HERBALIFE INTERNATIONAL INC, S-3, 1997-02-05

HERBALIFE INTERNATIONAL INC
S-3, 1997-02-05
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HERBALIFE INTERNATIONAL, INC.

<TABLE>
<S> <C> <C>
NEVADA 5149 22-2695420
(State of Incorporation) (Primary standard industrial (I.R.S. employer
classification code number) identification
number)
</TABLE>

1800 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
(310) 410-9600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

ROBERT SANDLER, ESQ.
HERBALIFE INTERNATIONAL, INC.
1800 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
(310) 410-9600
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------------

COPY TO:

<TABLE>
<S> <C>
ANTHONY T. ILER, ESQ. ALLAN G. SPERLING, ESQ.
IRELL & MANELLA LLP CLEARY, GOTTLIEB, STEEN & HAMILTON
333 SOUTH HOPE STREET, SUITE 3300 ONE LIBERTY PLAZA
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10006
(213) 620-1555 (212) 225-2000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
With respect to the DECS Equity Prospectus, as soon as practicable after this
Registration Statement becomes effective.
With respect to the Shelf Prospectus, from time to time after this Registration
Statement becomes effective.
--------------------------

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. /X/

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value................. 5,600,000 shares $25.75 $144,200,000 $43,697
</TABLE>

(1) Includes 4,000,000 shares that may be delivered by Salomon Inc pursuant to
the terms of certain exchangeable notes as described herein (plus 600,000
shares deliverable on exercise of an over-allotment option) and 1,000,000
shares that may be loaned by Mark Hughes or an affiliate thereof to Salomon
Brothers Inc from time to time in connection with market-making activities
as described herein.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act, based on the average of the
high and low prices of the Common Stock on the Nasdaq National Market on
February 3, 1997.
--------------------------

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, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.

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<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: (i) a
prospectus relating to the delivery by Salomon Inc ("Salomon") pursuant to the
% Exchangeable Notes due , 2000 (the "DECS") of Salomon of shares
of Common Stock of the Registrant (the "DECS Equity Prospectus") as described
herein and (ii) a prospectus relating to shares of Common Stock of the
Registrant that may be loaned by Mark Hughes, or an affiliate thereof, to
Salomon Brothers Inc from time to time in connection with market-making
activities in the DECS (the "Shelf Prospectus") as described herein. The
complete DECS Equity Prospectus follows immediately. Following such DECS Equity
Prospectus is an alternate cover page for the Shelf Prospectus, marked
"[ALTERNATE PAGE FOR SHELF PROSPECTUS]". All other pages of the DECS Equity
Prospectus will be used for the Shelf Prospectus.
<PAGE>
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 SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
FEBRUARY 5, 1997

PROSPECTUS [HERBALIFE LOGO]

4,000,000 SHARES

HERBALIFE INTERNATIONAL, INC.

COMMON STOCK

($.01 PAR VALUE)

Pursuant to the terms of the % Exchangeable Notes Due , 2000 (the
"Debt Exchangeable for Common Stock-SM-" or "DECS-SM-") of Salomon Inc, a
Delaware corporation ("Salomon"), Salomon may deliver to the holders of the DECS
shares of Common Stock, par value $.01 per share (the "Common Stock"), of
Herbalife International, Inc. (the "Company" or "Herbalife"). This Prospectus
relates to the delivery by Salomon pursuant to the DECS of up to 4,000,000
shares of Common Stock, plus up to an additional 600,000 shares of Common Stock
with respect to DECS solely to cover over-allotments, that Salomon may receive
from Mark Hughes, the Company's principal stockholder, Chairman of the Board,
Chief Executive Officer and President (the "Selling Stockholder"), under the
terms of a purchase contract (the "Stockholder DECS") between the Selling
Stockholder and Salomon. This Prospectus accompanies a Prospectus Supplement and
Prospectus of Salomon (together, the "DECS Prospectus") relating to the sale of
4,000,000 DECS, plus up to an additional 600,000 DECS solely to cover
over-allotments (the "DECS Offering"). The Company will not receive any of the
proceeds from the sale of the DECS or delivery thereunder of the Common Stock to
which this Prospectus relates. The Company takes no responsibility for any
information included in or omitted from the DECS Prospectus. The DECS Prospectus
does not constitute a part of this Prospectus nor is it incorporated by
reference herein.

The Company and the Selling Stockholder have agreed, subject to certain
exceptions, not to sell, without the prior written consent of Salomon Brothers
Inc ("Salomon Brothers"), any Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days after the
date of this Prospectus. See "Plan of Distribution."

In connection with market-making activities in the DECS, Salomon Brothers may,
subject to certain limitations, from time to time, borrow, return and reborrow
up to 1,000,000 shares of Common Stock from the Selling Stockholder or an
affiliate thereof. See "Plan of Distribution." Salomon Brothers is not under any
obligation to engage in any market-making transactions with respect to the DECS,
and any market-making in the DECS actually engaged in by Salomon Brothers may
cease at any time. The Registration Statement of which this Prospectus forms a
part includes a Prospectus relating to shares of Common Stock which may be
offered and sold by Salomon Brothers pursuant to such market-making activities.

The Common Stock is listed for trading on the Nasdaq National Market under the
symbol "HERB." On February 4, 1997, the last reported sale price of the Common
Stock on the Nasdaq National Market was $28.00 per share. See "Price Range of
Common Stock."

"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.

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

THE DATE OF THIS PROSPECTUS IS .
<PAGE>
IN CONNECTION WITH THE DECS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR
THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE PRINCIPAL EXCHANGE OR TRADING
SYSTEM ON WHICH THE DECS AND THE COMMON STOCK ARE TRADED, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

FORWARD-LOOKING STATEMENTS

Certain information incorporated by reference into this Prospectus includes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and is subject to the safe harbor created by that
Act. There are several important factors that could cause actual results to
differ materially from those anticipated by the forward-looking statements
contained in such discussions. Additional information on the risk factors that
could affect Herbalife's financial results is included in this Prospectus and in
other documents incorporated by reference herein.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of the reports, proxy statements and other information may be obtained
from the Public Reference Section of the Commission, at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission, including Herbalife.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules filed as a part thereof. For further
information about the Company and the securities offered hereby, reference is
made to the Registration Statement and to the financial statements, exhibits and
schedules filed therewith. The statements contained in this Prospectus about the
contents of any contract or other document referred to are not necessarily
complete, and where such contract or other document is filed as an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. The Registration Statement, including the
exhibits and schedules filed as a part thereof, may be inspected without charge
at the public reference facilities maintained by the Commission as set forth in
the preceding paragraph. Copies of these documents may be obtained from the
Commission at its principal office in Washington, D.C. upon payment of the
charges prescribed by the Commission.

2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE

The following documents have been filed with the Commission by the Company
and are incorporated herein by reference and made a part hereof: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995; (ii)
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and (iii) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A and any amendments thereto filed with the Commission for the purpose of
updating such description.

All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Common Stock shall be deemed
to be incorporated in this Prospectus by reference and to be a part hereof from
the date of filing of such documents. The Company will provide, without charge
to any person to whom a copy of this Prospectus is delivered, upon the written
or oral request of such person, a copy of any document incorporated by reference
herein other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such document. Requests should be
directed to Herbalife International, Inc., 1800 Century Park East, Los Angeles,
California 90067, Attention: Chief Counsel (telephone: (310) 410-9600).

Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

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"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers Inc.

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES
TO THE "COMPANY" INCLUDE HERBALIFE INTERNATIONAL, INC. AND ITS CONSOLIDATED
SUBSIDIARIES.

THE COMPANY

Herbalife is a network marketing company that sells a wide range of weight
management products, food and dietary supplements and personal care products
worldwide. As of December 31, 1996, the Company conducted business in 34
countries located in The Americas, Europe and Asia/Pacific Rim. Retail sales in
those regions represented 34.8%, 37.4% and 27.8%, respectively, of the Company's
total retail sales in the first nine months of 1996.

The Company has experienced substantial growth in retail sales and net
income in recent years. From 1991 to 1995, the Company's retail sales grew from
$191.0 million to $923.6 million, representing a compound annual growth rate of
48.3%, and the Company's net income grew from $7.1 million to $19.7 million,
representing a compound annual growth rate of 29.2%. For the nine months ended
September 30, 1996, retail sales and net income increased by 30.2% to $867.2
million and by 110.7% to $31.0 million, respectively, over the prior year
period. The increase for the nine-month period was primarily due to an expansion
of operations in new geographic markets.

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 Herbalife products to retail consumers or other distributors.
Distributors may also develop their own distributor organizations by sponsoring
other distributors to do business in any market where the Company operates,
entitling the sponsors to receive royalties and bonuses on product sales within
their downline organizations.

Management believes that Herbalife's network marketing system is ideally
suited to its products, which emphasize a healthy lifestyle, because sales of
such products are strengthened by ongoing personal contact between retail
consumers and distributors, many of whom use the Company's products themselves.
The Company's network marketing system appeals to a broad cross-section of
people throughout the world, particularly those seeking to supplement family
income, start a home business or pursue employment opportunities other than
conventional, full-time employment.

KEY OPERATING STRENGTHS

The Company believes the source of its success is its commitment to serving
the needs of its distributors. The Company provides its distributors with high
quality products and an appealing network marketing system that combines a
highly attractive compensation program with extensive Company-sponsored training
and motivational events and services. The Company has established a strong
operating platform to support distributors and facilitate future growth. The key
components of this platform include the following:

HIGH QUALITY PRODUCTS. The Company offers high quality weight management,
food and dietary supplement and personal care products, many of which emphasize
herbs and other natural ingredients in order to appeal to consumer demand for
products that contribute to a healthy lifestyle. These three product categories
represented 75.2%, 9.4% and 11.6% of total retail sales in 1995, respectively.

ATTRACTIVE DISTRIBUTOR COMPENSATION PROGRAM. The Company believes that it
offers one of the most financially rewarding compensation programs in the
network marketing industry. Combining the various sources of earnings available
to the Company's distributors, the Company's total "pay-out" (including
distributor allowances) on products subject to distributor royalties and
overrides is approximately 68% of the Company's suggested retail sales price.

4
<PAGE>
COMPREHENSIVE DISTRIBUTOR SUPPORT SERVICES. The Company is committed to
training and motivating its distributors and providing ongoing support. The
Company regularly conducts motivational events and training seminars, both live
and via Herbalife's "HBN" satellite network and teleconferences, and utilizes a
range of promotional literature, including catalogs and newsletters, all in
multiple languages and tailored to meet the particular needs of Herbalife
distributors worldwide.

PROVEN NEW MARKET EXPANSION PROGRAM. The Company has developed a
systematic, proven approach to opening new markets. With the advice of local
legal counsel and other advisors, the Company conducts a detailed analysis of
the new market's regulatory framework, modifies its products and marketing
system as necessary to obtain required regulatory approvals and establishes
plans for product distribution and distributor services within the new market.

GROWTH STRATEGY

The Company plans to continue capitalizing on its strong operating platform
and intends to pursue a growth strategy comprised of the following three
principal elements:

EXPAND INTO NEW MARKETS. The opening of new markets is an essential
component of the Company's business strategy. The Company believes there are
numerous additional markets in which its network marketing system and products
should prove successful. The Company plans to open up to four new markets in
1997 and up to six new markets in 1998. Potential new markets currently include
Chile, China, India, Indonesia, Malaysia, Thailand, Turkey and Ukraine.

EXPAND PRODUCT OFFERINGS. The Company is committed to expanding its product
line by developing and offering new products and introducing existing products
into markets where they are not currently offered. Expansion of product
offerings is designed to create enthusiasm among distributors and serve as a
promotional tool in selling other products. During 1997, the Company intends to
introduce up to 15 new products, including a new weight management program
consisting of several products and up to ten new personal care products. In
addition, the Company will continue its strategy of systematically introducing
its most popular existing products into markets where they are not currently
offered (subject to its ability to reformulate its products as necessary to
obtain required regulatory approvals).

ENHANCE SALES IN CERTAIN EXISTING MARKETS. Management will continue to seek
to enhance sales in the Company's existing markets. The Company intends to focus
initially on the United States and certain other markets, such as France,
Germany, Italy and Spain, where the Company has experienced a sales trend
characterized by an initial period of rapid sales growth followed by a decline
in sales. See "Business--Geographic Areas of Operations." Initiatives designed
to enhance sales in these markets will include the creation of new regional
planning and strategy groups, regular Company-sponsored and country-specific
training and motivational events and teleconferences, the hiring of additional
distributor support representatives, the introduction in each targeted
international market of up to five additional products not previously offered,
and the opening of new, more convenient distributor service centers in the
targeted international markets.

5
<PAGE>
THE OFFERINGS

<TABLE>
<S> <C>
Plan of Distribution.............. The DECS are being offered by Salomon in the DECS
Offering pursuant to the DECS Prospectus. Pursuant to
the terms of the DECS, Salomon may deliver shares of
Common Stock to the holders of the DECS at the maturity
thereof. This Prospectus relates to the delivery by
Salomon pursuant to the DECS of up to 4,000,000 shares
of Common Stock, plus up to an additional 600,000 shares
of Common Stock with respect to DECS solely to cover
over-allotments, if any, that Salomon may receive from
the Selling Stockholder under the terms of the
Stockholder DECS. For a description of certain
relationships between the Selling Stockholder and the
Company, see "Certain Transactions."

Selling Stockholder............... The Selling Stockholder in this offering is Mark Hughes,
the principal stockholder, Chairman of the Board, Chief
Executive Officer and President of the Company. As of
January 27, 1997, Mr. Hughes beneficially owned
17,402,238 shares of Common Stock (including 550,000
shares which are held in a foundation as to which Mr.
Hughes has no pecuniary interest), representing 57.6% of
the Company's outstanding Common Stock. Assuming the
delivery to Salomon of the maximum number of shares of
Common Stock that may be required by the Selling
Stockholder to satisfy the Stockholder DECS (assuming
full exercise of the over-allotment option), Mr. Hughes
would beneficially own 12,802,238 shares of Common Stock
(including the 550,000 foundation shares), representing
42.4% of the Company's currently outstanding Common
Stock. During the term of the DECS and the Stockholder
DECS, Mr. Hughes will retain the right to vote and
receive dividends on the shares of Common Stock subject
to the Stockholder DECS. See "Plan of Distribution."

Use of Proceeds................... All of the shares of Common Stock covered by this
Prospectus are beneficially owned by the Selling
Stockholder, who may deliver such shares to Salomon
pursuant to the Stockholder DECS. See "Plan of
Distribution." The Company will not receive any of the
proceeds from the sale of the DECS or the delivery
thereunder of the Common Stock to which this Prospectus
relates. See "Use of Proceeds."

Nasdaq National Market symbol of
the Common Stock................ HERB
</TABLE>

6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

Cost of sales....................... 33,892 63,138 103,834 130,707 143,557 103,542 123,914

Royalty overrides................... 28,312 60,851 107,381 125,820 138,940 98,434 134,091
--------- --------- --------- --------- --------- --------- ---------
Operating margin.................... 40,365 90,434 153,530 210,354 206,507 151,721 199,214

Marketing, distribution and
administrative expenses........... 31,737 59,583 88,918 139,629 176,046 130,282 151,878
Restructuring expenses.............. -- -- -- -- 2,300 -- --
Interest income--net................ 118 689 1,729 2,919 3,404 2,067 3,004
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes.......... 8,746 31,540 66,341 73,644 31,565 23,506 50,340
Income taxes........................ 1,663 11,464 25,160 27,616 11,837 8,815 19,379
--------- --------- --------- --------- --------- --------- ---------
Net income.......................... $ 7,083 $ 20,076 $ 41,181 $ 46,028 $ 19,728 $ 14,691 $ 30,961
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share:
Primary........................... $0.33 $0.79 $1.47 $1.50 $0.65 $0.48 $1.00
Fully diluted..................... $0.27 $0.74 $1.47 $1.50 $0.65 $0.48 $0.99
Cash dividends per common share..... -- $0.15 $0.49 $0.80 $0.74 $0.59 $0.45
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28,
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1991 1992 1993 1994 1995 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Approximate number of supervisors... 12,000 18,000 41,000 75,000 90,000 99,000
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of countries................. 11 15 16 24 32 34
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995 SEPTEMBER 30, 1996
--------- --------- --------- --------- --------- --------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
marketable securities............. $ 10,741 $ 28,847 $ 79,354 $ 59,113 $ 104,226 $ 115,476
Working capital..................... 5,519 18,732 72,723 89,825 85,126 93,169
Total assets........................ 27,912 61,089 130,820 174,057 207,690 231,337
Long-term obligations............... 324 1,045 994 1,014 1,779 1,673
Stockholders' equity................ 8,871 23,913 81,202 109,815 109,530 121,654
</TABLE>

7
<PAGE>
RISK FACTORS

Prior to making an investment decision, prospective investors should
consider carefully the information set forth below, as well as the other
information contained in this Prospectus.

DEPENDENCE ON DISTRIBUTORS

The Company's success depends in significant part upon its ability to
attract, maintain and motivate a large base of distributors. In its efforts to
attract and retain distributors, the Company competes with other network
marketing organizations, including those in the weight management, food and
dietary supplement and personal care product industries. In addition, as a
result of the Company's network marketing system and its international
sponsorship program, the distributor organizations headed by a relatively small
number of key distributors are responsible for a significant percentage of total
retail sales (in many cases, including retail sales in several different
countries). The Company does not believe that the loss of any key distributor
would necessarily result in the loss of a significant number of that
distributor's downline organization members because of the Company's generally
good relations with its distributors and because of the significant incomes that
many distributors would forego by ceasing to distribute the Company's products.
However, the loss of a key distributor, together with a significant number of
downline distributors, or the loss of a significant number of distributors for
any reason, could adversely affect sales of the Company's products and could
impair the Company's ability to attract new distributors.

The Company's ability to attract and retain distributors has been and could
again be negatively affected by adverse publicity and regulatory action relating
to the Company, its products or its operations, including its network marketing
system. In the mid-1980s, the Company's products and marketing system became the
subject of regulatory scrutiny in the United States, resulting in large part
from claims and representations made about the Company's products (including
impermissible therapeutic claims). The resulting adverse publicity caused a
rapid, substantial loss of distributors in the United States and a corresponding
reduction in sales beginning in 1985. More recently, adverse publicity in other
markets, including Brazil, France and Germany, contributed to a loss of
distributors and a decline in sales in those markets. See "--Sales and Earnings
Volatility." The Company expects that its business in particular markets will,
from time to time, continue to be adversely affected by negative publicity or
regulatory action. See "Business--Network Marketing System; Geographic Areas of
Operations; Regulation; Growth Strategy."

REGULATION

In both its United States and foreign markets, the Company is subject to and
affected by extensive governmental regulations, including, among other things,
regulations pertaining to (i) the formulation, manufacturing, packaging,
labeling, distribution, importation, sale and storage of the Company's products,
(ii) product claims and advertising (including direct claims and advertising by
the Company, as well as claims and advertising by distributors for which the
Company may be held responsible), (iii) the Company's network marketing system,
(iv) transfer pricing and similar regulations that affect the level of foreign
taxable income and customs duties, and (v) taxation of distributors, which in
some instances may impose an obligation on the Company to collect the taxes and
maintain appropriate records. See "Business--Regulation."

The Company could be found not to be in compliance with existing regulations
as a result, among other things, of the ambiguous nature of certain of the
regulations, the considerable interpretive and enforcement discretion given to
regulators or misconduct by distributors, who are generally independent
contractors over whom the Company has limited control. Any assertion or
determination that the Company or its distributors are not in compliance with
existing regulations could have a material adverse

8
<PAGE>
effect on the Company. The Company's business has been materially, adversely
affected in the past as a result of regulatory activities. See "--Sales and
Earnings Volatility."

In addition, the adoption of new regulations in the United States or in any
of the Company's international markets, or changes in the interpretation of
existing regulations, could have a material adverse effect on the Company. For
example, in December 1995, the United States Food & Drug Administration (the
"FDA") issued proposed regulations that govern the labeling of dietary
supplements, including how to declare nutritional information, how to make
permissible "statements of nutritional support" and when additional, defined
terminology may be used on dietary supplements. The proposed regulations were
expected to become final at the end of 1996; as of this date, however, no final
regulations have been issued. The proposed regulations would require the Company
to revise a substantial number of its labels at an undetermined, but likely
immaterial, expense to the Company. Further, in certain markets, including the
U.S., claims made with respect to weight management, dietary supplement,
personal care or other products of the Company may change the regulatory status
of the products. In the U.S., for example, it is possible that the FDA could
take the position that claims relating to certain products fall within an
"over-the-counter monograph" (see "Business--Regulation"), such that the
regulatory status of those products in the U.S. is or could become unclear.

The U.S. Federal Trade Commission ("FTC"), which exercises jurisdiction over
the advertising of all the Company's products, has in the past several years
instituted enforcement actions against several dietary supplement companies for
false and misleading advertising of certain products. These enforcement actions
have resulted in consent decrees and monetary payments by the companies
involved. In addition, the FTC has increased its scrutiny of the use of
testimonials, which are utilized by the Company. While the Company has not been
the target of FTC enforcement action for the advertising of its products, there
can be no assurance that the FTC will not question the Company's advertising or
other operations in the future.

As a marketer of food and dietary supplements and other products that are
ingested by consumers, the Company is subject to the risk that one or more of
the ingredients in its products may become the subject of adverse regulatory
action. For example, one of the ingredients in the
Thermojetics-Registered Trademark- original green herbal tablet is a Chinese
herb, Ma Huang, which contains naturally-occurring ephedrine in small
quantities. Ephedrine products have been the subject of adverse publicity in the
United States and other countries relating to alleged harmful effects, including
the deaths of several individuals. Currently, the Company offers the
Thermojetics-Registered Trademark- original green herbal tablet only in the
United States (except in certain states in which regulations may prohibit or
restrict the sale of such product). In response to potential federal regulatory
proposals that may have affected the sale of the
Thermojetics-Registered Trademark- original green herbal tablet in the United
States, the Company suspended sales of the product for approximately three
months commencing in July 1995 and introduced a reformulated herbal green tablet
that did not contain Ma Huang. When no such regulations were proposed or issued,
the Company renewed sales of Thermojetics-Registered Trademark- original green
herbal tablets in the United States in October 1995 (except in certain states in
which regulations may prohibit or restrict the sale of such product). During the
three-month suspension period, the Company did not experience a material change
in the level of sales of the reformulated Thermojetics-Registered Trademark-
green tablets versus sales of the Thermojetics-Registered Trademark- original
green tablets in the recently preceding months. However, it is possible that a
longer suspension period could have resulted in a decrease in sales of the
reformulated Thermojetics-Registered Trademark- green tablets or other products
within the Thermojetics-Registered Trademark- Weight Management System (even
though such products do not contain Ma Huang). The
Thermojetics-Registered Trademark- original green herbal tablet accounted for
2.1% and 2.7% of total retail sales in 1995 and in the nine months ended
September 30, 1996, respectively, although the marketing of the
Thermojetics-Registered Trademark- weight management tablets (original green,
green, beige and yellow) and other products in the
Thermojetics-Registered Trademark- line have contributed significantly to the
Company's retail sales. The Company also previously offered the
Thermojetics-Registered Trademark- original green herbal tablet in Canada but,
in response to Canadian marketing issues and regulatory concerns, suspended
sales of the product in February, 1994.

9
<PAGE>
The FDA has on record a small number of reports of adverse reactions
allegedly resulting from the ingestion of Ma Huang contained in the Company's
Thermojetics-Registered Trademark- original green tablet. The Company has not
received any communications from the FDA with respect to these reports. However,
many other companies manufacture products containing various amounts of Ma Huang
and the FDA has on record hundreds of reports of adverse reactions to these
products. On April 10, 1996, the FDA issued a statement warning consumers not to
purchase or ingest dietary supplements containing ephedrine that are claimed to
produce such effects as euphoria, heightened awareness, increased sexual
sensations or increased energy, because these products pose significant adverse
health risks, including dizziness, headache, gastrointestinal distress,
irregular heartbeat, heart palpitations, heart attack, strokes, seizures,
psychosis and death. The Company does not market its Ma Huang product with any
of these claims. The FDA stated that it intended to issue a proposed regulation
regarding ephedrine-containing products by December 31, 1996; however, no
proposal has been issued to date. There can be no assurance that the FDA will
not seek to impose additional regulations, possibly prohibiting, limiting
potencies or placing other restrictions on the sale of such products. In
addition, several states either regulate or are considering regulating
ephedrine-containing products as controlled substances or prohibiting the sale
of such products by persons other than licensed pharmacists. These regulations
could have an adverse effect on the Company's sale of the
Thermojetics-Registered Trademark- original green herbal tablet and possibly
other products.

There is a risk that the Company's product containing Ma Huang may become
subject to further federal, state, local or foreign laws or regulations, which
could require the Company to: (i) withdraw or reformulate its product with
reduced ephedrine levels or with a substitute for Ma Huang and/or (ii) relabel
its product with different warnings or revised directions for use and/or (iii)
not make certain statements, possibly including weight loss, with respect to any
product containing Ma Huang. Even in the absence of further laws or regulation,
the Company may elect to reformulate and/or relabel its product containing Ma
Huang. While the Company believes that its Ma Huang product could be
reformulated and relabeled, there can be no assurance in that regard or that
reformulation and/or relabeling would not have an adverse effect on sales of
such product or related products within the Thermojetics-Registered Trademark-
Weight Management Program even though such products do not contain Ma Huang.

A limited number of the products sold by the Company are labeled as
over-the-counter ("OTC") drugs as opposed to dietary supplements, conventional
foods or personal care items. Many OTC drug products do not require pre-approval
by the FDA, but must comply with applicable OTC monographs, which prescribe
permissible ingredients and appropriate labeling language. In addition, either
the Company or its supplier must register and file annual drug listing
information with the FDA. Because the FDA could take the position that claims
made with respect to any product of the Company fall within an OTC monograph,
the regulatory status of some of the Company's products is or could become
unclear. If any enforcement were undertaken, the Company could be required to
relabel or reformulate such products.

Governmental regulations in countries where the Company plans to commence or
expand operations may prevent or delay entry into the market. In addition, the
Company's ability to sustain satisfactory levels of sales in its markets is
dependent in significant part on its ability to introduce additional products
into such markets. However, government regulations in the Company's markets,
both domestic and international, can delay or prevent the introduction, or
require the reformulation or withdrawal, of certain of the Company's products.
For example, during the third quarter of 1995, the Company received inquiries
from certain government agencies within Germany and Portugal regarding the
Company's product, Thermojetics-Registered Trademark- Instant Herbal Beverage,
relating to the caffeine content of the product and the status of the product as
an "instant tea," which was disfavored by regulators, versus a "beverage." The
sale of this product in these countries was subsequently suspended by the
Company at the request of the regulators. Further, such regulatory action,
whether or not it results in a final determination adverse to the Company, could
create negative publicity (as it did in Germany with respect to
Thermojetics-Registered Trademark- Instant

10
<PAGE>
Herbal Beverage), with detrimental effects on the motivation and recruitment of
distributors and, consequently, on sales. See "Business--Regulation; Geographic
Areas of Operations."

The Company may be subject to challenges to the legality of its network
marketing system based on claims that such system is an illegal "pyramid scheme"
or similar allegations. For example, see the discussion of WEBSTER V.
OMNITRITION INTERNATIONAL, INC. in "Business--Regulation." While the Company
believes that its network marketing system complies with all applicable laws,
there can be no assurance that such challenges will not be made or made
successfully or that other legal developments in this area will not have a
material adverse effect on the Company.

DEPENDENCE ON KEY PERSONNEL

The business of the Company, particularly the operation of its distributor
network, is substantially dependent upon the active participation of Mark
Hughes, the Company's principal stockholder, Chairman of the Board, Chief
Executive Officer and President. The loss of Mr. Hughes' services would
adversely affect the business of the Company. The Company does not maintain key
man life insurance on Mr. Hughes.

SALES AND EARNINGS VOLATILITY

The Company's sales and earnings have been subject to significant volatility
in the past. In the mid-1980s, the Company's products and network marketing
system became the subject of regulatory scrutiny in the United States resulting
in large part from claims and representations made about the Company's products,
including impermissible therapeutic claims. Although the Company responded by
instituting certain regulatory compliance measures (see "Business--Regulation"),
as a result of the adverse publicity generated by the regulatory activities the
Company experienced, beginning in 1985, a rapid, substantial loss of
distributors in the United States and a corresponding reduction in sales. In
addition, the Company's sales in the United States were adversely affected by
competition from other weight management products. As a consequence, from 1987
(the Company's first full year as a public company) through 1990, the Company's
operations resulted either in net losses ($2.4 million in 1990 and $6.3 million
in 1988) or modest net income ($1.0 million in 1989 and $1.1 million in 1987).
More recently, adverse publicity and regulatory action in other markets,
including France and Germany, resulted in a loss of distributors and a decline
in sales in those markets, contributing to a reduction in worldwide net income
from $46.0 million in 1994 to $19.7 million in 1995. The Company expects that
its business in particular markets will, from time to time, continue to be
adversely impacted by regulatory actions, negative publicity and competition in
those markets. See "--Dependence on Distributors" and "Business--Geographic
Areas of Operations; Regulation."

In addition, after entering a new country, the Company has generally
experienced an initial period of rapid growth in sales as new distributors were
recruited, followed by a decline in sales. The Company believes that this sales
trend has been due in part to certain distributor migration patterns as well as
regulatory action and adverse publicity in certain markets. In certain of these
markets, the opening of new markets within the same geographic region or with
the same or similar language or cultural bases has resulted in a corresponding
tendency of some key distributors to focus their attention on business
opportunities provided by the new markets instead of developing their
established downline organizations in existing markets. Additionally, in certain
instances, the Company has become aware that certain sales in certain existing
markets were attributable to purchasers who distributed such product in
countries which had not yet been opened. When these countries were opened, such
sales in existing markets shifted to the newly opened markets, resulting in a
decline in sales in the existing markets.

11
<PAGE>
sales. Accordingly, the Company could be adversely affected if, because of
regulatory constraints, adverse publicity, competition or other factors, the
Company were unable to successfully market its weight management products. See
"Business--Product Overview."

The Company's sales and earnings continue to be subject to significant
potential volatility based upon, among other things, the adverse effect of
distributors' or the Company's failure, and allegations of their failure, to
comply with applicable regulations, which have in the past and could again in
the future result in the removal of certain products from sale in certain
countries, either temporarily or permanently; the negative impact of changes in
or interpretations of regulations that may limit or restrict the sale of certain
of the Company's products, the operation of its network marketing system, the
expansion of its operations into new markets, the introduction of its products
into each market and the recruitment and retention of distributors; the
inability of the Company to introduce new products or the introduction of new
products by the Company's competitors; general conditions in the weight
management, food and dietary supplement and personal care industries or the
network marketing industry; and consumer perceptions of the Company's products
and operations. In particular, because the Company's products are ingested by
consumers or applied to their bodies, the Company is highly dependent upon
consumers' perception of the safety, quality and efficacy of its products. As a
result, substantial negative publicity concerning one or more of the Company's
products or other products similar to the Company's products could adversely
affect the Company's sales and earnings.

DEPENDENCE UPON MATERIAL FOREIGN MARKETS

For 1995 and the nine months ended September 30, 1996, 63.9% and 75.3% of
the Company's total retail sales, respectively, were generated outside the
United States. Such reliance on foreign markets exposes the Company to the risks
associated with foreign operations, including, among other things, changes in or
interpretations of foreign regulations that may limit the Company's ability to
sell certain products, conduct a network marketing system or repatriate profits
to the United States, and the potential imposition of trade or foreign exchange
restrictions or increased tariffs. The Company is also exposed to risks
associated with foreign currency fluctuations. For instance, the Company's
purchases from suppliers are made in U.S. dollars while its sales to
distributors are generally made in local currencies; accordingly, strengthening
of the U.S. dollar versus a foreign currency can have a negative impact on the
Company. Although the Company engages in transactions to protect against certain
risks associated with foreign currency fluctuations, there can be no assurance
that such fluctuations will not have an adverse effect on the Company. As the
Company continues to expand its international operations, these and other risks
associated with international operations are likely to increase. See
"--Regulation" and "Business--Geographic Areas of Operations."

Further, during the nine months ended September 30, 1996, of the 33
countries in which the Company operated during that period, 13 countries
experienced an aggregate increase in retail sales of $377.8 million as compared
with the corresponding period in 1995. Japan, Russia and Brazil accounted for
80.1% of this increase. The growth in these 13 countries was offset by a $176.8
million aggregate decrease in retail sales in the remaining 20 countries in
which the Company operates. In addition, despite the substantial growth in
Japan, Russia and Brazil during the first nine months of 1996, the growth rate
for retail sales in Japan and Russia declined over the course of the three
months ended December 31, 1996, and the Company experienced generally declining
retail sales in Brazil over the course of the nine months ended September 30,
1996. Further, the addition of new supervisors declined in Japan and Russia
during the three months ended December 31, 1996 and in Brazil over the course of
the nine months ended September 30, 1996 (with a moderate increase in Brazil
during the fourth quarter of 1996), and sales of distributor kits (I.E., the
package of products and literature purchased in order to become a distributor)
declined in Russia during the three months ended December 31, 1996 and in Brazil
over the course of 1996. The Company may continue to experience these trends in
the future. The Company expects that its business in these and other markets
will, from time to time, continue to be adversely affected by regulatory action,
negative publicity, competition and other factors. See "--Sales

12
<PAGE>
and Earnings Volatility" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments and Outlook."

In addition, the Company's operations in certain markets may be adversely
affected by political, economic and social instability in those countries. In
Russia, for instance, a difficult business environment has thus far prevented
the Company from establishing a physical presence through a sales or
distribution center and has instead required the Company to rely on various
import/export companies located in Russia to conduct transactions in the
Company's products with Russian distributors. See "Business--Geographic Areas of
Operations."

UNCERTAINTIES ASSOCIATED WITH BUSINESS EXPANSION

The Company's continued growth is dependent in significant part upon its
ability to expand its operations into new markets. As compared to new market
openings in the past, the Company may have greater difficulty opening new
markets in the future due to greater regulatory barriers, the necessity of
adapting to entirely new regulatory systems and problems related to entering new
markets with different cultural bases and political systems from those
encountered in the past. In addition, the Company's success has been and will
continue to be significantly dependent on its ability to manage rapid growth,
through expansions and enhancements of its worldwide personnel and management
and information, order processing and fulfillment, inventory and shipping
systems and other aspects of operations. From time to time, the Company has
experienced out-of-stock situations with respect to certain products. As the
Company continues to add distributors, products and countries to its operations,
the ability to manage this growth will represent an increasing challenge. See
"Business--Geographic Areas of Operations; Regulation."

RELIANCE ON OUTSIDE MANUFACTURERS

All of the Company's products are manufactured by outside companies. Raven
Industries, Inc. ("Raven") manufactures the Company's powder products, and D&F
Industries, Inc. ("D&F") supplies the Company's tablet products, including
Activated Fiber,-TM- one of the Company's tablet products, pursuant to a
licensing agreement with Dynamic Products, Inc. ("Dynamic"). In addition, in May
1993, the Company entered into requirements contracts with each of Raven, D&F
and Dynamic, pursuant to which the Company has agreed to purchase all of its
requirements of powder products from Raven and all of its requirements of
tablet, capsule, liquid, cream and lotion products from Dynamic or D&F to the
extent each such manufacturer is capable or becomes capable of manufacturing
such products. Except with respect to certain research and development related
to its personal care product line, the Company does not maintain its own product
research, development and formulation staff and relies on Raven, D&F and other
outside manufacturers for such services. These services provided by Raven and
D&F are important to the Company. The Company's ability to enter new markets and
sustain satisfactory levels of sales in each market is dependent currently in
significant part upon the ability of Raven and D&F to reformulate existing
products for introduction into the Company's markets. The development of
additional new products in the future will likewise be dependent in significant
part on the services of Raven and D&F. See "Business--Product Overview--Product
Manufacturing and Development."

13
<PAGE>
Raven, D&F and Dynamic contracts would not have a material adverse effect on the
Company, although there can be no assurance in this regard. The Company has
commenced the process of identifying and evaluating alternative sources of
supply for weight management products and food and dietary supplements, among
other things, as the beginning of a contingency plan in the event that contract
extensions or replacements with the existing manufacturers are not achieved.
However, the Company's business could be adversely affected if its relationship
with Raven or D&F were impaired. See "Business--Product Overview--Product
Manufacturing and Development."

OWNERSHIP OF PROPRIETARY RIGHTS

The Company does not own the proprietary rights to its weight management
products and food and dietary supplements. However, Raven and D&F have granted
the Company the exclusive right to market any product which the Company
purchases from these suppliers. Further, the Company has obtained or has
applications pending for trademark registration of certain of its tradenames in
certain jurisdictions. However, there can be no assurance that another company
will not replicate one of the Company's products. In addition, Raven and D&F own
certain product formulations and manufacturing processes relating to the
Company's products. Two individuals (not affiliates of the Company) are
principal stockholders of each of D&F, Raven and Dynamic. Mark Hughes owns a
one-third ownership interest in Raven and a one-fifth ownership interest in
Dynamic. See "Business--Product Overview" and "Certain Transactions."

ABSENCE OF CLINICAL STUDIES AND SCIENTIFIC REVIEW; POTENTIAL MISUSE OF PRODUCTS

In general, the Company's products consist of weight management products,
food and dietary supplements and personal care products (a limited number of
which have been or may be classified in the U.S. as OTC drugs) which the Company
believes do not require approvals from the FDA or, in the United States market,
other regulatory agencies, prior to sale. The Company does not conduct clinical
studies of its products. The Company's products consist of herbs, vitamins,
minerals and other ingredients that the Company regards as safe when taken as
suggested by the Company. However, because the Company is highly dependent upon
consumers' perception of the safety and quality of its products as well as
similar products distributed by other companies, the Company could be adversely
affected in the event any of the Company's products or any similar products
distributed by other companies should prove or be asserted to be harmful to
consumers. In addition, because of the Company's dependence upon consumer
perceptions, any adverse publicity associated with illness or other adverse
effects resulting from consumers' use or misuse of the Company's products or any
similar products distributed by other companies could have a material adverse
impact on the Company. See "Business--Product Overview."

COMPETITION

In addition, the business of marketing weight management, food and dietary
supplement and personal care products is highly competitive. This market segment
includes numerous manufacturers, distributors, marketers, retailers and
physicians that actively compete for the business of consumers both in the
United States and abroad. The market is highly sensitive to the introduction of
new products

14
<PAGE>
or weight management plans (including various prescription drugs) that may
rapidly capture a significant share of the market. As a result, the Company's
ability to remain competitive depends in part upon the successful introduction
of new products. See "Business--Competition."

PRODUCT LIABILITY CLAIMS

As a marketer of food and dietary supplements and other products that are
ingested by consumers or applied to their bodies, the Company may be subjected
to various product liability claims, including, among other things, that its
products contain contaminants or include inadequate instructions as to use or
inadequate warnings concerning side effects and interactions with other
substances. While such claims to date have not been material to the Company and
the Company maintains product liability insurance, it is possible that
widespread product liability claims and the resultant adverse publicity could
negatively affect the Company. See "Business--Product Overview; Regulation."

CONCENTRATION OF STOCK OWNERSHIP

As of January 27, 1997, Mr. Hughes beneficially owned 17,402,238 shares of
the Company's Common Stock (including 550,000 shares which are held in a
foundation as to which Mr. Hughes has no pecuniary interest), representing 57.6%
of the currently outstanding shares of Common Stock. Accordingly, Mr. Hughes
currently has the power to elect the entire Board of Directors of the Company
and determine the outcome of all matters submitted to the Company's stockholders
for approval. In addition, Mr. Hughes will continue to retain voting power with
respect to the shares of Common Stock that are subject to the Stockholder DECS
and, therefore, may continue to maintain such voting power throughout the term
thereof. Assuming the delivery by Mr. Hughes to Salomon of the maximum number of
shares of Common Stock required to satisfy all of the Stockholder DECS (assuming
full exercise of the over-allotment option), Mr. Hughes would beneficially own
42.4% of the Company's currently outstanding Common Stock (including the 550,000
foundation shares). See "Plan of Distribution" and "Principal and Selling
Stockholders."

SHARES AVAILABLE FOR FUTURE PUBLIC SALE

In addition to shares already publicly held, as of January 31, 1997, (i) an
additional 968,100 shares (including 888,581 shares subject to outstanding stock
options that are currently exercisable) have been registered for sale under the
Securities Act in connection with various compensation plans of the Company, and
(ii) 13,402,238 shares owned by the Selling Stockholder (not including the
4,000,000 shares subject to the Stockholder DECS (assuming that the
over-allotment option relating to the DECS is not exercised)) are currently
available for sale pursuant to Rule 144 under the Securities Act, subject to the
volume limitations contained in the rule. The Company and the Selling
Stockholder have agreed, subject to certain exceptions, not to sell, without the
prior written consent of Salomon Brothers, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for such shares for a
period of 90 days after the date of this Prospectus. Future sales of substantial
amounts of Common Stock could adversely affect prices in the public market.

USE OF PROCEEDS

All of the shares of Common Stock covered by this Prospectus are
beneficially owned by the Selling Stockholder. See "Plan of Distribution." The
Company will not receive any of the proceeds from the sale of the DECS or the
delivery thereunder of the Common Stock to which this Prospectus relates.

15
<PAGE>
PRICE RANGE OF COMMON STOCK

The Common Stock has been quoted on the Nasdaq National Market under the
symbol "HERB" since April 21, 1992. The table below sets forth, for the periods
indicated, the high and low closing bid prices of the Common Stock, as reported
on the Nasdaq National Market. The closing bid 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.

<TABLE>
<CAPTION>
CLOSING BID PRICE
------------------------
HIGH LOW
----------- -----------
<S> <C> <C>
1994
First Quarter............................................................. $ 31 $ 171/8
Second Quarter............................................................ 271/2 18
Third Quarter............................................................. 231/4 16
Fourth Quarter............................................................ 191/8 141/4

1995
First Quarter............................................................. $ 173/4 $ 101/4
Second Quarter............................................................ 131/4 101/8
Third Quarter............................................................. 151/2 93/4
Fourth Quarter............................................................ 97/8 63/4

1996
First Quarter............................................................. $ 12 $ 85/8
Second Quarter............................................................ 163/8 101/8
Third Quarter............................................................. 157/8 121/2
Fourth Quarter............................................................ 325/8 151/2

1997
First Quarter (through February 4, 1997).................................. $ 367/8 $ 247/8
</TABLE>

As of January 27, 1997, 30,209,463 shares of the Company's Common Stock were
issued and outstanding and were held by 1,148 stockholders of record. For a
recent closing sale price of the Common Stock, see the cover page of this
Prospectus.

DIVIDEND POLICY

Prior to the third quarter of 1992, the Company had never paid a dividend on
its Common Stock. In June 1992, the Company announced the adoption of a cash
dividend practice. The Company paid quarterly dividends of $0.18 per share for
the dividends paid on February 11, 1994, May 5, 1994 and August 4, 1994,
increased the dividend to $0.22 per share for the dividends paid on November 3,
1994, February 2, 1995, May 4, 1995 and August 3, 1995, and reduced the dividend
to $0.15 per share for the dividends paid on November 2, 1995, February 15,
1996, May 6, 1996, August 7, 1996 and November 7, 1996. The declaration of
dividends in the future will be determined by the Board of Directors in its
discretion and the amount of dividends declared and paid in future quarters will
depend on, among other factors, the Company's profitability and other planned
uses of the Company's cash resources.

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The selected consolidated financial data set forth below for each of the
years in the five-year period ended December 31, 1995 are derived from the
audited consolidated financial statements of the Company. The selected
consolidated financial data set forth below for the nine months ended September
30, 1995 and 1996 are derived from unaudited consolidated financial statements
of the Company which, in the opinion of the Company, reflect all adjustments
(consisting of normal recurring accruals) necessary for the fair statement of
the results of the periods presented. Operating results for the nine month
periods are not necessarily indicative of the results that may be expected for
the entire year. The selected "Other Data" set forth below are derived from
unaudited internal records maintained by the Company in the ordinary course of
business and, in the opinion of the Company, reflect a fair statement of the
specified data for the periods presented. The selected financial and other data
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Retail sales(1)(2).................. $ 190,976 $ 405,092 $ 693,015 $ 884,058 $ 923,644 $ 666,223 $ 867,203
Less--Distributor allowances on
product purchases(1).............. 88,407 190,669 328,270 417,177 434,640 312,526 409,984
--------- --------- --------- --------- --------- --------- ---------
Net sales(1)(2)..................... 102,569 214,423 364,745 466,881 489,004 353,697 457,219
Cost of sales....................... 33,892 63,138 103,834 130,707 143,557 103,542 123,914
Royalty overrides(1)................ 28,312 60,851 107,381 125,820 138,940 98,434 134,091
--------- --------- --------- --------- --------- --------- ---------
Operating margin.................... 40,365 90,434 153,530 210,354 206,507 151,721 199,214
Marketing, distribution and
administrative expenses........... 31,737 59,583 88,918 139,629 176,046 130,282 151,878
Restructuring expenses.............. -- -- -- -- 2,300 -- --
Interest income--net................ 118 689 1,729 2,919 3,404 2,067 3,004
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes.......... 8,746 31,540 66,341 73,644 31,565 23,506 50,340
Income taxes........................ 1,663 11,464 25,160 27,616 11,837 8,815 19,379
--------- --------- --------- --------- --------- --------- ---------
Net income.......................... $ 7,083 $ 20,076 $ 41,181 $ 46,028 $ 19,728 $ 14,691 $ 30,961
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share:
Primary(3)........................ $0.33 $0.79 $1.47 $1.50 $0.65 $0.48 $1.00
Fully diluted(3).................. $0.27 $0.74 $1.47 $1.50 $0.65 $0.48 $0.99
Cash dividends per common share..... -- $0.15 $0.49 $0.80 $0.74 $0.59 $0.45
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28,
---------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Approximate number of
supervisors(4).................... 12,000 18,000 41,000 75,000 90,000 99,000

DECEMBER 31,
----------------------------------------------------------------
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of countries(5).............. 11 15 16 24 32 34
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995 SEPTEMBER 30, 1996
--------- --------- --------- --------- --------- --------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
marketable securites.............. $ 10,741 $ 28,847 $ 79,354 $ 59,113 $ 104,226 $ 115,476
Working capital..................... 5,519 18,732 72,723 89,825 85,126 93,169
Total assets........................ 27,912 61,089 130,820 174,057 207,690 231,337
Long-term obligations............... 324 1,045 994 1,014 1,779 1,673
Stockholders' equity................ 8,871 23,913 81,202 109,815 109,530 121,654
</TABLE>

17
<PAGE>
- ------------------------

(1) For a description of retail sales, distributor allowances on product
purchases, net sales and royalty overrides, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(2) Throughout this Prospectus, retail sales and net sales include license fees
paid by the Company's licensees in certain countries. See
"Business--Geographic Areas of Operation." License fees were not material in
any year presented.

(3) Primary earnings per share are computed by dividing net income less
preferred dividend requirements, by the weighted average number of common
and equivalent shares outstanding. The weighted average number of common and
equivalent shares outstanding for 1991, 1992, 1993, 1994, 1995 and the nine
months ended September 30, 1995 and 1996 were (in thousands) 20,541; 25,243;
28,036; 30,768; 30,313; 30,325; and 31,086, respectively. Fully diluted
earnings per share assumes the dilutive effect of convertible preferred
stock outstanding from November 13, 1989 to April 30, 1992 and the maximum
dilutive effect of stock options using the Treasury Stock method. Common
shares used in the calculation for 1991, 1992, 1993, 1994, 1995 and the nine
months ended September 30, 1995 and 1996 were (in thousands) 26,282; 27,166;
28,085; 30,768; 30,354; 30,325; and 31,394, respectively.

(4) Supervisors are those distributors who qualify as supervisors, generally, by
purchasing, either from the Company or other distributors, products
representing at least 4,000 "volume points" in one month or 2,500 "volume
points" in two consecutive months (volume points are point values assigned
to each of the Company's products that are equal in all countries and are
based on the suggested retail price of U.S. products). See
"Business--Marketing." Every February 28th (which is the end of the first
supervisor qualification period of each year), the Company deletes from the
rank of supervisor those supervisors who did not satisfy the supervisor
qualification requirements during the preceding twelve months. Distributors
who meet the supervisor requirements at any time during the year are
promoted to supervisor status at such time (including any supervisors who
were deleted on February 28th but who subsequently requalified). The Company
relies on distributors' certifications as to the amount and source of their
product purchases from other distributors. Although the Company applies
certain review procedures with respect to such certifications, they are not
directly verifiable by the Company.

(5) For a list of all the countries in which the Company currently operates, see
"Business--Geographic Areas of Operations."

18
<PAGE>
CAPITALIZATION

The following table sets forth the short-term obligations and capitalization
of the Company as of September 30, 1996. This table should be read in
conjunction with the Consolidated Financial Statements and the related notes
included elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
(AMOUNTS IN THOUSANDS)
<S> <C>
Short-term obligations
Current maturities of long-term obligations(1)......................................... $ 974
----------
----------
Long-term obligations(1)
Bank loans and contracts payable....................................................... $ 1,673

Stockholders' equity
Common Stock, $.01 par value; authorized 100,000,000 shares; issued 29,580,864
shares............................................................................... 296
Paid-in capital in excess of par value................................................. 35,849
Retained earnings (includes cumulative translation adjustment of $305,000)............. 86,665
Less: Unrealized loss on marketable securities......................................... (43)
Unearned compensation(2).......................................................... (1,113)
----------
Total stockholders' equity............................................................. 121,654
----------
Total capitalization................................................................... $ 123,327
----------
----------
</TABLE>

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

(1) For a description of long-term obligations, see Note 4 of Notes to
Consolidated Financial Statements.

(2) Represents unamortized compensation expense related to restricted stock
grants to two of the Company's executive officers.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS AND OUTLOOK

The Company utilizes a worldwide network marketing system to market weight
management products, food and dietary supplements and personal care products. As
of September 30, 1996, the Company conducted business in 33 countries located
throughout The Americas, Europe and Asia/ Pacific Rim.

The Company has reported increased annual retail sales and net sales in each
year since 1988 and has reported profits for each year since 1990. See
"--Presentation of Retail Sales." In the last five years, retail sales increased
from $191.0 million in 1991 to $923.6 million in 1995, representing a compound
annual growth rate of 48.3%, and net income increased from $7.1 million in 1991
to $19.7 million in 1995, representing a compound annual growth rate of 29.2%.
For the nine months ended September 30, 1996, retail sales and net income
increased by $201.0 million or 30.2% and $16.3 million or 110.7%, respectively,
compared to the corresponding period in 1995. The increase for the nine-month
period was primarily due to an expansion of operations into new geographic
markets.

The Company markets its products globally. For the nine months ended
September 30, 1996, 75.3% of retail sales were attributable to markets located
outside of the United States. The following summarizes the Company's retail
sales by region for the time periods indicated.

<TABLE>
<CAPTION>
NINE MONTHS NUMBER OF
ENDED COUNTRIES
YEAR ENDED DECEMBER 31, SEPTEMBER 30, OPEN
------------------------------- -------------------- AS OF
1993 1994 1995 1995 1996 9/30/96
--------- --------- --------- --------- --------- ---------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
The Americas..................................... $ 273.9 $ 354.3 $ 406.2 $ 289.7 $ 302.1 7
Europe........................................... 391.5 473.2 373.9 282.6 324.4 20
Asia/Pacific Rim................................. 27.6 56.5 143.5 93.9 240.7 6
--
--------- --------- --------- --------- ---------
Total Retail Sales........................... $ 693.0 $ 884.0 $ 923.6 $ 666.2 $ 867.2 33
--
--
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

For the nine months ended September 30,1996, a relatively small number of
countries accounted for a large proportion of the $201.0 million increase in
retail sales. Of the 33 countries in which the Company operated during the nine
months ended September 30, 1996, 13 countries experienced an aggregate increase
in retail sales of $377.8 million as compared with the comparable 1995 period.
Japan, Russia and Brazil accounted for 80.1% of this increase. The growth in
these 13 countries was offset by a $176.8 million aggregate decrease in retail
sales in the remaining 20 countries in which the Company operated. As part of
its growth strategy, management has recently implemented a plan to revitalize
sales in countries where the Company has experienced a loss of retail sales. See
"Business-- Growth Strategy." The concentration of increased retail sales in a
small number of countries is expected to make the Company's earnings in future
periods more susceptible to various risks described in "Risk Factors" above,
including "Dependence Upon Material Foreign Markets."

Subsequent to commencement of operations in 1980, the Company's network of
independent distributors has grown substantially to include 99,000 supervisors
as of February 28, 1996 and a much larger number of distributors. Although the
Company believes that the number of supervisors has continued to grow during
1996, the Company has experienced a decline in the addition of new supervisors
during certain periods in 1996 in several of its major markets. The addition of
new supervisors declined in Japan and Russia over the course of the three months
ended December 31, 1996 and in Brazil over the course of the nine months ended
September 30, 1996 (with a moderate increase in Brazil during the fourth quarter
of 1996), and sales of distributor kits declined in Russia over the course of
the

20
<PAGE>
three months ended December 31, 1996 and in Brazil over the course of 1996.
Furthermore, despite the substantial growth in Japan, Russia and Brazil in 1996,
the rate of growth of retail sales declined in Japan and Russia over the course
of the three months ended December 31, 1996, and retail sales generally declined
in Brazil over the course of the nine months ended September 30, 1996.

Consistent with the Company's growth strategy, the Company has continued its
efforts to expand its global presence by opening operations in new countries
where the Company believes there is or will be demand for its products and
participation in its network marketing system. From January 1, 1992 through
September 30, 1996, the Company commenced operations in 23 new countries. In the
first nine months of 1996, these countries contributed $539.2 million of retail
sales, representing 62.2% of the Company's total retail sales. During the first
nine months of 1996, the Company commenced operations in one new country and
subsequently opened an additional country in the fourth quarter of 1996. The
Company will continue to expand its operations in new countries as part of its
growth strategy. Potential new markets currently include Chile, China, India,
Indonesia, Malaysia, Thailand, Turkey and Ukraine. There can be no assurance
that the opening of any new markets will occur as planned or that any markets
opened will generate significant retail sales. See "Business--Growth Strategy."

There are a number of factors that can adversely impact the success of the
Company's business in any of its existing or potential markets. These factors
include the regulatory environment, consumer acceptance of network marketing
companies, the presence of possible competitors, adverse publicity and in-region
cultural or demographic factors. In several of the Company's markets, the
Company has experienced one or several of these factors, resulting in a decline
in retail sales. For instance, in France in late 1994 through 1995, certain
reports erroneously alleged that the Company was in some manner affiliated with
a disfavored religious group. During the third quarter of 1995, the Company
received inquiries from certain governmental agencies within Germany and
Portugal relating to the Company's product, Thermojetics-Registered Trademark-
Instant Herbal Beverage. The inquiries related to the caffeine content of the
product and the status of the product as an "instant tea," which was disfavored
by the regulators, versus a "beverage." The sale of this product in these
countries was subsequently suspended by the Company at the request of the
regulators. As a result of this and other factors, retail sales in Germany
declined from $159.5 million in 1994 to $ million for 1996. See "Risk
Factors--Sales and Earnings Volatility" and "Business--Geographic Areas of
Operations--Geographic Sales Trends."

The Company believes that, in certain of its markets, the opening of other
new markets within the same geographic region or with the same or similar
language or cultural bases has resulted in a corresponding tendency of some key
distributors to focus their attention on business opportunities provided by new
markets instead of developing their established downline organizations in
existing markets. Additionally, in certain instances, the Company has become
aware that certain sales in certain existing markets were attributable to
purchasers who distributed such product in countries which had not yet been
opened. When these countries were opened, such sales in existing markets shifted
to the newly opened markets, resulting in a decline in sales in the existing
market.

Further, the Company's weight management products have historically
contributed a significant portion of the Company's total retail sales. During
1995, the Company's 14 weight management products contributed 75.2% of total
retail sales, and one of these products contributed 22.1% of total retail sales.
As a result, in 1995, the Company sought to diversify its product offerings by
substantially expanding its personal care product line to include skin care,
perfumes, hair care, body lotions, soaps and gel products. This rapid
introduction of such products stimulated sales of the personal care product
line, which generated $107.4 million in retail sales in 1995. This level of
sales declined during the first nine months of 1996 to $74.1 million, a 1.9%
decrease from the comparable 1995 period, as the Company reduced the number of
new product introductions within this category. In addition, in 1996 the Company
expanded its line of nutritional products in the United States by adding 12 new
products. The Company intends to continue to introduce its most popular existing
products into international markets where they are not currently offered,
subject to its ability to reformulate such products to meet applicable

21
<PAGE>
regulatory requirements. In addition, the Company intends to introduce up to 15
new products in 1997, including a new weight management program consisting of
several products and up to ten personal care products.

PRESENTATION OF RETAIL SALES

Throughout this Prospectus, "retail sales" are determined as the gross sales
amounts reflected on the Company's invoices to its distributors. The Company
does not receive the amount reported as "retail sales," and the Company does not
monitor the actual retail prices charged for the Company's products. "Net sales"
represent the actual purchase prices paid to the Company by its distributors,
after giving effect to distributor discounts (referred to as "distributor
allowances"), which total approximately 50% of suggested retail sales prices.
The Company receives its net sales price in cash or through credit card payments
upon receipt of orders from distributors. The Company's "operating margin"
consists of net sales less (i) "cost of sales," consisting of the prices paid by
the Company to its manufacturers for products and costs related to product
shipments, foreign duties and tariffs and similar expenses, and (ii) "royalty
overrides," currently consisting of (a) royalties (5% to 15%) and bonuses (from
2% to 6%) on the suggested retail sales prices of products earned by qualifying
distributors on sales within their distributor organizations, and (b) the
President's Team Bonus payable to certain of the Company's most senior
distributors in the aggregate amount of up to an additional 1% of product retail
sales. Royalty overrides as shown on the financial statements and selected
financial data appearing elsewhere herein are net of a handling fee (6% of
retail sales effective April 1, 1994, previously 5%) charged by the Company to
its distributors on purchases of products from the Company.

The Company's use of "retail sales" in reporting financial and operating
data reflects the fundamental role of "retail sales" in the Company's accounting
systems, internal controls and operations, including the basis upon which
distributor bonuses are paid. The retail sales price of the Company's products
is reflected in distributor invoices as the price charged to distributors
together with, in most cases, a deduction for the corresponding distributor
allowance. The U.S. retail sales price is used by the Company to calculate,
among other things, royalty overrides and "volume points" earned by
distributors. Volume points are point values assigned to each of the Company's
products that are equal in all countries and are used as a supervisor
qualification criteria. In addition, management relies upon "retail sales" data
reflected in daily sales reports to monitor results of operations in each of the
Company's markets.

The significance of the Company's "net sales" is to reflect, generally, the
prices actually received by the Company after deducting the basic distributor
allowance, but before deducting royalty overrides and bonuses. The ratio of the
Company's "retail sales" to "net sales" is relatively constant because
distributor allowances historically total approximately 50% of suggested retail
sales prices. Accordingly, factors that affect "retail sales" generally have a
corresponding and proportionate effect on "net sales." To the extent the ratio
of "retail sales" to "net sales" varies from period to period, such variances
have resulted principally from sales of the Company's distributor kits and other
educational and promotional materials, for which there are no distributor
allowances. Sales of such items initially decreased and thereafter stabilized as
a percentage of total retail sales since 1991, but such decreases have not had a
material impact on the ratio of the Company's "retail sales" to "net sales" or
on the Company's operating margin.

The Company's results of operations for the periods described below are not
necessarily indicative of results of operations for future periods, which depend
upon numerous factors including the Company's ability in the future to enter new
markets and introduce additional and new products into its markets.

22
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO
NINE MONTHS ENDED SEPTEMBER 30, 1995

Retail sales for the nine months ended September 30, 1996 increased 30.2% to
$867.2 million from $666.2 million for the 1995 period. Retail sales of personal
care products for the nine months ended September 30, 1996 decreased 1.9% to
$74.1 million from $75.5 million for the 1995 period, due in part to fewer
personal care product introductions in the first nine months of 1996 as compared
to the prior year period.

Regionally, retail sales for the nine months ended September 30, 1996 as
compared with the 1995 period increased 156.3% in Asia/Pacific Rim (to $240.7
million from $93.9 million), 14.8% in Europe (to $324.4 million from $282.6
million) and 4.3% in The Americas (to $302.1 million from $289.7 million).

Increases in overall retail sales, particularly in the past year, have
resulted largely from increases in retail sales in the Asia/Pacific Rim region
where retail sales increased $146.8 million for the nine months ended September
30, 1996 compared to the corresponding period in the prior year. This increase
is predominately attributable to a $151.1 million increase in retail sales in
Japan, which was offset by modest declines in Australia and the Philippines.
Retail sales in Japan were $197.6 million or 82.1% of Asia/Pacific Rim retail
sales for the period. Management expects that Japan, along with other
Asia/Pacific Rim countries such as Taiwan and Korea, will continue to contribute
significantly to the Company's retail sales growth in future periods.

The Company has also experienced substantial growth within selected
countries in the European region. Within the European region, retail sales
increased $41.8 million for the nine month period ended September 30, 1996
compared to the corresponding period in the prior year. The largest impact
resulted from Russia, which contributed retail sales of $102.2 million for the
nine months ended September 30, 1996. Retail sales in the new European countries
were $18.5 million over the same period. Offsetting the contribution of these
sales were retail sales declines in established countries, Germany in
particular, which experienced a retail sales decrease of $61.1 million for the
nine months ended September 30, 1996 as compared to the 1995 period. The
decrease in Germany was due in part to the July 1995 suspension of sales of
Thermojetics-Registered Trademark- Instant Herbal Beverage in that country and
the adverse publicity stemming from the suspension.

In The Americas, combined retail sales for the nine months ended September
30, 1996 increased $12.4 million, or 4.3%, as compared to the 1995 period. As
compared to the prior year, retail sales decreased for the nine months ended
September 30, 1996 in the United States and several South American countries,
offset by Brazil, which opened in the fourth quarter of 1995. The opening of
Brazil resulted in sales for the nine months ended September 30, 1996 of $61.8
million. U.S. retail sales accounted for $214.2 million, or 24.7%, of worldwide
retail sales during the nine months ended September 30, 1996, as compared to
$254.3 million, or 38.2%, for the 1995 period. The reduction in U.S. retail
sales is attributable in part to the Company's commencement of operations in
Brazil and the continuing effect of the commencement of operations in Russia in
July 1995. The Company is aware that, prior to the opening of Brazil and Russia,
some retail sales in the U.S. were for products purchased in the U.S. but
re-directed to Brazil or Russia by distributors. The Company expects that U.S.
retail sales may continue to be impacted as the expansion of operations in
international markets continues.

The Company's operating margin increased 31.3% to $199.2 million for the
nine months ended September 30, 1996 from $151.7 million in the 1995 period. As
a percentage of retail sales, operating margin for the nine months ended
September 30, 1996 increased to 23.0% from 22.8% in the 1995 period.

Marketing, distribution and administrative expenses for the nine months
ended September 30, 1996 increased 16.6% to $151.9 million from $130.3 million
in the 1995 period. As compared to the prior year,

23
<PAGE>
such expenses, as a percentage of retail sales, decreased for the nine month
period ended September 30, 1996 from 19.6% to 17.5%. For the nine months ended
September 30, 1996, as compared to the 1995 period, selling expenses decreased
$8.7 million, corporate expenses increased $19.9 million and distribution center
operating costs increased $10.4 million. Selling expenses decreased as a result
of a revised format in which sales events are scheduled throughout the year
rather than concentrated in a particular period and a reduction in costs related
to such events. Administrative expenses increased due to the continued emphasis
on government and media relations and increased compensation and other costs
related primarily to the expansion into additional countries. Such increases in
corporate expenses were partially offset by a decrease in sales promotion
expenses. In addition, foreign exchange losses of $1.9 million for the nine
months ended September 30, 1996 compared to losses of $0.9 million for the 1995
period. The increases in distribution costs primarily resulted from facility and
staff expansions in Japan and new country openings in Brazil, South Africa and
Taiwan.

Income taxes of $19.4 million for the nine months ended September 30, 1996
increased from $8.8 million in the prior year. As a percentage of pre-tax
income, income taxes increased from 37.5% for the nine months ended September
30, 1995 to 38.5% for the 1996 period. The increase in the effective tax rate is
due in part to increased profits in countries that bear a higher effective tax
rate.

Net income for the nine months ended September 30, 1996 increased to $31.0
million from $14.7 million for the 1995 period.

1995 COMPARED TO 1994

Retail sales increased 4.5% to $923.6 million in 1995 from $884.1 million in
1994. Contributing to 1995 consolidated retail sales was the introduction of the
first three phases of products in the Company's new line of personal care
products, the Skin Survival Kit in January 1995, the fragrances, Parfums
Vitessence-TM-, in April 1995 and the facial products, Nature's Mirror-TM-, in
October 1995. The new products accounted for $107.4 million of consolidated
retail sales in 1995. The products were introduced extensively in Europe and The
Americas where they accounted for $49.2 million and $50.7 million, or 13.2% and
12.5%, of those regions' retail sales in 1995, respectively.

Regionally, retail sales in 1995 compared to 1994 increased 153.9% and 14.7%
in Asia/Pacific Rim and The Americas, respectively, and decreased 21.0% in
Europe. In The Americas, retail sales increased from $354.3 million in 1994 to
$406.2 million in 1995. In Asia/Pacific Rim, retail sales increased from $56.5
million in 1994 to $143.5 million in 1995. In Europe, retail sales decreased
from $473.2 million in 1994 to $373.9 million in 1995.

In The Americas, combined retail sales in 1995 increased $51.9 million, or
14.7%, when compared to 1994, which was due to (i) a sales increase in the U.S.
of $38.6 million or 13.1% when compared to 1994, and (ii) the October 1995
opening of Brazil, which reported retail sales of $24.2 million. The increases
were partly offset by a reduction in sales in Mexico resulting from devaluation
of the Mexican peso and a decrease in retail sales in Argentina in part
resulting from the opening of Brazil in 1995, as a result of which certain
Argentina product sales were redirected to Brazil. Within The Americas, U.S.
retail sales accounted for $333.6 million or 36.1% of total worldwide retail
sales in 1995, compared to $295.0 million or 33.4% of total worldwide retail
sales in 1994. The increase in U.S. retail sales as a percentage of worldwide
retail sales resulted from increased U.S. sales and approximately constant
foreign sales in 1995 as compared to 1994.

In the European region, the decrease in German sales of $43.9 million,
together with sales decreases in the Czech Republic, France, Israel, Italy,
Portugal, Spain and the U.K, were partially offset by sales in Belgium, Denmark,
Poland and Sweden, all of which opened in the second half of 1994, and sales in
Austria, Russia, South Africa and Switzerland, which opened in the second and
third quarters of 1995. The decrease in sales in Germany was due in part to the
suspension of sales of Thermojetics-Registered Trademark- Instant Herbal
Beverage in that country in July 1995. The suspension led to an increase in
product returns and distributor resignations, as well as a decline in sales of
other products. In 1995, sales in

24
<PAGE>
France continued to be negatively impacted by an adverse business environment,
including continued adverse publicity regarding certain of the Company's French
distributors. See "Business--Geographic Areas of Operations." The Company
believes that another significant factor affecting these markets has been the
opening of other new markets within the same geographic region or with the same
or similar language or cultural bases, and the inclination of some distributors
to focus their attention on business opportunities provided by new markets,
which can have a negative impact on existing markets.

The Asia/Pacific Rim growth was due to (i) sales increases in Japan of $63.0
million, or 335.7%, when compared to 1994, and (ii) the opening of the
Philippines in December 1994 and Taiwan in July 1995, which reported combined
retail sales of $17.6 million for 1995.

Operating margin decreased 1.8% to $206.5 million in 1995 from $210.4
million in 1994. As a percentage of retail sales, operating margin for 1995
decreased to 22.4% from 23.8% in 1994. The decreased operating margins are due
to higher cost of sales and royalty overrides as a percentage of retail sales.
The cost of sales percentage increased to 15.5% in 1995 from 14.8% in 1994. Such
increase includes higher freight costs resulting from (i) redeployment of
inventories to meet demand patterns and (ii) provisions made against slow moving
inventory. Royalty overrides as a percentage of retail sales increased to 15.0%
in 1995 from 14.2% in 1994. This increase includes primarily the effect of a
modification to the marketing plan made in June 1995, which increased the
royalties earned by distributors and increased bonuses payable to certain of the
Company's senior distributors.

Marketing, distribution and administrative expenses increased 26.1% to
$176.0 million in 1995 from $139.6 million in 1994. As a percentage of retail
sales, these expenses increased to 19.1% in 1995 from 15.8% in 1994. Selling
expenses increased $5.1 million, corporate expenses increased $18.6 million and
distribution expenses increased $12.7 million. The increased selling expenses
were instrumental in an effort to increase distributor kit sales, stimulate new
distributor sponsoring rates and expand distributor training. The increase was
also due to introductions of new technologies, such as International Satellite
Supervisor Training and The Herbalife Broadcast Network, a home based satellite
television program. The corporate expenses increased due to (i) initiatives
taken in new product introductions and marketing activities, (ii) intensified
government and media relations and other business related functions and (iii)
foreign exchange losses which increased $2.5 million in 1995, when compared to
1994. The increase in distribution expense was due to new country openings and
facility and staff expansions in Japan and Germany.

During 1995, the Company made a detailed study of its European warehousing
and distribution systems to identify possible areas of cost savings. As a
result, the Company planned to make a number of changes in its European
infrastructure in order to enhance operating efficiencies. In connection with
this change, the Company recorded a restructuring charge of $2.3 million,
primarily relating to lease termination costs. The infrastructure modifications
commenced in the second half of 1996.

Income taxes decreased to $11.8 million in 1995 from $27.6 million in 1994.
As a percentage of pre-tax income, income taxes remained constant at 37.5%.

Net income decreased 57.1% to $19.7 million in 1995 from $46.0 million in
1994, as a result of the factors described above.

1994 COMPARED TO 1993

Retail sales increased 27.6% to $884.1 million from $693.0 million for 1994
as compared to 1993.

Regionally, retail sales in 1994 compared to 1993 increased 104.5%, 29.4%
and 20.9% in Asia/ Pacific Rim, The Americas and Europe, respectively. In
Asia/Pacific Rim, retail sales in 1994 increased from $27.6 million to $56.5
million compared to 1993. This growth was due to the opening of Japan in late
1993, to the successful introduction of Thermojetics-Registered Trademark-
weight management tablets in a number of markets, and the positive impact that
sales of Thermojetics-Registered Trademark- weight management tablets had on
sales of the Company's other principal weight management products. In The
Americas, retail sales in 1994

25
<PAGE>
increased from $273.9 million to $354.3 million compared to 1993. This growth
was due to three factors: (i) the continued strength of
Thermojetics-Registered Trademark- weight management tablets in North America,
including the positive impact such sales have on sales of the Company's other
weight management products, (ii) the successful opening of Argentina in
mid-1994, resulting in sales of $19.1 million in that country, and (iii)
improved distribution of products in Mexico with the opening of the Company's
second distribution center in that country in 1994. In Europe, retail sales
increased from $391.5 million in 1993 to $473.2 million in 1994. The most
important factor impacting the growth in this region was the introduction of the
first Thermojetics-Registered Trademark- product,
Thermojetics-Registered Trademark- Instant Herbal Beverage, in 12 of the
region's countries during 1994, and its positive effect on sales of the other
weight management products. Partially offsetting this gain in Europe was an
adverse business environment resulting from negative publicity regarding the
Company's distributors in France. See "Geographic Areas of Operations."

Within The Americas, U.S. retail sales grew to $295.0 million or 33.4% of
total worldwide retail sales in 1994, compared to $247.0 million or 35.6% of
total worldwide retail sales in 1993. The decrease in U.S. retail sales as a
percentage of worldwide retail sales resulted from a greater increase in foreign
sales, in relation to U.S. sales, in 1994 as compared to 1993.

Operating margin increased 37.0% to $210.3 million in 1994 from $153.5
million in 1993. As a percentage of retail sales, operating margin for 1994
increased to 23.8% from 22.2% in 1993. The principal reasons for the improved
operating margin were (i) a reduced royalty override expense effective April 1,
1994 as a result of increasing the handling fee (6% of retail product sales
effective on that date, up from 5%), which fee is incorporated in royalty
override expense, and (ii) a reduction in costs of sales expense as a percentage
of retail sales from 15.0% in 1993 to 14.8% in 1994. The reduction in costs of
sales as a percentage of retail sales reflects the favorable effects of a duty
reduction initiative implemented by the Company in Europe in 1994 overcoming
increased freight costs associated with (i) the increase in foreign sales as a
percentage of total retail sales in 1994 when compared to 1993, and (ii) excess
air freight usage for new product introductions and new country openings.

Marketing, distribution and administrative expenses increased 57.0% to
$139.6 million in 1994 from $88.9 million in 1993. As a percentage of retail
sales, these expenses increased to 15.8% in 1994 from 12.8% in 1993. Sales
expenses increased due to various sales enhancement programs. Corporate expenses
increased due to accelerated activities in introducing new products in existing
markets. The increase in distribution costs resulted from expansion of
facilities to support new country opening initiatives.

Income taxes increased 9.8% to $27.6 million in 1994 from $25.2 million in
1993. As a percentage of pre-tax income, income taxes decreased to 37.5% in 1994
from 37.9% in 1993. This reduction is due to the implementation of tax
strategies by the Company which offset the effect of a U.S. tax rate increase
resulting from the 1993 Omnibus Budget Reconciliation Act.

Net income increased 11.8% to $46.0 million in 1994 from $41.2 million in
1993, as a result of the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its working capital and capital expenditure
requirements, including funding for expansion of operations, through net cash
provided by operating activities.

For the nine months ended September 30, 1996, net cash provided by operating
activities was $43.4 million, compared to $47.5 million for the same period in
1995. The decrease primarily resulted from (i) comparably higher receivable
balances primarily resulting from new and existing country expansion as compared
to significantly lower receivables in the prior year, and (ii) non-recurring
1995 inventory reductions as compared to relatively flat inventory balances in
1996. More efficient material planning allowed for a 20% reduction in inventory
levels in existing countries over a greater base of

26
<PAGE>
sales. These reductions were partially offset by increased net income from
expansion into new markets and additional liquidity provided by higher accrued
expense balances.

For the year ended December 31, 1995, net cash provided by operating
activities was $77.9 million, compared to $14.8 million and $36.5 million for
the years ended December 31, 1994 and 1993, respectively. Although net income in
1995 decreased $26.3 million when compared to 1994, net cash provided by
operating activities increased by $63.0 million. This increase resulted
primarily from reductions in inventories, prepaid expenses and other current
assets, increases in advanced sales deposits and royalty override accruals and
reduced taxable income and the timing of income tax payments.

Capital expenditures for the nine months ended September 30, 1996 were $11.0
million compared to $5.4 million for the corresponding prior year period. The
majority of the 1996 expenditures resulted from the expansion of office and
distribution facilities and additional costs incurred in connection with the
implementation of management information systems. Capital expenditures for the
year ended December 31, 1995 were $7.2 million compared to $8.6 million and $4.1
million for the years ended December 31, 1994 and 1993, respectively. The
majority of the 1995 expenditures were made to upgrade computer and office
equipment and to expand facilities to support growth. In connection with its
entry into each new market, the Company funds inventory requirements and, in
certain markets, establishes a distributor service center and/or a distribution
facility. While the capital requirements associated with entry into new markets
vary, the Company estimates that approximately $7 million will be required for
pre-opening expenses and capital expenditures associated with its 1997 new
market expansion activities.

Stockholders' equity increased $12.1 million to $121.7 million during the
nine months ended September 30, 1996. In 1996, net income of $31.0 million was
partially offset by $13.4 million of dividends declared and stock repurchases of
$5.4 million. Stockholders' equity decreased $0.3 million to $109.5 million at
December 31, 1995 from $109.8 million at December 31, 1994. In 1995, net income
of $19.7 million was offset by $22.2 million of dividends declared. The dividend
in the third and fourth quarters of 1995 was reduced to $0.15 per share from
$0.22 per share in the prior four quarters. The payment of dividends is
determined by the Board of Directors at its discretion and the amounts of
dividends declared and paid in future quarters will depend, among other factors,
on profitability, as well as other planned uses of the Company's cash resources.
See "Dividend Policy."

On January 12, 1996, the Company announced that its Board of Directors had
approved a share repurchase program pursuant to which up to $5 million could be
expended to repurchase shares of the Company's Common Stock. On September 13,
1996, the Company announced that the Board of Directors had approved the
extension of the share repurchase program, such that up to an aggregate of one
million shares of the Company's Common Stock could be repurchased. As of January
27, 1997, the Company had expended $7.5 million to make repurchases of 574,500
shares in the public market.

In total, cash and cash equivalents increased to $84.1 million at September
30, 1996 compared to $69.2 million at December 31, 1995. At September 30, 1996,
the Company's cash, cash equivalents and marketable securities aggregate balance
was $115.5 million, which represents an $11.3 million increase from the balance
as of December 31, 1995.

The Company has not been subjected to material price increases by its
suppliers for several years. The Company believes that it has the ability to
respond to a portion or possibly all of any price increases by raising the price
of its products. Purchases by the Company from its suppliers are generally made
in U.S. dollars, while sales to distributors are generally made in local
currencies. Consequently, strengthening of the U.S. dollar versus a foreign
currency can have a negative impact on the Company. See "Risk
Factors--Dependence Upon Material Foreign Markets." The Company is authorized to
enter into forward exchange contracts of up to $10 million to manage its foreign
exchange risk. Foreign exchange transaction losses totaled $3.3 million, $0.1
million and $2.6 million in the years ended December 31, 1993, 1994 and 1995,
respectively.

27
<PAGE>
BUSINESS

GENERAL

The Company has experienced substantial growth in retail sales and net
income in recent years. From 1991 to 1995, the Company's retail sales grew from
$191.0 million to $923.6 million, representing a compound annual growth rate of
48.3%, and the Company's net income grew from $7.1 million to $19.7 million,
representing a compound annual growth rate of 29.2%. For the nine months ended
September 30, 1996, retail sales and net income increased by 30.2% to $867.2
million and 110.7% to $31.0 million, respectively, over the prior year period.

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 Herbalife products to retail consumers and other
distributors. Distributors may also develop their own distributor organizations
by sponsoring other distributors to do business in any market where the Company
operates, entitling the sponsors to receive royalties and bonuses on product
sales within their downline organizations.

KEY OPERATING STRENGTHS

HIGH QUALITY PRODUCTS. The Company offers high quality products, many of
which emphasize herbs and other natural ingredients in order to appeal to
consumer demand for products that contribute to a healthy lifestyle. Herbalife's
complete product line consists of 77 products, including 14 weight management,
22 food and dietary supplement and 41 personal care products, with a varying
number of these products offered in each of the Company's markets. These three
product categories represented 75.2%, 9.4% and 11.6% of total retail sales in
1995, respectively.

ATTRACTIVE DISTRIBUTOR COMPENSATION PROGRAM. The Company believes that it
offers one of the most financially rewarding compensation programs in the
network marketing industry. Distributors' earnings are derived from two primary
sources: profits on the resale of products and a series of royalties and
production bonuses on product sales within a distributor's downline
organization. Combining these sources of earnings plus participation in the
President's Team bonus, the Company's total "pay-out" (including distributor
allowances) on products subject to distributor royalties and overrides is
approximately 68% of the Company's suggested retail sales price. Distributors
can also participate in various non-cash awards, such as the Get-A-Way vacations
and "HBN" satellite dishes offered through various

28
<PAGE>
Herbalife promotional programs. In addition, through its international
sponsorship program, the Company affords distributors the opportunity to earn
the same types of compensation both in the distributor's home country and in any
other country where Herbalife operates.

COMPREHENSIVE DISTRIBUTOR SUPPORT SERVICES. Mark Hughes and the Company's
top distributors, in conjunction with the Company's 225 distributor support and
relations employees and 81 sales and marketing employees, are committed to
training and motivating Herbalife's distributors. The Company strives to
effectively and efficiently communicate with its global distributor base by
capitalizing on new technologies and marketing techniques. The Company regularly
conducts motivational events and training seminars, both live and via
Herbalife's "HBN" satellite network and teleconferences, and utilizes a range of
promotional literature, including catalogs and newsletters, all in multiple
languages and tailored to meet the particular needs of Herbalife distributors
worldwide. The Company seeks to inspire distributor loyalty by making prompt
product deliveries and royalty payments and by providing detailed distributor
earnings statements.

ADVANCED INFORMATION SYSTEMS. To facilitate the Company's global expansion,
the Company employs advanced computer and telecommunications systems that link
its domestic and international operations and provide timely and accurate
product ordering, royalty payment processing and inventory management. Over the
last three years, the Company has invested approximately $11.2 million to
enhance its computer and telecommunications systems.

PROACTIVE APPROACH TO GOVERNMENT RELATIONS. The Company takes a proactive
approach to working with government agencies throughout the world in order to
create a favorable business environment for Herbalife and its distributors. In
1994, the Company formed its Government Relations Group, consisting of 11
employees, and in 1995 it established the position of Chief International
Counsel. These employees establish relationships with regulators and community
leaders in both new and existing markets and strive to ensure that the Company's
products comply with regulatory requirements. In addition, the Company
coordinates its activities in each market with a network of established legal
counsel, regulatory consultants and other advisors to support its worldwide
operations.

GROWTH STRATEGY

The Company's strategy for growth consists of the following three principal
elements:

EXPAND INTO NEW MARKETS. The opening of new markets is an essential
component of the Company's business strategy. From January 1, 1992 through
September 30, 1996, the Company has commenced operations in 23 new countries,
consisting of four in The Americas, 15 in Europe and four in Asia/Pacific Rim.
During the nine months ended September 30, 1996, these countries contributed
$539.2 million of retail sales, representing 62.2% of the Company's total retail
sales. The Company believes there are numerous additional markets in which its
network marketing system and products should prove successful. The Company plans
to open up to four new markets in 1997 and up to six new markets in 1998.
Potential new markets currently include Chile, China, India, Indonesia,
Malaysia, Thailand, Turkey and Ukraine.

29
<PAGE>
EXPAND PRODUCT OFFERINGS. The Company is committed to expanding its product
line by developing and offering new products and introducing existing products
into markets where they are not currently offered. Expansion of product
offerings is designed to create enthusiasm among distributors and serve as a
promotional tool in selling other products. During 1997, the Company intends to
introduce up to 15 new products, including a new weight management program
consisting of several products and up to ten new personal care products. In
addition, the Company will continue its strategy of systematically introducing
its most popular existing products into markets where they are not currently
offered (subject to its ability to reformulate its products as necessary to
obtain required regulatory approvals).

ENHANCE SALES IN CERTAIN EXISTING MARKETS. Management will continue to seek
to enhance sales in the Company's existing markets. The Company intends to focus
initially on the United States and certain other markets, such as France,
Germany, Italy and Spain, where the Company has experienced a sales trend
characterized by an initial period of rapid sales growth followed by a decline
in sales. See "--Geographic Areas of Operations." Initiatives designed to
enhance sales in these markets will include the creation of new regional
planning and strategy groups, regular Company-sponsored and country-specific
training and motivational events and teleconferences, the hiring of additional
distributor support representatives, the introduction in each targeted
international market of up to five additional products not previously offered,
and the opening of new, more convenient distributor service centers in the
targeted international markets.

PRODUCT OVERVIEW

The Company's products include weight management products, food and dietary
supplements, personal care products and educational and promotional materials.
The Company currently markets 77 products, exclusive of variations in product
flavors, reformulations of products to satisfy regulatory requirements within a
particular country or similar variations of the Company's basic product line. A
limited number of the Company's personal care products are classified in the
U.S. as OTC drugs.

The following chart summarizes the number of products offered by the Company
in its principal product categories as of December 31, 1996 and retail sales
information by product category during the indicated periods.

PRODUCT SALES BY CATEGORY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1994 1995 1996
------------------------- ------------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF
PRODUCT CATEGORY RETAIL TOTAL RETAIL RETAIL TOTAL RETAIL RETAIL TOTAL RETAIL
(NUMBER OF PRODUCTS IN CATEGORY) SALES SALES SALES SALES SALES SALES
- ------------------------------------------------- ----------- ------------ ----------- ------------ ----------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Weight Management(14)............................ $ 721,450 81.6% $ 694,269 75.2% $ %

Food and Dietary Supplements(22)................. 86,779 9.8 86,714 9.4

Personal Care Products(41)*...................... 26,605 3.0 107,385 11.6

Other**.......................................... 49,224 5.6 35,276 3.8
</TABLE>

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

* Includes a limited number of products that are classified in the U.S. as OTC
drugs.

** Includes distributor kits and other educational and promotional materials.
Such materials are regularly developed and enhanced by the Company and, as a
result, the number of such materials is not presented.

30
<PAGE>
The following chart sets forth the number of the Company's products
available as of December 31, 1996 by category in each of the Company's markets
as of that date.

NUMBER OF PRODUCTS OFFERED BY CATEGORY
(AS OF DECEMBER 31, 1996)

<TABLE>
<CAPTION>
NUMBER OF FOOD
NUMBER OF WEIGHT AND DIETARY NUMBER OF
MANAGEMENT SUPPLEMENT PERSONAL CARE TOTAL NUMBER OF
YEAR PRODUCTS PRODUCTS PRODUCTS PRODUCTS
COUNTRY ENTERED(1) (14 IN TOTAL) (22 IN TOTAL) (41 IN TOTAL) (77 IN TOTAL)
- ------------------------------------------- ------------- ----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
THE AMERICAS
United States............................ 1980 14 22 36 72
Canada................................... 1982 7 6 33 46
Mexico................................... 1989 11 9 20 40
Dominican Republic....................... 1994 6 0 0 6
Venezuela................................ 1994 5 0 0 5
Argentina................................ 1994 6 0 10 16
Brazil................................... 1995 6 0 0 6
EUROPE
United Kingdom........................... 1983 6 7 36 49
Israel................................... 1989 6 2 10 18
Spain.................................... 1989 6 1 33 40
France................................... 1990 6 0 34 40
Germany.................................. 1991 4 0 34 38
Italy.................................... 1992 6 1 34 41
Portugal................................. 1992 5 1 34 40
Czech Republic........................... 1992 6 0 10 16
Netherlands.............................. 1993 6 0 38 44
Belgium.................................. 1994 6 1 34 41
Poland................................... 1994 5 0 6 11
Denmark.................................. 1994 7 0 34 41
Sweden................................... 1994 7 1 34 42
Russia................................... 1995 8 4 10 22
Switzerland.............................. 1995 2 0 26 28
Austria.................................. 1995 2 1 34 37
Norway................................... 1995 4 0 28 32
Finland.................................. 1995 7 0 25 32
South Africa............................. 1995 6 0 32 38
Greece................................... 1996 2 0 32 34
ASIA/PACIFIC RIM
Australia................................ 1982 7 7 28 42
New Zealand.............................. 1988 8 6 38 52
Hong Kong................................ 1992 5 0 28 33
Japan.................................... 1993 6 1 21 28
Philippines.............................. 1994 7 0 0 7
Taiwan................................... 1995 4 0 10 14
Korea.................................... 1996 2 1 0 3
</TABLE>

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

(1) Throughout this Prospectus, "entering", "opening", "commencing operations"
or "doing business" in a market or country means that the Company has
obtained either regulatory approval of, or the favorable opinion of local
legal counsel with respect to, its network marketing system, has obtained
all requisite regulatory approvals of at least one product and has commenced
sales and shipment of that product within the market or country. With
respect to Japan, from 1989 through 1992, the Company operated under a
licensing arrangement in Japan and reported license fees with respect
thereto as revenue. Subsequently, in 1993, the Company formed a new Japanese
subsidiary whose revenues were then included in the Company's results of
operations. Accordingly, the Company considers Japan to have been "opened"
in 1993.

31
<PAGE>
WEIGHT MANAGEMENT PRODUCTS. A majority of the Company's sales are derived
from the 14 weight management products that the Company markets as the
Thermojetics-Registered Trademark- Weight-Management System. These weight
management products include the following: (i) Formula 1, a protein powder in
four different flavors designed as a meal replacement, (ii) the four
Thermojetics-Registered Trademark- weight management tablets (original green,
green, beige and yellow), (iii) Thermojetics-Registered Trademark- Herbal
Concentrate, an herbal beverage blended from five natural botanicals, and (iv) a
variety of other nutritional products, such as Cell-U-
Loss-Registered Trademark-, Activated Fiber, N.R.G. (Nature's Raw Guarana),
Thermo-bond-Registered Trademark- and Aminogen-Registered Trademark-.

FOOD AND DIETARY SUPPLEMENTS. The Company's food and dietary supplements
include a variety of products, each containing herbs, vitamins, minerals and
other natural ingredients. Such products are sold under various names, including
Herbal-Aloe, Florafiber, Xtra-Cal, Herbalifeline, Tang Kuei Plus, Male Factor
1000, Schizandra Plus and A.M. Replenishing and P.M. Cleansing formula. In
addition, in 1996, the Company launched its Health & Fitness Program and Bulk &
Muscle Program, together with a Longetics Program designed for the needs of
mature adults, which offer various products consisting of a protein drink mix, a
multivitamin, mineral and herbal tablet and Cell Activator. In 1996, the Company
also introduced products designed to meet the nutritional needs of children,
consisting of Kindermins-Registered Trademark-, a liquid multivitamin/herbal
formula, and Dinomins-Registered Trademark-, a chewable vitamin tablet.

PERSONAL CARE PRODUCTS. The Company's entire personal care product line is
marketed under the name Dermajetics-Registered Trademark-, which was initially
launched in 1995. Currently, the Dermajetics-Registered Trademark- product line
consists of the following products: The Skin Survival Kit, consisting of a day
and night moisturizer, a deep cleaning facial mask and a hydrating eye gel, all
packaged in a cosmetic bag; Parfums Vitessence-TM-, consisting of six eau
d'toilettes, three for men and three for women; Nature's Mirror-TM-, consisting
of a cleanser, toner and moisturizer for each of three different skin types;
Good Hair Day, consisting of seven hair care products; Ocean Currents,
consisting of three bath products; Aroma Vie, consisting of nine aromatic soaps
and oils; and other specialty personal care products, including Herbal Aloe Gel,
Super APR (Arthritis Pain Relief) and Body Toning Cream.

EDUCATIONAL AND PROMOTIONAL MATERIALS. The Company also sells distributor
kits, which an individual must purchase (at a worldwide average cost of
approximately $89 per kit) in order to become a distributor of the Company, as
well as other educational and promotional materials. Such materials include
sales aids, informational videotapes and cassette recordings. Sales of
distributor kits are not subject to distributor allowances (i.e., the Company
receives the entire retail sales amount from the sale of distributor kits).

PRODUCT MANUFACTURING AND DEVELOPMENT. The Company expands its product line
through the development of new products. New product ideas are derived from a
number of sources, including trade publications, scientific and health journals,
the Company's executives and consultants and outside parties. In advance of
introducing products into its markets, local counsel and other representatives
retained by the Company investigate product formulation matters as they relate
to regulatory compliance and other issues. The Company's products are then
reformulated to suit both the regulatory and marketing requirements of the
particular market. See "--Regulation."

All of the Company's weight management products and food and dietary
supplements are manufactured by outside companies. Raven manufactures the
Company's powder products, and D&F manufactures substantially all of the
Company's tablet and capsule products. Except with respect to certain research
and development related to its personal care product line, the Company does not
currently maintain its own product research, development and formulation staff
and relies on Raven, D&F and other outside manufacturers for the development of
such products. When the Company, one of its consultants or another party
(including, in many instances, Raven or D&F) identifies a new product concept or
when an existing product must be reformulated for introduction into a new or
existing market, the new product concept or reformulation project is generally
submitted to D&F or Raven for technological development and implementation.

32
<PAGE>
The Company does not own the proprietary rights to its weight management
products and food and dietary supplements. However, D&F and Raven have granted
the Company the exclusive right to market any product which the Company
purchases from these suppliers. In addition, the Company has obtained or has
applications pending for trademark registration of certain of its tradenames in
certain jurisdictions. See "--Trademarks." However, there can be no assurance
that another company will not replicate one of the Company's products.

The Company's business relationship with Raven and D&F represents an
important source of income to these manufacturers, as sales to the Company
comprise a substantial portion of the total sales of Raven and D&F. In May 1993,
the Company entered into requirements contracts with Raven, D&F and Dynamic.
Pursuant to these contracts, each manufacturer has agreed, among other things,
not to sell the products sold to the Company to third parties, and the Company
has agreed to purchase all of its requirements for powder products from Raven
and all of its requirements for tablet, capsule, liquid, cream and lotion
products from D&F or Dynamic, to the extent each such manufacturer is capable or
becomes capable of manufacturing such products. The manufacturers have waived
that requirement as it relates to certain personal care products. The contracts
also provide Raven, D&F and Dynamic a right of first refusal to establish any
manufacturing facility outside of North America that the Company proposes to
develop or acquire and the right to receive certain royalty payments in the
event that such a manufacturing facility were constructed or acquired and the
right of first refusal were not exercised.

The Company's contracts with Raven, D&F and Dynamic are due to expire in
January 1998, subject to automatic extension on the same terms for a period of
five years unless notice to the contrary is provided by either party no later
than six months prior to expiration. The Company is currently negotiating new
contracts with Raven, D&F and Dynamic. However, there can be no assurance that
Raven and D&F will continue to provide the product manufacturing, research,
development and formulation services that they have in the past. The Company
interacts regularly with outside third party suppliers (e.g., with respect to
the personal care line) regarding product manufacturing. In the event the
Company's contracts with Raven, D&F and Dynamic are not extended or replaced,
the Company believes that it has or can obtain in a timely manner alternative
sources of supply for substantially all of its weight management products and
food and dietary supplements and that the failure to extend or replace the
existing Raven, D&F and Dynamic contracts would not have a material adverse
effect on the Company, although there can be no assurance in this regard. The
Company has commenced the process of identifying and evaluating alternative
sources of supply for weight management products and food and dietary
supplements, among other things, as the beginning of a contingency plan in the
event that contract extensions or replacements with the existing manufacturers
are not achieved.

Two individuals (not affiliates of the Company) are the principal
stockholders of each of Raven, D&F and Dynamic. Mark Hughes, the Company's
principal stockholder, Chairman of the Board, Chief Executive Officer and
President, owns a one-third ownership interest in Raven and a one-fifth
ownership interest in Dynamic. See "Certain Transactions."

The Company maintains a staff for the research and development of new
personal care products. Information and specifications with respect to products
currently in the personal care product line are made available to outside
manufacturers on a confidential basis and for the limited purpose of
manufacturing these products for the Company. Manufacturers of certain of the
Company's personal care products include the European companies BCM Cosmetiques
S.A., formerly Croda Cosmetique France S.A., and Abodino S.A. and the U.S.
company Thibiant International Inc. The European manufacturers are supplied
components by Herbalife at no charge, then procure the raw materials, compound
the products and fill the supplied components. The U.S. manufacturer procures
the raw materials and the components, compounds the product and fills the
components. The Company's arrangement with the manufacturers can be terminated
by either party upon the completion of any outstanding purchase orders.

33
<PAGE>
PRODUCT RETURN AND BUY-BACK POLICIES. All of the Company's products include
a customer satisfaction guarantee. Within thirty days of purchase, any customer
who is not satisfied with an Herbalife product for any reason may return it or
any unused portion to the distributor from whom it was purchased for a full
refund from the distributor or credit toward purchase of another Herbalife
product. Distributors may obtain replacements from the Company for products
returned to them by consumers if they return such products to the Company on a
timely basis. In addition, in most jurisdictions, the Company maintains a
buy-back program pursuant to which it will repurchase products sold to a
distributor (subject to a 10% handling charge) provided that the distributor
resigns from the Company, returns the product in marketable condition within
twelve months of original purchase and meets certain documentation and other
requirements. The Company believes this buy-back policy addresses a number of
the regulatory compliance issues pertaining to network marketing systems. See
"Regulation--Network Marketing System." Historically, product returns and
buy-backs have not been significant, averaging 0.7% of annual retail sales
during the last five years.

RECENT REGULATORY DEVELOPMENTS. The development and marketing of the
Thermojetics-Registered Trademark- weight management tablets (original green,
green, beige and yellow) and other products in the
Thermojetics-Registered Trademark- line have contributed significantly to the
Company's retail sales. One of the ingredients in the
Thermojetics-Registered Trademark- original green herbal tablet is a Chinese
herb, Ma Huang, which contains naturally-occurring ephedrine in small
quantities. Ephedrine products have been the subject of adverse publicity in the
United States and other countries relating to alleged harmful effects, including
the deaths of several individuals. Currently, the Company offers the
Thermojetics-Registered Trademark- original green herbal tablet only in the
United States (except in certain states in which regulations may prohibit or
restrict the sale of such product). On April 10, 1996, the FDA issued a
statement warning consumers not to purchase or ingest dietary supplements
containing natural sources of ephedrine that are claimed to produce certain
effects (none of which are claimed by the Company's product), and the FDA stated
that it intended to issue a proposed regulation regarding ephedrine-containing
products by December 31, 1996. However, no proposal has been issued to date.
There can be no assurance that the FDA will not seek to impose additional
regulations, possibly prohibiting, limiting potencies or placing other
restrictions on the sale of such products. See "Risk Factors--Regulation" and
"--Regulation."

In addition, during the third quarter of 1995, the Company received
inquiries from certain governmental agencies within Germany and Portugal
relating to the Company's product, Thermojetics-Registered Trademark- Instant
Herbal Beverage, which does not contain Ma Huang. The inquiries related to the
caffeine content of the product and the status of the product as an "instant
tea," which was disfavored by the regulators, versus a "beverage." The sale of
this product in these countries was subsequently suspended by the Company at the
request of the regulators. The Company may in the future attempt to reintroduce
the product as a "beverage" in one or both of these markets.

NETWORK MARKETING SYSTEM

The Company's products are distributed exclusively through a network
marketing system consisting of an extensive network of distributors.
Distributors are generally independent contractors who purchase products
directly from the Company or from other distributors for resale to retail
consumers and other distributors. Distributors may elect to work on a full-time
or part-time basis. The Company believes that its network marketing system
appeals to a broad cross-section of people worldwide, particularly those seeking
to supplement family income, start a home business or pursue employment
opportunities other than conventional, full-time employment, and that a majority
of its distributors therefore work on a part-time basis. The Company believes
that its network marketing system is ideally suited to marketing its products
because sales of such products are strengthened by ongoing personal contact
between retail consumers and distributors, many of whom use the Company's
products themselves. The Company encourages its distributors to use the
Company's products and to communicate the results of their use of such products
to their retail customers.

34
<PAGE>
Distributors' earnings are derived from several sources. First, distributors
may earn profits by purchasing the Company's products at wholesale prices (which
are discounted 25% to 50% from suggested retail prices depending on the
distributor's level within the Company's distributor network and whether the
distributor has registered for Herbalife Advantage Program purchases) and
selling the Company's products to retail customers at retail prices. Second,
distributors may earn profits by selling products to other distributors who do
not qualify for the same level of discount as the selling distributor. Third,
distributors who sponsor other distributors and establish their own distributor
organizations may earn royalties of 5% to 15% on product sales up to three
levels down within their distributor organization and production bonuses of 2%
to 6% on product sales within their downline organizations (except with respect
to sales generated by distributors who have reached the "Global Expansion Team"
level or higher). Combining these sources of earnings and including
participation in the President's Team bonus (as described below), the Company's
total "pay-out" on products subject to distributor royalties and overrides is
approximately 68% of the Company's suggested retail sale price (I.E. 50%
distributor allowance plus up to 22% of suggested retail sales prices in royalty
overrides and similar bonuses, less a handling fee charged to distributors by
the Company).

Distributors earn the right to receive royalties and production bonuses upon
attaining the level of supervisor and above. Once a distributor becomes a
supervisor, he or she has an incentive to qualify (by earning specified amounts
of royalties) as a member of the Global Expansion Team, the Millionaire Team or
the President's Team and thereby receive higher production bonuses (2%, 4% and
6%, respectively). The Company believes that the right of distributors to earn
royalties and production bonuses contributes significantly to the Company's
ability to retain its most productive distributors.

To become a distributor, a person must be sponsored by an existing
distributor and must purchase a distributor kit from the Company (except in
Korea, where there is no charge for a distributor kit). To become a supervisor
or qualify for a higher level, distributors must purchase a certain amount of
the Company's products or earn certain amounts of royalties during specified
time periods and must re-qualify for such levels once each year. To attain
supervisor status, generally, a distributor must purchase, either from the
Company or other distributors, products representing at least 4,000 volume
points in one month or 2,500 volume points in two consecutive months (volume
points are point values assigned to each of the Company's products that are
equal in all countries and are based on the suggested retail price of U.S.
products). Supervisors may then attain higher levels (I.E., the Global Expansion
Team, the Millionaire Team or the President's Team) by earning increasing
amounts of royalties based on purchases by distributors within their
organizations. Supervisors contribute significantly to the Company's sales and
certain key supervisors who have attained the highest levels within the
Company's distributor network are responsible for generating a substantial
portion of the Company's sales and for recruiting a substantial number of the
Company's distributors. The following table sets forth the approximate number of
the Company's supervisors at the dates indicated:

<TABLE>
<CAPTION>
FEBRUARY 28,*
---------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Approximate Number of Supervisors....... 12,000 18,000 41,000 75,000 90,000 99,000
</TABLE>

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

* Every February 28th (which is the end of the first supervisor qualification
period of each year), the Company deletes from the rank of supervisor those
supervisors who did not satisfy the supervisor qualification requirements
during the preceding twelve months. Distributors who meet the supervisor
requirements at any time during the year are promoted to supervisor status at
such time (including any supervisors who were deleted on February 28th but who
subsequently requalified). The Company relies on distributors' certifications
as to the amount and source of their product purchases from other
distributors. Although the Company applies certain review procedures with
respect to such certifications, they are not directly verifiable by the
Company.

35
<PAGE>
The Company also has two compensation and incentive programs designed to
motivate distributors at both the most senior and junior levels within the
Company's distributor network. The Company's most senior distributors consist of
approximately 260 distributors (as of December 31, 1996) who comprise the
President's Team and who work closely with Mark Hughes to develop and implement
new initiatives and strategies for increasing sales and distributor productivity
throughout the Company's entire distributor organization. Qualifying President
Team members have the opportunity to participate in the President's Bonus, which
in 1996 consisted of a total available awards package of one percent of the
Company's total product retail sales, or approximately $11 million to $12
million. The distribution of the President's Bonus is determined by Mark Hughes
and is based in part upon each President Team member's participation in
corporate-sponsored training and motivational events. In this manner, the
Company attempts to involve its most senior distributors in the development and
growth of the Company in order to support the sales, training, motivation and
strategic planning efforts of Mark Hughes.

For the Company's most junior distributors, those who have not yet attained
supervisor status, the Company instituted a "Success Builder" program. This
program permits a distributor who purchases products representing 1,000 volume
points in one month to obtain a 42% distributor allowance from suggested retail
prices on the Company's products, rather than the standard 25%. In addition, in
1996, the Company introduced the Herbalife Advantage Program ("HAP"), which uses
a product brochure that enables the Company's junior distributors to obtain an
extra 10% distributor allowance over the standard 25% and to order products by
individual unit (rather than by cases) to better suit their inventory and usage
needs. The Success Builder and HAP programs are designed to provide incentives
to distributors who are in the initial stages of building distributor
organizations and to encourage them to reach supervisor status. In addition to
these programs, the Company periodically offers a variety of special promotions
related to particular products or sales periods, involving special cash bonuses
and other awards, such as Get-A-Way vacations.

The Company seeks to expand its distributor base in each market by offering
distributors attractive compensation opportunities. The Company believes its
international sponsorship program provides a significant advantage to its
distributors as compared with distributors in certain other network marketing
organizations because the program permits distributors in any country to sponsor
distributors in other countries (where the Company is licensed to do business
and where the Company has obtained required product approvals) and to earn the
same level of royalties and bonuses on sales by those distributors as if both
distributors resided in the same country.

The Company maintains a computerized system for processing distributor
orders and calculating distributor royalties and bonus payments which enables it
to remit such payments promptly to distributors. The Company believes that
prompt remittance of royalties is vital to maintaining a motivated network of
distributors and that its distributors' loyalty to the Company has been enhanced
by the Company's history of consistently making royalty and bonus payments on a
scheduled basis.

36
<PAGE>
GEOGRAPHIC AREAS OF OPERATIONS

The following chart sets forth the countries in which the Company currently
operates, the year operations were commenced in each country and retail sales
information by country during the past four years and for the nine months ended
September 30, 1995 and 1996.

RETAIL SALES BY COUNTRY

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
YEAR ---------------------------------------------- ----------------------
COUNTRY(1) ENTERED 1992 1993 1994 1995 1995 1996
- ------------------------------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
United States.................. 1980 $ 86,258 $ 246,984 $ 294,987 $ 333,595 $ 254,245 $ 214,152
Canada......................... 1982 4,815 10,100 10,789 12,042 9,028 10,208
Mexico......................... 1989 11,088 16,784 25,422 15,125 11,451 8,673
Dominican Republic (2)......... 1994 2,500 101 83 11
Venezuela...................... 1994 1,527 11,152 6,226 5,059
Argentina...................... 1994 19,061 10,006 8,652 2,192
Brazil......................... 1995 24,183 61,830
---------- ---------- ---------- ---------- ---------- ----------
THE AMERICAS: 102,161 273,868 354,286 406,204 289,685 302,125
---------- ---------- ---------- ---------- ---------- ----------
United Kingdom................. 1983 9,770 24,930 30,769 15,296 12,110 9,438
Israel (3)..................... 1989 3,831 30,359 73,278 30,133 25,552 6,463
Spain.......................... 1989 87,469 47,662 30,733 15,730 12,158 7,665
France......................... 1990 96,773 97,306 46,968 13,129 9,975 8,958
Germany........................ 1991 66,775 83,068 159,482 115,555 104,288 43,203
Italy.......................... 1992 903 77,842 72,009 56,687 42,087 39,251
Portugal....................... 1992 4,075 13,328 11,073 8,934 7,811 2,406
Czech Republic................. 1992 9,938 10,005 24,423 15,112 11,725 10,831
Netherlands.................... 1993 7,009 17,581 18,237 13,890 11,404
Belgium........................ 1994 1,965 3,775 2,851 1,827
Poland......................... 1994 792 6,238 3,731 12,786
Denmark........................ 1994 2,377 11,263 10,007 2,703
Sweden......................... 1994 1,799 17,845 12,142 11,583
Russia (4)..................... 1995 29,593 12,623 102,190
Switzerland.................... 1995 4,911 549 11,144
Austria........................ 1995 3,134 799 5,675
Norway......................... 1995 367 6,266
Finland........................ 1995 300 12,207
South Africa (5)............... 1995 7,707 289 18,328
Greece......................... 1996 23
---------- ---------- ---------- ---------- ---------- ----------
EUROPE: 279,534 391,509 473,249 373,946 282,587 324,351
---------- ---------- ---------- ---------- ---------- ----------
Australia...................... 1982 20,419 20,602 29,155 30,803 23,840 17,884
New Zealand.................... 1988 2,695 2,497 3,206 2,535 1,942 1,377
Hong Kong...................... 1992 283 3,853 5,323 10,783 7,540 7,663
Japan (6)...................... 1993 686 18,759 81,730 46,468 197,598
Philippines.................... 1994 80 13,219 12,430 1,560
Taiwan......................... 1995 4,424 1,731 14,645
Korea (7)...................... 1996
---------- ---------- ---------- ---------- ---------- ----------
ASIA/PACIFIC RIM: 23,397 27,638 56,523 143,494 93,951 240,727
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETAIL SALES: $ 405,092 $ 693,015 $ 884,058 $ 923,644 $ 666,223 $ 867,203
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>

- --------------------------
(1) The Company records sales data based on the country from which distributor
orders are shipped by the Company. Sales by distributors to other
distributors or retail consumers may occur in other countries, although such
sales generally violate geographic limitations imposed by the Company on
product sales.

(2) Sales in the Dominican Republic are shipped from the United States.

(3) The Company initiated operations in Israel in 1989 through a licensing
arrangement that was terminated in 1990. In 1991, the Company began
operating in Israel through a wholly-owned subsidiary. Accordingly, sales
data for Israel are reported only for 1991 and subsequent periods.

(4) The Company operates through various import/export companies located in
Russia to conduct transactions in the Company's products with Russian
distributors.

37
<PAGE>
(5) Because sales in South Africa are not large enough to be treated as a
separate segment, they are included with sales from the European region.

(6) In 1989 through 1992 the Company operated under a licensing arrangement in
Japan and recorded license fees with respect thereto as revenue. A new
Japanese subsidiary was formed in November 1993 whose results from that date
are reported above. 93.0% of the outstanding capital stock of the Japanese
subsidiary is owned by the Company, with the remainder owned by certain
officers and directors of the Company. In addition, the Company has begun
steps to pursue an initial public offering of shares of the Japanese
subsidiary in Japan. See "Certain Transactions."

(7) The Company initiated operations in Korea in the fourth quarter of 1996.

GEOGRAPHIC SALES TRENDS. The opening of new markets is an essential
component of the Company's business strategy. From January 1, 1992 through
September 30, 1996, the Company commenced operations in 23 new countries. In the
first nine months of 1996, these countries contributed $539.2 million of retail
sales, representing 62.2% of the Company's total retail sales. Consistent with
its growth strategy, the Company currently plans to enter up to four new markets
in 1997 and up to six new markets in 1998. Potential new markets currently
include Chile, China, India, Indonesia, Malaysia, Thailand, Turkey and Ukraine.

After entering a new country, the Company has generally experienced an
initial period of rapid growth in sales as new distributors were recruited,
followed by a decline in sales. The Company believes that a significant factor
affecting these markets has been the opening of other new markets within the
same geographic region or with the same or similar language or cultural bases
and the corresponding tendency of some distributors to focus their attention on
the business opportunities provided by new markets instead of developing their
established downline organizations in existing markets. Additionally, in certain
instances, the Company has become aware that certain sales in certain existing
markets were attributable to purchasers who distributed such product in
countries which had not yet been opened. When these countries were opened, such
sales in existing markets shifted to the newly opened markets, resulting in a
decline in sales in the existing markets.

Another significant factor contributing to such sales declines is the
adverse publicity that sometimes arises when the Company experiences rapid
growth within a market, thus drawing the attention of the media and the
Company's competitors. The Company believes such unfavorable press reports are
generally based upon a lack of familiarity with the Company and its network
marketing system and often originate from competitive forces in the local
market. For instance, in France in late 1994 through 1995, certain reports
erroneously alleged that the Company was in some manner affiliated with a
disfavored religious group. In other cases, including a situation in France that
resulted in the arrest of certain Herbalife distributors, adverse publicity has
arisen from allegations of tax improprieties, which typically occur when a
country applies its tax laws for the first time to a sales and distribution
system that is relatively new to that country, as is often the case with the
Company's network marketing system. See "--Regulation--Transfer Pricing and
Similar Regulations." The effect of occasional adverse publicity has at times
also led to increased regulatory scrutiny in certain countries, which may also
have an adverse effect on sales. For example, during the third quarter of 1995,
the Company received inquiries from certain governmental agencies within Germany
and Portugal related to the Company's product,
Thermojetics-Registered Trademark- Instant Herbal Beverage. The inquiries
related to the caffeine content of the product and the status of the product as
an "instant tea," which was disfavored by the regulators, versus a "beverage."
The sale of this product in these countries was subsequently suspended by the
Company at the request of the regulators. The Company may in the future attempt
to reintroduce the product as a "beverage" in one or both of these markets.

In 1997, the Company intends to initiate new strategies designed to enhance
sales in the countries in which the sales trend described above has occurred,
initially focusing efforts on France, Germany, Italy and Spain, as well as in
the United States. These strategies include the creation of regional planning
and strategy groups, regular Company-sponsored and country-specific promotional
events and teleconferences in order to provide additional training and
motivational support, the hiring of additional

38
<PAGE>
distributor support representatives to support marketing efforts, the addition
in each targeted international market of up to five products that were
previously unavailable in such markets, and the opening of new, more convenient
distributor service centers in the targeted international markets in connection
with the reconfiguration of the Company's European distribution infrastructure.

THE AMERICAS. Total retail sales in The Americas grew $12.4 million or 4.3%
in the nine months ended September 30, 1996 versus the comparable period in
1995. Brazil, which was opened in 1995, contributed $61.8 million of retail
sales during the first nine months of September 30, 1996. Despite the increase
in retail sales in Brazil relative to the 1995 period, the Company has
experienced declining retail sales in Brazil during the course of 1996. See
"Risk Factors--Sales and Earnings Volatility." Retail sales in the United States
decreased 15.8% to $214.2 million during the first nine months of 1996 from
$254.3 million in the comparable 1995 period. A portion of this decrease is
attributable to the fact that, prior to the opening of Brazil and Russia, the
Company has become aware that certain retail sales in the U.S. were for products
purchased in the U.S. but re-directed to Brazil or Russia by distributors.
Following the opening of these markets, such sales shifted to Brazil or Russia.
The Company will seek to enhance U.S. sales during 1997 through the various
initiatives described above. See "--Geographic Sales Trends."

EUROPE. Total retail sales in Europe increased $41.8 million or 14.8% in
the nine months ended September 30, 1996 versus the comparable period in 1995.
Sales increases in Denmark, Russia, South Africa and Sweden were offset in part
by sales decreases in Germany and Israel of $61.1 million and $19.1 million,
respectively, together with sales decreases in the Czech Republic, France,
Italy, Spain and the United Kingdom. In addition to the factors affecting sales
in existing markets generally as discussed above, the Company believes the sales
decreases in these countries were attributable to lengthy regulatory approval
processes that have impeded the introduction of the Company's most popular
existing products, the reduction in activity levels of certain key distributors
in those markets and resistance to network marketing, which resistance appears
to be particularly strong in Germany and France. In Russia, however, the Company
has experienced significant retail sales increases, despite a difficult business
environment as a result of the political, economic and social instability in
that country. Thus far, the difficult business environment has prevented the
Company from establishing a physical presence in Russia (through a sales or
distribution center) and instead has required the Company to rely on various
import/export companies located in Russia to conduct transactions in the
Company's products with Russian distributors. The Company plans to closely
monitor activities in Russia to determine the best means of conducting business
with its Russian distributors as events unfold in that country.

ASIA/PACIFIC RIM. Total retail sales in Asia/Pacific Rim grew $146.8
million or 156.3% in the nine months ended September 30, 1996 versus the
comparable period in 1995. This $146.7 million increase included retail sales
increases of $151.1 million in Japan. The growth in Japan resulted from new
products and marketing initiatives, and the Company believes that its success in
Japan is attributable to the personal nature of retail sales in the Japanese
market and the cultural acceptance of the Company's network marketing system in
such an environment.

NEW MARKET EXPANSION PROGRAM. The Company engages in a structured and
thorough analysis of potential new markets, including analysis of regulatory
conditions, product approval procedures, competitive forces, synergies between
new and existing countries and distributor presence or interest in new markets,
before selecting markets to enter. When the Company decides to enter a new
market, it first hires local legal counsel with expertise in the product
approval process to help ensure that the Company's network marketing system and
products comply with all applicable regulations and that the Company's profits
may be expatriated. In addition, local counsel helps to establish favorable
public relations in the new market by acting as an intermediary between the
Company and local regulatory authorities, public officials and business people.
Local counsel is also responsible for explaining the

39
<PAGE>
Company's products and product ingredients to appropriate regulators and, when
necessary, arranging for local technicians to conduct required ingredient
analysis tests of the Company's products. In recent years, the Company has
expanded its hiring of local firms with experience in governmental relations and
public relations prior to opening a market in order to ensure a more favorable
business environment upon entering the market.

Where regulatory approval in a foreign market is required, the Company's
local counsel work with regulatory agencies to confirm that all of the
ingredients of the Company's products are permissible within the new market.
During the regulatory compliance process, the Company may alter the formulation,
packaging or labeling of its products to conform to applicable regulations as
well as local variations in customs and consumer habits, and the Company may
modify certain aspects of it network marketing system as necessary to comply
with applicable regulations. Where reformulations of the Company's principal
weight management products are required, the Company has historically found
substitute or replacement ingredients to be readily available, although there
can be no assurance in this regard in the future. Where regulatory approval in a
foreign market is not required, the Company obtains the favorable opinion of
local counsel as to compliance with all applicable regulations. See
"--Regulation."

Following completion of the regulatory compliance phase, the Company
undertakes the steps necessary to meet the operational requirements of the new
market. The Company has recently developed a centralized distribution and
telephone ordering system. In the majority of its new markets, the Company
establishes a storefront sales center in one or more major cities and provides
for product purchases by telephone. Product is shipped to the purchaser from a
warehouse located in the general geographic region. In addition, the Company
initiates plans to satisfy the inventory, personnel and transportation
requirements of the new market, and the Company modifies its distributor
manuals, cassette recordings, video cassettes and other training materials as
necessary to be suitable for the new market. In certain instances where the
Company has achieved rapid sales growth in a new market, such as in Japan and
Brazil, the Company has experienced inventory shortages as a result of the large
demand for the Company's products.

Although the Company intends to expand into new markets, there can be no
assurance that the Company can open markets on a timely basis or that such new
markets will prove to be profitable. Significant regulatory and legal barriers
must be overcome before marketing can begin in any new market. In addition,
expansion of the Company's operations into new markets entails substantial
working capital and capital expenditure requirements associated with both the
regulatory compliance and operations phases of the process. The lead-time and
costs associated with opening anticipated new markets may significantly exceed
those of entering new markets in the past due to greater regulatory barriers,
the necessity of adapting to entirely new regulatory systems and problems
related to entering new markets with different cultural bases and political
systems from those encountered in the past. The lead-time necessary to open a
new market is generally up to two years but may be more.

PRODUCT DISTRIBUTION

The Company's weight management products, food and dietary supplements and
some personal care products are distributed to foreign markets either from the
facilities of the Company's manufacturers or from the Company's Los Angeles
distribution center. Products are distributed in the United States market from
the Los Angeles distribution center or from the Company's Memphis distribution
center. Products are generally transported by cargo ship or plane to the
Company's international markets and are warehoused in either one of the
Company's foreign distribution centers or a contracted third party warehouse and
distribution center. After arrival of the products in a foreign market,
distributors purchase the products from the local distribution center or the
associated sales center. The Company's Dermajetics-Registered Trademark-
personal care products are predominantly manufactured in France and the United
States. The products manufactured in France are shipped to a centralized
warehouse facility in Strasbourg, from which delivery by ship or plane to other
international markets occurs.

40
<PAGE>
Beginning in 1996 and continuing in 1997, the Company has undertaken the
process of reconfiguring its European product distribution system. As a part of
this process, the Company has reduced the number of European warehousing
facilities from nine to five and has opened new distribution sales centers.
These sales service centers are conveniently located and attractively designed
in order to encourage local distributors to meet and network with each other and
learn more about Herbalife's products, marketing system and upcoming events. In
addition, the Company has opened a central sales ordering facility in the United
Kingdom for answering and processing telephone orders from throughout Europe.
Operators at this center are capable of conversing in 17 different languages. As
part of this reconfiguration, the Company also implemented a new inventory
management system in the U.S., the U.K. and Japan. The new European system has
resulted in improved inventory management and a reduction in distribution costs
in 1996 as compared with 1995. Management anticipates that the reconfigured
European distribution system, featuring centralized distribution and telephone
ordering systems coupled with convenient storefront distributor service centers,
will be the model for developing distribution and distributor service systems in
other regions of the world.

MANAGEMENT INFORMATION AND TELECOMMUNICATIONS SYSTEMS

In order to facilitate its continued growth and support distributor
activities, the Company continually upgrades its management information and
telecommunications systems. These systems include, among other things: (i) a
centralized host computer located in the Company's Inglewood, California
Operations Center, which is linked to Herbalife's international markets through
a dedicated wide area network that provides on-line, real-time computer
connectivity and access; (ii) local area networks of personal computers within
Herbalife's markets, serving the Company's regional administrative staffs; (iii)
an international e-mail system through which Herbalife employees communicate;
(iv) a standardized Northern Telecom Meridian telecommunications system
connecting all of the Company's markets; and (v) a new inventory management
system that has recently been installed in the U.S., the U.K. and Japan. These
systems are designed to provide, among other things, financial and operating
data for management, timely and accurate product ordering, royalty payment
processing and inventory management and detailed distributor records. Over the
last three years, the Company has invested approximately $11.2 million to
enhance its computer and telecommunications systems.

REGULATION

In both its United States and foreign markets, the Company is subject to and
affected by extensive laws, regulations, administrative determinations, court
decisions and similar constraints (as applicable, at the federal, state and
local levels) (hereinafter "regulations") including, among other things,
regulations pertaining to (i) the formulation, manufacturing, packaging,
labeling, distribution, importation, sale and storage of the Company's products,
(ii) product claims and advertising (including direct claims and advertising by
the Company as well as claims and advertising by distributors, for which the
Company may be held responsible), (iii) the Company's network marketing system,
(iv) transfer pricing and similar regulations that affect the level of foreign
taxable income and customs duties, and (v) taxation of distributors, which in
some instances may impose an obligation on the Company to collect the taxes and
maintain appropriate records. See "Risk Factors--Regulation."

PRODUCTS. The formulation, manufacturing, packaging, storing, labeling,
advertising, distribution and sale of the Company's products are subject to
regulation by one or more governmental agencies, including the Food and Drug
Administration ("FDA"), the Federal Trade Commission ("FTC"), the Consumer
Product Safety Commission ("CPSC"), the United States Department of Agriculture
("USDA"), the Environmental Protection Agency ("EPA") and the United States
Postal Service. The Company's activities are also regulated by various agencies
of the states, localities and foreign countries in which the Company's products
are manufactured, distributed and sold. The FDA, in particular, regulates the
formulation, manufacture and labeling of foods, dietary supplements and OTC
drugs, such

41
<PAGE>
as those distributed by the Company. FDA regulations require the Company and its
suppliers to meet relevant good manufacturing practice ("GMP") regulations for
the preparation, packing and storage of these products. GMP's for dietary
supplements have yet to be promulgated but are expected to be proposed.

The 1994 Dietary Supplement Health and Education Act ("DSHEA") revises the
provisions of the Federal Food, Drug and Cosmetic Act ("FFDCA") concerning the
composition and labeling of dietary supplements and, the Company believes, is
generally favorable to the dietary supplement industry. The legislation creates
a new statutory class of "dietary supplements." This new class includes
vitamins, minerals, herbs, amino acids and other dietary substances for human
use to supplement the diet, and the legislation grandfathers, with certain
limitations, dietary ingredients that were on the market before October 15,
1994. A dietary supplement which contains a new dietary ingredient (I.E., one
not on the market before October 15, 1994) will require evidence of a history of
use or other evidence of safety establishing that it is reasonably expected to
be safe. Manufacturers of dietary supplements which make a "statement of
nutritional support" must have substantiation that the statement is truthful and
not misleading.

The majority of the products marketed by the Company are classified as
dietary supplements under the FFDCA. The labeling requirements for dietary
supplements have not been clearly established. In December 1995, the FDA issued
proposed regulations which govern the labeling of dietary supplements, including
how to declare nutritional information, how to make permissible "statements of
nutritional support" and when additional, defined terminology may be used on
dietary supplements. The proposed regulations were expected to become final at
the end of 1996; as of this date, however, no final regulations have been
issued. The proposed regulations would require the Company to revise a
substantial number of its labels at an undetermined, but likely immaterial,
expense to the Company. The FDA has informally stated that it will, subject to
public comment, withhold enforcement of these regulations until January 1, 1998.
Many states have also recently become active in the regulation of dietary
supplement products and may require the Company to modify the labeling or
formulation of certain products sold in those states.

All of the officers and directors of the Company are subject to a permanent
injunction entered in October 1986 pursuant to the settlement of an action
instituted by the California Attorney General, the State Health Director and the
Santa Cruz County District Attorney. The Company consented to the entry of this
injunction without in any way admitting the allegations of the complaint. The
injunction prevents the Company and such officers and directors from making
certain specified claims in future advertising of the Company's products and
requires the Company to implement certain documentation systems with respect to
payments to the Company's distributors. At the same time, the injunction does
not prevent the Company from continuing to make certain specified claims
concerning its products which have been and are being made, provided that it has
a reasonable basis for making such claims.

42
<PAGE>
in which regulations may prohibit or restrict the sale of such product). During
the three-month suspension period, the Company did not experience a material
change in the level of sales of the reformulated
Thermojetics-Registered Trademark- green tablets versus sales of the
Thermojetics-Registered Trademark- original green tablets in the recently
preceding months. However, it is possible that a longer suspension period could
have resulted in a decrease in sales of the reformulated
Thermojetics-Registered Trademark- green tablets or other products within the
Thermojetics-Registered Trademark- Weight Management System (even though such
products do not contain Ma Huang). The Thermojetics-Registered Trademark- green
tablets accounted for 2.1% and 2.7% of retail sales in 1995 and the nine months
ended September 30, 1996, respectively, although the marketing of the
Thermojetics-Registered Trademark- weight management tablets (original green,
green, beige and yellow) and other products in the
Thermojetics-Registered Trademark- line have contributed significantly to the
Company's retail sales. The Company also previously offered the
Thermojetics-Registered Trademark- original green herbal tablet in Canada but,
in response to Canadian marketing issues and regulatory concerns, suspended
sales of the product in February 1994.

The FDA has on record a small number of reports of adverse reactions
allegedly resulting from the ingestion of Ma Huang contained in the Company's
Thermojetics-Registered Trademark- original green tablet. The Company has not
received any communications from the FDA with respect to these reports. However,
many other companies manufacture products containing various amounts of Ma Huang
and the FDA has on record hundreds of reports of adverse reactions to these
products. On April 10, 1996, the FDA issued a statement warning consumers not to
purchase or ingest dietary supplements containing ephedrine that are claimed to
produce such effects as euphoria, heightened awareness, increased sexual
sensations or increased energy, because these products pose significant adverse
health risks, including dizziness, headache, gastrointestinal distress,
irregular heartbeat, heart palpitations, heart attack, strokes, seizures,
psychosis and death. The Company does not market its Ma Huang product with any
of these claims. The FDA stated that it intended to issue a proposed regulation
regarding ephedrine-containing products by December 31, 1996; however, no
proposal has been issued to date. There can be no assurance that the FDA will
not seek to impose additional regulations, possibly prohibiting, limiting
potencies or placing other restrictions on the sale of such products. In
addition, several states either regulate or are considering regulating
ephedrine-containing products as controlled substances or are prohibiting the
sale of such products by persons other than licensed pharmacists.

There is a risk that the Company's product containing Ma Huang may become
subject to further federal, state, local or foreign laws or regulations, which
could require the Company to: (i) withdraw or reformulate its product with
reduced ephedrine levels or with a substitute for Ma Huang and/or (ii) relabel
its product with different warnings or revised directions for use and/or (iii)
not make certain statements, possibly including weight loss, with respect to any
product containing Ma Huang. Even in the absence of further laws or regulation,
the Company may elect to reformulate and/or relabel its product containing Ma
Huang. While the Company believes that its Ma Huang product could be
reformulated and relabeled, there can be no assurance in that regard or that
reformulation and/or relabeling would not have an adverse effect on sales of
such product or related products within the Thermojetics-Registered Trademark-
product line even though such products do not contain Ma Huang. It is a regular
part of the Company's business to monitor regulatory developments of this sort
in all of its markets and to determine the optimal strategy for the Company in
each instance in which such a development arises.

Some of the products marketed by the Company are considered conventional
foods and are currently labeled as such. Both this category of products and
dietary supplements are subject to the Nutrition, Labeling and Education Act
("NLEA"), and regulations promulgated thereunder, which regulates health claims,
ingredient labeling and nutrient content claims characterizing the level of a
nutrient in the product.

A limited number of the products sold by the Company are labeled as OTC
drugs as opposed to dietary supplements, conventional foods or personal care
items. Many OTC drug products do not require pre-approval by the FDA, but must
comply with applicable OTC monographs, which prescribe permissible ingredients
and appropriate labeling language. In addition, either the Company or its

43
<PAGE>
supplier must register and file annual drug listing information with the FDA.
Because the FDA could take the position that claims made with respect to any
product of the Company fall within an OTC monograph, the regulatory status of
some of the Company's products is or could become unclear. If any enforcement
were undertaken, the Company could be required to relabel or reformulate such
products, which the Company believes it could do without any material adverse
effect on the Company or the sale of such products.

In foreign markets, prior to commencing operations and prior to making or
permitting sales of its products in the market, the Company may be required to
obtain an approval, license or certification from the country's ministry of
health or comparable agency. Where a formal approval, license or certification
is not required, the Company nonetheless seeks a favorable opinion of counsel
regarding the Company's compliance with applicable laws. Prior to entering a new
market in which a formal approval, license or certificate is required, the
Company works extensively with local authorities in order to obtain the
requisite approvals. The approval process generally requires the Company to
present each product and product ingredient to appropriate regulators and, in
some instances, arrange for testing of products by local technicians for
ingredient analysis. Such approvals may be conditioned on reformulation of the
Company's products or may be unavailable with respect to certain products or
certain ingredients. Product reformulation or the inability to introduce certain
products or ingredients into a particular market may have an adverse effect on
sales. The Company must also comply with product labeling and packaging
regulations that vary from country to country. The Company's failure to comply
with such regulations can result in, among other things, a product being removed
from sale in a particular market, either temporarily or permanently.

The FTC, which exercises jurisdiction over the advertising of all the
Company's products, has in the past several years instituted enforcement actions
against several dietary supplement companies for false and misleading
advertising of certain products. These enforcement actions have resulted in
consent decrees and monetary payments by the companies involved. In addition,
the FTC has increased its scrutiny of the use of testimonials, which are
utilized by the Company. While the Company has not been the target of FTC
enforcement action for the advertising of its products, there can be no
assurance that the FTC will not question the Company's advertising or other
operations in the future.

In certain countries, the Company may also be affected by regulations
applicable to the activities of its distributors because in some countries the
Company is, or regulators may assert that the Company is, responsible for its
distributors' conduct, or such regulators may request or require that the
Company take steps to ensure its distributors' compliance with regulations. The
types of regulated conduct include, among other things, representations
concerning the Company's products, income representations made by the Company
and/or distributors, public media advertisements (which in foreign markets may
require prior approval by regulators) and sales of products in markets in which
such products have not been approved, licensed or certified for sale. In certain
markets, it is possible that improper product claims by distributors could
result in the Company's products being reviewed or re-reviewed by regulatory
authorities and, as a result, being classified or placed into another category
as to which stricter regulations are applicable. In addition, certain labeling
changes might be required.

Through its manuals, seminars and other training materials and programs, the
Company attempts to educate its distributors as to the scope of permissible and
impermissible activities in each market. The Company also investigates
allegations of distributor misconduct. However, the Company's distributors are
generally independent contractors, and the Company is not able to monitor
directly all distributor activities. As a consequence, there can be no assurance
that the Company's distributors comply with applicable regulations. Misconduct
by distributors has in the past and could again have a material adverse effect
on the Company in a particular market or in general. See "Risk Factors--Sales
and Earnings Volatility."

44
<PAGE>
The Company is unable to predict the nature of any future laws, regulations,
interpretations or applications, nor can it predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on its business in the future. They could, however, require the
reformulation of certain products not able to be reformulated, imposition of
additional recordkeeping requirements, expanded documentation of the properties
of certain products, expanded or different labeling and scientific
substantiation regarding product ingredients, safety or usefulness. Any or all
such requirements could have a material adverse effect on the Company's results
of operations and financial condition.

NETWORK MARKETING SYSTEM. The Company's network marketing system is subject
to a number of federal and state regulations administered by the FTC and various
state agencies as well as regulations in foreign markets administered by foreign
agencies. Regulations applicable to network marketing organizations are
generally directed at ensuring that product sales are ultimately made to
consumers (as opposed to other distributors) and that advancement within such
organizations be based on sales of the organizations' products rather than
investments in the organizations or other non-retail sales related criteria. For
instance, in certain markets there are limits on the extent to which
distributors may earn royalties on sales generated by distributors that were not
directly sponsored by the distributor. Where required by law, the Company
obtains regulatory approval of its network marketing system or, where such
approval is not required, the favorable opinion of local counsel as to
regulatory compliance. However, the Company remains subject to the risk that, in
one or more of its markets, its marketing system could be found not to be in
compliance with applicable regulations. Failure by the Company to comply with
these regulations could have a material adverse effect on the Company in a
particular market or in general. See "--Product Distribution."

The Company is also subject to the risk of challenges to the legality of its
network marketing system. For example, in WEBSTER V. OMNITRITION INTERNATIONAL,
INC., 79 F.3d 776 (9th Cir. 1996), the "multi-level marketing" program of
Omnitrition International, Inc. ("Omnitrition") was challenged in a class action
by certain Omnitrition distributors who alleged that Omnitrition was operating
an illegal "pyramid scheme" in violation of federal securities laws, state
unfair practice and fraud laws and the Racketeer Influenced and Corrupt
Organizations Act. Initially, the trial court in that case rendered summary
judgment in favor of Omnitrition because the court found that Omnitrition had
adopted policies designed to encourage retail sales that took the program
outside the definition of a fraudulent pyramid scheme.

The importance of such policies was established by two FTC cases. The first,
IN RE KOSCOT INTERPLANETARY, INC., 86 F.T.C. 1106 (1975), set forth a standard
for determining whether a marketing system constituted a pyramid scheme. Under
the KOSCOT standard, a pyramid scheme is characterized by the participants'
payment of money to a company in return for (i) the right to sell a product and
(ii) the right to receive, in return for recruiting other participants into the
program, rewards that are unrelated to sales of the product to ultimate users.
Applying the KOSCOT standard in IN RE AMWAY CORP., 93 F.T.C. 618 (1979), the FTC
determined that a company will not be classified as operating a pyramid scheme
if it adopts and enforces policies that in fact encourage retail sales to
consumers and prevent "inventory loading" (I.E., distributors' purchases of
large quantities of non-returnable inventory to obtain the full amount of
compensation available under the system). In AMWAY, the FTC found that Amway
Corp.'s marketing system did not constitute a pyramid scheme, noting the
following Amway policies: (i) participants were required to buy back, from any
person they recruited, any saleable, unsold inventory upon the recruit's leaving
Amway; (ii) every participant was required to sell at wholesale or retail at
least 70% of the products bought in a given month in order to receive a bonus
for that month; and (iii) in order to receive a bonus in a month, each
participant was required to submit proof of retail sales made to ten different
consumers.

The U.S. appellate court in OMNITRITION reversed the trial court decision
and decided that triable issues of fact existed regarding whether Omnitrition's
marketing system constituted a pyramid scheme under the KOSCOT standard. The
appellate court emphasized the second of the KOSCOT tests, indicating

45
<PAGE>
that the right to earn compensation for, in effect, recruiting other
participants into the marketing system, which compensation is unrelated to the
sale of products to ultimate consumers, made the Omnitrition marketing system a
pyramid scheme "on its face." As such, the appellate court indicated that
Omnitrition was required to present evidence that the program's safeguards were
enforced and actually served to deter inventory loading and encourage retail
sales. The appellate court commented negatively on the fact that Omnitrition
paid compensation to participants based on the suggested retail price of
products ordered from the Company, rather than based on actual sales to
consumers. The appellate court also rejected Omnitrition's argument that
personal consumption of a product by a distributor could count towards
satisfying the requirement that sales be to "ultimate users." As is the case
with other network marketing companies, the compensation paid by the Company to
its distributors is based in part on their own orders, which may include orders
for products that they personally consume.

The Company believes that its network marketing system would not be
classified as a pyramid scheme under the standards set forth in KOSCOT, AMWAY,
OMNITRITION and other applicable law. In particular, in most jurisdictions
(including the U.S.), in order to address the problem of "inventory loading,"
the Company makes available an inventory buy-back program. Pursuant to this
program, the Company will repurchase products sold to a distributor (subject to
a handling charge) provided that the distributor resigns from the Company,
returns the product in marketable condition within twelve months of original
purchase and meets certain documentation and other requirements. The Company's
"Career Guide" provided to all distributors describes the Company's buy-back
program.

It is an ongoing part of the Company's business to monitor and respond to
regulatory and legal developments, including those that may affect its network
marketing system. However, there can be no assurance that the legality of the
Company's network marketing system would be upheld under the standards set forth
in KOSCOT, AMWAY, OMNITRITION or other applicable law, and any adverse decision
in this regard could have a material adverse effect on the Company. Among other
things, such a decision could require the Company to make modifications to its
network marketing system, result in negative publicity or have a negative impact
on distributor morale, and any of these results could have a material adverse
effect on the Company. Further, adverse rulings by the lower court, or further
rulings by appellate courts, in the OMNITRITION litigation or other similar
litigation could have a material adverse effect on the Company, even if the
Company's network marketing system is not itself challenged.

TRANSFER PRICING AND SIMILAR REGULATIONS. In many foreign countries, the
Company is subject to transfer pricing regulations, restrictions on management
fees charged by the Company to its local subsidiary and similar regulations and
restrictions designed to ensure that appropriate levels of income are reported
as earned by the local subsidiary and taxed by the foreign governmental
authorities. In addition, the Company's operations in foreign countries are
subject to regulations designed to ensure that appropriate levels of customs
duties are assessed on the importation of the Company's products.

While the Company believes it is in compliance with all applicable
regulations and restrictions, it is subject to the risk that foreign
governmental authorities could audit its transfer pricing and related practices
and assert that additional taxes are owed. For example, the Company is currently
subject to pending or proposed audits and assessments in a number of foreign
jurisdictions, including Italy, France and Germany, involving transfer pricing
issues, income taxes, value added taxes, withholding taxes and related interest
and penalties. In certain circumstances, additional taxes, interest and
penalties have been assessed, and the Company will be required to litigate to
reverse the assessments. None of the pending or proposed audits or assessments
is expected to have a material adverse effect on the Company. In most instances,
the Company and its tax advisors believe that the Company has substantial
defenses, and the Company is vigorously contesting all material outstanding
assessments.

In the event that such audits or assessments are concluded adversely to the
Company, the Company believes that it could generally offset or mitigate the
consolidated effect of foreign taxes required to be paid through the use of U.S.
foreign tax credits. However, depending upon the years at issue, the

46
<PAGE>
Company might not be able to amend prior U.S. tax returns to obtain the benefit
of such credits. Furthermore, to the extent that the Company's operations in
high tax jurisdictions such as Japan grow disproportionately relative to the
balance of Company's operations, the Company will be unable to fully utilize its
foreign tax credits in the U.S., which could, accordingly, result in the Company
paying a higher overall effective tax rate on its worldwide operations. Because
the laws and regulations governing U.S. foreign tax credits are complex and
depend, among other things, on tax treaties with foreign nations in addition to
U.S. tax laws, there can be no assurance that the Company would in fact be able
to take advantage of any tax credits.

OTHER REGULATIONS. The Company is also subject to a variety of other
regulations in various foreign markets, including regulations pertaining to
social security assessments and value added taxes, employment and severance pay
requirements, import/export regulations and antitrust issues. As an example, in
many markets, the Company is substantially restricted in the amount and types of
rules and termination criteria that it can impose on distributors without
causing social security assessments to be payable by the Company on behalf of
such distributors and without incurring severance obligations to terminated
distributors. In some countries, the Company may be subject to such obligations
in any event.

Failure by the Company to comply with such regulations could have a material
adverse effect on the Company in a particular market or in general. Such
assertions or the effect of adverse regulations in one market could adversely
affect the Company in other markets as well by causing increased regulatory
scrutiny in those other markets or as a result of the negative publicity
generated in those other markets. See "Risk Factors--Dependence Upon Material
Foreign Markets."

COMPLIANCE PROCEDURES. As indicated above, the Company, its products and
its network marketing system are subject, both directly and indirectly through
distributors' conduct, to numerous federal, state and local regulations both in
the United States and foreign markets. Beginning in 1985, the Company began to
institute formal regulatory compliance measures by developing a system to
identify specific complaints against distributors and to remedy any violations
by distributors through appropriate sanctions, including warnings, suspensions
and, when necessary, terminations. In its manuals, seminars and other training
programs and materials, the Company emphasizes that distributors are prohibited
from making therapeutic claims for the Company's products.

The Company's general policy regarding acceptance of distributor
applications from individuals who do not reside in one of the Company's markets
is to refuse to accept such individual's distributor application. From time to
time, exceptions to the policy are made on a country-by-country basis.

In order to comply with regulations that apply to both the Company and its
distributors, the Company conducts considerable research into the applicable
regulatory framework (typically, with the assistance of local legal counsel and
other representatives) prior to entering any new market to identify all
necessary licenses and approvals and applicable limitations on the Company's
operations in that market. The Company devotes substantial resources to
obtaining such licenses and approvals and bringing its operations into
compliance with such limitations. The Company also researches laws applicable to
distributor operations and revises or alters its distributor manuals and other
training materials and programs to provide distributors with guidelines for
operating a business, marketing and distributing the Company's products and
similar matters, as required by applicable regulations in each market. However,
the Company is not able to monitor its supervisors and distributors effectively
to ensure that they refrain from distributing the Company's products in
countries where the Company has not commenced operations, and the Company does
not devote significant resources to such monitoring.

In addition, regulations in existing and new markets are often ambiguous and
subject to considerable interpretive and enforcement discretion by the
responsible regulators. Moreover, even when the Company believes that it and its
distributors are initially in compliance with all applicable regulations,

47
<PAGE>
new regulations are regularly being added and the interpretation of existing
regulations is subject to change. Further, the content and impact of regulations
to which the Company is subject may be influenced by public attention directed
at the Company, its products or its network marketing system, so that extensive
adverse publicity about the Company, its products or its network marketing
system may result in increased regulatory scrutiny.

It is an ongoing part of the Company's business to anticipate and respond to
such new and changing regulations and make corresponding changes in the
Company's operations to the extent practicable. In furtherance of these efforts,
in 1994 the Company formed its Government Relations Group, currently consisting
of eight employees, and in 1995 created the position of Chief International
Counsel. These employees seek to establish relationships with regulators and
community leaders in both new and existing markets and strive to ensure that the
Company's products and network marketing system comply with regulatory
requirements. However, while the Company devotes considerable resources to
maintaining its compliance with regulatory constraints in each of its markets,
there can be no assurance that the Company would be found to be in full
compliance with applicable regulations in all of its markets at any given time
or that the regulatory authorities in one or more markets will not assert,
either retroactively or prospectively or both, that the Company's operations are
not in full compliance. Such assertions or the effect of adverse regulations in
one market could negatively affect the Company in other markets as well by
causing increased regulatory scrutiny in those other markets or as a result of
the negative publicity generated in those other markets. Such assertions could
have a material adverse effect on the Company in a particular market or in
general. Furthermore, depending upon the severity of regulatory changes in a
particular market and the changes in the Company's operations that would be
necessitated to maintain compliance, such changes could result in the Company
experiencing a material reduction in sales in such market or determining to exit
such market altogether. In such event, the Company would attempt to devote the
resources previously devoted to such market to a new market or markets or other
existing markets, but there can be no assurance that such transition would not
have an adverse effect on the Company's business and results of operations
either in the short or long term.

TRADEMARKS

The Company uses the umbrella trademarks Herbalife-Registered Trademark-,
Thermojetics-Registered Trademark-, Dermajetics-Registered Trademark- and
several other trademarks and tradenames in connection with its products and
operations. Trademark registrations are either issued or pending in the United
States Patent and Trademark Office and in comparable agencies in many other
countries. The Company considers its trademarks and tradenames to be an
important factor in its business. The Company's product formulations are not
protected by patents and are generally not patentable.

COMPETITION

The Company is subject to significant competition for the recruitment of
distributors from other network marketing organizations, including those that
market weight management products, food and dietary supplements and personal
care products, as well as other types of products. Some of the Company's
competitors are substantially larger and have available considerably greater
financial resources than the Company. The Company's ability to remain
competitive depends, in significant part, on the Company's success in recruiting
and retaining distributors through an attractive compensation plan and other
incentives. The Company believes that its production bonus program,
international sponsorship program and other compensation and incentive programs
provide its distributors with significant earning potential. However, there can
be no assurance that the Company's programs for recruitment and retention of
distributors will be successful. See "Risk Factors--Competition."

48
<PAGE>
both in the United States and abroad. The market is highly sensitive to the
introduction of new products or weight management plans (including various
prescription drugs) that may rapidly capture a significant share of the market.
As a result, the Company's ability to remain competitive depends in part upon
the successful introduction of new products.

EMPLOYEES

As of December 31, 1995 and 1996, the Company had 1,060 and 1,180 full-time
employees, respectively. These numbers do not include the Company's
distributors, who are generally independent contractors rather than employees of
the Company. The Company considers its employee relationships to be
satisfactory. Except for certain employees in Mexico, none of the Company's
employees is a member of any labor union, and the Company has never experienced
any business interruption as a result of any labor disputes.

PROPERTIES

The Company leases all of its physical properties located in the United
States. The Company's executive offices, re-located to Century City, California
in February 1996, include approximately 81,000 square feet of general office
space under a lease that expires in January 2006. The Company leases an
aggregate of approximately 78,000 square feet of office space, computer
facilities and conference rooms at the Operations Center in Inglewood,
California, under a lease that expires in October 2006, and approximately
146,000 square feet of warehouse space in two separate facilities located in Los
Angeles and Memphis. The Los Angeles and Memphis agreements have terms through
May 2001 and August 2006, respectively. The Company also leases warehouse and
office space in a majority of its other geographic areas of operations. The
Company believes that its existing facilities are adequate to meet its current
requirements and that comparable space is readily available at each of these
locations.

LEGAL MATTERS

The Company is from time to time engaged in routine litigation incident to
the conduct of its business. The Company regularly reviews all pending
litigation matters in which it is involved and establishes reserves deemed
appropriate by management for such litigation matters. The Company believes that
no litigation currently pending against it will have a material adverse effect
on its consolidated financial position and results of operations. See
"Regulation--Transfer Pricing and Similar Regulations" for a discussion of
certain pending tax matters.

HISTORY AND ORGANIZATION

The Company began operations in February 1980 as a California limited
partnership and operated in that form through December 1985, with the exception
of an interim period from October 1981 through August 1983 when the business was
operated through a California corporation. In January 1986, the Company's
business was transferred from the California limited partnership to its
corporate general partner, Herbalife International of America, Inc. ("Herbalife
of America"). In November 1986, Herbalife of America was acquired in a
stock-for-stock reorganization by Sage Court Ventures, Inc. ("Sage Court"). As a
result of the acquisition, Herbalife of America became a wholly-owned subsidiary
of Sage Court and the former stockholders of Herbalife of America acquired a
controlling interest in Sage Court. Sage Court's name was formally changed to
Herbalife International, Inc. in December 1986.

The Company's principal executive offices are located at 1800 Century Park
East, Los Angeles, California 90067, and its telephone number is (310) 410-9600.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the directors
and executive officers of the Company (ages are as of January 1, 1997).

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Mark Hughes.................... 41 Chairman of the Board, Chief Executive Officer and President

Christopher Pair (1)........... 42 Executive Vice President--International and Corporate Administration,
Chief Operating Officer, Secretary, and Director

Michael Rosen.................. 50 Executive Vice President, Chief Executive of Corporate Development and
Marketing, and Director

Timothy Gerrity................ 46 Executive Vice President and Chief Financial Officer

Robert Sandler................. 52 Executive Vice President and General Counsel

Edward J. Hall (1), (2), (3)... 50 Director

Alan Liker (3)................. 59 Director

Christopher M. Miner (1), (2),
(3).......................... 45 Director
</TABLE>

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

(1) Member of the Director Nomination Committee.

(2) Member of the Compensation, Stock Option and Business Development
Committees.

(3) Member of the Audit and Finance Committees.

MARK HUGHES founded the Company's business in 1980. Since that time Mr.
Hughes has controlled the operations of the business either as the sole
individual general partner of the California limited partnership through which
the business was conducted from inception to December 1985, as the President and
Chairman of the Board of the California corporation through which the business
was conducted for the interim period from October 1981 through August 1983, or
as the President and Chairman of the Board of Herbalife of America, Inc., which
was the corporate general partner of the California limited partnership from May
through December 1985 and the corporation through which the business was
conducted from January 1986 to November 1986. In November 1986, Mr. Hughes
became Chairman of the Board, Chief Executive Officer and President of the
Company (then called Sage Court Ventures, Inc.) when it acquired Herbalife of
America, Inc. in a stock-for-stock reorganization and has continued in those
positions since that time. Mr. Hughes serves on the Board of Directors of the
Direct Selling Association, a national trade organization for direct sales
companies.

CHRISTOPHER PAIR joined the Company's predecessor in March 1985 as Executive
Assistant to the President. From 1986 to 1989, he served as Vice
President--Administration for the Company and its predecessors and supervised
all administrative departments of the Company. In May 1991, Mr. Pair became the
Company's Executive Vice President--International and Corporate Administration
and Secretary, and is responsible for the Company's international development.
In November 1996, Mr. Pair became the Company's Chief Operating Officer. Mr.
Pair has been a director of the Company since May 1990. Prior to 1985, Mr. Pair
served in various management positions with U.S. Leasing, Raytheon Data Systems
and Consolidated Foods. Mr. Pair serves on the Board of Directors of the Direct
Selling Educational Foundation and also serves on the Direct Selling Association
Long Range Planning Committee. Mr. Pair received his B.S. and M.B.A. from the
University of Redlands.

MICHAEL ROSEN joined the Company in August 1993 and is currently Executive
Vice President and Chief Executive of Corporate Development and Marketing. Mr.
Rosen's responsibilities include investor relations, external affairs and
developing the Company's domestic and international sales and product

50
<PAGE>
literature. Since 1986, Mr. Rosen has served as the Chief Executive Officer of
Shop Television Network, a company which he founded. From February 1992 to
September 1993, Shop Television Network was subject to a Chapter 11
reorganization proceeding. In September 1993, the proceeding was dismissed
without the necessity of confirming a reorganization plan and all creditors were
fully repaid. Shop Television Network has no current operations. Mr. Rosen was
elected a director of the Company in January 1996.

TIMOTHY GERRITY joined the Company in May 1985 and is currently Executive
Vice President and Chief Financial Officer. Mr. Gerrity, a certified public
accountant, is responsible for the accounting and finance operations of the
Company. His previous experience includes management positions with Wickes
Corporation, Deloitte & Touche LLP, and Fluor Corporation. Mr. Gerrity received
his B.S. degree from California State University at Northridge and his M.B.A.
from the University of Southern California.

ROBERT SANDLER joined the Company in January 1997 as its Executive Vice
President and General Counsel. From 1975 to the present, Mr. Sandler has been a
member of Sandler & Morris, a law firm that he co-founded. From 1985 to 1994,
Mr. Sandler served in various capacities with various companies within the
Siemens family of companies, including most recently as the Executive Vice
President and General Counsel of Siemens Pacesetter. Mr. Sandler received his
A.B. degree from the University of California, Los Angeles and his J.D. degree
from the University of Southern California. Mr. Sandler is currently a director
of Physio-Control, a manufacturer of external defribrillators.

EDWARD J. HALL has served as the Chief Financial Officer of Cruttenden Roth
Incorporated, an investment banking firm, since April 1995. He served in a
similar capacity for H.J. Meyers & Co., Inc., an investment banking firm based
in Beverly Hills, California from March 1991 through March 1995. Between May
1990 and March 1991, Mr. Hall, a certified public accountant, was an independent
investor. From March 1988 through May 1990, Mr. Hall was an Executive Vice
President of Angeles Corporation, an investment management firm. Prior to
joining Angeles Corporation, Mr. Hall was with Deloitte & Touche LLP, where he
had been an audit partner since 1980. Mr. Hall was elected a director of the
Company in March 1992.

ALAN LIKER has served as a business advisor to a number of individuals and
companies during the past several years, including currently Budget Rent-A-Car
of Southern California. Until their sale in 1989, Mr. Liker was a director of
Shaklee Corporation and its Japanese affiliate, Shaklee KK. From 1976 to 1980,
he was a principal of Xerox Development Corporation, a strategic planning unit
of Xerox Corporation. Mr. Liker was previously a law professor at the Harvard
University, University of California (Los Angeles) and University of Southern
California law schools. He was elected to the Company's Board in December 1993
and is currently also a director of Team Rental Group, Inc. Previously he was a
director of First Charter Bank and Shop Television Network.

CHRISTOPHER M. MINER co-founded Workstation Technologies, Inc., a leading
developer of interactive communications software and hardware products, in 1989
and currently serves as director of that company. Prior to founding Workstation
Technologies, from 1987 to 1989, Mr. Miner served as Chief Financial Officer of
Technology Marketing, Inc., a custom electronic engineering organization and
board level test product manufacturer. Prior to joining Technology Marketing, he
served as Chief Financial Officer and Director for Media Systems Technology,
Inc., a software manufacturer from 1981 to 1987. Mr. Miner received his M.B.A.
from California State University in 1976. He was elected a director of the
Company in March 1996.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table lists, as of December 31, 1996, information as to the
beneficial ownership of Common Stock by (i) each of the Company's directors,
(ii) the Company's Chief Executive Officer and certain other executive officers,
(iii) all directors and executive officers as a group, and (iv) each person
believed by the Company to beneficially own more than five percent (5%) of the
outstanding Common Stock. In each instance, information as to the number of
shares owned and the nature of ownership has been provided by the individuals
identified or described and is not within the direct knowledge of the Company.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER OFFERING(2)
-------------------------- SHARES --------------------------
NAME AND ADDRESS NUMBER OF OFFERED NUMBER OF
OF BENEFICIAL OWNER(1) SHARES PERCENT HEREBY(2) SHARES PERCENT
- --------------------------------------------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Mark Hughes (3) ............................. 17,402,238 57.6% 4,600,000 12,802,238 42.4%
1800 Century Park East
Los Angeles, CA 90067

Christopher Pair (4) ........................ 151,250 0.5 -- 151,250 0.5
1800 Century Park East
Los Angeles, CA 90067

Michael Rosen (5) ........................... 60,000 0.2 -- 60,000 0.2
1800 Century Park East
Los Angeles, CA 90067

Edward J. Hall .............................. 0 0 -- 0 0
Cruttenden Roth Incorporated
18301 Von Karman
Suite 100
Irvine, CA 92715

Alan Liker .................................. 0 0 -- 0 0
150 South Doheny Drive
Beverly Hills, CA 90211

Christopher M. Miner ........................ 0 0 -- 0 0
Workstation Technologies
18010 Sky Park Circle
Irvine, CA 92714

All executive officers and directors as a
group (8 persons) (6)...................... 17,984,012 59.5 4,600,000 13,384,012 44.3
</TABLE>

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

(1) Except as otherwise indicated, the persons in this table have sole voting,
investment and dispositive power with respect to all shares of the Common
Stock shown as beneficially owned by them, subject to community property
laws where applicable.

(2) Assumes (i) Mr. Hughes' delivery to Salomon of the maximum number of shares
of Common Stock required to satisfy all of the Stockholder DECS (assuming
full exercise of the over-allotment option) and (ii) no change in the number
of outstanding shares of the Company's Common Stock from the date indicated
in the introductory paragraph above.

(3) Includes 550,000 shares owned by the Herbalife Family Foundation. Mr. Hughes
acts as a director of the foundation but has no pecuniary interest in the
shares owned by it.

(4) Consists of shares issuable upon exercise of stock options which are
presently exercisable.

(5) Includes 40,000 unvested restricted shares of common stock.

(6) Includes an aggregate of 374,100 shares issuable upon exercise of stock
options which are presently exercisable.

52
<PAGE>
CERTAIN TRANSACTIONS

The Company purchases its powder products from Raven, one-third of whose
stock is owned by Mark Hughes. In addition, one of the Company's tablet
products, Activated Fiber, is manufactured by D&F pursuant to a licensing
agreement with Dynamic, twenty percent and five percent of whose stock is owned
by Mark Hughes and Dr. David B. Katzin, respectively. Dr. Katzin was a director
of the Company until March 22, 1996 and an executive officer until December 31,
1996, and he is currently the Company's Executive Director of the Medical
Advisory Board. Two individuals (not affiliates of the Company) are principal
stockholders of each of D&F, Raven and Dynamic.

In May 1993, the Company entered into requirements contracts with each of
D&F, Raven and Dynamic that extend to January 1998 (subject to extension unless
either party elects to terminate). Pursuant to these requirements contracts, the
Company has agreed to purchase all of its requirements of powder products from
Raven and all of its requirements of tablet, capsule, liquid, cream and lotion
products from Dynamic or D&F to the extent each such manufacturer is capable or
becomes capable of manufacturing such products. However, the Company has
obtained waivers to permit the purchase of certain personal care products from
other manufacturers. The requirements contracts also provide Raven, D&F and
Dynamic a right of first refusal to establish any manufacturing facility outside
of North America that the Company proposes to develop or acquire, and the right
to receive certain royalty payments in the event that such a manufacturing
facility were constructed or acquired and the right of first refusal were not
exercised.

During 1996, the Company's purchases from Raven and Dynamic amounted to
$53.2 million and $3.2 million, respectively. Mr. Hughes' ownership interest in
Raven and Dynamic and Dr. Katzin's ownership interest in Dynamic entitle them to
a proportionate interest in the profits of those companies, if any. In 1995, Mr.
Hughes' share of the earnings of Raven and Dynamic totalled $2.6 million and
$0.3 million, respectively, and Dr. Katzin's share of the earnings of Dynamic
totalled $66,000. Management believes that the price paid under these
requirements contracts is appropriate, taking into account the product research,
development and formulation services provided by the companies.

During 1996, the Company engaged Nutrient Research Consultants, Ltd., a
California corporation ("Consultant"), which is wholly owned by Dr. Katzin, to
perform consulting services. Such services consisted of assistance in
distributor and supervisor education, identification of new product concepts,
product reformulation and governmental and public relations. Consultant was
engaged on a month-to-month basis pursuant to an oral agreement which had been
in effect since the expiration of a written six-month contract entered into
between Consultant and the Company in 1985. During the year ended December 31,
1996, Consultant received $230,000 from the Company in consulting fees.
Management believes that the terms of its agreement with Consultant fairly
reflected the value of the services provided by Consultant.

In January 1997, the Company entered into a Consulting Agreement with David
R. Addis, the former Chief Counsel of the Company. The agreement provides for
Mr. Addis to provide consulting services, as requested by the Company, through
the end of 1997 in connection with the business and operations of the Company,
including assistance in connection with the DECS Offering. Pursuant to the
agreement, Mr. Addis is entitled to receive, among other things, the following:
(i) base monthly compensation at the rate of $700,000 per annum through the end
of 1997; (ii) $1,000,000 payable on January 1, 1998; (iii) vesting of 40,000
restricted shares of the Company's Common Stock (originally granted pursuant to
a preexisting employment agreement with Mr. Addis) on January 1, 1998; (iv)
vesting of an option (originally granted pursuant to the preexisting employment
agreement) to purchase 17,500 shares of Common Stock of the Company in November
1997, provided that services continue to be provided through that time; (v)
forgiveness of $607,000 of the advances previously made to Mr. Addis; and (vi)
certain other benefits described in the agreement.

53
<PAGE>
In accordance with the 1994 Performance-Based Incentive Compensation Plan,
the Company made advances of targeted performance bonus amounts during 1994 to
Messrs. Hughes, Pair, Katzin, Addis and Rosen and during 1995 to Mr. Addis. As
of December 31, 1996, the remaining outstanding principal and accrued interest
obligations of such individuals were $2,046,000 in the case of Mr. Hughes;
$496,000 in the case of Mr. Pair; $168,000 in the case of Dr. Katzin; $1,098,000
in the case of Mr. Addis (of which $607,000 is being forgiven pursuant to Mr.
Addis' consulting agreement as discussed above); and $160,000 in the case of Mr.
Rosen. Each advance is a full recourse obligation of the executive with a
maturity date of two years following the date of the advance. In addition, the
advances bear interest at the applicable federal rate (AFR) for two-year notes
at the time of the advances. The rates for existing outstanding advances range
from 5.31% to 7.93%.

The Company has begun steps to pursue an initial public offering of shares
of Herbalife Japan KK ("Herbalife Japan") in Japan. Herbalife Japan was formed
in November 1992 as a wholly-owned subsidiary of the Company, and the Company
commenced operations through that subsidiary in November 1993. The Company has
conducted business in Japan, directly or through a licensee, since 1989. The
Company's advisors have informed the Company that the public offering process in
Japan is lengthy (offerings can take one to three years or longer to complete)
and involves a detailed review, among other things, of the systems and
procedures of the subject company by Japanese regulators. Consequently, there
can be no assurance of a successful completion of the offering. Similarly, the
Company has not yet determined whether to complete the offering, assuming
regulatory approval is obtained. However, in preparation for the possible
offering, in December 1996 the Company sold shares of Herbalife Japan to certain
of the Company's directors and executive officers, as well as to resident
managers of Herbalife Japan, as an incentive for increased efforts to facilitate
the operation of the Herbalife Japan business and the success of the offering.
The following table lists the purchasers of such shares, the number of shares
purchased and the percentage of Herbalife Japan's outstanding shares represented
thereby, and the purchase price paid to the Company by each individual:

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES HERBALIFE JAPAN AGGREGATE
NAME PURCHASED SHARES PRICE(1)
- ----------------------------------------- ------------------- ----------------- -------------

<S> <C> <C> <C>
Mark Hughes.............................. 10.00 5.000% $ 3,300,000

Christopher Pair......................... 1.15 0.575 379,500

Michael Rosen............................ 1.15 0.575 379,500

Timothy Gerrity.......................... 1.15 0.575 379,500

Alan Liker............................... 0.40 0.200 132,000

Other.................................... 0.15 0.075 49,500
----- ----- -------------

Total.................................... 14.00 7.000% $ 4,620,000
----- ----- -------------
----- ----- -------------
</TABLE>

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

(1) Purchase price for shares was denominated in Japanese yen; dollar amounts
reflect conversion at the yen-to-dollar exchange rate in effect on the date
of purchase.

The purchase price for the shares was determined, in part, based upon a
formula (the "Formula") prescribed by a Japanese regulatory authority
responsible for certain aspects of public offerings of securities in that
country, as applied to Herbalife Japan's 1995 results of operations. The Board
of Directors of the Company separately sought and obtained a valuation of the
shares from an independent investment banking firm, Houlihan, Lokey, Howard &
Zukin, Inc. ("Houlihan Lokey"), which rendered an opinion to the Board to the
effect that the fair market value of the shares was greater than that determined
under the Formula. Consequently, the purchase price per share was increased to
the fair value of the shares as indicated in the Houlihan Lokey opinion. The
Company's Board of Directors, based in part on the Houlihan Lokey opinion and
the determination of price derived under the Formula (which is utilized

54
<PAGE>
generally in Japan in connection with public offerings) and taking into account
the uncertainty of completion of the offering in Japan and other pertinent
factors, has determined that the purchase price reflects the fair market value
of the shares.

For each of the foregoing individuals, the purchase price for the shares was
paid to the Company approximately 30% in cash and approximately 70% in the form
of a full recourse promissory note bearing interest at 5.48% per annum in the
case of Mr. Hughes (loan denominated in U.S. dollars) and 2.125% per annum in
the case of each individual other than Mr. Hughes (loans denominated in Japanese
yen), with principal payable in five equal annual installments on the first five
anniversaries of the date of the purchase of shares and accrued interest payable
at the same time as principal.

In the event that the offering is completed in Japan, regulations in that
country will preclude any of the foregoing individuals from selling shares in
the public market for one year following the offering. Neither the Company nor
Herbalife Japan has entered into any agreement or arrangement with the above
individuals to repurchase the shares of Herbalife Japan purchased by them in the
event that the offering is not completed.

55
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock and 100,000,000 shares of undesignated preferred stock. The
following description of the Company's capital stock does not purport to be
complete or to give full effect to the provisions of statutory or common law and
is in all respects qualified by reference to the applicable provisions of the
Company's Articles of Incorporation, as amended.

COMMON STOCK

As of January 27, 1997, there were 30,209,463 shares of Common Stock issued
and outstanding held by 1,148 stockholders of record. The holders of Common
Stock are entitled to one vote for each share held and have no preemptive or
other rights to subscribe for additional shares from the Company. There are no
cumulative voting rights, with the result that the holder of more than 50% of
the Common Stock is able to elect all of the Company's directors. Holders of
Common Stock are entitled to such dividends as may be declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata the net assets of the Company remaining
after the payment of the full preferential amount to which the holders of any
outstanding class of preferred stock are entitled and after payment of all
creditors. The rights, preferences and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of holders of shares of
any series of preferred stock that the Company may designate and issue in the
future.

PREFERRED STOCK

There are currently no shares of the Company's preferred stock outstanding.
The Company's Board of Directors is authorized to issue from time to time up to
100,000,000 shares of preferred stock in one or more series, to determine the
rights, preferences, privileges and restrictions with respect thereto and to fix
the number and designation of shares constituting any series.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is U.S. Stock Transfer
Corp., Glendale, California.

56
<PAGE>
PLAN OF DISTRIBUTION

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among Salomon, the Company, the Selling
Stockholder (and his family trust) and the Underwriters named below, Salomon has
agreed to sell to each of the Underwriters, and each of the Underwriters
severally has agreed to purchase, the aggregate number of DECS set forth
opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS DECS
- --------------------------------------------------------------------------------- -----------
<S> <C>
Salomon Brothers Inc.............................................................
-----------
Total........................................................................ 4,000,000
-----------
-----------
</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 of the DECS offered pursuant to the DECS Prospectus if
any of the DECS are purchased.

Salomon has been advised by the Underwriters that they propose to offer the
DECS directly to the public initially at the public offering price set forth on
the cover of the DECS 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 Company and the Selling Stockholder have 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
from the date of this Prospectus without the prior written consent of Salomon
Brothers; 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 any defined
contribution qualified employee benefit plan in effect on the date of this
Prospectus may sell Common Stock to satisfy plan liquidity needs, and (y) such
agreement will not affect the ability of the Selling Stockholder to engage in
any of the transactions described in clause (i) or (ii) above in connection with
the offering of the Stockholder DECS or any exchange at maturity pursuant to the
terms of the Stockholder DECS or in connection with loans of shares of Common
Stock pursuant to the Securities Loan Agreement (as defined below). If any such
consent is given it would not necessarily be preceded or followed by a public
announcement thereof.

Salomon has granted to the Underwriters an option, exercisable for the
30-day period after the date of the DECS Prospectus, to purchase up to an
additional 600,000 DECS from Salomon, 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 pursuant to the DECS Prospectus. 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.

57
<PAGE>
The DECS will be a new issue of securities with no established trading
market. 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 Salomon and Herbalife 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 Selling Stockholder (and his
family trust) will guarantee the indemnity and contribution obligations of the
Company.

Pursuant to a Purchase Agreement between the Selling Stockholder and Salomon
(the "Purchase Agreement"), Salomon has agreed, subject to the terms and
conditions set forth therein, to purchase from the Selling Stockholder a number
of the Stockholder DECS equal to the aggregate number of DECS to be purchased by
the Underwriters from Salomon pursuant to the Underwriting Agreement (including
any DECS to be purchased by the Underwriters upon exercise of the over-allotment
option). Pursuant to the terms of the Stockholder DECS, the Selling Stockholder
will be obligated to deliver to Salomon at or prior to maturity of the DECS a
number of shares of Common Stock (or, at the Selling Stockholder's option, the
cash equivalent and/or such other consideration as permitted or required by the
terms of the Stockholder DECS) that are expected to have the same value as the
shares of Common Stock delivered pursuant to the DECS. The closing of the DECS
Offering is conditioned upon the closing of the purchase of the Stockholder DECS
pursuant to the Purchase Agreement. For further information, see the DECS
Prospectus.

Salomon Brothers Inc is an indirect wholly owned subsidiary of Salomon. The
participation of Salomon Brothers Inc in the DECS Offering complies with the
requirements of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding the underwriting by Salomon Brothers Inc or
the securities of its parent.

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 Salomon,
Herbalife, the Selling Stockholder and their respective affiliates.

In connection with the offering of the DECS, the Selling Stockholder or an
affiliate thereof (referred to herein as the "Lender") and Salomon Brothers Inc
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, Salomon Brothers Inc may from time to time borrow,
return and reborrow shares of Common 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 Salomon Brothers Inc. Salomon Brothers Inc may from time
to time borrow shares of Common Stock under the Securities Loan Agreement to
settle short sales of Common Stock entered into by Salomon Brothers Inc 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 Salomon Brothers Inc's market-making
transactions in the DECS and the consequent need to borrow shares of Common
Stock. The availability of shares of Common 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 Salomon Brothers Inc 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 such Agreement, a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.

58
<PAGE>
LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Irell & Manella LLP, Los Angeles,
California.

EXPERTS

The consolidated financial statements of the Company as of December 31, 1994
and 1995 and for each of the three years in the period ended December 31, 1995
incorporated in this Prospectus by reference have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and has been included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.

59
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER 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 COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS. 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 OFFER OR SOLICITATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Forward-Looking Statements..................... 2
Available Information.......................... 2
Documents Incorporated by Reference............ 3
Prospectus Summary............................. 4
Risk Factors................................... 8
Use of Proceeds................................ 15
Price Range of Common Stock.................... 16
Dividend Policy................................ 16
Selected Consolidated Financial and Operating
Data......................................... 17
Capitalization................................. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 20
Business....................................... 28
Management..................................... 50
Principal and Selling Stockholders............. 52
Certain Transactions........................... 53
Description of Capital Stock................... 56
Plan of Distribution........................... 57
Legal Matters.................................. 59
Experts........................................ 59
</TABLE>

4,000,000 SHARES

HERBALIFE
INTERNATIONAL, INC.

COMMON STOCK
($.01 PAR VALUE)

[HERBALIFE LOGO]
PROSPECTUS

DATED , 1997
<PAGE>
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 SUCH STATE.
<PAGE>
[ALTERNATE PAGE FOR SHELF PROSPECTUS]
SUBJECT TO COMPLETION
FEBRUARY 5, 1997

PROSPECTUS [HERBALIFE LOGO]

1,000,000 SHARES

HERBALIFE INTERNATIONAL, INC.

COMMON STOCK

($.01 PAR VALUE)

This Prospectus relates to shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Herbalife International, Inc., a Nevada corporation
("Herbalife" or the "Company"), which may be offered and sold by Salomon
Brothers Inc ("Salomon Brothers") in connection with market-making activities in
the % Exchangeable Notes due , 2000 (the "Debt Exchangeable for
Common StockSM" or "DECSSM") of Salomon Inc ("Salomon"). The DECS are being
offered pursuant to a prospectus supplement and prospectus (together, the "DECS
Prospectus") of Salomon relating to the sale of DECS which is accompanied by a
form of prospectus (the "DECS Equity Prospectus") relating to the delivery by
Salomon pursuant to the DECS of shares of Common Stock. The DECS Equity
Prospectus is also included as part of the Registration Statement of which this
Prospectus forms a part. Herbalife will not receive any of the proceeds from the
sale of the DECS or delivery thereunder of shares of Common Stock to which this
Prospectus relates. See "Use of Proceeds." The Company takes no responsibility
for any information included in or omitted from the DECS Prospectus. The DECS
Prospectus does not constitute a part of this Prospectus nor is it incorporated
by reference herein.

Salomon Brothers may, subject to certain limitations, from time to time borrow
shares of Common Stock from Mark Hughes, the Company's principal stockholder,
Chairman of the Board, Chief Executive Officer and President, or an affiliate
thereof ("Hughes"), to settle short sales of Common Stock entered into by
Salomon Brothers to hedge any long position in the DECS resulting from its
market-making activities. Such sales will be made on the New York Stock
Exchange, Inc. (the "NYSE") or in the over-the-counter market at market prices
prevailing at the time of sale or at prices related to such market prices.
Shares that have been returned to Hughes may be reborrowed. The number of shares
borrowed at any time may not exceed 1,000,000. See "Plan of Distribution."
Salomon Brothers is not under any obligation to engage in any market-making
transactions with respect to the DECS, and any market-making in the DECS
actually engaged in by Salomon Brothers may cease at any time.

"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.

THE DATE OF THIS PROSPECTUS IS .
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses payable in connection with the
offering of the securities to be registered and offered hereby. All of such
expenses are estimates, other than the registration fee payable to the
Securities and Exchange Commission and the fees payable to the NASD and Nasdaq
National Market, and all such expenses will be paid by Mark Hughes (the "Selling
Stockholder").

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 43,697
NASD Fee........................................................ $ 14,920
Blue Sky Fees................................................... *
Printing and Engraving Expenses................................. *
Legal Fees and Expenses......................................... *
Accounting Fees and Expenses.................................... *
Miscellaneous................................................... *
---------
Total....................................................... $ *
---------
---------
</TABLE>

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

* To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 78.751 of the General Corporation Law of Nevada ("GCL") empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of any action by or in the right of the
corporation, no indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation or for amounts paid in settlement to the corporation unless and only
to the extent that the court in which such action or suit was brought or other
court of competent jurisdiction determines that in view of all the circumstances
of the case such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. Section 78.751 further provides that to
the extent a director or officer of a corporation has been successful in the
defense of any action, suit or proceeding referred to above or in the defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.

The Articles of Incorporation, as amended (the "Articles"), and Restated
By-Laws of the Company provide, in effect, that to the extent and under the
circumstances permitted by Section 78.751 of the GCL and subject to certain
conditions, the Company shall indemnify any person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding of the type described above by reason of the fact that he or she is
or was a director or officer of the Company or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation.

II-1
<PAGE>
The Company has also entered into indemnification agreements with each of
its directors and executive officers providing, among other things, that the
director or officer shall be indemnified to the fullest extent permitted by
applicable law against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement in any action, suit or proceeding of the
type described above by reason of the fact that he or she is or was a director
or officer of the Company or is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation. In furtherance of
such indemnification agreements, the Company has established a $1,000,000 trust
fund from which payments owing under the indemnification agreements may be made.
The initial term of the trust is ten years.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement among the Company, Mark Hughes (and his family trust), Salomon
and the several Underwriters (1)

1.2 Form of Purchase Agreement between Mark Hughes and Salomon (1)

4 Form of Common Stock Certificate (2)

5 Opinion of Irell & Manella LLP (3)

23.1 Consent of Irell & Manella LLP (included in Exhibit 5)

23.2 Consent of Deloitte & Touche LLP (3)

24 Power of Attorney (see Signatures)

99 Form of Securities Loan Agreement between Mark Hughes or an affiliate thereof and Salomon
Brothers Inc (1)
</TABLE>

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

(1) To be filed by amendment.

(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-66576) initially filed on July 29, 1993.

(3) Filed herewith.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.

(b) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective;

(2) For purposes 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

II-2
<PAGE>
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.

(c) 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 items listed in item 15 hereof, 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 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.

(d) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on this 5th day of
February, 1997.

<TABLE>
<S> <C> <C>
HERBALIFE INTERNATIONAL, INC.
(a Nevada corporation)

By: /s/ CHRISTOPHER PAIR
-----------------------------------------
Christopher Pair
EXECUTIVE VICE PRESIDENT--INTERNATIONAL
AND CORPORATE ADMINISTRATION, CHIEF
OPERATING OFFICER AND SECRETARY
</TABLE>

II-4
<PAGE>
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors
of Herbalife International, Inc., a Nevada corporation, do hereby constitute and
appoint each of Mark Hughes, Chairman, President and Chief Executive Officer,
and Christopher Pair, Executive Vice President and Chief Operating Officer, or
either of them, the lawful attorney-in-fact and agent, with full power and
authority to do any and all acts and things and to execute any and all
instruments which said attorney and agent determines to be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulation or requirements of the
Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the
power and authority to sign the names of the undersigned officers and directors
in the capacities indicated below to this Registration Statement and/ or any
additional Registration Statement filed in connection herewith pursuant to
Section 462(b) of the Act, to any and all amendments, both pre-effective and
post-effective, and supplements thereto and to any and all instruments or
documents filed as part of or in connection with this Registration Statement or
such additional Registration Statement or amendments or supplements thereof, and
each of the undersigned hereby ratifies and confirms all that said attorney and
agent shall do or cause to be done by virtue hereof. This Power of Attorney may
be signed in several counterparts.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities indicated on February 5, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------

<C> <S>
Chairman, President and
/s/ MARK HUGHES Chief Executive Officer
- ------------------------------ (Principal Executive
Mark Hughes Officer) Executive Vice
President

Executive Vice
President--International
/s/ CHRISTOPHER PAIR and Corporate
- ------------------------------ Administration, Chief
Christopher Pair Operating Officer,
Secretary and Director

Executive Vice President
/s/ TIMOTHY GERRITY and Chief Financial
- ------------------------------ Officer (Principal
Timothy Gerrity Financial and Accounting
Officer)

/s/ MICHAEL ROSEN Executive Vice
- ------------------------------ President--Corporate
Michael Rosen Marketing and Director

/s/ EDWARD J. HALL
- ------------------------------ Director
Edward J. Hall

/s/ ALAN LIKER
- ------------------------------ Director
Alan Liker

/s/ CHRISTOPHER M. MINER
- ------------------------------ Director
Christopher M. Miner
</TABLE>

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
1.1 Form of Underwriting Agreement among the Company, Mark Hughes (and his family trust),
Salomon and the several underwriters (1)

1.2 Form of Purchase Agreement between Mark Hughes and Salomon (1)

4 Form of Common Stock Certificate (2)

5 Opinion of Irell & Manella LLP (3)

23.1 Consent of Irell & Manella LLP (included in Exhibit 5)

23.2 Consent of Deloitte & Touche LLP (3)

24 Power of Attorney (see "Signatures")

99 Form of Securities Loan Agreement between Mark Hughes or an affiliate thereof and
Salomon Brothers Inc (1)
</TABLE>

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

(1) To be filed by amendment.

(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-66576) initially filed on July 29, 1993.

(3) Filed herewith.

<PAGE>

EXHIBIT 5

[IRELL & MANELLA LLP LOGO]

February 5, 1997

Herbalife International, Inc.
1800 Century Park East
Los Angeles, California 90067

Ladies and Gentlemen:

We are counsel for Herbalife International, Inc., a Nevada corporation (the
"Company"), and are acting as such in connection with the filing of a
Registration Statement on Form S-3 (including all amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the delivery by Salomon Inc, a Delaware
corporation (including any related entity, "Salomon"), of up to 4,600,000
shares (including shares subject to an over-allotment option) of the
Company's Common Stock, par value $.01 per share ("Common Stock"), that
Salomon may receive from Mark Hughes, the Company's principal stockholder, or
an entity controlled by him, under the terms of a purchase contract with
Salomon and with respect to up to 1,000,000 shares of Common Stock that may
be borrowed by Salomon from Mr. Hughes to settle short sales of Common Stock
for the purposes described in the Registration Statement (all 5,600,000
shares covered by the Registration Statement being referred to herein as the
"Shares").

With respect to the Shares registered pursuant to the Registration
Statement (and any additional shares that may be registered pursuant to a
registration statement filed under Rule 462(b) under the Securities Act in
connection with the Registration Statement), it is our opinion that such Shares
are validly issued, fully paid and non-assessable.

We note that we are not licensed in the practice of law in the state of
Nevada and that our opinion herein is based on publicly available compilations
available with respect to the general corporation law of that state. We hereby
give our written consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in such
Registration Statement.

Very truly yours,

/s/ Irell & Manella LLP

Irell & Manella LLP

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
Herbalife International, Inc. on Form S-3 of our report dated February 12, 1996,
appearing in the Annual Report on Form 10-K of Herbalife International, Inc. for
the year ended December 31, 1995 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.

DELOITTE & TOUCHE LLP

Los Angeles, CA
February 4, 1997