney intend to enter into a Securities Loan Agreement (the
"Securities Loan Agreement") which provides that, subject to certain
restrictions and with the agreement of the Lender, Smith Barney may from time to
time borrow, return and reborrow shares of Class B Stock from the Lender (the
"Borrowed Securities"); provided, however, that the number of Borrowed
Securities at any time may not exceed 1,000,000 shares, subject to adjustment
for certain dilutive events. The Securities Loan Agreement is intended to
facilitate market-making activity in the DECS by Smith Barney. Smith Barney may
from time to time borrow shares of Class B Stock under the Securities Loan
Agreement for the purpose of settling short sales of Class B Stock, or for the
purpose of returning shares of Class B Stock previously borrowed by Smith Barney
to settle short sales of Class B Stock, in each case, where such short sales
were entered into by Smith Barney to hedge any long position in the DECS
resulting from its market-making activities. Such sales will be made in the
over-the-counter market at market prices prevailing at the time of sale or at
prices related to such market prices. Market conditions will dictate the extent
and timing of Smith Barney's market-making transactions in the DECS and the
consequent need to borrow shares of Class B Stock. The availability of shares of
Class B Stock under the Securities Loan Agreement at any time is not assured and
any such availability does not assure market-making activity with respect to the
DECS and any market-making actually engaged in by Smith Barney may cease at any
time. The foregoing description of the Securities Loan Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Securities Loan Agreement, a copy of which has been filed with the Commission
and is hereby incorporated by reference.

In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking transactions with the
Company, the Mark Hughes Entities and their respective affiliates.

LEGAL MATTERS

Certain legal matters will be passed upon for the Trust and the
Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton &
Finger, Wilmington, Delaware.

EXPERTS

The statement of assets, liabilities and capital included in this
Prospectus has been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report appearing herein, and is included in
reliance upon the report of such firm given upon their authority as experts in
auditing and accounting.

ADDITIONAL INFORMATION

The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act with
respect to the DECS offered hereby. Further information concerning the DECS and
the Trust may be found in the Registration Statement, of which this Prospectus
constitutes a part. The Registration Statement may be inspected without charge
at the Commission's office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of the fees prescribed by
the Commission. Such Registration Statement is also available on the
Commission's website (http://www.sec.gov).

33
<PAGE> 36

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE TRUSTEES OF DECS TRUST III

We have audited the accompanying statement of assets, liabilities and
capital of DECS Trust III (a Delaware trust) as of March 3, 1998. This financial
statement is the responsibility of the Trustees of the Trust. Our responsibility
is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets, liabilities and
capital is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement of
assets, liabilities and capital. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the statement of assets, liabilities and capital referred
to above presents fairly, in all material respects, the financial position of
DECS Trust as of March 3, 1998, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

New York, New York
March 4, 1998

34
<PAGE> 37

DECS TRUST III

STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
MARCH 3, 1998

<TABLE>
<S> <C>
ASSETS
Cash........................................................ $100
Total Assets................................................ $100

LIABILITIES
Total Liabilities........................................... $ --
NET ASSETS.................................................. $100

CAPITAL
DECS, 1 DECS issued and outstanding......................... $100
</TABLE>

The accompanying notes are an integral part of this financial statement.

35
<PAGE> 38

DECS TRUST III

NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
MARCH 3, 1998

I. ORGANIZATION

DECS Trust III (the "Trust"), organized as a Delaware business trust on
January 22, 1998, is a closed-end management investment company registered under
the Investment Company Act of 1940. The term of the Trust is anticipated to
expire in the year 2001; however, the exact date will be determined in the
future. The Trust may be dissolved prior to its planned termination date under
certain circumstances as outlined in the registration statement.

The Trust has registered 5,750,000 DECS representing shares of beneficial
interest in the Trust. The only securities that the Trust is authorized to issue
are the DECS. Each of the DECS represents the right to receive (a) quarterly
distributions during the term of the Trust, and (b) upon the conclusion of the
term of the Trust (the "Exchange Date"), certain shares of the Class B Common
Stock, par value $.01, of Herbalife International, Inc. or cash with an
equivalent value (such amounts determined as described in the registration
statement). The DECS are not subject to redemption prior to the Exchange Date or
the earlier termination of the Trust. The Trust will hold a series of
zero-coupon U.S. Treasury securities and one or more forward purchase contracts
relating to the Common Stock. The business activities of the Trust are limited
to the matters discussed above. The Trust will be treated as a grantor trust for
U.S. federal income tax purposes.

On March 3, 1998, the Trust issued one DECS to Smith Barney Inc. ("Smith
Barney") in consideration for a purchase price of $100.

II. ORGANIZATIONAL COSTS, FEES AND EXPENSES

Organizational costs and ongoing fees of the Trust will be borne by Smith
Barney.

III. MANAGEMENT AND ADMINISTRATION OF TRUST

The Trust will be managed by its trustees and will not have a separate
investment adviser. The Trust will be overseen by three trustees and the daily
administration will be carried out by The Bank of New York as the administrator.
The Bank of New York will also serve as the Trust's custodian, paying agent,
registrar and transfer agent with respect to the DECS.

36
<PAGE> 39

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR ANY OF THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE TRUST SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. HOWEVER, IF ANY MATERIAL CHANGE
OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS
WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Fees and Expenses..................... 8
The Trust............................. 8
Use of Proceeds....................... 9
Investment Objectives and Policies.... 9
Investment Restrictions............... 19
Risk Factors Relating to DECS......... 19
Net Asset Value....................... 22
Description of the DECS............... 23
Management and Administration of the
Trust............................... 24
Certain United States Federal Income
Tax Considerations.................. 27
Underwriting.......................... 31
Legal Matters......................... 33
Experts............................... 33
Additional Information................ 33
Report of Independent Accountants..... 34
Statement of Assets, Liabilities and
Capital............................. 35
</TABLE>

Until , 1998, all dealers effecting transactions in the DECS,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
======================================================
======================================================

5,000,000 DECSSM
DECS TRUST III
------------

PROSPECTUS

MARCH , 1998

------------
SALOMON SMITH BARNEY

PRUDENTIAL SECURITIES INCORPORATED

======================================================
<PAGE> 40

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

1. Financial Statements

<TABLE>
<S> <C> <C> <C>
Part A -- (i) Report of Independent Accountants
(ii) Statement of Assets, Liabilities and Capital as of March 3,
1998
Part B -- none
</TABLE>

2. Exhibits

<TABLE>
<S> <C> <C>
(a)(1)(A) -- Declaration of Trust dated as of January 22, 1998**
(a)(1)(B) -- Amended and Restated Declaration of Trust dated as of March
23, 1998
(a)(2)(A) -- Certificate of Trust dated January 22, 1998**
(a)(2)(B) -- Restated Certificate of Trust dated March 3, 1998**
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of specimen certificate of DECS (included in Exhibit
2(a)(1)(B))
(d)(2) -- Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in Exhibit
2(a)(1)(B))
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement
(i) -- Not applicable
(j) -- Custodian Agreement dated as of March 3, 1998**
(k)(1) -- Form of Administration Agreement
(k)(2) -- Form of Paying Agent Agreement
(k)(3) -- Form of Purchase Contract
(k)(4) -- Form of Collateral Agreement
(k)(5) -- Form of Fund Expense Agreement
(k)(6) -- Form of Fund Indemnity Agreement
(l) -- Opinion and Consent of Counsel to the Trust
(m) -- Not applicable
(n)(1) -- Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2(n)(1))
(n)(2) -- Consent of Independent Public Accountants**
(n)(3) -- Consents to being named as Trustee
(o) -- Not applicable
(p) -- Subscription Agreement dated as of March 3, 1998**
(q) -- Not applicable
(r) -- Financial Data Schedule
</TABLE>

- ---------------

** Previously filed.

ITEM 25. MARKETING ARRANGEMENTS

See Exhibit 2(h) to this Registration Statement.

C-1
<PAGE> 41

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:

<TABLE>
<S> <C>
Registration fees........................................... $39,491
Nasdaq National Market System listing fee................... 40,000
Printing (other than certificates).......................... 10,000
Engraving and printing certificates......................... 1,000
Fees and expenses of qualification under state securities
laws (including fees of counsel).......................... 10,000
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 10,000
NASD fees................................................... 11,680
Miscellaneous............................................... 3,829
-------
Total............................................. $136,000
=======
</TABLE>

- ---------------

* To be furnished by amendment.

ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

As of the effective date of this Registration Statement:

<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
DECS representing shares of beneficial interest.......... 1
</TABLE>

ITEM 29. INDEMNIFICATION

The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.

The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1)(B)
to this Registration Statement provides for indemnification to each Trustee
against any claim or liability incurred in acting as Trustee of the Trust,
except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the Trustee's duties. The Custodian Agreement,
Administration Agreement and Paying Agent Agreement filed as Exhibits 2(j),
2(k)(1) and 2(k)(2) to this Registration Statement provide for indemnification
to the Custodian, Administrator and Paying Agent against any loss or expense
incurred in the performance of their obligations under the respective
agreements, unless such loss or expense is due to willful misfeasance, bad
faith, gross negligence or reckless disregard of their obligations. The Fund
Indemnity Agreement filed as Exhibit 2(k)(6) to this Registration Statement
provides that Smith Barney will indemnify the Trust for certain indemnification
expenses incurred under the Amended and Restated Declaration of Trust, the
Custodian Agreement, the Administration Agreement and the Paying Agent
Agreement.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with

C-2
<PAGE> 42

the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Not applicable.

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained as follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of the Registrant, c/o Puglisi
& Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715 and at the
offices of The Bank of New York, the Registrant's Administrator, Custodian,
paying agent, transfer agent and registrar. All other records so required to be
maintained are maintained at the offices of the Registrant, c/o Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715.

ITEM 32. MANAGEMENT SERVICES

Not applicable.

ITEM 33. UNDERTAKINGS

(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if (1) subsequent
to the effective date of this Registration Statement, its net asset value per
share declines more than ten percent from its net asset value per share as of
the effective date of this Registration Statement or (2) the net asset value per
share increases to an amount greater than its net proceeds as stated in its
prospectus contained herein.

(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.

C-3
<PAGE> 43

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 23rd day of March, 1998.

DECS TRUST III

By: /s/ DONALD J. PUGLISI

------------------------------------

Donald J. Puglisi,

Managing Trustee

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
person, in the capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>

/s/ DONALD J. PUGLISI Managing Trustee March 23, 1998
- --------------------------------------------------------
Donald J. Puglisi

/s/ WILLIAM R. LATHAM, III Trustee March 23, 1998
- --------------------------------------------------------
William R. Latham, III

/s/ JAMES B. O'NEILL Trustee March 23, 1998
- --------------------------------------------------------
James B. O'Neill
</TABLE>

C-4
<PAGE> 44

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
------- ---------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of January 22, 1998**
(a)(1)(B) Amended and Restated Declaration of Trust dated as of
, 1998
(a)(2)(A) Certificate of Trust dated January 22, 1998**
(a)(2)(B) Restated Certificate of Trust dated March 3, 1998**
(b) Not applicable
(c) Not applicable
(d)(1) Form of specimen certificate of DECS (included in Exhibit
2(a)(1)(B))
(d)(2) Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in
Exhibit 2(a)(1)(B))
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement
(i) Not applicable
(j) Custodian Agreement dated as of March 3, 1998**
(k)(1) Form of Administration Agreement
(k)(2) Form of Paying Agent Agreement
(k)(3) Form of Purchase Contract
(k)(4) Form of Collateral Agreement
(k)(5) Form of Fund Expense Agreement
(k)(6) Form of Fund Indemnity Agreement
(l) Opinion and Consent of Counsel to the Trust
(m) Not applicable
(n)(1) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2(n)(1))
(n)(2) Consent of Independent Public Accountants**
(n)(3) Consents to being named as Trustee
(o) Not applicable
(p) Subscription Agreement dated as of March 3, 1998**
(q) Not applicable
(r) Financial Data Schedule
</TABLE>

- ---------------
* To be filed by amendment.

** Previously filed.

<PAGE> 1
EXHIBIT 2(a)(1)(B)

AMENDED AND RESTATED

DECLARATION OF

TRUST

CONSTITUTING

DECS TRUST III

Dated as of March 23, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I

DEFINITIONS

ARTICLE II

TRUST DECLARATION; PURPOSES, POWERS AND
DUTIES OF THE TRUSTEES; ADMINISTRATION

SECTION 2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3 Resignation of Initial Trustee; Transfer of Beneficial Interest Ratification and Approval
of Action of Either or Both of the Initial Sponsor and the Initial Trustee . . . . . . . . . . . . . . . . 5
SECTION 2.4 Declaration of Trust; Purposes of the Trust; Statement of Intent . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5 General Powers and Duties of the Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.6 Portfolio Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.7 Portfolio Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.8 Manner of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.9 Limitations on Trustees' Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.10 Legal Title to Trust Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.11 Situs of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE III

ACCOUNTS AND PAYMENTS

SECTION 3.1 The Trust Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
[SECTION 3.2 Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3 Distributions to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.4 Segregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE IV

REDEMPTION

SECTION 4.1 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE V

ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS

SECTION 5.1 Form of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.3 Replacement of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.4 Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.5 General Provisions Regarding the DECS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE VI

ISSUANCE OF THE CONTRACTS

SECTION 6.1 Execution of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE VII

TRUSTEES

SECTION 7.1 Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.2 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.3 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7.4 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.5 Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.6 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.7 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1 Meetings of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.2 Books and Records; Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.4 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.5 Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.6 Nature of Holder's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.7 Delaware Law to Govern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

ii
<PAGE> 4

AMENDED AND RESTATED DECLARATION OF TRUST

This Amended and Restated Declaration of Trust, dated as of
February [ ], 1998 (the "Trust Agreement"), by and between Smith Barney Inc.,
as sponsor (the "Sponsor"), Donald J. Puglisi, William R. Latham III and James
B. O'Neill as trustees (the "Trustees"), Alan Rifkin, as initial sponsor,
Michael E. Sherman, as initial trustee, and the Holders (as defined herein),
constituting DECS Trust III (the "Trust").

WITNESSETH:

WHEREAS, Alan Rifkin (the "Initial Sponsor") and Michael E.
Sherman, as trustee (the "Initial Trustee"), have previously entered into a
Declaration of Trust dated as of January 22, 1998 (the "Original Agreement"),
creating DECS Trust;

WHEREAS, the Initial Sponsor desires to transfer his interest
in the Trust to the Sponsor;

WHEREAS, the Initial Trustee desires to resign as trustee of
the Trust, such resignation to be effective upon the appointment and acceptance
of the Trustees as provided herein;

WHEREAS, the Trustees hereby ratify and approve the transfer
of the interest of the Initial Sponsor in the Trust to the Sponsor;

WHEREAS, the parties hereto desire to amend and restate the
Original Agreement in certain respects; and

WHEREAS, the Initial Trustee, on behalf of the Trust, and the
Sponsor entered into a Subscription Agreement dated March 3, 1998 (the
"Subscription Agreement") pursuant to which the Trust issued to the Sponsor one
DECS in consideration of the aggregate purchase price therefor of $100.00;

NOW, THEREFORE, the parties hereto agree to amend and restate
the Original Agreement as provided herein. Upon the execution and delivery of
copies hereof by the parties hereto, the Original Agreement will be
automatically amended and restated in its entirety to read as provided herein.

ARTICLE I

DEFINITIONS

Whenever used in this Trust Agreement, the following words and
phrases shall have the meanings listed below. Any reference to any agreement
shall be a reference to such agreement as supplemented or amended from time to
time.

"Act": The Delaware Business Trust Act, 12 Del. C. Section
3801 et seq.
<PAGE> 5

"Additional Purchase Price": The Additional Purchase Price as
defined in the Contract.

"Adjustment Event": An Adjustment Event as defined in the
Contract.

"Administration Agreement": The Administration Agreement,
dated as of the date hereof, between the Administrator and the Trust, and any
substitute agreement therefor entered into pursuant to Section 2.5(a) hereof.

"Administrator": The Bank of New York or its successor as
permitted under Section 6.1 of the Administration Agreement or appointed
pursuant to Section 2.5(a) hereof.

"Business Day": A day on which the New York Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.

"Cash Delivery Option": The Cash Delivery Option as defined
in the Contracts.

"Certificate": Any certificate evidencing the ownership of
DECS substantially in the form of Exhibit A hereto.

"Closing Date": The Closing Date as defined in the
Underwriting Agreement.

"Code": The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any
regulation thereunder shall constitute a reference to any successor provision
thereto.

"Collateral Agent": The Bank of New York or its successor as
permitted under the Collateral Agreements.

"Collateral Agreements": The Collateral Agreements among each
of the Sellers, the Trust and such other parties, securing the Sellers'
obligations under the Contract, substantially in the form of Exhibit B hereto.

"Commencement Date": The day on which the Underwriting
Agreement is executed.

"Commission": The United States Securities and Exchange
Commission.

"Common Stock": Class B Common Stock, $.01 par value, of the
Company.

"Company": Herbalife International, Inc., a Nevada
corporation.

"Contracts": The forward purchase agreements among the Trust,
one or more existing shareholders of the Company and certain other parties
thereto, substantially in the form of Exhibit C hereto.

2
<PAGE> 6

"Custodian": The Bank of New York or its successor as
permitted under paragraph 11 of the Custodian Agreement or appointed pursuant
to Section 2.5(a) hereof.

"Custodian Agreement": The Custodian Agreement, dated as of
March 3, 1998, between the Custodian and the Trust, and any substitute
agreement therefor entered into pursuant to Section 2.5(a) hereof.

"DECS": The DECS issued by the Trust evidencing a Holder's
undivided interest in the Trust and right to receive a pro rata distribution
upon liquidation of the Trust Estate.

"Depositary": The Depository Trust Company, or any successor
thereto.

"Distribution Date": Each ___________, ______, _________ and
___________ of each year commencing ______, 1998, to and including ___________,
2001 or if any such date is not a Business Day, then the first Business Day
thereafter.

"Event of Default": An Event of Default as defined in the
Contracts.

"Exchange": The distribution by the Trust to the Holders of
the Shares, Reported Securities and/or cash delivered to the Trust pursuant to
the Contracts (or, to the extent one or more Sellers elect the Cash Delivery
Option under the Contracts, the amount in cash specified in such Contracts as
payable in respect thereof), on the Exchange Date.

"Exchange Date": The Exchange Date as defined in the
Contracts.

"Exchange Rate": The Exchange Rate as defined in the
Contracts.

"Firm Purchase Price": The Firm Purchase Price as defined in
the Contracts.

"Holder": The registered owner of any DECS as recorded on the
books of the Paying Agent.

"Indemnity Agreement": The Fund Indemnity Agreement dated as
of the date hereof between the Trust and the Sponsor substantially in the form
of Exhibit D hereto.

"Investment Company Act": The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.

"Managing Trustee": The Trustee designated as such by the
Trustees, who hereby initially designate Donald J. Puglisi as the Managing
Trustee.

"Option Closing Date": The settlement date for the sale of
any Option DECS with respect to which the option provided for in Section 4(b)
of the Underwriting Agreement is exercised by the Underwriter.

"Original Agreement": The meaning specified in the recitals
hereof.

3
<PAGE> 7

"Participant": A Person having an account with the
Depositary.

"Paying Agent": The Bank of New York or its successor as
permitted under Section 6.6 of the Paying Agent Agreement or appointed pursuant
to Section 2.5(a) hereof.

"Paying Agent Agreement": The Paying Agent Agreement, dated
as of the date hereof, between the Paying Agent and the Trust, and any
substitute agreement therefor entered into pursuant to Section 2.5(a) hereof.

"Person": An individual, a partnership, a corporation, a
trust, a limited liability company, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.

"Prospectus": The prospectus of the Trust relating to the
offering of the DECS and constituting a part of the Registration Statement, as
first filed with the Commission pursuant to Rule 497(b) or (h) under the
Securities Act, and as subsequently amended or supplemented by the Trust.

"Quarterly Distribution": [$_____] per DECS paid to each
Holder on each Distribution Date.

"Record Date": Each __________, _____, ________, and
__________ of each year commencing _______, 1998.

"Registration Statement": Registration Statement on Form N-2
(Registration Nos. 333-44807 and 811-08615) of the Trust, as amended.

"Reported Securities": Reported Securities as defined in the
Contracts.

"Securities Act": The Securities Act of 1933, as amended from
time to time.

"Sellers": The Persons named as Sellers in the Contracts.

"Shares": Shares of Common Stock to be delivered by the
Sellers to the Trust pursuant to the Contracts, and by the Trust to the Holders
pursuant to the DECS, on the Exchange Date.

"Temporary Investments": Direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.

"Transfer Agent and Registrar": With respect to the Common
Stock or any Reported Securities at any time, the Person then acting as
Transfer Agent and Registrar for such Common Stock or Reported Securities.

"Treasury Securities": The meaning specified in Section
2.6(b) hereof.

4
<PAGE> 8

"Trust Account": The account created pursuant to Section 3.1
hereof.

"Trust Agreement": The meaning specified in the recitals
hereof.

"Trust Estate": The Contracts and the Treasury Securities
held at any time by the Trust, together with any Temporary Investments held at
any time pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom
and any other moneys held at any time in the Trust Account.

"Trustee": The meaning specified in the recitals hereof.

"Underwriter": Smith Barney Inc., in its capacity as
underwriter of the DECS pursuant to the Underwriting Agreement.

"Underwriting Agreement": The Underwriting Agreement as
described in the Prospectus.

ARTICLE II

TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION

SECTION 2.1 Name. The Trust is named "DECS Trust III," as
such name may be modified from time to time by the Trustees following written
notice to the Holders and in which name the Trustees may conduct the affairs of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued on behalf of the Trust. The Trust's activities may
be conducted under the name of the Trust or any other name deemed advisable by
the Trustees.

SECTION 2.2 Office. The address of the principal office and
registered office for service of process of the Trust is Donald J. Puglisi,
c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware
19715. On ten Business Days' written notice to the Holders, the Trustees may
designate another principal office.

SECTION 2.3 Resignation of Initial Trustee; Transfer of
Beneficial Interest; Ratification and Approval of Action of Either or Both of
the Initial Sponsor and the Initial Trustee.

(a) The Initial Sponsor hereby assigns, transfers, conveys
and sets over to the Sponsor all of its rights and interests in, to and under
the Original Agreement. The Sponsor hereby accepts such assignment effective
as of the date hereof.

(b) The Initial Trustee hereby resigns as trustee of the
Trust, such resignation to be effective upon the appointment and acceptance of
the Trustees pursuant to Section 2.4(b) of this Agreement. The Initial Trustee
hereby conveys, assigns and transfers to the Trustees, effective as of the date
hereof, and to their successors and assigns, all the rights, powers and trusts
of the Initial Trustee as trustee, under and pursuant to the Original
Agreement, and all

5
<PAGE> 9

property and money held by the Initial Trustee as trustee under the Original
Agreement. The Initial Trustee hereby represents to the Sponsor and the
Trustees that, at the time the Trustees' appointment as such becomes effective,
it will hold no monies or other property as trustee under the Original
Agreement.

(c) The Sponsor and the Trustees hereby ratify and approve
any and all actions taken by either or both of the Initial Sponsor and the
Initial Trustee on behalf of the Trust on or prior to the date hereof.

SECTION 2.4 Declaration of Trust; Purposes of the Trust;
Statement of Intent.

(a) The Sponsor hereby creates the Trust in order that it may
acquire the Treasury Securities, enter into the Contracts, issue and sell to
the Sponsor and the Underwriter the DECS, hold the Trust Estate in trust for
the use and benefit of all present and future Holders and otherwise carry out
the terms and conditions of this Trust Agreement, all for the purpose of
achieving the investment objectives set forth in the Prospectus.

(b) The Sponsor hereby appoints the Trustees of the Trust
effective as of the date hereof, to have all the rights, powers and duties set
forth herein and in the Act. Effective as of date hereof, the Trustees shall
have all rights, powers and duties set forth herein and in the Act with respect
to accomplishing the purposes of the Trust. The Trustees hereby accept such
appointment and agree to hold the Trust Estate in Trust for the use and benefit
of all present and future Holders, subject to all trusts, conditions and
provisions of this Agreement, and accept, upon the trusts expressed in this
Agreement, all the rights, powers and trusts of the Initial Trustee as trustee
under and pursuant to the Original Agreement and agree to be bound by all the
terms of the Original Agreement and this Agreement, such acceptance and
agreement to be effective as of the close of business on the date hereof.

(c) The Trust shall not engage in any activities other than
those required or authorized by the terms of this Agreement relating to the
issuance, sale and payment of the DECS in accordance with their terms, and the
acquisition, management, collection and holding of the Trust Estate, all in
accordance with the terms of this Agreement.

(d) It is the intention of the parties hereto that the Trust
constitute a business trust under the Act and that this Trust Agreement
constitute the governing instrument of the Trust. It is the intention of the
parties hereto that, for purposes of federal income taxes, state and local
income and franchise taxes imposed upon, measured by, or based upon gross or
net income, the Trust shall be treated as a grantor trust owned solely by the
present and future Holders and the provisions of this Agreement shall be
interpreted in a manner consistent with such intention.

(e) The Trustees hereby declare that they will accept and
hold the Trust Estate in trust for the use and benefit of all present and
future Holders. The Initial Trustee hereby resigns as trustee effective upon
the appointment and acceptance of the Trustees under the terms of this
Agreement. The Sponsor hereby waives the thirty (30) day notice requirement of
Section 5 of the Original Agreement. The Initial Sponsor has heretofore
deposited with the Initial Trustees the sum of $1 to accept and hold in trust
hereunder until the issuance and sale of the DECS to the

6
<PAGE> 10

Underwriter, whereupon such sum shall be donated to an organization satisfying
the requirements of Section 170(c)(2) of the Code selected by unanimous consent
of the Trustees.

SECTION 2.5 General Powers and Duties of the Trustees. In
furtherance of the provisions of Section 2.4 hereof, the Sponsor authorizes and
directs the Trustees, on behalf of the Trust:

(a) to enter into and perform (and, in accordance with
Section 8.4(a) hereof, amend), the Contracts, the Collateral
Agreements, the Underwriting Agreement, the Indemnity Agreement, the
Custodian Agreement, the Administration Agreement and the Paying Agent
Agreement and to perform all obligations of the Trustees (including
the obligation to provide indemnity hereunder and thereunder) and
enforce all rights and remedies of the Trust under each of such
agreements; and if any of the Custodian Agreement, the Administration
Agreement, the Collateral Agreements and the Paying Agent Agreement
terminates, or the agent of the Trust thereunder resigns or is
discharged, to appoint a substitute agent and enter into a new
agreement with such substitute agent containing provisions
substantially similar to those contained in the agreement being
terminated; provided that in any such new agreement (i) the Custodian
and the Paying Agent shall each be a commercial bank or trust company
organized and existing under the laws of the United States of America
or any state therein, shall have full trust powers and shall have
minimum capital, surplus and retained earnings of not less than
$100,000,000; and (ii) the Administrator and the Collateral Agent
shall each be a reputable financial institution qualified in all
respects to carry out its obligations under the Administration
Agreement or the Collateral Agreements, as the case may be;

(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the Trust
to the Trust Account and to make payments out of the Trust Account as
set forth in Article III hereof;

(c) to issue and sell to the Underwriters an aggregate of
up to 5,750,000 DECS (including those DECS subject to the over-
allotment option of the Underwriter provided for in the Underwriting
Agreement) pursuant to the Underwriting Agreement and as contemplated
by the Prospectus; provided, however, that subsequent to the
determination of the public offering price per DECS and related
underwriting discount for the DECS to be sold to the Underwriter but
prior to the sale of the DECS to the Underwriter, the DECS originally
issued to the Sponsor shall be split into a greater number of DECS,
with any fractional shares being rounded down to the nearest integral
number, so that immediately following such split the value of each
DECS held by the Sponsor will equal the aforesaid public offering
price;

(d) to select independent public accountants and, subject
to the provisions of Section 8.5 hereof, to engage such independent
public accountants;

(e) to engage legal counsel and, to the extent required
by Section 2.7 hereof, to engage professional advisors and pay
reasonable compensation thereto;

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(f) to defend any action commenced against the Trustees
or the Trust and to prosecute any action which the Trustees deem
necessary to protect the Trust and the rights and interests of
Holders, and to pay the costs thereof;

(g) to arrange for the bonding of officers and employees
of the Trust as required by Section 17(g) of the Investment Company
Act and the rules and regulations thereunder;

(h) to delegate any and all of its powers and duties
hereunder as contemplated by the Custodian Agreement, the Paying Agent
Agreement and the Administration Agreement, to the extent permitted by
applicable law; and

(i) to adopt and amend bylaws, and take any and all such
other actions as necessary or advisable to carry out the purposes of
the Trust, subject to the provisions hereof and applicable law,
including, without limitation, the Investment Company Act.

SECTION 2.6 Portfolio Acquisition. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees, acting on behalf of the Trust:

(a) to enter into the Contracts with respect to the
Shares subject thereto with the Sellers on the Commencement Date for
settlement on the date or dates provided thereunder and, subject to
satisfaction of the conditions set forth in the Contracts, to pay the
Firm Purchase Price and the Additional Purchase Price, if any,
thereunder with the proceeds of the sale of the DECS, net of
underwriting commissions and net of the purchase price paid for the
Treasury Securities as provided in paragraph (b) below; and, subject
to the adjustments and exceptions set forth in the Contracts, the
Contracts shall entitle the Trust to receive from the Sellers on the
Exchange Date the Shares and/or Reported Securities subject thereto
(or, if one or more the Sellers elects the Cash Delivery Option under
the Contracts, the amount in cash specified in such Contracts in
respect thereof) so that the Trust may execute the Exchange with the
Holders; and

(b) to purchase for settlement at the Closing Date, and
at the Option Closing Date, as appropriate, with the proceeds of the
sale of the DECS, net of underwriting commissions, U.S. Treasury
securities from such brokers or dealers as the Trustees shall
designate in writing to the Administrator having the terms set forth
on Schedule I hereto ("Treasury Securities").

SECTION 2.7 Portfolio Administration. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees:

(a) Determination of Exchange Rate Adjustments. Upon
receipt of any notice pursuant to Section 5.4(b) of the Contracts of
an event requiring an adjustment to the Exchange Rate, Exchange Price
or Closing Price, or upon otherwise acquiring knowledge of such an
event, to calculate the required adjustment and furnish notice thereof
to the Collateral Agent, the Sellers and the Administrator, or to
request from the Sellers or the

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<PAGE> 12
Administrator such further information as may be necessary to
calculate or effect the required adjustment;

(b) Selection of Independent Investment Bank. At such
times and for such purposes as provided in the Contracts, to select
and retain a nationally recognized investment banking firm to
determine the market value of any property as provided in the
Contracts, and to deliver to the Sellers notice pursuant to Section
8.1 of the Contracts identifying the firm proposed to be selected and
retained, and to consult with the Sellers on such selection and
retention as provided in such Section 8.1;

(c) Acceleration. In the event an Acceleration Date
shall occur due to an Event of Default as provided in Article VII of
any of the Contracts, to deliver the notice to the related Seller
contemplated in the last paragraph of Article VII of the Contracts, if
applicable, and to liquidate a proportionate amount of Treasury
Securities and distribute the proceeds thereof pro rata to each of the
Holders of the DECS, together with any shares of Common Stock or other
amounts to be distributed to the Holders of the DECS, in each case in
accordance with the Contracts and the Collateral Agreements;

(d) Determination of Exchange Date Amounts. To
calculate, on the Exchange Date, the number of Shares (or, if one or
more Sellers elect the Cash Delivery Option under his or her Contract,
the amount in cash) required to be delivered by each of the Sellers
under Section 1.1 of the Contracts or, if an Adjustment Event shall
have occurred, the amount of cash required to be delivered by the
Sellers, and the number of Reported Securities permitted to be
delivered by the Sellers in lieu of all or a portion of such cash, all
as provided in Section 6.2 of the Contracts, and to furnish notice of
the amounts so determined to the Collateral Agent and the Sellers.

(e) Distribution of Exchange Consideration. Unless an
Event of Default or an Adjustment Event shall have occurred or one or
more Sellers elect the Cash Delivery Option under the Contracts (in
which event the cash received in respect thereof shall be distributed
pro rata to the Holders of the DECS):

(i) Determination of Fractional Shares. To
determine, on the Exchange Date: (a) for each Holder of DECS,
such Holder's pro rata share of the total number of Shares
delivered to the Trust under the Contracts on the Exchange
Date; and (b) the number of fractional Shares allocable to
each Holder (including, in the case of the Depositary,
fractional shares allocable to beneficial owners of Securities
who own through Participants) and in the aggregate;

(ii) Cash for Fractional Shares. To sell, in the
principal market therefor, on the Exchange Date, a number of
Shares equal to the aggregate number of fractional Shares
determined pursuant to clause (i) (b) above, rounded down to
the nearest integral number; and to distribute to the Holders,
pro rata in accordance with the fractional shares to which
they would otherwise have been entitled, the aggregate
proceeds of such sale (net of any brokerage or related
expenses); and

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<PAGE> 13

(iii) Delivery of Shares. To deliver the remaining
Shares to the Transfer Agent and Registrar on the Exchange
Date, with instructions that such Shares be re-registered and
re-issued as follows: (a) for and in the name of each Holder
(other than the Depositary) who holds DECS in definitive form,
if any, the Transfer Agent and Registrar shall be instructed
to issue definitive certificates representing a number of
Shares equal to such Holder's pro rata share of the total
number of Shares delivered to the Trust under the Contracts,
rounded down to the nearest integral number and the Trustees
shall cause the delivery of such re-registered and re-issued
Shares to each respective Holder; and (b) the Transfer Agent
and Registrar shall be instructed to transfer all remaining
Shares to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such Shares to each Participant who holds DECS, with
each Participant receiving its pro rata share of the total
Shares delivered to the Trust on the Exchange Date, reduced by
the aggregate fractional shares allocable to such Participant
as described in (i) above;

(iv) Distribution of Other Property. To
distribute on the Exchange Date to each Holder of DECS such
Holder's pro rata share of the total number or amount of each
other type of property owned by the Trust at the Exchange
Date, rounded to the nearest integral number; and

(v) Record Date. The distributions described in
this paragraph (e) shall be made to Holders of record as of
the close of business on the Business Day preceding the
Exchange Date.

SECTION 2.8 Manner of Sales. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution
for the Trust, shall designate in writing to the Paying Agent, taking into
account such factors as price, commission, size of order, difficulty of
execution and brokerage skill required.

SECTION 2.9 Limitations on Trustees' Powers. The Trustees are
not permitted:

(a) to purchase or hold any securities or instruments
except for the Shares, the Contracts, the Treasury Securities, the
Temporary Investments contemplated by Section 3.5 hereof and any
Reported Securities, cash or other property delivered pursuant to the
terms of any Contract;

(b) to dispose of the Contracts prior to the Exchange
Date;

(c) to issue any securities or instruments except for the
DECS, or to issue any DECS other than the DECS sold to the Sponsor and
the DECS to be sold pursuant to the Underwriting Agreement;

(d) to make short sales or purchases on margin;

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<PAGE> 14

(e) to write put or call options;

(f) to borrow money;

(g) to underwrite securities;

(h) to purchase or sell real estate, commodities or
commodities contracts;

(i) to purchase restricted securities;

(j) to make loans; or

(k) to take any action, or direct or permit the
Administrator, the Paying Agent or the Custodian to take any action,
that would vary the investment of the Holders within the meaning of
Treasury Regulation Section 301.7701-4(c), or otherwise take any
action or direct or permit any action to be taken that would or could
cause the Trust not to be a "grantor trust" owned solely by the
present and future Holders under the Code.

SECTION 2.10 Legal Title to Trust Property. Legal title to
the Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Estate to be vested in a trustee or trustees, in which case
legal title shall be deemed to be vested in the Trustees, a co-trustee and/or a
separate trustee, as the case may be.

SECTION 2.11 Situs of Trust. The Trust shall be located and
administered in, and all bank accounts of the Trust maintained in, the State of
Delaware or the State of New York. Payments shall be received by the Trust
only in the State of Delaware or the State of New York and payments will be
made by the Trust only from the State of Delaware or the State of New York.

ARTICLE III

ACCOUNTS AND PAYMENTS

SECTION 3.1 The Trust Account. The Trustees shall, upon
issuance of the DECS, establish with the Paying Agent an account to be called
the "Trust Account". All moneys received by the Trust or the Trustees in
respect of the Contracts, the Treasury Securities and any Temporary Investments
held pursuant to Section 3.5 hereof, all moneys received from the sale of the
DECS to the Sponsor, and any proceeds from the sale of the DECS to the
Underwriter after the purchase of the Contracts and the Treasury Securities
shall be credited to the Trust Account.

SECTION 3.2 Payment of Fees and Expenses. The Sponsor will
pay the fees and expenses of the Trust incurred in connection with the offering
of the DECS and the costs and expenses incurred in the organization of the
Trust.

SECTION 3.3 Distributions to Holders. On or shortly after
each Distribution Date the Trust shall distribute to each Holder of record at
the close of business on the preceding

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<PAGE> 15

Record Date, at the post office address of the Holder appearing on the books of
the Trust or Paying Agent or by any other means mutually agreed upon by the
Holder and the Trust, an amount equal to such Holder's pro rata share of the
Quarterly Distribution computed as of the close of business on such
Distribution Date.

SECTION 3.4 Segregation. All moneys and other assets
deposited or received by the Trust or the Trustees hereunder shall be held by
them in trust as part of the Trust Estate until required to be disbursed or
otherwise disposed of in accordance with the provisions of this Trust
Agreement, and the Trust or the Trustees shall handle such moneys and other
assets in such manner as shall constitute the segregation and holding in trust
within the meaning of the Investment Company Act.

SECTION 3.5 Temporary Investments. To the extent necessary to
enable the Paying Agent to make the next succeeding Quarterly Distribution, any
moneys deposited with or received by the Trustees in the Trust Account shall be
invested as soon as possible by the Paying Agent in Temporary Investments
maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent
shall hold any Temporary Investment to its maturity and shall apply the
proceeds thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to
time by the Trustees or pursuant to standing instructions from the Trustees to
the Administrator, and the Administrator and/or Paying Agent shall have no
liability to the Trust or any Holder or any other Person with respect to any
such Temporary Investment. Any interest or other income received on any moneys
in the Trust Account shall, upon receipt thereof, be deposited into the Trust
Account.

ARTICLE IV

REDEMPTION

SECTION 4.1 Redemption. The Trustees shall have no right or
obligation to redeem DECS.

ARTICLE V

ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS

SECTION 5.1 Form of Certificate. Each Certificate evidencing
DECS shall be countersigned manually or in facsimile by the Managing Trustee
and countersigned manually by the Paying Agent in substantially the form of
Exhibit A hereto with the blanks appropriately filled in, shall be dated the
date of execution and delivery by the Paying Agent and shall represent a
fractional undivided interest in the Trust, the numerator of which fraction
shall be the number of DECS set forth on the face of such Certificate and the
denominator of which shall be

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<PAGE> 16

the total number of DECS outstanding at that time. All DECS shall be issued in
registered form and shall be numbered serially.

The DECS delivered to the Underwriter on the Closing Date and
on any settlement date under Section 4(b) of the Underwriting Agreement will be
issued in the form of a global Certificate or Certificates representing the
DECS issued to the Underwriter, to be delivered to the Depositary by or on
behalf of the Trust. Such Certificate or Certificates shall initially be
registered on the books and records of the Trust in the name of Cede & Co., the
nominee of DTC, and no beneficial owner of such DECS will receive a definitive
Certificate representing such beneficial owner's interest in such DECS, except
as provided in the next paragraph. Unless and until definitive, fully
registered Certificates have been issued pursuant to the next paragraph, the
Trust shall be entitled to deal with the Depositary for all purposes of this
Agreement as the Holder and the sole holder of the Certificates and shall have
no obligation to the beneficial owners thereof, and none of the Trust, the
Trustees, or any agent of the Trust or the Trustees shall have any liability
with respect to or responsibility for the records of the Depositary.

If the Depositary elects to discontinue its services as
securities depository and a successor depositary is not appointed by the Trust
within 90 days, then definitive Certificates shall be prepared by the Trust.
Upon surrender of the global Certificate or Certificates accompanied by
registration instructions, the Trustees shall cause definitive Certificates to
be delivered to the beneficial owners in accordance with the instructions of
the Depositary. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions.

Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying
Agent and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
DECS. Until so exchanged, the temporary Certificates shall be entitled to the
same benefits hereunder as definitive Certificates.

SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange
of Certificates. DECS may be transferred by the Holder thereof by presentation
and surrender of properly endorsed Certificates at the office of the Paying
Agent, accompanied by such documents executed by the Holder or his authorized
attorney as the Paying Agent deems

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<PAGE> 17

necessary to evidence the authority of the person making the transfer.
Certificates issued pursuant to this Trust Agreement are exchangeable for one
or more other Certificates representing an equal aggregate number of DECS and
all Certificates issued as may be requested by the Holder and deemed
appropriate by the Paying Agent shall be issued in denominations of one DECS or
any multiple thereof. The Paying Agent may deem and treat the person in whose
name any DECS shall be registered upon the books of the Paying Agent as the
owner of such DECS for all purposes hereunder and the Paying Agent shall not be
affected by any notice to the contrary. The transfer books maintained by the
Paying Agent for the purposes of this Section 5.2 hereof shall include the name
and address of the record owners of the DECS and shall be closed in connection
with the termination of the Trust pursuant to Section 8.3 hereof.

A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer shall be paid to the
Paying Agent by the Holder. A Holder may be required to pay a fee for each new
Certificate to be issued pursuant to the preceding paragraph in such amount as
may be specified by the Paying Agent and approved by the Trustees.

All Certificates cancelled pursuant to this Trust Agreement
may be voided by the Paying Agent in accordance with the usual practice of the
Paying Agent or in accordance with the instructions of the Trustees; provided,
however, that the Paying Agent shall not be required to destroy cancelled
Certificates.

The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of DECS as it may, in its
discretion, deem necessary.

SECTION 5.3 Replacement of Certificates. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any
duplicate Certificate pursuant to this Section 5.3 hereof, the original
Certificate claimed to have been lost, stolen or destroyed shall become null
and void and of no effect, and any bona fide purchaser thereof shall have only
such rights as are afforded under Article 8 of the Uniform Commercial Code to a
Holder presenting a Certificate for transfer in the case of an overissue.

SECTION 5.4 Limitation on Liability. Pursuant to Section
3803(a) of the Act, the Holders of the DECS shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.

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<PAGE> 18

SECTION 5.5. General Provisions Regarding the DECS.

(a) The consideration received by the Trust for the issuance
of the DECS shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.

(b) Upon issuance of the DECS as provided in this Trust
Agreement, the DECS so issued shall be deemed to be validly issued, fully paid
and non-assessable.

(c) Every person, by virtue of having become a Holder in
accordance with the terms of this Trust Agreement, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound by, this
Trust Agreement.

ARTICLE VI

ISSUANCE OF THE CONTRACTS

SECTION 6.1 Execution of the Contracts. The Contracts shall
be countersigned manually or in facsimile by the Managing Trustee and executed
manually by each of the Sellers and shall be dated the date of execution and
delivery by each of the Sellers.

ARTICLE VII

TRUSTEES

SECTION 7.1 Trustees. The Trust shall have three Trustees who
shall initially be elected by the Initial Trustee. One Trustee shall be the
Managing Trustee and, as such, is authorized to execute documents and
instruments on behalf of the Trust. The Managing Trustee will be appointed by
resolution of the Trustees. Each Trustee shall serve until the next regular
annual or special meeting of Holders called for the purpose of electing
Trustees and, then, until such Trustee's successor is duly elected and
qualified. Holders may not cumulate their votes in the election of Trustees.
Each Trustee shall not be considered to have qualified for the office unless
such Trustee shall agree to be bound by the terms of this Trust Agreement and
shall evidence his consent by executing this Trust Agreement or a supplement
hereto.

SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that
if required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within
sixty days (unless the Commission by order shall extend such period) a meeting
of Holders for the purpose of electing Trustees in compliance with Sections 10
and 16 of the Investment Company Act. Until a vacancy in the office of any
Trustee is filled as provided above, the remaining Trustees in office,
regardless of their number, shall have the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by this Trust
Agreement. Election shall be by the affirmative vote of Holders of a majority
of the DECS entitled to vote present in person or by proxy at a special meeting
of Holders called for the purpose of electing any Trustee. Each individual
Trustee shall be at least 21 years of age and

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<PAGE> 19

shall not be under any legal disability. No Trustee who is an "interested
person", as defined in the Investment Company Act, may assume office if it
would cause the composition of the Trustees of the Trust not to be in
compliance with the percentage limitations on interested persons in Section 10
of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or election of a successor Trustee shall be mailed promptly after
acceptance of such appointment by the successor Trustee to each Holder.

SECTION 7.3 Powers. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of
the Trust's business, and shall have the rights, powers and authority of a
board of directors of a corporation organized under Delaware law. The Trustees
shall have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Trust and shall not employ, or permit another to employ, such
funds or assets in any manner except for the exclusive benefit of the Trust and
except in accordance with the terms of this Trust Agreement. Subject to the
continuing supervision of the Trustees and as permitted by applicable law, the
functions of the Trust shall be performed by the Custodian, the Paying Agent,
the Administrator and such other entities engaged to perform such functions as
the Trustees may determine, including, without limitation, any or all
administrative functions.

SECTION 7.4 Meetings. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours'
notice (which may be waived by any or all of the Trustees in writing either
before or after such meeting or by attendance at the meeting unless the Trustee
attends the meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in
office are present or by a unanimous written consent of the Trustees without a
meeting. Except as otherwise required under the Investment Company Act, all or
any of the Trustees may participate in a meeting of the Trustees by means of a
conference telephone call or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to such communications equipment shall constitute
presence in person at such meeting.

SECTION 7.5 Resignation and Removal. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding DECS, notice of which vote
shall be given to the remaining Trustees and the Administrator. The
resignation, removal or failure to reelect any Trustee shall not cause the
termination of the Trust.

SECTION 7.6 Liability. The Trustees shall not be liable to
the Trust or any Holder for any action taken or for refraining from taking any
action except in the case of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties of their office.

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<PAGE> 20
Specifically, without limitation, the Trustees shall not be responsible for or
in respect of the recitals herein or the validity or sufficiency of this Trust
Agreement or for the due execution hereof by any other Person, or for or in
respect of the validity or sufficiency of DECS or certificates representing
DECS and shall in no event assume or incur any liability, duty or obligation to
any Holder or to any other Person, other than as expressly provided for herein.
The Trustees may employ agents, attorneys, administrators, accountants and
auditors, and shall not be answerable for the default or misconduct of any such
Persons if such Persons shall have been selected with reasonable care. Action
in good faith may include action taken in good faith in accordance with an
opinion of counsel. In no event shall any Trustee be personally liable for any
expenses with respect to the Trust. Each Trustee shall be indemnified from the
Trust Account with respect to any claim, liability, loss or expense incurred in
acting as Trustee of the Trust, including the costs and expenses of the defense
against any such claim or liability, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties of his office.

SECTION 7.7 Compensation. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and anticipated out-of-pocket expenses.
In addition, the Managing Trustee shall receive an additional one-time, up-front
fee of $3,600 for serving in such capacity. The Trustees will not receive any
pension or retirement benefits. In the event of the resignation or removal of a
Trustee, such Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal through the Exchange
Date.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1 Meetings of Holders. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders
of not less than 51% of the DECS outstanding (unless substantially the same
matter was voted on during the preceding 12 months), and shall be called as
provided in Section 7.2 hereof (or as otherwise required by the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, when requested by the Holders of not less than 10% of the DECS
outstanding for the purposes of voting upon the question of the removal of any
Trustee or Trustees). The Trustees shall establish, and notify the Holders in
writing of, the record date for each such meeting which shall be not less than
10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The
Administrator shall, as soon as possible after any such record date (or prior
to such record date if appropriate), mail by first class mail to each Holder a
notice of meeting and a proxy statement and form of proxy in the form approved
by the Trustees and complying with the Investment Company Act and the rules and
regulations thereunder. Except as otherwise specified herein or in any
provision of the Investment Company Act and the rules and regulations
thereunder, any action may be taken by vote of Holders of a majority of

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<PAGE> 21

the DECS outstanding present in person or by proxy if Holders of a majority of
DECS outstanding on the record date are so represented. Each DECS shall have
one vote and may be voted in person or by duly executed proxy. Any proxy may
be revoked by notice in writing, by a subsequently dated proxy or by voting in
person at the meeting, and no proxy shall be valid after eleven months
following the date of its execution. Any investment company (as defined in
Section 3 of the Investment Company Act) owning DECS in excess of the limits
imposed by Sections 12(d)(1)(A)(i) and 12(d)(1)(c) of the Investment Company
Act will be required to vote its DECS in proportion to the votes of all other
Holders.

SECTION 8.2 Books and Records; Reports. (a) The Trustees
shall keep a certified copy or duplicate original of this Trust Agreement on
file at the office of the Trust and the office of the Administrator available
for inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31
of the Investment Company Act and the rules and regulations thereunder.

(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per DECS and the other information required under Section 19 of
the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or distribute reports as required by Section 30
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.

(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities shall be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or shall be valued at cost
with accrued interest or discount earned included in interest receivable and
(iii) the Contracts shall be valued at the mean of the bid prices received by
the Administrator from at least three independent broker-dealer firms
unaffiliated with the Trust to be named by the Trustees who are in the business
of making bids on financial instruments similar to the Contracts and with terms
comparable thereto. In the event that the Trust (acting through the
Administrator) is unable to obtain valuations from three independent
broker-dealer firms, as required by clause (iii) of the preceding sentence, on
a timely basis or without unreasonable effort or expense, the Contracts shall
be valued at the median of bid prices received from two such broker-dealer
firms. In the event that the Trust (acting through the Administrator) is
unable to obtain a valuation for the Contracts that it believes to be
reasonable through the above method, valuation shall be

18
<PAGE> 22

established at a level deemed to be fair and reflective of the market value for
the Contracts based on all appropriate factors relevant to the value of the
Contracts as set forth in pricing guidelines adopted by the Trustees.

SECTION 8.3 Termination. (a) The Trust created hereby shall
dissolve, and its affairs be wound up, upon the earliest of (i) the date 90
days after the execution of this Trust Agreement if (x) the DECS have not
theretofore been issued or (y) the net worth of the Trust is not at least
$100,000 at such time, (ii) the date of the repayment, sale or other
disposition, as the case may be, of all of the Contracts, the Treasury
Securities and any other securities held hereunder, (iii) the date 10 Business
Days after the Exchange Date (or, if the Contracts shall be accelerated
pursuant to Article VII thereof, 10 Business Days after the date on which the
Trust shall receive the Shares, cash or other property then required to be
delivered by each of the Sellers, or the proceeds of any sale of collateral
pursuant to the Collateral Agreements), and (iv) the date which is 21 years
less 91 days after the death of the last survivor of all of the descendants of
Joseph P. Kennedy living on the date hereof. The Trust is irrevocable, the
Sponsor has no right to withdraw any assets constituting a portion of the Trust
Estate, and the dissolution of the Sponsor shall not operate to terminate the
Trust. The death or incapacity of any Holder shall not operate to terminate
this Trust Agreement, nor entitle his legal representatives or heirs to claim
an accounting or to take any action or proceeding in any court for a partition
or winding up of the Trust, and shall not otherwise affect the rights,
obligations and liabilities of the parties hereto.

(b) Written notice of any dissolution shall be sent to
Holders specifying the record date for any distribution to Holders and the time
of dissolution as determined by the Trustees, upon which the books maintained
by the Paying Agent pursuant to Section 5.2 hereof shall be closed.

(c) To the extent permitted by applicable law, for purposes
of dissolution under Sections 8.3(a)(ii), (iii) and (iv) hereof, within five
Business Days after such dissolution, the Trustees shall effect the sale of any
remaining property of the Trust, and the Paying Agent shall distribute pro rata
as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each DECS.

(d) Upon the winding up of the Trust and its dissolution, the
Managing Trustee shall cause the Certificate of Trust to be canceled by filing
a certificate of cancellation with the Office of the Secretary of State of the
State of Delaware in accordance with the provisions of Section 3810 of the Act.
Upon the dissolution of the Trust, the sale of Trust property and distribution
of the Trust Estate to the Holders, and the filing of the certificate of
cancellation, the Trust shall terminate and this Agreement shall be of no
further force or effect.

SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.5(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and
sale to the Underwriter of the DECS and

19
<PAGE> 23

thereafter without the consent of any of the Holders (i) to cure any ambiguity
or to correct or supplement any provision contained herein or therein which may
be defective or inconsistent with any other provision contained herein or
therein; (ii) to change any provision hereof or thereof as may be required by
applicable law or the Commission or any successor governmental agency
exercising similar authority; or (iii) to make such other provisions in regard
to matters or questions arising hereunder or thereunder as shall not materially
adversely affect the interests of the Holders (as determined in good faith by
the Trustees, who may rely on an opinion of counsel).

(b) This Trust Agreement may also be amended from time to
time by the Trustees (or the performance of any of the provisions of the Trust
Agreement may be waived) with the consent by the required vote of the Holders
in accordance with Section 8.1 hereof; provided that this Trust Agreement may
not be amended (i) without the consent by vote of the Holders of all DECS then
outstanding, so as to increase the number of DECS issuable hereunder above the
number of DECS specified in Section 2.5(c) hereof or such lesser number as may
be outstanding at any time during the term of this Trust Agreement, (ii) to
reduce the interest in the Trust represented by DECS without the consent of the
Holders of such DECS, (iii) if such amendment is prohibited by the Investment
Company Act or other applicable law, (iv) without the consent by vote of the
Holders of all DECS then outstanding, if such amendment would effect a change
in the voting requirements set forth in Section 8.1 hereof or this Section 8.4,
or (v) without the consent by vote of the Holders of the lesser of (x) 67% or
more of the DECS represented at a special meeting of Holders, if more than 50%
of the DECS outstanding are represented at such meeting, and (y) more than 50%
of the DECS outstanding, if such amendment would effect a change in Section 2.4
or 2.9 hereof.

(c) Promptly after the execution of any amendment, the
Trustees shall furnish written notification of the substance of such amendment
to each Holder.

(d) Notwithstanding subsections (a) and (b) of this Section
8.4, no amendment hereof shall permit the Trust, the Trustees, the
Administrator, the Paying Agent or the Custodian to take any action or direct
or permit any Person to take any action that (i) would vary the investment of
Holders within the meaning of Treasury Regulation Section 301.7701-4(c), or
(ii) would or could cause the Trust, or direct or permit any action to be taken
that would or could cause the Trust, not to be a "grantor trust" under the
Code.

SECTION 8.5 Accountants.

(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
national securities exchange are required to file annually pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, a balance sheet accompanied by a statement of the aggregate value
of investments on the date of such balance sheet, a list showing the

20
<PAGE> 24

amounts and values of such investments owned on the date of such balance sheet,
and a statement of income for the period covered by the report. Financial
statements contained in such annual reports shall be accompanied by a
certificate of independent public accounts based upon an audit not less in
scope or procedures than that which independent public accountants would
ordinarily make for the purpose of presenting comprehensive and dependable
financial statements and shall contain such information as the Commission may
prescribe. Each such report shall state that such independent public
accountants have verified investments owned, either by actual examination or by
receipt of a certificate from the Custodian.

(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person,
of a majority of the Trustees who are not "interested persons" as defined in
the Investment Company Act and such selection shall be submitted for
ratification at the first meeting of Holders to be held as set forth in Section
8.1 hereof, and thereafter as required by the Investment Company Act and the
rules and regulations thereunder. The employment of any independent public
accountant for the Trust shall be conditioned upon the right of the Holders by
a vote of the lesser of (i) 67% or more of the DECS present at a special
meeting of Holders, if Holders of more than 50% of DECS outstanding are present
or represented by proxy at such meeting or (ii) more than 50% of the DECS
outstanding to terminate such employment at any time without penalty.

(c) The foregoing provisions of this Section 8.5 are in
addition to any applicable requirements of the Investment Company Act and the
rules and regulations thereunder.

SECTION 8.6 Nature of Holder's Interest. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this Trust
Agreement, for the Shares, the Contract, the Treasury Securities or other
assets or monies from time to time received, held and applied by the Trustees
hereunder. No Holder shall have any right except as provided herein to control
or determine the operation and management of the Trust or the obligations of
the parties hereto. Nothing set forth herein or in the certificates
representing DECS shall be construed to constitute the Holders from time to
time as partners or members of an association.

SECTION 8.7 Delaware Law to Govern. This Trust Agreement is
executed and delivered in the State of Delaware, and all laws or rules of
construction of the State of Delaware shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.

SECTION 8.8 Notices. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed or delivered to the General Counsel of Smith Barney,
Inc., 390 Greenwich Street, New York, New York 10013, Telephone: (212)
816-6000, Telecopier: (212) ___________, Attention: General Counsel. Any
notice, demand, direction or instruction to be given to the Trust and the
Trustees hereunder shall

21
<PAGE> 25

be in writing and shall be duly given if mailed or delivered to the Trust
at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware
19715, Telephone: (302) 738-6680, Telecopier: (302) 738-7210, Attention: Donald
J. Puglisi and to each Trustee at such Trustee's address set forth beneath its
signature below, or such other address as shall be specified to the other
parties hereto by such party in writing. Any notice to be given to a Holder
shall be duly given if mailed, first class postage prepaid, or by such other
substantially equivalent means as the Trustees may deem appropriate, or
delivered to such Holder at the address of such Holder appearing on the registry
of the Paying Agent.

SECTION 8.9 Severability. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions and terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement or
of the Certificates, or the rights of the Holders thereof.

SECTION 8.10 Counterparts. This Trust Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument.

SECTION 8.11 Successors and Assigns. Whenever in this Trust
Agreement any of the parties hereto is named or referred to, the successors and
assigns of such party shall be deemed to be included, and all covenants and
agreements in this Trust Agreement by the Sponsor and Trustees shall bind and
inure to the benefit of their respective successors and assigns, whether or not
so expressed.

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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed.

SPONSOR:

SMITH BARNEY INC.

By:

/s/ WILLIAM McCOY
---------------------------------------

TRUSTEES:

Managing Trustee

/s/ DONALD J. PUGLISI
---------------------------------------
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715

/s/ WILLIAM R. LATHAM III
---------------------------------------
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715

/s/ JAMES B. O'NEILL
---------------------------------------
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715

23
<PAGE> 27

INITIAL SPONSOR:

/s/ ALAN RIFKIN
---------------------------------------
Alan Rifkin

INITIAL TRUSTEE:

/s/ MICHAEL E. SHERMAN
---------------------------------------
Michael E. Sherman

<PAGE> 28
Schedule I

TREASURY SECURITIES

All terms specified are for stripped principal or interest
components of U.S. Treasury debt obligations.

Aggregate Face Amount, Per
STRIPS Payment Date Security, Payable at Payment Date

<PAGE> 29
Exhibit A

Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York Corporation ("DTC"),
to DECS Trust III or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede & Co.
(or in such other name as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein. This certificate may be exchanged by an authorized
representative of DTC in whole or in part for securities in definitive form,
registered in the names of such holders as such representative of DTC shall
specify, in which case, a new certificate will be issued in the name of Cede &
Co. (or in such other name as is requested by such authorized representative
of DTC) representing the securities not issued in definitive form.

THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE
HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND.

$____ DECS

DECS TRUST III

CUSIP NO. ___________

NO. 1 ______________ DECS

THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF
__________ DECS OF DECS TRUST III CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS
IN DECS TRUST III, A TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE
PURSUANT TO AN AMENDED AND RESTATED DECLARATION OF TRUST BETWEEN SMITH BARNEY
INC. AND THE TRUSTEES NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS
SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH
THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND
IS BOUND, A COPY OF WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE
TRUST'S ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY
STREET, FLOOR 12E, NEW YORK 10286, ATTENTION: MARK G. WALSH. THIS CERTIFICATE
IS TRANSFERABLE AND EXCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS
DULY AUTHORIZED ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF
THIS CERTIFICATE PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF
TRANSFER AND ANY OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR
TRANSFER, IN FORM SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND
EXPENSES PROVIDED IN THE TRUST AGREEMENT.

A-1
<PAGE> 30

THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY THE PAYING
AGENT.

WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.

DECS Trust III

DATED:

____________________________________
Managing Trustee

COUNTERSIGNED:

The Bank of New York, as Paying Agent

By:

____________________________________
Authorized Signature

A-2

<PAGE> 1
EXHIBIT 1.1

DECS TRUST III

5,000,000 DECS* SM

(Representing Beneficial Interests in Contracts Relating to Shares of Class
B Common Stock, $.01 par value, of Herbalife International, Inc.)

Underwriting Agreement

New York, New York
March [ ], 1998

Salomon Smith Barney
Smith Barney Inc.
Prudential Securities Incorporated
As Representatives of the several Underwriters,
[c/o Smith Barney Inc.]
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

DECS Trust III, a statutory business trust organized under the
Delaware Business Trust Act, 12 Del.C. Section 3801 et seq. (the "Delaware
Act"), of the State of Delaware (such trust and the trustees thereof acting in
their capacities as such being referred to herein as the "Trust"), proposes to
issue and to sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, an aggregate of 5,000,000 DECS representing shares of
beneficial interest in the Trust (the "Underwritten DECS"). In addition, the
Underwriters will have an option to purchase up to [ ] DECS (the "Option DECS"
and, together with the Underwritten DECS, the "DECS") to cover over-allotments,
if any. The Option DECS and the Underwritten DECS, together with the [ ] DECS of
the Trust subscribed for by Smith Barney Inc. ("Smith Barney") pursuant to the
Subscription Agreement, dated March 3, 1998, between Smith Barney and the Trust
(the "Subscription DECS"), are referred to herein as the "Securities." The
Securities are to be issued under an Amended and Restated Declaration of Trust,
dated as of March [ ], 1998 (the "Trust Agreement"), among the initial trustee
and initial sponsor of the Trust, trustees of the Trust (the "Trustees") and
Smith Barney, as sponsor.

The Trust has entered into forward purchase contracts (the
"Contracts") with the persons listed on Schedule II hereto (each a "Seller" and
collectively, the "Sellers"), the related persons listed on Schedule II hereto
under "Corporate Seller Control Person" (each, a "Corporate Seller Control
Person" and collectively, the "Corporate Seller Control Persons"), Mark Hughes
and the Mark Hughes Family Trust, solely controlled by Mark Hughes, pursuant to
which each Seller has agreed to sell, and the Trust has agreed to purchase, the
number of shares of Class B Common Stock, $.01 par value (the "Shares"), of
Herbalife International, Inc. (the "Company") specified therein on [ ]
[ ], 2001 (the "Exchange Date") (subject to the Sellers' right to deliver cash
with a value equivalent thereto, or other property, as provided in the
Contracts). Each Seller's obligations under his, her or its respective Contract
will be secured by a pledge of collateral under a collateral agreement (each a
"Collateral Agreement") among such Seller, the Trust and The Bank of New York
("BoNY"), as collateral agent (in such capacity, the "Collateral Agent").

- --------

* Plus an option to purchase from DECS Trust up to [ ] additional DECS to
cover over-allotments.

<PAGE> 2

persons listed on Schedule II hereto under "Corporate Seller Control Person"
(each, a "Corporate Seller Control Person" and collectively, the "Corporate
Seller Control Persons"), Mark Hughes and the Mark Hughes Family Trust, solely
controlled by Mark Hughes, pursuant to which each Seller has agreed to sell, and
the Trust has agreed to purchase, the number of shares of Class B Common Stock,
$.01 par value (the "Shares"), of Herbalife International, Inc. (the "Company")
specified therein on [ ] [ ], 2001 (the "Exchange Date") (subject to the
Sellers' right to deliver cash with a value equivalent thereto, or other
property, as provided in the Contracts). Each Seller's obligations under his,
her or its respective Contract will be secured by a pledge of collateral under a
collateral agreement (each a "Collateral Agreement") among such Seller, the
Trust and The Bank of New York ("BoNY"), as collateral agent (in such capacity,
the "Collateral Agent").

It is further understood by the parties hereto that the persons
listed on Schedule III hereto each a "Lender" and collectively, the "Lenders"
are concurrently entering into a securities loan agreement dated the date hereof
(the "Securities Loan Agreement") which provides that, subject to certain
restrictions and with the agreement of the Lenders, Smith Barney may from time
to time borrow, return and reborrow from the Lenders certain of the Shares for
the purpose of facilitating market-making activity in the DECS by Smith Barney.

In connection with the foregoing, the Company has filed with the
Commission a registration statement with respect to (i) 5,000,000 Shares in
respect of the Underwritten DECS, plus an additional [ ] Shares in respect of
the Option DECS and an additional [ ] Shares in respect of the Subscription
DECS, for delivery by the Sellers pursuant to the Securities and (ii) 1,000,000
Shares (the "Borrowed Shares") for borrowing and delivery pursuant to the
Securities Loan Agreement, which registration statement is referred to in
Section 2(a) of this Agreement.

To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representatives as used herein shall mean
you, as Underwriters, and the terms Representatives and Underwriters shall mean
either the singular or plural as the context requires. The use of the neuter in
this Agreement shall include the feminine and masculine wherever appropriate.
Certain terms used herein are defined in Section 23 hereof.

1. Representations and Warranties of the Trust. The Trust
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 1.

(a) The Trust meets the requirements for use of Form N-2 under
the Act and has prepared and filed with the Commission (a) a notification on
Form N-8A (the "Notification") of registration of the Trust as an investment
company under the Investment Company Act and (b) a registration statement on
Form N-2 (file numbers 333-44807 and 811-08615), including a related preliminary
prospectus, for the registration of the offering and sale of the DECS under the
Act. The Trust may have filed one or more amendments thereto, including the
related preliminary prospectus, each of which has previously been furnished to
you. The Trust will next file with the Commission one of the following: either
(1) prior to the Trust Effective Date of such registration statement, a further
amendment to such registration statement (including the form of final
prospectus); or (2) after the Trust Effective Date of such registration
statement, a final prospectus in accordance with Rules 430A and 497(h). In the
case of clause (2), the Trust has included in such registration

<PAGE> 3

statement, as amended at the Trust Effective Date, all information (other than
Rule 430A Information) required by the Act and the rules thereunder to be
included in such registration statement and the Trust Prospectus. As filed, such
amendment and form of final prospectus, or such final prospectus, shall contain
all Rule 430A Information, together with all other such required information,
and, except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to you
prior to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Trust Prospectus) as the Trust
has advised you, prior to the Execution Time, will be included or made therein.

(b) On the Trust Effective Date, the Trust Registration Statement
and the Notification did or will, and when the Trust Prospectus is first filed
(if required) in accordance with Rule 497(h) and on the Closing Date (as defined
herein) and on any date on which Option DECS are purchased, if such date is not
the Closing Date (a "Settlement Date"), the Trust Prospectus (and any
supplements thereto) will comply in all material respects with the applicable
requirements of the Act, the Exchange Act and the Investment Company Act, and
the respective rules thereunder; on the Trust Effective Date and at the
Execution Time, the Trust Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and, on the Trust Effective Date, the Trust Prospectus, if not filed
pursuant to Rule 497(h), did not or will not, and on the date of any filing
pursuant to Rule 497(h) and on the Closing Date and any settlement date, the
Trust Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

(c) No stop order suspending the effectiveness of the Trust
Registration Statement is in effect, no order preventing or suspending the use
of any Preliminary Trust Prospectus has been issued by the Commission, no notice
or order under Section 8(e) of the Investment Company Act has been issued, and
no proceedings for any such purpose are pending before or threatened by the
Commission.

(d) The Trust has been duly created, is validly existing as a
business trust under the Delaware Act, has the power and authority to own or
lease, as the case may be, and to operate its properties and conduct its
business as described in the Trust Prospectus and to enter into and perform its
obligations under this Agreement, the Trust Agreement and each of the
Fundamental Documents (as defined below) and is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification
other than where the failure to be so qualified would not have a material
adverse effect on the Trust or its assets. The Trust has no subsidiaries.

(e) The Trust is registered with the Commission as a
non-diversified, closed-end management investment company under the Investment
Company Act and no order of suspension or revocation of such registration has
been issued or proceedings therefor initiated or, to the knowledge of the Trust,
threatened by the Commission. No person is serving or acting as an officer or
trustee of the Trust except in accordance with the provisions of the Investment
Company Act.

(f) This Agreement has been duly authorized, executed and
delivered by the Trust.

(g) Each of the Contracts, the Collateral Agreements, the
Administration Agreement between BoNY and the Trust (the "Administration
Agreement"), the Custodian Agreement between BoNY and the Trust (the "Custodian
Agreement"), the Paying Agent Agreement between BoNY and the Trust (the "Paying
Agent Agreement") and the Fund Indemnity Agreement between Smith Barney and the
Trust (the "Fund Indemnity Agreement") (the Contracts, the Collateral
Agreements, the Administration Agreement, the Custodian Agreement, the Paying
Agent Agreement and the Fund Indemnity Agreement are referred to herein,
collectively, as the "Fundamental Agreements") has been duly authorized,
executed and delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto, is valid and binding agreement of
the Trust, enforceable against the Trust in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and by general equitable.

3
<PAGE> 4

(g) Each of the Contracts, the Collateral Agreements, the
Administration Agreement between BoNY and the Trust (the "Administration
Agreement"), the Custodian Agreement between BoNY and the Trust (the "Custodian
Agreement"), the Paying Agent Agreement between BoNY and the Trust (the "Paying
Agent Agreement") and the Fund Indemnity Agreement between Smith Barney and the
Trust (the "Fund Indemnity Agreement") (the Contracts, the Collateral
Agreements, the Administration Agreement, the Custodian Agreement, the Paying
Agent Agreement and the Fund Indemnity Agreement are referred to herein,
collectively, as the "Fundamental Agreements") has been duly authorized,
executed and delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto, is a valid and binding agreement of
the Trust, enforceable against the Trust in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and by general equitable
principles.

(h) The execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement and each
Fundamental Agreement (including the issue and sale by the Trust of the DECS as
contemplated by this Agreement) do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach or violation of, or default under, or give the holder of any indebtedness
of the Trust the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Trust
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Trust is a
party or by which it may be bound, or to which any of the property or assets of
the Trust is subject, nor will such action result in any violation of the
provisions of the Trust Agreement or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Trust or any of its assets or properties; and no consent, approval,
authorization, order of, or qualification or filing with, any governmental body
or agency, self-regulatory organization or court or other tribunal, whether
foreign or domestic, is required for the execution and delivery by the Trust of
this Agreement or the Fundamental Agreements or the performance by the Trust of
its obligations hereunder and thereunder, except for the filing of a Certificate
of Trust and the filing of a Restated Certificate of Trust with the office of
the Secretary of State of the State of Delaware (which filings have been duly
made) and such as have been obtained and as may be required by the securities or
Blue Sky laws of the various states and foreign jurisdictions in connection with
the offer and sale of the DECS by the Underwriters.

(i) The DECS, the Trust Agreement and the Fundamental Agreements
conform in all material respects to the descriptions thereof contained in the
Trust Prospectus.

(j) The Trust Agreement and the Fundamental Agreements comply
with all applicable provisions of the Act, the Exchange Act and the Investment
Company Act, and all approvals of such documents required under the Investment
Company Act by the holders of the Securities and the Trustees have been obtained
and are in full force and effect.

(k) On the Closing Date, as defined below in Section 5, the
Fundamental Agreements will be in full force and effect and the Trust will not
be in default thereunder and, to the knowledge of the Trust, no event will have
occurred which with the passage of time or the giving of notice or both would
constitute a default thereunder. The Trust is not currently in breach of, or in

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<PAGE> 5

default under, the Trust Agreement or any other written agreement or instrument
to which it or its property is bound or affected.

(l) All of the outstanding Securities have been duly authorized
and are validly issued, fully paid and nonassessable undivided beneficial
interests in the assets of the Trust, and the form of certificate used to
evidence the Securities is in due and proper form and complies with all
provisions of applicable law.

(m) The DECS have been duly authorized by the Trust for issuance
to the Underwriters pursuant to this Agreement and, when issued and delivered by
the Trust in accordance with the terms of this Agreement and the Trust Agreement
against payment of the purchase price therefor as provided herein, will be
validly issued, fully paid and nonassessable undivided beneficial interests in
the assets of the Trust, and the issuance of such DECS will not be subject to
any preemptive or similar rights. No person has rights to the registration of
any securities because of the filing of the Trust Registration Statement, and no
holder of the Securities will be subject to personal liability by reason of
being such a holder.

(n) The DECS have been approved for listing on the National
Market System of the National Association of Securities Dealers Automated
Quotation System (the "Nasdaq National Market System"), subject to official
notice of issuance. The Trust's Registration Statement on Form 8-A under the
Exchange Act is effective.

(o) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, of the Trust, or in the investment objectives,
investment policies, liabilities, business, prospects or operations of the Trust
from that set forth in the Trust Prospectus (exclusive of any supplements
thereto subsequent to the date of this Agreement) and there have been no
transactions entered into by the Trust which are material to the Trust other
than those in the ordinary course of its business or as described in the Trust
Prospectus (exclusive of any supplements thereto subsequent to the date of this
Agreement).

(p) There are no legal or governmental proceedings pending or, to
the knowledge of the Trust, threatened against or affecting the Trust that are
required to be described in the Trust Registration Statement or the Trust
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Trust Registration
Statement or the Trust Prospectus or to be filed as exhibits to the Trust
Registration Statement that are not described or files as required.

(q) The Trust has all necessary consents, authorizations,
approvals, orders (including exemptive orders), certificates and permits of and
from, and has made all declarations and filings with, all governmental
authorities, self-regulatory organizations and courts and other tribunals,
whether foreign or domestic, to own and use its assets and to conduct its
business in the manner described in the Trust Prospectus, except to the extent
that the failure to obtain or file the foregoing would not have a material
adverse effect on the Trust and except such as may be required by the securities
or Blue Sky laws of the various states in connection with the offer and sale of
the DECS.

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<PAGE> 6

(r) There are no material restrictions, limitations or
regulations with respect to the ability of the Trust to invest its assets as
described in the Trust Prospectus, other than as described therein.

(s) The Trust has good title to all properties owned by it, in
each case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Trust Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Trust.

(t) There are no legal or governmental proceedings pending to
which the Trust is a party or of which any property of the Trust is the subject
which, if determined adversely to the Trust, would individually or in the
aggregate have a material adverse effect on the current or future financial
position or results of operations of the Trust; and, to the best of the Trust's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.

(u) The statement of assets, liabilities and capital included in
the Trust Registration Statement and the Trust Prospectus, together with the
notes thereto, present fairly the financial position of the Trust at the date
indicated, and such financial statement has been prepared in conformity with
generally accepted accounting principles.

(v) The accountants who certified the financial statements and
supporting schedules included in the Trust Registration Statement are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.

(w) The Trust has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the DECS or the Shares, and has not effected
any sales of the Company's common stock which, if effected by the Company, would
be required to be disclosed in response to Item 701 of Regulation S-K.

2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 2.

(a) The Company meets the requirements for use of Form S-3 under
the Act and has prepared and filed with the Commission a registration statement
(file number 333-46201) on Form S-3, including a related preliminary prospectus,
for the registration under the Act of the offering and sale of the Shares in
connection with the offering and sale of the DECS and an alternate form of
related preliminary prospectus for registration of the use of the Borrowed
Shares in connection with the Securities Loan Agreement. The Company may have
filed one or more amendments thereto, including the related preliminary
prospectuses, each of which has previously been furnished to you. The Company
will next file with the Commission one of the following: either (1) prior to the
Company Effective Date of such registration statement, a further amendment to
such registration statement, (including the final forms of such prospectuses),
(2) after the Company Effective Date of such registration statement, such final
prospectuses in accordance with

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<PAGE> 7

Rules 430A and 424(b), or (3) a final prospectus in accordance with Rules 415
and 424(b). In the case of clause (2), the Company has included in such
registration statement, as amended at the Company Effective Date, all
information (other than Rule 430A Information) required by the Act and the rules
thereunder to be included in such registration statement and the Company
Prospectus with respect to the Shares and the offering thereof and the Borrowed
Shares and the use thereof. As filed, such amendment and form of final
prospectuses, or such final prospectuses, shall contain all Rule 430A
Information, together with all other such required information with respect to
the Shares and the offering thereof and the Borrowed Shares and the use thereof
and, except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to you
prior to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Company Prospectus) as the
Company has advised you, prior to the Execution Time, will be included or made
therein. If the Company Registration Statement contains the undertaking
specified by Regulation S-K Item 512(a), the Company Registration Statement, at
the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x).

(b) On the Company Effective Date, the Company Registration
Statement did or will, and when the Company Prospectus is first filed (if
required) in accordance with Rule 424(b) and on the Closing Date (as defined
herein) and on any Settlement Date, and on each day when borrowings are made
under the Securities Loan Agreement, the Company Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable requirements
of the Act and the Exchange Act and the respective rules thereunder; on the
Company Effective Date and at the Execution Time, the Company Registration
Statement did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Company
Effective Date, the Company Prospectus, if not filed pursuant to Rule 424(b),
did not or will not, and on the date of any filing pursuant to Rule 424(b) and
on the Closing Date and any Settlement Date, and on each day when borrowings are
made under the Securities Loan Agreement, the Company Prospectus (together with
any supplement thereto) will not, include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to the information contained in or omitted from the Company
Registration Statement, or the Company Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished herein or in writing
to the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Company Registration Statement or the Company
Prospectus (or any supplement thereto).

(c) No stop order suspending the effectiveness of the Company
Registration Statement is in effect, no order preventing or suspending the use
of any Preliminary Company Prospectus has been issued by the Commission, and no
proceedings for any such purpose are pending before or threatened by the
Commission. Each document incorporated by reference in the Company Registration
Statement or the Company Prospectus, when they were filed or are filed with the
Commission, conformed or will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents contained or will contain an untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

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<PAGE> 8

(d) The business of the Company and its subsidiaries, including
without limitation the recruitment of distributors and the distribution and
marketing of the Company's products, (a) is conducted in accordance with the
Company's multi-level marketing and distribution plan as described in the
Company Prospectus, (b) does not require the consent, approval, authorization,
filing, registration or qualification or order of or with any court or
governmental agency or body, except such as have been obtained or effected, and
(c) does not violate any statute, law, rule or regulation of any country, or any
political subdivision thereof, in which the Company or any of its subsidiaries
operates, and does not breach or violate any of the terms and provisions of, or
constitute a default under, any judgment, decree or order, applicable to the
Company or any of its subsidiaries, of any court, regulatory body,
administrative agency, governmental body, arbitrator or other governmental
authority having jurisdiction over the Company or its subsidiaries or any of its
or their property, except in each of (b) and (c) for any consent, approval,
authorization, filing, registration, qualification or order the failure of which
to obtain or effect, or any violation, breach or default which, would not have a
material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business.

(e) The Company is not an "investment company" as defined in the
Investment Company Act.

(f) Neither the Company nor any of its subsidiaries has taken and
none of such entities will take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
DECS or the Shares, it being understood that this sentence shall not apply to
any share repurchase program conducted by the Company in compliance with the
Exchange Act and other applicable law.

Any certificate signed by any officer of the Company and delivered to the
Representatives or counsel for the Underwriters in connection with the offering
of the Securities shall be deemed a representation and warranty by the Company,
(and not of such officer in his individual capacity) as to matters covered
thereby, to each Underwriter.

3. Representations and Warranties of the Sellers, the Corporate
Seller Control Persons, the Mark Hughes Family Trust and Mark Hughes. Each of
the Sellers, the Corporate Seller Control Persons, the Mark Hughes Family Trust
and Mark Hughes (each, a "Mark Hughes Entity" and collectively, the "Mark Hughes
Entities") severally and jointly, represents and warrants to, and agrees with,
each Underwriter, the Company and the Trust that:

(a) The Mark Hughes Family Trust has been duly created, is
validly existing and has the power and authority to own its property.

(b) Each of the Sellers and the Corporate Seller Control Persons
has been duly organized, is validly existing as a limited liability company in
good standing under the laws of the State of Delaware, with full power and
authority to own its property, and, in the case of each Seller, does not conduct
any business in any jurisdiction, own any material property other than Shares or
have any subsidiaries.

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<PAGE> 9

(c) Each of the Mark Hughes Entities has full right, power and
authority to enter into and perform its obligations under this Agreement, each
Contract and Collateral Agreement to which such Mark Hughes Entity is a party
and the letter agreement among each of the Mark Hughes Entities and Smith Barney
relating to expenses of the Trust (the "Reimbursement Agreement").

(d) This Agreement has been duly authorized by each of the Mark
Hughes Entities (other than Mark Hughes) and duly executed and delivered by each
of the Mark Hughes Entities. Each Contract and Collateral Agreement to which
each Mark Hughes Entity is a party and the Reimbursement Agreement have been
duly authorized by such Mark Hughes Entity (other than Mark Hughes), and
executed and delivered by such Mark Hughes Entity and, assuming due
authorization, execution and delivery by the other parties thereto, is a valid
and binding agreement of such Mark Hughes Entity, enforceable against such Mark
Hughes Entity in accordance with its terms.

(e) The execution and delivery by each of the Mark Hughes
Entities of this Agreement, each Contract and Collateral Agreement to which such
Mark Hughes Entity is a party and the Reimbursement Agreement, the performance
by such Mark Hughes Entity of its obligations hereunder and thereunder and the
consummation of the transactions herein and therein contemplated do not and will
not, whether with or without the giving of notice or passage of time or both,
conflict with, result in a breach or violation of or imposition of any lien
(other than pursuant to each Collateral Agreement to which such Mark Hughes
Entity is a party), charge or encumbrance upon any property or assets of such
Mark Hughes Entity or its subsidiaries pursuant to (i) the Organizational
Documents of such Mark Hughes Entity or its subsidiaries, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which such Mark Hughes Entity or its subsidiaries is a party or bound or to
which its or their property is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to such Mark Hughes Entity or
its subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over such
Mark Hughes Entity or its subsidiaries or any of its or their properties.
Amounts received by each of the Mark Hughes Entities, if any, at the Closing
Date and, if any Option DECS are purchased, at the time of delivery thereof
pursuant to Section 4(b), pursuant to such Mark Hughes Entity's Contract will
not be used by such Mark Hughes Entity for the purpose, whether immediate,
incidental or ultimate, of buying or carrying a margin stock, as such terms are
defined in Regulation G promulgated by the Board of Governors of the Federal
Reserve System.

(f) Each of the Sellers, the Corporate Seller Control Persons and
the Mark Hughes Family Trust is not and, after giving effect to the transactions
contemplated in each Contract and Collateral Agreement and the offering and sale
of the DECS contemplated by this Agreement, will not be an "investment company"
or an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act.

(g) Each of the Sellers is the sole registered owner of and has,
and on the Closing Date (and, if any Option DECS are purchased, at the time of
delivery thereof pursuant to Section 4(b)) will have, good and valid title to
the Shares to be pledged and assigned by it under its Collateral Agreement, free
and clear of any security interests, claims, liens, equities and other
encumbrances, except for those created pursuant to its Collateral Agreement; and
such Seller has the

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<PAGE> 10

full right, power and authority, and all authorization and
approval required by law to pledge and assign the Shares to be pledged and
assigned by such Seller pursuant to its Collateral Agreement.

(h) Title to any Shares to be delivered by a Seller pursuant to
such Seller's Contract on the Exchange Date, assuming payment of the
consideration due pursuant to such Seller's Contract on the Closing Date, will
pass to the Trust free and clear of any security interests, claims, liens,
equities and other encumbrances. The sale, transfer and delivery of any Shares
to be delivered by a Seller pursuant to such Seller's Contract is not, and at
the time of delivery of such Shares will not be, subject to any right of first
refusal or similar rights of any person pursuant to any contract to which such
Seller or any shareholder of such Seller is a party or by which any of them is
bound.

(i) Each of the Mark Hughes Entities hereby repeats and confirms
as if set forth in full herein each of the representations, warranties,
guarantees and agreements made by such Mark Hughes Entity in each Contract and
Collateral Agreement to which such Mark Hughes Entity is a party and agrees that
the representations, warranties, guarantees and agreements therein and herein
are made hereby for the benefit of, and may be relied upon by, (i) the
Underwriters and Cleary, Gottlieb, Steen & Hamilton, counsel to the Underwriters
and (ii) the Company and Irell & Manella LLP, counsel to the Company and to the
Mark Hughes Entities.

(j) None of the Mark Hughes Entities has taken or will take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares or the DECS, it being
understood that this sentence shall not apply to any share repurchase
program conducted by the Company in compliance with the Exchange Act and all
other applicable law.

(k) Each of the Mark Hughes Entities is familiar with the Company
Registration Statement and the Company Prospectus and verifies that the
information set forth therein respecting him or it is true and complete.

(l) No consent, approval, license, authorization, order or
validation of, and no filing, recording, or registration with, any court or
governmental authority, agency or body is required for the compliance by each
Mark Hughes Entity with all of the provisions of this Agreement, each Contract
and Collateral Agreement to which such Mark Hughes Entity is a party and the
Reimbursement Agreement, except such as have been obtained under the Act and
such as may be required under the blue sky laws in connection with the purchase
and distribution of the DECS by the Underwriters and the distribution of the
Shares pursuant to the terms of the DECS in the manner contemplated in this
Agreement and in the Trust Prospectus and the Company Prospectus.

(m) Certificates in negotiable form for each Seller's Shares have
been placed in custody, for delivery pursuant to the terms of such Seller's
Contract and Collateral Agreement, under a Custody Agreement and Power of
Attorney duly authorized, executed and delivered by such Seller, in the form
heretofore furnished to you (the "Custody Agreement") with the Bank of New York,
as Custodian (the "Custodian"); the Shares represented by the certificates so
held in custody for each Seller are subject to the interests of the Trust
pursuant to such Seller's Contract and Collateral Agreement; the arrangements
for custody and delivery of such certificates, made by such Seller

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<PAGE> 11

pursuant to such Seller's Contract and Collateral Agreement and the Custody
Agreement, are not subject to termination by any acts of such Seller, or by
operation of law, whether by the death or incapacity of such Seller or the
occurrence of any other event; and if any such death, incapacity or any other
such event shall occur before the delivery of such Shares pursuant to such
Seller's Contract and Collateral Agreement, certificates for the Shares will be
delivered by the Custodian in accordance with the terms and conditions of such
Seller's Contract and Collateral Agreement and the Custody Agreement as if such
death, incapacity or other event had not occurred, regardless of whether or not
the Custodian shall have received notice of such death, incapacity or other
event.

Any certificate signed by any Mark Hughes Entity or any officer
thereof, as the case may be, and delivered to the Representatives or counsel for
the Underwriters in connection with the offering of the Securities shall be
deemed a representation and warranty by such Mark Hughes Entity (and not, except
in the case of certificates of Mark Hughes, of such officer in his individual
capacity), as to matters covered thereby, to each Underwriter.

4. Purchase and Sale.

(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Trust agrees to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Trust, at a purchase price of $[ ] per DECS, the amount of the
Underwritten DECS set forth opposite such Underwriter's name in Schedule I
hereto.

(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Trust hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
[ ] Option DECS at the same purchase price per DECS as the Underwriters shall
pay for the Underwritten DECS. The option may be exercised only to cover
over-allotments in the sale of the Underwritten DECS by the Underwriters. The
option may be exercised in whole or in part at any time (but not more than once)
on or before the 30th day after the date of the Trust Prospectus upon written or
facsimile notice by the Representatives to the Trust setting forth the number of
shares of the Option DECS as to which the several Underwriters are exercising
the option and the Settlement Date. Delivery of certificates for the Option DECS
by the Trust, and payment therefor to the Trust, shall be made as provided in
Section 5 hereof. The number of shares of the Option DECS to be purchased by
each Underwriter shall be the same percentage of the total number of Option DECS
to be purchased by the several Underwriters as such Underwriter is purchasing of
the Underwritten DECS, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional DECS.

(c) As compensation to the Underwriters for their commitment
hereunder, and in view of the fact that the proceeds of the sale of the DECS
will be used by the Trust as specified in the Contracts, the Mark Hughes
Entities agree, severally and jointly, to pay to Smith Barney, at the time of
each delivery of DECS pursuant to Section 5, an amount equal to $[ ] per DECS
being delivered at such time, plus $[ ] per DECS for each Subscription DECS
owned by Smith Barney after giving effect to the subdivision of the Subscription
DECS provided for in the Subscription Agreement.

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<PAGE> 12

5. Delivery and Payment. Delivery of and payment for the
Underwritten DECS and the Option DECS (if the option provided for in Section
4(b) hereof shall have been exercised on or before the first Business Day prior
to the Closing Date) shall be made at 10:00 A.M., New York City time, on March
[ ], 1998, or at such time on such later date not later than five Business Days
after the foregoing date as the Representatives shall designate, which date and
time may be postponed by agreement among the Representatives, the Trust and the
Mark Hughes or as provided in Section 13 hereof (such date and time of delivery
and payment for the DECS being herein called the "Closing Date"). Delivery of
the DECS shall be made to the Representatives for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the Trust
by wire transfer payable in immediately available same-day funds to an account
specified by the Trust in writing at least two Business Days in advance of the
Closing Date. Delivery of the DECS shall be made through the facilities of the
Depository Trust Company unless the Representatives shall otherwise instruct.

The Trust agrees to have the DECS available for inspection and
checking by the Representatives in New York, New York, not later than 1:00 P.M.
on the Business Day prior to the Closing Date.

If the option provided for in Section 4(b) hereof is exercised
after the first Business Day prior to the Closing Date, the Trust will deliver
the Option DECS (at the expense of the Trust) to the Representatives on the date
specified by the Representatives (which shall be within three Business Days
after exercise of said option) for the respective accounts of the several
Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the Trust
by wire transfer payable in immediately available same-day funds to an account
specified by the Trust in writing at least two Business Days in advance of such
Settlement Date. If settlement for the Option DECS occurs after the Closing
Date, the Trust, the Company and the Sellers will deliver to the Representatives
on the Settlement Date for the Option DECS, and the obligation of the
Underwriters to purchase the Option DECS shall be conditioned upon receipt of,
supplemental opinions, certificates and letters confirming as of such date the
opinions, certificates and letters delivered on the Closing Date pursuant to
Section 10 hereof.

6. Offering by the Underwriters. It is understood that the
several Underwriters propose to offer the DECS for sale to the public as set
forth in the Trust Prospectus.

7. Agreements of the Trust. The Trust agrees with the several
Underwriters that:

(a) The Trust will use its best efforts to cause the Trust
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Trust will not file any amendment of the Trust
Registration Statement or supplement to the Trust Prospectus or any Rule
462(b) Trust Registration Statement unless the Trust has furnished you a
copy for your review prior to filing and will not file any such proposed
amendment or supplement to which you object. Subject to the foregoing
sentence, if the Trust Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Trust Prospectus is
otherwise required under Rule 424(b), the Trust will cause the Trust
Prospectus, properly completed,

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<PAGE> 13

and any supplement thereto to be filed with the Commission pursuant to
the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representatives
of such timely filing. The Trust will promptly advise the
Representatives (1) when the Trust Registration Statement, if not
effective at the Execution Time, shall have become effective, (2) when
the Trust Prospectus, and any supplement thereto, shall have been filed
(if required) with the Commission pursuant to Rule 424(b) or when any
Rule 462(b) Trust Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the DECS,
any amendment to the Trust Registration Statement or any Rule 462(b)
Trust Registration Statement, shall have been filed or become effective,
(4) of any request by the Commission or its staff for any amendment of
the Trust Registration Statement, or any Rule 462(b) Trust Registration
Statement, or for any supplement to the Trust Prospectus or for any
additional information, (5) of the issuance by the Commission of any
stop order suspending the effectiveness of the Trust Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Trust of any notification with
respect to the suspension of the qualification of the DECS for sale in
any jurisdiction or the institution or threatening of any proceeding for
such purpose. The Trust will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.

(b) If, at any time when a prospectus relating to the DECS is
required to be delivered under the Act, any event occurs as a result of
which the Trust Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Trust Registration Statement or supplement the
Trust Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Trust promptly will (1) notify the
Representatives of any such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 7, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemental
Trust Prospectus to you in such quantities as you may reasonably
request.

(c) The Trust will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Trust
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Trust Registration Statement (without exhibits
thereto). The Trust will furnish to the Representatives and counsel for
the Underwriters, without charge, copies of the Trust Registration
Statement (including exhibits thereto). The Trust will furnish to the
Underwriters not later than (i) 6:00 P.M., New York City time, on the
date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 noon, New York City time, on
such date or (ii) 6:00 P.M., New York City time, on the Business Day
following the date on which the public offering price was determined, if
such determination occurred after 12:00 noon, New York City time, on
such date, as many copies of each Preliminary Trust Prospectus, the
Trust Prospectus and any supplement thereto as the Representatives may
reasonably request; further, so long as delivery of a prospectus by an
Underwriter or any dealer may be required by the Act, as many copies of
each Preliminary Trust Prospectus and the Trust Prospectus and any
supplement thereto as the Representatives may reasonably request.

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<PAGE> 14
(d) The Trust will arrange, if necessary, for the qualification
of the DECS and the Shares for sale under the laws of such jurisdictions
as the Representatives may designate, will maintain such qualifications
in effect so long as required for the distribution of the DECS and will
pay any fee of the National Association of Securities Dealers, Inc. (the
"NASD"), in connection with its review, if any, of the Trust
Registration Statement and the offering of the DECS.

8. Agreements of the Company. The Company agrees with the several
Underwriters that:

(a) The Company will use its best efforts to cause the Company
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Company will not file any amendment of the
Company Registration Statement or supplement to the Company Prospectus
or any Rule 462(b) Company Registration Statement unless the Company has
furnished to you a copy for your review prior to filing and will not
file any such proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, if the Company Registration
Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Company Prospectus is otherwise required under Rule
424(b), the Company will cause the Company Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly advise
the Representatives (1) when the Company Registration Statement, if not
effective at the Execution Time, shall have become effective, (2) when
the Company Prospectus, and any supplement thereto, shall have been
filed (if required) with the Commission pursuant to Rule 424(b) or when
any Rule 462(b) Company Registration Statement shall have been filed
with the Commission, (3) when, prior to termination of the offering of
the DECS, any amendment to the Company Registration Statement shall have
been filed or become effective, (4) of any request by the Commission or
its staff for any amendment of the Company Registration Statement, or
any Rule 462(b) Company Registration Statement, or for any supplement to
the Company Prospectus or for any additional information, (5) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Company Registration Statement or the institution
or threatening of any proceeding for that purpose and (6) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.

(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act (including in respect of the
offering and sale of the DECS or the use of the Borrowed Shares), any
event occurs as a result of which the Company Prospectus as then
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend the Company
Registration Statement or supplement the Company Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder,
the Company promptly will (1) notify the Representatives of such event,
(2) prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 8, an amendment or supplement
which will correct such statement or omission or effect such compliance
and (3) supply any supplemented Company Prospectus to you in such
quantities as you may reasonably request.

(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.

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<PAGE> 15

Exchange Act or the respective rules thereunder, the Company promptly
will (1) notify the Representatives of such event, (2) prepare and file
with the Commission, subject to the second sentence of paragraph (a) of
this Section 8, an amendment or supplement which will correct such
statement or omission or effect such compliance and (3) supply any
supplemented Company Prospectus to you in such quantities as you may
reasonably request.

(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.

(d) The Company will furnish to the Representatives and counsel
for the Underwriters, without charge, signed copies of the Company
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Company Registration Statement (without
exhibits thereto). The Company will furnish to the Underwriters not
later than (A) 6:00 P.M., New York City time, on the date of
determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 noon, New York City time, on
such date or (B) 6:00 P.M., New York City time, on the Business Day
following the date on which the public offering price of the DECS was
determined, if such determination occurred after 12:00 noon, New York
City time, on such date, as many copies of each Preliminary Company
Prospectus, the Company Prospectus and any supplement thereto as the
Representatives may reasonably request; further, so long as delivery of
a prospectus by any Underwriter or any dealer may be required by the Act
(including in respect of the offering and sale of the DECS or the
borrowing of the Borrowed Shares), as many copies of each Preliminary
Company Prospectus and the Company Prospectus and any supplement thereto
as the Representatives may reasonably request. The Company will pay the
expenses of printing or other production of the Company Registration
Statement, each Preliminary Company Prospectus and the Company
Prospectus.

(e) The Company will cooperate with the Trust for purposes of the
qualification of the DECS and the Shares for sale under the laws of such
jurisdictions as the Representatives may designate, will maintain such
qualifications in effect so long as required for the distribution of the
DECS, the Shares or the use of the Borrowed Shares and will pay any fee
of the NASD in connection with its review, if any, of the Company
Registration Statement and the offering of the Shares in connection with
the offering of the DECS or the use of the Borrowed Shares; provided
that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to (A) taxes or (B) service of process
in suits, in each case, other than those arising out of the offering or
sale of the DECS, the offering and sale of the Shares in connection with
the offering of the DECS or the use of the Borrowed Shares, in any
jurisdiction where it is not now so subject.

(f) The Company will not, without the prior written consent of
Smith Barney, during the period of 90 days following the Execution Time,
(i) offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, or announce the offering of any shares of any
class of common stock of the Company or any

15
<PAGE> 16

securities convertible into or exercisable or exchangeable for shares of
any class of common stock of the Company (whether such shares or any
such securities are now owned or hereafter acquired) or (ii) enter into
any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any class of the
common stock of the Company, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of any class of
common stock of the Company or such other securities, in cash or
otherwise; provided, however, that the Company may issue, or grant
options for, any class of common stock of the Company pursuant to any
stock plan for employees or directors, or any employee benefit plan, of
the Company in effect at the Execution Time, or pursuant to any stock
options outstanding at the Execution Time.

(g) The Company will furnish the Trust in sufficient quantities
for transmission to holders of the DECS the Company's annual report to
shareholders and reports on Forms 10-K and 10-Q as soon as practicable
after such reports are required to be filed with the Commission.

(h) The Company will take such actions as may be reasonably
necessary to comply with the rules and regulations of the Nasdaq
National Market System in respect of the offering of the Shares
contemplated hereby.

(i) The Company will not become an "investment company" as
defined in the Investment Company Act.

(j) Neither the Company nor any of its subsidiaries has taken and
none of such entities will take, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in destabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the DECS or the Shares, it being understood that this
sentence shall not apply to any share repurchase program conducted by
the Company in compliance with the Exchange Act and all other applicable
law.

(k) The Company will, promptly following each time the Company
Registration Statement or the Company Prospectus is amended or
supplemented, notify Smith Barney of such amendment or supplement. The
Company will, promptly following (A) filing by the Company of any Annual
Report on Form 10-K or Quarterly Report on Form 10-Q under the Exchange
Act (or any successor forms) and (B) receipt of a written request by
Smith Barney (the date and time as of which any such filing is made or
request is received is referred to herein as a "Bringdown Date"),
deliver or cause to be delivered promptly to Smith Barney a certificate
of the Company signed by the chief executive officer and the principal
financial or accounting officer of the Company, dated the Bringdown
Date, in form satisfactory to Smith Barney, of the same tenor as the
certificate referred to in Section 10(m) but modified to relate to the
Bringdown Date in lieu of the Closing Date, to the last day of the
fiscal quarter for which financial statements of the Company were last
filed with the Commission and to the Company Registration Statement and
the Company Prospectus as amended and supplemented to the Bringdown
Date.

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<PAGE> 17

(l) The Company will, promptly following each Bringdown Date,
furnish or cause to be furnished promptly to Smith Barney written
opinions of counsel for the Company satisfactory to Smith Barney, of the
same tenor as the opinions referred to in Sections 10(c) through (j) but
modified to relate to the Company Registration Statement and the Company
Prospectus as amended and supplemented to the Bringdown Date or, in lieu
of such opinions, counsel last furnishing such opinions to Smith Barney
may furnish Smith Barney with a letter to the effect that it may rely on
such last opinions to the same extent as though they were dated the date
of such letter authorizing reliance (except that statements in such last
opinion will be deemed to relate to the Company Registration Statement
and the Company Prospectus as amended and supplemented to the Bringdown
Date).

(m) The Company will, promptly following each Bringdown Date
which occurs on or following the date of a filing that results in the
inclusion or incorporation in the Company Registration Statement or the
Company Prospectus of amended or supplemental financial information that
has not previously been addressed by a letter of the type described
below, cause its independent public accountants promptly to furnish to
Smith Barney a letter, dated the Bringdown Date, in form satisfactory to
Smith Barney, of the same tenor as the letter referred to in Section
10(o) with such changes as may be necessary to reflect such amended or
supplemental financial information included or incorporated by reference
in the Company Registration Statement and the Company Prospectus, as
amended or supplemented to the Bringdown Date; provided, however, that
if the Company Registration Statement or the Company Prospectus is
amended or supplemented solely to include or incorporate by reference
financial information as of and for a fiscal quarter, such independent
public accountants may limit the scope of such letter, which shall be
satisfactory in form to Smith Barney, to the unaudited financial
statements, the related "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in such
amendment or supplement, unless, in the judgment of Smith Barney, such
letter should cover other information or changes in specified financial
statement line items.

9. Agreements of the Mark Hughes Entities. Each of the Mark
Hughes Entities agrees with each of the Underwriters that:

(a) Each Mark Hughes Entity will not, without the prior written
consent of Smith Barney, during the period of 90 days following the
Execution Time, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, or announce the offering of any
shares of any class of common stock of the Company or any securities
convertible into or exercisable or exchangeable for shares of any class
of common stock of the Company (whether such shares or any such
securities are now owned or hereafter acquired) or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any class of the
common stock of the Company, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of any class of
common stock of the Company or such other securities, in cash or
otherwise; provided, however, that the Mark Hughes Entities may engage
in any of the transactions described in clause (i) or (ii) above in
connection with (a) the offering by the Trust of the DECS or any
delivery of Shares pursuant to the terms of the DECS, (b) the loaning of
Shares pursuant to the Securities Loan

17
<PAGE> 18

Agreement, or (c) sales by the Herbalife Family Foundation, a charitable
trust of which Mark Hughes is a director but with respect to which Mark
Hughes has no pecuniary interest.

(b) No Mark Hughes Entity will take any action designed to or
which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the DECS or the Shares, it being understood that
this sentence shall not apply to any share repurchase program conducted
by the Company in compliance with the Exchange Act and all other
applicable law.

(c) Each Mark Hughes Entity will advise you promptly, and if
requested by you, will confirm such advice in writing, so long as
delivery of a prospectus relating to the Shares (including with respect
to the offering and sale of the DECS or the use of Borrowed Shares) by
an underwriter or dealer may be required under the Act, of any change in
the information in the Company Registration Statement or the Company
Prospectus relating to such Mark Hughes Entity.

10. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten DECS and the Option
DECS, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Trust, the Company, the
Sellers, the Corporate Seller Control Persons, the Mark Hughes Family Trust and
Mark Hughes contained herein as of the Execution Time, the Closing Date and any
Settlement Date pursuant to Section 4(b) hereof, to the accuracy of the
statements of the Trust, the Company, the Sellers, the Corporate Seller Control
Persons, the Mark Hughes Family Trust and Mark Hughes made in any certificates
pursuant to the provisions hereof, to the performance by each of the Trust, the
Company, the Sellers, the Corporate Seller Control Persons, the Mark Hughes
Family Trust and Mark Hughes of their respective obligations hereunder and to
the following additional conditions:

(a) If the Trust Registration Statement or the Company
Registration Statement has not become effective prior to the Execution
Time, unless the Representatives agree in writing to a later time, such
Trust Registration Statement or Company Registration Statement will
become effective not later than (i) 6:00 P.M. New York City time on the
date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 3:00 P.M. New York City time on
such date or (ii) 9:30 A.M. New York City time on the Business Day
following the day on which the public offering price of the DECS was
determined, if such determination occurred after 3:00 P.M. New York City
time on such date; if filing of the Trust Prospectus or the Company
Prospectus, or any supplement thereto, is required pursuant to Rule
497(h) or Rule 424(b), such Trust Prospectus or Company Prospectus, and
any such supplement, will be filed in the manner and within the time
period required by such Rule; and no stop order suspending the
effectiveness of the Trust Registration Statement or the Company
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or threatened.

(b) The Representatives shall have received the opinion of
Richards, Layton & Finger, special Delaware counsel for the Trust, dated
the Closing Date and addressed to the Representatives, with respect to
such matters as the Representatives may reasonably request.

18
<PAGE> 19

(c) The Company shall instruct Irell & Manella LLP, counsel for
the Company, to furnish, and such counsel shall have furnished, an
opinion to the Representatives dated the Closing Date and addressed to
the Representatives, to the effect that:

(i) each of the Company and Herbalife International of
America, Inc. (the "Subsidiary") has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own or lease, as the
case may be, and to operate its properties and conduct its
business as described in the Company Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or
conducts material business and where the failure to be so
qualified would, individually or in the aggregate, have a
material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Company Prospectus;
notwithstanding the foregoing, the Company is duly qualified to
do business as a foreign corporation and is in good standing
under the laws of California;

(ii) all the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set
forth in the Company Prospectus, all outstanding shares of
capital stock of the Subsidiary are directly owned by the Company
free and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other security
interest, claim, lien or encumbrance;

(iii) the Company's authorized equity capitalization is as
set forth in the Company Prospectus; the capital stock of the
Company conforms to the description thereof contained in the
Company Prospectus; all outstanding Shares have been duly and
validly authorized and issued and are fully paid and
nonassessable; the Shares are duly approved for quotation through
the Nasdaq National Market System; the certificates for the
Shares are in valid and sufficient form; and the holders of
outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the
Shares under the Company's Amended and Restated Articles of
Incorporation, Restated Bylaws or applicable law, or, to the
knowledge of such counsel, after due inquiry, any indenture,
agreement, instrument or order by which the Company is subject;

(iv) to the knowledge of such counsel, after due inquiry,
there is no pending or threatened action, suit or proceeding by
or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its subsidiaries
or its or their property of a character required to be disclosed
in the Company Registration Statement which is not adequately
disclosed in the Company Prospectus, and there is no franchise,
contract or other document of a character required to be
described in the Company Registration Statement or Company
Prospectus, or to be filed as an exhibit thereto, which is not
described or

19
<PAGE> 20
filed as required; and the statements in the Company Prospectus
under the heading "Description of Capital Stock" fairly summarize
the matters therein described insofar as such statements relate
to laws, regulations, judgments, decrees or orders of the United
States or the State of California;

(v) the Company Registration Statement has become
effective under the Act; any required filing of the Company
Prospectus, and any supplements thereto, pursuant to Rule 424(b)
has been made in the manner and within the time period required
by Rule 424(b); to the knowledge of such counsel, after due
inquiry, no stop order suspending the effectiveness of the
Company Registration Statement has been issued, no proceedings
for that purpose have been instituted or threatened and the
Company Registration Statement and the Company Prospectus (other
than the financial statements and other financial and statistical
information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules
thereunder; and such counsel has no reason to believe that on the
Company Effective Date or at the Execution Time the Company
Registration Statement contains or contained any untrue statement
of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Company Prospectus as of its
date and on the Closing Date includes any untrue statement of a
material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each
case, other than the financial statements and other financial and
statistical statements and other financial information contained
therein, as to which such counsel need express no opinion) (which
conclusions may be expressed in a separate letter);

(vi) this Agreement has been duly authorized, executed and
delivered by the Company;

(vii) the Company is not an "investment company" as
defined in the Investment Company Act;

(viii) to the knowledge of such counsel, after due
inquiry, there is no action, proceeding or investigation pending
or threatened against the Company, any of its subsidiaries or any
Mark Hughes Entity which questions the validity of the issuance
of the DECS or the offering thereof by the Underwriters;

(ix) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the performance by the Company of the
transactions contemplated herein, except such as have been
obtained under the Act and such as may be required under the blue
sky laws of any jurisdiction in connection with the purchase and
distribution of the DECS or the distribution of Shares pursuant
to the terms of the DECS by the Underwriters in the

20
<PAGE> 21

manner contemplated in this Agreement and in the Trust Prospectus
or the Company Prospectus;

(x) neither the performance of this Agreement by the
Company, the distribution of the Shares, nor the consummation of
any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a
breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the
Subsidiary pursuant to (i) the charter or by-laws of the Company
or the Subsidiary, (ii) the terms of any indenture or material
agreement or instrument, known to such counsel, after due
inquiry, to which the Company or any of its subsidiaries is a
party or bound, (iii) any judgment, order or decree, known to
such counsel, after due inquiry, to be applicable to the Company
or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its
subsidiaries or (iv) any law; and

(xi) to the knowledge of such counsel, after due inquiry,
no holders of securities of the Company other than the Sellers
have rights to the registration of such securities under the
Company Registration Statement.

In rendering such opinion, such counsel may include customary
qualifications and exceptions and rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of
California, the State of Delaware or the Federal laws of the United
States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the Underwriters (B)
as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials. References
to the Company Prospectus in this paragraph (c) include any supplements
thereto at the Closing Date.

(d) The Company shall instruct non-U.S. counsel to the Company's
subsidiaries in Brazil, Germany, France, Italy, Japan, Taiwan and the
United Kingdom and non-U.S. counsel to the Company with respect to its
operations in Russia, to furnish, and each such counsel shall have
furnished, an opinion to the Representatives dated the Closing Date and
addressed to the Representatives, in the form attached hereto as Exhibit
B.

(e) The Mark Hughes Entities (other than the Mark Hughes Family
Trust) shall instruct Irell & Manella LLP or Lee, Goddard & Duffy LLP,
counsel for such Mark Hughes Entities, to furnish, and such counsel
shall have furnished, an opinion to the Representatives dated the
Closing Date and addressed to the Representatives, to the effect that:

(i) each of the Sellers and Corporate Seller Control
Persons has been duly organized and is validly existing as a
limited liability corporation in good standing under the laws of
the State of Delaware with full power and authority to own or
lease, as the case may be, and to operate its properties and
conduct its business, and is duly qualified to do business and is
in good standing under the laws of each jurisdiction which
requires such qualification;

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<PAGE> 22
(ii) the Custody Agreement and Power of Attorney have been
duly authorized, executed and delivered by the Sellers, the
Custody Agreement is valid and binding on the Sellers and each
Seller has full legal right and authority to sell, pledge,
transfer and deliver in the manner provided in the Contracts and
Collateral Agreements and the Custody Agreement, the Shares to be
sold, pledged, transferred and delivered thereunder;

(iii) this Agreement has been duly authorized by each of
the Mark Hughes Entities (other than Mark Hughes and the Mark
Hughes Family Trust) and duly executed and delivered by each of
the Mark Hughes Entities (other than the Mark Hughes Family
Trust); each Contract and Collateral Agreement to which each Mark
Hughes Entity is a party and the Reimbursement Agreement has been
duly authorized by such Mark Hughes Entity (other than Mark
Hughes and the Mark Hughes Family Trust) and duly executed and
delivered by such Mark Hughes Entity (other than the Mark Hughes
Family Trust) and, assuming due authorization, execution and
delivery by the other parties thereto, constitutes a valid and
legally binding agreement of such Mark Hughes Entity (other than
the Mark Hughes Family Trust), enforceable against such Mark
Hughes Entity (other than the Mark Hughes Family Trust) in
accordance with its terms, subject, as to enforcement of
remedies, to bankruptcy, insolvency and other similar laws
affecting creditors' rights generally, and to general equitable
principles; and the execution and delivery by each of the Mark
Hughes Entities (other than the Mark Hughes Family Trust) of this
Agreement, each Contract and Collateral Agreement to which such
Mark Hughes Entity is a party and the Reimbursement Agreement,
the performance by such Mark Hughes Entity of its obligations
hereunder and thereunder and the consummation of the transactions
herein and therein contemplated do not and will not, whether with
or without the giving of notice or passage of time or both,
conflict with, result in a breach or violation of or imposition
of any lien (other than pursuant to the Collateral Agreement to
which such Mark Hughes Entity is a party), charge or encumbrance
upon any property or assets of such Mark Hughes Entity or its
subsidiaries pursuant to (i) the Organizational Documents of such
Mark Hughes Entity or any of its subsidiaries, (ii) the terms of
any indenture or material agreement or instrument, known to such
counsel, after due inquiry, to which such Mark Hughes Entity or
any of its subsidiaries is a party or bound, (iii) judgment,
order or decree applicable to such Mark Hughes Entity or any of
its subsidiaries of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over such Mark Hughes Entity or its subsidiaries or
(iv) any law;

(iv) no consent, approval, license, authorization, order
or validation of, and no filing, recording, or registration with,
any court or governmental authority, agency or body is required
for the compliance by each Mark Hughes Entity (other than the
Mark Hughes Family Trust) with all of the provisions of this
Agreement, each Contract and Collateral Agreement to which such
Mark Hughes Entity is a party and the Reimbursement Agreement,
except such as have been obtained under the Act and such as may
be required under the blue sky laws in connection with the
purchase and distribution of the DECS by the Underwriters and the
distribution of the Shares

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<PAGE> 23

pursuant to the terms of the DECS in the manner contemplated in
this Agreement and in the Trust Prospectus and the Company
Prospectus;

(v) this Agreement, the Reimbursement Agreement and each
Contract and Collateral Agreement will be (A) binding on and
legally enforceable against the estate of Mark Hughes should he
become deceased or the legal representative, attorney, or
guardian of Mark Hughes should he lack legal capacity and (B)
binding on and legally enforceable against the Mark Hughes Family
Trust despite the death or legal incapacity of any settlor or
beneficiary of such trust;

(vi) none of the Sellers, the Corporate Seller Control
Persons or the Mark Hughes Family Trust is and, after giving
effect to the transactions contemplated in each Contract and
Collateral Agreement and the offering and sale of the DECS as
contemplated by this Agreement, will be an "investment company"
or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act;

(vii) the Collateral Agreements create a valid security
interest in favor of the Collateral Agent (as defined therein)
for the benefit of the Trust in the Shares pledged thereunder as
security for the performance by the applicable Seller of its
obligations under the Contract to which such Seller is a party
and to secure the observance and performance of the covenants and
agreements of the applicable Seller contained in the Contract and
the Collateral Agreement to which such Seller is a party;

(viii) pursuant to Section 9-103(6) of the California UCC
as currently in effect, the perfection and the effect of
perfection or non-perfection of the security interest of the
Trust in the Shares pledged pursuant to the Contracts and the
Collateral Agreements will be governed by the laws of the State
of New York, assuming the Share certificates are located in New
York at all times.

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
State of California, the State of Delaware, or the Federal laws of the
United States, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the
Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials. References to the Company Prospectus in this paragraph
(e) include any supplements thereto at the Closing Date. The opinion of
such counsel shall be rendered to the Underwriters at the request of the
Company and shall so state therein.

(f) The Company shall instruct Conrad Lee Klein, Esq. to furnish,
and such counsel shall have furnished, a letter to the Representatives
dated the Closing Date and addressed to the Representatives, in form and
substance substantially similar to the opinion delivered by such counsel
to Salomon Brothers Inc on October 18, 1993 and satisfactory to the
Representatives, confirming as of such date the opinion given in the
letters to the Company, dated June 8 and July 14, 1993, with respect to
the Company's compliance with

23
<PAGE> 24

the Final Judgment and Permanent Injunction, dated October 15, 1986, in
California v. Herbalife International, Inc.

(g) The Company shall instruct Hogan & Hartson LLP, special
regulatory counsel for the Company, to furnish, and such counsel shall
have furnished, an opinion to the Representatives dated the Closing Date
and addressed to the Representatives, to the effect that:

(i) the statements in the Company Prospectus under the
Captions "Risk Factors - Regulation " and "Business -
Regulation," insofar as such statements purport to summarize
applicable provisions of the FDA Act, the regulations promulgated
thereunder and the FDA's June 4, 1997 proposed regulation for
dietary supplements containing ephedrine alkaloids, are accurate
summaries in all material respects of the provisions purposed to
be summarized under such captions in the Company Prospectus.

Such counsel shall state that no facts have come to their attention
which causes them to believe that the statements in the Company
Prospectus under the caption "Risk Factors -- Regulation" and "Business
-- Regulation," insofar as such statements relate the FDA regulatory
matters, at the time the Company Registration Statement became
effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or, as of the date of the
Company Prospectus or as of the date thereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
References to the Company Prospectus in this paragraph (g) include any
supplements thereto at the Closing Date.

(h) The Company shall instruct Morrison & Foerster LLP, special
counsel to the Company and Mark Hughes, to furnish, and such counsel
shall have furnished:

(i) an advisory letter to the Representatives dated the
Closing Date and addressed to the Representatives, with respect
to the legality of that the Company's multi-level marketing and
distribution plan under any U.S. or California statute, law, rule
or regulation.

(ii) an opinion to the Representatives dated the Closing
Date and addressed to the Representatives, to the effect there is
no prohibition or restriction on the ability of Mark Hughes to,
directly or indirectly through one or more intermediary entities,
transfer, encumber, hypothecate, conceal, pledge or in any way
dispose of any Shares (including without limitation as
contemplated in the Forward Purchase Contracts and Collateral
Agreements) that arises from the proceeding for the dissolution
of the marriage of Mark and Suzan Hughes or under California
marital property or family law; and

(iii) Suzan Hughes has no claims with respect to the
Collateral, as defined in each Collateral Agreement, pledged
pursuant to such Collateral Agreement that

24
<PAGE> 25

may be superior to the rights of the Trust in such Collateral in
the event of any change in the marital status of Mark Hughes.

(i) The Company shall instruct Robert A. Sandler, Esq. to
furnish, and such counsel shall have furnished, a letter to the
Representatives dated the Closing Date and addressed to the
Representatives, in form and substance satisfactory to the
Representatives.

(j) The Company shall instruct Gerald M. Yaroslow, Esq. or other
counsel satisfactory to the Representatives, to furnish, and such
counsel shall have furnished, an opinion to the Representatives dated
the Closing Date and addressed to the Representatives, in form and
substance satisfactory to the Representatives.

(k) The Representatives shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters and the Trust,
such opinion or opinions, dated the Closing Date and addressed to the
Representatives, with respect to the issuance and sale of the DECS, the
Trust Registration Statement, the Trust Prospectus (together with any
supplement thereto), the Fundamental Documents, the Company Registration
Statement, the Company Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require,
and the Company shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon
such matters.

(l) The Trust shall have furnished to the Representatives a
certificate of the Trust, signed by the Managing Trustee and dated the
Closing Date, to the effect that:

(i) the representations and warranties of the Trust in
this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as if made on the
Closing Date and the Trust has complied in all material respects
with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing
Date; and

(ii) no stop order suspending the effectiveness of the
Trust Registration Statement or the use of the Trust Prospectus
has been issued and no proceedings for that purpose have been
instituted or, to the Trust's knowledge, threatened.

(m) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Company Registration Statement,
the Company Prospectus, any supplements to the Company Prospectus and
this Agreement and that:

(i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as if made on the
Closing Date and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;

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<PAGE> 26

(ii) no stop order suspending the effectiveness of the
Company Registration Statement or the use of the Company
Prospectus has been issued and no proceedings for that purpose
have been instituted or, to the Company's knowledge, threatened;
and

(iii) since the date of the most recent financial
statements included in the Company Prospectus (exclusive of any
supplement thereto), there has been no material adverse effect on
the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or
contemplated in the Company Prospectus (exclusive of any
supplement thereto).

(n) Each of the Sellers, the Corporate Seller Control Persons,
the Mark Hughes Family Trust and Mark Hughes shall have furnished to the
Representatives a certificate, signed by Mark Hughes and two appropriate
officers of such Seller or Corporate Seller Control Person or one other
appropriate officer of the Mark Hughes Family Trust, as the case may be,
dated the Closing Date, to the effect that each signer of such
certificate has carefully examined the Company Registration Statement,
the Company Prospectus, any supplements to the Company Prospectus and
this Agreement and that:

(i) the representations and warranties of such Mark Hughes
Entity in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as if
made on the Closing Date and such Mark Hughes Entity has complied
with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing
Date.

(o) At the Execution Time and at the Closing Date, Deloitte &
Touche shall have furnished to the Representatives letters, dated
respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and the
Exchange Act and the respective applicable published rules and
regulations thereunder and stating in effect that:

(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the
Company Registration Statement and the Company Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;

(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; carrying out certain specified procedures (but not
an examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders, directors and committees of the Company and its
subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial

26
<PAGE> 27

and accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 1997, nothing
came to their attention which caused them to believe that:

(A) with respect to the period subsequent to
December 31, 1997, there were any material changes, at a
specified date not more than three business days prior to
the date of the letter, in the long-term debt of the
Company and its subsidiaries or capital stock of the
Company or decreases in the shareholders' equity of the
Company or the working capital of the Company and its
subsidiaries as compared with the amounts shown on the
December 31, 1997, consolidated balance sheet included or
incorporated in the Company Registration Statement and the
Company Prospectus, or for the period from January 1, 1998
to such specified date there were any decreases, as
compared with the corresponding period in the preceding
[quarter], in net sales, operating margin or net income of
the Company and its subsidiaries, except in all instances
for changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the
Representatives; or

(B) the information included or incorporated in the
Company Registration Statement and Company Prospectus in
response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information),
Item 402 (Executive Compensation) and Item 503(d) (Ratio
of Earnings to Fixed Charges) is not in conformity with
the applicable disclosure requirements of Regulation S-K;

(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Company
Registration Statement and the Company Prospectus, including the
information set forth under the captions "Prospectus Summary,"
"Risk Factors," "Selected Consolidated Financial and Operating
Data," "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business,"
"Principal and Selling Stockholders," "Certain Transactions" and
"Description of Capital Stock" in the Company Prospectus and the
information included or incorporated in Items 1, 2, 6, 7, 8 and
11 of the Company's Annual Report on Form 10-K, incorporated in
the Company Registration Statement and the Company Prospectus,
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.

References to the Company Prospectus in this paragraph (m) include any
supplement thereto to the date of the letter.

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<PAGE> 28

(p) The Shares shall have been duly approved for quotation
through the Nasdaq National Market System, and satisfactory evidence of
such action shall have been provided to the Representatives.

(q) The DECS shall have been approved for listing on the Nasdaq
National Market System, subject only to official notice of issuance.

(r) The NASD shall not have raised any objection with respect to
the fairness and reasonableness of the underwriting terms and
arrangements.

(s) Each Fundamental Agreement shall have been executed and
delivered by all parties thereto, and each Seller shall have delivered
to the Collateral Agent the number of Shares required by the Collateral
Agreement to which such Seller is a party to be initially pledged and
assigned by such Seller thereunder in accordance with the requirements
of such Collateral Agreement.

(t) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A
hereto from each executive officer and director of the Company addressed
to the Representatives relating to sales and certain other dispositions
of shares of common stock of the Company or certain other securities,
and such letter agreements shall be in full force and effect on the
Closing Date.

(u) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Company Registration Statement
(exclusive of any amendment thereof) and the Company Prospectus
(exclusive of any supplement thereto), there shall not have been (i) any
change or decrease specified in the letter or letters referred to in
paragraph (m) of this Section 10 or (ii) any change, or any development
involving a prospective change, in or affecting the condition (financial
or otherwise), earnings, business or properties of the Company and its
direct and indirect subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Company Prospectus (exclusive of any
supplement thereto) the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the DECS as contemplated by the Trust
Registration Statement and the Company Registration Statement (in either
case, exclusive of any amendment thereof) and the Trust Prospectus and
the Company Prospectus (in either case, exclusive of any supplement
thereto).

(v) Prior to the Closing Date, the Company, the Trust, and each
of the Sellers, the Corporate Seller Control Persons, the Mark Hughes
Family Trust and Mark Hughes shall have furnished to the Representatives
such further information, certificates and documents as the
Representatives may reasonably request.

If any of the conditions specified in this Section 10 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this

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<PAGE> 29

Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Trust and the Company in writing or by
telephone or facsimile confirmed in writing.

The documents required to be delivered by this Section 10 shall
be delivered at the office of Cleary, Gottlieb, Steen & Hamilton, counsel for
the Underwriters, at One Liberty Plaza, New York, New York 10006, on the Closing
Date.

11. Expenses.

(a) Each of the Sellers, the Corporate Seller Control Persons,
the Mark Hughes Family Trust, Mark Hughes and the Company, severally and
jointly, will pay all expenses incident to the performance by the Trust and each
Seller of their respective obligations under this Agreement and their Contracts
and Collateral Agreements, including (i) the preparation, printing and filing of
the Notification and the Trust Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto, (ii)
the preparation, printing and delivery of this Agreement, the Trust Agreement,
each of the Fundamental Agreements and such other documents as may be required
in connection with the offering, purchase, sale, issuance or delivery of the
DECS, (iii) the preparation, issuance and delivery of the certificates for the
DECS to the Representatives, (iv) the fees and disbursements of the Trust's
counsel, accountants and other advisors, (v) the fees and disbursements of the
Sellers' counsel and other advisors, (vi) the qualification of the DECS under
state securities laws in accordance with the provisions of Section 7(d) hereof,
including filing fees and the reasonable fees and disbursements of the counsel
for the Underwriters in connection therewith and in connection with the
preparation of the related blue sky survey and any supplement thereto, (vii) the
printing and delivery to the Representatives of copies of each Preliminary Trust
Prospectus, the Trust Prospectus and any amendments or supplements thereto,
(viii) the fees and expenses of any transfer agent or registrar for the DECS,
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, securing any required review by
the NASD of the Trust Registration Statement and the offering of the DECS in
accordance with the provisions of Section 7(d) hereof, (x) the fees and expenses
incurred in connection with the listing of the DECS on the Nasdaq National
Market System and (xi) the fees and expenses incurred in connection with the
preparation and filing of a registration statement under the Exchange Act
relating to the DECS. Each of the Sellers, the Corporate Seller Control Persons,
the Mark Hughes Family Trust, Mark Hughes and the Company, severally and
jointly, will reimburse the Underwriters through Smith Barney on the Closing
Date in immediately available funds for the Up-Front Fee Amount and the Up-Front
Expense Amount (each as defined in the Fund Expense Agreement dated as of the
Closing Date between Smith Barney and BoNY) and for the up-front fees of the
trustees of the Trust paid by Smith Barney. The Mark Hughes Entities shall not
be obligated pursuant to this Section 11(a) to pay any fees or disbursements of
counsel to the Underwriters other than in connection with clauses (vi) and (ix)
of this Section 11(a).

(b) Each of the Sellers, the Corporate Seller Control Persons,
the Mark Hughes Family Trust, Mark Hughes and the Company, severally and
jointly, will pay all expenses incident to the performance by the Company of its
obligations under this Agreement, including (i) the preparation, printing and
filing of the Company Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for the Shares to the
Trust, (iii) the fees and disbursements

29
<PAGE> 30

of the Company's counsel, accountants and other advisors, (iv) the qualification
of the Shares under state securities laws in accordance with the provisions of
Section 8(e) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of any related blue sky survey and any
supplement thereto, (v) the printing and delivery to the Representatives of
copies of each Preliminary Company Prospectus, the Company Prospectus and any
amendments or supplements thereto, (vi) the fees and expenses of any transfer
agent or registrar for the Shares, (vii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, securing any required review by the NASD of the Company Registration
Statement and the offering of the Shares in accordance with the provisions of
Section 8(e) hereof and (viii) the fees and expenses incurred in connection with
the approval of the Shares for quotation through the Nasdaq National Market
System.

(c) If the sale of the DECS provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 10 hereof is not satisfied, because of any termination pursuant
to Section 15 hereof or because of any refusal, inability or failure on the part
of the Company, Mark Hughes, the Mark Hughes Family Trust, any Seller or any
Corporate Seller Control Person to perform any agreement herein or comply with
any provision hereof other than by reason of a default by the Underwriters, each
of the Sellers, the Corporate Seller Control Persons, the Mark Hughes Family
Trust, Mark Hughes and the Company, jointly and severally, will reimburse the
Underwriters through Smith Barney upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by the Underwriters in connection with the proposed purchase and sale
of the DECS.

(d) The provisions of this Section 11 shall not supersede or
otherwise affect any agreement that the Company, the Sellers, the Corporate
Seller Control Persons, the Mark Hughes Family Trust and Mark Hughes may
otherwise have for the allocation of such expenses among themselves.

12. Indemnification and Contribution.

(a) The Company agrees to indemnify and hold harmless each Mark
Hughes Entity, the Trust, each of the Trustees, each Underwriter, the directors,
officers, employees and agents of each Underwriter, and each person who controls
the Trust or any Underwriter within the meaning of the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Company Registration
Statement as originally filed or in any amendment thereof, or in any Preliminary
Company Prospectus or the Company Prospectus, or in any amendment thereof or
supplement thereto (each such document, a "Company Registration Document"), or
the omission or alleged omission to state in any Company Registration Document a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Trust Registration Statement as originally
filed or in any amendment thereof, or in any Preliminary Trust Prospectus or the
Trust Prospectus, or in any amendment thereto or supplement thereto (each such

30
<PAGE> 31

document, a "Trust Registration Document") or the omission or alleged omission
to state in any Trust Registration Document a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
in each such case agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company in any such case will not be liable to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in any Company Registration Document or Trust Registration
Document in reliance upon and in conformity with written information furnished
to the Company or the Trust by or on behalf of any Underwriter through the
Representatives specifically for inclusion therein. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.

(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, its directors, each of its officers who
signs the Registration Statement, the Sellers, the Corporate Seller Control
Persons, the Mark Hughes Family Trust, Mark Hughes and each person who controls
the Company within the meaning of the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, to the same
extent as the foregoing indemnity to each Underwriter, but only with reference
to written information relating to such Underwriter furnished to the Company or
the Trust by or on behalf of such Underwriter through the Representatives
specifically for inclusion in the Company Registration Documents or the Trust
Registration Documents, as the case may be. This indemnity agreement will be in
addition to any liability which any Underwriter may otherwise have. Each of the
Company, the Sellers, the Corporate Seller Control Persons, the Mark Hughes
Family Trust and Mark Hughes acknowledges that the statements set forth in the
legend in block capital letters on page 2 related to stabilization and syndicate
covering transactions and in the third, sixth and ninth paragraphs under the
heading "Plan of Distribution" related to concessions and reallowances, related
to listing the DECS and related to stabilization, syndicate covering
transactions and penalty bids, respectively, in any Preliminary Company
Prospectus, the Company Prospectus, any Preliminary Trust Prospectus or the
Trust Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in any Company Registration
Document or any Trust Registration Document.

(c) Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 12, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint

31
<PAGE> 32

counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded upon the advice of its counsel
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action (provided that,
with respect to the matters set forth in clauses (i), (ii) and (iii), in no
event shall the indemnifying party be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from its own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions arising out of the same general allegations or
circumstances) or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding. An indemnifying party
will not be liable to an indemnified party for any amount paid by the
indemnified party to settle or compromise any pending or threatened claim,
action, suit or proceeding if such settlement or compromise is entered into
without the consent of the indemnifying party, which consent may not be withheld
unless such settlement or compromise is unreasonable in light of the pending or
threatened claim, action, suit or proceeding against, and defenses available to,
the indemnified party.

(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 12 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, each Seller, each Corporate
Seller Control Person, the Mark Hughes Family Trust and Mark Hughes, jointly and
severally, and the Underwriters severally agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, each Seller, each Corporate Seller
Control Person, the Mark Hughes Family Trust, Mark Hughes and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Sellers, the Corporate Seller
Control Persons, the Mark Hughes Family Trust and Mark Hughes on the one hand
and the Underwriters on the other from the offering of the DECS; provided,
however, that in no case shall any Underwriter (except as may be provided in any
agreement among the underwriters relating to the offering of the DECS) be
responsible for any amount in excess of the underwriting discount applicable to
the DECS purchased by such Underwriter hereunder. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, the Company,
each Seller, each Corporate Seller Control Person, the Mark Hughes Family Trust
and Mark Hughes, jointly and severally, and the Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company, such Seller, such
Corporate Seller Control Person, the Mark Hughes Family Trust and Mark Hughes on
one hand and of the

32
<PAGE> 33

Underwriters on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
The benefits received by the Company, the Sellers, the Corporate Seller Control
Persons, the Mark Hughes Family Trust and Mark Hughes shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by the Trust, and the benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Trust Prospectus and, as between the
Company and the Underwriters, the Company shall be deemed for this purpose to
have received such total net proceeds as are received by the Trust. Relative
fault shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information provided by the
Company, a Seller, a Corporate Seller Control Person, the Mark Hughes Family
Trust or Mark Hughes on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, each Seller, each Corporate Seller Control Person, the Mark Hughes
Family Trust, Mark Hughes and the Underwriters agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 12, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter; each person who controls the Company within the meaning of either
the Act or the Exchange Act, each officer of the Company who shall have signed
the Company Registration Statement and each director of the Company shall have
the same rights to contribution as the Company; each person who controls a
Seller, a Corporate Seller Control Person or the Mark Hughes Family Trust within
the meaning of the Act or the Exchange Act shall have the same rights to
contribution as such Seller, Corporate Seller Control Person or Mark Hughes
Family Trust, as the case may be, subject in each case to the applicable terms
and conditions of this paragraph (d).

13. Subordination

(a) The Company agrees, and each Mark Hughes Entity agrees,
that the obligations of the Company to indemnify and hold harmless each
Mark Hughes Entity against any Losses as provided in paragraph (a) of
Section 12 (the "Subordinated Indemnification Obligations") are
subordinated in right of payment, to the extent and in the manner
provided in this Section 13, to the prior payment of all obligations of
the Company to indemnify and hold harmless the Trust, each
Underwriter, the directors, officers, employees and agents of each
person who controls the Trust or any Underwriter within the meaning of
the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (each a "Senior Indemnified
Party" and collectively the "Senior Indemnified Parties") against any
Losses as provided in paragraph (a) of Section 12 (the "Senior
Indemnification Obligations") and that the subordination is for the
benefit of and enforceable by the Senior Indemnified Parties.

(b) Upon any payment or distribution of the assets of the
Company to creditors upon a total or partial liquidation or a total or
partial dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company
or its property: (i) the Senior Indemnified Parties shall be entitled
to receive payment in full of all Senior Indemnification Obligations in
cash before any Mark Hughes Entity shall be entitled to receive any
payment of Subordinated Indemnification Obligations; and (ii) until
such Senior Indemnification Obligations are paid in full in cash, any
payment to which any Mark Hughes Entity would be entitled but for this
Section 13 shall be made to the Senior Indemnified Parties as their
interests may appear.

(c) The Company may not pay any Subordinated Indemnification
Obligations if the Company has failed to pay to the Senior Indemnified
Parties any Senior Indemnification Obligations that are then payable.

(d) If any payment in respect of Subordinated Indemnification
Obligations are made to any Mark Hughes Entity that because of this
Section 13 should not have been made to it, the Mark Hughes Entity who
received the payment shall hold it in trust for the Senior Indemnified
Parties and pay it over to them as their interests may appear.

(e) After all Senior Indemnification Obligations of the Company
are paid in full in cash and until the Subordinated Indemnification
Obligations are paid in full, the Mark Hughes Entities shall be
subrogated to the rights of the Senior Indemnified Parties to receive
payments applicable to such Senior Indemnification Obligations. A
payment made under this Section 13 to a Senior Indemnified Party which
otherwise would have been made to a Mark Hughes Entity is not, as
between the Company and the Mark Hughes Entities, a payment by the
Company on such Senior Indemnification Obligations.

(f) Each Mark Hughes Entity acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each Senior Indemnified Party to enter
into this Agreement.

14. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the DECS agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of DECS set forth
opposite their names in Schedule I hereto bears to the aggregate amount of DECS
set forth opposite the names of all the remaining Underwriters) the DECS which
the defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that in the event that the aggregate amount of DECS which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate amount of DECS set forth in Schedule I hereto, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the DECS, and if such nondefaulting
Underwriters do not purchase all the DECS, this Agreement will terminate without
liability to any nondefaulting Underwriter, the Company, the Sellers, the
Corporate Seller Control Persons, the Mark Hughes Family Trust or Mark Hughes.
In the event of a default by any Underwriter as set forth in this Section 14,
the Closing Date shall be postponed for such period, not exceeding five Business
Days, as the Representatives shall determine in order that the required changes
in the Company Registration Statement, the Company Prospectus, the Trust
Registration

33
<PAGE> 34

Statement and the Trust Prospectus or in any other documents or arrangements may
be effected. Nothing contained in this Agreement shall relieve any defaulting
Underwriter of its liability, if any, to the Company, the Sellers, the Corporate
Seller Control Persons, the Mark Hughes Family Trust or Mark Hughes and any
nondefaulting Underwriter for damages occasioned by its default hereunder.

15. Termination. This Agreement shall be subject to termination
in the absolute discretion of the Representatives, by notice given to the Trust
and the Company prior to delivery of and payment for the DECS, if at any time
prior to such time (i) trading in any class of the Company's Common Stock shall
have been suspended by the Commission or the Nasdaq National Market or trading
in securities generally on the New York Stock Exchange or the Nasdaq National
Market shall have been suspended or limited or minimum prices shall have been
established on such Exchange or National Market, (ii) a banking moratorium shall
have been declared by either Federal or New York State authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis,
the effect of which on financial markets of the United States is such as to make
it, in the sole judgment of the Representatives, impractical or inadvisable to
proceed with the offering or delivery of the DECS as contemplated by the Trust
Prospectus (exclusive of any supplement thereto).

16. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Trust, the Company, each Seller, each Corporate Seller Control Person, the Mark
Hughes Family Trust, Mark Hughes, or their respective officers, if applicable,
and of the Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Trust, the Company, any Seller, any Corporate
Seller Control Person, the Mark Hughes Family Trust, Mark Hughes, or any of the
officers, directors or controlling persons referred to in Section 12 hereof, and
will survive delivery of and payment for the DECS. The provisions of Sections
11, 12 and 18 hereof shall survive the termination or cancellation of this
Agreement.

17. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to Smith Barney, will be mailed,
delivered or telefaxed to the Salomon Smith Barney General Counsel (fax no.:
(212) 816-6[ ]) and confirmed to the General Counsel, care of Salomon Smith
Barney, at 388 Greenwich Street, New York, New York 10013, attention: General
Counsel; if sent to the Trust, will be mailed, delivered or telefaxed and
confirmed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204,
Newark, Delaware 19715, Attention: Donald J. Puglisi; if sent to the Company,
will be mailed, delivered, telefaxed and confirmed to it at Herbalife
International, Inc., 1800 Century Park East, Los Angeles, California 90067 (fax
no.: [ ]), Attention: Robert A. Sandler; if sent to Mark Hughes or the Mark
Hughes Family Trust, will be mailed, delivered, telegraphed and confirmed to him
or it care of Herbalife International, Inc., 1800 Century Park East, Los
Angeles, California 90067, attention of [ ]; if sent to the Sellers or the
Corporate Seller Control Persons, will be mailed, delivered, telegraphed and
confirmed to it care of Herbalife International, Inc., attention of [ ].

18. Guaranty. (a) In order to induce the Underwriters to enter
into this Agreement and for other valuable consideration, each of Mark Hughes,
the Mark Hughes Family Trust, the Sellers and the Corporate Seller Control
Persons, jointly and severally, hereby irrevocably guarantees (as primary
obligor and not merely as surety) to the Trust, each of the Trustees, each

34
<PAGE> 35

Underwriter, the directors, officers, employees and agents of each Underwriter,
and each person who controls the Trust or any Underwriter within the meaning of
the Act, the Exchange Act or other Federal or state statutory law or regulation,
at common law or otherwise (each of such persons, a "Beneficiary") (i) the
accuracy of the representations and warranties of the Company contained in
Section 2 hereof, (ii) the performance by the Company of the agreements
contained in Section 8 hereof and (iii) the performance by the Company of its
indemnification obligations contained in Sections 12(a) and 12(d) hereof and of
its obligation to pay expenses contained in Section 11 hereof.

(b) The obligations of Mark Hughes, the Mark Hughes Family Trust,
each Seller and each Corporate Seller Control Person under this Section 18 shall
be unconditional, irrespective of the validity or enforceability of any other
provision of this Agreement.

(c) The obligations of Mark Hughes, the Mark Hughes Family Trust,
each Seller and each Corporate Seller Control Person under this Section 18
constitute guarantees of performance and of payment, and not merely guarantees
of collection, and shall remain in full force and effect until all amounts
payable by the Company in respect of the matters (the "Guaranteed Matters") that
are the subject of the obligations of Mark Hughes, the Mark Hughes Family Trust,
each Seller and each Corporate Seller Control Person under this Section 18(a) of
this Agreement have been validly, finally and irrevocably paid in full, and
shall not be affected in any way by the absence of any action to obtain such
amounts from the Company or by any variation, extension, waiver, compromise or
release of any or all of the obligations of the Company hereunder or of any
security from time to time therefor. Each of Mark Hughes, the Mark Hughes Family
Trust, the Sellers and the Corporate Seller Control Persons hereby waives all
requirements as to promptness, diligence, presentment, demand for payment,
protest and notice of any kind with respect to his obligations under this
Section 18. Each of Mark Hughes, the Mark Hughes Family Trust, the Sellers and
the Corporate Seller Control Persons hereby agrees, jointly and severally, that
action may be taken directly against such person under this Section 18 without
any action being taken against the Company.

(d) The obligations of Mark Hughes, the Mark Hughes Family Trust,
each Seller and each Corporate Seller Control Person under this Section 18 shall
not be affected by any change in applicable laws, rules or regulations or by any
present or future action of any governmental authority or court amending,
varying, reducing or otherwise affecting or purporting to amend, vary, reduce or
otherwise affect any of the obligations of the Company under this Agreement or
by any other circumstance (other than by complete, irrevocable performance or
payment) that might otherwise constitute a legal or equitable discharge or
defense of a surety or a guarantor. If the Company merges or consolidates with
or into another entity, loses its separate legal identity or ceases to exist,
Mark Hughes, the Mark Hughes Family Trust, each Seller and each Corporate Seller
Control Person shall nonetheless continue to be liable for the payment of all
amounts that would have been payable by the Company in respect of the Guaranteed
Matters.

(e) The obligations of Mark Hughes, the Mark Hughes Family Trust,
each Seller and each Corporate Seller Control Person under this Section 18 shall
remain in full force and effect or shall be reinstated (as the case may be) if
at any time any payment of the Company in respect of the Guaranteed Matters, in
whole or in part, is rescinded or must otherwise be returned by a Beneficiary
upon the insolvency, bankruptcy or reorganization of the Company or otherwise,
all as though such payment had not been made.

35
<PAGE> 36

(f) If at any time when any amount payable by the Company in
respect of the Guaranteed Matters is overdue and unpaid Mark Hughes, the Mark
Hughes Family Trust, any Seller or any Corporate Seller Control Person receives
any amount as a result of any action against the Company or any of its property
or assets or otherwise for or on account of any payment made by Mark Hughes, the
Mark Hughes Family Trust, any Seller or any Corporate Seller Control Person
pursuant to this Section 18, Mark Hughes, the Mark Hughes Family Trust, such
Seller or such Corporate Seller Control Person, as the case may be, shall
forthwith pay such amount received by it to Smith Barney, on behalf of the
Beneficiaries, without demand, to be credited and applied toward any such amount
payable by the Company.

(g) Notwithstanding the foregoing, Mark Hughes, the Mark Hughes
Family Trust, each Seller and each Corporate Seller Control Person shall be
liable for any representation or warranty referred to in Section 18(a)(i) or for
any agreement referred to in Section 18(a)(ii) only if the circumstances
underlying the breach of representation or violation of the agreement are a
basis on which action is taken against any Beneficiary by a third party or are a
reason for a diminution in the value of any Shares or any DECS beneficially
owned by the Trust or an Underwriter, in each case, as principal (including for
this purpose any such Shares or DECS the Trust or such Underwriter, as the case
may be, may have sold following such diminution in value). Moreover, none of
Mark Hughes, the Mark Hughes Family Trust, the Sellers or the Corporate Seller
Control Persons shall have any such liability unless written notice of a
Beneficiary's claim under this Section 18(a) and this Section 18(g) is asserted
against Mark Hughes, the Mark Hughes Family Trust, any Seller or any Corporate
Seller Control Person, before the Company shall have made generally available to
its security holders and to the Representatives an earning statement or
statements of the Company and its subsidiaries which will satisfy the provisions
of Section 11(a) of the Act and Rule 148 under the Act.

(h) The indemnity, contribution and guarantee agreements set
forth in this Agreement, including the limitations on the liabilities of Mark
Hughes, the Mark Hughes Family Trust, each Seller and each Corporate Seller
Control Person set forth in paragraph (g) above, shall be in addition to any
liability which the Company, Mark Hughes, the Mark Hughes Family Trust, each
Seller or each Corporate Seller Control Person may otherwise have.

19. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 12 hereof,
and no other person will have any right or obligation hereunder. This Agreement
will be (A) binding on and legally enforceable against the estate of Mark Hughes
should he become deceased or the legal representative, attorney, or guardian of
Mark Hughes should he lack legal capacity and (B) binding on and legally
enforceable against the Mark Hughes Family Trust despite the death or legal
incapacity of any settlor or beneficiary of such trust.

20. Applicable Law. This agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

21. Counterparts. This Agreement may be executed by any one or
more of the parties in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same agreement.

36
<PAGE> 37

22. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.

23. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.

"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

"Business Day" shall mean any day other than a Saturday, a Sunday
or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in New York City.

"Commission" shall mean the Securities and Exchange Commission.

"Company Borrowings Prospectus" shall mean the prospectus
relating to the Borrowed Shares that is used in connection with the use
of Borrowed Shares and that is first filed pursuant to Rule 424(b) after
the Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of such final prospectus relating to the Borrowed
Shares included in the Company Registration Statement at the Company
Effective Date.

"Company DECS Prospectus" shall mean the prospectus relating to
the Shares that is used in connection with the offering and sale of the
DECS and that is first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, shall mean
the form of final prospectus relating to the Shares that is used in
connection with such offering and sale and that is included in the
Company Registration Statement at the Company Effective Date.

"Company Effective Date" shall mean each date and time that the
Company Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Company Registration Statement
became or become effective.

"Company Prospectus" shall mean the Company Borrowings Prospectus
and the Company DECS Prospectus.

"Company Registration Statement" shall mean the registration
statement referred to in Section 2(a) above including incorporated
documents, exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any post-effective
amendment thereto or any Rule 462(b) Company Registration Statement
becomes effective prior to the Closing Date, shall also mean such
registration statement as so amended or such Rule 462(b) Company
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Company
Effective Date as provided by Rule 430A.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

37
<PAGE> 38

"Execution Time" shall mean the date and time that this Agreement
is executed and delivered by the parties hereto.

"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission
promulgated thereunder.

"Organizational Documents" shall mean, in respect of any company,
corporation, partnership, limited liability company, governmental agency
or other enterprise, as applicable, its founding act, charter, articles
of incorporation and by-laws, memorandum and articles of association,
statute, certificate of partnership, partnership agreement, limited
liability company agreement, or similar instrument.

"Preliminary Company Prospectus" shall mean any preliminary
prospectus referred to in Section 2(a) and any preliminary prospectus
included in the Company Registration Statement at the Company Effective
Date that omits Rule 430A Information.

"Preliminary Trust Prospectus" shall mean any preliminary
prospectus referred to in Section 1(a) above and any preliminary
prospectus included in the Trust Registration Statement at the Trust
Effective Date that omits Rule 430A Information.

"Rule 415," "Rule 424," "Rule 430A," "Rule 462," "Rule 497(h)",
"Regulation S-K" and "Regulation S-X" refer to such rules and
regulations under the Act.

"Rule 430A Information" shall mean information with respect to
the DECS, the Shares and the offering thereof permitted to be omitted
from the Trust Registration Statement (or, as used in Section 2 above,
the Company Registration Statement) when it becomes effective pursuant
to Rule 430A.

"Rule 462(b) Company Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to Rule
462(b) relating to the offering covered by the initial registration
statement referred to in Section 2(a) above.

"Rule 462(b) Trust Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to Rule
462(b) relating to the offering covered by the initial registration
statement referred to in Section 1(a) above.

"Salomon Smith Barney" shall mean Smith Barney Inc. or Salomon
Brothers Inc, to the extent that either such party is a signatory to
this Agreement.

"Trust Effective Date" shall mean each date and time that the
Trust Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Trust Registration Statement became or
become effective.

"Trust Prospectus" shall mean the prospectus relating to the DECS
that is first filed pursuant to Rule 497(h) after the Execution Time or,
if no filing pursuant to Rule 497(h) is required, shall mean the form of
final prospectus relating to the DECS included in the Trust Registration
Statement at the Trust Effective Date.

38
<PAGE> 39

"Trust Registration Statement" shall mean the registration
statement referred to in paragraph 1(a) above, including exhibits and
financial statements, as amended at the Trust Execution Time (or, if not
effective at the Trust Execution Time, in the form in which it shall
become effective) and, in the event any post-effective amendment thereto
or any Rule 462(b) Trust Registration Statement becomes effective prior
to the Closing Date, shall also mean such registration statement as so
amended or such Rule 462(b) Trust Registration Statement, as the case
may be. Such term shall include any Rule 430A Information deemed to be
included therein at the Trust Effective Date as provided by Rule 430A.

As used herein, the terms "Trust Registration Statement,"
"Preliminary Trust Prospectus" and "Trust Prospectus" shall not include the
Company Prospectus attached thereto.

39
<PAGE> 40
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Trust, the Company, the Sellers, the Corporate Seller Control Persons, the Mark
Hughes Family Trust, Mark Hughes and the several Underwriters.

Very truly yours,

DECS Trust III

By: ____________________________
Name: Donald J. Puglisi
Title: Managing Trustee

Herbalife International, Inc.

By:_____________________________
Name: Mark Hughes
Title: Chairman of the Board, Chief
Executive Officer and President

Mark Hughes Family Trust

By:_____________________________
Name: Mark Hughes
Title: Trustee

Mark Hughes

By:_____________________________

Sellers

MH Holdings III N, LLC
By:_____________________________
Name:
Title:

MH Holdings III O, LLC
By:_____________________________
Name:
Title:

40
<PAGE> 41
MH Holdings III P, LLC
By:_____________________________
Name:
Title:

MH Holdings III Q, LLC

By:_____________________________
Name:
Title:

Corporate Seller

Control Persons

Mark Hughes Holdings I, LLC

By:_____________________________
Name:
Title:

Mark Hughes Holdings II, LLC

By:_____________________________
Name:
Title:

The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.

Smith Barney Inc.

By:___________________________
Name:
Title:

For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement

41
<PAGE> 42

SCHEDULE I

<TABLE>
<CAPTION>
NUMBER OF UNDERWRITTEN
DECS TO BE
UNDERWRITERS PURCHASED
- ------------ ---------
<S> <C>
Smith Barney Inc.

Prudential Securities Incorporated

---------
Total................................... 5,000,000
=========
</TABLE>

<PAGE> 43
SCHEDULE II

List of Sellers

<TABLE>
<CAPTION>
Underwritten Option Total
Seller Corporate Seller Control Person Shares Shares Shares
------ ------------------------------- ------------ ------ ------
<S> <C> <C> <C> <C>
MH Holdings III N MH Holdings I and MH Holdings II [ ] [ ] [ ]
MH Holdings III O MH Holdings I and MH Holdings II [ ] [ ] [ ]
MH Holdings III P MH Holdings I and MH Holdings II [ ] [ ] [ ]
MH Holdings III Q MH Holdings I and MH Holdings II [ ] [ ] [ ]

Total 5,000,000 [ ] [ ]
========= ===== ====
</TABLE>

2
<PAGE> 44
SCHEDULE III

List of Lenders

MH Holdings F
MH Holdings G

3
<PAGE> 45
[FORM OF LOCK-UP AGREEMENT] EXHIBIT A

[LETTERHEAD OF EXECUTIVE OFFICER OR DIRECTOR OF HERBALIFE INTERNATIONAL, INC.]

Corporation
Public Offering of Common Stock

,19

Smith Barney Inc.
Prudential Securities Incorporated
As Representatives of the several Underwriters,
[c/o Smith Barney Inc.]
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), among the Mark
Hughes Entities (as defined therein) Herbalife International, Inc., a Nevada
corporation (the "Company"), DECS Trust III (the "Trust"), a Delaware business
trust, and each of you as representatives of a group of Underwriters named
therein, relating to an underwritten public offering of DECS representing shares
of beneficial interest in the Trust.

In order to induce you and the other Underwriters to enter into
the Underwriting Agreement, the undersigned will not, without the prior written
consent of Smith Barney Inc., for a period of 90 days after the date of this
Agreement, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, or announce the offering of any shares of any class of common stock
of the Company or any securities convertible into or exercisable or exchangeable
for shares of any class of common stock of the Company (whether such shares or
any such securities are now owned or hereafter acquired) or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of any class of the common stock of the
Company, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of any class of common stock of the Company or such
other securities, in cash or otherwise, provided, however, that the Company
may issue, or grant options for, the common stock of the Company pursuant to any
stock plan for employees or directors, or any employee benefit plan, of the
Company in effect at the Execution Time, or pursuant to any stock options
outstanding at the Execution Time.

If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.

<PAGE> 46
Yours very truly,

[SIGNATURE OF EXECUTIVE OFFICER OR
DIRECTOR]

[NAME AND ADDRESS OF EXECUTIVE OFFICER
OR DIRECTOR]

<PAGE> 47
EXHIBIT B

Form of Opinion to Be Delivered by Counsel to Material Foreign Subsidiaries

1. The Company is validly existing as a corporation in good standing under
the laws of [insert Country in which the Subsidiary Operates] and has
corporate power to own its properties and conduct its business as
currently conducted.

2. The Company's authorized and issued equity capitalization is [ ], and
all the outstanding shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
nonassessable.

3. The business of the Company in [insert Country in which the Subsidiary
Operates], including without limitation the recruitment of distributors
and the distribution and marketing of the products listed on Annex A
hereto (the "Products"), which we have been advised by the Company are
all the products currently being distributed or marketed by the Company
in [insert the Country in which the Subsidiary operates], to the extent
conducted in accordance with the Company's multi-level marketing and
distribution plan (the "Marketing Plan"), (a) does not require the
consent, approval, authorization, filing, registration, qualification or
order of or with any court or governmental agency or body [except for
the (insert any requisite consent, approval, authorization, filing,
registration, qualification or order), which have been obtained or
supplied for________________] and (b) does not violate any statute, law,
rule or regulation of [insert the Country in which the Subsidiary
operates] or any political subdivision thereof, and does not breach or
violate any of the terms and provisions of or constitute a default
under, any judgment, decree or order, known to us, applicable to the
Company, of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or any of its properties.

4. Based on inquiry of appropriate officers of the Company, and on our past
and continuing representation of the Company, we know of no legal or
governmental proceedings pending to which the Company is a party, or
threatened against the Company, that could (a) have a material adverse
effect on the business or financial condition of the Company, (b) result
in the discontinuance or reformulation of any Product or (c) result in
any change to the Marketing Plan; provided that for this purpose we have
not regarded any legal or governmental proceedings to be "threatened"
unless the potential litigant or governmental authority has manifested
to the management of the Company or to us a present intention to
initiate such proceedings.

5. Based on inquiry of appropriate officers and independent auditors of the
Company, and on our past and continuing representation of the Company,
the Company has paid and discharged all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any property pertaining to it, and has filed all tax
returns required to be filed, in each case in a timely manner and prior
to the date on which penalties attach.

6. Based on inquiry of appropriate officers of the Company, and on our past
and continuing representation of the Company, we are not aware of any
liabilities of the Company (contingent or otherwise) that are required
to be reported but are not reported in the most recent audited financial
statements of the Company (insert year of most recent audited financial
statements) or the unaudited interim financial statements of the Company
dated (insert dates of all unaudited interim financial statements
subsequent to the most recent audited financial statements).

6
<PAGE> 48

We express no opinion other than as to the law of [insert Country in which the
Subsidiary operates].

<PAGE> 1
EXHIBIT 2(k)(1)

ADMINISTRATION AGREEMENT

This ADMINISTRATION AGREEMENT dated as of this [ ] day of
March 1998 by and between The Bank of New York, a New York banking corporation
(the "Administrator"), and DECS Trust III (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust"), a
statutory business trust organized under the Business Trust Act of the State of
Delaware pursuant to a Declaration of Trust dated as of January 23, 1998, as
amended and restated as of March [ ], 1998 (the "Trust Agreement").

WITNESSETH

WHEREAS the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold the forward
purchase contracts with one or more existing shareholders (the "Sellers") of
Herbalife International, Inc. (the "Company") (individually, a "Contract" and
collectively, the "Contracts") and to issue DECS in accordance with the terms
and conditions of the Trust Agreement;

WHEREAS the Trust desires to engage the services of the
Administrator to assume certain duties and responsibilities of the Trust under
the Trust Agreement and the Investment Company Act and to undertake certain
services on behalf of and subject to the supervision of the Trust as provided
herein; and

WHEREAS the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trust, on the terms and conditions
hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:

ARTICLE I
DEFINITIONS

1.1. Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.

ARTICLE II
ENGAGEMENT OF ADMINISTRATOR

2.1. Engagement. The Trust hereby engages the
Administrator, and the Administrator hereby agrees to be so engaged, to provide
or cause the provision of the services hereinafter enumerated.

<PAGE> 2

2.2. Services of Administrator. Subject to the
supervision of the Trust, the Administrator shall on behalf of the Trust take
the actions set forth in Sections 2.6, 2.7 and 2.8 of the Trust Agreement, to
the extent such responsibilities can lawfully be delegated to the
Administrator; provided, however, that the Administrator shall not (i) render
investment advisory services to the Trust as defined in the Investment Company
Act or the Investment Advisers Act of 1940; (ii) have the power of the Trustees
to sell the Treasury Securities except as provided in Section 2.8 of the Trust
Agreement; or (iii) have the power to select the independent public accountants
for the Trust. Additionally, the Administrator shall be responsible for
rendering the following services:

(a) instructing the Paying Agent on behalf of the Trust to
take the actions set forth in Sections 2.6, 2.7, 2.8 and 3.5 of the Trust
Agreement and to otherwise perform the duties of the Paying Agent referred to
in the Trust Agreement;

(b) with the approval of the Trustees, engaging legal and
other professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above;

(c) receiving all demands, bills and invoices for expenses
incurred by or on behalf of the Trust and pay the same, or cause the Paying
Agent to pay the same, out of moneys paid to the Administrator pursuant to the
Fund Expense Agreement dated the date hereof between Smith Barney Inc. and The
Bank of New York (the "Fund Expense Agreement") but in no event out of any
assets of the Trust, and give notice to Smith Barney Inc. pursuant to the Fund
Indemnity Agreement dated the date hereof between Smith Barney Inc. and the
Trust (the "Fund Indemnity Agreement") of any claim for Indemnification
Expenses (as defined in the Fund Indemnity Agreement) or any threatened claim
for Indemnification Expenses;

(d) (i) keeping or causing to be kept all the books and
records of the Trust (other than those to be kept by the Paying Agent), and
(ii) preparing and, as necessary, mailing, filing or publishing, or, as
appropriate, direct the Paying Agent or cause the legal and other professional
advisors engaged pursuant to Section 2.2(b) preparing and, as necessary, mail,
file or publish any and all notices, proxies, reports, tax returns and other
communications and documents as required under the Trust Agreement, the
Investment Company Act, the Securities Exchange Act of 1934, or the Code, or,
as reasonably requested by the Trustees, under any other applicable laws, rules
or regulations or otherwise; provided, however, that responsibility for the
adequacy and accuracy of any such reports, returns, etc. shall be that of the
Trustees and provided, further, that the Administrator shall have no liability
for the adequacy or accuracy of such reports, returns, etc.;

(e) at the request of the Trustees and upon being furnished
with such reasonable security and indemnity against any related expense or
liability as the Administrator may require, instituting and prosecuting, in
accordance with the instructions of the Trustees, legal or other appropriate
proceedings to enforce any and all rights and remedies of the Trust;

(f) receiving and reviewing on behalf of the Trust all
notices, reports, certificates and other documents regarding the Contracts and
the Treasury Securities;

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<PAGE> 3

(g) make or cause to be made all necessary arrangements with
respect to meetings of Trustees and meetings of Holders, including, without
limitation, the preparation of notices, proxies and minutes, subject to the
approval of the Trustees; and

(h) in conjunction with the Trustees, determining and
publishing, in such manner as the Trustees shall direct in writing, the Trust's
net asset value in accordance with Section 8.2(c) of the Trust Agreement and
the Trust's policy as set forth in the Prospectus.

2.3. Certain Rights of the Administrator. In connection
with the performance of its duties under this Agreement, the Administrator
shall not be liable to the Trust, the Trustees or any Holder (i) for any action
taken or for refraining from taking any action hereunder except in the case of
its willful misfeasance, bad faith, gross negligence or the reckless disregard
of its duties hereunder, (ii) with respect to any action taken or omitted to be
taken by it in good faith in accordance with the directions of the Trustees or
of any Trustee or (iii) in connection with the performance of its duties under
Section 2.2(h) hereof, for good faith reliance upon information furnished by
third parties selected by the Administrator with due care. The Administrator
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages. The Administrator may consult with counsel and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon. The Administrator may perform its
duties and exercise its rights hereunder either directly or by or through
agents or attorneys appointed with due care by it but shall be liable for the
acts and omissions of such persons to the same extent as if the functions had
been performed by the Administrator itself (except as to the extent that the
Trustees shall have directed the Administrator to retain such persons, in which
event the Administrator shall not be liable for such persons' acts or
omissions). Without limiting the generality of the preceding sentence, the
Administrator (i) may select and employ independent public accountants
acceptable to the Trustees (other than the independent public accountants
referred to in clause (iii) of Section 2.2 of this Agreement and Section 2.5(d)
of the Trust Agreement) to keep the financial books and records of the Trust,
to prepare the financial statements of the Trust and to prepare Trust tax
returns, and (ii) may select and engage attorneys acceptable to the Trustees to
prepare annual, semiannual and periodical reports, notices of meetings and
proxy statements, annual reports to Holders and other documents required under
the Investment Company Act or the Securities Exchange Act of 1934. The
Administrator shall not be liable and shall be fully protected in acting upon
any writing or document reasonably believed by it to be genuine and to have
been given, signed or made by the proper person or persons and shall not be
held to have any notice of any change of authority of any person until receipt
of written notice thereof from a Trustee.

2.4. Power of Attorney. The Trustees hereby appoint the
Administrator, acting through any duly appointed officer, the attorney-in-fact
and agent of the Trust for the purpose of performing the duties prescribed in
Sections 2.2(d)(ii) and 2.2(g) hereof.

2.5. Delivery of Certain Documents. The Trust will
deliver to the Administrator, promptly following the execution hereof: (a) a
complete conformed copy of the registration statement of the Trust under the
Securities Act and the Investment Company Act,

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<PAGE> 4

including all amendments, exhibits and schedules thereto; and (b) the EDGAR
access codes (Central Index Key, CIK Confirmation Code, Password and Password
Modification Access Code) employed to file such registration statement.

ARTICLE III
COMPENSATION OF ADMINISTRATOR

3.1. Compensation. (a) For services to be rendered by the
Administrator (i) pursuant to this Agreement, (ii) as custodian under the
Custodian Agreement, dated as of March [ ], 1998, between the Administrator,
as custodian, and the Trust, (iii) as paying agent under the Paying Agent
Agreement, dated as of March [ ], 1998, between the Administrator, as paying
agent, and the Trust, and (iv) as collateral agent under the Collateral
Agreements, dated as of March [ ], 1998, among the Administrator, as
collateral agent, each of the Sellers and the Trust, and for the payment of
Trust expenses pursuant to Section 2.2(c) hereof, the Administrator shall
receive only such fees and expenses as shall be paid to it pursuant to the
terms of the Fund Expense Agreement and shall have no recourse to the assets of
the Trust for the payment of any such amounts.

(b) In connection with the performance of the services
referred to in Section 3.1(a) hereof, the Administrator, as such or in any
other capacity, shall not be required to advance, expend or risk its own funds
or otherwise incur or become exposed to financial liability in the performance
of its duties hereunder or under the other agreements referred to in Section
3.1(a) hereof.

3.2. Additional Services. If and to the extent that the
Trustees shall request the Administrator to render services for the Trust,
other than those to be rendered by the Administrator hereunder, and if the
Administrator agrees to render such services, such additional services shall be
compensated separately on terms to be agreed upon between the Administrator and
the Trustees from time to time.

ARTICLE IV
TERMINATION

4.1. Termination.

(a) This Agreement shall terminate immediately upon written
notice of termination from the Trustees to the Administrator if any of the
following events shall occur:

(i) If the Administrator shall violate or default in the
performance of any provision of this Agreement, the Trust Agreement,
or the Investment Company Act, and after notice of such violation or
default, shall not cure such violation or default within 30 days; or

(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or

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<PAGE> 5

substantially all of its property by reason of the foregoing, or
approving any petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain in force
or unstayed for a period of 30 days; or

(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver
of the Administrator or of all or substantially all of its property,
or shall make a general assignment for the benefit of its creditors,
or shall admit in writing its inability to pay its debts generally as
they become due; or

(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.

If any of the events specified in clauses (ii), (iii) or (iv)
of this Section 4.1(a) shall occur, the Administrator shall give immediate
written notice thereof to the Trustees.

(b) Notwithstanding anything to the contrary contained
herein, this Agreement shall terminate immediately (i) upon termination of the
Trust Agreement, (ii) upon termination of the Paying Agent Agreement, (iii)
upon termination of all Collateral Agreements, (iv) upon termination of the
Custodian Agreement or (v) upon the resignation or removal of the Custodian.

(c) The Trustees may remove the Administrator, or the
Administrator may resign, and thereby terminate this Agreement without penalty
upon 60 days' prior written notice to the other party hereto; provided that
neither party hereto may terminate this Agreement pursuant to this Section
4.1(c) unless a successor Administrator shall have been appointed and shall
have accepted the duties of the Administrator. If, within 30 days after notice
by the Administrator to the Trustees of termination of this Agreement, no
successor Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.

4.2. Effect of Termination. The Administrator shall
forthwith upon termination of this Agreement deliver to the Trustees any
records or other property of the Trust then in the possession or custody of the
Administrator. Any obligation to indemnify the Administrator pursuant to
Section 6.6 hereof shall survive the termination of this Agreement.

ARTICLE V
RECORDS AND REPORTS

5.1. Books and Records; Inspection and Copying. The
Administrator shall keep, or cause to be kept, appropriate, and reasonably
detailed and accurate, books and records of all its activities pursuant to this
Agreement. The Trustees shall have the right to inspect such books and records
during the Administrator's normal business hours upon reasonable request, and
to make copies of the same at the expense of the Trust.

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<PAGE> 6

5.2. Access to Information. The Administrator shall make
available to each of the Trustees all information it receives and compiles with
respect to the Contracts and the Treasury Securities, the moneys available to
the Trust, the financial condition of the Trust and all other relevant matters
concerning the Trust.

ARTICLE VI
MISCELLANEOUS

6.1. Binding Effect. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided further that the Trustees have given their prior written
consent to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.

6.2. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written.
This Agreement shall not be amended, changed, modified, or discharged, in whole
or in part, except by an instrument in writing signed by both parties hereto,
or their respective successors or permitted assigns.

6.3. Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication
is accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S. first
class mail, certified or registered, return receipt requested, postage prepaid,
to the following addresses of the parties hereto:

The Trust: DECS Trust III
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19716
Telephone: 302-738-6680
Telecopier: 302-738-7210

The Administrator: The Bank of New York
101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Mark G. Walsh
Telephone: 212-816-5228
Telecopier: 212-816-7157

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<PAGE> 7

Any party may at any time give written notice to the other
party that it wishes to change its address for the purposes of this Section
6.3.

6.4. Applicable Law. The provisions of this Agreement
shall be construed and interpreted in accordance with the laws of the State of
New York as at the time in effect except to the extent such law is preempted by
federal law.

6.5. Non-assignability. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.

6.6. Indemnification. The Trust shall indemnify and hold
the Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of
any inaccuracy in information furnished to the Administrator by the Trustees,
or any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.

6.7. Provisions of Law to Control. This Agreement shall
be subject to the applicable provisions of the Investment Company Act and the
rules and regulations of the Commission thereunder. To the extent that any
provisions herein contained conflict with any applicable provisions of the
Investment Company Act or such rules and regulations, the latter shall control.

6.8. Counterparts. This Agreement may be signed in
counterparts with all counterparts constituting one and the same instrument.

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<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto executed this Administration
Agreement as of the day and year first above written.

DECS TRUST III

___________________________________
Donald J. Puglisi
as Managing Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19716

THE BANK OF NEW YORK

By:________________________________
Name: Mark G. Walsh
Title: Assistant Vice president

<PAGE> 1
EXHIBIT 2(k)(2)

PAYING AGENT AGREEMENT

This PAYING AGENT AGREEMENT dated as of this [ ] day of March
1998 by and between The Bank of New York, a New York banking corporation (the
"Paying Agent"), and DECS Trust III (such trust and the trustees thereof acting
in their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of January 22, 1998, as amended and
restated as of March [ ], 1998 (the "Trust Agreement").

WITNESSETH

WHEREAS the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold the U.S. treasury
securities (the "Treasury Securities"), to enter into and hold forward purchase
contracts with one or more existing shareholders of Herbalife International,
Inc. (individually, a "Contract" and collectively, the "Contracts") and to
issue DECS to the public in accordance with the terms and conditions of the
Trust Agreement;

WHEREAS the Trustees desire to engage the services of the
Paying Agent to assume certain responsibilities and to perform certain duties
as the transfer agent, registrar and paying agent with respect to the DECS upon
the terms and conditions of this Agreement; and

WHEREAS the Paying Agent is qualified and willing to assume
such responsibilities and to perform such duties, subject to the supervision of
the Trustees, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.

ARTICLE II
PAYING AGENT

2.1 Appointment of Paying Agent and Acceptance. The
Trust Agreement provides that The Bank of New York shall act as the initial
Paying Agent. The Bank of New York hereby accepts such appointment and agrees
to act in accordance with its standard procedures and the provisions of the
Trust Agreement and the provisions set forth in this Article II as Paying Agent
with respect to the DECS. Without limiting the generality of the foregoing,
The Bank of New York, as Paying Agent, agrees that it shall establish and
maintain the Trust Account, subject to the provisions of Section 2.3 hereof.

<PAGE> 2

2.2 Certificates and Notices. The Trustees shall deliver
to the Paying Agent the certificates and notices required to be delivered to
the Paying Agent pursuant to the Trust Agreement, and the Paying Agent shall
mail or publish such certificates or notices as required by the Trust
Agreement, but the Paying Agent shall have no responsibility to confirm or
verify the accuracy of certificates or notices of the Trustees so delivered.

2.3 Payments and Investments. The Paying Agent shall
make payments out of the Trust Account as provided in Section 3.3 of the Trust
Agreement. The Paying Agent on behalf of the Trust shall effect the
transactions set forth in Sections 2.6, 2.7, 2.8, 3.5 and 8.3 of the Trust
Agreement upon instructions to do so from the Administrator (except that with
respect to its obligations under Section 8.3 of the Trust Agreement, the Paying
Agent shall act without instructions from the Administrator) and shall invest
moneys on deposit in the Trust Account in the Temporary Investments in
accordance with Section 3.5 of the Trust Agreement. Except as otherwise
specifically provided herein or in the Trust Agreement, the Paying Agent shall
not have the power to sell, transfer or otherwise dispose of any Temporary
Investment prior to the maturity thereof, or to acquire additional Temporary
Investments. The Paying Agent shall hold any Temporary Investments to its
maturity and shall apply the proceeds thereof paid upon maturity to the payment
of the next succeeding Quarterly Distribution. All such Temporary Investments
shall be selected by the Trustees from time to time or pursuant to standing
instructions from the Trustees, and the Paying Agent shall have no liability to
the Trust or any Holder or any other Person with respect to any such Temporary
Investment.

2.4 Instructions from Administrator. The Paying Agent
shall execute all instructions received from an officer of the Administrator,
except to the extent that they conflict with or are contrary to the terms of
the Trust Agreement or this Agreement.

ARTICLE III
TRANSFER AGENT AND REGISTRAR

3.1 Original Issue of Certificates. On the date DECS
sold pursuant to the Underwriting Agreement are originally issued, certificates
for such DECS shall be issued by the Trust, and, at the request of the
Trustees, registered in such names and such denominations as the Underwriters
shall have previously requested of the Trustees, executed manually or in
facsimile by the Managing Trustee and countersigned by the Paying Agent. At no
time shall the aggregate number of DECS represented by such countersigned
certificates exceed the number of then outstanding DECS except as permitted by
Section 3.4 hereof.

3.2 Registry of Holders. The Paying Agent shall maintain
a registry of the Holders of the DECS.

3.3 Registration of Transfer of DECS. DECS shall be
registered for transfer or exchange, and new certificates shall be issued, in
the name of the designated transferee or transferees, upon surrender of the old
certificates in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the
Paying Agent to be responsible, (b) such assurances as the Paying Agent shall
deem necessary or appropriate to

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<PAGE> 3

evidence the genuineness and effectiveness of each necessary endorsement and
(c) satisfactory evidence of compliance with all applicable laws relating to
the collection of taxes or funds necessary for the payment of such taxes.

3.4 Lost Certificates. If there shall be delivered to
the Paying Agent (a) evidence to its satisfaction of the destruction, loss or
theft of any certificate for DECS and (b) such security or indemnity as may be
required by it to hold it and any of its agents harmless, then, in the absence
of notice to the Paying Agent that such certificate has been acquired by a bona
fide purchaser, the Managing Trustee shall execute and upon its request the
Paying Agent shall countersign and deliver, in lieu of any such destroyed, lost
or stolen certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the
Paying Agent to issue a replacement or new certificate pursuant to this Section
3.4 shall be deemed to be a representation and warranty by the Trust to the
Paying Agent that such issuance will comply with provisions of law, the Trust
Agreement and the resolutions adopted by the Trustees with respect to lost
securities. If, after the delivery of such new certificate, a bona fide
purchaser of the original certificate in lieu of which such new certificate was
issued presents for payment such original certificate, the Trust and the Paying
Agent shall be entitled to recover such new certificate from the person to whom
it was delivered or any transferee thereof, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor
to the extent of any loss, damage, cost or expense incurred by the Trust or the
Paying Agent in connection therewith. Upon the issuance of any new certificate
under this Section 3.4, the Trust and the Paying Agent may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Paying Agent) connected therewith.

3.5 Transfer Books. The Paying Agent shall maintain the
transfer books listing the Holders of the DECS. In case of any written request
or demand for the inspection of the transfer books of the Trust or any other
books in the possession of the Paying Agent, the Paying Agent will notify the
Trustees and secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the transfer books or
other books to any person in case it is advised by its counsel that its failure
to do so would be unlawful.

3.6 Disposition of Canceled Certificates, Records. The
Paying Agent shall retain certificates which have been canceled in transfer or
in exchange and accompanying documentation in accordance with applicable rules
and regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the Federal Reserve System. Thereafter such records shall not be destroyed by
the Paying Agent but will be safely stored for possible future reference. In
case of any request or demand for the inspection of the register of the Trust
or any other books in the possession of the Paying Agent, the Paying Agent will
notify the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful, or

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<PAGE> 4

(ii) expose it to liability, unless the Trustees shall have offered
indemnification satisfactory to the Paying Agent.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE TRUST

The Trust represents and warrants to the Paying Agent that:

(a) the Trust is a validly existing trust under the laws
of the State of Delaware and the Trustees have full
power under the Trust Agreement to execute and
deliver this Agreement and to authorize, create and
issue the DECS;

(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes
the valid and binding agreement of the Trust,
enforceable against the Trust in accordance with its
terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting
creditors' rights and to general equitable
principles;

(c) the form of the certificate evidencing the DECS
complies with all applicable laws of the State of
Delaware and the State of New York;

(d) the DECS have been duly and validly authorized,
executed and delivered by the Trust and are validly
issued;

(e) the DECS have been registered under the Securities
Act of 1933, the Trust has been registered under the
Investment Company Act, and no further action by or
before any governmental body or authority of the
United States or of any state thereof is required in
connection with the execution and delivery of this
Agreement or the issuance of the DECS;

(f) the execution and delivery of this Agreement and the
issuance and delivery of the DECS do not and will not
conflict with, violate, or result in a breach of, the
terms, conditions or provisions of, or constitute a
default under, the Trust Agreement, any law or
regulation, any order or decree of any court or
public authority having jurisdiction over the Trust,
or any mortgage, indenture, contract, agreement or
undertaking to which the Trust is a party or by which
it is bound; and

(g) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the
DECS.

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<PAGE> 5

ARTICLE V
DUTIES AND RIGHTS

5.1 Duties.

(a) The Paying Agent is acting solely as agent for the
Trust hereunder and owes no fiduciary duties to any
other Person by reason of this Agreement.

(b) In the absence of bad faith, gross negligence or
willful misfeasance on its part in the performance of
its duties hereunder or its reckless disregard of its
duties and obligations hereunder, the Paying Agent
shall not be liable for any action taken, suffered,
or omitted in the performance of its duties under
this Agreement or in accordance with any direction or
request of the Managing Trustee not inconsistent with
the provisions of this Agreement. The Paying Agent
shall under no circumstances be liable for any
punitive, exemplary, indirect or consequential
damages hereunder.

5.2. Rights.

(a) The Paying Agent may rely and shall be protected in
acting or refraining from acting upon any
communication authorized hereby and upon any written
instruction, notice, request, direction, consent,
report, certificate, share certificate or other
instrument, paper or document reasonably believed by
it to be genuine. The Paying Agent shall not be
liable for acting upon any telephone communication
authorized hereby which the Paying Agent believes in
good faith to have been given by the Trustees.

(b) The Paying Agent may consult with legal counsel and
the advice of such counsel shall be full and complete
authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.

(c) The Paying Agent may perform its duties and exercise
its rights hereunder either directly or by or through
agents or attorneys appointed with due care by it
hereunder.

5.3 Disclaimer. The Paying Agent makes no
representations as to (a) the first two recitals of this Agreement or (b) the
validity or adequacy of the DECS.

5.4 Compensation, Expenses and Indemnification.

(a) The Paying Agent shall receive for all services
rendered by it under this Agreement and, upon the
prior written approval of the Trustees, for all
expenses, disbursements and advances incurred or made
by the Paying Agent in accordance with any provision
of this Agreement (including the reasonable

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compensation and the expenses and disbursements of
its agents and counsel), the compensation set forth
in Section 3.1 of the Administration Agreement.

(b) The Trust shall indemnify the Paying Agent for and
hold it harmless against any loss, liability, claim
or expense (including the costs of investigation,
preparation for and defense of legal and/or
administrative proceedings relating to a claim
against it and reasonable attorneys' fees and
disbursements) arising out of or in connection with
the performance of its obligations under this
Agreement, provided such loss, liability or expense
is not the result of gross negligence, willful
misfeasance or bad faith on its part in the
performance of its duties hereunder or its reckless
disregard of its duties or obligations hereunder,
including the costs and expenses of defending itself
against any claim or liability in connection with its
exercise or performance of any of its duties or
obligations hereunder and thereunder. The
indemnification provided by this Section 5.4(b) shall
survive the termination of this Agreement.

ARTICLE VI
MISCELLANEOUS

6.1 Term of Agreement.

(a) The term of this Agreement is unlimited unless
terminated as provided in this Section 6.1 or unless
the Trust is terminated, in which case this Agreement
shall terminate ten days after the date of
termination of the Trust. This Agreement may be
terminated by either party hereto without penalty
upon 60 days' prior written notice to the other party
hereto; provided that neither party hereto may
terminate this Agreement pursuant to this Section
6.1(a) unless a successor Paying Agent shall have
been appointed and shall have accepted the duties of
the Paying Agent. The termination of the
Administration Agreement or the resignation or
removal of the Custodian shall cause the termination
of this Agreement simultaneously therewith. If,
within 30 days after notice by the Paying Agent of
termination of this Agreement, no successor Paying
Agent shall have been selected and accepted the
duties of the Paying Agent, the Paying Agent may
apply to a court of competent jurisdiction for the
appointment of a successor Paying Agent.

(b) Except as otherwise provided in this paragraph (b),
the respective rights and duties of the Trust and the
Paying Agent under this Agreement shall cease upon
termination of this Agreement. The Trust's
representations, warranties, covenants and
obligations to the Paying Agent under Sections 4 and
5.4 hereof shall survive the termination hereof.
Upon termination of the Agreement, the Paying Agent
shall, at the Trust's request, promptly deliver to
the Trust or to any successor Paying Agent as
requested by the Trust (i) copies of all books and
records maintained by it and (ii) any funds deposited
with the Paying Agent by the Trust.

<PAGE> 7

6.2 Communications. Except for communications authorized
to be made by telephone pursuant to this Agreement, all notices, requests and
other communications to any party hereunder shall be in writing (including
telecopy or similar writing) and given to such person at its address or
telecopy number set forth below:

If to the Trust, DECS Trust III
addressed: c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19716
Telephone: 302-738-6680
Telecopier: 302-738-7210

with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.

If to the Paying Agent, The Bank of New York
addressed: 101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Mark G. Walsh
Telephone: 212-815-5228
Telecopier: 212-815-7183

or such other address or telecopy number as such party may hereafter specify
for such purposes by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Trust by the Trustees
(or by the Administrator, provided that the Trust shall not have delivered to
the Paying Agent an instrument in writing revoking the authorization of the
Administrator to act for it pursuant hereto) and on behalf of the Paying Agent
by a Senior Vice President or Vice President of the Paying Agent assigned to
its Corporate Trust Department.

6.3 Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.

6.4 No Third Party Beneficiaries. Nothing herein,
express or implied, shall give to any Person, other than the Trustees, the
Paying Agent and their respective successors and assigns, any benefit of any
legal or equitable right, remedy or claim hereunder.

6.5 Amendment; Waiver.

(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in
whole or in part, except by a written instrument
signed by a duly authorized representative of the
party to be charged. The Trust shall notify the
Paying Agent of any change in the Trust Agreement
prior to the effective date of any such change.

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<PAGE> 8

(b) Failure of either party hereto to exercise any right
or remedy hereunder in the event of a breach hereof
by the other party shall not constitute a waiver of
any such right or remedy with respect to any
subsequent breach.

6.6 Successors and Assigns. Any corporation into which
the Paying Agent may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Paying Agent shall be a party, shall be the
successor Paying Agent under the Trust Agreement without the execution or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, provided that such corporation meets the requirements set forth
in the Trust Agreement and provided further that the Trust has given its prior
written consent to the Paying Agent with respect to any such merger,
conversion or consolidation. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors of each of the
Trust and the Paying Agent. This Agreement shall not be assignable by either
the Trust or the Paying Agent without the prior written consent of the other
party.

6.7 Severability. If any clause, provision or section
hereof shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any of the remaining clauses, provisions or sections
hereof.

6.8 Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.

6.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.

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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.

DECS TRUST III

___________________________________
Donald J. Puglisi
as Managing Trustee

THE BANK OF NEW YORK

By:________________________________
Name: Mark G. Walsh
Title: Assistant Vice President

<PAGE> 1
EXHIBIT 1.2

FORWARD PURCHASE AGREEMENT*

THIS AGREEMENT is made as of this [ ] day of March, 1998 among
[Selling Shareholder], a limited liability company organized under the laws of
the State of Delaware ("Seller" and, together with the Other Sellers (as defined
below), "Sellers"), each of the Corporate Seller Control Persons (as defined
below), each a limited liability company organized under the laws of the State
of Delaware, the Mark Hughes Family Trust, originally established on September
3, 1987, as amended and restated on December 31, 1996, and further amended on
September 17, 1997 and as further amended on March 22, 1998 (collectively the
"Mark Hughes Family Trust"), Mark Hughes (each of Seller, the Corporate Seller
Control Persons, the Mark Hughes Family Trust and Mark Hughes, a "Mark Hughes
Entity", and collectively, the "Mark Hughes Entities") and DECS Trust III, a
business trust organized under the laws of the State of Delaware under and by
virtue of an amended and restated declaration of trust, dated as of March [ ],
1998 (the "Declaration of Trust") (such trust and the trustees thereof acting in
their capacity as such being referred to herein as "Purchaser").

WHEREAS, Seller owns shares of Class B Common Stock, $.01 par
value (the "Common Stock"), of Herbalife International, Inc., a Nevada
corporation (including its successors, the "Company");

WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
5,750,000 DECS (the "DECS"), the terms of which contemplate delivery by
Purchaser to the holders thereof of a number of shares of Common Stock (or, if
some or all of the Sellers exercise their cash settlement option, cash in lieu
of part or all thereof), on [ ] [ ], 2001 (the "Exchange Date");

WHEREAS, in exchange for certain consideration to be paid by
Purchaser hereunder and under other similar agreements, Purchaser and Seller
desire to provide for the future acquisition, sale and delivery of the aggregate
number of shares of Common Stock contemplated to be delivered by Purchaser in
respect of the DECS on the Exchange Date, at a price to be established under
this Agreement and such other agreements;

WHEREAS, Seller has agreed, pursuant to the Collateral Agreement
(the "Collateral Agreement") dated as of March [ ], 1998, among Purchaser,
Seller, each of the Corporate Seller Control Persons, the Mark Hughes Family
Trust, Mark Hughes and The Bank of New York, as collateral agent (the
"Collateral Agent"), to grant Purchaser a security interest in the shares of
Common Stock specified therein and in certain other circumstances certain other
collateral to secure the obligations of Seller hereunder;

WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated March [ ], 1998 (the "Underwriting Agreement"), among
Purchaser, Seller, the other persons and entities named as "Sellers" therein
(collectively, the "Other Sellers"), each of the Corporate

- --------
* This is a form of Forward Purchase Agreement. A substantially identical
agreement will be entered into by each Seller.

<PAGE> 2

Seller Control Persons, the Mark Hughes Family Trust, Mark Hughes, the Company
and Smith Barney Inc. and Prudential Securities Incorporated (each an
"Underwriter", and collectively, the "Underwriters"), to issue and sell to the
Underwriters an aggregate of [ ] DECS (the "Initial DECS") and, at the
Underwriters' option, up to [ ] additional DECS (the "Additional DECS") to cover
over-allotments, if any;

WHEREAS, MH Holdings I and MH Holdings II (each a "Corporate
Seller Control Person", and collectively, the "Corporate Seller Control
Persons") hold 99% and 1%, respectively, of the limited liability company
interests of each of the Sellers;

WHEREAS, the Mark Hughes Family Trust holds 99% of the limited
liability company interests of each of the Corporate Seller Control Persons;

WHEREAS, the Mark Hughes Family Trust is solely controlled by
Mark Hughes;

NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:

DEFINITIONS

As used herein, the following words and phrases shall have the
following meanings:

"Acceleration Date" has the meaning provided in Article VII.

"Acceleration Value" has the meaning provided in Article VII.

"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.

"Additional DECS" has the meaning provided in the recitals of
this Agreement.

"Additional Purchase Price" has the meaning provided in Section
1.2(b).

"Additional Share Base Amount" means a number equal to the number
of Additional DECS that the Underwriters elect to Purchase under the
Underwriting Agreement.

"Additional Shares" has the meaning provided in Section 1.1(b).

"Additional STRIPS" means the U.S. Treasury obligations purchased
by Purchaser for settlement on the Option Closing Date.

"Adjustment Event" has the meaning provided in Section 6.2.

"Administrator" means The Bank of New York, administrator for
Purchaser under the Administration Agreement dated as of March [ ], 1998, or any
successor thereto.

<PAGE> 3

"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a partner in, or a trustee, settlor, beneficiary, member,
manager, director or officer of, such Person and, with respect to any Person
that is a natural person, further includes such Person's immediate family
members, including his father, mother, spouse and children, the spouses of his
children, his siblings and their spouses and children. For purposes of this
definition, "control" (including the terms "controlled by" or "under common
control with") means, as to any Person, the possession, direct or indirect, of
the power to vote ten percent or more of the limited liability company interests
of such Person (or of the securities having ordinary voting power for the
election of directors of such Person), or the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or by contract or otherwise.

"Associate" when used to indicate a relationship with any Person
means (i) a limited liability company, corporation or organization of which such
Person is an officer, director, member, manager or partner or is, directly or
indirectly, the beneficial owner of ten percent or more of any class of equity
securities or limited liability company interests, as the case may be, (ii) any
trust or other estate in which such Person serves as trustee or in a similar
capacity, and (iii) any relative or spouse of such Person or any relative of
such spouse.

"Bankruptcy Code" has the meaning provided in Section 10.7.

"Business Day" means any day that is not a Saturday, a Sunday or
a day on which the NYSE or banking institutions or trust companies in The City
of New York are authorized or obligated by law or executive order to close.

"Calculation Period" means any period of Trading Days for which
an average security price must be determined pursuant to this Agreement.

"Cash Delivery Option" has the meaning provided in Section
1.3(d).

"Closing Price" means, for any security on any date of
determination, (i) the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security (regular way) on the NYSE on such
date, (ii) if such security is not listed for trading on the NYSE on any such
date, as listed in the composite transactions for the principal United States
national securities exchange on which such security is so listed, (iii) if such
security is not so listed on a United States national securities exchange, as
reported by The Nasdaq Stock Market, (iv) if such security is not so reported,
as reported in the composite transactions for the principal United States
regional securities exchange on which such security is so listed, (v) if such
security is not so listed on a United States regional security exchange, the
last quoted bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar organization or (vi) if
such security is not so quoted, the average of the mid-point of the last bid and
ask prices for such security from at least three nationally recognized
investment banking firms selected by the Administrator for such purpose. The
Closing Price as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section 6.1(c).

3
<PAGE> 4

"Collateral" has the meaning provided in the Collateral
Agreement.

"Collateral Agent" has the meaning provided in the recitals of
this Agreement.

"Collateral Agreement" has the meaning provided in the recitals
of this Agreement.

"Commission" means the Securities and Exchange Commission.

"Common Stock" has the meaning provided in the recitals of this
Agreement.

"Company" has the meaning provided in the recitals of this
Agreement.

"Contract Shares" has the meaning provided in Section 1.1.

"Corporate Seller Control Person" and "Corporate Seller Control
Persons" have the meaning provided in the recitals of this Agreement.

"Custodian" means The Bank of New York, custodian for Purchaser
under the Custodian Agreement dated as of March [ ], 1998, or any successor
thereto.

"Declaration of Trust" has the meaning provided in the
introductory paragraph of this Agreement.

"DECS" has the meaning provided in the recitals of this
Agreement.

"Dilution Adjustment" means any fraction or number by which the
Exchange Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which
Closing Prices may be divided pursuant to Section 6.1(c).

"Event of Default" has the meaning provided in Article VII.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

"Exchange Date" has the meaning provided in the recitals of this
Agreement.

"Exchange Price" means the average Closing Price per share of
Common Stock on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Common Stock occurring later than the 60th calendar day immediately prior to,
but not including, the Exchange Date, Exchange Price shall mean the market value
per share of the Common Stock as of the Exchange Date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator. The Exchange Price as determined pursuant to the
foregoing shall be subject to adjustment in certain circumstances as provided in
Section 6.1(c).

"Exchange Rate" has the meaning provided in Section 1.1(c).

4
<PAGE> 5

"Firm Payment Date" has the meaning provided in Section 1.3(a).

"Firm Purchase Price" has the meaning provided in Section 1.2(a).

"Firm Share Base Amount" has the meaning provided in Section
1.1(a).

"Firm Shares" has the meaning provided in Section 1.1(a).

"Forward Purchase Contract Characterization" has the meaning
provided in Section 5.2(a).

"Independent Dealers" has the meaning provided in Article VII.

"Initial DECS" has the meaning provided in the recitals of this
Agreement.

"Initial Price" has the meaning provided in Section 1.1(c).

"Mark Hughes Entity" and "Mark Hughes Entities" mean each of the
Sellers, the Corporate Seller Control Persons, the Mark Hughes Family Trust,
Mark Hughes and any successor entity pursuant to Section 5.6(b) hereof.

"Mark Hughes Family Trust" has the meaning provided in the
introductory paragraph of this Agreement.

"Market Price" means, as of any date of determination, the
average Closing Price per share of Common Stock on the 20 Trading Days
immediately prior to (but not including) the date of determination; provided,
however, that if there are not 20 Trading Days for the Common Stock occurring
later than the 60th calendar day immediately prior to, but not including, such
date, the Market Price shall mean the market value per share of Common Stock as
of such date as determined by a nationally recognized investment banking firm
retained for such purpose by the Administrator.

"NYSE" means the New York Stock Exchange Inc.

"Officer" shall mean the manager, trustee, president, any vice
president, the chief financial officer, the treasurer or the secretary of a
Person.

"Officer's Certificate" means a certificate signed by an Officer
of a Person.

"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trust.

"Option Closing Date" means the settlement dates for the
Additional DECS under Section 5 of the Underwriting Agreement.

"Ordinary Cash Dividend" means, with respect to any consecutive
365-day period, any dividend with respect to Common Stock paid in cash to the
extent that the amount of

5
<PAGE> 6

such dividend, together with the aggregate amount of all other dividends on the
Common Stock paid in cash during such 365-day period, does not exceed on a per
share basis 10% of the average of the Closing Prices of the Common Stock over
such 365-day period; provided that, for purposes of the foregoing definition,
the amount of cash dividends paid on a per share basis shall be appropriately
adjusted to reflect the occurrence during such period of any event described in
Article VI.

"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or any
political subdivision or agency thereof.

"Purchaser" has the meaning provided in the introductory
paragraph of this Agreement.

"Reimbursement Agreement" means the reimbursement agreement,
dated as of March _____, 1998 among Smith Barney Inc., the Sellers and certain
other Persons named therein.

"Reported Securities" has the meaning provided in Section 6.2.

"Seller" and "Sellers" have the meaning provided in the
introductory paragraph of this Agreement.

"Threshold Appreciation Price" has the meaning provided in
Section 1.1(c).

"Trading Day" means, with respect to any security the Closing
Price of which is being determined, a day on which such security (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.

"Transaction Value" has the meaning provided in Section 6.2.

"Underwriter" and "Underwriters" have the meaning provided in the
recitals of this Agreement.

"Underwriting Agreement" has the meaning provided in the recitals
of this Agreement.

6
<PAGE> 7

ARTICLE I

SALE AND PURCHASE

1.1 Sale and Purchase.

(a) Firm Shares. Upon the terms and subject to the conditions of
this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase and acquire from Seller, the number of shares of Common Stock (the
"Firm Shares") equal to the product of ____________ (the "Firm Share Base
Amount") and the Exchange Rate.

(b) Additional Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase and acquire from Seller, a number of additional shares of
Common Stock (the "Additional Shares") equal to the product of the Additional
Share Base Amount and the Exchange Rate. In addition to the other conditions set
forth herein, such purchase and sale shall be conditioned on the Underwriters'
purchase of the Additional Share Base Amount of Additional DECS pursuant to the
Underwriting Agreement on the Option Closing Date. Promptly after receipt by
Purchaser of notice that the Underwriters are exercising their option to
purchase Additional DECS, Purchaser will provide Seller with written notice of
such exercise by the Underwriters, stating the related Additional Share Base
Amount and the date on which Purchaser shall deliver the purchase price for the
Additional Shares, which shall be the Option Closing Date for the Additional
DECS. The Firm Shares and the Additional Shares (if any) are collectively
referred to herein as the "Contract Shares."

(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Exchange Price is greater
than $[ ] (the "Threshold Appreciation Price"), [ ], (ii) if the Exchange Price
is less than or equal to the Threshold Appreciation Price but greater than [$ ]
(the "Initial Price"), a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next higher
1/10,000th) equal to the Initial Price divided by the Exchange Price and (iii)
if the Exchange Price is less than or equal to the Initial Price, 1.

1.2 Purchase Price.

(a) Firm Purchase Price. The purchase price for the Firm Shares
(the "Firm Purchase Price") shall be $[Y x Firm Share Base Amount] in cash.

(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal to
(i) the difference between (1) the aggregate proceeds to Purchaser from the sale
of the Additional DECS and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller on the Option Closing Date for the Additional DECS, of the
Additional STRIPS, multiplied by (ii) a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Initial
DECS purchased by the Underwriters under the Underwriting Agreement.

7
<PAGE> 8

1.3 Payment for and Delivery of Contract Shares.

(a) Firm Payment Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Firm
Purchase Price on March [ ], 1998 (the "Firm Payment Date") at the offices of
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006,
or at such other place as shall be agreed upon by Purchaser and Seller, paid by
wire transfer of Federal (immediately available same-day) funds to an account
designated by Seller, against delivery by Seller to the Collateral Agent of the
number of shares of Common Stock and/or cash, securities and other property
necessary to comply with Seller's obligations under the Collateral Agreement.

(b) Option Closing Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price on the Option Closing Date at the offices of Cleary, Gottlieb,
Steen & Hamilton, New York, New York 10006, or at such other place as shall be
agreed upon by Purchaser and Seller, paid by wire transfer of Federal
(immediately available same-day) funds to an account designated by Seller,
against delivery by Seller to the Collateral Agent of the additional number of
shares of Common Stock and/or cash, securities and other property necessary to
comply with Seller's obligations under the Collateral Agreement.

(i) Seller agrees to deliver the Contract Shares to Purchaser on
the Exchange Date. Seller shall be deemed to have instructed the
Collateral Agent to deliver to the Custodian, for the account of
Purchaser, shares of Common Stock then held by the Collateral Agent as
collateral under the Collateral Agreement, in an amount equal to the
number of Contract Shares, rounded down to the nearest whole number.
Instead of any fractional shares of Common Stock that would otherwise be
deliverable (prior to rounding) to Purchaser at the Exchange Date,
Seller agrees to make a cash payment in respect of such fractional
shares of Common Stock in an amount equal to the value thereof at the
Exchange Price. Notwithstanding the foregoing, if an Adjustment Event
shall have occurred prior to the Exchange Date then, in lieu of the
foregoing, Seller shall be deemed to have instructed: (A) in the case of
any cash required to be delivered on the Exchange Date as provided in
Section 6.2, the Collateral Agent to wire transfer Federal (immediately
available) funds to an account designated by Purchaser; and (B) in the
case of any Reported Securities required to be delivered by Seller in
lieu of cash as provided in Section 6.2, the Collateral Agent to deliver
to the Custodian, for the account of Purchaser, a specified number of
Reported Securities then held as collateral under the Collateral
Agreement, as provided in Section 6(g) of the Collateral Agreement.

(ii) In the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Common Stock (and/or,
after an Adjustment Event, cash or Reported Securities) sufficient to
meet Seller's obligations hereunder, delivery shall be effected by
delivery by the Collateral Agent to the Custodian, for the account of
Purchaser, of the market value of the shares of Common Stock required to
be delivered

8
<PAGE> 9

hereunder, in the form of any shares of Common Stock then pledged by
Seller plus cash generated from the liquidation of U.S. Government
obligations then pledged by Seller (and/or, after an Adjustment Event,
the market value of the alternative consideration required to be
delivered hereunder, in the form of any Reported Securities then
pledged, plus any cash then pledged, plus cash generated from the
liquidation of U.S. Government obligations then pledged). In such event,
Seller shall be deemed to have instructed the Collateral Agent to
liquidate and turn into cash the U.S. Government obligations then
pledged by Seller to the extent necessary to satisfy Seller's
obligations hereunder.

(iii) Certificates representing Common Stock (or Reported
Securities) in registered form that are part of the Contract Shares
shall be registered in Purchaser's name or in the name of a depositary
or a nominee of a depositary as requested by Purchaser, unless such
Common Stock (and/or Reported Securities) is represented by one or more
global certificates registered in the name of a depositary or a nominee
of a depositary or are book entry securities, in which event Purchaser's
interest in such securities shall be noted in a manner satisfactory to
Purchaser and its counsel.

(iv) Seller's right to deliver (or cause to be delivered) to
Purchaser hereunder Common Stock and Reported Securities shall be
conditioned upon such Common Stock and Reported Securities to be so
delivered being transferable by Purchaser, following receipt from
Seller, without any restrictions not generally applicable to all holders
of such Common Stock or Reported Securities, as the case may be. If the
condition set forth in the preceding sentence shall not be satisfied
with respect to any Common Stock or Reported Securities to be delivered
by Seller, then, notwithstanding the provisions hereof, Seller shall
exercise the Cash Delivery Option.

(d) Cash Delivery Option. At its option, Seller may deliver to
Purchaser on the Exchange Date, in lieu of the Contract Shares, an amount in
cash equal to, subject to adjustment as provided in Section 6.2, the Exchange
Price of the Contract Shares (the "Cash Delivery Option"), paid by wire transfer
to an account designated by Purchaser, in Federal (immediately available) funds.
Seller may elect the Cash Delivery Option in respect of all, but not less than
all, Contract Shares and may do so by notice to Purchaser, the Collateral Agent
and the Custodian not less than 25 Business Days prior to the Exchange Date. If
Seller elects the Cash Delivery Option and so notifies Purchaser, Purchaser
shall promptly notify The Depository Trust Company and publish a notice in a
daily newspaper of national circulation stating whether the holders of DECS will
receive shares of Common Stock, cash or a combination thereof and, if a
combination of Common Stock and cash, the relative proportion of each.

(e) Seller represents, and Purchaser acknowledges, that it is
Seller's current intention to deliver Contract Shares to the Purchaser on the
Exchange Date and not to exercise the Cash Delivery Option; however, Seller
intends to consider all relevant economic, market and business factors in
ultimately determining whether to deliver Contract Shares on the Exchange Date
or to exercise the Cash Delivery Option.

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<PAGE> 10

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF EACH OF SELLER, THE
CORPORATE SELLER CONTROL PERSONS, THE MARK HUGHES
FAMILY TRUST AND MARK HUGHES

(a) Each of Seller, the Corporate Seller Control Persons, the
Mark Hughes Family Trust and Mark Hughes, severally and jointly, represents and
warrants to Purchaser that each representation and warranty made by such Person
in Section 3 of the Underwriting Agreement is true and correct on the date
hereof.

(b) Each of the Mark Hughes Entities, severally and jointly,
further represents and warrants to Purchaser that:

(i) Each Mark Hughes Entity holds itself out as a separate and
distinct entity, under such Mark Hughes Entity's own name, and such Mark
Hughes Entity acts solely under its own individual, limited liability
company or trust name, as the case may be, and through its authorized
officers and agents.

(ii) Each Mark Hughes Entity separately identifies its funds and
other assets. Each Mark Hughes Entity maintains its financial statements
and accounting records separate from those of any Affiliate or any other
Person. Such Mark Hughes Entity maintains its own separate books of
account. All of such Mark Hughes Entity's assets are held by or on
behalf of such Mark Hughes Entity and, when held on behalf of such Mark
Hughes Entity by another entity, are kept identifiable (in accordance
with customary usages) as assets owned by such Mark Hughes Entity.

(iii) Each Mark Hughes Entity (other than Mark Hughes) observes
all customary formalities regarding its existence as a limited liability
company or trust, as the case may be.

(iv) Seller does not, directly or indirectly, engage in any
business in any jurisdiction and has not incurred or undertaken to incur
any obligations (including debt) other than (a) entering into this
Agreement, the Collateral Agreement, the Underwriting Agreement and the
Reimbursement Agreement or any other agreement(s) or instrument(s)
entered into in connection with the foregoing (collectively, the "DECS
Documents") and performing its obligations hereunder and thereunder and
(b) in connection with a Permitted Obligation as defined in Section 5.7,
does not own any material property or assets other than the Common Stock
subject to this Agreement and the Collateral Agreement and does not have
any subsidiaries.

(v) Seller has not guaranteed the debts or obligations of any of
its Affiliates, nor has it loaned money or otherwise provided financial
assistance to any of its Affiliates, nor has it pledged, granted a
security interest in or lien upon its assets for the benefit of any of
its Affiliates, nor held itself out to be responsible for the debts or
obligations of any of its Affiliates or the decisions or actions
respecting the daily business and affairs of

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<PAGE> 11

any of its Affiliates other than (i) entering into the DECS Documents
and as necessary to comply with the terms and obligations imposed by the
DECS Documents, or (ii) in connection with a Permitted Obligation as
defined in Section 5.7.

(vi) Seller has not permitted any of its Affiliates to guarantee
or undertake to guarantee the debts or obligations of Seller, nor has it
permitted any of its Affiliates to loan money or otherwise provide
financial assistance to Seller, nor has it permitted any of its
Affiliates to pledge, grant a security interest in or lien upon such
Affiliate's assets for the benefit of Seller, nor has it permitted any
Affiliate to hold itself out to be responsible for the debts or
obligations of Seller or the decisions or actions respecting the daily
business and affairs of Seller other than (i) entering into the DECS
Documents and as necessary to comply with the terms and obligations
imposed by the DECS Documents, or (ii) in connection with a Permitted
Obligation as defined in Section 5.7.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller that:

(a) each representation and warranty made by Purchaser in Section
1 of the Underwriting Agreement is true and correct on the date hereof; and

(b) it acknowledges that the Common Stock delivered pursuant to
this Agreement and the Collateral Agreement may contain one or more of the type
of legends referred to in Section 3(e) of the Collateral Agreement (which legend
(i) will not be applicable to the delivery of any such Common Stock to the Trust
pursuant to this Agreement and the Collateral Agreement or to the delivery of
any such Common Stock by the Trust to the holders of DECS pursuant to the DECS
and (ii) will be removed at the request of the Collateral Agent to the transfer
agent for the Common Stock prior to any such delivery to holders of DECS).

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATIONS

(a) The obligation of Purchaser to deliver the Firm Purchase
Price on the Firm Payment Date is subject to the satisfaction of the following
conditions:

(i) the purchase by the Underwriters of the Initial DECS pursuant
to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;

(ii) the representations and warranties of each Mark Hughes
Entity contained in Article II hereof shall be true and correct as of
the Firm Payment Date;

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<PAGE> 12

(iii) the Collateral Agreement shall have been executed by each
Mark Hughes Entity and the delivery of the Collateral thereunder shall
have been made; and

(iv) the Reimbursement Agreement shall have been executed by each
Mark Hughes Entity and each Other Seller.

(b) The obligation of Purchaser to deliver the Additional
Purchase Price on the Option Closing Date is subject to the satisfaction of the
following conditions:

(i) the purchase by the Underwriter of the Additional DECS
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;

(ii) the representations and warranties of each of the Mark
Hughes Entities contained in Article II hereof shall be true and correct
as of the Option Closing Date; and

(iii) the delivery of any additional Collateral under the
Collateral Agreement shall have been made.

ARTICLE V

COVENANTS

5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares,
cash or Reported Securities pursuant hereto.

5.2 Forward Purchase Contract. Each of Purchaser and Seller
hereby agrees that

(a) it will treat this Agreement in its entirety as a forward
purchase contract for the delivery of the Contract Shares on the Exchange Date
(including as a result of acceleration or otherwise) (the "Forward Purchase
Contract Characterization"), under the terms of which contract (i) at the time
of issuance of the DECS Purchaser deposits irrevocably with Seller a fixed
amount of cash equal to the Firm Purchase Price (plus, if the Underwriters
exercise their option to purchase Additional DECS, the Additional Purchase
Price) to assure the fulfillment of Purchaser's purchase obligation described in
clause (ii) below, which deposit will unconditionally and irrevocably be applied
at the Exchange Date to satisfy such obligation and (ii) at the Exchange Date
such cash deposit unconditionally and irrevocably will be applied by Seller in
full satisfaction of Purchaser's obligation under the forward purchase contract,
and Seller will deliver to Purchaser the number of Contract Shares that
Purchaser is entitled to receive at that time pursuant to the terms of this
Agreement (subject to Seller's right to deliver cash and/or other property as
provided in this Agreement in lieu of the Contract Shares);

<PAGE> 13

(b) it will treat, consistent with the above characterization,
amounts paid to Seller in respect of this Agreement as allocable in their
entirety to the amount of the cash deposit attributable to such Agreement;

(c) it will not treat this Agreement, any portion of this
Agreement or any obligation hereunder as giving rise to any interest income or
other inclusions of ordinary income (in the case of Purchaser) or as giving rise
to any interest expense or other deductions of ordinary expense (in the case of
Seller);

(d) it will not treat the delivery of any portion of the Contract
Shares, cash or Reported Securities to be delivered pursuant to this Agreement
as the payment of interest or ordinary income; and

(e) it will not take any action (including filing any tax return
or form or taking any position in any tax proceeding) that is inconsistent with
the obligations contained in clauses (a) through (d), unless such action or
position is required by an applicable taxing authority or unless such action or
position is required by a change in statutory law or regulation or by a judicial
or other authoritative interpretation of the law enacted, promulgated or
published after the date of this Agreement.

5.3 Limitations on Trading During Certain Days. Each Mark Hughes
Entity hereby agrees that he or it will not, and will cause each of his or its
Affiliates that is under his or its control not to, buy or sell shares of Common
Stock, Class A Common Stock (the "Class A Stock") par value $.01, of the Company
or Reported Securities for his or its own account during the 60 days prior to
the Exchange Date, except that the Company may repurchase the aforementioned
securities pursuant to an ongoing share repurchase program conducted in
compliance with the conditions specified in Section 5(b) of Rule 10b-18 of the
Exchange Act.

5.4 Notices. Each Mark Hughes Entity will cause to be delivered
to Purchaser:

(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon such Mark Hughes Entity's
obtaining knowledge that any of the conditions or events described in paragraph
(a) or (b) of Article VII shall have occurred with respect to the Company,
notice of such occurrence; and

(b) In case at any time prior to the Exchange Date such Mark
Hughes Entity receives notice, or otherwise obtains knowledge, that any event
requiring that an adjustment be effected pursuant to Article VI hereof shall
have occurred or be pending, then such Mark Hughes Entity shall promptly cause
to be delivered to Purchaser a notice identifying such event and stating, if
known to such Mark Hughes Entity, the date on which such event is to occur and,
if applicable, the record date relating to such event. Such Mark Hughes Entity
shall cause further notices to be delivered to Purchaser if such Mark Hughes
Entity shall subsequently receive notice, or shall otherwise obtain knowledge,
of any further or revised information regarding the terms or timing of such
event or any record date relating thereto.

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<PAGE> 14

5.5. Affirmative Covenants. During the term of this Agreement,
each of the Mark Hughes Entities, jointly and severally, covenants and agrees
that he or it will:

(a) Comply in all material respects with all applicable laws,
rules, regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of any Mark Hughes Entity to perform his or its
obligations hereunder or under the Collateral Agreement, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon such Mark Hughes Entity or
upon such Mark Hughes Entity's property, including, in the case of the Seller,
the collateral pledged under the Collateral Agreement, except to the extent
contested in good faith.

(b) Furnish to Purchaser as soon as possible and in any event
within twenty calendar days after such Mark Hughes Entity shall become aware of
the occurrence of any failure by any Mark Hughes Entity to comply with or
perform any agreement or obligation contained in this Agreement or the
Collateral Agreement, a statement of such Mark Hughes Entity describing such
failure and setting forth details of such failure and the action which such Mark
Hughes Entity has taken and proposes to take with respect thereto.

5.6 Additional Affirmative Covenants of each of the Mark Hughes
Entities. During the term of this Agreement, each of the Mark Hughes Entities,
jointly and severally, further covenants and agrees that:

(a) Each of the Mark Hughes Entities (other than Mark Hughes)
will continue in good standing under the laws of the state of its formation and
will continue to be wholly controlled, directly or indirectly, by Mark Hughes,
so long as Mark Hughes has legal capacity.

(b) Each Mark Hughes Entity (other than Mark Hughes) shall not
consolidate with or merge with or into, or transfer all or substantially of its
assets to, any other Person unless:

(i) either (x) such Mark Hughes Entity shall be the resulting or
surviving entity or (y) such other Person is an entity organized and existing
under the laws of the United States, a State thereof or the District of
Columbia, such other Person expressly assumes by supplemental agreement executed
and delivered to the Trust, in form satisfactory to counsel to the Trust, all
the obligations of such Mark Hughes Entity under the Underwriting Agreement,
Collateral Agreement, the Reimbursement Agreement, and this Agreement (in which
case all such obligations of such Mark Hughes Entity shall terminate); and

(ii) such Mark Hughes Entity shall deliver to the Trust prior to
the proposed transaction an Officer's Certificate and an Opinion of Counsel,
each of which shall state that such consolidation, merger or transfer and such
supplemental agreement comply with this Section 5.6(b) and that all conditions
precedent herein provided for relating to such transaction have been complied
with.

Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of a Mark Hughes Entity in accordance with this
Section 5.6(b), the successor entity formed by such consolidation or into which
such Mark Hughes Entity is merged or to which such

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<PAGE> 15

transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of such Mark Hughes Entity under this Agreement with the
same effect as if such successor entity had been named as such Mark Hughes
Entity herein, and the predecessor entity, shall be relieved of any further
obligation under this Agreement.

(c) Each of the Mark Hughes Entities (other than Mark Hughes)
will comply in all respects with the requirements and limitations of its powers,
as the case may be, as set forth in its organizational documents.

(d) Each Mark Hughes Entity will at all times hold itself out,
and each of its Affiliates will at all times hold such Mark Hughes Entity out as
a separate and distinct entity, under such Mark Hughes Entity's own name and
such Mark Hughes Entity will act solely under its own individual, limited
liability company or trust name, as the case may be, and through its authorized
officers and agents.

(e) Each Mark Hughes Entity will separately identify funds and
other assets of such Mark Hughes Entity. Such Mark Hughes Entity will maintain
separate accounting records separate from those of any Affiliate or any other
Person. Such Mark Hughes Entity will maintain its own separate bank accounts.
All of such Mark Hughes Entity's assets will at all times be held by or on
behalf of such Mark Hughes Entity and, when held on behalf of such Mark Hughes
Entity by another entity, will at all times be kept identifiable (in accordance
with customary usages) as assets owned by such Mark Hughes Entity.

(f) Each Mark Hughes Entity (other than Mark Hughes) will observe
all customary formalities regarding the existence of such Mark Hughes Entity as
a limited liability company or trust, as the case may be.

5.7 Negative Covenants of Seller. During the term of this
Agreement, Seller will not, and each of the Corporate Seller Control Persons,
the Mark Hughes Family Trust and Mark Hughes, jointly and severally, covenants
and agrees to cause Seller not to:

(a) Directly or indirectly, incur any obligations (including
debt) other than (i) pursuant to or as necessary to comply with the terms and
obligations imposed by this Agreement, the Collateral Agreement, the
Underwriting Agreement, the Reimbursement Agreement or any other agreement(s) or
instrument(s) entered into in connection with the foregoing (collectively, the
"DECS Documents"), (ii) the note outstanding as of the date hereof issued by
Seller to MH Holdings I, including accrued interest thereon and any replacement,
refunding, refinancing, extension or other successor obligation thereto, (iii)
organizational and administrative expenses of Seller (including, without
limitation, annual state franchise taxes), and (iv) any obligations between or
among Seller and any of the other Mark Hughes Entities, including, without
limitation, distribution of available cash and advances provided that each such
action is accurately reflected in the books and records of Seller (collectively,
the matters in clauses (ii) - (iv) are referred to as "Permitted Obligations").

<PAGE> 16

(b) Acquire or own any property or assets nor engage in any
business other than (i) entering into the DECS Documents and as necessary to
comply with the terms and obligations imposed by the DECS Documents, or (ii) as
the beneficiary of a Permitted Obligation of any other Seller.

(c) Guarantee the debts or obligations of any of its Affiliates,
nor loan money or otherwise provided financial assistance to any of its
Affiliates, nor will it pledge, grant a security interest in or lien upon its
assets for the benefit of any of its Affiliates, nor will it hold itself out to
be responsible for the debts or obligations of any of its Affiliates or the
decisions or actions respecting the affairs of any of its Affiliates, other than
(i) entering into the DECS Documents and as necessary to comply with the terms
and obligations imposed by the DECS Documents, or (ii) in connection with a
Permitted Obligation.

(d) Permit any of its Affiliates to guarantee the debts or
obligations of Seller, nor will it permit any of its Affiliates to loan money or
otherwise provide financial assistance to Seller, nor will it permit any of its
Affiliates to pledge, grant a security interest in or lien upon such Affiliate's
assets for the benefit of Seller, nor will it permit any Affiliate to hold
itself out to be responsible for the debts or obligations of Seller or the
decisions or actions respecting the affairs of Seller, other than (i) entering
into the DECS Documents and as necessary to comply with the terms and
obligations imposed by the DECS Documents, or (ii) in connection with a
Permitted Obligation.

5.8 Covenants of each of the Mark Hughes Entities (other than
Seller). During the term of this Agreement, each of the Mark Hughes Entities
(other than Seller) covenants and agrees that each of them:

(a) Will cause, in its or his capacity as an Affiliate of any
other Mark Hughes Entity, such other Mark Hughes Entity to comply with its
obligations under this Agreement and the Collateral Agreement.

(b) Will not, and will cause each of its or his Affiliates that
is under its or his control not to, buy or sell Common Stock, Class A Stock or
Reported Securities for its or his own account during the 60 days prior to the
Exchange Date, except that the Company may repurchase the aforementioned
securities pursuant to an ongoing share repurchase program conducted in
compliance with the conditions specified in Section 5(b) of Rule 10b-18 of the
Exchange Act .

5.9 Further Assurances. From time to time on and after the date
hereof through the Exchange Date (or, if later, the date on which this Agreement
has been fully performed), each of the parties hereto shall use its or his
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of

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<PAGE> 17

transfer and conveyance necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Agreement in accordance with the
terms and conditions hereof.

ARTICLE VI

ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE

6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and
Closing Price shall be subject to adjustment successively from time to time as
follows:

(a) Stock Dividends, Splits, Reclassifications, Etc. If the
Company shall, after the date hereof,

(i) pay a stock dividend or make a distribution, in either case,
with respect to Common Stock in shares of such stock;

(ii) subdivide or split its outstanding shares of Common Stock
into a greater number of shares;

(iii) combine its outstanding shares of Common Stock into a
smaller number of shares; or

(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Common Stock any other equity securities of the
Company;

then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of common stock (or the fraction
thereof) that a holder who held one share of Common Stock immediately prior to
such event would be entitled solely by reason of such event to hold immediately
after such event. In the case of the reclassification of any shares of Common
Stock into any other equity securities of the Company other than the Common
Stock, such other equity securities shall be deemed shares of Common Stock for
all purposes hereunder. The Exchange Price and Closing Price shall also be
adjusted in the manner described in paragraph (c).

(b) Right or Warrant Issuances. If the Company shall, after the
date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants (other than rights to purchase Common Stock pursuant to a
plan for the reinvestment of dividends or interest) to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price of the Common Stock on the Business
Day next following the record date for the determination of holders of Common
Stock entitled to receive such rights or warrants, then, in each such case, the
Exchange Rate shall be multiplied by the following Dilution Adjustment: a
fraction, of which the numerator shall be (A) the number of shares of Common
Stock outstanding on the record date for the issuance of such rights or warrants
plus (B) the number of additional shares of Common Stock offered for
subscription or

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<PAGE> 18

purchase pursuant to such rights or warrants, and of which the denominator shall
be (x) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants plus (y) the number specified in clause
(B) above multiplied by the quotient of the exercise price of such rights or
warrants divided by the Market Price of the Common Stock on the Business Day
next following the record date for the determination of holders of Common Stock
entitled to receive such rights or warrants. To the extent that such rights or
warrants expire prior to the Exchange Date and shares of Common Stock are
delivered with respect to less than all of such rights or warrants prior to such
expiration, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered pursuant to such rights or warrants. The
Exchange Price and Closing Price shall also be adjusted in the manner described
in paragraph (c).

(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be
made to the Exchange Price as such term is used throughout the
definition of Exchange Rate. The required adjustment to the Exchange
Price shall be made at the Exchange Date by multiplying the Exchange
Price by the cumulative Dilution Adjustment.

(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment
is effected shall be adjusted by being divided by the relevant Dilution
Adjustment.

(d) Timing of Dilution Adjustments. Each Dilution Adjustment
shall be effected:

(i) in the case of any dividend, distribution, or issuance of
rights or warrants, at the opening of business on the Business Day next
following the record date for determination of holders of Common Stock
entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after
such record date, at the time such dividend, distribution or issuance
shall be announced by the Company; and

(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.

(e) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or if
there is not a nearest 1/10,000th to the next higher 1/10,000th). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein;

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<PAGE> 19

provided, however, that any adjustments which by reason of this sentence are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any announcement or declaration of a record date in
respect of a dividend, distribution or issuance requiring an adjustment pursuant
to this Section 6.1 shall subsequently be canceled by the Company, or such
dividend, distribution or issuance shall fail to receive requisite approvals or
shall fail to occur for any other reason, then, upon such cancellation, failure
of approval or failure to occur, the Exchange Rate shall be readjusted to the
Exchange Rate which would then have been in effect had adjustment for such event
not been made. If an Adjustment Event shall occur after the occurrence of one or
more events requiring an adjustment pursuant to this Section 6.1, the Dilution
Adjustments previously applied to the Exchange Rate in respect of such events
shall not be rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.

6.2 Adjustment for Consolidation, Merger or Other Adjustment
Event. In the event of (a) any dividend or distribution by the Company to all
holders of Common Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in Section 6.1(a)(i), any
other equity securities issued pursuant to a reclassification referred to in
Section 6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the
Company to all holders of Common Stock of rights or warrants to subscribe for or
purchase any of its securities (other than rights or warrants referred to in
Section 6.1(b)), (b) any consolidation or merger of the Company with or into
another entity (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation), (c) any sale, transfer,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, (d) any statutory exchange of
securities of the Company with another corporation (other than in connection
with a merger or acquisition) or (e) any liquidation, dissolution or winding up
of the Company (any such event described in clause (a), (b), (c), (d) or (e), an
"Adjustment Event"), the Exchange Rate shall be adjusted so that on the Exchange
Date Seller shall deliver to Purchaser, in lieu of or (in the case of an
Adjustment Event described in clause (a) above) in addition to, the Contract
Shares, cash in an amount equal to the product of the number of Contract Shares
and the Transaction Value (as defined below). Following an Adjustment Event, the
Exchange Price, as such term is used throughout the definition of Exchange Rate,
shall be deemed to equal (A) if shares of Common Stock are outstanding at the
Exchange Date, the Exchange Price of the Common Stock, as adjusted pursuant to
Section 6.1(c), otherwise zero, plus (B) the Transaction Value.

Notwithstanding the foregoing, with respect to any Reported
Securities (as defined below) received by holders of Common Stock in an
Adjustment Event, Seller shall, in lieu of delivering cash in respect of such
Reported Securities as described above, deliver a number of such Reported
Securities with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that would otherwise
be deliverable in respect of Reported Securities received in such Adjustment
Event, unless Seller has made an election to exercise the Cash Delivery Option
or such Reported Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect thereto.
If, following any Adjustment Event, any Reported Security ceases to

<PAGE> 20

qualify as a Reported Security, then (x) Seller shall not deliver such Reported
Security but instead shall deliver of an equivalent amount of cash and (y)
notwithstanding clause (ii) of the definition of Transaction Value, the
Transaction Value of such Reported Security shall mean the fair market value of
such Reported Security on the date such security ceases to qualify as a Reported
Security, as determined by a nationally recognized investment banking firm
retained for this purpose by the Administrator.

"Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of Common Stock, (ii)
for any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as adjusted pursuant
to the definition thereof) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received, as determined
by a nationally recognized investment banking firm retained for this purpose by
the Administrator; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause (iv)
of the definition of Reported Securities, Transaction Value with respect to any
such Reported Security means the average of the mid-point of the last bid and
ask prices for such Reported Security as of the Exchange Date from each of at
least three nationally recognized investment banking firms retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock and (y) with respect to all other Reported Securities, if there
are not 20 Trading Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the Exchange Date,
Transaction Value with respect to such Reported Security means the fair market
value per security of such Reported Security as of the Exchange Date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock. For purposes of calculating the Transaction Value, any cash,
Reported Securities or other property receivable in an Adjustment Event shall be
deemed to have been received immediately prior to the close of business on the
record date for such Adjustment Event or, if there is no record date for such
Adjustment Event, immediately prior to the close of business on the effective
date of such Adjustment Event.

"Reported Securities" means any securities received in an
Adjustment Event that (A) are (i) listed on a United States national securities
exchange, (ii) reported on a United States national securities system subject to
last sale reporting, (iii) traded in the over-the-counter market and reported on
the National Quotation Bureau or similar organization or (iv) for which bid and
ask prices are available from at least three nationally recognized investment
banking firms and (B) are either (x) perpetual equity securities or (y)
non-perpetual equity or debt securities with a stated maturity after the
Exchange Date. The number of shares of any Reported Securities included in the
calculation of Transaction Value pursuant to clause (ii) of the definition
thereof shall be subject to adjustment if any event that would, had it occurred
with respect to the Common Stock or the Company, have required an adjustment
pursuant to Section 6.1 or 6.2,

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<PAGE> 21

shall occur with respect to such Reported Securities or the issuer thereof
subsequent to the date the Adjustment Event is consummated. Adjustment for such
subsequent events shall be as nearly equivalent as practicable to the
adjustments provided for in Section 6.1 or 6.2, as applicable.

ARTICLE VII

ACCELERATION

If one or more of the following events (each an "Event of
Default") shall occur:

(a) Any Mark Hughes Entity (or any Other Seller) shall commence a
voluntary case or other proceeding seeking a liquidation, reorganization or
other relief with respect to himself or itself or his or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of him or it or any substantial part of his or its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against him or it, or shall take any action to authorize any of the foregoing;

(b) an involuntary case or other proceeding shall be commenced
against any Mark Hughes Entity (or any Other Seller) seeking liquidation,
reorganization or other relief with respect to him or it or his or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of him or it or any substantial part of his or its
property; or an order for relief shall be entered against any Mark Hughes Entity
(or any Other Seller) under the federal bankruptcy laws as now or hereafter in
effect; or

then an "Acceleration Date" shall occur, Seller's rights under
Section 1.3(d) shall terminate immediately and (i) in the case of clause
(c), Seller shall become obligated to the extent permitted by law to
deliver to Purchaser (and shall be deemed to instruct the Collateral
Agent to deliver to the Custodian, for the account of Purchaser, and to
liquidate and turn into cash the U.S. Government obligations then
pledged by Seller to the extent necessary to satisfy such obligation)
the Contract Shares, in the form of the shares of Common Stock then
pledged by Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by Seller, or a combination thereof
(or, after an Adjustment Event, the alternate consideration to be
delivered, in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof); or

(ii) in the case of clauses (a) or (b), Seller shall become
obligated to the extent permitted by law to deliver to Purchaser (and
shall be deemed to instruct the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, and to liquidate and turn

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<PAGE> 22

into cash the U.S. Government obligations then pledged by Seller to the
extent necessary to satisfy such obligation) a number of shares of
Common Stock, in the form of the shares of Common Stock then pledged by
Seller, or cash generated from the liquidation of U.S. Government
obligations then pledged by Seller, or a combination thereof (or, after
an Adjustment Event, the alternate consideration to be delivered, in the
form of Reported Securities then pledged, cash then pledged, cash
generated from the liquidation of U.S. Government obligations then
pledged, or a combination thereof), with an aggregate value (based on
the Closing Price on the Acceleration Date) equal to the Acceleration
Value (as defined below).

"Acceleration Value" means an amount determined by the
Administrator on the basis of quotations from Independent Dealers (as defined
below). Each quotation will be for an amount that would be paid to the relevant
Independent Dealer in consideration of an agreement between Purchaser and such
Independent Dealer that would have the effect of preserving for Purchaser the
economic equivalent of the payments and deliveries that Purchaser would, but for
the occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the Exchange
Rate that may have been effected on or prior to the Acceleration Date). On or as
soon as reasonably practicable following the Acceleration Date, the
Administrator will request each Independent Dealer to provide its quotation as
soon as reasonably practicable, but in any event within two Business Days. The
Administrator shall compute the Acceleration Value upon receipt of each
Independent Dealer's quotation, provided that if, at the close of business on
the fourth Business Day following the Acceleration Date, the Administrator shall
have received quotations from fewer than four of the Independent Dealers, the
Administrator shall compute the Acceleration Value using the quotations, if any,
it shall have received at or prior to such time. If four quotations are
provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. (For
this purpose, if more than one quotation has the same highest or lowest value,
then one of such quotations shall be disregarded.) If two or three quotations
are provided, the Acceleration Value will be the arithmetic mean of such
quotations. If one quotation is provided, the Acceleration Value will be equal
to such quotation. If no quotations are provided, the Acceleration Value will be
the aggregate value (based on the Closing Price on the Acceleration Date) of the
number of shares of Common Stock (or, after an Adjustment Event, Reported
Securities, cash or a combination thereof) that would be required to be
delivered hereunder on the Acceleration Date if the Exchange Date were redefined
to be the Acceleration Date.

"Independent Dealers" means four nationally recognized
independent investment banking firms selected in good faith by the
Administrator.

As promptly as reasonably practicable after receipt of the
quotations on which the Acceleration Value is based (or, as the case may be,
after failure to receive any such quotations within the time period prescribed
above), Purchaser shall deliver to Seller and the Collateral Agent a notice
specifying the number of shares of Common Stock (or, after an Adjustment Event,
the alternate consideration) required to be delivered by Seller. Purchaser and
Seller agree that the obligations contained in clauses (i) and (ii) above are a
reasonable pre-estimate of loss

22
<PAGE> 23

and not a penalty. Such amount is payable for the loss of bargain and Purchaser
will not be entitled to recover additional damage as a consequence of loss
resulting from an Event of Default.

ARTICLE VIII

8. Guaranty. (a) In order to induce the Purchaser to enter into
this Agreement and for other valuable consideration, each of Mark Hughes, the
Mark Hughes Family Trust and the Corporate Seller Control Persons, jointly and
severally, hereby irrevocably guarantees (as primary obligor and not merely as
surety) to the Purchaser, the trustees, directors, officers, employees and
agents of the Purchaser, and each person who controls the Purchaser within the
meaning of the Act or the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise (each of such persons, a
"Beneficiary") (i) the accuracy of the representations and warranties of the
Seller contained in Article II hereof and (ii) the performance by the Seller of
the covenants and agreements contained in each of Article I, Article V and
Article VII hereof.

(b) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Article VIII shall be
unconditional, irrespective of the validity or enforceability of any other
provision of this Agreement.

(c) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Article VIII constitute
guarantees of performance and of payment, and not merely guarantees of
collection, and shall remain in full force and effect until all obligations of
and all amounts payable by the Seller in respect of the matters (the "Guaranteed
Matters") that are the subject of the obligations of Mark Hughes, the Mark
Hughes Family Trust and each Corporate Seller Control Person under this Article
VIII of this Agreement have been validly, finally and irrevocably performed or
paid in full, as the case may be, and shall not be affected in any way by the
absence of any action to obtain such performance or amounts, as the case may be,
from the Seller or by any variation, extension, waiver, compromise or release of
any or all of the obligations of the Seller hereunder or of any security from
time to time therefor. Each of Mark Hughes, the Mark Hughes Family Trust and the
Corporate Seller Control Persons hereby waives all requirements as to
promptness, diligence, presentment, demand for payment, protest and notice of
any kind with respect to his or its obligations under this Article VIII. Each of
Mark Hughes, the Mark Hughes Family Trust and the Corporate Seller Control
Persons hereby agrees, jointly and severally, that action may be taken directly
against such person under this Article VIII without any action being taken
against the Seller.

(d) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Article VIII shall not be
affected by any change in applicable laws, rules or regulations or by any
present or future action of any governmental authority or court amending,
varying, reducing or otherwise affecting or purporting to amend, vary, reduce or
otherwise affect any of the obligations of the Seller under this Agreement or by
any other circumstance (other than by complete, irrevocable performance or
payment) that might

23
<PAGE> 24

otherwise constitute a legal or equitable discharge or defense of a surety or a
guarantor. If the Seller merges or consolidates with or into another entity,
loses its separate legal identity or ceases to exist, Mark Hughes, the Mark
Hughes Family Trust and the Corporate Seller Control Persons shall nonetheless
continue to be liable for the performance of all obligations or the payment of
all amounts, as the case may be, that would have been due or payable, as the
case may be, by the Seller in respect of the Guaranteed Matters.

(e) The obligations of Mark Hughes, the Mark Hughes Family Trust
and the Corporate Seller Control Persons under this Article VIII shall remain in
full force and effect or shall be reinstated (as the case may be) if at any time
any obligation or payment of the Seller in respect of the Guaranteed Matters, in
whole or in part, is rescinded or must otherwise be returned by a Beneficiary
upon the insolvency, bankruptcy or reorganization of the Seller or otherwise,
all as though such performance or payment, as the case may be, had not been
made.

(f) If at any time when any obligation of, or any amount payable
by the Seller in respect of, the Guaranteed Matters is overdue and unperformed
or unpaid, as the case may be, Mark Hughes, the Mark Hughes Family Trust or any
Corporate Seller Control Person receives any amount as a result of any action
against the Seller or any of its property or assets or otherwise for or on
account of any payment made by Mark Hughes, the Mark Hughes Family Trust or any
Corporate Seller Control Person pursuant to this Article VIII, Mark Hughes, the
Mark Hughes Family Trust or such Corporate Seller Control Person, as the case
may be, shall forthwith pay such amount received by it to Smith Barney Inc., on
behalf of the Beneficiaries, without demand, to be credited and applied toward
any such amount payable by the Seller.

(g) The guarantee agreements set forth in this Agreement shall be
in addition to any liability which the Seller, Mark Hughes, the Mark Hughes
Family Trust or the Corporate Seller Control Persons may otherwise have.

ARTICLE IX

MISCELLANEOUS

9.1 Adjustments; Selection of Independent Investment Banking
Firm. Purchaser shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Seller notice of any
such adjustment and shall provide Seller reasonable opportunity to review the
calculations pertaining to any such adjustment. If, pursuant to the terms and
conditions hereof, the Administrator shall be required to retain a nationally
recognized independent investment banking firm for any purpose provided herein,
such nationally recognized independent investment banking firm shall be selected
and retained by the Administrator only after consultation with Seller; provided,
however, that Seller shall be deemed to have waived his right to consult if
Seller fails to consult within five Business Days of notice being sent by the
Administrator to Seller seeking consultation. Purchaser may delegate the
effectuation and calculation of any such adjustments to its Administrator.

24
<PAGE> 25
9.2 Notices. Notices to Purchaser shall be directed to it in care
of the Administrator for Purchaser, The Bank of New York, 101 Barclay Street,
New York, New York 10286, Telephone: (212) 816-5228, Telecopier: (212) 816-7157;
notices to Seller, either Corporate Seller Control Person, the Mark Hughes
Family Trust, or Mark Hughes shall be directed to Mark Hughes, Herbalife
International, Inc., 1800 Century Park East, Century City, CA 90067-1501,
Telephone: (310) 410-9600, Telecopier: (310) 577-3904, with a copy to
Irell & Manella LLP, 333 South Hope Street, Suite 3300, Los Angeles, California
90071, Telephone: (213) 620-1555, Telecopier: (213) 229-0515, Attention: Anthony
T. Iler, Esq. Notwithstanding the foregoing, notices to a party shall be
directed to such other address for such party as shall be specified by such
party in a like notice given pursuant to this Section 9.2. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if either (i) personally delivered (including delivery by courier
service or by Federal Express or any other nationally recognized overnight
delivery service for next day delivery) to the offices specified in the
preceding sentence, in which case they shall be deemed received on the first
Business Day by which delivery shall have been made to said offices; or (ii)
sent by certified mail, return receipt requested, in accordance with the
preceding sentence, in which case they shall be deemed received when receipted
for unless acknowledgment is refused (in which case delivery shall be deemed to
have been received on the first Business Day on which such acknowledgment is
refused). Any notice, demand or other communication to be provided by or on
behalf of Purchaser pursuant to this Agreement shall be sent to the address of
Seller, the Corporate Seller Control Persons, the Mark Hughes Family Trust or
Mark Hughes provided in this Section 9.2 notwithstanding the death of Mark
Hughes, the adjudication of Mark Hughes as incompetent or the appointment of a
guardian with respect to the affairs of Mark Hughes. Any failure by Seller, the
Corporate Seller Control Persons, the Mark Hughes Family Trust or Mark Hughes or
any guardian, conservator, executor, administrator or other similarly appointed
person to receive any such notice, demand or communication shall in no way
abrogate, invalidate or otherwise affect the validity or enforceability of the
notice, demand or communication or the matters set forth therein.

9.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

9.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.

9.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser, Seller, each of the Corporate
Seller Control Persons, the Mark Hughes Family Trust and Mark Hughes or, in the
case of a waiver, by the party or parties against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other

25
<PAGE> 26

right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

9.6 No Third Party Rights; Successors and Assigns. Except as
otherwise agreed in writing, this Agreement is not intended and shall not be
construed to create any rights in any person other than Seller and Purchaser and
their respective successors and assigns and no person shall assert any rights as
third party beneficiary hereunder. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party. This Agreement will be (A) binding on and
legally enforceable against the estate of Mark Hughes should he become deceased
or the legal representative, attorney, or guardian of Mark Hughes should he lack
legal capacity and (B) binding on and legally enforceable against the Mark
Hughes Family Trust despite the death or legal incapacity of any settlor or
beneficiary of such trust.

9.7. Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code") and is acting as agent and custodian for Purchaser in
connection with this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The parties hereto
further acknowledge and agree that this Agreement is a "securities contract", as
such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.

9.8 Governing Law; Jurisdiction; Severability; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the parties hereto hereby
expressly and irrevocably consent and submit to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
or he might otherwise be entitled. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH
PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE OTHER PARTY
HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON
WHICH SUCH OTHER PARTY HERETO HAS

26
<PAGE> 27

RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY
DOCUMENT RELATED THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER
PARTY HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO TRIAL BY JURY.

IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date and year first above written.

PURCHASER: SELLER:

DECS TRUST III: [ ]

By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title

MH HOLDINGS I: MARK HUGHES:

By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title

MH HOLDINGS II: MARK HUGHES FAMILY TRUST:

By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title

<PAGE> 1
EXHIBIT 2(k)(4)
COLLATERAL AGREEMENT*

Among

[ ],

As Pledgor,

MH Holdings I,

MH Holdings II,

The Mark Hughes Family Trust,

Mark Hughes,

THE BANK OF NEW YORK, As Collateral Agent

and

DECS TRUST III

Dated as of

March [ ], 1998

- --------

* This is a form of Collateral Agreement. A substantially identical agreement
will be entered into by each Pledgor.
<PAGE> 2

The following Table of Contents has been inserted for convenience
of reference only and does not constitute a part of the Collateral Agreement.

TABLE OF CONTENTS
<TABLE>
<CAPTION>

SECTION

<S> <C>
1. The Security Interests.....................................................1

2. Definitions................................................................2

3. Representations and Warranties of each of the Mark Hughes Entities.........6

4. Representations and Warranties of the Collateral Agent.....................7

5. Certain Covenants of each of the Mark Hughes Entities......................8

6. Administration of the Collateral and Valuation of the Securities..........10

7. Income and Voting Rights on Collateral....................................14

8. Remedies upon Events of Default...........................................15

9. The Collateral Agent......................................................17

10. Guarantee................................................................20

11. Miscellaneous............................................................21

12. Termination of Collateral Agreement......................................23

13. No Personal Liability of Trustees........................................23
</TABLE>

Exhibit A - Certificate for Substituted Collateral

Exhibit B - Certificate for Additional Collateral

<PAGE> 3

COLLATERAL AGREEMENT

THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of March
[ ], 1998, among [ ], a limited liability company organized under the law of the
State of Delaware (the "Pledgor"), MH Holdings I and MH Holdings II, each a
limited liability company organized under the laws of the State of Delaware
(each a "Corporate Seller Control Person", and together, the "Corporate Seller
Control Persons"), the Mark Hughes Family Trust, originally established on
September 3, 1987, as amended and restated on December 13, 1996, and further
amended on September 17, 1997 and as further amended on March 22, 1998
(collectively the "Mark Hughes Family Trust"), Mark Hughes, The Bank of New
York, a New York banking corporation, as collateral agent (the "Collateral
Agent") hereunder for the benefit of DECS Trust III, a statutory business trust
organized under the Business Trust Act of the State of Delaware (such trust and
the trustees thereof acting in their capacity as such being referred to herein
as the "Trust" or "Purchaser"), and the Trust;

W I T N E S S E T H:

WHEREAS, pursuant to the Forward Purchase Agreement (the
"Purchase Agreement"), dated as of March [ ], 1998, among each of the Mark
Hughes Entities and Purchaser, the Pledgor has agreed to sell and Purchaser has
agreed to purchase Class B Common Stock, $.01 par value (the "Common Stock"), of
Herbalife International, Inc., a Nevada corporation (the "Company"), subject to
the terms and conditions of the Purchase Agreement; and

NOW, THEREFORE, to secure the performance by the Pledgor of its
obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:

1. The Security Interests.

In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:

(a) Security Interests. The Pledgor hereby grants, sells,
conveys, assigns, transfers and pledges unto the Collateral Agent, as agent of
and for the benefit of the Trust, a security interest in and to, and a lien upon
and right of set-off against, all of Pledgor's right, title and interest in and
to (i) the Pledged Items described in paragraphs (b) and (c); (ii) all additions
to and substitutions for such Pledged Items; (iii) (subject to the remittance of
certain payments upon satisfaction of the conditions specified in Section 7(a)
hereof) all income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in connection with
the Pledged Items (whether such proceeds arise before or after the commencement
of any proceeding under any applicable bankruptcy, insolvency or other similar
law, by or against the Pledgor with respect to the Pledgor); and (iv) all powers
and rights now owned or hereafter acquired under or with respect to the Pledged
Items (such Pledged Items, additions, substitutions, income, proceeds,
collections, powers and rights being herein collectively called the
"Collateral"). The Collateral Agent shall have all of the rights, remedies

<PAGE> 4

and recourses with respect to the Collateral afforded a secured party by the New
York Uniform Commercial Code, in addition to, and not in limitation of, the
other rights, remedies and recourses afforded to the Collateral Agent by this
Agreement.

(b) Firm Payment Date. At the Firm Payment Date, the Pledgor
shall deliver to the Collateral Agent in pledge hereunder one or more
certificates in registered form representing in the aggregate [ ] shares of the
Common Stock, indorsed in blank or in the name of the Collateral Agent for the
benefit of the Trust (together with all signature guarantees and any other
documents necessary to permit the Collateral Agent to effect the re-registration
of such Common Stock without further action by the Pledgor) or, if such Common
Stock is not issuable in certificated form but is held in book entry form by The
Depository Trust Company, the Pledgor shall transfer such number of shares of
Common Stock to an account of the Collateral Agent or to an account (other than
an account of the Pledgor) designated by the Collateral Agent with The
Depository Trust Company.

(c) Option Closing Date. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the Option Closing
Date, the Pledgor shall deliver to the Collateral Agent in pledge hereunder one
or more certificates in registered form representing in the aggregate a number
of shares of Common Stock equal to the Additional Share Base Amount, indorsed in
blank or in the name of the Collateral Agent for the benefit of the Trust
(together with all signature guarantees and any other documents necessary to
permit the Collateral Agent to effect the re-registration of such Common Stock
without further action by the Pledgor) or, if such Common Stock is not issuable
in certificated form but is held in book entry form by The Depository Trust
Company, the Pledgor shall transfer such number of shares of Common Stock to an
account of the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust Company.

(d) Reregistration. Immediately following the Firm Payment Date
and any Option Closing Date, the Collateral Agent shall cause all certificates
for Common Stock delivered pursuant to Section 1(b) or 1(c) above to be
re-registered on the books of the transfer agent for the Common Stock into the
name of the Collateral Agent or its nominee, and shall thereafter maintain them
in such form until the termination of this Agreement; provided, however, that at
any time following the Firm Payment Date and any Option Closing Date, the
Collateral Agent may cause any such certificates for the Common Stock to be
deposited with The Depository Trust Company and thereafter hold such
certificates in book entry form in an account (other than an account of the
Pledgor) designated by the Collateral Agent.

2. Definitions.

Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:

<PAGE> 5

respect to any Person that is a natural person, further includes such Person's
immediate family members, including his father, mother, spouse and children, the
spouses of his children, his siblings and their spouses and children. For
purposes of this definition, "control" (including the terms "controlled by" or
"under common control with") means, as to any Person, the possession, direct or
indirect, of the power to vote ten percent or more of the limited liability
company interests of such Person (or of the securities having ordinary voting
power for the election of directors of such Person), or the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities or by contract or otherwise.

"Authorized Representative" of the Pledgor means any trustee or
other representative as to whom Pledgor shall have delivered notice to the
Collateral Agent that such trustee or other representative is authorized to act
hereunder on behalf of Pledgor.

"Business Day" means any day except a Saturday, Sunday or other
day on which banking institutions in New York City are authorized or obligated
by law or regulation to close or a day on which the New York Stock Exchange,
Inc. is closed.

"Cash Delivery Obligations" means, at any time (A) if no
Adjustment Event shall have occurred prior to such time, zero, and (B) from and
after any Adjustment Event, the product of: (i) the Firm Share Base Amount plus
the Additional Share Base Amount (if any) and (ii) the Transaction Value of any
property other than Reported Securities received by the Pledgor in such
Adjustment Event, multiplied successively by each number by which the Exchange
Rate shall have been multiplied on or prior to the Adjustment Event pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement.

"Collateral" has the meaning specified in Section 1(a).

"Collateral Agent" means the financial institution identified as
such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.

"Collateral Agreement" means this Collateral Agreement and any
exhibits hereto.

"Collateral Event of Default" has the meaning specified in
Section 6(e).

"Collateral Requirement" means, as of any date and with respect
to: (i) any Common Stock, 100%; (ii) any Reported Securities, 100%; (iii) any
U.S. Government Securities pledged in respect of Cash Delivery Obligations,
105%; and (iv) any other U.S. Government Securities, 150%, provided that upon
and after any failure to cure an Insufficiency Determination by 4:00 p.m. New
York City time on the Business Day following telephonic notice of such
Insufficiency Determination as described in Section 6(e), which insufficiency
shall be continuing on such Business Day, the Collateral Requirement relating to
any U.S. Government Securities (other than U.S. Government Securities pledged in
respect of Cash Delivery Obligations) shall be 200%. The portion of any pledged
U.S. Government Securities that shall be deemed at any time to be in respect of
Cash Delivery Obligations shall be as provided in Section 6(e).

<PAGE> 6

"Delivery Date" has the meaning specified in Section 8(a).

"Eligible Collateral" means (i) Common Stock, (ii) U.S.
Government Securities, and (iii) from and after any Adjustment Event, Reported
Securities, provided, in each case, that (A) the Pledgor has good and marketable
title thereto, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions and (B) the Collateral Agent has
a valid, first priority perfected security interest therein and first lien
thereon, and provided further that to the extent the number of shares of Common
Stock or Reported Securities pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be Eligible Collateral.

"Event of Default" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d), (iv) if an
Adjustment Event shall have occurred prior to the Exchange Date, failure by
Pledgor to cause to be delivered to Purchaser on the Exchange Date the
consideration then required to be delivered pursuant to Section 6.2 of the
Purchase Agreement or (v) if Pledgor shall have exercised its Cash Delivery
Option, a failure by the Pledgor to deliver cash on the Exchange Date in the
amount required under Section 1.3(d) of the Purchase Agreement.

"Ineligible Collateral" means Collateral that does not constitute
"Eligible Collateral".

"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.

"Market Value" means, as of any date: (a) with respect to any
Common Stock (except as otherwise provided in Section 6(e)(2)), the Closing
Price on such date; (b) with respect to any U.S. Government Security, the
product of (x)(i) the average unit bid price for such security on the Trading
Day prior to such date as published in the New York edition of The Wall Street
Journal or The New York Times or, if not so published, (ii) the lower bid price
quoted (which quotation shall be evidenced in writing) on such date (or if such
date is not a Trading Date, on the preceding Trading Date) by either of two
nationally recognized dealers making a market in such security which are members
of the National Association of Securities Dealers, Inc. and (y) the number of
such units comprised in the outstanding principal amount of such U.S. Government
Security; and (c) with respect to any unit of Reported Securities, the Closing
Price thereof on such date; provided that the "Market Value" of any Ineligible
Collateral shall be zero.

"Maximum Deliverable Number" means, on any date, with respect to
the Common Stock, the product of the Firm Share Base Amount plus the Additional
Share Base Amount (if any), multiplied successively by each number by which the
Exchange Rate shall have been multiplied on or prior to such date pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement. The
Maximum Deliverable Number of Reported Securities means, on any date, the
product of (i) the Firm Share Base Amount plus the Additional Share Base Amount
(if any) and (ii) the number of Reported Securities received by the Pledgor in
the Adjustment Event for each share of Common Stock, multiplied successively by
each number by

4
<PAGE> 7

which the Exchange Rate shall have been multiplied on or prior to such date and
after the date of such Adjustment Event pursuant to the adjustments provided for
under Article VI of the Purchase Agreement.

"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

"Pledge Value" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral divided by the Collateral Requirement for such Collateral.

"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock or, from and after an Adjustment Event, Reported Securities, on
such date plus (b) from and after an Adjustment Event, the Cash Delivery
Obligations.

"Pledged Items" means, as of any date, any and all securities and
instruments delivered by the Pledgor to be held by the Collateral Agent under
this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.

"Prior Collateral" has the meaning specified in Section 6(b)(1).

"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.

"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification

<PAGE> 8

requirement for such item of Collateral pursuant to any federal or state
securities law; provided that the required delivery of any assignment from the
seller, pledgor, assignor or transferor of such item of Collateral, together
with any evidence of the corporate or other authority of such Person, shall not
constitute a "Transfer Restriction."

"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.

"UCC" means the Uniform Commercial Code as in effect in the State
of New York.

"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date.

3. Representations and Warranties of each of the Mark Hughes
Entities.

Each of the Mark Hughes Entities, jointly and severally, hereby
represents and warrants to the Collateral Agent and the Trust that:

(a) Power. Each of the Mark Hughes Entities has full power
and authority to execute and deliver this Collateral Agreement and to
perform and observe the provisions hereof;

(b) Non-Contravention. The execution, delivery and
performance by each of the Mark Hughes Entities of this Collateral
Agreement do not and will not violate, contravene or constitute a
default under any provision of applicable law or regulation or of any
material agreement, judgment, injunction, order, decree or other
instrument binding upon such Mark Hughes Entity. Each of the Mark Hughes
Entities is not in default under any agreement by which the Collateral
may be bound and no litigation, arbitration or administrative
proceedings are current or pending, which default, litigation,
arbitration or administrative proceedings are material to the Collateral
in the context of this Collateral Agreement.

(c) Binding Effect. This Collateral Agreement constitutes
a valid and binding agreement of each of the Mark Hughes Entities
enforceable against such Mark Hughes Entity in accordance with its
terms.

(d) Solvency. Each of the Mark Hughes Entities is
presently solvent and able to pay, and paying his or its debts as they
become due, and anticipates that it will continue to be able to pay his
or its debts as they become due for the foreseeable future.

(e) No Transfer Restrictions. Except for any legend with
respect to restrictions pursuant to applicable federal and state
securities laws on transfer of the Common Stock pledged by the Pledgor
hereunder which appears on the [face] [back] of the certificates
representing such Common Stock (and which (i) will not be applicable to

6
<PAGE> 9

the delivery of any such Common Stock to the Trust pursuant to the
Purchase Agreement and this Agreement or to the delivery of any such
Common Stock by the Trust to the holders of DECS pursuant to the DECS
and (ii) will be removed at the request of the Collateral Agent to the
transfer agent for the Common Stock prior to any such delivery to the
holders of DECS) no Transfer Restrictions exist with respect to or
otherwise apply to the assignment of, or transfer by the Pledgor of
possession of, any items of Collateral to the Collateral Agent
hereunder, or the subsequent sale or transfer of such items of
Collateral by the Collateral Agent pursuant to the terms hereof.

(f) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Pledged Items, free of all
Liens (other than the Lien created by this Collateral Agreement) and
Transfer Restrictions (except for any legend as provided in Section 3(e)
hereof). Upon delivery of the Pledged Items described in paragraphs (b)
and (c) of Section 1 to the Collateral Agent hereunder, the Collateral
Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such Pledged Items subject to no other Lien.
None of the Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.

(g) Control of Mark Hughes Family Trust. The Mark Hughes
Family Trust is solely controlled by Mark Hughes as the sole trustee of
such trust.

(h) Interest in Corporate Seller Control Persons. The Mark
Hughes Family Trust holds 99% of the membership interests in each of the
Corporate Seller Control Persons.

(i) Interest in Seller. The Corporate Seller Control
Persons collectively hold 100% of the membership interests in the
Seller.

4. Representations and Warranties of the Collateral Agent.

The Collateral Agent represents and warrants to the Pledgor and
the Trust that:

(a) Corporate Existence and Power. The Collateral Agent is
a banking corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and
has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to enter into, and
perform its obligations under, this Collateral Agreement.

(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral
Agreement have been duly authorized by all necessary corporate action on
the part of the Collateral Agent (no action by the shareholders of the
Collateral Agent being required) and do not and will not violate,
contravene or constitute a default under any provision of applicable law
or regulation or of the charter or by-laws of the Collateral Agent or of
any material agreement, judgment, injunction, order, decree or other
instrument binding upon the Collateral Agent.

7
<PAGE> 10

(c) Binding Effect. This Collateral Agreement constitutes
a valid and binding agreement of the Collateral Agent enforceable
against the Collateral Agent in accordance with its terms.

5. Certain Covenants of each of the Mark Hughes Entities.

The Pledgor agrees that, so long as any of its obligations under
the Purchase Agreement remain outstanding:

(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged
hereunder, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions (except for any legend
as provided in Section 3(e) hereof), and, subject to the terms of this
Collateral Agreement, will at all times hereafter have good, right and
lawful authority to assign, transfer and pledge such Collateral and all
such additions thereto and substitutions therefor under this Collateral
Agreement.

(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than
the Pledge Value Requirement at all times, and shall pledge additional
Collateral in the manner described in Section 6(d) as necessary to cause
such requirement to be met.

(c) Pledge upon Adjustment Event. Upon the occurrence of
an Adjustment Event, the Pledgor shall immediately cause to be delivered
to the Collateral Agent, in the manner provided in Section 6(d): (i)
U.S. Government Securities having an aggregate Market Value at least
equal to 105% of the Cash Delivery Obligations, if any; and (ii)
Reported Securities in an amount at least equal to the Maximum
Deliverable Number thereof (if any), or, at Pledgor's election, U.S.
Government Securities having an aggregate Market Value at least equal to
150% of such Maximum Deliverable Number of Reported Securities; in each
case to be held as substitute or additional Collateral hereunder.

(d) Composition of Pledged Items. Notwithstanding the
Pledgor's right to substitute Collateral pursuant to Section 6(b), the
Pledgor shall cause the Collateral to include, on the Exchange Date,
unless Pledgor shall have exercised its Cash Delivery Option, a number
of shares of Common Stock (and/or, if an Adjustment Event shall have
occurred, Reported Securities) at least equal to the number of shares of
Common Stock (and/or, if an Adjustment Event shall have occurred,
Reported Securities) required to be delivered under the Purchase
Agreement on the Exchange Date. If the Pledgor exercises its Cash
Delivery Option, then the Pledgor shall cause the Collateral to consist
entirely of U.S. Government Obligations or cash at all times from and
after the date 25 Business Days prior to the Exchange Date.

(e) Further Assurances. The Pledgor shall, at its expense
and in such manner and form as the Trust or the Collateral Agent may
require, give, execute, deliver, file and record any financing
statement, notice, instrument, document, agreement or other

8
<PAGE> 11

papers that may be necessary or desirable in order to create, preserve,
perfect, substantiate or validate any security interest granted pursuant
hereto or to enable the Collateral Agent to exercise and enforce its
rights and the rights of the Trust hereunder with respect to such
security interest. To the extent permitted by applicable law, the
Pledgor hereby authorizes the Collateral Agent to execute and file, in
the name of the Pledgor or otherwise, Uniform Commercial Code financing
or continuation statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing
statement relating to this Agreement) which the Collateral Agent in its
sole discretion may deem necessary or appropriate to further perfect, or
maintain the perfection of the security interests granted hereby.

Each Mark Hughes Entity, jointly and severally, agrees so
long as any of its obligations under the Purchase Agreement remain
outstanding:

(f) Control of Mark Hughes Family Trust. The Mark Hughes
Family Trust shall be solely controlled by Mark Hughes and Mark Hughes
shall be the sole trustee of such trust so long as he has legal capacity
to so act.

(g) Each Mark Hughes Entity (other than Mark Hughes) shall
not consolidate with or merge with or into, or transfer all or
substantially of its assets to, any other Person unless:

(i) either (x) such Mark Hughes Entity shall be the
resulting or surviving entity or (y) such other Person is an
entity organized and existing under the laws of the United
States, a State thereof or the District of Columbia, such other
Person expressly assumes by supplemental agreement executed and
delivered to the Trust, in form satisfactory to counsel to the
Trust, all the obligations of such Mark Hughes Entity under the
Underwriting Agreement, Collateral Agreement, the Reimbursement
Agreement, and this Agreement (in which case all such obligations
of such Mark Hughes Entity shall terminate); and

(ii) such Mark Hughes Entity shall deliver to the Trust
prior to the proposed transaction an Officer's Certificate and an
Opinion of Counsel, each of which shall state that such
consolidation, merger or transfer and such supplemental agreement
comply with this Section 5(g) and that all conditions precedent
herein provided for relating to such transaction have been
complied with.

Upon any consolidation or merger, or any transfer of all
or substantially all of the assets of a Mark Hughes Entity in accordance
with this Section 5(g), the successor entity formed by such
consolidation or into which such Mark Hughes Entity is merged or to
which such transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of such Mark Hughes Entity under
this Agreement with the same effect as if such successor entity had been
named as such Mark Hughes Entity herein, and the predecessor entity,
shall be relieved of any further obligation under this Agreement.

<PAGE> 12

6. Administration of the Collateral and Valuation of the
Securities.

(a) Valuation of Collateral. The Collateral Agent shall determine
on each Business Day whether the Pledge Value is at least equal to the Pledge
Value Requirement and whether an Insufficiency Determination or Collateral Event
of Default shall have occurred and, from and after any substitution of U.S.
Government Securities for pledged Common Stock or Reported Securities pursuant
to paragraph (b) of this Section 6, shall determine the Pledge Value on each
Business Day and shall provide written notice of the Pledge Value to the
Pledgor.

(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:

(1) Unless an Event of Default or a failure by the Pledgor
to meet any of its obligations under Section 5(b) or (c) hereof has
occurred and is continuing, the Pledgor shall have the right at any time
and from time to time to deposit Eligible Collateral with the Collateral
Agent in substitution for Pledged Items previously deposited hereunder
("Prior Collateral") and to obtain the release from the Lien hereof of
such Prior Collateral.

(2) If the Pledgor wishes to deposit Eligible Collateral
with the Collateral Agent in substitution for Prior Collateral, the
Pledgor shall (i) give written notice to the Collateral Agent
identifying the Prior Collateral to be released from the Lien hereof,
(ii) deliver to the Collateral Agent concurrently with such Eligible
Collateral a certificate of the Pledgor substantially in the form of
Exhibit A hereto and dated the date of such delivery, (A) identifying
the items of Eligible Collateral being substituted for the Prior
Collateral and the Prior Collateral that is to be transferred to the
Pledgor and (B) certifying that the representations and warranties
contained in such Exhibit A hereto are true and correct on and as of the
date thereof and (iii) deliver to the Collateral Agent concurrently with
such Eligible Collateral an opinion (dated the date of such delivery) of
counsel, substantially similar to those delivered by Irell & Manella LLP
at the Firm Purchase Date with respect to similar matters, addressed to
the Collateral Agent confirming the representations contained in the
second sentence of paragraph 3(b) of Exhibit A hereto. The Pledgor
hereby covenants and agrees to take all actions required under Section
6(d) and any other actions necessary to create for the benefit of the
Collateral Agent a valid, first priority perfected security interest in,
and a first lien upon, such Eligible Collateral deposited with the
Collateral Agent in substitution for Prior Collateral.

(3) No such substitution shall be made unless and until
the Collateral Agent shall have determined that the aggregate Pledge
Value of all of the Collateral at the time of such proposed
substitution, after giving effect to the proposed substitution, shall at
least equal the Pledge Value Requirement.

(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
the Pledgor substantially in the form of Exhibit B hereto

10
<PAGE> 13

and dated the date of such delivery, (A) identifying the additional items of
Eligible Collateral being pledged and (B) certifying that with respect to such
items of additional Eligible Collateral the representations and warranties
contained in such Exhibit B hereto are true and correct on and as of the date
thereof and (ii) an opinion, dated the date of such delivery, of counsel
addressed to the Collateral Agent, substantially similar to those delivered by
Irell & Manella LLP at the Firm Purchase Date with respect to similar matters,
confirming the representations contained in the second sentence of paragraph
2(b) of Exhibit B hereto. The Pledgor hereby covenants and agrees to take all
actions required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority perfected
security interest in, and a first lien upon, such additional Eligible
Collateral.

(d) Delivery of Collateral. The Pledgor shall deliver all
Collateral to the Collateral Agent in accordance with the following provisions:

(1) Pledged Common Stock. In the case of Collateral
consisting of Common Stock, by delivery of certificates evidencing such
Common Stock, indorsed in blank (together with all signature guarantees
and any other documents necessary to permit the Collateral Agent to
effect the re-registration thereof without further action by the
Pledgor) or registered in the name of the Collateral Agent or its
nominee or, if such Common Stock is not issuable in certificated form
but is held in book entry form by The Depository Trust Company, by
transfer to an account of the Collateral Agent or to an account (other
than an account of the Pledgor) designated by the Collateral Agent with
The Depository Trust Company;

(2) Pledged U.S. Government Securities. In the case of
Collateral consisting of U.S. Government Securities, by transfer thereof
through the Book Entry System of the Federal Reserve System to the
account of the Collateral Agent or to an account (other than an account
of the Pledgor) designated by the Collateral Agent; and

(3) Pledged Reported Securities. In the case of Collateral
consisting of Reported Securities, by delivery of certificates
evidencing such Reported Securities, indorsed in blank (together with
all signature guarantees and any other documents necessary to permit the
Collateral Agent to effect the re-registration thereof without further
action by the Pledgor) or registered in the name of the Collateral Agent
or its nominee or, if such Reported Securities are not issuable in
certificated form but are held in book entry form by The Depository
Trust Company, by transfer to an account of the Collateral Agent or to
an account (other than an account of the Pledgor) designated by the
Collateral Agent with The Depository Trust Company. Each such delivery
of Reported Securities shall be accompanied by an opinion of counsel,
substantially similar to those delivered by Irell & Manella LLP at the
Firm Purchase Date with respect to similar matters, satisfactory to the
Collateral Agent that the Collateral Agent has obtained a valid, first
priority perfected security interest in, and a first lien upon, such
Reported Securities.

Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any opinions
and certificates delivered

11
<PAGE> 14

pursuant to Sections 6(b), 6(c), 6(d)(3) or otherwise pursuant to the terms
hereof in connection therewith to determine that they comply as to form with the
requirements for Eligible Collateral. Immediately following the delivery to the
Collateral Agent of any Collateral in the form of certificates indorsed in
blank, the Collateral Agent shall cause all such certificates to be
re-registered on the books of the applicable transfer agent into the name of the
Collateral Agent or its nominee, and shall thereafter maintain all such
Collateral in such form until the termination of this Agreement; provided,
however, that at any time following such delivery to the Collateral Agent, the
Collateral Agent may cause any such certificates to be deposited with The
Depository Trust Company and thereafter hold such certificates in book entry
form in an account (other than an account of Pledgor) designated by the
Collateral Agent. The Pledgor hereby designates the Collateral Agent as the
person in whose name any Collateral held in book entry form in the Federal
Reserve System shall be registered.

(e) Insufficiency Determination.

(1) If on any Business Day the Collateral Agent determines
that the aggregate Pledge Value of the Collateral is less than the
Pledge Value Requirement (any such determination, an "Insufficiency
Determination"), the Collateral Agent shall, by telephone call to an
Authorized Representative of the Pledgor followed by a written
confirmation of such call, promptly notify the Pledgor of such
determination and of the amount of the insufficiency.

(2) If, by 4:00 p.m., New York City time on the Business
Day following the day on which telephonic notice shall have been given
pursuant to the preceding paragraph (e)(1), the Pledgor shall have
failed to deliver, in the manner set forth in paragraphs (c) and (d) of
this Section 6, sufficient additional Eligible Collateral so that, after
giving effect to such delivery (and taking into account that Common
Stock and Reported Securities in excess of the Maximum Deliverable
Number thereof shall not constitute Eligible Collateral), the aggregate
Pledge Value of the Collateral, as of such Business Day, is at least
equal to the Pledge Value Requirement, then (x) the Collateral
Requirement with respect to any U.S. Government Securities pledged
hereunder (other than in respect of Cash Delivery Obligations) shall be
increased from 150% to 200%, and (y) unless a Collateral Event of
Default shall have occurred and be continuing, the Collateral Agent
shall:

(i) commence sales, in the manner described in
paragraph (3) below, of such portion of the Collateral consisting
of U.S. Government Securities as may be required to be sold in
order to generate proceeds sufficient to purchase Common Stock
and/or, after an Adjustment Event, Reported Securities, as
described in the following clause (ii); and

(ii) commence purchases, in the manner described in
paragraph (3) below, of Common Stock and/or, after an Adjustment
Event, Reported Securities, in an amount sufficient to cause the
aggregate Pledge Value of the Collateral to be at least equal to
the Pledge Value Requirement.

<PAGE> 15

Notwithstanding the foregoing, the Collateral Agent shall
discontinue sales and purchases pursuant to the preceding clauses (i)
and (ii), respectively, if at any time a Collateral Event of Default
shall have occurred and be continuing. The Collateral Agent shall
determine the Market Value and the Pledge Value of the Collateral after
each purchase of Common Stock or Reported Securities pursuant to the
preceding clause (ii) in order to determine whether the Pledge Value
Requirement is met and whether a Collateral Event of Default has
occurred. Solely for purposes of such calculation, the Market Value of
the Common Stock or Reported Securities shall be: (A) the most recent
sales price as reported in the composite transactions for the principal
securities exchange on which the Common Stock or Reported Securities, as
the case may be, are then listed or, if such securities are not so
listed, the last quoted ask price for such securities in the
over-the-counter market as reported by The NASDAQ National Market or, if
not so reported, by the National Quotation Bureau or a similar
organization; or (B) if higher, in the case of Common Stock, the most
recent available Closing Price.

A "Collateral Event of Default" shall mean, at any time,
the occurrence of any of the following: (A) failure of the aggregate
Market Value of the Collateral to equal or exceed the Pledge Value
Requirement; (B) failure of the Market Value of any U.S. Government
Securities pledged at such time (not including any U.S. Government
Securities pledged in respect of Cash Delivery Obligations at such time)
to have an aggregate Market Value of at least 105% of the Market Value
of a number of shares of Common Stock (or, from and after any Adjustment
Event, Reported Securities) equal to (x) the Maximum Deliverable Number
thereof minus (y) the number thereof pledged as Collateral hereunder at
such time; or (C) from and after any Adjustment Event, failure of the
U.S. Government Securities pledged in respect of Cash Delivery
Obligations to have an aggregate Market Value at least equal to 105% of
the Cash Delivery Obligations at such time, if, in the case of a failure
described in this clause (C), such failure shall continue to be in
effect at 4:00 p.m., New York City time, on the Business Day following
the day on which telephonic notice in respect thereof shall have been
given pursuant to paragraph (e)(1) above. For purposes of this
Agreement, the portion of any pledged U.S. Government Securities that
shall be deemed to be in respect of Cash Delivery Obligations at any
time shall be a portion having a Market Value equal to 105% of the Cash
Delivery Obligations at such time (or, if less, the aggregate Market
Value of all U.S. Government Securities pledged at such time).

(3) Collateral sold and Common Stock or shares of Reported
Securities purchased by the Collateral Agent pursuant to the preceding
paragraphs (e)(2)(i) and (ii) may be sold and purchased on any
securities exchange or in any over-the-counter market or in any private
purchase transaction, and at such price or prices, in each case as the
Collateral Agent may deem satisfactory. The Pledgor covenants and agrees
that it will execute and deliver such documents and take such other
action as the Collateral Agent deems necessary or advisable in order
that any such sales and purchases may be made in compliance with law.

<PAGE> 16

(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate Pledge Value of all of the Collateral remaining after such release as
determined on such Business Day is at least equal to the Pledge Value
Requirement.

(g) Delivery of Purchase Agreement Consideration. On the Exchange
Date, unless Pledgor shall have exercised its Cash Delivery Option, the
Collateral Agent shall deliver to the Trust Common Stock (or, if an Adjustment
Event shall have occurred, Reported Securities) then held by it hereunder
representing the number of shares of Common Stock (or, if an Adjustment Event
shall have occurred, Reported Securities) then required to be delivered under
the Purchase Agreement. Upon such delivery, the Trust shall hold such Common
Stock or Reported Securities, as the case may be, absolutely and free from any
claim or right whatsoever.

(h) Investment of Cash Collateral. The Collateral Agent shall
invest any cash received by it pursuant to Section 6.2 of the Purchase Agreement
in U.S. Treasury Securities maturing on or before the Exchange Date.

7. Income and Voting Rights on Collateral.

(a) Unless an Event of Default or failure by the Pledgor to meet
any of Pledgor's obligations under Section 5(b) or (c) hereof has occurred and
is continuing, the Pledgor shall be entitled to receive for Pledgor's own
account all dividends, interest and, if any, principal and premium relating to
all of the Collateral, unless the payment thereof to the Pledgor would reduce
the aggregate Pledge Value of the Collateral below the Pledge Value Requirement.
The Collateral Agent agrees to remit to the Pledgor on the Business Day received
or the first Business Day thereafter all such payments received by it. If an
Event of Default or failure by the Pledgor to meet any of its obligations under
Section 5(b) or (c) hereof has occurred and is continuing, all such payments
made or accrued after and during the continuance of such Event of Default or
failure shall be retained by the Collateral Agent, and any such payments which
are received by the Pledgor shall be received in trust for the benefit of the
Trust, shall be segregated from other funds of the Pledgor and shall forthwith
be paid over to the Collateral Agent. Any such payments so retained by, or paid
over to, the Collateral Agent shall be held by the Collateral Agent as
Collateral hereunder. If any such Event of Default or failure is no longer
continuing, then the Collateral Agent shall remit any such payments that are so
retained by, or paid to it, on the first Business Day after the Collateral Agent
shall have received notice from the Trust that such Event of Default or failure
is no longer continuing, unless the payment thereof to the Pledgor would reduce
the aggregate Pledge Value of the Collateral below the Pledge Value Requirement.

14
<PAGE> 17

(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall promptly deliver to the Pledgor such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the
Collateral which is registered in the name of the Collateral Agent or its
nominee and shall further deliver such documents and instruments as shall be
specified in a written request by the Pledgor.

If an Event of Default shall have occurred and be continuing, the
Collateral Agent shall have the right to the extent permitted by law, and the
Pledgor shall take all such action as may be necessary or appropriate to give
effect to such right, to vote and to give consents, ratifications and waivers,
and take any other action with respect to any or all of the Collateral with the
same force and effect as if the Collateral Agent were the absolute and sole
owner thereof.

8. Remedies upon Events of Default.

(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, shall: (i) deliver all Collateral consisting of
Common Stock or Reported Securities (but not, in either case, in excess of the
number of shares thereof deliverable under the Purchase Agreement at such time)
to the Trust on the date of the notice delivered to the Collateral Agent
pursuant to the last paragraph of Article VII of the Purchase Agreement relating
to such Event of Default (or, in the case of an Event of Default described in
clause (iii), (iv) or (v) of the definition thereof, on the Exchange Date) (in
either case, the "Delivery Date"), whereupon the Trust shall hold such Common
Stock or Reported Securities absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption of the Pledgor
which may be waived, and the Pledgor, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which Pledgor
has or may have under any law now existing or hereafter adopted; and (ii) if
such delivery shall be insufficient to satisfy in full all of the obligations of
Pledgor under the Purchase Agreement, sell all of the remaining Collateral, or
such lesser portion thereof as may be necessary to generate proceeds sufficient
to satisfy in full all of the obligations of Pledgor under the Purchase
Agreement, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Collateral Agent may deem satisfactory. The Pledgor
covenants and agrees to execute and deliver such documents and take such other
action as the Collateral Agent deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which Pledgor has or may have
under any law now existing or hereafter adopted. The notice (if any) of such
sale required by Article 9 of the UCC shall (1) in

<PAGE> 18

case of a public sale, state the time and place fixed for such sale, (2) in case
of sale at a broker's board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or the portion thereof so being sold, will first be offered for sale at such
board or exchange, and (3) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

(b) Power of Attorney. The Collateral Agent is hereby irrevocably
appointed the true and lawful attorney of the Pledgor with full power and
authority, in the name and stead of the Pledgor, to do all of the following: (i)
upon any delivery or sale of all or any part of any Collateral made either under
the power of delivery or sale given hereunder or under judgment or decree in any
judicial proceedings for foreclosure or otherwise for the enforcement of this
Collateral Agreement, to make all necessary deeds, bills of sale and instruments
of assignment, transfer or conveyance of the property thus delivered or sold;
(ii) upon the occurrence of an Adjustment Event while any shares of Common Stock
are Pledged Items, to take any necessary actions with respect to such shares of
Common Stock to cause the Pledged Items to conform to the requirements of this
Agreement following the occurrence of the Adjustment Event, including, without
limitation, the tender of shares of Common Stock and the sale of property (other
than Reported Securities) received in respect of Common Stock. For such purposes
the Collateral Agent may execute all necessary documents and instruments. This
power of attorney shall be deemed coupled with an interest, and the Pledgor
hereby ratifies and confirms all that his attorneys acting under such power, or
such attorneys' successors or agents, shall lawfully do by virtue of this
Collateral Agreement. If so requested by the Collateral Agent, by the Trustees
or by any purchaser of the Collateral or a portion thereof, the Pledgor shall
further ratify and confirm any such delivery or sale by executing and delivering
to the Collateral Agent, to the Trustees or to such purchaser or purchasers at
the expense of the Pledgor all proper deeds, bills of sale, instruments of
assignment, conveyance of transfer and releases as may be designated in any such
request. The Pledgor's obligations and authorizations hereunder shall not be
terminated by operation of law or the occurrence of any event whatsoever,
including the death or disability of the Pledgor, or the occurrence of any other
event.

16
<PAGE> 19

(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Collateral Agent may proceed to realize upon the security
interest in the Collateral against any one or more of the types of Collateral,
at any one time, as the Collateral Agent shall determine in its sole discretion
subject to the foregoing provisions of this Section 8. The proceeds of any sale
of, or other realization upon, or other receipt from, any of the Collateral
remaining after delivery to the Trust pursuant to Section 8(a) shall be applied
by the Collateral Agent in the following order of priorities:

(1) first, to the payment to the Trust of an amount equal to: (A) the
aggregate Market Value of a number of shares of Common Stock
equal to (1) the number of shares of Common Stock required to be
delivered under the Purchase Agreement on the Delivery Date minus
(2) the number of shares of Common Stock delivered by the
Collateral Agent to the Trust on the Delivery Date as described
above; or (B) from and after an Adjustment Event, the sum of (1)
the Cash Delivery Obligations on the Delivery Date and (2) the
aggregate Market Value on the Delivery Date of a number of
Reported Securities (and, if applicable, shares of Common Stock)
equal to (x) the number thereof required to be delivered on the
Delivery Date under Section 6.2 of the Purchase Agreement minus
(y) the number thereof delivered by the Collateral Agent to the
Trust on the Delivery Date as described above; or (C) if the
Pledgor shall have exercised its Cash Delivery Option, the amount
of cash required to be delivered under Section 1.3(d) of the
Purchase Agreement minus the amount of cash so delivered;

(2) second, to the payment to the Collateral Agent of the expenses of
such sale or other realization, including reasonable compensation
to the Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, including brokerage
fees in connection with the sale by the Collateral Agent of any
Pledged Item; and

(3) finally, if all of the obligations of the Pledgor hereunder and
under the Purchase Agreement have been fully discharged or
sufficient funds have been set aside by the Collateral Agent at
the request of the Pledgor for the discharge thereof, any
remaining proceeds shall be released to the Pledgor.

9. The Collateral Agent.

The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:

(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
grossly negligent failure to act or its own willful misconduct, subject to the
following:

17
<PAGE> 20

(1) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion of
counsel.

(2) The Collateral Agent shall not be liable with respect
to any action taken, suffered or omitted by it in good faith (i)
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Collateral Agreement or (ii) in
accordance with any direction or request of the Trustees.

(3) The Collateral Agent shall not be liable for any error
of judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.

(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any note, notice, resolution, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document believed
by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons.

(5) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

(6) The Collateral Agent may perform any duties hereunder
either directly or by or through agents or attorneys, and the Collateral
Agent shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder.
In furtherance thereof, any subsidiary owned or controlled by the
Collateral Agent, or its successors, as agent for the Collateral Agent,
may perform any or all of the duties of the Collateral Agent relating to
the valuation of securities and other instruments constituting
Collateral hereunder.

(7) In no event shall the Collateral Agent be personally
liable for any taxes or other governmental charges imposed upon or in
respect of (i) the collateral or (ii) the income or other distributions
thereon.

(8) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the duties specified
in Section 6 with respect to such Collateral at the time of delivery
thereof.

18
<PAGE> 21

The Collateral Agent shall not be responsible for the correctness
of the recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given to or held by it hereunder or for the validity or sufficiency of the
Purchase Agreement or the Lien on the Collateral purported to be created hereby.

(b) Knowledge. The Collateral Agent shall not be deemed to have
knowledge of any Event of Default (except a Collateral Event of Default), unless
and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.

(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.

(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.

(e) Removal. The Collateral Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Collateral
Agent and to the Pledgor and signed by the Trust.

(f) Appointment of Successor. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any public officer or officers or
of a receiver appointed by a court, a successor may be appointed by the Trust by
an instrument or concurrent instruments in writing signed by the Trust or by its
attorneys in fact fully authorized a copy of such instrument or concurrent
instruments shall be sent by registered mail to the Pledgor.

(2) Every such temporary or permanent successor Collateral Agent
appointed pursuant to the provisions hereof shall be a trust company or bank in
good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.

19
<PAGE> 22

(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor an instrument in writing
accepting such appointment hereunder, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessors. Such
predecessor shall, nevertheless, on the written request of its successor or the
Pledgor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the Pledgor be required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties, rights, powers,
duties and obligations hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, at the request of
the temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Pledgor.

10. Guarantee.

(a) In order to induce the Purchaser to enter into this Agreement
and for other valuable consideration, each of Mark Hughes, the Mark Hughes
Family Trust and the Corporate Seller Control Persons, jointly and severally,
hereby irrevocably guarantees (as primary obligor and not merely as surety) to
the Purchaser, the trustees, directors, officers, employees and agents of the
Purchaser, and each person who controls the Purchaser within the meaning of the
Act or the Exchange Act or other Federal or state statutory law or regulation,
of common law or otherwise (each of such persons, a "Beneficiary") (i) the
accuracy of the representations and warranties of the Pledgor contained in
Section 3 hereof and (ii) the performance by the Pledgor of the covenants and
agreements contained in each of Section 1, Section 3, Section 5, Section 6, and
Section 8 hereof.

(b) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Section 10 shall be
unconditional, irrespective of the validity or enforceability of any other
provision of this Agreement.

(c) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Section 10 constitute
guarantees of performance and of payment, and not merely guarantees of
collection, and shall remain in full force and effect until all obligations of
and all amounts payable by the Pledgor in respect of the matters (the
"Guaranteed Matters") that are the subject of the obligations of Mark Hughes,
the Mark Hughes Family Trust and each Corporate Seller Control Person under this
Section 10 of this Agreement have been validly, finally and irrevocably
performed or paid in full, as the case may be, and shall not be affected in any
way by the absence of any action to obtain such performance or amounts, as the
case may be, from the Pledgor or by any variation, extension, waiver, compromise
or release of any or all of the obligations of the Pledgor hereunder or of any
security from time to time therefor. Each of Mark Hughes, the Mark Hughes Family
Trust and the Corporate Seller Control Persons hereby waives all requirements as
to promptness, diligence, presentment, demand for payment, protest and notice of
any kind with respect to his or its obligations under

<PAGE> 23

this Section 10. Each of Mark Hughes, the Mark Hughes Family Trust and the
Corporate Seller Control Persons hereby agrees, jointly and severally, that
action may be taken directly against such person under this Section 10 without
any action being taken against the Pledgor.

(d) The obligations of Mark Hughes, the Mark Hughes Family Trust
and each Corporate Seller Control Person under this Section 10 shall not be
affected by any change in applicable laws, rules or regulations or by any
present or future action of any governmental authority or court amending,
varying, reducing or otherwise affecting or purporting to amend, vary, reduce or
otherwise affect any of the obligations of the Pledgor under this Agreement or
by any other circumstance (other than by complete, irrevocable performance or
payment) that might otherwise constitute a legal or equitable discharge or
defense of a surety or a guarantor. If the Pledgor merges or consolidates with
or into another entity, loses its separate legal identity or ceases to exist,
Mark Hughes, the Mark Hughes Family Trust and the Corporate Seller Control
Persons shall nonetheless continue to be liable for the performance of all
obligations or the payment of all amounts, as the case may be, that would have
been due or payable, as the case may be, by the Pledgor in respect of the
Guaranteed Matters.

(e) The obligations of Mark Hughes, the Mark Hughes Family Trust
and the Corporate Seller Control Persons under this Section 10 shall remain in
full force and effect or shall be reinstated (as the case may be) if at any time
any obligation or payment of the Pledgor in respect of the Guaranteed Matters,
in whole or in part, is rescinded or must otherwise be returned by a Beneficiary
upon the insolvency, bankruptcy or reorganization of the Company or otherwise,
all as though such performance or payment, as the case may be, had not been
made.

(f) If at any time when any obligation of, or any amount payable
by the Pledgor in respect of, the Guaranteed Matters is overdue and unperformed
or unpaid, as the case may be, Mark Hughes, the Mark Hughes Family Trust or any
Corporate Seller Control Person receives any amount as a result of any action
against the Pledgor or any of its property or assets or otherwise for or on
account of any payment made by Mark Hughes, the Mark Hughes Family Trust or the
Corporate Seller Control Persons pursuant to this Section 10, Mark Hughes, the
Mark Hughes Family Trust or such Corporate Seller Control Person, as the case
may be, shall forthwith pay such amount received by it to Smith Barney Inc., on
behalf of the Beneficiaries, without demand, to be credited and applied toward
any such amount payable by the Pledgor.

(g) The guarantee agreements set forth in this Agreement shall be
in addition to any liability which the Pledgor, Mark Hughes, the Mark Hughes
Family Trust or either Corporate Seller Control Person may otherwise have.

11. Miscellaneous.

(a) Benefit of Agreement; Successors and Assigns. Whenever any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All the covenants and agreements herein
contained by or on behalf of the Pledgor, any other Mark Hughes Entity and the
Collateral Agent shall bind, and inure to the benefit of, their respective
successors and assigns whether so expressed or not, and shall be enforceable by
and inure to the benefit of the Trust and its successors and assigns. This
Agreement will be

21
<PAGE> 24

(A) binding on and legally enforceable against the estate of Mark Hughes should
he become deceased or the legal representative, attorney, or guardian of Mark
Hughes should he lack legal capacity and (B) binding on and legally enforceable
against the Mark Hughes Family Trust despite the death or legal incapacity of
any settlor or beneficiary of such trust.

(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.

(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, each Mark Hughes Entity and the Trust.

(d) Notices.

(1) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth
opposite such party's name on the signature pages hereto or at such
other address as may be designated by notice duly given in accordance
with this Section 11(d) to each other party hereto.

(2) Each such notice given pursuant to paragraph (1) shall
be effective (i) if sent by certified mail (return receipt requested),
72 hours after being deposited in the United States mail, postage
prepaid; (ii) if given by telex or telecopier, when such telex or
telecopied notice is transmitted; or (iii) if given by any other means,
when delivered at the address specified in this Section 12(d).

(e) Governing Law. This Collateral Agreement shall in all
respects be construed in accordance with and governed by the laws of the State
of New York; provided that as to Pledged Items located in any jurisdiction other
than the State of New York, the Collateral Agent on behalf of the Trust shall
have all of the rights to which a secured party is entitled under the laws of
such other jurisdiction.

(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.

(g) Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code") and is acting as agent and custodian for the Trust in
connection with the Purchase Agreement and that the Trust is a "customer" of the
Collateral Agent within the meaning of said Section 101(22).

22
<PAGE> 25

(h) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY
FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE
OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY HERETO TO THE WAIVER OF ITS
OR HIS RIGHTS TO TRIAL BY JURY.

12. Termination of Collateral Agreement.

This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.

13. No Personal Liability of Trustees.

By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.

<PAGE> 26

IN WITNESS WHEREOF, each of the Pledgor, the Corporate Seller
Control Persons, the Mark Hughes Family Trust, Mark Hughes, the Collateral Agent
and the Trust has caused this Collateral Agreement to be duly executed on its
behalf as of the date hereof.

PLEDGOR:

------------------------------------------

By:
------------------------------------------
Name:
Title:

Address for Notices:

------------------------------------------
Attention:

------------------------------------------

MH HOLDINGS I:

------------------------------------------

By:
------------------------------------------
Name:
Title:

Address for Notices:

------------------------------------------
Attention:

------------------------------------------

<PAGE> 27

MH HOLDINGS II:

------------------------------------------

By:
------------------------------------------
Name:
Title:

Address for Notices:

------------------------------------------
Attention:

------------------------------------------

MARK HUGHES FAMILY TRUST

------------------------------------------

By:
------------------------------------------
Name:
Title:

Address for Notices:

------------------------------------------
Attention:

------------------------------------------

<PAGE> 28

MARK HUGHES

------------------------------------------

By:
------------------------------------------
Name:
Title:

Address for Notices:

------------------------------------------
Attention:

------------------------------------------

THE TRUST:

DECS TRUST III

By:
--------------------------------------
Donald J. Puglisi,
as Trustee

By:
--------------------------------------
William R. Latham, III,
as Trustee

By:
--------------------------------------
James B. O'Neill,
as Trustee

Address for Notices:

-----------------------------------------
Attention:

-----------------------------------------

<PAGE> 29

COLLATERAL AGENT:

as Collateral Agent

By:
---------------------------------------
Name:
Title:

Address for Notices:

-----------------------------------------
Attention:

-----------------------------------------

<PAGE> 30

Exhibit A
to
Collateral Agreement

CERTIFICATE FOR SUBSTITUTED COLLATERAL

The undersigned, _____________ (the "Pledgor"), hereby certifies, pursuant to
Section 6(b) of the Collateral Agreement dated as of March [ ], 1998 among the
Pledgor, The Bank of New York, as Collateral Agent, certain other parties
thereto, and DECS TRUST III (the "Collateral Agreement"; terms defined in the
Collateral Agreement being used herein as defined therein), that:

1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):

2. The Pledgor requests that the Collateral Agent transfer to the
Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:

3. The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:

(a) Consents to Transfer. No Transfer Restrictions
exist with respect to or otherwise apply to the assignment of, or
transfer by the Pledgor of possession of, any items of
Substituted Collateral to the Collateral Agent under the
Collateral Agreement, or the subsequent sale or transfer of such
items of Substituted Collateral by the Collateral Agent pursuant
to the terms of the Collateral Agreement.

(b) Title to Collateral; Perfected Security
Interest. The Pledgor has good and marketable title to the
Substituted Collateral, free of all Liens (other than the Lien
created by the Collateral Agreement) and Transfer Restrictions.
Upon delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Substituted
Collateral subject to no other Lien. None of such Substituted
Collateral is or shall be pledged by the Pledgor as collateral
for any other purpose.

This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.

A-1
<PAGE> 31

IN WITNESS WHEREOF, the undersigned has executed this Certificate
this _____ day of ______, 1998.

-------------------------------------------
Name:
Title:

A-2

<PAGE> 32

Exhibit B

Collateral Agreement

CERTIFICATE FOR ADDITIONAL COLLATERAL

The undersigned, __________________ (the "Pledgor"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of
March [ ], 1998, among the Pledgor, The Bank of New York, as Collateral Agent,
certain other parties thereto, and DECS TRUST III (the "Collateral Agreement";
terms defined in the Collateral Agreement being used herein as defined therein),
that:

1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):

2. The Pledgor hereby represents and warrants to the Collateral
Agent that:

(a) Consents to Transfer. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by
the Pledgor of possession of, any items of Additional Collateral to the
Collateral Agent under the Collateral Agreement, or the subsequent sale
or transfer of such items of Additional Collateral by the Collateral
Agent pursuant to the terms of the Collateral Agreement.

(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Additional Collateral, free
of all Liens (other than the Lien created by the Collateral Agreement)
and Transfer Restrictions. Upon delivery of the Collateral to the
Collateral Agent, the Collateral Agent will obtain a valid, first
priority perfected security interest in, and a first lien upon, such
additional Collateral subject to no other Lien. None of such Additional
Collateral is or shall be pledged by the Pledgor as collateral for any
other purpose.

This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.

B-1
<PAGE> 33

IN WITNESS WHEREOF, the undersigned has executed this Certificate
this _____ day of _____ 1998.

-------------------------------------------
Name:
Title:

B-2

<PAGE> 1
EXHIBIT 2(k)(5)

FUND EXPENSE AGREEMENT

Agreement dated as of March [ ], 1998 between Smith Barney
Inc. ("Smith Barney") and The Bank of New York (the "Service Provider"), in its
capacities as administrator, custodian, paying agent and collateral agent for
DECS Trust III (the "Trust").

WHEREAS the Trust is a statutory business trust organized
under the Business Trust Act of the State of Delaware pursuant to a Declaration
of Trust dated as of January 22, 1998, as amended and restated as of March [
], 1998 (the "Trust Agreement"); and

WHEREAS Smith Barney desires to make provision for the payment
of certain initial and ongoing expenses of the Trust;

NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:

1. Definitions. (a) Capitalized terms used herein and
not defined herein shall have the meanings ascribed thereto in the Trust
Agreement.

(b) The following terms shall have the following meanings:

"Additional Expense" means the Ordinary Expense the incurring
of which will require the Service Provider to provide the Additional Expense
Notice pursuant to Section 3(a) hereof and any Ordinary Expense incurred
thereafter.

"Additional Expense Notice" means the notice required to be
given by the Service Provider to Smith Barney pursuant to Section 3(a)(i)
hereof.

"Closing Date" shall have the meaning ascribed thereto in the
Underwriting Agreement.

"Ordinary Expense" of the Trust means any expense of the Trust
other than any expense of the Trust arising under Sections 2.2(e) and 6.6 of
the Administration Agreement, Section 15 of the Custodian Agreement, Section
5.4(b) of the Paying Agent Agreement and Section 7.6 of the Trust Agreement.

"Up-front Fee Amount" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of its collective services as Administrator, Custodian, Paying Agent
and Collateral Agent for the entire term of the Trust.

"Up-front Expense Amount" means the amount set forth as such
on Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.

<PAGE> 2

2. Agreement to Pay Up-front Fees and Expenses. Smith
Barney agrees to pay to the Service Provider in New York Clearing House funds
on the Closing Date the Up-front Fee Amount and the Up-front Expense Amount.

3. Agreement to Pay Additional Expenses. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that, together with all
prior Ordinary Expenses incurred by the Administrator on behalf of the Trust,
would cause the aggregate amount of Ordinary Expenses of the Trust to exceed
the Up-front Expense Amount, the Administrator shall provide to Smith Barney
(i) prompt written notice to the effect that the aggregate amount of Ordinary
Expenses of the Trust will exceed the Up-front Expense Amount, and (ii) an
accounting, in such detail as shall be reasonably acceptable to Smith Barney,
of all Ordinary Expenses incurred on behalf of the Trust through the date of
the Additional Expense Notice.

(b) From and after the date of the Additional Expense Notice,
the Service Provider agrees that it will not, without the prior written consent
of Smith Barney, incur on behalf of the Trust (i) any single expense in excess
of $3,000 or (ii) in any calendar quarter, expenses aggregating in excess of
$15,000. Subject to the foregoing, the Service Provider shall give notice to
Smith Barney in writing promptly following the incurring of any Additional
Expense. Such notice shall be accompanied by any demand, bill, invoice or
other similar document in respect of such Additional Expense.

(c) Subject to the first sentence of paragraph (b) of this
Section 3, Smith Barney agrees to pay to the Service Provider from time to time
the amount of any Additional Expense. Payment by Smith Barney of any
Additional Expense shall be made in New York Clearing House funds by the later
of (i) five Business Days after the receipt by Smith Barney of written notice
from the Service Provider of the incurring thereof or (ii) the due date for the
payment of such Additional Expense.

(d) Smith Barney may contest in good faith the reasonableness
of any Additional Expense and the parties shall attempt to resolve amicably the
disagreement; provided that if the parties cannot resolve the dispute by the
due date hereunder with respect to such Additional Expense, subject to the
first sentence of paragraph (b) of this Section 3, Smith Barney shall pay the
amount of such Additional Expense, subject to later adjustment and credit if
such dispute is resolved in favor of Smith Barney.

4. Condition to Payment. The obligations of Smith
Barney hereunder shall be subject to the condition that the Trust's DECS shall
have been issued and paid for on the Closing Date.

5. Trust Termination; Refund of Unused Expense Funds.
If at the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement the aggregate amount of Ordinary Expenses incurred by the Service
Provider on behalf of the Trust through the date of termination shall be less
than the Up-front Expense Amount, the Service Provider shall, promptly
following the date of such termination, pay to Smith Barney in New York
Clearing House funds the amount of such excess.

2
<PAGE> 3

6. Termination of Administration Agreement. If the
Administration Agreement is terminated in accordance with Section 4.1 thereof,
the Service Provider shall promptly pay to Smith Barney (i) the ratable portion
of its Up-front Fee Amount for the period from the date of the termination of
the Administration Agreement to the Exchange Date and (ii) any unexpended
portion of the Up-front Expense Amount.

7. Statements and Reports. The Service Provider shall
collect and safekeep all demands, bills, invoices or other written
communications received from third parties in connection with any Ordinary
Expenses and Additional Expenses and shall prepare and maintain adequate books
and records showing all receipts and disbursements of funds in connection
therewith. Smith Barney shall have the right to inspect and to copy, at its
expense, all such documents, books and records at all reasonable times and from
time to time during the term of this Agreement.

8. Term of Contract. This Agreement shall continue in
effect until the termination of the Trust in accordance with Section 8.3 of the
Trust Agreement.

9. No Assignment. No party to this Agreement may assign
its rights or delegate its duties hereunder without the prior written consent
of the other party.

10. Amendments. The Service Provider agrees that it will
not consent to any amendment to any of the Administration Agreement, the
Custodian Agreement, the Paying Agent Agreement or the Collateral Agreement
without the prior written consent of Smith Barney.

11. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or
modification of this Agreement shall be valid unless the amendment or
modification is in writing and is signed by all the parties to this Agreement.

12. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified,
postage prepaid, to the appropriate party at its address on the signature pages
hereof or at such other address subsequently notified to the other parties
hereto. A copy of any communication to Smith Barney shall be furnished to
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York
10006, Attention: Allan G. Sperling, provided that the failure to furnish such
copy shall not affect the effectiveness of any such communication. Any party
may change its address for purposes hereof by delivering a written notice of
the change to the other parties. All notices given under this Agreement shall
be deemed received (a) in the case of hand delivery, on the day of delivery,
(b) in the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such
notice was deposited in the mail.

13. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

3
<PAGE> 4

14. Governing Law. This Agreement shall be governed by
and be construed in accordance with the laws of the State of New York.

15. Counterparts. This Agreement may be signed in
counterpart with all of such counterparts constituting one and the same
instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives as of the date first above
written.

SMITH BARNEY INC.

By:___________________________________
Name:
Title:
Address: 390 Greenwich Street
New York, New York 10013
Attention:

THE BANK OF NEW YORK

By:___________________________________
Name: Mark G. Walsh
Title: Assistant Vice President
Address: 101 Barclay Street
New York, New York 10286

4
<PAGE> 5
SCHEDULE I

to Fund Expense Agreement

Up-front Fee Amount: $[ ]

Up-front Expense Amount: $[ ]

<PAGE> 1
EXHIBIT 2(k)(6)

FUND INDEMNITY AGREEMENT

Agreement dated as of March [ ], 1998 between Smith Barney
Inc. ("Smith Barney") and DECS Trust III (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust").

WHEREAS the Trust is a statutory business trust organized
under the Business Trust Act of the State of Delaware pursuant to a Declaration
of Trust dated as of January 23, 1998, as amended and restated as of March [
], 1998 (the "Trust Agreement"); and

WHEREAS, Smith Barney, as sponsor under the Trust Agreement,
desires to make provision for the payment of certain indemnification expenses
of the Trust;

NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:

1. Definitions. Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Trust Agreement.

2. Agreement to Pay Expenses. Smith Barney agrees to
pay to the Trust, and hold the Trust harmless from, any expenses of the Trust
arising under Sections 2.2(e) and 6.6 of the Administration Agreement, Section
15 of the Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and
Section 7.6 of the Trust Agreement (collectively, together with any amounts
paid pursuant to paragraph 4 of this Agreement, "Indemnification Expenses").
Subject to paragraph 4 hereof, payment hereunder by Smith Barney shall be made
in New York Clearing House funds no later than five Business Days after the
receipt by Smith Barney, pursuant to paragraph 3 hereof, of written notice of
any claim for Indemnification Expenses.

3. Notice of Receipt of Claim. The Trust shall give
notice to, or cause notice to be given to, Smith Barney in writing of any claim
for Indemnification Expenses or any threatened claim for Indemnification
Expenses immediately upon the Trust acquiring knowledge thereof. Such written
notice shall be accompanied by any demand, bill, invoice or other communication
received from any third party claimant (a "Claimant") in respect of such
Indemnification Expense.

4. Right to Contest. The Trust agrees that Smith Barney
may, and Smith Barney is authorized on behalf of the Trust to, contest in good
faith with any Claimant any amount contained in any claim for Indemnification
Expense, provided, that if, within such time period as Smith Barney shall
determine to be reasonable, Smith Barney and such Claimant are unable to
resolve amicably any disagreement regarding such claim for Indemnification
Expense, Smith Barney shall retain counsel reasonably satisfactory to the
Trustees to represent the Trustees in any resulting proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding.
Notwithstanding any other provision herein, it is understood that (a) Smith
Barney shall not, in respect of the legal expenses of any indemnified party in
connection with any

<PAGE> 2

proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel), and (b) Smith Barney shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the Claimant, Smith Barney agrees
to indemnify the Trust from and against any loss or liability by reason of such
settlement or judgment.

5. Statements and Reports. The Trust shall collect and
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any claim for Indemnification Expenses
and shall prepare and maintain adequate books and records showing all receipts
and disbursements of funds in connection therewith. Smith Barney shall have
the right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.

6. Term of Contract. This Agreement shall continue in
effect until the termination of the Trust in accordance with Section 8.3 of the
Trust Agreement.

7. No Assignment. No party to this Agreement may assign
its rights or delegate its duties hereunder without the prior written consent
of the other parties, except that the Trust may delegate any and all duties
hereunder to the Administrator to the extent permitted by law.

8. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or
modification of this Agreement shall be valid unless the amendment or
modification is in writing and is signed by all the parties to this Agreement.

9. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified,
postage prepaid, to the appropriate party at its address on the signature pages
hereof or at such other address subsequently notified to the other parties
hereto. A copy of any communication to Smith Barney shall be furnished to
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York
10006, Attention: Raymond B. Check, provided that the failure to furnish such
copy shall not affect the effectiveness of any such communication. Any party
may change its address for purposes hereof by delivering a written notice of
the change to the other parties. All notices given under this Agreement shall
be deemed received (a) in the case of hand delivery, on the day of delivery,
(b) in the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such
notice was deposited in the mail.

10. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

11. Governing Law. This Agreement shall be governed by
and be construed in accordance with the laws of the State of New York.

<PAGE> 3
12. Counterparts. This Agreement may be signed in counterpart
with all of such counterparts constituting one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives the date first above written.

SMITH BARNEY INC.

By:__________________________________

Address: 390 Greenwich Street
New York, New York 10013
Attention:

DECS TRUST III

By:__________________________________
Donald J. Puglisi,
as Managing Trustee
Address: c/o Puglisi & Associates
850 Library Avenue,
Suite 204
Newark, Delaware 19716

<PAGE> 1
EXHIBIT 2(l)

[Letterhead of Richards, Layton & Finger]

DECS Trust III
c/o Puglisi & Associates
850 Liberty Avenue, Suite 204
Newark, Delaware 19715

Re: DECS Trust III

Ladies and Gentlemen:

We have acted as special Delaware counsel for DECS Trust III, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of the
following:

(a) The Certificate of Trust of the Trust (the "Original Certificate
of Trust"), dated January 22, 1998, as filed in the office of the Secretary
of State of the State of Delaware (the "Secretary of State") on January 22,
1998;

(b) The Restated Certificate of Trust of the Trust (the "Restated
Certificate of Trust"; and together with the Original Certificate of Trust, the
"Certificate of Trust"), dated March 3, 1998, as filed in the office of the
Secretary of State on March 3, 1998;
<PAGE> 2
DECS Trust III
March 23, 1998
Page 2

(c) The Declaration of Trust of the Trust, dated as of January 22,
1998, between Alan Rifkin, as sponsor (the "Initial Sponsor"), and Michael E.
Sherman, as trustee (the "Initial Trustee");

(d) The registration statement (the "Initial Registration Statement")
on Form N-2, including a prospectus (the "Prospectus"), relating to the issuance
of up to 1,150,000 DECS of the Trust representing undivided beneficial interests
in the assets of the Trust (the "DECS"), as filed by the Trust with the
Securities and Exchange Commission (the "SEC") on January 23, 1998, as amended
by Pre-Effective Amendment No. 1 to the Initial Registration Statement
("Amendment No. 1"), filed by the Trust with the SEC on March 5, 1998, as
amended by Pre-Effective Amendment No. 2 to the Initial Registration Statement
("Amendment No. 2"), filed by the Trust with the SEC on March 23, 1998 (the
Initial Registration Statement, as amended by Amendment No. 1 and Amendment No.
2, being hereinafter referred to as the "Registration Statement");

(e) A form of Amended and Restated Trust Agreement of the Trust, to
be entered into among the Initial Sponsor, the Initial Trustee, Smith Barney
Inc., as sponsor, Donald J. Puglisi, William R. Latham III and James B. O'Neill,
as trustees, and the Holders (as defined therein), including Exhibit A attached
thereto (the "Trust Agreement"); and

(f) A Certificate of Good Standing for the Trust, dated March 23,
1997, obtained from the Secretary of State.

Initially, capitalized terms used herein and not otherwise defined
are used as defined in the Trust Agreement.

For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (f) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (f) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that bears upon or is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that
(i) all signatures on documents examined by us are genuine, (ii) all documents
submitted to us as originals are authentic, and (iii) all documents submitted
to us as copies conform with the original copies of those documents.

<PAGE> 3
DECS Trust III
March 23, 1998
Page 3

For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate of Trust constitute the entire agreement among
the parties thereto with respect to the subject matter hereof, including with
respect to the creation, operation and termination of the Trust, and that the
Trust Agreement and the Certificate of Trust are in full force and effect and
have not been amended, (ii) except to the extent provided in paragraph 1 below,
the due creation or due organization or due formation, as the case may be, and
valid existence in good standing of each party to the documents examined by us
under the laws of the jurisdiction governing its creation, organization or
formation, (iii) the legal capacity of natural persons who are parties to the
documents examined by us, (iv) that each of the parties to the documents
examined by us has the power and authority to execute and deliver, and to
perform its obligations under, such documents, (v) the due authorization,
execution and delivery by all parties thereto of all documents examined by
us, (vi) the receipt by each Person to whom a DECS is to be issued by the Trust
(collectively, the "DECS Holders") of an interest in the DECS Certificate
(substantially in the form of Exhibit A to the Trust Agreement) and the payment
for the DECS acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (vii) that the DECS are issued and sold to the DECS
Holders in accordance with the Trust Agreement and the Registration Statement.
We have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.

This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.

Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:

1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
Section 3801, et. seq.

2. When issued and sold, the DECS will represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.

3. The DECS Holders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We note
<PAGE> 4
DECS Trust III
March 23, 1998
Page 4

that the DECS Holders may be obligated to make payments as set forth in the
Trust Agreement.

We consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. In addition, we hereby consent to the use of our
name under the heading "Legal Matters" in the Prospectus. In giving the
foregoing consents, we do not thereby admit that we come within the category of
Persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the SEC thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.

Very truly yours,

/s/ RICHARDS, LAYTON & FINGER

EAM/DKD/cal

<PAGE> 1
EXHIBIT 2(n)(1)

[CLEARY, GOTTLIEB, STEEN & HAMILTON LETTERHEAD]

March 23, 1998

DECS Trust III
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715

Ladies and Gentlemen:

We have acted as special tax counsel to DECS Trust III (the "Trust") in
connection with the registration statement on Form N-2 of the Trust (the
"Registration Statement") with the Securities and Exchange Commission and
hereby confirm to you our advice as set forth under the heading "Certain United
States Federal Income Tax Considerations" in the Prospectus included in the
Registration Statement.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Certain
United States Federal Income Tax Considerations" in the Prospectus. In giving
such consent, we do not thereby admit that we are in the capacity of persons
whose consent is required under Section 7 of the Act.

Very truly yours,

Cleary, Gottlieb, Steen & Hamilton

By: /s/ Erika W. Nijenhuis
-----------------------------------
Erika W. Nijenhuis, a Partner

<PAGE> 1
EXHIBIT 2(n)(3)

CONSENT TO BEING NAMED AS TRUSTEE

The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust III (the "Trust") and any amendments
thereto, as a person about to become a Trustee of the Trust.

Dated: March 23, 1998

/s/ James B. O'Neill
------------------------------
James B. O'Neill
<PAGE> 2

CONSENT TO BEING NAMED AS TRUSTEE

Dated: March 23, 1998

/s/ Donald J. Puglisi
------------------------------
Donald J. Puglisi
<PAGE> 3

CONSENT TO BEING NAMED AS TRUSTEE

Dated: March 23, 1998

/s/ William R. Latham, III
------------------------------
William R. Latham, III

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECS TRUST
III STATEMENT OF ASSETS, LIABILITIES AND CAPITAL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-23-1998
<PERIOD-END> MAR-23-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 100
<OTHER-ITEMS-ASSETS> 100
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 100
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>