HERBALIFE INTERNATIONAL INC, SC 14D1, 1999-09-17

HERBALIFE INTERNATIONAL INC
SC 14D1, 1999-09-17
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934

HERBALIFE INTERNATIONAL, INC.
(Name of Subject Company)

MH MILLENNIUM HOLDINGS LLC
MH MILLENNIUM ACQUISITION CORP.
MARK HUGHES
(Bidders)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
426908208 (CLASS A)
426908307 (CLASS B)
(Cusip Number of Class of Securities)

MH MILLENNIUM HOLDINGS LLC
MH MILLENNIUM ACQUISITION CORP.
MARK HUGHES
C/O HERBALIFE INTERNATIONAL, INC.
1800 CENTURY PARK EAST
LOS ANGELES, CA 90067
ATTN. TIMOTHY GERRITY
TEL. (301) 410-9600
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)

COPY TO:
ANTHONY T. ILER, ESQ.
IRELL & MANELLA LLP
333 SOUTH HOPE STREET, SUITE 3300
LOS ANGELES, CA 90071
(213) 620-1555

CALCULATION OF FILING FEE

Transaction Valuation*: $267,834,554 Amount of Filing Fee: $53,557

* For purposes of calculating the fee only. This amount assumes the
purchase of all shares of Class A common stock, par value $.01 per
share, and all shares of Class B common stock, par value $.01 per
share, (collectively, the "Common Shares") of Herbalife International,
Inc. (the "Company") from stockholders other than the Continuing
Stockholder (as defined herein) at a price per share of $17.00 in cash,
plus the payment of the aggregate spread value of the outstanding
options to purchase Common Shares to be cancelled in the transactions
(based upon the applicable strike price and the per share transaction
price), estimated at $57,054,733. The amount of the filing fee,
calculated in accordance with Section 14(g)(3) and Rule 0-11(d) under
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate transaction value.

/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

Amount Previously Paid: N/A Filing Party: N/A

Form or registration no.: N/A Date Filed: N/A

(Continued on following pages)
(Page 1 of 9 pages)
<PAGE> 2
CUSIP No. 426908208 14D-1 Page 2
426908307
================================================================================
1. Name of Reporting Persons MH MILLENNIUM HOLDINGS LLC
S.S. or I.R.S. Identification Nos. of Above Persons 95-475-8098

- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)/X/
(b)/ /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds

Not Applicable
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)

/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization

DELAWARE
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person

(1)
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares

/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7

(1)
- --------------------------------------------------------------------------------
10. Type of Reporting Person

CO
================================================================================

(1) MH Millennium Holdings LLC owns no shares of any class of common stock of
the Company. The Mark Hughes Family Trust (the "Trust"), however, which is
the sole member of MH Millennium Holdings LLC, as of September 8, 1999
beneficially owned 5,704,331 Class A Shares and 11,258,665 Class B Shares,
(including 308,331 Class A Shares and 466,665 Class B Shares which the Trust
has a right to acquire within 60 days of the date hereof), representing in
the aggregate 55.4% of the outstanding Class A Shares and 59.0% of the
outstanding Class B Shares, respectively. Mark Hughes is the sole trustee
of The Mark Hughes Family Trust and its beneficiary.
<PAGE> 3
CUSIP No. 426908208 14D-1 Page 3
426908307
================================================================================
1. Name of Reporting Persons MH MILLENNIUM ACQUISITION CORP.

S.S. or I.R.S. Identification Nos. of Above Persons 95 475 7938

SC/BK/OO (subordinated debentures)
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)

/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization

NEVADA
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person

(2)
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares

/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7

(2)
- --------------------------------------------------------------------------------
10. Type of Reporting Person

CO
================================================================================
(2) MH Millennium Acquisition Corp. owns no shares of any class of common stock
of the Company. MH Millennium Holdings LLC, however, owns 100% of MH
Millennium Acquisition Corp. For further information, see note 1 on page 2
of this Schedule 14D-1.
<PAGE> 4
CUSIP No. 426908208 14D-1 Page 4
426908307
================================================================================
1. Name of Reporting Persons Mark Hughes

S.S. or I.R.S. Identification Nos. of Above Persons

Not Applicable
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)

/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization

United States
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person

(3)
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares

/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7

(3)
- --------------------------------------------------------------------------------
10. Type of Reporting Person

IN
================================================================================
(3) Mr. Hughes, directly or indirectly, is the beneficial owner of 5,704,331
Class A Shares and 11,258,665 Class B Shares, excluding 183,333 Class A
Shares and 366,666 Class B Shares owned by the Herbalife Family Foundation
(in which Mr. Hughes has no pecuniary interest) and including 308,331 Class
A Shares and 466,663 Class B Shares issuable upon exercise of stock options
that are exercisable within 60 days of September 1, 1999. The Class A Shares
and the Class B Shares beneficially owned by Mr. Hughes or entities
controlled by him, calculated in accordance with the SEC's Exchange Act Rule
13d-3, represented 55.4% of the total outstanding Class A Shares and 59.0%
of the total outstanding Class B Shares as of September 1, 1999.
<PAGE> 5
CUSIP No. 426908208 14D-1 Page 5
426908307

ITEM 1. SECURITY AND SUBJECT COMPANY.

(a) The name of the subject company is Herbalife International, Inc.,
a Nevada corporation (the "Company"). The address of the Company's principal
executive offices is 1800 Century Park East, Los Angeles, CA 90067.

(b) This Statement relates to the offer by MH Millennium Acquisition
Corp., a Nevada corporation (the "Purchaser"), a wholly owned subsidiary of MH
Millennium Holdings LLC, a Delaware limited liability company (the "Parent"), to
purchase all shares of Class A common stock of the Company, $.01 par value per
share ("Class A Shares"), and Class B common stock of the Company, $.01 par
value per share ("Class B Shares" and together with the Class A Shares, the
"Shares"), at the purchase price of $17.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated September 17, 1999 (the "Offer to Purchase") and the related Letter of
Transmittal (which, together with any supplements or amendments, collectively
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2)
hereto, respectively. As of September 8, 1999, there were 9,982,300 Class A
Shares outstanding and 18,604,515 Class B Shares outstanding. Mr. Hughes and
entities controlled and beneficially owned by him, directly and indirectly (the
"Continuing Stockholder") has agreed not to tender any Shares owned by the
Continuing Stockholder pursuant to the Offer and to ensure that none of such
Shares will be cancelled for cash in the merger (the "Merger") to be consummated
if the Offer is consummated. In the Merger, all Shares outstanding and held by
stockholders other than the Continuing Stockholder, Parent, Purchaser or the
Company (the "Public Stockholders") (except dissenting Shares) will be cancelled
for $17.00 per Share in cash.

(c) The information set forth in Section 6 ("Price Range of Shares")
of the Offer to Purchase is incorporated herein by reference.
<PAGE> 6
Page 6

ITEM 2. IDENTITY AND BACKGROUND.

(a) - (d), (g) This Statement is being filed by the Purchaser, the
Parent and Mark Hughes (collectively, the "Bidders"). The Purchaser is currently
owned by the Parent. The information set forth in THE TENDER OFFER -- Section 8
("Certain Information Concerning the Purchaser and the Parent") of the Offer to
Purchase, in Schedule I ("Certain Information Concerning Parent, Purchaser and
Mr. Hughs") and Schedule II, ("Directors and Executive Officers of the Company")
thereto is incorporated herein by reference.

(e) - (f) During the last five years, none of the Bidders nor to the
best of their knowledge, any of the persons listed in Schedule II to the Offer
to Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations, or similar misdemeanors); or (ii) was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining further violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.

(a) - (b) The information set forth in the INTRODUCTION; SPECIAL
FACTORS -- ("Background of The Offer and The Merger"), ("Description of DECS
Securities") of the Offer to Purchase is incorporated herein by reference.

ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) - (b) The information set forth in THE TENDER OFFER -- Section 9
("Financing Of The Offer and The Merger") of the Offer to Purchase is
incorporated herein by reference.

ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.

(a) - (e) The information set forth in SPECIAL FACTORS -- ("Purposes of
the Offer and the Merger"), ("Certain Effects of the Offer and the Merger"),
("Interests of Certain Persons"), ("Conduct of Herbalife's Business after the
Offer and the Merger"), ("Description of Ownership of Herbalife Before and After
the Offer and the Merger"); THE TENDER OFFER -- Section 11 ("Dividends and
Distributions") and in Section 10 ("The Merger Agreement") of the Offer to
Purchase is incorporated herein by reference.

(f) - (g) The information set forth in SPECIAL FACTORS -- ("Certain
Effects of the Offer and the Merger") of the Offer to Purchase is incorporated
herein by reference.

ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a) - (b) The information set forth in the INTRODUCTION; SPECIAL
FACTORS -- ("Interests of Certain Persons"), ("Description of Ownership of
Herbalife Before and After the Offer and the Merger"); THE TENDER OFFER --
Section 13 ("Certain Transactions") and Section 14 ("Recent Purchases of Company
Securities") of the Offer to Purchase is incorporated herein by reference.

ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.

The information set forth in the INTRODUCTION; SPECIAL FACTORS --
("Background of The Offer and The Merger"), ("Certain Effects of the Offer and
the Merger"), ("Interests of Certain Persons"); THE TENDER OFFER -- Section 10
("The Merger Agreement"), Section 11 ("Dividends and Distributions") and Section
13 ("Certain Transactions") of the Offer to Purchase is incorporated herein by
reference.

ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth in the INTRODUCTION; SPECIAL FACTORS --
("Background of The Offer and The Merger"); and THE TENDER OFFER -- Section 15
("Fees and Expenses") of the Offer to Purchase is incorporated herein by
reference.

ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.

Not applicable.
<PAGE> 7
Page 7

ITEM 10. ADDITIONAL INFORMATION.

(a) The information set forth in SPECIAL FACTORS -- ("Background of The
Offer and The Merger") of the Offer to Purchase is incorporated herein by
reference.

(b) - (c) The information set forth in THE TENDER OFFER -- Section 12
("Certain Legal Matters; Regulatory Approvals") is incorporated herein by
reference.

(d) Not applicable.

(e) The information set forth in SPECIAL FACTORS -- ("Certain
Litigation") of the Offer to Purchase is incorporated herein by reference.

(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Agreement and Plan of Merger, dated September 13, 1999, to
the extent not otherwise set forth herein, copies of which are filed as Exhibits
(a)(1), (a)(2) and (c)(1) hereto, respectively, is incorporated herein by
reference in its entirety.

ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
(a)(1) Offer to Purchase, dated September 17, 1999.

(a)(2) Letter of Transmittal.

(a)(3) Notice of Guaranteed Delivery.

(a)(4) Form of letter, dated September 17, 1999, to
brokers, dealers, commercial banks, trust
companies and other nominees.

(a)(5) Form of letter to be used by brokers, dealers,
commercial banks, trust companies and nominees to
their clients.

(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.

(a)(7) Summary Advertisement, dated September 17, 1999.

(a)(8) Press Release, dated September 13, 1999.

(b) Not Applicable

(c)(1) Agreement and Plan of Merger, dated September 13,
1999, by and among the Company, Mark Hughes, the
Mark Hughes Family Trust, the Parent and the
Purchaser (included as Annex A to Exhibit
(a)(1)).

(c)(2) The Equity Commitment Letter from Mark Hughes to
the Company, dated September 10, 1999.

(d) Not Applicable

(e) Not Applicable

(f) Not Applicable
</TABLE>
<PAGE> 8
Page 8

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

Dated: September 17, 1999

MH MILLENNIUM HOLDINGS LLC:

By: /s/ MARK HUGHES
------------------------------------------
Name: Mark Hughes

Title: Managing Member

MH MILLENNIUM ACQUISITION CORP.:

By: /s/ MARK HUGHES
------------------------------------------
Name: Mark Hughes

Title: President

MARK HUGHES

By: /s/ MARK HUGHES
------------------------------------------

<PAGE> 9
EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

(a)(1) Offer to Purchase, dated September 17, 1999.

(a)(2) Letter of Transmittal.

(a)(3) Notice of Guaranteed Delivery.

(a)(4) Form of letter, dated September 17, 1999, to
brokers, dealers, commercial banks, trust
companies and other nominees.

(a)(5) Form of letter to be used by brokers, dealers,
commercial banks, trust companies and nominees to
their clients.

(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.

(a)(7) Form of Summary Advertisement, dated September
17, 1999.

(a)(8) Press Release, dated September 13, 1999.

(b) Not Applicable

(c)(2) Equity Commitment Letter from Mark Hughes to the
Company, dated September 10, 1999.

(d) Not Applicable

(e) Not Applicable

(f) Not Applicable

<PAGE> 1

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF

HERBALIFE INTERNATIONAL, INC.
BY

MH MILLENNIUM ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF

MH MILLENNIUM HOLDINGS LLC
FOR

$17.00 NET PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

THIS OFFER IS BEING MADE IN ACCORDANCE WITH AN AGREEMENT AND PLAN OF MERGER
(THE "MERGER AGREEMENT"), DATED AS OF SEPTEMBER 13, 1999, AMONG HERBALIFE
INTERNATIONAL, INC. (THE "COMPANY" OR "HERBALIFE"), MH MILLENNIUM HOLDINGS LLC
(THE "PARENT"), MH MILLENNIUM ACQUISITION CORP. (THE "PURCHASER"), THE COMPANY'S
FOUNDER, CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHAIRMAN OF THE BOARD, MARK
HUGHES ("MR. HUGHES") AND THE MARK HUGHES FAMILY TRUST.

THE BOARD OF DIRECTORS OF THE COMPANY, HAVING RECEIVED THE RECOMMENDATION OF
A SPECIAL COMMITTEE OF THE BOARD CONSISTING SOLELY OF INDEPENDENT DIRECTORS, (1)
HAS UNANIMOUSLY (WITH MR. HUGHES ABSTAINING) APPROVED THE MERGER AGREEMENT AND
RESOLVED THAT THE OFFER, THE MERGER, AND THE MERGER AGREEMENT ARE FAIR TO AND IN
THE BEST INTERESTS OF THE PUBLIC STOCKHOLDERS (AS DEFINED) AND (2) HAS
RECOMMENDED THAT THE PUBLIC STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES IN RESPONSE TO THE OFFER.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION TIME OF THE OFFER AT LEAST A MAJORITY
OF THE SHARES OF CLASS A COMMON STOCK AND AT LEAST A MAJORITY OF THE SHARES OF
CLASS B COMMON STOCK OUTSTANDING AS OF SEPTEMBER 13, 1999, EXCLUDING SHARES
OWNED BY THE CONTINUING STOCKHOLDER (AS DEFINED), AND (2) OBTAINING FINANCING
FOR THE OFFER AND RELATED TRANSACTIONS.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERIT OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.

IMPORTANT

Any stockholder who wishes to tender Shares should either (i) complete and
sign a Letter of Transmittal (or a facsimile of one) in accordance with the
instructions set forth in the Letter of Transmittal and mail or deliver it,
together with the certificate(s) representing the tendered Shares and any other
required documents, to the Depositary named on the back cover of this Offer to
Purchase or (ii) tender the Shares using the procedures for book-entry transfer
described in Section 3. A stockholder whose Shares are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee must contact
the broker, dealer, commercial bank, trust company or other nominee if the
stockholder wishes to tender Shares.

Any stockholder who wishes to tender Shares but whose certificates are not
immediately available, or who cannot comply with the procedures for book-entry
transfer described in this Offer to Purchase on a timely basis, may tender the
Shares by following the procedures for guaranteed delivery described in Section
3.

Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal, or other tender offer materials,
may be directed to the Information Agent or the Dealer Manager at the addresses
and telephone numbers set forth on the back cover. Holders of Shares may also
contact brokers, dealers or banks for additional copies of this Offer to
Purchase, the Letter of Transmittal or other tender offer materials.

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

The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
September 17, 1999
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
INTRODUCTION..................................................... 1
SPECIAL FACTORS.................................................. 3
Background of the Offer and the Merger...................... 3
Recommendation of the Special Committee and the Board of
Directors; Fairness of the Offer and the Merger............. 10
Opinion of Financial Advisor to the Special Committee....... 14
Purposes of the Offer and the Merger........................ 19
Position of the Purchaser As to the Fairness of the Offer
and the Merger.............................................. 19
Certain Effects of the Offer and the Merger................. 20
Interests of Certain Persons................................ 20
Description of DECS Securities.............................. 23
Conduct of Herbalife's Business After the Offer and the
Merger...................................................... 23
Certain Financial Projections............................... 24
Certain Litigation.......................................... 25
Certain Federal Income Tax Consequences..................... 25
Description of Ownership of Herbalife Before and After the
Offer and the Merger........................................ 26
THE TENDER OFFER................................................. 26
1. Terms of the Offer.......................................... 26
2. Acceptance for Payment and Payment for Shares............... 28
3. Procedures for Tendering Shares............................. 29
4. Withdrawal Rights........................................... 31
5. Conditions of the Offer..................................... 32
6. Price Range of Shares....................................... 33
7. Certain Information Concerning the Company.................. 34
8. Certain Information Concerning the Purchaser and the
Parent...................................................... 36
9. Financing of the Offer and the Merger....................... 36
10. The Merger Agreement........................................ 37
11. Dividends and Distributions................................. 46
12. Certain Legal Matters; Regulatory Approvals................. 46
13. Certain Transactions........................................ 47
14. Recent Purchases of Company Securities...................... 49
15. Fees and Expenses........................................... 50
16. Miscellaneous............................................... 50
SCHEDULE I Certain Information Concerning Parent, Purchaser and I-1
Mr. Hughes.....................................................
SCHEDULE II Directors and Executive Officers of the Company...... II-1
SCHEDULE III Financial Statements of the Company................. III-1
ANNEX A Agreement and Plan of Merger............................. A-1
ANNEX B Opinion of Bear, Stearns & Co. Inc....................... B-1
ANNEX C Text of Sections 92A.300 through 92A.500 of the Nevada C-1
Revised Statutes...............................................
</TABLE>

i
<PAGE> 3

TO THE HOLDERS OF CLASS A COMMON STOCK AND CLASS B COMMON
STOCK OF HERBALIFE INTERNATIONAL, INC.:

INTRODUCTION

MH Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"),
which is wholly owned by MH Millennium Holdings LLC, a Delaware limited
liability company (the "Parent"), hereby offers (the "Offer") to purchase all
the outstanding shares of Class A Common Stock, par value $.01 per share (the
"Class A Shares") and Class B Common Stock, par value $.01 per share (the "Class
B Shares" and, together with the Class A Shares, the "Shares"), of Herbalife
International, Inc., a Nevada corporation (the "Company" or "Herbalife"), for
$17.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal (which terms and conditions
constitute the "Offer Documents"). The Offer will expire at 12:00 Midnight, New
York City time, on October 15, 1999 (the "Expiration Time") unless the Offer is
extended.

The Offer is being made in accordance with an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of September 13, 1999, among the Company, the
Parent, the Purchaser, the Company's founder, Chief Executive Officer, President
and Chairman of the Board, Mark Hughes ("Mr. Hughes", and together with entities
controlled and beneficially owned by him, directly and indirectly, the
"Continuing Stockholder") and the Mark Hughes Family Trust (the "Family Trust").
Mr. Hughes and the Family Trust, which directly and indirectly own all of the
common stock of the Purchaser, have guaranteed all of the Parent's and the
Purchaser's obligations under the Merger Agreement. Mr. Hughes has also agreed
not to tender in response to the Offer any of the Shares of the Company
beneficially owned by the Continuing Stockholder and to ensure that none of the
Shares beneficially owned by the Continuing Stockholder will be cancelled for
cash in the Merger (as defined below).

The Offer is conditioned upon, among other things, (i) there being tendered
and not withdrawn prior to the Expiration Time at least a majority of the Class
A Shares and at least a majority of the Class B Shares outstanding as of
September 13, 1999, excluding Shares owned by the Continuing Stockholder (the
"Minimum Condition"), and (ii) the Financing Condition (as defined in Section 5)
having been satisfied. The Minimum Condition is not waivable by the Purchaser or
the Parent without the consent of the Company, acting through a Special
Committee of the Board of Directors consisting solely of independent directors
(the "Special Committee").

If the Minimum Condition is met and the Offer is consummated, the Purchaser
and the Parent will, subject to certain conditions, cause the Purchaser to be
merged with the Company (the "Merger") in a transaction in which the Company
will be the surviving corporation, the Continuing Stockholder will own all of
the stock of the surviving corporation, and the stockholders of the Company
other than the Continuing Stockholder (the "Public Stockholders") will receive
$17.00 per Share in cash (unless particular stockholders elect to exercise
dissenters' rights with respect to their Shares as provided by the Merger
Agreement and as described in Section 10 of this Offer to Purchase). If the
Minimum Condition is not met and not waived by the Company, then the Purchaser
is not obligated or permitted under the Merger Agreement to consummate the Offer
or the Merger. The Offer is also subject to other conditions described in
Section 5.

Mr. Hughes currently owns 5,396,000 Class A Shares, representing 54% of the
outstanding Class A Shares, and 10,792,002 Class B Shares, representing 58% of
the outstanding Class B Shares. On September 13, 1999, the Continuing
Stockholder acted by written consent (the "Stockholder Consent") to approve and
adopt the Merger Agreement and the Merger.

The purpose of the Offer and the Merger is to enable the Continuing
Stockholder to acquire all the Shares that the Continuing Stockholder does not
already own. However, as noted above, the Purchaser has agreed that it may not
consummate the Offer or the Merger unless the Minimum Condition is satisfied or
waived. Therefore, even though the Continuing Stockholder currently owns a
sufficient number of Shares to approve the Merger without the vote or approval
of any other stockholders, and has already executed the

1
<PAGE> 4

Stockholder Consent, neither the Merger nor the Offer may be consummated unless
the Minimum Condition is satisfied or waived.

In connection with the Offer and the Merger, Public Stockholders are
entitled to exercise dissenters' rights. See Section 10.

Tendering stockholders will not be required to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes as a result of the sale of Shares to the
Purchaser in response to the Offer.

Any tendering stockholder who fails to complete and sign the Substitute
Form W-9 included in the Letter of Transmittal may be subject to a required
backup Federal income tax withholding of 31% of the gross proceeds payable to
the stockholder or another payee pursuant to the Offer. See Section 3. The
Purchaser will pay all charges and expenses of U.S. Stock Transfer Corporation,
as Depositary (the "Depositary"), and D.F. King & Co., Inc. as Information Agent
(the "Information Agent"), incurred in connection with the Offer. See Section
15.

THE BOARD OF DIRECTORS OF THE COMPANY, HAVING RECEIVED THE RECOMMENDATION
OF THE SPECIAL COMMITTEE, (1) HAS UNANIMOUSLY (WITH MR. HUGHES ABSTAINING)
APPROVED THE MERGER AGREEMENT AND RESOLVED THAT THE OFFER, THE MERGER, AND THE
MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE PUBLIC
STOCKHOLDERS AND (2) HAS RECOMMENDED THAT THE PUBLIC STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES IN RESPONSE TO THE OFFER.

Bear, Stearns & Co. Inc. ("Bear Stearns"), financial advisor to the Special
Committee, has delivered to the Special Committee its written opinion to the
effect that, as of the date of the Merger Agreement, the consideration to be
received in the Offer and the Merger is fair, from a financial point of view, to
the Public Stockholders. The full text of the written opinion of Bear Stearns
containing the assumptions made, the matters considered and the scope of the
opinion is included in this Offer to Purchase as Annex B. Stockholders are urged
to read the Bear Stearns opinion in its entirety.

THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH YOU SHOULD READ CAREFULLY BEFORE YOU MAKE ANY DECISION WITH
RESPECT TO THE OFFER.

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SPECIAL FACTORS

BACKGROUND OF THE OFFER AND THE MERGER

During 1998, Herbalife experienced a significant deterioration in its stock
market valuation. This began in July 1998 and continued during August, September
and October 1998. Herbalife's Class A Shares and Class B Shares, which traded as
high as $29 and $27 1/4 per share, respectively, in May and March of 1998,
traded at prices as low as $7 1/2 and $6 in October 1998. Valuations have since
increased, but only to levels that remain significantly below the market
valuations experienced during the first half of 1998. On September 13, 1999, the
last trading day prior to the announcement of the execution of the Merger
Agreement, the closing sale prices for Herbalife's Class A Shares and Class B
Shares were $12 and $9 5/32 per share, respectively.

Following the decline in the Company's stock price in the second half of
1998, Mr. Hughes and the other senior executives of Herbalife began to consider
preliminarily strategic alternatives for Herbalife in view of Herbalife's
unsatisfactory stock market performance. Senior executives of Herbalife
considered that Herbalife would have greater flexibility as a private company to
invest in the future of Herbalife, particularly given the longer term pay-off
anticipated from investments in new geographic and product markets. Among other
things, senior executives of Herbalife considered that certain of the markets
that Herbalife is in the process of opening, such as China and India, will
require a substantially greater lead-time and investment in infrastructure than
countries opened by Herbalife in the past. The Indian market, which Herbalife
has been preparing to open since 1995, is expected to be open in the fourth
quarter of 1999. The Chinese market, which Herbalife has been preparing to open
since 1997, awaits finalization of marketing and manufacturing plans and is not
expected to be open until late in the year 2000 or early in 2001. In addition,
Herbalife senior executives considered that new markets, such as China and
India, might be less likely to deliver the rapid growth historically experienced
in many new markets, such as Japan. These types of investments may require
significant up-front expenditures, the benefits of which may not be apparent in
Herbalife's financial results until significantly later periods. The senior
executives of Herbalife considered that, as a public company, Herbalife would
have less flexibility to make long-term investments such as these.

Beginning in September 1998, senior executives of Herbalife and Mr. Hughes
began to have preliminary communications with several investment banking firms
concerning possible alternatives to increase shareholder value. Certain of these
firms addressed the advantages and disadvantages of various capital-markets
transactions, including a going private transaction, a leveraged
recapitalization transaction financed in part by a private equity sponsor and a
"Dutch auction" self-tender by Herbalife. Based on the discussions with these
investment banks and the factors discussed above, Mr. Hughes and Herbalife's
senior management determined that a going private transaction was superior to
the other alternatives in terms of enhancing shareholder value. From September
1998 through March 1999, senior executives of Herbalife interviewed several
investment banking firms to obtain their views concerning the advisability of,
and their qualifications to advise senior executives of Herbalife on the
structuring and financing of, such a transaction. In addition, during this
period senior executives of Herbalife met with a representative of one private
equity sponsor firm. Representatives of Donaldson, Lufkin & Jenrette Securities
Corporation ("Donaldson, Lufkin & Jenrette") were first interviewed on March 31,
1999. At that time and in subsequent meetings and conversations, representatives
of Donaldson, Lufkin & Jenrette provided preliminary views concerning the
feasibility and financing of a going private transaction, as well as other
possible transaction structures. On April 23, 1999, Herbalife formally engaged
Donaldson, Lufkin & Jenrette to advise Herbalife and to arrange for the
financing for a possible transaction. Such engagement did not include a request
to render, and Donaldson, Lufkin & Jenrette has not at any time rendered, an
opinion with respect to the fairness of any price proposed in connection with
the going private transaction.

In the fourth quarter of 1998, senior executives of Herbalife began work on
a multi-year business plan containing certain projections of future operating
performance, which was completed in January 1999. A principal feature of the
plan was a projected sales growth rate of 5% per year starting in the year 2000.
See "-- Certain Financial Projections." In addition, Herbalife and its legal,
accounting and tax advisors also began considering structures for a going
private transaction. In particular, Herbalife and its tax advisors began to
consider a number of structures for obtaining the necessary financing while
minimizing Herbalife's worldwide

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<PAGE> 6

effective tax rate. Following its engagement, Donaldson, Lufkin & Jenrette began
to assist Herbalife and its advisors to address structuring issues.

In addition, immediately following its engagement, Donaldson, Lufkin &
Jenrette began its "due diligence" review of Herbalife, including financial,
business and legal information requested by Donaldson, Lufkin & Jenrette and
provided by Herbalife. In particular, Herbalife provided its multi-year business
plan to Donaldson, Lufkin & Jenrette. On April 26, 1999, Donaldson, Lufkin &
Jenrette met with representatives of Herbalife to receive general presentations
regarding Herbalife's business. In addition, legal counsel for Donaldson, Lufkin
& Jenrette commenced a legal due diligence review. This review involved written
requests for information, on-site inspections of documents at Herbalife's
headquarters and telephone conferences with representatives of, and advisors to,
Herbalife worldwide.

In May and June of 1999, Herbalife continued to provide Donaldson, Lufkin &
Jenrette with financial and business information and its legal counsel with
legal information. In addition, during this period various structural aspects of
the transaction were considered in detail. As they were considered, each of
these aspects of the transaction was analyzed in relation to the multi-year
business plan. These included further analysis of the optimal structure of third
party indebtedness from the point of view of minimizing Herbalife's worldwide
effective tax rate, the degree of benefit to Herbalife if recapitalization
accounting treatment for the transaction were available, the treatment of
minority interests in Herbalife's Japanese subsidiary and the nature and extent
of Herbalife's senior executives' continuing equity participation in Herbalife
after any transaction. In particular, senior executives of Herbalife formulated
the general terms of the new stock option plan. See "-- Interests of Certain
Persons -- New Stock Option Plan." Herbalife's senior executives and Donaldson,
Lufkin & Jenrette also continued discussions regarding the expected uses of
proceeds in the transaction. In particular, senior executives of Herbalife
informed Donaldson, Lufkin & Jenrette that as part of any proposal, Mr. Hughes
indicated that he would seek a significant amount of personal liquidity in
connection with the transaction, plus an additional amount to enable him to
satisfy (through companies he controls) his obligations to DECS Trust III. Mr.
Hughes' concern about personal liquidity was based upon his belief that, as a
private company with significant debt-service obligations, he expected that his
ability to receive dividends on his common stock, which historically have been
significant, would be extremely limited. In addition, any such proposal would
include this amount in view of the lack of liquidity he would have in his
investment in Herbalife if it became a private company. Mr. Hughes informed
Donaldson, Lufkin & Jenrette that this amount (not including the amount needed
to satisfy the obligations to DECS Trust III) would be $125 million.
Representatives of Deloitte & Touche, which provided the tax advice to Mr.
Hughes and Herbalife in connection with the transaction, proposed that these
sums should be provided to Mr. Hughes in the form of loans from Herbalife to one
or more entities owned by Mr. Hughes to be made at the closing of any
transaction. The terms of these loans are described in "-- Interests of Certain
Persons -- The Board of Directors."

At a meeting on June 7, 1999, Mr. Hughes and his tax advisors began
consideration of the structure of the loans to Mr. Hughes.

Donaldson, Lufkin & Jenrette advised the senior executives of Herbalife
that a cash price of $12.50 per Share in the going private transaction should be
proposed. Mr. Hughes and Herbalife's senior executives concluded that $12.50 per
Share would be a fair price to offer to Herbalife's stockholders.

In late June and early July 1999, senior executives of Herbalife, in
consultation with Herbalife's tax and legal advisors, finalized the terms of the
proposed loans to a limited liability company controlled and beneficially owned
by Mr. Hughes. These terms included securing the $125 million loan with the
investments anticipated to be purchased using the proceeds from that loan, and
having Mr. Hughes personally guarantee the $66 million loan.

On July 8, 1999, at a special meeting of the Board of Directors, Mr. Hughes
delivered to the Board of Directors a proposal to pursue an acquisition of
Herbalife in a going private transaction. This proposal expressed the interest
of Mr. Hughes in acquiring 100% ownership of Herbalife through companies he
controls. In particular, the proposal provided that all stockholders of
Herbalife other than Mr. Hughes would be entitled to receive $12.50 in cash for
each Share owned by them and that all stock options held by Herbalife

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<PAGE> 7

option holders, excluding those held by Mr. Hughes, would be accelerated as to
vesting and would be canceled in exchange for cash payments equal to the
difference, if any, between $12.50 a Share and the exercise price of the
options, multiplied by the number of Shares subject to such options. On July 8,
1999, the $12.50 offer price represented a 17% and 45% premium to the closing
prices of the Class A Shares and Class B Shares, respectively. Mr. Hughes'
proposal included the same proposed price per Share for each of the Company's
two classes of Shares as a result of provisions in Herbalife's charter requiring
an identical price in specified transactions as well as fiduciary duty
considerations. In addition, the proposal provided that an entity controlled by
Mr. Hughes would receive two loans from Herbalife totaling approximately $191
million and that certain members of Herbalife's senior management would
participate in a new stock option plan, for which shares representing
approximately 16.5% of the post-transaction fully diluted equity of Herbalife
would be reserved for future issuance. In making his proposal, Mr. Hughes stated
that he had no intention of selling any of his Shares. Mr. Hughes' proposal was
accompanied by a draft form of merger agreement.

At the special meeting, Mr. Michael E. Rosen, a member of the Board of
Directors and Herbalife's Executive Vice President and Chief Executive Corporate
Marketing and Corporate Development, explained the proposal. Because Mr. Hughes
and certain other members of the Board of Directors would have a continuing
financial interest in any transaction arising out of the proposal, the Board of
Directors established an independent Special Committee of the Board of
Directors. The Special Committee was given exclusive authority to evaluate,
negotiate and decide whether or not to engage in the transaction (which was
initially proposed as a one-step long-form merger) and certain related
transactions. Messrs. Edward Hall and Christopher Miner, members of the Board of
Directors with significant business and financial experience, were named as the
members of the Special Committee. These two directors were chosen because
neither of them had a conflict of interest in relation to the proposed
transaction. The Board of Directors authorized the Special Committee to
establish such procedures, review such information and engage such financial
advisors and legal counsel as it deemed necessary to fully and adequately make
determinations about Mr. Hughes' proposal and to accept the proposal, reject the
proposal, or seek to negotiate with Mr. Hughes regarding the terms of the
proposed transaction, and to fulfill its other duties.

At the special meeting of the Board of Directors, Mr. Hughes delivered a
letter from Donaldson, Lufkin & Jenrette to Herbalife dated July 7, 1999, to the
effect that, based on information provided to Donaldson, Lufkin & Jenrette to
that date, subject to certain conditions, it was highly confident that the
financing needed for the proposed transaction could be arranged.

Also, a representative of Deloitte & Touche LLP ("Deloitte & Touche")
present at the special meeting described the general tax and accounting aspects
of the proposal, and representatives of Irell & Manella LLP (the legal advisor
to the Company and Mr. Hughes) present at the special meeting described the
Board of Directors' fiduciary duties in relation to the proposal.

On July 12, 1999, the Special Committee engaged Latham & Watkins as its
legal counsel to advise the Special Committee regarding its duties in response
to the proposal. The Special Committee and Latham & Watkins discussed on several
occasions the procedures to be followed in analyzing the proposal and any other
offers from Mr. Hughes or others to acquire Herbalife. Latham & Watkins advised
the Special Committee concerning the Special Committee's legal responsibilities
and the legal principles applicable to, and the legal consequences of, actions
taken by the Special Committee with respect to the proposal and any other offers
from Mr. Hughes.

The Special Committee provided to Latham & Watkins the draft merger
agreement provided to the Board of Directors at the July 8, 1999 meeting,
together with the other documents provided at such meeting.

Beginning on July 13, 1999, Latham & Watkins submitted requests for legal
documents to Irell & Manella LLP, which were also given to Herbalife. Over the
next few weeks, Herbalife provided the documents requested, including the
multi-year business plan referred to above.

On July 21, 1999, after having interviewed several nationally recognized
investment banking firms, the Special Committee engaged Bear Stearns to serve as
its financial advisor for the purpose of advising the Special Committee and
assisting the Special Committee in any negotiations with Mr. Hughes and if

5
<PAGE> 8

necessary, delivering a fairness opinion to the Special Committee in connection
with the proposed transaction. On July 21, 1999, the Special Committee
instructed Bear Stearns to commence its investigation and analysis of the value
of Herbalife and the proposal of Mr. Hughes. Thereafter, Bear Stearns submitted
to the Company its requests for business and financial information.

On behalf of the Special Committee, Latham & Watkins requested that
Herbalife provide members of the Special Committee with compensation for serving
on the Special Committee. By unanimous written consent dated July 23, 1999, the
Herbalife Board of Directors approved compensation for the Special Committee in
recognition of the added efforts and time they would need to expend during their
assignment. The terms of this compensation are described under "-- Interests of
Certain Persons -- The Board of Directors."

During the period from July 21, 1999 to August 11, 1999, Bear Stearns
reviewed financial and other information concerning Herbalife, including
Herbalife's audited and interim financial statements, Herbalife's multi-year
financial model, and other information concerning Herbalife described below in
"-- Opinion of Financial Advisor to the Special Committee." Bear Stearns also
met with members of Herbalife's management on several occasions.

On July 28, 1999, the Special Committee met with Herbalife's senior
executives, Bear Stearns, Donaldson, Lufkin & Jenrette, Irell & Manella LLP and
Latham & Watkins to receive presentations from Herbalife's senior executives
about the proposed transaction and Herbalife's business, prospects, financial
position and financial statements. In addition, management of Herbalife
presented Herbalife's multi-year business plan, which included projections of
future operating performance.

On July 30, 1999, Bear Stearns and Latham & Watkins met with Mr. Hughes to
discuss his views of Herbalife's business and prospects and his reasons for
proposing the transaction. Representatives of Donaldson, Lufkin & Jenrette and
Irell & Manella LLP were also present at the meeting.

On August 5, 1999, Bear Stearns met with Herbalife's Chief Financial
Officer and certain members of the finance department for a more detailed review
of various aspects of Herbalife's historical and projected financial
performance. With respect to projections, Bear Stearns and the Company's
representatives discussed in detail the assumptions used in the preparation of
the projections, as well as alternative assumptions that management had also
considered at the time the projections were prepared.

On August 10, 1999, the Special Committee held a telephonic meeting at
which Bear Stearns and Latham & Watkins participated. At the meeting,
representatives of Bear Stearns presented the preliminary conclusions of their
valuation analysis to the members of the Special Committee. The representatives
of Bear Stearns indicated that, based on the information that they had received
to date, they would be unable to recommend that Bear Stearns' valuation
committee approve the issuance of a fairness opinion at the proposed $12.50
merger price. In addition, representatives of Latham & Watkins reviewed the
other proposed terms of the transaction with the Special Committee and concluded
that they could not recommend that the Special Committee accept the terms and
conditions offered in the initial proposal. The Special Committee determined
that, before taking action to reject the initial proposal, Mr. Hughes should be
given the opportunity to further explain his proposal to the Special Committee.

Accordingly, that same day, the members of the Special Committee
participated in a teleconference call with representatives of Herbalife,
Donaldson, Lufkin & Jenrette, Irell & Manella LLP, Bear Stearns and Latham &
Watkins. In this conference call, Donaldson, Lufkin & Jenrette and Irell &
Manella LLP provided additional information to the Special Committee and its
advisors regarding Mr. Hughes' views as to the fairness of the proposed
transaction.

On August 11, 1999, the Special Committee held a further telephonic meeting
at which Bear Stearns and Latham & Watkins participated. The views expressed on
the previous day's conference call were discussed in detail. Bear Stearns and
Latham & Watkins both indicated that their views as to the fairness of the
proposed transaction had not been materially altered as a result of the previous
conference call. After further discussion, the Special Committee voted
unanimously to reject Mr. Hughes' initial proposal, and directed the Special
Committee's advisors to communicate the rejection to Mr. Hughes' advisors.

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On August 12, 1999, the Special Committee delivered a letter to Mr. Hughes
stating that it had consulted with its legal and financial advisors and on
August 11, 1999 had resolved to reject Mr. Hughes' initial proposal. Prior to
delivering the letter, Bear Stearns and Latham & Watkins informed Donaldson,
Lufkin & Jenrette and Irell & Manella LLP that the Special Committee rejected
the proposal based on the insufficient value of the proposal and the terms of
the draft merger agreement supplied with Mr. Hughes' July 8, 1999 proposal. Bear
Stearns and Latham & Watkins indicated that the Special Committee's view was
that, given the inadequacy of Mr. Hughes' proposal, negotiations on that
proposal would not be productive.

On August 12, 1999, Mr. Hughes delivered a letter to the Special Committee
requesting additional information regarding the reasons for the Special
Committee's rejection.

On August 13, 1999, senior executives of Herbalife, together with
representatives of Donaldson, Lufkin & Jenrette and Bear Stearns as well as
Latham & Watkins and Irell & Manella LLP, participated in a telephonic
conference call during which the reasons for the Special Committee's rejection
of Mr. Hughes' offer were described in greater detail. During this call, the
Special Committee's advisors generally described their approach to analyzing the
fairness of Mr. Hughes' initial proposal. From a financial standpoint, Bear
Stearns discussed broadly the valuation methods that it employed in reaching its
conclusion that the proposed offer price was inadequate. From a legal
standpoint, Latham & Watkins indicated that the Special Committee objected to
several aspects of the merger agreement, including the lack of a meaningful
public stockholder voice in the approval of the transaction, the absence of
dissenters' rights, the lack of financing commitments, terms governing the
payment and reimbursement of expenses, the inclusion of a "material adverse
change" condition in Mr. Hughes' favor, the extensive nature of the proposed
representations and warranties from Herbalife to Mr. Hughes, and certain other
provisions. Bear Stearns and Latham & Watkins indicated that, on the basis of
the foregoing financial and legal analyses, the Special Committee had concluded
that Mr. Hughes' initial offer should be rejected. Neither the Special Committee
nor its advisors offered to Mr. Hughes a counter-proposal or indicated what
price they believed would be acceptable.

Between August 13, 1999 and August 19, 1999, senior executives of Herbalife
discussed possible responses to the Special Committee's action with its
financial and legal advisors. In particular, the senior executives consulted
with Donaldson, Lufkin & Jenrette regarding possibly raising the price per share
to be offered in the proposal. Mr. Hughes consulted with his advisors and
considered the views expressed by Bear Stearns on the August 13, 1999 telephonic
conference call. On August 18, 1999, a representative of Donaldson, Lufkin &
Jenrette informed a representative of Bear Stearns that Mr. Hughes might be
willing to offer a price of $14.50 to $15.00 per share, and also address
substantially all of the legal concerns the Special Committee had expressed in
regard to the proposed merger agreement. On August 19, 1999, a representative of
Donaldson, Lufkin & Jenrette received an indication from a representative of
Bear Stearns that the Special Committee might be willing to consider an offer in
the $15.00 per share price range as a basis for commencement of discussions, but
that such a price was probably below the price that the Special Committee
considered acceptable by a significant amount. The representative from
Donaldson, Lufkin & Jenrette acknowledged that a $15.00 offer might not be
sufficient for the Special Committee, but that his understanding from Mr. Hughes
was that he was unwilling at that time to offer significantly more than $15.00
per share.

On August 19, 1999, Mr. Hughes delivered a letter to the Special Committee
that offered a price of $15.00 per share and indicated that he believed he would
be able to meet a majority of the Special Committee's concerns regarding the
other terms of the proposed merger agreement. In addition, Mr. Hughes' letter
invited the Special Committee and its advisors to meet with Mr. Hughes and his
advisors so that details of his proposal and the basis for his belief in its
fairness could be discussed.

On August 20, 1999, Bear Stearns informed Donaldson, Lufkin & Jenrette that
it believed that the Special Committee would not accept the offer contained in
Mr. Hughes' August 19th letter. On August 24, 1999, Bear Stearns and Donaldson,
Lufkin & Jenrette, as well as Latham & Watkins and Irell & Manella LLP,
participated in a telephonic conference call to discuss further valuation and
legal issues. A representative of Irell & Manella LLP described possible
modifications to the merger agreement to address concerns previously articulated
by the Special Committee. Principally, the representative indicated a
willingness of Mr. Hughes to condition the proposed transaction on obtaining a
"majority of the minority" vote in favor of

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<PAGE> 10

the merger, as well as Mr. Hughes' willingness to grant dissenters' rights, even
though dissenters' rights would not otherwise be available under Nevada
corporate law. In addition, the representative indicated that Mr. Hughes might
be willing to eliminate the condition in the merger agreement that there be no
material adverse change in Herbalife's business, on the assumption that there
would be a financing condition to consummation of the proposed transaction. Mr.
Hughes' advisors indicated that Mr. Hughes was unwilling to remove the financing
condition, and was unwilling to provide financing commitments. Advisors to the
Special Committee expressed concern about the lack of financing commitments,
especially in light of the significant loans proposed to be made to Mr. Hughes
at closing, and the effect that these loans may have on the marketability of the
financing. Mr. Hughes' advisors indicated that the proposed loans were a
fundamental element of Mr. Hughes' willingness to proceed with the transaction,
and that Donaldson, Lufkin & Jenrette took the loans into account in issuing
their "highly confident" letter. Advisors to the Special Committee also
indicated that the Special Committee did not find a commitment for Herbalife to
pay all expenses of the proposed transaction in all scenarios to be acceptable
and asked for a schedule of expenses incurred and proposed to be incurred in
connection with the proposed transaction, which was provided the next day.
Advisors to the Special Committee also expressed a concern about the one-step
merger structure of the proposal because the possibility of delays would be
greater in a merger as compared to a tender offer.

Following the discussion of legal points, Bear Stearns and Donaldson,
Lufkin & Jenrette discussed valuation issues. In particular, Donaldson, Lufkin &
Jenrette described the premiums to market implied by Mr. Hughes' current offer.
In addition, Donaldson, Lufkin & Jenrette explained that the conditions that may
have contributed to the Company's recent stock price performance were unlikely
to change in the near term. Donaldson, Lufkin & Jenrette also indicated that
there was a limited universe of public companies comparable to Herbalife. Bear
Stearns believed that there were several companies that were relevant
comparisons to Herbalife and that some of these companies suggested higher
valuations for Herbalife. At the conclusion of the call, Bear Stearns and Latham
& Watkins indicated that they would discuss the call with the members of the
Special Committee and have further discussions with Mr. Hughes' advisors at a
later date.

On August 24, 1999 and again on August 27, 1999, the Special Committee held
telephonic meetings at which representatives of Bear Stearns and Latham &
Watkins participated. At these meetings, the Special Committee discussed in
detail the proposed terms of Mr. Hughes' revised proposal. The Special Committee
directed its advisors to continue discussions with Mr. Hughes and his advisors
to determine whether Mr. Hughes' revised proposal could be improved further.

On September 7, 1999, representatives of Herbalife, Bear Stearns,
Donaldson, Lufkin & Jenrette, Irell & Manella LLP and Latham & Watkins met to
discuss Mr. Hughes' proposal. A representative of Irell & Manella LLP summarized
the unresolved legal issues that the Special Committee identified as being
particularly significant, including the lack of financing commitments, the
requirement that Herbalife pay all expenses of the proposed transaction even if
the transaction were not completed, and the structure of the transaction as a
merger rather than as a tender offer followed by a merger. A representative of
Latham & Watkins described the disadvantages of a merger from the Special
Committee's perspective. In particular, he noted that a merger would generally
take longer to consummate than a tender offer, resulting in delay and
potentially added risk to stockholders that the transaction is not consummated.
In addition, a tender offer provided greater flexibility in the timing of
raising the financing for the transaction. Irell & Manella LLP and Donaldson,
Lufkin & Jenrette indicated that, for the reasons described by the Latham &
Watkins representative, Mr. Hughes might be agreeable to a tender offer
structure. They also indicated that Mr. Hughes could not accept any transaction
which required that he obtain financing commitments (particularly bridge
financing commitments) because of the associated expense of obtaining
commitments and the potentially onerous terms of bridge financing, but that,
under certain circumstances, he might be agreeable to paying a portion of the
expenses of a failed transaction. After further discussion, a representative of
Donaldson, Lufkin & Jenrette, based on discussions with Mr. Hughes, indicated to
Bear Stearns that Mr. Hughes would be willing to consider a final offer of
$16.50 per share and possibly agree to a limited expense reimbursement
provision, but that he would not compromise on the issue regarding financing
commitments. Bear Stearns informed Donaldson, Lufkin & Jenrette that, based on
its prior discussions with the Special Committee, it did not believe that such
an offer would be acceptable to the Special Committee.

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After further discussions among Mr. Hughes and his advisors, Donaldson, Lufkin &
Jenrette informed Bear Stearns that Mr. Hughes would be prepared to offer a
final price of $17.00 per share and agree to pay up to $2 million of his own
expenses (including expenses incurred by Herbalife for his benefit) under
certain circumstances. As part of this proposal, Mr. Hughes would not agree to
provide financing commitments. In addition, Mr. Hughes' offer indicated a
willingness to structure the transaction as a tender offer, if the legal and
financial advisors for the Special Committee and Mr. Hughes jointly concluded
that a tender offer was preferable from a timing and flexibility standpoint.
Donaldson, Lufkin & Jenrette indicated to Bear Stearns that Mr. Hughes had
indicated that the $17.00 proposal was absolutely his best and final offer, and
that any attempt by the Special Committee or its advisors to seek additional
cash consideration would be unacceptable to Mr. Hughes and would seriously
affect his willingness to proceed in further negotiations with the Special
Committee. Bear Stearns indicated that, based on prior discussions with the
Special Committee, Bear Stearns believed that the Special Committee might be
receptive to Mr. Hughes' final proposal.

On September 8, the Special Committee held a telephonic meeting at which
representatives of Bear Stearns and Latham & Watkins participated. Bear Stearns
and Latham & Watkins updated the Special Committee on the developments at the
meeting on September 7, and obtained the Special Committee's authorization to
continue negotiations with Mr. Hughes and his advisors.

Between September 7 and 10, Irell & Manella LLP and Latham & Watkins
further negotiated the specific terms of the merger agreement. Revisions agreed
upon included the restructuring of the transaction to a cash tender offer,
followed by a cash merger.

On September 10, 1999, Mr. Hughes delivered a letter to the Special
Committee setting forth an offer on substantially the same terms outlined in the
September 7, 1999 meeting. Herbalife's advisors also delivered a revised draft
version of the merger agreement and a revised draft letter from Donaldson,
Lufkin & Jenrette as to its confidence that the requisite financing for the
transactions could be arranged.

On September 13, 1999, the Special Committee met in person with
representatives of Bear Stearns and Latham & Watkins to consider and vote upon
Mr. Hughes' revised proposal. Representatives of Latham & Watkins discussed the
duties of the Special Committee members in evaluating the most recent proposal
from Mr. Hughes. They reviewed with the Special Committee the history of the
process undertaken by the Special Committee to date. In addition, they
summarized the terms of the proposed merger agreement, and discussed the
concessions that had been made by Mr. Hughes in the terms of the transaction, as
compared to what had originally been proposed. Thereafter, representatives of
Bear Stearns made a detailed presentation regarding their views and analyses of
various aspects of the proposed transaction, the terms of the proposed merger
agreement, and other matters. At this meeting, Bear Stearns delivered its
written opinion, that, based upon the matters presented to the Special Committee
and as set forth in its opinion, as of the date of the opinion, the
consideration proposed to be received in the proposed tender offer and merger is
fair, from a financial point of view, to the Public Stockholders. After
discussion and consideration, the Special Committee unanimously approved the
Merger Agreement, determined that the terms of the tender offer and the merger
are fair to, and in the best interests of the Public Stockholders, recommended
that the Board of Directors approve the Merger Agreement and determined that the
Board of Directors should recommend that the Public Stockholders of Herbalife
accept the proposed tender offer and tender their Shares pursuant to the
proposed tender offer.

Following the Special Committee meeting, a meeting of the full Board of
Directors was convened at the corporate offices of Herbalife. All directors were
present except for Mr. Pair, who participated by telephone. In addition,
representatives of Donaldson, Lufkin & Jenrette, Irell & Manella LLP and Latham
& Watkins were present. Mr. Hall, on behalf of the Special Committee, reported
that the Special Committee had resolved to recommend to the Board of Directors
that Mr. Hughes' proposal be accepted. He indicated that the Special Committee
had received a presentation from Bear Stearns and its written opinion to the
effect that the consideration to be received in the proposed tender offer and
the proposed merger is fair, from a financial point of view, to the Public
Stockholders. He indicated that the Special Committee had also received a
presentation from Latham & Watkins on the terms of the proposed agreement and
plan of merger, including various provisions that had been negotiated to improve
the agreement from the perspective of Public Stockholders. Representatives of
Irell & Manella LLP then summarized the terms of the agreement and plan of
merger, as

9
<PAGE> 12

finally negotiated with the representatives of the Special Committee, and
reviewed with the Board of Directors, draft resolutions relating to the proposed
transactions. A representative of Irell & Manella LLP also summarized the
fiduciary standard applicable to directors in approving transactions of this
nature. A representative of Latham & Watkins then summarized for the full Board
of Directors the activities of the Special Committee over the preceding
approximately two months, including the numerous meetings and telephone
conferences. The representative indicated that, in addition to price, the
Special Committee placed importance on several improvements achieved in the
terms of the proposal, including among other things (i) the addition of a
requirement that a majority of the Class A Shares and a majority of the Class B
Shares, other than those owned by Mr. Hughes, be tendered in the proposed tender
offer in order for the transaction to proceed; (ii) the inclusion of dissenters'
rights, even though not mandated by Nevada corporate law; (iii) the conversion
of the merger structure to a cash tender offer to be followed by a cash merger;
(iv) the requirement that Herbalife continue to make regular quarterly dividends
and make a special "stub" dividend for the period in which the transactions
close; (v) the inclusion of only minimal representations and warranties from
Herbalife; (vi) Mr. Hughes' obligation to pay up to $2 million of the expenses
incurred by him or on his behalf in the event that the Merger Agreement were to
be terminated under specified circumstances; and (vii) the condition in favor of
Herbalife that a solvency opinion from an independent valuation expert be
delivered at the closing. Donaldson, Lufkin & Jenrette delivered a letter to the
Board of Directors dated September 13, 1999 reiterating their confidence that
the requisite financing for the transaction could be arranged.

Following further discussion, there was a motion to approve and adopt the
resolutions pertaining to the Merger Agreement and related matters. The
resolutions were approved and adopted by the Board of Directors unanimously,
with Mr. Hughes abstaining from the vote.

Immediately following the meeting, Herbalife, Mr. Hughes and his related
entities entered into the definitive Merger Agreement, and Herbalife issued a
press release announcing that its Board of Directors had accepted Mr. Hughes'
proposal and entered into the definitive Merger Agreement.

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS; FAIRNESS OF
THE OFFER AND THE MERGER

Recommendation of the Special Committee and the Board of Directors

As described above, the Special Committee has unanimously (a) approved the
Merger Agreement and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Public Stockholders; (b) recommended
that the Board of Directors approve the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger; and (c) determined
that the Board of Directors should recommend that the Public Stockholders accept
the Offer and tender their Shares pursuant to the Offer.

The Board of Directors has unanimously (a) determined that the terms of the
Offer, the Merger and the Merger Agreement are fair to, and in the best
interests of, the Public Stockholders; (b) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger; and (c)
recommended that the Public Stockholders accept the Offer and tender their
Shares pursuant to the Offer.

Fairness of the Offer and the Merger

In recommending approval of the Merger Agreement and the transactions
contemplated thereby, and recommending that the Public Stockholders tender their
Shares pursuant to the Offer, the Special Committee considered a number of
factors, including:

(i) The results of operations, financial condition, assets,
liabilities, business strategy and prospects of the Company and the nature
of the industry in which the Company competes. The members of the Special
Committee and its advisors also had discussions with members of the
Company's management regarding such business, conditions and prospects. In
reviewing the Company's business prospects, the Special Committee reviewed
the Company's potential international expansion markets, and the signifi

10
<PAGE> 13

cant investment and expense associated with entering those markets. The
Special Committee also reviewed the volatility in the Company's financial
results in recent periods caused by its dependence on international
markets, including Asia, Russia and Latin America;

(ii) The opinion of Bear Stearns dated September 13, 1999 that, as of
the date of such opinion and based upon and subject to certain factors and
assumptions stated therein, the consideration to be received in the Offer
and the Merger is fair, from a financial point of view, to the Public
Stockholders. THE FULL TEXT OF THE BEAR STEARNS OPINION IS ATTACHED AS
ANNEX B TO THIS OFFER TO PURCHASE AND IS INCORPORATED HEREIN BY REFERENCE.
STOCKHOLDERS ARE URGED TO READ THE BEAR STEARNS OPINION IN ITS ENTIRETY,
AND TO READ THE DESCRIPTION OF SUCH OPINION UNDER THE CAPTION "-- OPINION
OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE;"

(iii) Current and historical market prices and trading history of the
Shares, including the relatively low trading volume of the Shares;

(iv) The relationship of the Offer Price to the current market price
and the historical market prices for the Shares and the fact that the Offer
Price represents a premium of approximately 42% over the per Share closing
price of the Class A Shares and approximately 86% over the per Share
closing price of the Class B Shares on September 13, 1999, the last trading
day prior to the public announcement of execution of the Merger Agreement.
The historical market prices of the Shares during the time the Shares have
been publicly traded are deemed relevant because they indicate the
arms'-length trading prices of the Shares for that period as determined in
the open market;

(v) The fact that the public float for the Shares consists of only
approximately 46% of the outstanding Class A Shares and 42% of the
outstanding Class B Shares. Because of the limited float and relatively low
trading volume in the Shares, the Special Committee believed that attempts
to sell significant portions of the Shares would cause substantial downward
pressure on market prices, and therefore believed that an offer by Mr.
Hughes represents an opportunity for Public Stockholders to realize a
higher price for such Shares than might be realized in market transactions;

(vi) The fact that the Merger Agreement includes an obligation on the
part of Parent and Purchaser to make a first-step cash tender offer,
thereby enabling stockholders who tender their Shares to receive cash
consideration without waiting for the Merger to be consummated. In
addition, stockholders who do not tender their Shares pursuant to the Offer
would receive in the Merger the same cash price per Share paid by Parent
and Purchaser in the Offer (unless such stockholders elect to exercise
their dissenters' rights);

(vii) The fact that the per Share price to be received in the Offer
and the Merger is payable in cash, thereby eliminating any uncertainties in
valuing the consideration to be received by the stockholders;

(viii) The availability by the terms of the Merger Agreement of
dissenters' rights under the Nevada Revised Statutes pursuant to which
stockholders of the Company who dissent from the Merger may have the fair
value of their Shares judicially determined;

(ix) The unlikelihood that the Company would be able to effect a
transaction for the sale of the Company without the cooperation of Mr.
Hughes, as well as the unlikelihood that a prospective acquiror would make
a serious offer for the Shares not owned by Mr. Hughes and his affiliates
without also entering into an agreement with Mr. Hughes. The Special
Committee concluded that, in view of Mr. Hughes' stated unwillingness to
sell his Shares to a third party, it was not likely that any party other
than Mr. Hughes would propose a transaction that was more favorable to the
Company and its stockholders. Accordingly, the Special Committee and Bear
Stearns were not authorized to, and did not, solicit third party
indications of interest to acquire the Company as a whole or any of its
businesses. In the event that the Company should receive a proposal from a
third party, the terms of the Merger Agreement permit the Board of
Directors to provide information to and negotiate with such party and to
modify or

11
<PAGE> 14

withdraw its recommendation to the stockholders if the Board of Directors
determines that its failure to take such action would be inconsistent with
its fiduciary duties under applicable law;

(x) The fact that Parent and Purchaser have advised the Company that
they are not aware of any offer having been made from any other person
regarding the acquisition of the Company or any significant portion of its
assets or equity securities;

(xi) The Special Committee's recognition that consummation of the
Merger will preclude the Public Stockholders from participating in any
future growth of the Company; however, in the view of the Special
Committee, this loss of opportunity was adequately reflected in the Offer
Price of $17.00 per Share;

(xii) The Special Committee's consideration of the likelihood of the
consummation of the proposed transaction in light of (a) the fact that the
Parent and Purchaser have provided the Special Committee with copies of a
"highly confident" letter with respect to the Offer and the Merger, but had
not provided financing commitments, (b) the limited nature of the other
conditions to the Offer and the Merger, (c) the significant percentage of
Shares owned by the Continuing Stockholder and (d) the proposed structure
of the transaction and anticipated closing date;

(xiii) The arm's-length negotiations between the Special Committee and
its representatives and Mr. Hughes and his representatives, including that
the negotiations resulted in (a) a substantial increase in the price at
which Purchaser was prepared to acquire the Shares, from $12.50 per Share
to $17.00 per Share, and (b) the Special Committee's belief, confirmed by
Bear Stearns in their discussions with Donaldson, Lufkin & Jenrette, that
$17.00 per Share was the highest price that could be obtained from Mr.
Hughes under the circumstances;

(xiv) The terms of the Offer, the Merger and the Merger Agreement,
including provisions that (a) without the consent of the Special Committee,
the Merger Agreement may not be amended and the Purchaser may not reduce
the Offer Price or the number of Shares to be purchased, modify the form of
consideration to be paid in the Offer, impose additional conditions to the
Offer or amend or modify any other material term of the Offer in a manner
materially adverse to the holders of Shares, (b) the recommendation of the
Special Committee may be withdrawn, modified or amended to the extent the
Special Committee believes it necessary to do so in the exercise of its
fiduciary duties and (c) it is a condition to the Merger that all Shares
validly tendered and not withdrawn pursuant to the Offer shall have been
purchased by the Purchaser;

(xv) The requirement of the Minimum Condition that the Offer cannot be
consummated unless at least a majority of both the Class A Shares and the
Class B Shares outstanding at the date of the execution of the Merger
Agreement (other than Shares owned by the Continuing Stockholder) are
tendered pursuant to the Offer and not withdrawn;

(xvi) The nature of the "highly confident" letter received by the
Board of Directors of the Company and the Special Committee with respect to
the Offer and the Merger, including the identity of the institution
providing such letter, their knowledge of the Company and their experience
in consummating financing for transactions such as the Offer and the
Merger, and the conditions to such letter; and

(xvii) The fact that the Merger Agreement requires that the Company
continue to pay regular quarterly cash dividends on the Shares until the
Effective Time, and requires the Company to declare pro rata special
dividends at the same rate at the consummation of the Offer and the Merger
with respect to the "stub" period since the most recent regularly quarterly
dividend payment record date.

The foregoing discussion of the information and factors considered by the
Special Committee is not meant to be exhaustive but includes the material
factors considered by the Special Committee in reaching its conclusions and
recommendations. In view of the variety of factors considered in its reaching a
determination, the Special Committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the Special Committee may have given different weights to
different factors.

12
<PAGE> 15

In reaching its determinations referred to above, the Board of Directors
considered the following factors, each of which, in the view of the Board of
Directors, supported such determinations:

(i) The conclusions and recommendations of the Special Committee;

(ii) The factors referred to above as having been taken into account
by the Special Committee; and

(iii) The fact that the Offer Price and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations among the
Special Committee, the Company and Mr. Hughes and their respective
advisors.

The Board of Directors, including the members of the Special Committee,
also believes that the Offer and the Merger are procedurally fair because, among
other things:

(i) The Special Committee consisted of two non-employee independent
directors appointed to represent the interests of the Public Stockholders;

(ii) The Special Committee retained and received advice from its
independent legal counsel, Latham & Watkins;

(iii) The Special Committee retained and received an opinion from Bear
Stearns as its independent financial advisor to assist it in evaluating a
potential transaction with Parent and Purchaser;

(iv) The detailed review by the Special Committee and its advisors of
the business and financial condition of the Company;

(v) The deliberations pursuant to which the Special Committee
evaluated the Offer and the Merger;

(vi) The $17.00 Offer Price and the other terms and conditions of the
Merger Agreement resulted from active arm's-length bargaining between
representatives of the Special Committee, on the one hand, and
representatives of Mr. Hughes, on the other hand;

(vi) The Minimum Condition (which may not be waived without the
consent of the Special Committee) has the effect of requiring the holders
of a majority of both the Class A Shares and the Class B Shares (other than
the Continuing Stockholder) to tender their Shares into the Offer in order
for it to be consummated; and

(vii) The availability of dissenters' rights to the Public
Stockholders.

The Board of Directors and the Special Committee recognized that the Merger
was not structured to require the approval of a majority of the stockholders of
the Company other than the Continuing Stockholder, and that the Continuing
Stockholder currently has sufficient voting power to approve the Merger without
the affirmative vote of any other stockholder of the Company. The Continuing
Stockholder acted by written consent on September 13, 1999, to approve and adopt
the Merger and the Merger Agreement. However, the Special Committee and the
Board of Directors also recognized that, since (x) it is a condition to the
Merger that Purchaser shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer, and (y) it is a condition (waivable only with
the consent of the Special Committee) to consummation of the Offer that there be
validly tendered and not withdrawn at least a majority of the issued and
outstanding Class A Shares and Class B Shares without regard to the Shares owned
by the Continuing Stockholder (i.e., the Minimum Condition), the Merger is
effectively conditioned on satisfaction of the Minimum Condition.

The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the opportunity to participate in
the future growth prospects of the Company, and, therefore, in reaching its
conclusion to approve the Offer and the Merger, determined that the historical
results of the operations and future prospects of the Company are adequately
reflected in the Offer Price. The members of the Board of Directors, including
the members of the Special Committee, evaluated the Parent's and Purchaser's
proposal, the Offer and the Merger in light of their knowledge of the business,
financial condition and prospects of the Company, and based upon the advice of
financial and legal advisors. In light of the number and variety of factors that
the Board of Directors considered in connection with their evaluation of the

13
<PAGE> 16

Offer and the Merger, the Board of Directors did not find it practicable to
assign relative weights to any of the foregoing factors.

OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE

At the September 13, 1999 meeting of the Special Committee, Bear Stearns
delivered its opinion (the "Bear Stearns Opinion" or the "Opinion") to the
effect that, as of the date thereof, and subject to the assumptions and
qualifications set forth therein, the consideration to be received in the Offer
and the Merger was fair, from a financial point of view, to the Public
Stockholders.

THE FULL TEXT OF THE BEAR STEARNS OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY BEAR STEARNS, IS ATTACHED AS ANNEX B TO THIS OFFER TO PURCHASE,
AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE BEAR STEARNS OPINION
SET FORTH IN THIS OFFER TO PURCHASE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE BEAR STEARNS OPINION. HERBALIFE STOCKHOLDERS ARE URGED TO
READ CAREFULLY THE BEAR STEARNS OPINION IN ITS ENTIRETY.

The Opinion is expressly intended for the benefit and use of the Special
Committee and does not constitute a recommendation to the Special Committee or
any holders of Shares as to whether to tender their Shares in the Offer. The
Opinion does not address the Continuing Stockholder's underlying business
decision to pursue the Offer and the Merger.

The consideration to be received by the Public Stockholders in the Offer
and the Merger was determined by Mr. Hughes and the Special Committee through
arm's-length negotiations. Although Bear Stearns was consulted and provided
certain advice to the Special Committee from time to time during the course of
such negotiations, the consideration to be received was not based on any
recommendation by Bear Stearns. The Special Committee did not provide specific
instructions to, or place any limitations upon, Bear Stearns with respect to the
procedures to be followed or factors to be considered by Bear Stearns in
performing its analyses or rendering the Bear Stearns Opinion.

In the course of performing its review and analyses for rendering the
Opinion, Bear Stearns:

- reviewed the Merger Agreement;

- reviewed Herbalife's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the years ended December 31, 1996 through 1998, and its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1999 and
June 30, 1999;

- reviewed certain operating and financial information, including
projections, provided to Bear Stearns by management relating to
Herbalife's business and prospects;

- met with certain members of Herbalife's senior management to discuss
Herbalife's business, operations, historical and projected financial
statements and future prospects;

- reviewed the historical prices, valuation parameters and trading volumes
of the Class A Shares and Class B Shares of Herbalife;

- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which Bear Stearns deemed generally
comparable to Herbalife;

- reviewed the terms of recent acquisitions of companies which Bear Stearns
deemed generally comparable to Herbalife;

- performed discounted cash flow analyses based on the projections for
Herbalife furnished to Bear Stearns; and

- conducted other studies, analyses, inquiries and investigations that Bear
Stearns deemed appropriate.

14
<PAGE> 17

In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the projections provided to it
by Herbalife. With respect to Herbalife's projected financial results, Bear
Stearns assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of
Herbalife as to the expected future performance of Herbalife. Bear Stearns did
not assume any responsibility for the independent verification of any such
information or of the projections provided to Bear Stearns, and Bear Stearns
further relied upon the assurances of the senior management of Herbalife that
they were unaware of any facts that would make the information and projections
provided to Bear Stearns incomplete or misleading. In arriving at the Opinion,
Bear Stearns did not perform or obtain any independent appraisal of the assets
or liabilities of Herbalife, nor was Bear Stearns furnished with any such
appraisals.

Bear Stearns noted that the Continuing Stockholder owns a majority of the
Class A Shares and Class B Shares of Herbalife. Bear Stearns also noted that the
Continuing Stockholder has represented to Bear Stearns and to the Special
Committee that he has no intention of selling any of his Shares. Accordingly,
neither Bear Stearns nor the Special Committee solicited, nor was Bear Stearns
asked to solicit, third party acquisition interest in Herbalife. Bear Stearns
assumed that the representations and warranties made in the Merger Agreement
were true and that the Offer and the Merger will be completed in accordance with
the terms of the Merger Agreement. The Bear Stearns Opinion is necessarily based
on economic, market and other conditions, and the information made available to
Bear Stearns, as of the date at such Opinion.

In connection with preparing and rendering the Opinion, Bear Stearns
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a complete
description of the analyses underlying the Bear Stearns Opinion. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
summary description. Bear Stearns believes that its analyses must be considered
as a whole, and that selecting portions of its analyses and the factors
considered by it, without considering all such factors and analyses, could
create an incomplete view of the processes underlying the Opinion. Moreover, the
estimates contained in such analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Accordingly, such estimates are inherently subject to
substantial uncertainties.

The following is a summary of the material valuation, financial and
comparative analyses performed by Bear Stearns in arriving at the Bear Stearns
Opinion as of the date thereof.

(i) Comparable Public Company Analysis. In the course of its analysis, Bear
Stearns compared certain ratios and multiples of Herbalife to the corresponding
ratios and multiples of certain publicly-traded companies that Bear Stearns
believed were generally comparable to Herbalife (the "Comparable Companies").
The Comparable Companies included Natrol, Inc., Nature's Sunshine Products,
Inc., NBTY, Inc., Nu Skin Enterprises, Inc., Nutraceutical International
Corporation, Rexall Sundown, Inc., Twinlab Corporation, USANA, Inc. and Weider
Nutrition International, Inc. The multiples and ratios were calculated based on
publicly available financial information and research reports, and were adjusted
for certain extraordinary and non-recurring items. Financial data reviewed
included revenue, earnings before interest, taxes, depreciation and amortization
("EBITDA"), earnings before interest and taxes ("EBIT"), net income and earnings
per share ("EPS") for various time periods as well as certain operating margins,
valuation statistics, financial ratios and projected growth rates. For purposes
of its analysis, Bear Stearns also reviewed the harmonic mean of certain
valuation multiples of the Comparable Companies.

Among other analyses, for each of the Comparable Companies, Bear Stearns
calculated the ratio of their equity value as of September 9, 1999 plus debt
less cash and cash equivalents ("Enterprise Value") to their respective
revenues, EBITDA and EBIT during the most recent 12-month period ("LTM") and
projected calendar 1999 and 2000 revenues, EBITDA and EBIT and the ratios of
their stock prices as of September 9, 1999 to their respective LTM earnings per
share and projected calendar year 1999 and 2000 earnings per share. References
to "P/E" in the tables below refers to a price to EPS multiple.

15
<PAGE> 18

Results of those analyses are summarized as follows:

REVENUE, EBITDA AND EBIT MULTIPLES

<TABLE>
<CAPTION>
ENTERPRISE VALUE/
------------------------------------------------------------------------------------
LTM PROJECTED CALENDAR 1999 PROJECTED CALENDAR 2000
-------------------------- -------------------------- --------------------------
REVENUES EBITDA EBIT REVENUES EBITDA EBIT REVENUES EBITDA EBIT
-------- ------ ------ -------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HERBALIFE TRANSACTION MULTIPLE......... 0.52x 5.4x 6.7x 0.53x 5.0x 5.8x 0.50x 4.9x 5.8x
COMPARABLE COMPANIES MULTIPLE RANGE:
Low.................................. 0.49x 3.6x 4.1x 0.63x 4.1x 5.1x 0.52x 3.4x 4.2x
Harmonic Mean........................ 0.83 5.4 6.7 0.89 6.2 7.5 0.73 5.2 6.4
High................................. 1.34 8.6 12.4 1.26 8.5 12.0 1.09 7.8 9.6
SHARE PRICE IMPUTED BY MULTIPLE:
Low.................................. $16.34 $12.67 $12.02 $19.37 $14.55 $15.41 $17.32 $12.97 $13.47
Harmonic Mean........................ 24.84 17.12 16.85 25.70 19.85 20.87 22.81 17.88 18.42
High................................. 37.68 24.62 27.77 34.68 25.82 30.92 31.89 24.53 25.52
</TABLE>

P/E MULTIPLES

<TABLE>
<CAPTION>
CALENDAR CALENDAR
LTM 1999 2000
P/E P/E P/E
------ -------- --------
<S> <C> <C> <C>
HERBALIFE TRANSACTION MULTIPLE.............................. 12.1x 10.6x 10.5x
COMPARABLE COMPANIES MULTIPLE RANGE:
Low....................................................... 7.9x 9.2x 7.6x
Harmonic Mean............................................. 11.3 12.4 9.0
High...................................................... 25.6 23.0 13.0
SHARE PRICE IMPUTED BY MULTIPLE:
Low....................................................... $11.02 $14.65 $12.27
Harmonic Mean............................................. 15.81 19.82 14.58
High...................................................... 35.91 36.84 21.19
</TABLE>

Bear Stearns noted that the Comparable Companies that distributed their
products predominantly through use of multi-level marketing generally traded at
discounts to those companies which used traditional distribution channels.
Further, Bear Stearns observed that the companies which traded above the
harmonic mean tended to be larger companies (relative to Herbalife) in terms of
equity market capitalization and value of public float. Bear Stearns also noted
that earnings forecasts were not generally available for certain of the smaller
Comparable Companies, which may provide an upward bias to the harmonic means of
forecasted earnings.

Bear Stearns also analyzed the historical and projected financial
performance of Herbalife and the Comparable Companies. Bear Stearns observed
that Herbalife's historical growth rates of revenues and earnings were generally
lower than those of the Comparable Companies and that such slower growth was
generally expected to continue in the future based on the management
projections. Bear Stearns also compared Herbalife's profit margins to those of
the Comparable Companies and noted that Herbalife's margins were generally lower
than those of the Comparable Companies.

Bear Stearns chose the Comparable Companies because they have general
business, operating and financial characteristics similar to those of Herbalife.
However, Bear Stearns noted that no company used in the foregoing analysis is
identical to Herbalife. Accordingly, Bear Stearns did not rely solely on the
mathematical results of the analysis, but also made qualitative judgments
concerning differences in financial and operating characteristics of Herbalife
and the Comparable Companies and other factors that could affect the values of
each.

(ii) Comparable Transactions Analysis. Bear Stearns reviewed certain
publicly-available financial information related to 13 merger and acquisition
transactions completed over the prior four years that it deemed generally
comparable to the Transaction (the "Comparable Transactions"). For each of the
Comparable Transactions, Bear Stearns reviewed certain publicly-available
financial information for the acquired companies including revenue, EBITDA,
EBIT, net income and certain valuation statistics, as

16
<PAGE> 19

adjusted for certain extraordinary and non-recurring items. Bear Stearns
observed that the multiples paid in the Comparable Transactions were generally
substantially higher than those implied for Herbalife in the Offer and the
Merger. Bear Stearns noted that all but one of these transactions took place
prior to the substantial decline in the stock prices of companies in the vitamin
and nutritional supplement sector beginning in the summer of 1998. Bear Stearns
noted that the equity market capitalizations for publicly-traded companies in
the vitamin and nutritional supplement sector in most cases fell by over 50%
(and in the case of one company as high as 83%) from June 1998 as compared to
September 1999. Valuation multiples for such companies fell similarly.
Accordingly, Bear Stearns put little weight on its analysis of Comparable
Transactions in reaching its valuation conclusions.

Bear Stearns noted that no transaction used in the foregoing analysis is
identical to the Offer and the Merger. Accordingly, Bear Stearns did not rely
solely on the mathematical results of the analysis, but also made qualitative
judgments concerning differences in financial and operating characteristics of
the Comparable Transactions and other factors that could affect the value of the
companies or transactions to which Herbalife or the Offer and the Merger are
being compared.

(iii) Discounted Cash Flow Analysis. In the course of this analysis, Bear
Stearns, based on management projections, calculated a stream of future
unlevered free cash flows for the years ended December 31, 2000 to 2006.
Unlevered free cash flow, as calculated by Bear Stearns, is equal to
tax-effected earnings before interest and taxes (EBIT) plus depreciation and
amortization less capital expenditures and working capital requirements. The
cash flows were discounted at certain discount rates ranging from 12.0% to
16.0%, based on a weighted average cost of capital estimated, in part, by using
the Comparable Companies. A terminal value was calculated to estimate the value
of all future cash flows by using a growing perpetuity of the 2006 (the last
projected year) cash flow, assuming perpetual growth rates of between 0.0% to
4.0%. Such perpetual growth rates imply terminal value multiples of EBITDA of
3.8x to 5.6x (at a discount rate of 14%). The summation of the present value of
the projected unlevered free cash flows and the present value of the terminal
value yielded per share results is summarized in the following table:

<TABLE>
<CAPTION>
PERPETUAL GROWTH RATES
----------------------------------------------
0.0% 1.0% 2.0% 3.0% 4.0%
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Discount Rates:
12.0%....................................... $16.55 $17.05 $17.64 $18.33 $19.16
14.0%....................................... 15.88 16.32 16.84 17.46 18.19
16.0%....................................... 15.30 15.69 16.15 16.69 17.34
</TABLE>

Bear Stearns also performed certain sensitivity analysis assuming higher
and lower revenue growth rates (P5% revenue growth rate from the management
projections) and higher and lower profit margins (P2% EBITDA margin). Such
analyses produced values for Herbalife of $11.48 to $23.23 per share.

(iv) Public Shareholder Valuation Analysis. Bear Stearns examined the
present value to stockholders of holding Herbalife stock for three and five
years. Specifically, Bear Stearns assumed that Herbalife continued to pay
dividends at the current level and that the hypothetical stock price in three
and five years was estimated based on multiplying projected EPS (based on the
management projections) by a range of P/E multiples. The sum of the present
value of the dividend stream and the present value of the estimated stock price
at the end of the projected period was used to determine a hypothetical current
value for the stock. Bear Stearns used a range of discount rates from 12.0% to
20.0%, based on the estimated cost of equity capital for

17
<PAGE> 20

Herbalife. The range of present values of the projected dividend payments and
the estimated future stock price after five years is summarized in the following
table:

<TABLE>
<CAPTION>
P/E MULTIPLE -- YEAR 5
----------------------------------------------
8.0X 10.0X 12.0X 14.0X 16.0X
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Discount Rates:
12.0%....................................... $10.98 $13.19 $15.39 $17.60 $19.80
14.0%....................................... 10.13 12.15 14.17 16.19 18.20
16.0%....................................... 9.36 11.21 13.06 14.91 16.76
18.0%....................................... 8.67 10.37 12.07 13.76 15.46
20.0%....................................... 8.04 9.60 11.16 12.72 14.29
</TABLE>

Similarly, Bear Stearns performed such analysis using the future stock
price after three years. Based on this analysis, a range of stock prices from
$10.01 to $22.95 was calculated.

(v) Historical Stock Price Analysis. Bear Stearns reviewed the historical
closing stock prices of Herbalife Class A Shares and Herbalife Class B Shares.
Over the prior twelve months ending on September 9, 1999, Herbalife's Class A
Shares had traded between a high of $16.25 on January 14, 1999 and a low of
$7.50 on October 8, 1998 and Herbalife's Class B Shares traded between a high of
$13.00 on January 14, 1999, and a low of $6.00 on October 8, 1998. Bear Stearns
also observed that Herbalife's non-voting Class B Shares have consistently
traded at a substantial discount to the voting Class A Shares since the
recapitalization in December 1997.

Bear Stearns noted that the stock prices of Herbalife during 1997 and the
first half of 1998 were generally above $20.00, with the stocks trading for a
short period of time above $30.00. Bear Stearns also noted that the stock prices
of Herbalife fell significantly during the summer of 1998, which coincided with
(i) difficult market conditions and reduced financial performance in certain of
Herbalife's international markets, including Russia, and (ii) an overall decline
in the stock prices for companies in the vitamin and nutritional supplement
sector due in part to perceived slowing of industry growth rates and increased
competition in the sector.

Bear Stearns observed that, based on the proposed stock price of $17.00 per
share for both the Class A Shares and the Class B Shares, the following premia
were applicable as of September 9, 1999:

<TABLE>
<CAPTION>
TRANSACTION PREMIUM OVER
--------------------------------
PERIOD CLASS A SHARES CLASS B SHARES
------ -------------- --------------
<S> <C> <C>
One-Day Prior............................................... 40.9% 82.6%
One-Month Prior............................................. 42.4 77.8
20 Trading Days Average..................................... 41.5 81.8
One-Year Average............................................ 43.7 78.5
52-Week High................................................ 4.6 30.8
52-Week Low................................................. 126.7 183.3
</TABLE>

Bear Stearns compared these premia with those of certain "going private"
and "minority buy-in" transactions which it deemed comparable and found that the
premia to be paid in the Transaction to the Class A Shares were generally above
the premia paid in such transactions, with the premia to the Class B Shares
generally at the high end of such transactions. Bear Stearns further noted that
while premia analyses are an indicia of value, such analyses by themselves were
not sufficient to reach conclusions as to financial fairness.

(vi) Other Analyses. Bear Stearns conducted such other analyses as it
deemed necessary, including the following:

- reviewing historical and projected financial and operating data for
Herbalife;

- analyzing selected investment research reports on, and earnings and other
estimates for, Herbalife;

18
<PAGE> 21

- analyzing the historic stock performance and trading volume for both
classes of Herbalife common stock;

- analyzing the historic dividend payments and dividend yields of
Herbalife; and

- reviewing available information regarding the institutional holdings of
both classes of Herbalife common stock.

The Special Committee engaged Bear Stearns as its financial advisor based
on Bear Stearns' experience and expertise. Bear Stearns is an internationally
recognized investment banking firm that has substantial experience in the
healthcare and consumer products industries and expertise in transactions
similar to the Transaction. As part of its investment banking business, Bear
Stearns is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Pursuant to
the terms of its engagement letter dated July 21, 1999 (the "Bear Stearns
Engagement Letter"), the Special Committee has agreed to have Herbalife (i) pay
Bear Stearns a non-refundable retainer in the amount of $400,000, (ii) pay Bear
Stearns a fee of $1.35 million in connection with the delivery of the Bear
Stearns Opinion and (iii) reimburse Bear Stearns for all reasonable out-of-
pocket expenses (including fees and disbursements of counsel, and of other
consultants and advisors retained by Bear Stearns). Herbalife has also agreed to
indemnify Bear Stearns and certain related persons against certain liabilities
in connection with its engagement, including certain liabilities under the
federal securities laws. In the ordinary course of business, Bear Stearns may
actively trade the equity securities of Herbalife for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.

PURPOSES OF THE OFFER AND THE MERGER

The purpose of the Continuing Stockholder for engaging in the transactions
contemplated by the Merger Agreement is to provide the Public Stockholders a
fair price for their Shares, acquire 100% ownership of Herbalife and to
terminate the status of Herbalife as a company with publicly traded equity. The
Continuing Stockholder believes that the Company has not been rewarded by the
public equity markets in recent periods, and that the conditions that may have
contributed to that situation are not likely to change in the near future. If
the Offer and the Merger are completed, Herbalife will become wholly owned
(through one or more controlled entities) by Mr. Hughes. In addition, senior
executives of Herbalife will receive rights to purchase 16.5% of Herbalife's
fully diluted equity pursuant to a new stock option plan. See "Interests of
Certain Persons -- New Stock Option Plan."

While Mr. Hughes believes that there will be significant opportunities
associated with his investment in Herbalife, Mr. Hughes realizes that there are
also substantial risks that such opportunities may not be fully realized. The
primary risks to Mr. Hughes are that Herbalife will not be able to service its
third party indebtedness and that, as a result, the value of Mr. Hughes' equity
ownership interest in Herbalife could be significantly reduced or potentially
eliminated. Herbalife historically has not carried significant amounts of
indebtedness on its balance sheet. The financing required to consummate the
Merger will require material debt service obligations. As described below
under"-- Interests of Certain Persons -- The Board of Directors," Mr. Hughes
will personally guarantee an $89 million loan from Herbalife to an entity
controlled and beneficially owned by Mr. Hughes, and the investments purchased
using the proceeds of a $125 million loan from Herbalife to that entity will be
pledged to secure the repayment of that loan. Consequently, defaults under
either of the loans (or defaults by Herbalife under its third party financing)
could have a material adverse effect on Mr. Hughes.

POSITION OF THE PURCHASER AS TO THE FAIRNESS OF THE OFFER AND THE MERGER

Mr. Hughes has considered the analyses and findings of the Special
Committee and the Board of Directors (described in detail in "-- Recommendation
of the Special Committee and the Board of Directors; Fairness of the Offer and
the Merger") with respect to the fairness of the Offer and the Merger. As of the
date of this Offer to Purchase, the Continuing Stockholder believes, based in
part on the analyses and findings of
19
<PAGE> 22

the Special Committee and the Board of Directors with respect to the fairness of
the Merger, that the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby are fair to, and that the Merger are in the
best interests of the Public Stockholders. The Continuing Stockholder makes no
recommendation as to whether the Public Stockholders should tender their shares
in the Offer.

The Continuing Stockholder believes that the Offer and the Merger are
procedurally fair to the Public Stockholders of Herbalife based in part on the
reasons stated above by the Special Committee.

CERTAIN EFFECTS OF THE OFFER AND THE MERGER

Upon consummation of the Offer and the Merger, Herbalife will become a
privately held corporation. Accordingly, the Public Stockholders will not have
the opportunity to participate in the earnings and growth of Herbalife after the
Merger and will not have the right to vote on corporate matters. Instead, the
Public Stockholders of Herbalife will have the right to receive $17.00 in cash,
without interest, for each Share held by them, other than Shares in respect of
which dissenters' rights have been perfected. The Public Stockholders will not
face the risk of any losses generated by Herbalife's operations or any decline
in the value of Herbalife after the Merger.

Following the completion of the Merger, the Shares will cease to be traded
on Nasdaq and Herbalife's registration and reporting obligations under section
12 of the Securities Exchange Act of 1934 will terminate. Herbalife expects,
however, to have reporting obligations under section 15 of the Securities
Exchange Act of 1934 in connection with an exchange-offer registration statement
related to the financing of the Offer and the Merger. See Section 9.

It is expected that if the Merger is not consummated, senior executives of
Herbalife, under the general direction of the Board of Directors, will continue
to manage Herbalife and the shares will continue to be traded on Nasdaq.

INTERESTS OF CERTAIN PERSONS

In considering the recommendations of the Special Committee and Board of
Directors with respect to the Offer and the Merger, the Public Stockholders
should be aware that certain officers and directors of Herbalife, have interests
in connection with the Merger which may present them with actual or potential
conflicts of interest as summarized below. The Special Committee and the Board
of Directors were aware of these interests and considered them among the other
matters described under "Recommendation of the Special Committee and the Board
of Directors; Fairness of the Offer and the Merger." These interests are
described below.

The Board of Directors

Mr. Hughes, Herbalife's founder, President, Chief Executive Officer,
Chairman of the Board and principal stockholder, currently owns 5,396,000 shares
of Class A Shares, representing 54% of the outstanding Class A Shares, and
10,792,002 shares of Class B Shares, representing 58% of the outstanding Class B
Shares. After the Merger, Mr. Hughes will own 100% of Herbalife. In connection
with the Offer and the Merger, Mr. Hughes will obtain, through an entity or
entities controlled and beneficially owned by him, two loans in the aggregate
amount of approximately $214 million. The first of the loans, in the amount of
approximately $89 million, will be used to satisfy the financial obligations of
Mr. Hughes and affiliated entities to DECS Trust III incurred in connection with
the issuance of the DECS securities by that entity. The proceeds of the second
loan, in the amount of $125 million, will be retained by the borrower entity. It
is expected that, provided certain conditions are satisfied, Mr. Hughes will be
permitted to retain the investment income from the proceeds of the $125 million
loan, and that dividends will be permitted to be declared and paid to Mr. Hughes
and/or his controlled entities in amounts sufficient to enable the borrower to
pay interest to Herbalife on the loans. Finally, provided certain covenants
anticipated to be included in the third-party financing are satisfied, beginning
three years following the closing of the Merger, Herbalife will be permitted to
provide funds to Mr. Hughes and/or his controlled entities in an amount
sufficient to satisfy the obligations

20
<PAGE> 23

under the loans, thereby releasing the guaranty of the $89 million loan and
releasing the collateral pledge on the investments purchased with the proceeds
of the $125 million loan.

Additionally, Mr. Hughes owns a 5% interest in Herbalife's Japanese
subsidiary, which he will continue to hold after the completion of the Merger.

Mr. Hughes' options to purchase Shares will be cancelled for no
consideration or contributed to capital.

Mr. Michael E. Rosen, a director and executive officer of the Company,
currently owns approximately 11,253 and 22,502 shares, respectively, of
Herbalife's Class A Shares and Class B Shares. If the Merger is consummated, Mr.
Rosen will receive $573,835 in payment for his Shares based on owning 33,755
Shares at a per Share price of $17. Mr. Rosen and Mr. Christopher Pair, also a
director and executive officer of the Company, will also benefit from
acceleration, vesting and cancellation for cash of all of their outstanding
options to purchase the Shares. The aggregate payment to each of Messrs. Rosen
and Pair in respect of the cancellation for cash of their options will be
$5,471,656, and $6,320,226, respectively. In addition, after the completion of
the Merger they each will receive options exercisable for 2.5%, of the
fully-diluted equity interests in Herbalife through a new stock option plan. As
more fully described under the heading, "-- New Stock Option Plan" below, the
new stock option plan will entitle option holders to acquire equity interests in
Herbalife. These equity interests may have substantial value if Herbalife
remains profitable. Additionally, Messrs. Rosen and Pair each own a 0.58% and
0.58% interest, respectively, in Herbalife's Japanese subsidiary, which they
will continue to hold after the completion of the Merger.

Mr. Alan Liker, a director of the Company, will benefit from acceleration,
vesting and cancellation for cash of all of his outstanding options to purchase
Shares. The aggregate payment to Mr. Liker in respect of the cancellation for
cash of his options will be $1,273,677. In addition, Mr. Liker owns a 0.2%
interest in Herbalife's Japanese subsidiary and will continue to hold such
interest after the completion of the Merger. After the Merger, the Continuing
Stockholder expects that Mr. Liker will continue as a director.

Mr. Hall currently owns 2,333 Shares and 4,666 Shares, respectively, of
Class A Shares and Class B Shares. If the Merger is consummated, Mr. Hall will
receive $118,983 in payment for his Shares based on owning 6,999 Shares, at a
per Share price of $17.00. Messrs. Hall and Miner will also benefit from
acceleration, vesting and cancellation for cash of all of their outstanding
options to purchase Shares. The aggregate payment to each of Messrs. Hall and
Miner in respect of the cancellation for cash of their options will be
$1,273,677, and $1,205,717, respectively.

As previously publicly reported, substantially all outstanding stock
options held by directors and employees of Herbalife were repriced in October
1998, following the decrease in the public trading prices of Herbalife's Shares
that was experienced during the second half of 1998. The value of the stock
option cash-outs summarized above includes the effect of the repricing.

Special Committee Compensation

Messrs. Hall and Miner are entitled to compensation and expense
reimbursement for their service on the Special Committee, in addition to normal
directors fees. The Board of Directors has granted each of Messrs. Hall and
Miner a fee of $35,000 for their services on the Special Committee through the
end of October 1999 and $10,000 per month for each month thereafter until the
dismissal of the Special Committee by the Board of Directors, up to a maximum of
$30,000, plus $2,000 per diem in the event they are required to perform
additional functions or commit additional time in connection with any litigation
relating to the Offer and the Merger. All compensation to members of the Special
Committee is and was payable regardless of the recommendation of the Special
Committee with respect to the fairness of the Merger. The Board of Directors
considered that the interest of Messrs. Hall and Miner in the sale of their
Shares and the cancellation for cash payments of their stock options aligned
their interests with those of the Public Stockholders. That fact, together with
the non-contingent nature of the compensation due to them for service on the
Special Committee and the expectation that they will not continue to serve as
directors of Herbalife following the Offer and the Merger, contributed to the
Board of Directors' conclusion that each of Messrs. Hall and Miner was
disinterested in the transactions proposed by Mr. Hughes.

21
<PAGE> 24

Except as indicated above, the members of the Board of Directors do not own
any Shares or hold any stock options to acquire Shares.

Herbalife's Articles of Incorporation, Bylaws and existing indemnification
agreements provide for the indemnification of Herbalife's directors and officers
under certain circumstances for actions taken on behalf of Herbalife.
Herbalife's directors and officers are also covered by directors and officers
liability insurance maintained by Herbalife. The Merger Agreement provides that
all rights to indemnification and exculpation from liabilities for acts or
omissions of the current or former directors and officers existing under the
Company's Articles of Incorporation, Bylaws and any indemnifications prior to
the Merger shall be assumed and will survive the Merger. In addition, the
Surviving Corporation will be required to maintain in effect (for not less than
six years from the Effective Time of the Merger) directors' and officers'
liability insurance with the same or substantially similar coverage to the
existing insurance policies. See Section 10.

Senior Executives

The senior executives of Herbalife consist of the persons described below.
Certain senior executives will receive, in certain cases described below,
payment for their Shares and cancellation of stock options for cash. In
addition, certain senior executives will participate in the new stock option
plan. See "-- New Stock Option Plan" below.

<TABLE>
<CAPTION>
PERCENTAGE TOTAL
PAYMENT FOR PARTICIPATION PARTICIPATION
COMMON PAYMENT FOR TOTAL IN NEW STOCK IN POST-MERGER
STOCK OPTIONS PAYMENTS OPTION PLAN EQUITY*
----------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Mark Hughes................ $ -- $ -- $ -- --% 100%**
Michael E. Rosen........... 573,835 5,471,656 6,045,491 15.15 2.5
Christopher Pair........... -- 6,320,226 6,320,226 15.15 2.5
Timothy Gerrity............ -- 3,574,844 3,574,844 8.08 1.3
Robert A. Sandler.......... -- 3,741,667 3,741,667 8.08 1.3
</TABLE>

- ---------------
* For each individual other than Mr. Hughes, percentage assumes the exercise of
all other stock options granted pursuant to the new stock option plan.

** Subject to dilution by exercise of stock options granted pursuant to the new
stock option plan.

New Stock Option Plan

At the completion of the Merger, Herbalife will adopt a new stock option
plan that provides for the grant of stock options to senior executives of
Herbalife. The number of shares subject to the stock options will be 16.5% of
the fully diluted shares outstanding after the Merger. The exact terms of the
new stock option plan have not yet been determined; the summary below is
intended to be a general description of the broad parameters of the plan as
determined to date by the Continuing Stockholder.

The exercise price of the options will be calculated based on the estimated
fair value of Herbalife in the Merger. The exercise price will be required to be
paid in cash, or, in the discretion of Herbalife, by delivery of a recourse
note.

All options will be 100% vested upon grant and will have a term of five
years. Herbalife plans to grant options under the new stock option plan as
follows:

<TABLE>
<CAPTION>
PERCENTAGE PARTICIPATION
NAME IN NEW STOCK OPTION PLAN
---- ------------------------
<S> <C>
Michael E. Rosen............................................ 15.15%
Christopher Pair............................................ 15.15
Timothy Gerrity............................................. 8.08
Robert A. Sandler........................................... 8.08
Other members of management................................. 53.54
------
100.00%
</TABLE>

22
<PAGE> 25

Option holders will be entitled to require Herbalife to repurchase any
shares of stock acquired upon the exercise of options beginning two years after
the grant of the options, as long as such shares have been held for a minimum
period of six months. Herbalife will have the right to repurchase any shares of
stock beginning six months after exercise of such options and five years after
the grant of the options. The purchase price to be paid by Herbalife for shares
of stock purchased will be the fair market value of the shares purchased,
determined as of the date of the exercise of the put or call right on the
shares, as applicable. If Herbalife's shares are not publicly traded, the fair
market value will be determined based on a formula which values Herbalife based
on a multiple of Herbalife's cash flow. Repurchases of stock by Herbalife may be
deferred to comply with applicable legal or contractual requirements, and any
payments so deferred will accrue interest until paid.

In general, except for transfers to Herbalife, shares of stock acquired
upon the exercise of options under the new stock option plan may not be
transferred until five years after the grant of the options or the occurrence of
an initial public offering of Herbalife.

Option holders will have pro-rata piggyback registration rights with
respect to any registration of Shares, subject to customary limitations,
exclusions and cut-backs.

DESCRIPTION OF DECS SECURITIES

In March 1998, DECS Trust III, a Delaware business trust, issued 5 million
DECS securities in an underwritten public offering. The DECS securities
represent beneficial ownership interests in DECS Trust III. Each of the DECS
securities represents the right to receive (a) an annual distribution of
$2.0125, payable quarterly on each February 15, May 15, August 15 and November
15, during the term of the DECS trust, beginning May 15, 1998 and (b) generally,
upon the conclusion of the term of DECS Trust III on February 15, 2001, between
.8288 and 1.0 shares of Class B Shares or cash with an equivalent value.
However, in the case of an "adjustment event" such as that resulting from the
Merger, the settlement value of each DECS unit becomes fixed, in this case at
the same $17.00 per Share price as is payable in the Offer and the Merger. In
connection with the sale of the DECS securities, DECS Trust III entered into
forward purchase contracts with Mr. Hughes and entities controlled by him,
whereby Mr. Hughes and those entities pledged 5 million Class B Shares to DECS
Trust III and agreed to provide either cash or Shares to DECS Trust III upon
settlement as specified in the forward purchase contracts. At the time that
these contracts were entered into, Mr. Hughes received approximately $88 million
in cash; Herbalife received none of the proceeds from the issuance of the DECS
securities or the forward purchase contracts. As a result of the settlement
value of the DECS becoming fixed at $17.00 per Share as a result of the Merger,
the forward purchase contracts further require that Mr. Hughes and the
Hughes-controlled entities party to the forward purchase contracts deliver to
DECS Trust III government securities with a value equal to 105% of the
settlement value of the DECS, or approximately $89 million. At the time that
such governmental securities are provided to DECS Trust III, DECS Trust III will
be obligated to return the pledged Class B Shares to Mr. Hughes and his
controlled companies. In order to deliver to DECS Trust III the approximately
$89 million in government securities, Mr. Hughes will receive a loan from
Herbalife at the completion of the merger, the proceeds of which will be used to
purchase such government securities. See "Special Factors -- Interests of
Certain Persons -- The Board of Directors."

CONDUCT OF HERBALIFE'S BUSINESS AFTER THE OFFER AND THE MERGER

Mr. Hughes is continuing to evaluate Herbalife's business, practices,
operations, properties, corporate structure, capitalization, management and
personnel to determine what changes, if any, will be desirable. Subject to the
foregoing, Mr. Hughes expects that after the Merger the day-to-day business and
operations of Herbalife will be conducted substantially as they are currently
being conducted by Herbalife. Mr. Hughes does not currently intend to dispose of
any assets of Herbalife other than in the ordinary course of business.
Additionally, Mr. Hughes does not currently contemplate any material change in
the composition of Herbalife's current management or employees, although after
the Merger, the Board of Directors will consist of Messrs. Hughes, Rosen, Pair
and Liker. Messrs. Miner and Hall will resign from the Board of Directors when
the Merger is complete.
23
<PAGE> 26

CERTAIN FINANCIAL PROJECTIONS

Senior executives of Herbalife have developed a multi-year business plan
containing certain projections of the future operating performance of Herbalife.
Such projections do not give effect to the tender offer, merger, or concurrent
issuance of debt, and were prepared for internal financial planning purposes and
in connection with the Continuing Stockholder's proposal for the going private
transaction. These projections were not reviewed with or approved by
non-management members of the Board of Directors.

Herbalife does not as a matter of course publicly disclose projections as
to future revenue, earnings, or other results. Herbalife's projections were not
prepared with a view to public disclosure and the following summary thereof is
included in the Offer to Purchase only because such information was available to
Mr. Hughes for purposes of making his proposal. Herbalife's projections were
also not prepared with a view to compliance with the published guidelines of the
Securities and Exchange Commission regarding projections, nor were they prepared
in accordance with the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial
projections.

Neither the Company's independent auditors, nor any other independent
accountants, have compiled, examined, or performed any procedures with respect
to the projections contained herein, nor have they expressed any opinion or any
other form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, the projections.

These forward looking statements reflect numerous assumptions and estimates
made by Herbalife's management, which are not apparent on the face of
Herbalife's projections. The assumptions and estimates underlying the
projections are inherently uncertain and, though considered reasonable by the
senior executives of Herbalife when made, are subject to a wide variety of
factors that could cause actual results to differ materially from those
contained in the projections, including, among other factors, industry
performance, general business, economic, regulatory, and market and financial
conditions, all of which are difficult to predict. Accordingly, there can be no
assurance that the projections are indicative of the future performance of
Herbalife or that actual results will not differ materially from those presented
in the projections. Inclusion of the projections in this Offer to Purchase
should not be regarded as a representation by any person that the results
contained in the projections will be achieved.

Herbalife does not generally publish its business plans and strategies or
make external disclosures of its anticipated financial position or results of
operations. Accordingly, neither Herbalife nor Mr. Hughes intends to update or
otherwise revise the projections to reflect circumstances existing since their
preparation or to reflect the occurrence of unanticipated events, even in the
event that any or all of the underlying assumptions are shown to be in error.
Furthermore, neither Herbalife nor Mr. Hughes intends to update or revise the
projections to reflect changes in general economic or industry conditions.

The senior executives of Herbalife and Mr. Hughes have made the following
projections for fiscal years 1999 through 2006, respectively: (i) total retail
sales of $1,667 million, $1,750 million, $1,842 million, $1,941 million, $2,038
million, $2,140 million, $2,247 million and $2,359 million, (ii) net income of
$49.7 million, $50.3 million, $56.5 million, $58.6 million, $56.4 million, $60.2
million, $63.9 million and $67.6 million, (iii) EBITDA of $91.9 million, $94.5
million, $105.3 million, $109.4 million, $106.5 million, $110.3 million, $114.4
million, and $119.2 million, and (iv) earnings per share of $1.60, $1.62, $1.82,
$1.89, $1.82, $1.94, $2.06 and $2.18. Herbalife's projections were based on
historical data specific to Herbalife. In preparing Herbalife's projections,
senior executives of Herbalife made the following material assumptions: (i)
retail sales growth of approximately 1% in 1999 and approximately 5% annually
thereafter; (ii) marketing, distribution, and administrative expense growth of
approximately 7% annually through year 2003 and 5% annually thereafter. These
growth rates take into account the building of required infrastructure as well
as new country and product development. A reduction in product cost of sales has
been projected in year 2001, and thereafter, in conjunction with an anticipated
improvement in product costs due to the expiration of the existing contract with
Herbalife's primary supplier of powder and tablet products. All other major
expense categories, including distributor royalty payments and income taxes,
have been projected to remain consistent with historical ratios. Mr. Hughes used
these projections in evaluating Herbalife's overall value and its ability

24
<PAGE> 27

to service third party indebtedness that would be incurred in the financing of
the Offer, the Merger and the related transactions.

CERTAIN LITIGATION

On September 14, 1999, two putative class action lawsuits, one entitled
Patricia Lisa and Harbor Finance Partners v. Mark Hughes, et al., Case No. BC
216711, and the other entitled Stuart H. Savett v. Herbalife International,
Inc., et al., Case No. BC 216761, were filed in the Superior Court of the State
of California, County of Los Angeles, challenging the fairness of the proposed
transaction. Two similar lawsuits were later filed in the same court, one on
September 15, 1999, entitled Kenneth Schweitzer v. Herbalife International, Inc.
et al., Case No. BC 216823, and the other on September 16, 1999, entitled
Frances Longstreth v. Herbalife International, Inc., et al., Case No. BC 216911.
These lawsuits are referred to collectively herein as the "Lawsuits."

The Lawsuits challenge the fairness of the proposed transaction to the
Company's Public Stockholders, alleging, among other things, that the price to
be paid in the Offer and the Merger does not reflect the value of the Company's
assets, and that the Offer and the Merger are unfair because they will deprive
the Public Stockholders of the ability to share proportionately in the Company's
future growth in profits and earnings. The Lawsuits also allege that the Special
Committee was not independent, and that the Company's directors breached their
fiduciary duties to the Public Stockholders in approving the proposed
transactions. The plaintiffs have requested an injunction prohibiting the
defendants from proceeding with the proposed transactions, unspecified damages,
costs and attorneys' fees, and other relief.

The Company and Mr. Hughes believe that the Lawsuits are without merit and
plan to vigorously defend them and any other actions that may be brought in
connection with the proposed transactions. There can be no assurances, however,
with regard to the outcome of any such suits or to the impact that an adverse
result would have on the Company's and the Purchaser's ability to consummate the
Offer, the Merger and the related transactions.

The Company believes that additional lawsuits may have been filed but the
Company has not yet been served with such lawsuits.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES.

The following summary is a general discussion of certain of the expected
Federal income tax consequences of the Offer and the Merger. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), and
published regulations, rulings and judicial decisions in effect at the date of
this Offer to Purchase, all of which are subject to change. The summary does not
discuss all aspects of Federal income taxation that may be relevant to a
particular holder in light of his or her personal circumstances or to certain
types of holders subject to special treatment under the Federal income tax laws,
such as life insurance companies, financial institutions, tax-exempt
organizations and non-U.S. persons. In particular, the summary does not address
issues of taxation pertinent to the Continuing Stockholder or other members of
senior management of the Company. The following summary may not be applicable
with respect to Shares acquired through exercise of employee stock options or
otherwise as compensation or held as part of a straddle or hedging transaction.
It also does not discuss any aspects of state or local tax laws or of tax laws
of jurisdictions outside the United States of America.

THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR
GENERAL INFORMATION ONLY. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SALE OF THEIR SHARES, INCLUDING
THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE
CHANGES IN TAX LAWS.

Sales of Shares in response to the Offer and cancellation of Shares in the
Merger will be taxable transactions for Federal income tax purposes. For Federal
income tax purposes, a tendering stockholder or a stockholder whose Shares are
cancelled in the Merger will generally recognize gain or loss equal to the
difference between the amount of cash received by the stockholder upon sale or
cancellation of the Shares and
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the stockholder's tax basis in the Shares which are sold or cancelled. Under
present law, gain or loss will be calculated separately for each block of Shares
tendered and purchased pursuant to the Offer and cancelled pursuant to the
Merger.

If Shares are held by a tendering stockholder or by a stockholder whose
Shares are cancelled in the Merger as capital assets, gain or loss recognized by
the stockholder will be capital gain or loss, which will be long term or short
term depending on whether the stockholder's holding period for the Shares
exceeds one year. Long term capital gains recognized by a stockholder who is an
individual will generally be taxed at a maximum Federal marginal tax rate of
20%. Short term capital gains recognized by an individual will generally be
taxed at the individual's ordinary income tax rate. Capital gains recognized by
a corporate stockholder will be taxed at a maximum Federal marginal tax rate of
35%.

A stockholder (other than certain exempt stockholders, including all
corporations and certain foreign individuals) who tenders Shares or whose Shares
are cancelled in the Merger may be subject to 31% backup withholding unless the
stockholder provides its taxpayer identification number ("TIN") and certifies
that the TIN is correct or properly certifies that it is awaiting a TIN. This
should be done by completing and signing the substitute Form W-9 included as
part of the appropriate letter of transmittal. A stockholder that does not
furnish its TIN also may be subject to a penalty imposed by the IRS.

If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from each payment to that stockholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.

DESCRIPTION OF OWNERSHIP OF HERBALIFE BEFORE AND AFTER THE OFFER AND THE MERGER

Immediately after the Offer and the Merger, Mr. Hughes will own all of the
common equity of Herbalife through one or more entities he controls and
beneficially owns. In addition, senior executives of Herbalife will be granted
options to purchase Shares representing 16.5% of the fully diluted equity of
Herbalife. See "-- Interests of Certain Persons -- New Stock Option Plan."

Mr. Hughes, directly or indirectly, is the beneficial owner of 5,704,331
Class A Shares and 11,258,665 Class B Shares, excluding 183,333 Class A Shares
and 366,666 Class B Shares owned by the Herbalife Family Foundation (in which
Mr. Hughes has no pecuniary interest) and including 308,331 Class A Shares and
466,663 Class B Shares issuable upon exercise of stock options that are
exercisable within 60 days of September 1, 1999. The Class A Shares and the
Class B Shares beneficially owned by Mr. Hughes or entities controlled by him,
calculated in accordance with the SEC's Exchange Act Rule 13d-3, represented
55.4% of the total outstanding Class A Shares and 59.0% of the total outstanding
Class B Shares as of September 1, 1999.

THE TENDER OFFER

1. TERMS OF THE OFFER. On the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of the extension or amendment), the Purchaser will accept for payment and pay
for all Shares which are validly tendered prior to the Expiration Time and not
withdrawn in accordance with Section 4.

In the Merger Agreement, the Purchaser has agreed that it will not (a)
decrease the number of Shares it is offering to purchase; (b) reduce the Offer
Price; (c) modify or add to the conditions described in Section 5; (d) change
the form of consideration it is offering; (e) extend the Offer, except as
required or permitted by the Merger Agreement (which is described below); and
(f) amend, alter, add or waive any term of the Offer in any manner adverse to
the holders of the Shares.

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<PAGE> 29

If at any scheduled Expiration Time, all conditions to the Offer (described
in Section 5) have not been satisfied or waived, the Purchaser shall, at the
request of the Company, and the Purchaser may, without the consent of the
Company, extend the Offer.

The Purchaser reserves the right, at any time and from time to time (except
as limited by the Merger Agreement), to extend the period during which the Offer
is open, by giving oral or written notice of the extension to the Depositary and
by making a public announcement of it as described below. During any extension,
all Shares previously tendered and not withdrawn will remain tendered in
response to the Offer, subject to the rights of a tendering stockholder to
withdraw tendered Shares. See Section 4.

Subject to the Merger Agreement and the applicable regulations of the
Securities and Exchange Commission (the "SEC"), the Purchaser reserves the
right, at any time and from time to time, to: (i) delay acceptance for payment
of, or, regardless of whether Shares were already accepted for payment, payment
for, Shares pending receipt of any regulatory or third-party approval described
in Section 12 or in order to comply in whole or in part with any other
applicable law; (ii) terminate the Offer and not accept for payment any Shares
if any of the conditions described to in Section 5 have not been satisfied or
upon the occurrence of any of the events described in Section 5; or (iii) waive
any condition (except the Minimum Condition) or otherwise amend the Offer in any
respect, in each case, by giving oral or written notice of the delay,
termination, waiver or amendment to the Depositary and by making a public
announcement of it, as described below.

The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the tendered
Shares promptly after the termination or withdrawal of the Offer; and (ii) the
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the first sentence of the preceding paragraph), any
Shares upon the occurrence of any of the events described in Section 5 without
extending the period of time during which the Offer is open.

The Purchaser will make a public announcement of any extension, delay,
termination, waiver or amendment as promptly as practicable after it takes
place. In the case of an extension, the Purchaser will make a public
announcement no later than 9:00 a.m., New York City time, on the business day
after the day of the previously scheduled Expiration Time. Subject to applicable
law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which
require that material changes be promptly disseminated to stockholders in a
manner reasonably designed to inform them of the changes), the Purchaser will
have no obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a press release.

If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition to the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Consummation of the Offer
is conditioned upon satisfaction of the conditions set forth in Section 5. The
Purchaser reserves the right (but will not be obligated) to waive any or all of
those conditions (except the Minimum Condition).

If, prior to the Expiration Time, the Purchaser increases the Offer Price,
that increase will be applicable to all stockholders whose Shares are accepted
for payment, including stockholders who tender their Shares before the Purchaser
increases the Offer Price. If, at the time notice of an increase in the Offer
Price is first published or otherwise given to holders of Shares, the Offer is
scheduled to expire earlier than the tenth business day after (but including)
the day the notice is first published or otherwise given, the Offer will be
extended at least until the expiration of that ten-business-day period.

The Company has given the Purchaser a stockholder list and security
position listings for the purpose of enabling the Purchaser to disseminate the
Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list, or who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.

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<PAGE> 30

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. On the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of the extension or amendment), the Purchaser
will purchase, by accepting for payment, and will pay for, all Shares which are
validly tendered (and not properly withdrawn in accordance with Section 4) prior
to the Expiration Time. Shares will be accepted as soon as practicable after the
later to occur of (i) the Expiration Time, and (ii) the satisfaction or waiver
of the conditions set forth in Section 5. Any determination concerning the
satisfaction of the terms and conditions of the Offer will be in the reasonable
discretion of the Purchaser. See Section 5. The Purchaser expressly reserves the
right, in its sole discretion, to delay acceptance for payment of, or, subject
to the applicable SEC rules, payment for, Shares in order to comply in whole or
in part with any applicable law. See Section 12.

In all cases, payment for Shares which are tendered in response to the
Offer and accepted for payment will be made only after timely receipt by the
Depositary of (a) the certificate(s) representing the tendered Shares (the
"Share Certificates"), or timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of the Shares (if that procedure is available) into
the Depositary's account at The Depository Trust Company (the "Book-Entry
Transfer Facility"), as described in Section 3; (b) a properly completed and
duly executed Letter of Transmittal (or facsimile of one), or an Agent's Message
in connection with a book-entry transfer; and (c) any other documents required
by the Letter of Transmittal.

An "Agent's Message" is a message, transmitted by the Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from a participant in the Book-Entry Transfer
Facility which is tendering Shares that the participant has received, and agrees
to be bound by the terms of, the Letter of Transmittal and that the Purchaser
may enforce that agreement against the participant.

For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares when the Purchaser gives
oral or written notice to the Depositary of the Purchaser's acceptance of the
Shares for payment. Payment for Shares which are accepted will be made by
deposit of the aggregate purchase price for all the Shares which are accepted
for payment with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL
THE PURCHASER PAY INTEREST ON THE OFFER PRICE BY REASON OF ANY DELAY IN PAYING
FOR SHARES. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, the Purchaser's obligation to pay for
Shares will be satisfied and tendering stockholders must look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance of
their Shares pursuant to the Offer. If, for any reason, acceptance for payment
of or payment for any Shares tendered in response to the Offer is delayed, or
the Purchaser is prevented from accepting for payment or paying for Shares which
are tendered in response to the Offer, the Depositary may, nevertheless, retain
tendered Shares on behalf of the Purchaser and those Shares may not be
withdrawn, except to the extent the tendering stockholder exercises withdrawal
rights as described in Section 4. The Purchaser will pay any stock transfer
taxes incident to the transfer to it of validly tendered Shares, except as
otherwise provided in Instruction 6 of the Letter of Transmittal, as well as the
charges and expenses of the Depositary and the Information Agent.

If any tendered Shares are not accepted for payment for any reason, or if
certificates which are submitted evidence more Shares than are tendered,
certificates representing unpurchased or untendered Shares will be returned or
sent, without expense to the tendering stockholder (or, in the case of Shares
tendered by book-entry transfer into the Depositary's account at the Book-Entry
Transfer Facility, Shares which are not purchased will be credited to an account
at that Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.

Subject to the terms of the Merger Agreement, the Purchaser reserves the
right to transfer or assign, in whole, or in part from time to time, to one or
more of its affiliates the right to purchase all or any portion of the Shares
which are tendered in response to the Offer, but such a transfer or assignment
will not relieve the

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<PAGE> 31

Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares which are validly
tendered in response to the Offer and accepted for payment.

3. PROCEDURES FOR TENDERING SHARES.

Valid Tender of Shares. Except as set forth below, in order for Shares to
be validly tendered in response to the Offer, (a) a Letter of Transmittal or a
facsimile of one, properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Time; and (b) either (i) the certificates
representing the tendered Shares must be received by the Depositary along with
the Letter of Transmittal; (ii) the Shares must be tendered using the procedure
for book-entry transfer described below, and the Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Time; or (iii) the tendering
stockholder must comply with the guaranteed delivery procedures described below.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL,
AND OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. ITEMS WILL BE
DEEMED DELIVERED ONLY WHEN THEY ARE ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer the Shares into the Depositary's
account at the Book-Entry Transfer Facility. Although delivery of Shares may be
effected through book-entry transfer at the Book-Entry Transfer Facility, a
Letter of Transmittal or a facsimile of one, with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other required documents, as well as the Book Entry Confirmation
relating to the Shares, must be transmitted to and received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Time or the guaranteed delivery procedures described below
must be followed.

REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT
ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY OR TO THE PURCHASER
DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Signature Guarantees. Signatures on Letters of Transmittal need not be
guaranteed, unless, in the case of the Letter of Transmittal, the Shares to
which they relate are being tendered by a registered holder of Shares who has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the Letter of Transmittal. Signatures
on Letters of Transmittal on which either of those boxes has been completed must
be guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each an "Eligible Institution"). See
Instruction 1 of the Letter of Transmittal.

If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or
certificates representing Shares which are not tendered or are not accepted for
payment are to be returned, to a person other than the registered holder(s),
then the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear on the Share Certificate, with the signature(s) on the Share
Certificate or stock powers guaranteed. See Instructions 1 and 5 of the Letter
of Transmittal.

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<PAGE> 32

If Share Certificates are delivered to the Depositary at different times, a
properly completed and duly executed Letter of Transmittal (or facsimile of one)
must accompany each delivery.

Guaranteed Delivery. If a stockholder wishes to tender Shares in response
to the Offer but the Share Certificates are not immediately available or time
will not permit all required documents to reach the Depositary prior to the
Expiration Time, or the procedure for book-entry transfer cannot be completed on
a timely basis, the Shares may nevertheless be tendered as follows:

(i) the tender must be made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided with this Offer to Purchase,
must be received by the Depositary before the Expiration Time; and

(iii) the Share Certificates representing all tendered Shares, in
proper form for transfer, or the Book-Entry Confirmation, together with a
properly completed and duly executed Letter of Transmittal (or facsimile of
one), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal must be received by the Depositary within
three Nasdaq National Market trading days after the date of execution of
the Notice of Guaranteed Delivery.

A Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary, but must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery distributed with this Offer to Purchase.

Payment for Shares which are accepted for payment will be made only after
(i) timely receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, the Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile of one), together with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Accordingly, it is possible that payment will not be made to all tendering
stockholders at the same time.

Backup United States Federal Withholding Tax. Under the United States
Federal income tax laws, the Depositary may be required to withhold 31% of the
amount of any payments made to certain stockholders. To prevent backup Federal
income tax withholding, each tendering stockholder must provide the Depositary
with the stockholder's correct taxpayer identification number, or certify that
the stockholder is exempt from backup Federal income tax withholding, by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Instruction 10 of the Letter of Transmittal.

Appointment as Proxy. By executing a Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser as the tendering
stockholder's attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by the Purchaser (and with respect to any
other securities issued in respect of those Shares on or after the date of this
Offer to Purchase). That proxy is considered coupled with an interest in the
tendered Shares. This appointment will be effective if, when and to the extent
that the Purchaser accepts the tendered Shares for payment pursuant to the
Offer. When tendered Shares are accepted for payment, all prior proxies given by
the stockholder with respect to the tendered Shares and any other securities
issued in respect of them will, without further action, be revoked, and no
subsequent proxies may be given. The designees of the Purchaser will, with
respect to the tendered Shares and any other securities for which the
appointment is effective, be empowered to exercise all voting and other rights
of the tendering stockholder as they, in their sole discretion, deem proper at
any annual, special, adjourned or postponed meeting of the Company's
stockholders, and the Purchaser reserves the right to require that in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Shares, the Purchaser will be able to
exercise full voting rights with respect to the Shares.

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<PAGE> 33

Proxies are effective only as to Shares accepted for payment pursuant to
the Offer. The Offer does not constitute a solicitation of proxies, absent a
purchase of Shares, for any meeting of the Company's stockholders. Any
solicitation of proxies will be made only pursuant to separate proxy soliciting
materials complying with the Exchange Act.

Determinations Regarding Tenders. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any Shares
using any of the procedures described above will be determined by the Purchaser,
in its sole discretion, and the Purchaser's determination will be final and
binding on all parties. The Purchaser reserves the absolute right to reject any
or all tenders of Shares which it determines were not in proper form or if the
acceptance for payment of, or payment for, the Shares may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right, in its sole discretion, to waive any of the conditions of the Offer or
any defect or irregularity in any tender with respect to Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.

The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions to it) will be final
and binding. None of the Purchaser, the Depositary, the Information Agent, the
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in tenders or will incur any liability for
failure to give any such notification.

Binding Agreement. The Purchaser's acceptance for payment of Shares
tendered in response to the Offer will constitute a binding agreement by the
tendering stockholder to sell, and by the Purchaser to purchase, the tendered
Shares on the terms and subject to the conditions of the Offer.

4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made in response to the Offer are irrevocable. Shares tendered
in response to the Offer may be withdrawn at any time prior to the Expiration
Time and, unless they have been accepted for payment by the Purchaser, may also
be withdrawn at any time after November 15, 1999.

If the Purchaser extends the Offer, is delayed in its acceptance of Shares
for payment or is unable to accept Shares for payment for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, retain tendered Shares on behalf of the Purchaser, and those
Shares may not be withdrawn except to the extent that tendering stockholders are
entitled to withdraw them as described in this Section 4. Any such delay will be
accompanied by an extension of the Offer to the extent required by law.

For a withdrawal to be effective, a written or facsimile transmission of a
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. A notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and (if Share Certificates have
been tendered) the name of the registered holder, if different from that of the
person who tendered the Shares. If Share Certificates evidencing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the release of those Share Certificates, the serial numbers shown on
the particular Share Certificates to be withdrawn must be submitted to the
Depositary, and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless the Shares have been tendered for the account
of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must also specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares. Withdrawals of Shares may not be rescinded.
After Shares are properly withdrawn, they will be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered at any time prior to the Expiration Time using one of the procedures
described in Section 3.

All questions as to the form and validity (including, without limitation,
time of receipt) of notices of withdrawal will be determined by the Purchaser,
in its sole discretion, and its determination will be final and binding. None of
the Purchaser, the Depositary, the Information Agent, the Dealer Manager or any
other

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<PAGE> 34

person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification.

5. CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer unless the Minimum Condition is met prior to the
Expiration Date or such later date as the Offer may be extended as provided in
Section 1.1(a) of the Merger Agreement or by an amendment to the Merger
Agreement. Furthermore, notwithstanding any other term of the Offer, Purchaser
shall not be required to accept for payment or, subject as aforesaid, to pay for
any Shares not theretofore accepted for payment or paid for, and may terminate
the Offer, subject to the terms and conditions of the Merger Agreement and
Purchaser's obligation to extend the Offer pursuant to the Merger Agreement, if,
at any time on or after the date of the Merger Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists (capitalized terms below not previously defined
having the meanings provided for in the Merger Agreement):

(a) any material Governmental Approvals required to be obtained or any
material filings, notices or declarations with or to Governmental
Authorities required to be made by the parties or their Subsidiaries,
officers, directors and affiliates in order to consummate the Offer, shall
fail to have been obtained or made, or if obtained or made, any such
approval does or would contain any conditions, limitations or restrictions
that have or would reasonably be expected to have a Company Material
Adverse Effect or Parent Material Adverse Effect;

(b) a Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other
order which is in effect and has the effect of making the acquisition of
Shares by Purchaser, the Offer, the Merger or the other transactions
contemplated by the Merger Agreement illegal or prohibits or imposes
material limitations on the ability of Purchaser to consummate the Offer,
the Merger or the acquisition of the Shares or otherwise prohibits(directly
or indirectly) consummation of the transactions contemplated by the Merger
Agreement or prohibits or imposes material limitations on the ability of
Parent to own or operate all or a material portion of the Company's and its
subsidiaries' businesses or assets, taken as a whole;

(c) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct, or any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case at the date of the Merger Agreement and at the scheduled or extended
expiration of the Offer (unless a representation speaks as of an earlier
date, in which case if any such representation is not true and correct as
of such earlier date), which breaches have not been cured within 10
business days after the giving of written notice to the Company;

(d) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Merger Agreement, which breaches have not been cured within 10 business
days after the giving of written notice to the Company; or

(e) the Merger Agreement shall have been terminated in accordance with
its terms;

(f) Parent, Purchaser and/or one or more of their respective
subsidiaries shall not have obtained the Debt Financing (as defined in
Section 10), on terms and conditions satisfactory in form and substance to
Parent and Purchaser in their sole reasonable discretion (including the
availability of funds for the loans described in "Special
Factors -- Interests of Certain Persons", which loans shall be permitted to
be made immediately after the Effective Time) in amounts that, together
with cash and cash equivalents of the Company as of the Effective Date, is
sufficient to satisfy the Uses of Funds (as defined in the Merger
Agreement) (the "Financing Condition");

32
<PAGE> 35

(g) the number of Shares as to which the holders thereof have properly
exercised, or reasonably appear to have properly exercised, dissenters'
rights, if any, with respect to the Merger exceed three percent (3%) of the
total number of Shares outstanding as of the date of the Merger Agreement,

which, in the reasonable judgment of Parent or Purchaser in any such case, and
regardless of the circumstances (including any action or omission by Parent or
Purchaser) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payments therefor.

The foregoing conditions in paragraphs (a) through (g) are for the sole
benefit of Purchaser and Parent and may, subject to the terms of the Merger
Agreement and except for the Minimum Condition, be waived by Purchaser and
Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.

6. PRICE RANGE OF SHARES. The Class A Shares and Class B Shares are
traded on the Nasdaq National Market under the symbols "HERBA" and "HERBB,"
respectively. The following table sets forth the high and low sales prices for
each quarterly period since the fourth quarter of 1997, and for the current
fiscal year to date, of the Class A Shares and Class B Shares. The sales prices
in the table were taken from a written summary provided to Herbalife by NASDAQ.
Prices reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
HIGH LOW HIGH LOW
----- ---- ----- ----
<S> <C> <C> <C> <C>
1997:
Fourth quarter commencing December 15, 1997*........ $24 $20 1/2 $23 $20
1998:
First quarter....................................... 28 5/8 19 7/16 27 1/4 17 3/4
Second quarter...................................... 29 21 1/2 26 7/8 19 1/8
Third quarter....................................... 28 1/2 8 7/8 23 7/8 6 5/8
Fourth quarter...................................... 15 3/16 7 1/2 12 1/8 6
1999:
First quarter....................................... 16 1/4 10 7/8 13 8 29/32
Second quarter...................................... 12 1/8 10 9 3/4 8 5/16
Third quarter (through September 16, 1999).......... 16 10 1/16 15 5/8 8 3/8
</TABLE>

- ---------------
* Herbalife's recapitalization into a dual class capital structure became
effective December 12, 1997. Beginning December 15, 1997, Herbalife's public
equity commenced trading as the Class A Shares and the Class B Shares. Prior
to December 15, 1997, Herbalife's shares traded under the symbol "HERB" on the
Nasdaq National Market System. During the fourth quarter of 1997 prior to
December 15, the high sales price of Herbalife's old common stock was $27 7/8
per share and the low sales price was $19 1/4 per share. During the third
quarter of 1997, the high sales price of Herbalife's old common stock was
$26 1/4 per share and the low sales price was $14 7/8 per share.

On September 13, 1999, the last trading day prior to announcement of the
execution of the Merger Agreement, the closing price per Share of the Class A
Shares and the Class B Shares, respectively, as reported by the Nasdaq National
Market System was $12 and 9 5/32. On that day, the high and low bid quotations
per Share of Class A Shares and Class B Shares as reported by the Nasdaq
National Market were $12 6/32 and $11 3/4, and $9 1/4 and $9 1/16, respectively.
On September 16, 1999, the last full day of trading prior to the commencement of
the Offer, the closing price per share of the Class A Shares and the Class B
Shares, respectively, as reported by the Nasdaq National Market was $14 13/16
and $14 3/8, respectively.

STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.

33
<PAGE> 36

7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or is based upon publicly available documents
and records on file with the Securities and Exchange Commission and other public
sources. Neither the Purchaser nor Parent assumes any responsibility for the
accuracy or completeness of the information concerning the Company contained in
those documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of that
information of which neither the Purchaser nor Parent is aware.

Herbalife sells a wide range of weight management products, food and
dietary supplements and personal care products worldwide. As of June 30, 1999,
Herbalife conducted business in 44 countries located in Asia/ Pacific Rim,
Europe and the Americas and operated through 40 domestic and foreign
subsidiaries. Herbalife products are marketed exclusively through a network
marketing system. This system enables Herbalife's independent distributors to
earn profits by selling Herbalife products to retail consumers or other
distributors. Distributors may also develop their own distributor downline
organizations by sponsoring other distributors to do business in any market
where Herbalife operates, entitling the sponsors to receive cash incentives
(including royalty overrides and bonuses) on product sales within their downline
organizations. Herbalife is the issuer of the stock which is subject to the Rule
13e-3 transaction.

Herbalife 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, Herbalife's business
was transferred from the California limited partnership to its corporate general
partner, Herbalife International of America, Inc. In November 1986, Herbalife
International of America, Inc. was acquired in a stock-for-stock reorganization
by Sage Court Ventures, Inc. As a result of the acquisition, Herbalife
International of America, Inc. became a wholly owned subsidiary of Sage Court
and the former stockholders of Herbalife International of America, Inc. acquired
a controlling interest in Sage Court. Sage Court's name was formally changed to
Herbalife International, Inc. in December 1986.

For additional information concerning the Company's financial projections,
see "Special Factors -- Certain Financial Projections."

The following selected consolidated financial data relating to the Company
and its subsidiaries has been taken or derived from the audited financial
statements contained in the Company 10-K and the unaudited financial statements
contained in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1999 (the "Company 10-Q"). More comprehensive financial
information is included in the Company 10-K and the Company 10-Q and the other
documents filed by the Company with the SEC, and the financial data set forth
below is qualified in its entirety by reference to those reports and other
documents. They may be examined and copies may be obtained from the SEC's
offices in the manner set forth below.

34
<PAGE> 37

HERBALIFE INTERNATIONAL, INC.

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Retail sales......................... $884,058 $923,644 $1,200,144 $1,490,693 $1,644,837 $796,589 $854,563
Less -- Distributor allowances on
product purchases.................. 417,177 434,640 568,209 708,241 778,195 376,869 401,774
-------- -------- ---------- ---------- ---------- -------- --------
Net sales............................ 466,881 489,004 631,935 782,452 866,642 419,720 452,789
Cost of sales........................ 130,707 143,557 168,432 205,070 230,818 108,146 116,116
Royalty overrides.................... 125,820 138,940 184,669 233,883 250,905 122,676 134,940
-------- -------- ---------- ---------- ---------- -------- --------
Gross profit......................... 210,354 206,507 278,834 343,499 384,919 188,898 201,733
Marketing, distribution and
administrative expenses............ 139,629 176,046 210,087 257,514 306,589 140,645 163,011
Restructuring expense................ -- 2,300 -- -- -- -- --
Interest income -- net............... 2,919 3,404 4,084 4,535 2,533 1,675 837
-------- -------- ---------- ---------- ---------- -------- --------
Income before income taxes and
minority interest.................. 73,644 31,565 72,831 90,520 80,863 49,928 39,559
Income taxes......................... 27,616 11,837 28,040 34,850 31,132 19,222 15,230
Minority interest.................... -- -- -- 1,003 1,233 590 424
-------- -------- ---------- ---------- ---------- -------- --------
Net income........................... $ 46,028 $ 19,728 $ 44,791 $ 54,667 $ 48,498 $ 30,116 $ 23,905
======== ======== ========== ========== ========== ======== ========
Earnings per share:
Basic.............................. $ 1.54 $ 0.66 $ 1.50 $ 1.81 $ 1.68 $ 1.03 $ 0.84
Diluted............................ $ 1.50 $ 0.65 $ 1.43 $ 1.72 $ 1.60 $ 0.99 $ 0.79
Cash dividends per common share...... $ 0.80 $ 0.74 $ 0.60 $ 0.60 $ 0.60 $ 0.30 $ 0.30
Weighted average shares used in the
calculation of net income per share
Basic.............................. 29,864 29,904 29,803 30,193 28,897 29,110 28,586
Diluted............................ 30,768 30,313 31,379 31,803 30,342 30,565 30,301
BALANCE SHEET AND OTHER DATA:
Working capital...................... $ 89,825 $ 85,126 $ 109,662 $ 125,986 $ 120,623 $118,983 $127,056
Total assets......................... 174,057 207,690 269,114 314,580 348,183 309,239 356,541
Total debt(b)........................ 1,490 2,964 4,799 4,115 4,996 3,866 5,122
Stockholders' equity................. 109,815 109,530 138,468 154,733 163,811 152,553 175,416
Book value per share................. 3.68 3.66 4.65 5.12 5.67 5.24 6.14
Ratio of earnings to fixed
charges(a)......................... 44.2x 14.3x 19.3x 16.8x 10.6x 14.9x 10.6x
</TABLE>

- ---------------
(a) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges. Fixed
charges consist of interest expense, and a portion of operating lease rental
expense deemed to be representative of the interest factor.

(b) Total debt includes long-term debt and the current portion of long-term
debt.

The Company is subject to the informational and reporting requirements of
the Exchange Act and is required to file reports and other information with the
SEC relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of those persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
SEC. These reports, proxy statements and other information can be inspected and
copied at the public reference facilities of the SEC located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the SEC: Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of this material may be obtained by mail, upon payment of the
SEC's customary fees, from the SEC's principal office at 450 Fifth Street, N.W.,
Washington,

35
<PAGE> 38

D.C. 20549. The SEC also maintains an Internet site on the world wide web at
http://www.sec.gov that contains reports, proxy statements and other
information. Reports, proxy statements and other information concerning the
Company should also be available for inspection at the offices of Nasdaq, 1735 K
Street, N.W., Washington, D.C. 20006. All of the information with respect to the
Company and its affiliates set forth in this Offer to Purchase has been derived
from publicly available information.

8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT.

The Purchaser is a Nevada corporation, and the Parent is a Delaware limited
liability company, organized in order to enter into the transactions which are
the subject of the Merger Agreement (including the Offer and the Merger). The
principal executive offices of the Purchaser and the Parent are located at c/o
Herbalife International, Inc., 1800 Century Park East, Los Angeles, California
90067. The Purchaser is wholly owned by the Parent. Neither the Purchaser nor
the Parent have any significant assets or liabilities and neither entity has
engaged in activities other than those incidental to its formation and
capitalization, its execution of the Merger Agreement and preparation for the
Offer and the Merger because both the Purchaser and the Parent are newly formed
and have minimal assets and capitalization, no meaningful financial information
regarding them is available.

During the last five years none of the Purchaser's or Parent's officers,
directors or general partners was (1) convicted in a criminal proceeding; or (2)
party to a civil proceeding of a judicial or administrative body and as a result
of the proceeding was or is subject to a judgment enjoining future violations of
or prohibiting activities subject to, Federal or state securities laws or
finding any violation of such laws.

Neither Purchaser nor Parent is subject to the informational and reporting
requirements of the Exchange Act and neither Purchaser nor Parent is required to
file reports and other information with the Commission relating to its
businesses, financial condition or other matters.

The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I.

Except as set forth in this Offer to Purchase, none of the Purchaser,
Parent or, to the best of their knowledge, any of the persons listed on Schedule
I or any associate or majority owned subsidiary of any of those persons
beneficially owns any equity security of the Company, and none of the Purchaser,
the Parent or, to the best of their knowledge, any of the other persons referred
to above, or any of their respective directors, executive officers or
subsidiaries, has effected any transaction in any equity security of the Company
during the past 60 days.

Except as described in this Offer to Purchase, none of the Purchaser,
Parent or, to the best of their knowledge, any of the persons listed on Schedule
I has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, without
limitation, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any securities of the Company, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies. Except as described in
this Offer to Purchase, none of the Purchaser, Parent or, to the best of their
knowledge, any of the persons listed on Schedule I has had any transactions with
the Company or any of its executive officers, directors or affiliates that would
require reporting under the rules of the SEC.

Except as described in this Offer to Purchase, since January 1, 1996, there
have been no contacts, negotiations or transactions between the Parent or the
Purchaser, or their respective subsidiaries, or, to the best of their knowledge,
any of the persons listed in Schedule I, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets.

9. FINANCING OF THE OFFER AND THE MERGER. Approximately $500 million will
be required to finance the Offer, the Merger and the loans to the
Hughes-controlled entities and to pay related expenses and fees. Approximately
$440 million of this amount will be financed through third party indebtedness,
and the balance
36
<PAGE> 39

of approximately $60 million will be funded from cash on Herbalife's balance
sheet. The third party indebtedness is expected to be financed with a
combination of borrowings by Herbalife under a new senior credit facility with a
syndicate of major commercial banks and the issuance by Herbalife of new
subordinated debentures to qualified institutional buyers in a Rule 144A
offering. The 144A offering would provide customary registration rights in a
registered exchange offer after such 144A offering. It is expected that the
senior credit facility will consist of one or more term loans and a revolving
credit facility, and that it will be secured by substantially all of Herbalife's
assets. The subordinated debentures will be unsecured and are expected to have a
term of seven years. The other terms and conditions of these sources of
financing are expected to be those customary for similar debt financing
transactions. Herbalife's financial advisor, Donaldson, Lufkin & Jenrette, has
advised it that, subject to certain conditions, it is highly confident that such
financing in the aggregate amount described above could be arranged. Herbalife
currently expects to borrow the required funds at interest rates prevailing for
similar transactions at the time of the completion of the Offer and the Merger.
Herbalife may, however, revise the allocation between these two sources of
credit in light of market and business conditions at the time of borrowing. The
Merger Agreement provides for a financing condition. Therefore, notwithstanding
Donaldson, Lufkin & Jenrette's expression of confidence, it is possible that the
financing required to consummate the Offer and the Merger will not be available.
In that case, none of Mr. Hughes, Purchaser or Parent would have an obligation
to complete the Offer or the Merger. Herbalife intends to repay the indebtedness
principally through corporate earnings. It may also refinance portions of the
indebtedness in the future.

10. THE MERGER AGREEMENT.

The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable, but in no event later than five business days after
the initial public announcement of the execution of the Merger Agreement.

The Merger Agreement provides that the obligation of Parent to, and of
Parent to cause Purchaser to, consummate the Offer and accept for payment, and
pay for, any Shares tendered and not withdrawn pursuant to the Offer is subject
only to the conditions set forth above in Section 5 (the "Offer Conditions")
(any of which may be waived in whole or in part by Purchaser in its sole
discretion; provided, however, that Purchaser may not waive the Minimum
Condition (as defined above in Section 5) without the prior written consent of
the Company). Purchaser expressly reserved in the Merger Agreement the right,
subject to compliance with the Exchange Act, to modify the terms of the Offer,
except that, without the express written consent of the Company, neither Parent
nor Purchaser may (i) reduce the number of Shares subject to the Offer; (ii)
reduce the Offer Price; (iii) add to or modify the Offer Conditions; (iv) except
as provided in the next paragraph, change the Expiration Time of the Offer; (v)
change the form of consideration payable in the Offer; or (vi) amend, alter, add
or waive any term of the Offer in any manner adverse to the holders of the
Shares.

Notwithstanding the foregoing, if on any scheduled Expiration Time of the
Offer, which shall initially be 20 business days after the commencement date of
the Offer, all Offer Conditions have not been satisfied or waived, the Merger
Agreement provides that Purchaser may, without the consent of the Company, and
at the request of the Company shall, from time to time, extend the Expiration
Time of the Offer, and Purchaser may, without the consent of the Company, extend
the Offer for any period required by any rule, regulation, interpretation or
position of the SEC or the SEC staff applicable to the Offer. The Merger
Agreement provides that subject only to the conditions set forth above in
Section 5, Purchaser shall, and Parent shall cause Purchaser to, as soon as
practicable after the expiration of the Offer, accept for payment, and pay for,
all Shares validly tendered and not withdrawn that Purchaser becomes obligated
to accept for payment pursuant to the Offer.

The Merger. The Merger Agreement provides that upon the terms and subject
to the conditions set forth in such agreement, and pursuant to Section 92A.250
of the Nevada Revised Statutes (the "NRS"), at the Effective Time (as defined
below) (i) Purchaser shall be merged with and into the Company and the separate
existence of Purchaser shall cease; (ii) the Company shall continue as the
Surviving Corporation (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Nevada; and (iii) the separate corporate
existence of the Company shall continue unaffected by the Merger.

37
<PAGE> 40

The Continuing Stockholder currently owns a sufficient number of Shares to
approve the Merger without the vote of any other stockholders, and has already
given its written consent to the Merger. Prior to consummation of the Merger,
the Company shall disseminate to its stockholders a Schedule 14C Information
Statement describing the Merger.

Subject to the provisions of the Merger Agreement, as soon as practicable
on or after the satisfaction or waiver of the conditions set forth in
"Conditions to the Merger" (the "Merger Conditions"), the parties shall file and
execute articles of merger (the "Articles of Merger") with the Secretary of
State of the State of Nevada, in such form as required by and executed in
accordance with the relevant provisions of the NRS, and shall make all other
filings or recordings required under the NRS and other applicable law. The
Merger shall become effective at the time and on the date which the Articles of
Merger are duly filed with the Secretary of State of the State of Nevada or at
such later time as the parties shall agree and specified in the Articles of
Merger (the "Effective Time"). The Merger Agreement further provides that
notwithstanding anything contrary therein, in the event that Purchaser shall
acquire 90% of both classes of the issued and outstanding Shares, including
Shares accepted for purchase pursuant to the Offer, then the parties will, at
the request of Parent or Purchaser, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without approval of the Company's stockholders, in accordance with
Section 92A.180 of the NRS.

The Merger Agreement provides that the directors and officers of Purchaser
at the Effective Time will be the initial directors and officers, respectively,
of the Surviving Corporation until their successors shall have been duly elected
or appointed. The Merger Agreement also provides that (i) the articles of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation, until
amended in accordance with such articles and the NRS; and (ii) the bylaws of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation until amended as provided by law, its
articles of incorporation and bylaws.

Conversion of Capital Stock. The Merger Agreement provides that as of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Shares or any shares of capital stock of Purchaser:

(i) Each issued and outstanding share of capital stock of Purchaser
shall be converted into and become one fully paid and nonassessable Class A
Share, par value $.01 per Share, of the Surviving Corporation;

(ii) Each Share that is owned by the Company and each Share that is
owned by Purchaser or Purchaser shall automatically be canceled and retired
and shall cease to exist and no consideration shall be delivered in
exchange therefor;

(iii) Each issued and outstanding Class A Share that is owned by one
or more limited liability companies owned by Mr. Hughes and which hold a
portion of Mr. Hughes's Shares (collectively, "Debtor LLC") shall become
one fully paid and nonassessable Class B Share of the Surviving
Corporation, and each issued and outstanding Class B Share that is owned by
Debtor LLC shall remain outstanding; and

(iv) Subject to the rights of stockholders ("Dissenting Stockholders")
who properly exercise their right of appraisal under the NRS in regard to
their Shares ("Dissenting Shares"), each issued and outstanding Share
(other than Shares to be canceled or to remain outstanding in accordance
with clause (ii) above, and other than Dissenting Shares) shall be
converted into the right to receive in cash, without interest, $17.00 per
Share (the "Merger Consideration"). The Merger Agreement provides that as
of the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall cease to
have any rights with respect thereto, except the right to receive the
Merger Consideration upon surrender of such certificate, without interest.

Stock Options. The Merger Agreement provides that at the Effective Time,
each issued and outstanding warrant, option and other right to acquire Company
Securities (an "Option"), but excluding all such Options
38
<PAGE> 41

held by the Continuing Stockholder, if not already vested, will become vested
and shall terminate. Each holder of any such Option will receive an amount in
cash equal to the product of (i) the number of Shares subject to such Option
immediately prior to the Effective Time; and (ii) the excess (if any) of the per
Share Merger Consideration over the per Share exercise price of such Option,
multiplied by the number of Shares for which such Option is exercisable
immediately prior to the Effective Time. All Options held by the Continuing
Stockholder shall be cancelled without the right to receive consideration of any
kind for such Options.

Representation and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including the
following representations by the Company: organization and qualification of
company and its significant subsidiaries, capital structure, power and
authorities, recommendations of the Board of Directors, anti-takeover
provisions, consents and approvals, no violations, supplied information and
brokers and finders, and the following representation and warranties of Parent
and Purchaser: organization, authority, consents and approvals, no violations,
supplied information, interim operations of Purchaser, capitalization, solvency,
and brokers and finders.

The Parent and the Purchaser also represent and warrant that the Company
has received written assurances from Donaldson, Lufkin & Jenrette, dated
September 13, 1999 relating to such firm's confidence that financing for the
Offer, the Merger and related transactions as described in the Merger Agreement
(the "Debt Financing") could be arranged, and that the Continuing Stockholder
has issued the Equity Commitment, true and complete copies of which have been
provided to the Special Committee and the Board of Directors. Funds from the
Debt Financing, together with Company cash and cash equivalents would be
sufficient to fund: (i) the Offer; (ii) the Merger Consideration for all Shares
subject to conversion in accordance with the Merger Agreement; (iii) the other
transactions contemplated by the Merger Agreement (including, without
limitation, the cancellation of all outstanding warrants, options and other
rights to acquire Company securities for their spread value, and the loans
described in "Special Factors -- Interests of Certain Persons"; (iv) all fees
and expenses of the Company, Parent and Purchaser incurred in connection with
the transactions contemplated by the Merger Agreement; and (v) the working
capital needs of the Company following the Merger, including, without
limitation, if applicable, letters of credit (collectively, the funds required
for the matters specified in clauses (i)-(v) are referred to as the "Uses of
Funds"). None of the representations and warranties of the Company, Parent or
Purchaser will survive the Effective Time.

Pursuant to the Equity Commitment, the Continuing Stockholder has agreed
not to tender in response to the Offer any of the Shares of the Company
beneficially owned by the Continuing Stockholder and to ensure none of the
Shares beneficially owned by the Continuing Stockholder will be cancelled for
cash in the Merger.

Payment of Dividends. Under the Merger Agreement, the Company has
covenanted and agreed that, prior to the Effective Time, the Company will
continue to declare and pay its regular quarterly cash dividend on the Shares in
accordance with prior practice. In addition, the Company will declare two
additional special dividends. A special dividend shall be paid to holders of
record on the close of business on the date the Offer is consummated, in an
amount equal to the Company's most recent quarterly dividend rate, pro rated for
the period consisting of the number of days elapsed since the last regular
quarterly dividend record date through and including the date of the
consummation of the Offer. In addition, a second special dividend shall be paid
to holders of record on the close of business on the last business day prior to
the Effective Time, in an amount equal to the Company's most recent quarterly
dividend rate, pro rated for the period consisting of the number of days elapsed
since the last regular or special dividend record date (including the first
special dividend record date) through and including the Effective Time.

No Solicitation. The Merger Agreement provides that the Company, its
subsidiaries and their affiliates will not, and the Company, its subsidiaries
and their affiliates will use their reasonable efforts to ensure that their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other representatives and agents do not, directly or indirectly,
initiate, solicit, encourage or participate in negotiations or discussions
relating to, or provide any information to any natural person, corporation,
partnership, limited liability company or entity (each, a "Person") concerning,
or take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal (as
defined below) relating to the Company, its subsidiaries or any affiliate, or
any inquiry with respect thereto, or agree to

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<PAGE> 42

approve or recommend any Acquisition Proposal; provided, however, that prior to
the Effective Time, the Special Committee may take such action if in the opinion
of the Special Committee after consultation with its counsel, the failure to
take any of the foregoing actions would be inconsistent with the fiduciary
duties of the Special Committee to the stockholders (other than the Continuing
Stockholder) under applicable law. Furthermore, if taking any such action
involves, directly or indirectly, providing access and/or furnishing information
concerning the Company's business, properties or assets to any Person, the
access and/or information shall be provided only pursuant to any appropriate
confidentiality agreement.

The Merger Agreement also provides that the Company (acting through the
Special Committee) shall promptly notify Parent of any such offers, proposals or
Acquisition Proposals (including, without limitation, the terms and conditions
and the identity of the Person making such offer or proposal), and will keep
Parent apprised of all developments with respect to any such Acquisition
Proposal, including without limitation, any modifications thereof. In addition,
the Merger Agreement provides that no provision of the Merger Agreement will
prohibit the Company or the Special Committee from: (i) taking and disclosing to
the Company's stockholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act; or
(ii) making such disclosure to the Company's stockholders which, in the opinion
of the Special Committee, after consultation with its counsel, may be required
under applicable law.

As used in the Merger Agreement, "Acquisition Proposal" means any tender or
exchange offer involving the Company or its securities, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company, any proposal or
offer with respect to any recapitalization or restructuring with respect to the
Company or any proposal or offer with respect to any other transaction similar
to any of the foregoing with respect to the Company. For purposes of the Merger
Agreement, the term "Acquisition Proposal" shall not apply to any transaction
involving Parent, Purchaser or their respective affiliates.

Cooperation With Financing. The Merger Agreement provides that Parent,
Purchaser and Mr. Hughes shall use commercially reasonable best efforts to
obtain the Debt Financing for the Offer and the Merger. The Company agrees to
provide, and use commercially reasonable efforts to cause its subsidiaries, its
officers and employees, representatives and advisors, to provide all necessary
cooperation reasonably requested by Parent, Purchaser and Mr. Hughes in
connection with such financing, including causing its appropriate officers and
employees to be available on a customary basis for "road show" appearances, the
preparation of disclosure documents in connection therewith, and causing its
independent accountants and counsel to provide assistance to Parent, Purchaser
and Mr. Hughes as reasonably required in connection with such financing. The
Merger Agreement also provides that the Company's obligations shall not include
any obligation to obtain any extraordinary waivers, consents or approvals to
loan agreements, leases or other contracts or to agree to an adverse
modification thereof, to prepay or incur additional obligations to any other
parties or to incur or become liable for any other costs or expenses. In
addition, under the terms of the Merger Agreement, Parent and Purchaser are
obligated to keep the Company informed of the status of their arrangements for
the financing, including providing prompt written notification to the Company
with respect to certain material adverse developments relating to the
contemplated financing. In the event Parent and Purchaser are unable to arrange
any portion of the Debt Financing, Parent and Purchaser shall use commercially
reasonable best efforts (but without any requirement to expend additional funds
or modify in a manner adverse to Parent, Purchaser of Mr. Hughes any of the
terms of the Offer, the Merger or the other transactions contemplated by the
Merger Agreement) to arrange any such portion from alternative sources on
substantially the same terms and conditions as such portion of the financing.
The Merger Agreement further provides that the Company is not required to enter
into any credit agreement, indenture, guarantee or similar agreement related to
the Debt Financing (other than by operation of law upon consummation of the
Merger) without the consent of the Special Committee.

The Merger Agreement provides that prior to the acceptance for purchase of
the Shares properly tendered in the Offer, Mr. Hughes shall, and shall have
caused each direct or indirect entity controlled by him

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<PAGE> 43

to have complied in all material respects with the equity commitment made by him
and referenced in the Merger Agreement.

Other Agreements of Parent, Purchaser and the Company. The Company has
agreed that, upon reasonable notice, it shall: (i) give Parent, Purchaser and
their respective officers, employees, accountants, counsel, financing sources
and other agents and representatives full access to all buildings, officers, and
other facilities and to all contracts, books, tax returns and other records of
the Company; (ii) promptly furnish a copy of each report and other document
filed or received by it during such period prior to the Effective Time, pursuant
to the requirements of Federal securities law or regulations; (iii) permit
Parent and Purchaser to make inspections as they may require; (iv) cause its
officers to furnish such financial, operating, technical and product data
(including financial statements) as reasonably requested by Parent or Purchaser;
(v) allow Parent and Purchaser the opportunity to interview the Company's
employees and other personnel with the Company's prior written consent; and (vi)
assist and cooperate with Parent and Purchaser with respect to the foregoing.

The parties to the Merger Agreement have agreed to cooperate with each
other and use their reasonable best efforts: (i) to promptly prepare and file
all necessary documentation; (ii) to effect all applications, notices, petitions
and filings; (iii) to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and governmental authorities
which are necessary or advisable to consummate the transactions contemplated by
the Merger Agreement; and (iv) to comply with the terms and conditions of all
such approvals. Under the terms of the Merger Agreement, each of Parent and the
Company have also agreed to notify the other party promptly of the receipt of
comments or request from governmental authorities relating to governmental
approvals, and to supply the other party with copies of all correspondence
between the notifying party or any of its representatives and governmental
authorities with respect to governmental approvals.

Under the Merger Agreement, the Company has also agreed to give prompt
notice to Parent of: (i) any notice of default receive by prior to the Effective
Time under any material instrument or material agreement to which it is a party
or by which it is bound, which default, if not remedied, would render materially
incomplete or untrue any representation or warranty made pursuant to the Merger
Agreement; (ii) any suit, action or proceeding instituted or, to the knowledge
of the Company, threatened against or effecting the Company prior to the
Effective Time which, if adversely determined, would render materially incorrect
any representation or warranty made pursuant to the Merger Agreement; and (iii)
any material breach of the Company's covenants hereunder or the occurrence of
any event that is reasonably likely to cause any of its representations and
warranties made to become incomplete or untrue in any material respect.

Subject to the terms and conditions contained therein, the parties to the
Merger Agreement have also agreed to use all reasonable efforts to take (or
cause to be taken) all action and to do (or cause to be done), all things
necessary, proper or advisable under applicable laws and regulations, or to
remove any injunctions or other impediment or delays, to consummate and make
effective the Offer, the Merger and the other transactions contemplated by the
Merger Agreement.

Certain Use of Proceeds. The Merger Agreement provides that the Surviving
Corporation, immediately after the Effective Time, will make loans to a company
controlled and beneficially owned by Mr. Hughes, in the form and on the terms
and conditions satisfactory to Parent and Mr. Hughes in their sole reasonable
discretion (as more fully described in Exhibit B to the Merger Agreement and
summarized above in "Special Factors -- Interests of Certain Persons -- The
Board of Directors").

Solvency Matters. Under the terms of the Merger Agreement, Parent and the
Company have agreed to jointly retain a mutually satisfactory appraisal firm
(the "Appraiser") to provide a letter to the Special Committee and the Board of
Directors of the Parent (the "Solvency Letter") to the effect that the financing
to be provided to Purchaser to effect the Offer and the Merger and the other
transactions contemplated in the Merger Agreement will not cause: (i) the fair
salable value of the Surviving Corporation's assets to be less than the total
amount of its existing liabilities; (ii) the fair salable value of the assets of
the Surviving Corporation to be less than the amount that will be required to
pay its probable liabilities on its existing debts

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<PAGE> 44

as they mature; (iii) the Surviving Corporation not to be able to pay its
existing debts as they mature; or (iv) the Surviving Corporation to have an
unreasonably small capital with which to engage in its business.

The Merger Agreement further provides that the Appraiser will be requested
to deliver a Solvency Letter as promptly as practicable. If the Appraiser is
unable to deliver the Solvency Letter or the Solvency Letter is not reasonably
acceptable to the Special Committee (after reasonable efforts are made to remedy
any deficiencies in the Solvency Letter), Parent and Purchaser have covenanted
and agreed in the Merger Agreement that, notwithstanding anything to the
contrary in the Merger Agreement, Parent and Purchaser shall not consummate the
Offer.

Indemnification, Exculpation and Insurance. In the Merger Agreement, Parent
has agreed that all rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at or
prior to the Effective Time (including with respect to the transactions
contemplated by the Merger Agreement) existing as of September 13, 1999 or at
the Effective Time in favor of the then current or former directors or officers
of the Company as provided in the Company's Amended and Restated Articles of
Incorporation, the Company's Restated Bylaws or any indemnification agreements
(each as in effect on September 13, 1999) shall be assumed by the Surviving
Corporation in the Merger, without further action, as of the Effective Time and
shall survive the Merger and shall continue in full force and effect without
amendment, modification or repeal in accordance with their terms; provided,
however, that if any claims are asserted or made during the continuance of such
terms, all rights to indemnification (and to advancement of expenses) under the
Merger Agreement in respect of any such claims shall continue, without
diminution, until disposition of any and all such claims.

The Merger Agreement provides that in the event that Parent, the Surviving
Corporation or any of their successors or assigns: (i) consolidates with or
merges into any other person and is not the continuing or surviving corporation
or entity of such consolidation or merger; or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, proper provision will be made so that the successors and assigns of
Parent or the Surviving Corporation, as the case may be, shall expressly assume
the obligations set forth above. In the event the Surviving Corporation
transfers any material portion of its assets, in a single transaction or in a
series of transactions, Parent has agreed in the Merger Agreement that it will
either guarantee the indemnification obligations referred to in paragraph (a)
above or take such other action to insure that the ability of the Surviving
Corporation, legal and financial, to satisfy such indemnification obligations
will not be diminished in any material respect.

The Merger Agreement provides that the Surviving Corporation shall: (i)
maintain for a period of not less than six years from the Effective Time the
Company's current directors' and officers' insurance and indemnification policy
to the extent that it provides coverage for events occurring prior to the
Effective Time (the "D&O Insurance"), for all persons who are directors or
officers of the Company on September 13, 1999 (the "Insured Parties"); or (ii)
cause to be provided coverage no less advantageous to the Insured Parties than
the D&O Insurance, in each case so long as the annual premium therefor would not
be in excess of 150% of the last annual premium paid for the D&O Insurance prior
to the date of the Merger Agreement (such 150% amount, the "Maximum Premium").
If the existing D&O Insurance expires, is terminated or canceled during such
six-year period, the Merger Agreement provides that the Surviving Corporation
will use all reasonable efforts to cause to be obtained as much D&O Insurance as
can be obtained for the remainder of such period for an annualized premium not
in excess of the Maximum Premium.

Conditions to the Merger. The Merger Agreement provides that the respective
obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver, on or prior to the closing date of the Merger (the
"Closing Date") of the following conditions: (i) all material Governmental
Approvals (as defined above in Section 5) and all material filings, notices or
declarations to Governmental Authorities required to be made in order to
consummate the Merger shall have been obtained or made, other than the filing of
the Articles of Merger and other than any deviation that does not have and may
not reasonably be expected to have a material adverse effect; (ii) no statute,
rule, regulation, injunction or other order which prohibits or material limits
Purchaser from consummating the Merger or Parent from owning and operating all
or a material portion of the Company's assets shall be in effect; and (iii)
Purchaser shall have: (A) commenced the Offer; and

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<PAGE> 45

(B) purchased, pursuant to the terms and conditions of such Offer, all Shares
duly tendered and not withdrawn, provided, however, that neither Parent nor
Purchaser shall be entitled to rely on such condition if either of them shall
have failed to purchase Shares pursuant to the Offer in breach of their
obligations under the Merger Agreement.

The Merger Agreement also provides that the obligation of the Company to
effect the Merger shall be subject to the satisfaction or waiver, on or prior to
the Closing Date of the following conditions: (i) the representations and
warranties of Parent and Purchaser set forth in the Merger Agreement are true
and correct; (ii) each of Parent and Purchaser shall have performed in all
material respects each of their respective obligations under the Merger
Agreement; (iii) Parent shall have deposited with a bank or trust company
designated to act as agent for the stockholders in regard to the receipt of the
merger consideration; (iv) the Solvency Letter shall have been delivered to the
Special Committee and the Board of Directors prior to the acceptance of Shares
pursuant to the Offer; and (v) the Stockholder Consent (as defined in the Merger
Agreement) shall be in full force and effect.

Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of it by the stockholders of the Company:

(a) By mutual written consent of Parent and the Board of Directors.

(b) By either Parent, Purchaser or the Board of Directors:

(i) if the Merger shall not have been consummated on or prior to
March 31, 2000; provided, however, that the right to terminate the
Merger Agreement shall not be available to any party whose failure to
fulfill any material obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Merger to be consummated on
or prior to such date; or

(ii) if a court of competent jurisdiction or other governmental
authority shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties
hereto shall use their reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order,
decree, ruling or other action shall have become final and
non-appealable; or

(iii) if the Offer terminates or expires on account of the failure
of any condition of the Offer without Purchaser having purchased any
Shares pursuant to the Offer; provided, however, that the right to
terminate the Merger Agreement shall not be available to any party whose
failure to fulfill any material obligation under the Merger Agreement
has been the cause of, or resulted in, the failure of any Offer
Condition (as defined above in Section 5).

(i) if the Board of Directors or the Special Committee shall have
withdrawn, modified or changed in a manner adverse to Parent or
Purchaser its approval or recommendation of the Merger Agreement, the
Offer or the Merger or shall have approved or recommended an Acquisition
Proposal; or

(ii) if Bear Stearns shall have withdrawn, modified or changed in a
manner adverse to Parent or Purchaser its opinion as to the fairness,
from a financial point of view, of the consideration to be received in
the Offer and the Merger; or

(iii) if the Company breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements as
contained in the Merger Agreement or breaches any of its representations
or warranties as contained in the Merger Agreement, in any material
respect, which breach shall not have been cured in the case of a
representation or warranty, prior to the Closing or, in the case of a
covenant or agreement, within 10 days following receipt by the Company
of written notice specifying such breach from Parent or Purchaser.

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<PAGE> 46

(d) By the Company (acting through the Special Committee):

(i) if Parent or Purchaser breaches or fails in any material
respect to perform or comply with any of their respective material
covenants and agreements contained in the Merger Agreement or breaches
any of their respective representations or warranties contained in the
Merger Agreement, in any material respect, which breach shall not have
been cured in the case of a representation or warranty, prior to the
Closing or, in the case of a covenant or agreement, within 10 days
following receipt by Parent of written notice specifying such breach
from the Company; or

(ii) if Purchaser or Parent shall have (A) failed to commence the
Offer within five business days of the public announcement by Parent and
the Company of the execution of the Merger Agreement, or (B) failed to
pay for Shares pursuant to the Offer in accordance with the Merger
Agreement.

In the event of termination of the Merger Agreement by Parent,
Purchaser or the Company (acting through the Board of Directors or the
Special Committee) as provided under "-- Termination," the Merger Agreement
shall forthwith become null and void and there shall be no liability or
obligation on the part of Parent, Purchaser or the Company or their
respective officers, directors or employees except for fraud and as set
forth in this paragraph and in "-- Fees and Expenses," and nothing in this
paragraph shall relieve any party from liability for any willful breach of
any provision of the Merger Agreement.

Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the consummation
of the contemplated transactions, including, without limitation, all fees and
expenses of the parties' respective financial advisors and legal and accounting
advisors (collectively, "Costs") shall be paid by the Company, whether or not
the closing occurs; provided, however, that if a Reimbursement Event (as defined
below) occurs, Parent, Purchaser and Mr. Hughes shall reimburse the Company for
$2 million (or such lesser amount actually incurred) of the Costs incurred by
them in connection herewith. As used in the Merger Agreement, "Reimbursement
Event" means a failure to consummate the Offer or the Merger as a result of the
Financing Condition (as defined above in Section 5) to the Offer not being
satisfied for any reason, and then only if the non-satisfaction of the Financing
Condition is not principally the result of a Company Material Adverse Effect.
Notwithstanding anything in this paragraph to the contrary, in the event that
the Merger Agreement is terminated pursuant to paragraph (d) under
"-- Termination," then Parent, Purchaser and Mr. Hughes shall be responsible
fully for the Costs incurred by them.

Amendment and Modification. The Merger Agreement provides, subject to
applicable law and except as set forth in "-- Procedure for Termination,
Amendment, Execution or Waiver," that the Merger Agreement may be amended,
modified and supplemented in any and all respects, whether before or after any
vote of the Company's stockholders, by written agreement of the parties hereto,
by action taken by their respective managing member, Boards of Directors or the
duly authorized designee thereof at any time prior to the Closing Date;
provided, however, that after the approval of the Merger Agreement by the
stockholders of the Company, no such amendment, modification or supplement shall
reduce or change the form of the Merger Consideration.

Extension; Waiver. Except as set forth under "-- Procedure for Termination,
Amendment, Extension or Waiver," the Merger Agreement provides that at any time
prior to the Effective Time, the parties to the Merger Agreement, by action
taken or authorized by their respective managing member or Boards of Directors,
may, to the extent legally allowed: (i) extend the time for the performance of
any of the obligations or other acts of the other parties to the Merger
Agreement; (ii) waive any inaccuracies in the representations and warranties of
the other parties to the Merger Agreement contained therein or in any document
delivered pursuant thereto; or (iii) except as set forth in "-- Amendment and
Modification," waive compliance with any of the agreements or conditions of the
other parties to the Merger Agreement. The Merger Agreement further provides
that any agreement to any such extension or waiver is valid only if set forth in
a written instrument signed on behalf of such party. The failure of any party to
the Merger Agreement to assert any of its rights under the Merger Agreement or
otherwise shall not constitute a waiver of those rights.

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<PAGE> 47

Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that a termination of the Merger Agreement pursuant to
"-- Termination," an amendment of the Merger Agreement pursuant to "-- Amendment
and Modification" or an extension or waiver pursuant to "-- Extension; Waiver"
shall, in order to be effective, require in the case of Parent, Purchaser or the
Company, action by its respective managing member, Board of Directors or the
duly authorized designee thereof; provided, however, that the affirmative vote
of a majority of the Special Committee shall be required to: (i) amend or
terminate the Merger Agreement by the Company; (ii) exercise or waive any of the
Company's rights or remedies under the Merger Agreement; (iii) extend the time
for performance of Parent's and Purchaser's respective obligations under the
Merger Agreement; or (iv) take any action to amend or otherwise modify the
Company's Amended and Restated Articles of Incorporation or the Company's
Restated Bylaws.

Guarantee. The Merger Agreement provides that each of Mr. Hughes and The
Family Trust, jointly and severally, irrevocably guarantees (as primary obligor
and not merely as surety) to the Company and each person who controls the
Company within the meaning of the Securities Act or the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise: (i)
the accuracy of the representations and warranties of Parent and Purchaser
contained in the Merger Agreement and set forth in "-- Representations and
Warranties"; and (ii) the performance by Parent and Purchaser of the covenants
and agreements contained in the Merger Agreement.

Certain Conditions of the Offer. The conditions to the Offer are described
in Section 5 of the Offer to Purchase.

Dissenters' Rights. The Nevada Revised Statutes do not require the Company
to provide stockholders with dissenters' rights in connection with the Merger.
The Company has, however, pursuant to the Merger Agreement, agreed to grant
stockholders the right to dissent from the Merger notwithstanding the provisions
of the Nevada Revised Statutes.

Stockholders who oppose the proposed Merger will have the right to receive
payment for the value of their Shares as set forth in Sections 92A.300 through
92A.500 of the Nevada Revised Statutes. To assert the dissenters' rights
provided under the Merger Agreement, a stockholder must deliver a written notice
to the Company prior to October 25, 1999, of his intention to demand payment for
his Shares if the Merger is effectuated. A stockholder who holds his Shares
beneficially, and not of record, may assert his dissenters' rights only by
submitting with his written notice the written consent of the stockholder of
record to the dissent, and must exercise his dissenters' rights for all the
Shares of which he is the beneficial owner or over which he has power to direct
the vote.

If the Merger is consummated, the Company is required to deliver a written
dissenter's notice no later than 10 days after the consummation of the Merger to
all stockholders who gave due notice of their intention to demand payment. The
notice shall state where a demand for payment must be sent and where and when
certificates must be deposited in order to obtain payment; shall include a form
for demanding payment which includes the date of the first announcement to the
news media or to the stockholders of the terms of the proposed Merger and a
request for certification of the date on which the stockholder (or the person on
whose behalf the stockholder dissents) acquired beneficial ownership of the
shares; shall state the date by which the Company must have received the demand
for payment; and shall be accompanied by a copy of Sections 92A.300 through
92A.500 of the Nevada Revised Statutes. Stockholders who fail to demand payment,
or fail to deposit certificates as required by the notice mailed to the
dissenting stockholders, in each case by the date set forth in such notice,
shall have no right to receive payment for their shares.

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<PAGE> 48

Within 30 days following the date on which demand for payment is received
from dissenting stockholders who have deposited their certificates with the
Company, all in accordance with the notice of the Company, the Company shall
remit to the dissenting stockholders the amount which the Company estimates to
be the fair value of the Shares, with interest. The remittance shall be
accompanied by the following:

(1) the Company's closing balance sheet and statements of income and
stockholders' equity for a fiscal year ending not more than 16 months
before the date of remittance, together with the latest available interim
financial statements;

(2) a statement of the Company's estimate of the fair value of the
Shares;

(3) an explanation of how the interest was calculated;

(4) a statement of the dissenter's right to demand payment pursuant to
Section 92.A480 (Dissenter's Estimate of Fair Value); and

(5) a copy of Sections 92A.300 through 92.A.500 of the Nevada Revised
Statutes.

The Company may elect, however, to withhold remittance from any dissenter
with respect to Shares of which the dissenter (or the person on whose behalf the
dissenter acts) was not the beneficial owner on the date specified in the notice
to dissenters that is described in the immediately preceding paragraph.

If a dissenting stockholder believes that the amount remitted is less than
the fair value of his Shares, he may, within 30 days after the date of mailing
of the Company's remittance, mail to the Company his own estimate of the value
of the deficiency. If a dissenting stockholder fails to do so, he shall be
entitled to no more than the amount remitted. If a demand for payment remains
unsettled for 60 days after such demand is made by a dissenting stockholder, the
Company shall file a petition in an appropriate court requesting that the fair
value of the Shares and interest thereon be determined by the court. All
dissenters are entitled to judgment for the amount by which the fair value of
their Shares, plus interest, is found to exceed the amount previously remitted,
and for the fair value, plus interest, of his after-acquired shares for which
the Company elected to withhold payment. If the Company fails to file a
petition, each dissenter who has made a demand and who has not already settled
his claim against the Company shall be paid by the Company the amount demanded
by him with interest and may sue thereafter in an appropriate court.

The foregoing summary does not purport to be a complete statement of the
provisions of Section 92A.300 through 92A.500 of the Nevada Revised Statutes and
is qualified in its entirety by reference to those sections, a copy of which is
attached as Annex C. Stockholders intending to exercise appraisal rights should
review Annex C for more complete and definitive statement of the rights of
dissenting stockholders and the procedures to be followed.

11. DIVIDENDS AND DISTRIBUTIONS.

The Company has paid cash dividends of $.15 per share on its Shares since
1997 on the following dates: February 12, 1997; May 8, 1997; August 1, 1997;
November 6, 1997; February 11, 1998; May 7, 1998; July 31, 1998; November 5,
1998; February 12, 1999; May 6, 1999; and August 2, 1999. Under the Merger
Agreement, prior to the Effective Time, the Company is required to continue to
declare and pay its regular quarterly cash dividends on the Common Shares in
accordance with prior practice. In addition, the Company has agreed to declare
two additional special dividends. The first special dividend will be declared to
holders of record on the date the Offer is consummated in an amount equal to the
Company's most recent quarterly dividend, pro rated for the period consisting of
the number of days elapsed since the last regular quarterly dividend record date
through the date of the consummation of the Offer and the second such dividend
will be declared to holders of record on the last business day prior to the
Effective Time also in an amount equal to the Company's most recent quarterly
dividend, pro rated for the period consisting of the number of days since the
last regular or special dividend record date through the Effective Time.

12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.

General. Except as otherwise disclosed in this Offer to Purchase, based on
the Company's representations and warranties in the Merger Agreement and a
review of publicly available filings by the Company with
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<PAGE> 49

the Commission, the Purchaser is not aware of: (i) any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer or by the Merger;
or (ii) any approval or other action by any governmental, administrative or
regulatory agency or authority, domestic or foreign, that would be required for
the Purchaser to acquire and own Shares.

Going Private Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act, which is applicable to certain going private transactions.
This Offer to Purchase contains information required by Rule 13e-3. Also, the
Parent, the Purchaser and the Company have filed with the SEC a Transaction
Statement on Schedule 13E-3. The Schedule 13E-3 and any exhibits or amendments
to it may be inspected at, and copies obtained from, the places described in
Section 7 (except that they will not be available at the regional offices of the
SEC).

State Takeover Statutes. The Company is incorporated under the laws of
Nevada. Sections 78.411 to 78.444 of the Nevada Revised Statutes limit the
ability of a Nevada corporation to engage in certain "combinations" with an
"interested stockholder." With certain exceptions, an interested stockholder is
a person who owns 10% or more of the corporation's outstanding voting stock,
including any rights to acquire stock under an option, warrant, agreement,
arrangement or understanding, or upon the exercise of conversion or exchange
rights, and stock with respect to which the person has voting rights only, or is
an affiliate or associate of the corporation and was the owner of 10% or more of
the corporation's voting stock at any time within the previous three years.
These statutes prohibit combinations with an interested stockholder for three
years from the date of the interested stockholder's acquisition of the shares of
the corporation unless, prior to the date on which the person becomes an
interested stockholder, the board of directors of the corporation approves the
combination or the transaction which resulted in the person becoming an
interested stockholder. These statutes, however, do not apply to any combination
with a stockholder who was an interested stockholder on January 1, 1991. Since
the Offer and the Merger involve the Company combining with a stockholder who
was an interested stockholder on January 1, 1991, these statutes are not
applicable.

A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.

13. CERTAIN TRANSACTIONS.

On April 23, 1998 Raven Industries ("Raven"), D&F Industries ("D&F") and
Dynamic Products, Inc. ("Dynamic"), Herbalife's most significant suppliers of
powder and tablet products, concluded a $225 million bond offering and secured a
$50 million secured bank credit facility. Part of the proceeds from the offering
and the credit facility were used to repurchase certain ownership interests in
such entities, including the entire ownership interest of Mr. Hughes
(representing 1/3 and 1/5of the formerly outstanding shares of Raven and
Dynamic, respectively), as well as the entire ownership of shares of Dynamic
held by a former director and executive officer of Herbalife (representing 5% of
the formerly outstanding shares of Dynamic). Mr. Hughes sold his shares for
approximately $43 million. As a result, Mr. Hughes and such employee have ceased
to have any ownership interest in those suppliers. Herbalife consented to the
grant of a security interest in the manufacturers' assets in connection with the
proposed bank credit facility being arranged by the suppliers; under Herbalife's
supply agreements with the manufacturers, the granting of such a security
interest required Herbalife's consent (which consent could not be unreasonably
withheld). Herbalife believes that such transaction did not have a material
impact on its operations.

47
<PAGE> 50

For the period ended April 23, 1998, Herbalife's purchases from Raven and
Dynamic amounted to $16.4 million and $1.0 million, respectively. Until April
23, 1998, Mr. Hughes' ownership interest in Raven and Dynamic entitled him to a
proportionate interest in the profits of those companies, if any. In 1998, Mr.
Hughes' share of the earnings of Raven and Dynamic totaled $2.2 million and $0.1
million, respectively. Herbalife's 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.

In accordance with the Herbalife's 1994 Plan Performance-Based Annual
Incentive Compensation Plan, Herbalife made advances of targeted performance
bonus amounts during 1996, 1997 and 1998 to Mr. Hughes, during 1996, 1997, 1998
and 1999 to Mr. Pair, during 1996 and 1998 to Mr. Rosen and during 1997 and 1998
to Messrs. Sandler and Gerrity. As of June 30, 1999, all such advances have been
repaid except the advance made to Mr. Pair in 1999. The 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 advance bears interest at the
applicable federal rate (AFR) for two-year notes at the time of the advances.
The rate for the existing outstanding advance is 4.67%.

In 1998, Herbalife also made loans in the aggregate amounts including
interest of $61,000 and $79,000 to Messrs. Miner and Pair, respectively, which
were both repaid in 1999.

In 1998, Herbalife obtained the necessary regulatory approvals to make an
initial public offering of shares of Herbalife Japan KK ("Herbalife Japan") in
Japan. On December 30, 1996, in preparation for the possible offering, Herbalife
sold shares of Herbalife Japan to certain of its 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 percentage of Herbalife Japan's outstanding
shares represented thereby, and the purchase price paid to Herbalife by each
individual as of the date of the sale:

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME HERBALIFE JAPAN SHARES AGGREGATE PRICE(1)
---- ---------------------- ------------------
<S> <C> <C>
Mark Hughes..................................... 5.000% $3,300,000
Christopher Pair................................ 0.575 379,500
Michael E. Rosen................................ 0.575 379,500
Timothy Gerrity................................. 0.575 379,500
Alan Liker...................................... 0.200 132,000
Other........................................... 0.075 49,500
----- ----------
Total................................. 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 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 separately
sought and obtained a valuation of the shares from an independent investment
banking firm, Houlihan, Lokey, Howard & Zukin, Inc., which rendered an opinion
to the effect that the fair market value of the shares was greater than that
determined under the formula prescribed. Consequently, the purchase price per
share was increased to the fair value of the shares as indicated in the
Houlihan, Lokey, Howard & Zukin opinion. The Board of Directors, based in part
on the Houlihan, Lokey, Howard & Zukin opinion and the determination of price
derived under the formula (which is utilized 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 Herbalife approximately 30% in cash and approximately 70% in the
form of a full recourse promissory note bearing interest at 6.31% 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
48
<PAGE> 51

principal and accrued interest payments due over five years ending December 31,
2002. The aggregate amount outstanding under such promissory notes at December
31, 1998 was $2.7 million.

In 1997, Herbalife engaged Mr. Liker to provide consulting services though
1999 in connection with the offering in Japan. Under the terms of the oral
agreement with Mr. Liker, Mr. Liker received $80,000 in 1997 and in 1998 and is
to receive an additional $80,000 in 1999 from Herbalife for such services.

Herbalife has no current intention to make an initial public offering of
Herbalife Japan shares, based, among other things, on economic and financial
market conditions in Japan and on the impact from the completion of the Offer
and the Merger and the third party financing incurred in connection therewith.

14. RECENT PURCHASES OF COMPANY SECURITIES. Herbalife's board of directors
has authorized a stock repurchase program since 1996. Under this program,
Herbalife has repurchased shares of its stock since January 1, 1997 as described
in the following table:

<TABLE>
<CAPTION>
NUMBER OF SHARES HIGH REPURCHASE LOW REPURCHASE
REPURCHASED PRICE PRICE AVERAGE
----------------- ----------------- ----------------- REPURCHASE TOTAL
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B PRICE AMOUNT
------- ------- ------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
First Quarter*......... 201,950 -- $18.08 -- $15.88 -- $17.43 $ 3,520,271
Second Quarter*........ 288,360 -- 18.32 -- 16.13 -- 17.04 4,914,715
Third Quarter*......... 60,000 -- 18.08 -- 15.13 -- 17.14 1,028,599
Fourth Quarter*........ 655,000 190,000 23.75 23.25 19.88 20.63 22.26 18,810,668

1998
First Quarter.......... -- 754,000 -- 27.06 -- 18.00 22.65 17,076,713
Second Quarter......... -- 381,500 -- 25.50 -- 20.56 23.53 8,976,629
Third Quarter.......... -- 325,617 -- 23.25 -- 7.13 11.62 3,784,519
Fourth Quarter......... -- 4,600 -- 8.19 -- 7.08 7.83 36,004
</TABLE>

- -------------------------
* For each period prior to the Company's 1997 dual class recapitalization,
shares repurchased consisted of the Company's common stock.

Herbalife suspended repurchases of Shares in the Fourth quarter of 1998 due
to global economic uncertainty. No Shares have been repurchased by Herbalife to
date in 1999.

In addition, since January 1, 1997, Mr. Hughes has acquired shares of
Herbalife's stock as follows:

March 13, 1997: 34,000 Shares granted as incentive compensation
pursuant to Herbalife's amended and restated 1994 performance based annual
incentive compensation plan.

December 11, 1997: 12,700 Shares granted as incentive compensation
pursuant to Herbalife's amended and restated 1994 performance based annual
incentive compensation plan. (4,233 Class A Shares and 8,467 Class B
Shares)

March 2, 1998: 12,400 Class A Shares and 24,800 Class B Shares were
granted as incentive compensation pursuant to the Herbalife's amended and
restated 1994 performance based annual incentive compensation plan.

There has been no transaction involving Herbalife Shares which was effected
during the past 60 days by Herbalife or, to Herbalife's knowledge, any of the
executive officers.

49
<PAGE> 52

15. FEES AND EXPENSES. The Company has agreed in the Merger Agreement to
pay all expenses of the Offer and the Merger whether or not it is completed
(except that the Continuing Stockholder is responsible for up to $2 million of
the Continuing Stockholder's Costs (as defined in the Merger Agreement) under
certain circumstances described in the Merger Agreement). Estimated fees and
expenses incurred or to be incurred in connection with the Offer, the Merger and
related transactions are as follows:

<TABLE>
<S> <C>
Financial advisory/dealer manager fees and expenses(1)...... $14,800,000
Legal fees and expenses(2).................................. 2,800,000
Accounting fees and expenses................................ 2,100,000
Depositary fees and expenses................................ 20,000
Information Agent fees and expenses......................... 20,000
Securities and Exchange Commission filing fee............... 54,000
Printing and mailing costs.................................. 250,000
Miscellaneous expenses...................................... 200,000
-----------
Total............................................. $20,244,000
===========
</TABLE>

- ---------------
(1) Includes the fees and expenses to Donaldson, Lufkin & Jenrette for financial
advisory services to Herbalife related to the Offer and Merger, the
estimated fees related to the Debt Financing, and the fees and expenses of
Bear Stearns for financial advisory services to the Special Committee.

(2) Includes the estimated fees and expenses of counsel for the Special
Committee, Mr. Hughes and their respective counsel and their advisors'
counsels.

Except as set forth below, neither the Purchaser nor the Parent funds will
pay any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.

Pursuant to the engagement agreement between Herbalife and Donaldson,
Lufkin & Jenrette, Donaldson, Lufkin & Jenrette has the exclusive right, but not
the obligation, to act as the sole placement and arranging agent for the Debt
Financing.

The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation together with reimbursement for
its reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses, including certain liabilities under the federal
securities laws.

In addition, the Purchaser has retained U.S. Stock Transfer Corporation as
the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding offering material to their customers.

16. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial action
or pursuant to any state statute. If the Purchaser becomes aware of any state
statute prohibiting the making of the Offer or the acceptance of the Shares
which are tendered in response to the Offer, the Purchaser will make a good
faith effort to comply with that state statute. If, after a good faith effort
the Purchaser cannot comply with any such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER WHICH IS NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE,

50
<PAGE> 53

THAT INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.

Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 under the
Exchange Act, and Purchaser and the Company have filed with the Commission a
Rule 13e-3 Transaction Statement on Schedule 13E-3, together with exhibits,
pursuant to Rule 13e-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission a Solicitation/Recommendation Statement on Schedule 14D-9,
together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting
forth the recommendations of the Board and the Special Committee with respect to
the Offer and the reasons for such recommendations and furnishing certain
additional related information. Such Schedules and any amendments thereto,
including exhibits, may be inspected and copies may be obtained from the
Commission in the manner set forth in Section 7 (except that they will not be
available at the regional offices of the Commission).

MH MILLENNIUM ACQUISITION CORP.

September 17, 1999

51
<PAGE> 54

SCHEDULE I

CERTAIN INFORMATION CONCERNING PARENT, PURCHASER AND MR. HUGHES

Parent. MH Millennium Holdings, LLC, a Delaware limited liability company,
is a newly formed entity formed and wholly owned by The Mark Hughes Family
Trust, of which Mr. Hughes is the sole trustee. Its sole business purpose is to
engage in the Merger, the Offer and the related transactions and, after the
Merger and the Offer, to hold a portion of the common stock of Herbalife. The
Mark Hughes Family Trust is the sole member of MH Millennium Holdings LLC. Mr.
Hughes is the manager of MH Millennium Holdings LLC.

Purchaser. MH Millennium Acquisition Corp. is a newly formed Nevada
corporation organized by MH Millennium Holdings LLC and Mr. Hughes for the
purpose of effecting the Merger, the Offer and the related transactions. The
sole stockholder of MH Millennium Acquisition Corp. is MH Millennium Holdings
LLC. The sole director of MH Millennium Acquisition Corp. is Mr. Hughes. Mr.
Hughes is the President of MH Millennium Acquisition Corp.

None of MH Millennium Holdings LLC and Millennium Acquisitions Corp.
conduct operations.

Mr. Hughes. Mr. Hughes founded Herbalife's business in 1980. Since that
time, he 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 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 Herbalife when it acquired Herbalife International of America, Inc.
in a stock-for-stock reorganization and has continued in those positions since
that time. Mr. Hughes is a citizen of the United States.

The business address for each of the foregoing is 1800 Century Park East,
Los Angeles, California 90067. None of the foregoing or any executive officer,
director or person controlling any member of the foregoing was during the last
five years convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.

I-1
<PAGE> 55

SCHEDULE II

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Biographical information follows for each director of Herbalife and for two
of its executive officers who are not directors. The table sets forth certain
information regarding these individuals (ages are as of January 1, 1999).

<TABLE>
<CAPTION>
NAME AGE POSITION WITH HERBALIFE
---- --- -----------------------
<S> <C> <C>
Mark Hughes............................ 43 Chairman of the Board, Chief Executive Officer and
President
Christopher Pair....................... 44 Director, Executive Vice President, Chief Operating
Officer and Secretary
Michael E. Rosen....................... 52 Director, Executive Vice President, Chief Executive
Corporate Marketing and Corporate Development
Edward J. Hall......................... 52 Director
Alan Liker............................. 61 Director
Christopher M. Miner................... 47 Director
Robert A. Sandler...................... 54 Executive Vice President and General Counsel
Timothy Gerrity........................ 48 Executive Vice President and Chief Financial Officer
</TABLE>

MARK HUGHES founded Herbalife'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 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 Herbalife when it acquired Herbalife International of America, Inc.
in a stock-for-stock reorganization and has continued in those positions since
that time. Mr. Hughes is a citizen of the United States.

CHRISTOPHER PAIR joined Herbalife's predecessor in March 1985 as Executive
Assistant to the President. From May 1991 to November 1996, Mr. Pair served as
Herbalife's Executive Vice President -- International and Corporate
Administration and Secretary. In November 1996, Mr. Pair became Herbalife's
Executive Vice President and Chief Operating Officer. Mr. Pair has been a
director of Herbalife since May 1990 and is the Corporate Secretary. Prior to
1985, Mr. Pair served in various management positions with U.S. Leasing,
Raytheon Data Systems and Consolidated Foods. Mr. Pair is Vice-Chairman of the
Direct Selling Educational Foundation and serves on its Executive Committee. Mr.
Pair is also Vice-Chairman of the Board of Directors of the Direct Selling
Association, a member of its Executive and Finance Committee and serves on its
Long-Range Planning Committee. He also serves on the Board of the Counsel for
Responsible Nutrition, The American Herbal Products Association and is a member
of the CEO Council of The World Federation of Direct Selling Associations. Mr.
Pair received his B.S. and M.B.A. from the University of Redlands. Mr. Pair is a
citizen of the United States.

MICHAEL E. ROSEN joined Herbalife in August 1993 and is currently Executive
Vice President, and Chief Executive Corporate Marketing and Corporate
Development. Mr. Rosen's responsibilities include Herbalife's international and
domestic marketing, developing Herbalife's personal care and cosmetic lines,
investor relations and external affairs. Mr. Rosen has served as a director of
Herbalife since May 1996. Prior to joining Herbalife, Mr. Rosen was Chairman of
the JCP Television Shopping Network, which he founded in 1986. Mr. Rosen is a
citizen of the United States.

EDWARD J. HALL, a certified public accountant, is an independent investor.
From April 1995 through November 1998, he served as the Chief Financial Officer
of Cruttenden Roth Incorporated, an investment banking firm. The principal
executive offices of Cruttenden Roth Incorporated are located at 18301 Von
Karman, Suite 100, Irvine, California 92715. He served in a similar capacity for
H.J. Meyers & Co., Inc., an

II-1
<PAGE> 56

investment banking firm based in Beverly Hills, California from March 1991
through March 1995. The principal executive offices of H.J. Meyers & Co., Inc.
are located at 356 N. Camden Drive, Beverly Hills, California 90210. From 1988
through 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 Herbalife in March 1992. Mr. Hall is a
citizen of the United States.

ALAN LIKER has served as a business advisor to a number of individuals and
companies during the past several years. Currently, Mr. Liker serves as a
business adviser to Budget Rent-A-Car of Southern California. The principal
executive offices of Budget Rent-A-Car of Southern California are located at 105
S. Doheny Drive, Beverly Hills, California 90221. 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 Herbalife's
Board in December 1993. Previously he was a director of Budget Group, Inc.,
First Charter Bank and the JCP Television Shopping Network. Mr. Liker is a
citizen of the United States.

CHRISTOPHER M. MINER is serving as the Chief Executive Officer and Chief
Financial Officer of Redfish Telemetrix, Inc., a telecommunication company,
since May 1997. The principal executive offices of Redfish Telemetric, Inc. are
located at 3183 Airway Avenue, Bldg. E, Cost Mesa, CA 92626. He has served as
Chief Financial Officer of Wow! Laboratories, Inc., an oral healthcare company,
from July 1996 to December 1998. The principal executive offices of Wow!
Laboratories, Inc. are located at 18430 Bandiller Circle, Fountain Valley, CA
92708. Mr. Miner co-founded Vis-A-Vis Communications, Inc. (formerly Workstation
Technologies, Inc.) in 1989. Vis-A-Vis Communications is a leading developer of
interactive communications software and hardware products. The principal
executive offices of Vis-A-Vis Communications, Inc. are located at 18010 Sky
Park Circle, Irvine, CA 92714. Prior to founding Vis-A-Vis Communications, 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 Medica 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. Mr. Miner is a citizen of the United States.

ROBERT A. SANDLER joined Herbalife in January 1997 as its Executive Vice
President and General Counsel. From 1975 to the present, Mr. Sandler has been a
member of Sandler & Morse, 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 defibrillators. Mr. Sandler is a
citizen of the United States.

TIMOTHY GERRITY joined Herbalife in May 1985 and currently serves as its
Executive Vice President and Chief Financial Officer. Mr. Gerrity, a certified
public accountant, is responsible for the worldwide financial affairs of
Herbalife. His previous experience includes various management positions with
Wickes Corporation, Deloitte & Touche LLP, and Fluor Corporation. Mr. Gerrity
was recently appointed a member of the Finance Committee of the Direct Selling
Association. Mr. Gerrity received his B.S. degree from California State
University at Northridge and his M.B.A. from the University of Southern
California. Mr. Gerrity is a citizen of the United States.
------------------------

II-2
<PAGE> 57

SCHEDULE III

FINANCIAL STATEMENTS OF THE COMPANY

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
Independent Auditors' Report................................ III-2
Consolidated Balance Sheets -- December 31, 1998 and 1997... III-3
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996.......................... III-5
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1998, 1997, and 1996..... III-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996......................... III-7
Notes to Consolidated Financial Statements.................. III-8
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheet -- June 30, 1999................. III-27
Consolidated Statements of Income for the Six Months Ended
June 30, 1999 and 1998.................................... III-28
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998.............................. III-29
Notes to Consolidated Financial Statements.................. III-30
</TABLE>

III-1
<PAGE> 58

INDEPENDENT AUDITORS' REPORT

To the Stockholders of Herbalife International, Inc.:

We have audited the accompanying consolidated balance sheets of Herbalife
International, Inc. and subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Herbalife International, Inc.
and subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Los Angeles, California
February 24, 1999

III-2
<PAGE> 59

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

ASSETS

<TABLE>
<CAPTION>
NOTES 1998 1997
----- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................. 2,4 $100,721,000 $ 78,913,000
Marketable securities...................................... 2 5,186,000 43,794,000
Receivables, including related party receivables of
$6,642,000 (1998) and $10,259,000 (1997)................. 6,8 44,471,000 46,021,000
Inventories................................................ 2, 3 88,138,000 71,583,000
Prepaid income taxes....................................... 2,931,000 695,000
Prepaid expenses and other current assets.................. 14,734,000 7,466,000
Deferred income taxes...................................... 2, 12 21,870,000 19,502,000
------------ ------------
Total current assets............................. 278,051,000 267,974,000
------------ ------------

PROPERTY -- at cost: 2, 5
Furniture and fixtures..................................... 16,090,000 14,521,000
Equipment.................................................. 44,789,000 29,381,000
Leasehold improvements and building........................ 22,361,000 20,061,000
------------ ------------
83,240,000 63,963,000
Less accumulated depreciation and amortization............. (45,792,000) (34,225,000)
------------ ------------
37,448,000 29,738,000
------------ ------------
OTHER ASSETS............................................... 6, 8 22,701,000 13,409,000
DEFERRED INCOME TAXES...................................... 2, 12 6,696,000
GOODWILL(net of accumulated amortization of $1,601,000 and
$1,428,000 in 1998 and 1997, respectively)............... 2 3,287,000 3,459,000
------------ ------------
TOTAL............................................ $348,183,000 $314,580,000
============ ============
</TABLE>

See the accompanying notes to consolidated financial statements
III-3
<PAGE> 60

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998 AND 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTES 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable........................................ 2, 8 $ 14,963,000 $ 12,654,000
Royalty overrides....................................... 2 58,389,000 56,643,000
Accrued compensation.................................... 18,132,000 19,516,000
Accrued expenses........................................ 29,007,000 19,137,000
Dividends payable....................................... 4,296,000 4,634,000
Current portion of contracts payable and bank loans..... 4, 5 2,639,000 1,449,000
Advance sales deposits.................................. 2 7,919,000 18,375,000
Income taxes payable.................................... 2, 9, 12 22,083,000 9,580,000
------------ ------------
Total current liabilities..................... 157,428,000 141,988,000

NON-CURRENT LIABILITIES:
Contracts payable, net of current portion............... 4, 5 2,357,000 2,666,000
Deferred income taxes................................... 2, 12 -- 1,739,000
Other non-current liabilities........................... 6, 7, 8 21,992,000 11,586,000
------------ ------------
Total liabilities............................. 181,777,000 157,979,000
------------ ------------
MINORITY INTEREST....................................... 2, 8 2,595,000 1,868,000
------------ ------------
COMMITMENTS AND CONTINGENCIES........................... 5, 6, 7, 9

STOCKHOLDERS' EQUITY: 10
Class A Common stock, $0.01 par value; 33,333,333 shares
authorized, 9,980,753 (1998) and 9,811,623 (1997)
shares issued and outstanding......................... 100,000 98,000
Class B Common stock, $0.01 par value; 66,666,667 shares
authorized, 18,603,561 (1998) and 19,818,248 (1997)
shares issued and outstanding......................... 186,000 198,000
Paid-in capital in excess of par value.................. 54,823,000 50,319,000
Retained earnings....................................... 110,941,000 109,106,000
Unearned compensation................................... -- (152,000)
Accumulated other comprehensive income.................. 2 (2,239,000) (4,836,000)
------------ ------------
Total stockholders' equity.................... 163,811,000 154,733,000
------------ ------------
TOTAL......................................... $348,183,000 $314,580,000
============ ============
</TABLE>

See the accompanying notes to consolidated financial statements
III-4
<PAGE> 61

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
NOTES 1998 1997 1996
--------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Retail sales..................... 2 $1,644,837,000 $1,490,693,000 $1,200,144,000
Less -- distributor allowances on
product purchases.............. 2 778,195,000 708,241,000 568,209,000
-------------- -------------- --------------
Net sales........................ 2 866,642,000 782,452,000 631,935,000
Cost of sales, including
purchases from related parties
of $17,369,000 (through April
23,1998), $66,771,000 (1997)
and $56,374,000 (1996)......... 8 230,818,000 205,070,000 168,432,000
Royalty overrides................ 2 250,905,000 233,883,000 184,669,000
Marketing, distribution and
administrative expenses........ 5, 6, 8 306,589,000 257,514,000 210,087,000
Interest income -- net........... 2,533,000 4,535,000 4,084,000
-------------- -------------- --------------
Income before income taxes and
minority interest.............. 80,863,000 90,520,000 72,831,000
Income taxes..................... 2, 9, 12 31,132,000 34,850,000 28,040,000
-------------- -------------- --------------
Income before minority
interest....................... 49,731,000 55,670,000 44,791,000
Minority interest................ 2, 8 1,233,000 1,003,000
-------------- -------------- --------------
NET INCOME....................... $ 48,498,000 $ 54,667,000 $ 44,791,000
============== ============== ==============
EARNINGS PER SHARE............... 2, 10
Basic.......................... $ 1.68 $ 1.81 $ 1.50
Diluted........................ $ 1.60 $ 1.72 $ 1.43
CASH DIVIDENDS PER COMMON
SHARE.......................... $ 0.60 $ 0.60 $ 0.60
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic.......................... 28,897,000 30,193,000 29,803,000
Dilutive effect of stock
options................... 1,445,000 1,610,000 1,576,000
-------------- -------------- --------------
Diluted........................ 30,342,000 31,803,000 31,379,000
============== ============== ==============
</TABLE>

See the accompanying notes to consolidated financial statements
III-5
<PAGE> 62

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
PAID IN ACCUMULATED
CAPITAL IN OTHER
COMMON COMMON EXCESS RETAINED UNEARNED COMPREHENSIVE
STOCK A STOCK B OF PAR VALUE EARNINGS COMPENSATION INCOME
-------- -------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ $300,000 $40,417,000 $ 69,323,000 $ (1,716,000) $ 1,206,000
Issuance of 839,000 shares of Common
Stock under the 1991 Stock Option
Plan.............................. 8,000 4,721,000
Issuance of Common Stock under the
1994 Incentive Compensation
Plan.............................. 1,307,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 4,284,000
Repurchase of 575,000 Shares of
Common Stock...................... (6,000) (7,471,000)
Amortization of unearned
compensation...................... 1,304,000
Net income.......................... 44,791,000
Translation adjustments............. (2,175,000)
Unrealized loss on Marketable
Securities........................ (45,000)
Total comprehensive income..........
Cash dividends declared............. (17,780,000)
-------- -------- ----------- ------------ ------------ -----------
Balance at December 31, 1996........ $302,000 $43,258,000 $ 96,334,000 $ (412,000) $(1,014,000)
Issuance of 669,826 shares of Common
Stock under the 1991 Stock Option
Plan.............................. 7,000 4,942,000
Issuance of Common Stock under 1994
Incentive Compensation Plan....... 865,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 3,448,000
One-for-three reverse Stock split... (206,000) 206,000
Stock split effected in the form of
a stock dividend.................. 206,000 (206,000)
Repurchase of 503,000 shares of
Common Stock A and 789,000 shares
of Common Stock B................. (5,000) (8,000) (2,194,000) (23,756,000)
Amortization of unearned
compensation...................... 260,000
Net income.......................... 54,667,000
Translation adjustments............. (3,877,000)
Unrealized gain on marketable
securities........................ 55,000
Total comprehensive income..........
Cash dividends declared............. (18,139,000)
-------- -------- ----------- ------------ ------------ -----------
Balance at December 31, 1997........ $ 98,000 $198,000 $50,319,000 $109,106,000 $ (152,000) $(4,836,000)
Issuance of 159,000 shares of Class
A Common Stock and 346,000 Shares
of Class B Common Stock under the
1991 Stock Option Plan............ 2,000 3,000 5,056,000
Issuance of Common Stock under 1994
Incentive Compensation Plan....... 1,000 873,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 2,092,000
Recapitalization costs.............. (616,000)
Repurchase of 3,000 shares of Class
A Common Stock and 1,585,000
shares of Class B Common Stock.... (16,000) (2,901,000) (29,563,000)
Amortization of unearned
compensation...................... 152,000
Net income.......................... 48,498,000
Translation adjustments............. 2,591,000
Unrealized gain on marketable
securities........................ 6,000
Total comprehensive income..........
Cash dividend declared.............. (17,100,000)
-------- -------- ----------- ------------ ------------ -----------
Balance at December 31, 1998........ $100,000 $186,000 $54,823,000 $110,941,000 $(2,239,000)
======== ======== =========== ============ ============ ===========

TOTAL
STOCKHOLDER'S COMPREHENSIVE
EQUITY INCOME
------------- -------------
<S> <C> <C>
Balance at December 31, 1995........ $109,530,000
Issuance of 839,000 shares of Common
Stock under the 1991 Stock Option
Plan.............................. 4,729,000
Issuance of Common Stock under the
1994 Incentive Compensation
Plan.............................. 1,307,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 4,284,000
Repurchase of 575,000 Shares of
Common Stock...................... (7,477,000)
Amortization of unearned
compensation...................... 1,304,000
Net income.......................... 44,791,000 44,791,000
Translation adjustments............. (2,175,000) (2,175,000)
Unrealized loss on Marketable
Securities........................ (45,000) (45,000)
----------
Total comprehensive income.......... 42,571,000
==========
Cash dividends declared............. (17,780,000)
------------
Balance at December 31, 1996........ $138,468,000
Issuance of 669,826 shares of Common
Stock under the 1991 Stock Option
Plan.............................. 4,949,000
Issuance of Common Stock under 1994
Incentive Compensation Plan....... 865,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 3,448,000
One-for-three reverse Stock split...
Stock split effected in the form of
a stock dividend..................
Repurchase of 503,000 shares of
Common Stock A and 789,000 shares
of Common Stock B................. (25,963,000)
Amortization of unearned
compensation...................... 260,000
Net income.......................... 54,667,000 54,667,000
Translation adjustments............. (3,877,000) (3,877,000)
Unrealized gain on marketable
securities........................ 55,000 55,000
----------
Total comprehensive income.......... 50,845,000
==========
Cash dividends declared............. (18,139,000)
------------
Balance at December 31, 1997........ $154,733,000
Issuance of 159,000 shares of Class
A Common Stock and 346,000 Shares
of Class B Common Stock under the
1991 Stock Option Plan............ 5,061,000
Issuance of Common Stock under 1994
Incentive Compensation Plan....... 874,000
Additional capital from tax benefit
of 1991 Stock Option Plan......... 2,092,000
Recapitalization costs.............. (616,000)
Repurchase of 3,000 shares of Class
A Common Stock and 1,585,000
shares of Class B Common Stock.... (32,480,000)
Amortization of unearned
compensation...................... 152,000
Net income.......................... 48,498,000 48,498,000
Translation adjustments............. 2,591,000 2,591,000
Unrealized gain on marketable
securities........................ 6,000 6,000
----------
Total comprehensive income.......... 51,095,000
==========
Cash dividend declared.............. (17,100,000)
------------
Balance at December 31, 1998........ $163,811,000
============
</TABLE>

See the accompanying notes to consolidated financial statements
III-6
<PAGE> 63

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 48,498,000 $ 54,667,000 $ 44,791,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 15,801,000 10,966,000 10,557,000
Deferred income taxes.................................. (10,803,000) (2,984,000) (9,683,000)
Amortization of unearned compensation.................. 152,000 260,000 1,304,000
Stock grant............................................ 88,000 462,000 2,497,000
Unrealized foreign exchange (gain) loss................ (1,059,000) 1,735,000 (368,000)
Minority interest in earnings.......................... 1,233,000 1,003,000 --
Other.................................................. 393,000 299,000 256,000
Changes in operating assets and liabilities:
Receivables............................................ 4,621,000 (18,896,000) (10,377,000)
Inventories............................................ (13,024,000) (31,355,000) (7,454,000)
Prepaid expenses and other current assets.............. (6,987,000) (2,002,000) (1,388,000)
Other assets........................................... (172,000) (885,000) (1,035,000)
Accounts payable....................................... 1,601,000 (2,301,000) (466,000)
Royalty overrides...................................... (661,000) 16,885,000 11,335,000
Accrued expenses and accrued compensation.............. 6,401,000 4,938,000 20,065,000
Advance sales deposits................................. (10,835,000) 10,869,000 (6,790,000)
Income taxes payable................................... 12,518,000 6,709,000 11,802,000
Deferred compensation liability........................ 9,476,000 4,935,000 2,832,000
------------ ------------ ------------
CASH PROVIDED BY OPERATING ACTIVITIES.................... 57,241,000 55,305,000 67,878,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property.................................. (19,098,000) (13,090,000) (15,401,000)
Proceeds from sale of property......................... 131,000 176,000 549,000
Net changes in marketable securities................... 38,613,000 (181,000) (8,553,000)
Deferred compensation plan............................. (11,595,000) (4,009,000) (2,455,000)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES...... 8,051,000 (17,104,000) (25,860,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid......................................... (17,530,000) (18,150,000) (17,869,000)
Distribution to minority interest...................... (505,000) (98,000)
Additions to bank loans and contracts payable.......... 1,483,000 510,000 1,219,000
Principal payments on bank loans and contracts
payable............................................. (1,544,000) (3,337,000) (1,619,000)
Exercise of stock options.............................. 5,061,000 4,949,000 4,729,000
Stock repurchases...................................... (32,480,000) (25,963,000) (7,477,000)
Recapitalization cost.................................. (616,000) -- --
Other.................................................. -- -- (6,000)
------------ ------------ ------------
NET CASH USED IN FINANCING ACTIVITIES.................... (46,131,000) (42,089,000) (21,023,000)
------------ ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................ 2,647,000 (4,680,000) (2,690,000)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 21,808,000 (8,568,000) 18,305,000
CASH AND CASH EQUIVALENTS AT JANUARY 1................... 78,913,000 87,481,000 69,176,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT DECEMBER 31................. $100,721,000 $ 78,913,000 $ 87,481,000
============ ============ ============
CASH PAID DURING THE YEAR
Interest Paid.......................................... $ 1,321,000 $ 506,000 $ 352,000
============ ============ ============
Income Taxes Paid (Refunded)........................... $ 27,012,000 $ 27,110,000 $ 21,186,000
============ ============ ============
</TABLE>

See the accompanying notes to consolidated financial statements
III-7
<PAGE> 64

HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

Herbalife International, Inc. and its subsidiaries (the "Company") markets
weight management products, food and dietary supplements and personal care
products worldwide. The Company's products, which consist of herbs and other
natural ingredients, are marketed through a network marketing system in which
"distributors" who are generally independent contractors purchase products for
resale to retail consumers and other distributors. As of December 31, 1998, the
Company conducted business in forty-two countries located in the Asia/Pacific
Rim, Europe and Americas. In the Company's foreign markets, distributors market
the same, or essentially the same products, as those sold in the United States
and in fundamentally the same manner.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements include the accounts of the Company
and its subsidiaries; all significant intercompany transactions and accounts
have been eliminated.

Translation of Foreign Currencies

Foreign subsidiaries asset and liability accounts are translated for
consolidated financial reporting purposes into U.S. dollar amounts at year-end
exchange rates. Revenue and expense accounts are translated at the average rates
during the year. Foreign exchange translation adjustments are included in other
comprehensive income. Transaction losses, which were $771,000, $1,564,000, and
$3,013,000 in the years ending December 31, 1998, 1997 and 1996, respectively,
are included in marketing, distribution and administrative expenses in the
accompanying Consolidated Statements of Income.

Forward Exchange Contracts

The Company enters into forward exchange contracts in managing its foreign
exchange risk on intercompany transactions and does not use the contracts for
trading purposes. Gains and losses related to qualifying hedges are deferred and
recognized in operating income when the underlying hedged transaction occurs.
Premium payments on such contracts are amortized to expense over the life of the
contracts.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are comprised primarily of money market accounts, foreign and
domestic bank accounts, and tax-exempt municipal bonds with short-term
maturities. To reduce its credit risk, the Company monitors the credit standing
of the financial institutions that hold the Company's cash and cash equivalents.

Marketable Securities

The Company's marketable securities are classified as "available for sale".
Fluctuations in fair value are included in other comprehensive income.
Marketable securities are comprised primarily of tax-exempt municipal bonds with
contractual maturities of up to five years.

III-8
<PAGE> 65
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Value of Financial Instruments

The Company has estimated the fair value of its financial instruments using
the following methods and assumptions:

The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value because of the short term maturity of
these instruments.

Marketable securities are based on the quoted market prices for these
instruments.

Foreign exchange contracts are based on exchange rates at December 31,
1998. The fair value of option contracts are based on dealer quotes.

Inventories

Inventories are stated at lower of cost (on the first-in, first-out basis)
or market.

Advertising Costs

The Company expenses advertising costs in the period incurred. Literature
and promotional items are sold to distributors and are included in inventories
and are charged to cost of sales as they are sold.

Long-Lived Assets

Depreciation of furniture, fixtures and other equipment is computed on a
straight-line basis over the estimated useful lives of the related assets, which
range from three to six years. Leasehold improvements are amortized on a
straight-line basis over the life of the related asset or the term of the lease,
whichever is shorter.

Goodwill is being amortized over periods ranging from fifteen to forty
years.

Long-lived assets are reviewed for impairment, based on undiscounted cash
flows, whenever events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable.

Income Taxes

Income tax expense includes income taxes payable for the current year and
the change in deferred income tax assets and liabilities for the future tax
consequences of events that have been recognized in the Company's financial
statements or income tax returns. A valuation allowance is recognized to reduce
the carrying value of deferred income tax assets if it is believed to be more
likely than not that a component of the deferred income tax assets will not be
realized.

Royalty Overrides

An independent distributor may earn commissions called royalty overrides or
production bonuses based on retail volume. Such commissions are based on the
retail sales volume of certain other members of the independent sales force who
are sponsored by the distributor.

Minority Interest

On December 30, 1996, the Company sold shares of Herbalife Japan to certain
Company Directors, Executive Officers and Resident Managers of Herbalife Japan.
The minority interest represents the minority stockholders' approximate 7%
interest in the equity of Herbalife Japan -- See Footnote 8 -- "Transactions
with Related Parties".

III-9
<PAGE> 66
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Revenue Recognition

The Company records its retail sales based upon suggested retail prices as
reflected on the Company's sales invoices to its distributors. The Company does
not receive the amount reported as retail sales, but generally receives the net
sales price in cash or through credit card payments upon receipt of orders from
distributors. The net sales price is the suggested retail price less a
distributor allowance approximating 50%. Sales, related royalty overrides, and
allowances for product returns are recorded when the merchandise is shipped.
Advance sales deposits represent prepaid orders for which the Company has not
shipped the merchandise.

Sources of Supply and Product Development

All of the Company's products are manufactured by outside companies. Raven
Industries ("Raven") currently manufactures most of the Company's powder
products, and D&F Industries ("D&F) currently supplies most of the Company's
tablet and capsule products. For a number of years prior to 1998, the Company
was subject to requirements contracts with each of Raven, D&F and Dynamic
Products, Inc. ("Dynamic") pursuant to which the Company agreed to purchase all
of its requirements of powder products from Raven and all of its requirements of
tablet, capsule and certain other products from Dynamic or D&F, to the extent
each such manufacturer was capable of manufacturing such products. In 1996 and
1997, aggregate purchases by the Company from Raven and D&F represented a
majority of the Company's product purchases. In September 1997, the Company
entered into new three-year agreements with Raven, D&F and Dynamic, pursuant to
which revised pricing and other provisions became effective on January 12, 1998.
The new contracts provide, among other things, the ability for the Company to
source and develop products with other third party manufacturers, subject to
minimum percentage purchase and other requirements for nutritional supplement,
and a small number of non-nutritional supplement, products falling into
specified product categories. As a result, and because the new contracts confirm
the Company's ownership of product formulations for substantially all of the
Company's nutritional products, the Company has the capacity, and in the future
may seek, to "second source" particular nutritional supplement products with
multiple manufacturers. In addition, a number of the Company's new products,
such as WaferFull(TM) and Chew Slim(TM)weight management products are being
manufactured for the Company by new manufacturers. Increasingly, the Company's
in-house staff has been conducting product research and development and product
formulation. However, the Company has historically relied on Raven and D&F for
these services, and will continue to do so, albeit to a lesser extent, in the
future.

Earnings Per Share

At December 31, 1997, the Company adopted Statement of Financial Accounting
Standard No. 128 ("SFAS 128"), "Earnings per Share". SFAS 128 replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share based upon the weighted average number of common shares outstanding
for the period. It also requires dual presentation of basic and diluted earnings
per share for companies with complex capital structures. Earnings per share for
the current and prior periods have been presented in conformity with the
provisions of SFAS 128

Net income as presented in the consolidated income statement is used as the
numerator in the earnings per share calculation for both the basic and diluted
computations.

Stock Compensation

Effective January 1, 1996, the Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation". This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans, such as stock purchase plans, stock options,
restricted stock and stock appreciation rights as well as non-employee equity
transactions. The Company has not changed the

III-10
<PAGE> 67
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

method of accounting for its employee stock compensation plans, but as permitted
by this statement, has provided the fair value disclosure requirements in
Footnote 10.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.

Recently Issued Accounting Pronouncements

At December 31, 1998, the Company adopted Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS 130), No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131) and No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" (SFAS 132). The adoption of these standards expanded or
modified disclosures but had no impact on consolidated financial position,
results of operations or cash flows.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities and
will be effective January 1, 2000. The Company has not yet analyzed the impact
of adopting this statement.

In April, 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Cost of Start-up
Activities." This Statement requires that all start-up activities, including
organizational costs, be expensed as incurred. The Company elected to adopt SOP
98-5 on January 1, 1998. The effects of adopting this SOP did not have a
material impact on consolidated financial position, results of operations or
cash flows.

In March, 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This Statement establishes
guidance on the capitalization of software for internal use. The Company will
adopt SOP 98-1 on January 1, 1999 as required. The Company has not yet analyzed
the impact of adopting this statement.

3. INVENTORIES

Inventories consist primarily of finished goods available for resale and
can be categorized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Product........................................... $75,182,000 $61,048,000
Literature........................................ 7,009,000 4,990,000
Promotional items................................. 5,947,000 5,545,000
----------- -----------
Total................................... $88,138,000 $71,583,000
=========== ===========
</TABLE>

III-11
<PAGE> 68
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BANK LOANS AND CONTRACTS PAYABLE

Bank loans and contracts payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Capitalized leases, due in monthly installments
through 2003 (Note 5)............................. $3,748,000 $3,824,000
Bank loans.......................................... 1,248,000 291,000
---------- ----------
Total..................................... 4,996,000 4,115,000
Less current portion................................ 2,639,000 1,449,000
---------- ----------
Long-term portion................................... $2,357,000 $2,666,000
========== ==========
</TABLE>

Annual scheduled payments of bank loans and contracts payable are:
$2,639,000 (1999), $1,346,000 (2000), $780,000 (2001), $187,000 (2002), and
$44,000 (2003).

The Company has revolving bank credit facilities in Turkey in the amount of
$2,000,000. The credit facilities will continue to be available until written
notice is provided. The credit facilities provide for borrowings at local
interest rates, set when borrowings are made. The borrowings are collateralized
by cash investments on account with the bank. At December 31, 1998, there was
$1,248,000 outstanding at December 31, 1998.

The Company has a line of credit arrangement expiring December 31, 2000,
which provides for unsecured borrowings of up to $25 million with the interest
rate based on Libor plus 1/2%. The Company had no borrowings under the line of
credit agreement at December 31, 1998, although $4.4 million was used to secure
letters of credit. The terms of the line of credit agreement contain, among
other provisions, requirements for maintaining defined levels of working
capital, net worth and fixed charge ratio.

The Company has pledged cash and cash equivalents to secure financing
primarily for the benefit of its foreign subsidiaries, including letters of
credit, leases and other obligations. As of December 31, 1998, an aggregate of
$2.5 million had been pledged against $2.0 million of commitments for debt
obligations.

5. LEASE OBLIGATIONS

The Company has warehouse and office facilities, furniture and fixtures and
equipment under leases which expire at various dates through 2009. Under the
lease agreements, the Company is also obligated to pay property taxes,
insurance, and maintenance costs.

Certain of the leases contain renewal options. Future minimum rental
commitments for non-cancelable operating leases and capital leases at December
31, 1998 were as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
----------- ----------
<S> <C> <C>
1999............................................... $10,971,000 $2,028,000
2000............................................... 9,984,000 1,820,000
2001............................................... 7,193,000 825,000
2002............................................... 5,826,000 194,000
2003............................................... 5,667,000 45,000
Thereafter......................................... 12,996,000 --
----------- ----------
Total.................................... $52,637,000 4,912,000
===========
Less: Amounts included above representing
interest......................................... 1,164,000
----------
Present value of net minimum lease payments........ $3,748,000
==========
</TABLE>

III-12
<PAGE> 69
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Rental expense for the years ended December 31, 1998, 1997 and 1996 was
$18,336,000, $14,299,000 and $9,434,000, respectively.

Property under capital leases is included in property in the accompanying
balance sheets at December 31, 1998 and 1997 as follows:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Equipment........................................... $6,935,000 $6,105,000
Less: accumulated amortization...................... 3,487,000 2,096,000
---------- ----------
Total..................................... $3,448,000 $4,009,000
========== ==========
</TABLE>

6. EMPLOYEE COMPENSATION PLANS

In addition to the stock option plan discussed in Note 10, the Company has
two incentive compensation plans: the 1992 Executive Incentive Compensation Plan
(the "1992 Plan") and the 1994 Performance-Based Annual Incentive Compensation
Plan (the "1994 Plan"). Under the 1992 plan, a target percentage of earnings
before bonuses and income taxes may be awarded to Officers, Directors and Key
Employees, as determined by the Chief Executive Officer and Compensation
Committee, based on the attainment of certain corporate and business objectives.
The expense under the 1992 Plan for 1996 was $320,000. No bonuses were awarded
under this plan for 1998 or 1997.

The 1994 Plan provides additional compensation as an incentive to key
executives and consultants to attain certain specified performance objectives of
the Company. The amount of the available awards to individual participants and
the aggregate amount to all participants is determined based upon objective
performance goals as determined by the Compensation Committee of the Board of
Directors. The amounts awarded under the 1994 Plan for 1998, 1997 and 1996
totaled $6,750,000, $8,400,000 and $5,850,000, respectively.

In accordance with the 1994 Plan, the Company made advances of targeted
performance bonus amounts during 1998, 1997 and 1996 to the participants. As of
December 31, 1998, the remaining outstanding principal and accrued interest was
$6,000,000, included in receivables in the accompanying balance sheets. 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 outstanding advances at December 31, 1998 range from
4.33% to 5.64%.

The Company also maintains a profit sharing plan pursuant to Sections 401
(k) and (m) of the Internal Revenue Code. The plan is available to substantially
all employees who meet length of service requirements. Employees may elect to
contribute 2% to 17% of their compensation, and the Company will match a portion
of the participant's contribution. Participants are partially vested in the
Company contributions after three years and fully vested after seven years. The
Company contributed $646,000, $470,000 and $399,000 for the years ended December
31, 1998, 1997 and 1996, respectively.

In 1996, the Company implemented two non-qualified, deferred compensation
plans for select groups of management: the "Management Plan" and the "Senior
Executive Plan". The Deferred Compensation Plans are unfunded and their benefits
are paid from the general assets of the Company, except that the Company has
contributed certain amounts to a "rabbi trust" whose assets will be used to pay
the benefits if the Company remains solvent, but can be reached by the Company's
creditors if the Company becomes insolvent. The Deferred Compensation Plans
allow eligible employees to elect annually to defer up to fifty percent (50%) of
their base annual salary and up to one hundred percent (100%) of their annual
bonus for each calendar year (the "Annual Deferral Amount"). The Company makes
matching contributions on behalf of each participant in the Senior Executive
Plan of one hundred percent (100%) of the amount deferred by each participant up
to ten percent (10%) of the participant's base annual salary. Each participant
in either of the Deferred

III-13
<PAGE> 70
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Compensation Plans has at all times a fully vested and non-forfeitable interest
in each year's contribution, including interest credited thereto, and in any
Company matching contributions, if applicable. In connection with a
participant's election to defer an Annual Deferral Amount, the participant may
also elect to receive a short-term payout, equal to the Annual Deferral Amount
plus interest. Such amount is payable in five or more years from the first day
of the year in which the Annual Deferral Amount is actually deferred. The gross
deferred compensation expense was $6,144,000, $4,683,000 and $2,826,000 for
1998, 1997 and 1996, respectively. The deferred compensation expense net of
participant contributions was $2,780,000, $1,078,000 and $616,000 for 1998, 1997
and 1996, respectively. The long-term deferred compensation liability, included
in other noncurrent liabilities in the accompanying balance sheet, was
$13,845,000 and $7,336,000 for December 31, 1998 and 1997, respectively.
Included in other assets is the related deferred compensation investment of
$12,445,000 and $6,464,000 for December 31, 1998 and 1997, respectively.

In addition, effective as of August 9, 1994, the Company entered into a
Deferred Compensation Agreement with a Senior Executive, pursuant to which this
employee has received and will continue to receive $600,000 in cash deferred
compensation from the Company on each of the first five anniversary dates of
such Deferred Compensation Agreement on which this employee remained
continuously employed by the Company. The gross deferred compensation expense
under the agreement with this employee was $600,000 for each of the three years
ended December 31, 1998. The long-term deferred compensation liability under the
agreement with this employee, included in other noncurrent liabilities in the
accompanying balance sheet, was $2,025,000 and $1,425,000 for December 31, 1998
and 1997, respectively.

7. RETIREMENT PLAN

In September 1997, the Company implemented a nonqualified, non-contributory
Supplemental Executive Retirement Plan ("SERP") providing retirement benefits
for a select group of management and highly compensated employees. The SERP is
unfunded and its benefits are paid from the general assets of the Company,
except that the Company has contributed $4,389,000 to a "rabbi trust" whose
assets will be used to pay benefits if the Company remains solvent, but can be
reached by the Company's creditors if the Company becomes insolvent. The normal
retirement benefit under the SERP is 60 quarterly installment payments
commencing at age 65, each of which equals one-quarter of 1.75% of
"compensation" times the number of years of service up to 20 years. A
participant becomes fully vested in his or her interest in the SERP on his or
her normal or early retirement date, death, or disability, or on a change in
control of the Company. If a participant's employment is terminated for cause,
the Company has the discretion to reduce his or her vested benefit to zero. In
all other cases, a participant's vested interest is zero until he or she has
completed five years of service, and gradually increases to 100% when he or she
has completed nine years of service. The Plan Administrator has the discretion
to credit a participant with additional years of service as of his or her date
of

III-14
<PAGE> 71
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

hire or commencement of participation in the SERP. The following table shows the
net periodic pension cost and other data about the SERP:

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of
year/inception.................................. $ 5,965,000 $ 5,561,000
Service cost...................................... 989,000 270,000
Interest cost..................................... 432,000 134,000
Actuarial loss.................................... 1,643,000
----------- -----------
Benefit obligation at end of year................. $ 9,029,000 $ 5,965,000
=========== ===========
Funded status..................................... $(9,029,000) $(5,965,000)
Unrecognized actuarial loss....................... 1,643,000
Unrecognized prior service cost................... 5,066,000 5,437,000
----------- -----------
Net amount recognized............................. $(2,320,000) $ (528,000)
=========== ===========
Amounts recognized in the statement of
consolidated balance sheet consolidated balance
sheets consist of:
Accrued benefit liability....................... $(6,246,000) $(4,233,000)
Intangible asset................................ 3,926,000 3,705,000
----------- -----------
Net amount recognized............................. $(2,320,000) $ (528,000)
=========== ===========

1998 1997
----------- -----------
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate..................................... 6.5% 7.25%
Expected return on plan assets.................... N/A N/A
Rate of compensation increase..................... 4% 4%

1998 1997
----------- -----------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost...................................... $ 989,000 $ 270,000
Interest cost..................................... 432,000 134,000
Amortization of prior service cost................ 371,000 124,000
----------- -----------
Net periodic pension cost......................... $ 1,792,000 $ 528,000
=========== ===========
</TABLE>

8. TRANSACTIONS WITH RELATED PARTIES

On April 23, 1998, Raven Industries ("Raven") and D&F Industries ("D&F"),
two of the significant suppliers of the Company's products, and Dynamic
Products, Inc. ("Dynamic") another supplier to the Company, concluded a bond
offering. Part of the proceeds from the offering was used to repurchase certain
ownership interests in such entities, including the entire ownership interest of
Mr. Hughes, CEO and President of the Company in Raven and Dynamic (representing
1/3 and 1/5 of the formerly outstanding ownership, respectively), as well as the
entire ownership interest of an employee (formerly a Director and Executive
Officer) of the Company in Dynamic (representing 5% of the formerly outstanding
ownership). Total purchases from Raven Industries were $16,379,000, $63,424,000
and $53,193,000 for the period January 1, 1998 through April 23, 1998 and for
the years ended December 31, 1997 and 1996, respectively. Total purchases from
Dynamic Products, Inc. were $990,000, $3,347,000 and $3,181,000 for the period
January 1, 1998 through April 23, 1998 and for the years ended December 31, 1997
and 1996, respectively. At December 31, 1997, the aggregate amounts payable to
these suppliers were $103,000.

In addition to advances described in Note 6, the Company has made
additional advances of $704,000 to certain officers and a Director. The
outstanding principal and accrued interest was $642,000 at December 31,

III-15
<PAGE> 72
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1998 (included in receivables on the accompanying balance sheet). Each
outstanding advance is a full recourse obligation of the officer with a maturity
date of three months to 30 months. The advances bear interest ranging from 5.06%
to 5.75%.

The Company engaged Nutrient Research Consultants, Ltd., which is wholly
owned by an employee (former Director and Executive Officer), to perform
consulting services related to the formulation and testing of nutritional
products. For the year ended December 31, 1996, payments by the Company to this
consulting firm amounted to $230,000. No payments were made to this firm in 1997
and 1998.

In December 1996, the Company sold an approximate 7% interest in its
Japanese subsidiary to certain Company directors, executive officers and
resident managers of Herbalife Japan K.K.. The aggregate sales price was
$4,620,000: $1,386,000 in cash and $3,234,000 in full recourse interest bearing
notes. The notes are payable in 16 equal quarterly principal and interest
installments, beginning in March 1998, as amended. The outstanding note
receivable balance at December 31, 1998 and 1997 was $2,665,000 and $3,224,000,
respectively (included in other assets on the accompanying balance sheet). The
sales price of the shares was determined based upon a valuation performed by an
independent investment banking firm. The profit recognized from the sale has
been deferred until the interest ultimately is sold to a third party.

9. CONTINGENCIES

The Company is subject to transfer pricing regulations, restrictions on the
management fees it charges to its worldwide subsidiaries and similar regulations
and restrictions designed to ensure that appropriate levels of income are
reported as earned by each local subsidiary and taxed by the appropriate
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 substantial compliance with all
applicable regulations and restrictions, it is subject to the risk that
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 which are at various levels of review,
assessment or appeal in a number of foreign jurisdictions, including Italy and
France, involving transfer pricing issues, income taxes, value added taxes,
withholding taxes and related interest and penalties in material amounts. In
certain circumstances, additional taxes, interest and penalties have been
assessed, and the Company will be required to litigate to reverse the
assessments. In addition, Italian criminal tax proceedings are pending against
the former managing director of the Company's Italian subsidiary in his capacity
as such with respect to certain tax issues affecting the Company (and not
affecting distributors or the taxation of distributors). The Company has been
advised by its Italian tax counsel that referral of tax charges to criminal
authorities in Italy is a relatively common procedure (pursuant to statutory
provisions requiring referral of specific types of claims based upon the amounts
thereof) and in any event believes that the Company has strong defenses to the
charges. None of the pending or proposed audits, assessments or litigation is
expected to have a material adverse effect on the Company. However, ultimate
resolution of these matters may take several years and the outcome is uncertain.

In the event that such audits or assessments are concluded adversely to the
Company, the Company believes that it may be able to offset or mitigate the
consolidated effect of foreign income tax assessments through the use of U.S.
foreign tax credits. Currently, the foreign tax credits are being fully
utilized, so that additional such credits might not be usable to offset current
taxes. Further, 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 such additional foreign tax
credits in the future.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

to ascertain what causes of action the plaintiffs are attempting (or have the
right) to allege against the Company, the case appears to be primarily a claim
for breach of contract. In addition, the Miron Suit appears to attempt to
challenge the legality of the company's marketing system. The Company believes
that it has meritorious defenses to the allegations that appear to be asserted
against the Company. Due to the uncertainty inherent in any litigation and the
early stage of this proceeding, however, there can be no assurances that the
Company will obtain a favorable resolution of the Miron Suit or that an adverse
disposition of the case would not have a material adverse effect on the Company.

Furthermore, the Company is from time to time engaged in routine
litigation. The Company regularly reviews all pending litigation matters in
which it is involved and, estimating the impact of such litigation matters,
establishes reserves considered appropriate by management. The Company's
estimates of the impact of these matters may change as the matters progress and
are ultimately resolved.

10. STOCKHOLDERS' EQUITY

At a Special Meeting of the Company's shareholders held on December 11,
1997, the Company's shareholders approved a recapitalization plan (the
"Recapitalization"), pursuant to which the Company's Articles of Incorporation
were amended and restated to: (i) effect a one-for-three reverse split (the
"Reverse Split") of the Old Common Stock, (ii) reclassify each resulting whole
share of Old Common Stock as a share of Class A Stock, (iii) create a new class
of non-voting common stock, designated Class B Stock, and (iv) fix the relative
rights, powers and limitations of the Class A Stock and the Class B Stock. The
Recapitalization did not change the aggregate number of shares of the Company's
authorized and outstanding capital stock. On December 12, 1997, the
Recapitalization became effective and the Company's Board of Directors declared
a dividend of two shares of Class B Stock on each whole share of Class A Stock
resulting from the Reverse Split. On December 15, 1997, trading of both the
Class A Stock and the Class B Stock commenced on the NASDAQ National Market
system. Common stock options and SARs have been retroactively adjusted to
reflect the Recapitalization.

The Company's 1991 Stock Option Plan ("1991 Plan"), as amended, permits the
granting of non-qualified stock options to key employees and consultants to
purchase 7,400,000 shares of the Company's Class A Stock and/or Class B Stock
(less shares previously exercised) at prices not less than 85% of the fair
market value of such shares on the date the option is granted. All options
outstanding at December 31, 1998 were granted at the fair market value of such
shares on the grant date. The contractual life of the options are generally 10
years and vest ratably over a maximum of 5 years in minimum annual installments
of 20%.

The Company's 1994 Plan allows for the granting of stock based performance
awards authorized by the Compensation Committee of the Board of Directors.
Compensation costs for these awards are recorded based on the quoted market
price of the Company's common stock at the end of the period in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations.

The employees are entitled to receive dividends, but assumption of full
beneficial ownership vests ratably over five years and is contingent upon
remaining in continuous employment for the vesting period. Paid-in Capital in
Excess of Par Value and Unearned Compensation were recorded for the market value
of the shares issued. Unearned Compensation is being amortized to compensation
expense over the vesting period and is shown as a reduction of stockholders'
equity. Stock based compensation costs included in the determination of income
were $240,000, $1,332,000, and $4,798,000 for the years ended 1998, 1997, and
1996, respectively.

During October, 1998, 1.9 million Class A Stock options and 5.1 million
Class B Stock options were repriced by the Company to reflect the then current
stock price of $8.000 and $6.625 respectively.

The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25. Had compensation cost for stock option grants
been calculated using the fair value provisions of

III-17
<PAGE> 74
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the Company's net earnings and earnings per share
would have been reduced to the pro forma amounts indicated in the following
table:

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Income -- as reported........... $48,498,000 $54,667,000 $44,791,000
Net Income -- pro forma............. $33,190,000 $46,881,000 $42,054,000
Basic EPS -- as reported............ $ 1.68 $ 1.81 $ 1.50
Basic EPS -- pro forma.............. $ 1.15 $ 1.55 $ 1.41
Diluted EPS -- as reported.......... $ 1.60 $ 1.72 $ 1.43
Diluted EPS -- pro forma............ $ 1.14 $ 1.49 $ 1.38
</TABLE>

The pro forma effect on net income for the years presented is not
necessarily representative of the pro forma effect on net income for future
years since the pro forma compensation costs relate only to stock options
granted or repriced since January 1, 1995.

The fair value of the stock options granted during the years presented was
determined using the Black-Scholes option pricing model and the following
weighted average assumptions:

<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Risk free interest rate............ 4.44% 4.51% 6.49% 6.49% 6.47% 6.47%
Expected option life............... 6.7 years 6.7 years 6.9 years 6.9 years 5.5 years 5.5 years
Volatility......................... 61.09% 59.54% 75.18% 75.18% 77.68% 77.68%
Dividend yield..................... 3.00% 3.50% 3.50% 3.50% 5.20% 5.20%
</TABLE>

III-18
<PAGE> 75
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Option groups outstanding at December 31, 1998, 1997 and 1996 and related
option information follows:

<TABLE>
<CAPTION>
CLASS A STOCK CLASS B STOCK
-------------------------------------------- -------------------------------------
WEIGHTED WEIGHTED
OPTIONS AVERAGE SARS OPTIONS AVERAGE SARS
--------------- -------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
Outstanding at January 1..... 2,041,000 $14.27 -- 4,156,000 $14.40 --
Granted...................... 374,000 22.12 -- 1,334,000 19.89 --
Repriced..................... 1,907,000 8.00 -- 5,075,000 6.63 --
Exercised.................... (159,000) 9.86 -- (346,000) 9.57 --
Surrendered for repricing.... (1,907,000) 17.53 -- (5,075,000) 16.30 --
Canceled..................... (16,000) 10.65 -- (37,000) 10.61 --
--------------- ------ --------------- --------------- ------ --------
Outstanding at December 31... 2,240,000 $7.85 -- 5,107,000 $ 6.58 --
====== =============== ====== ========
Available for grant at
December 31................ 15,000 45,000
--------------- ---------------
Total reserved shares.... 2,255,000 5,152,000
=============== ===============
Exercisable at December 31... 736,000 1,462,000
=============== ===============
Option prices per share
Granted.................... $8.00 - $22.13 $6.63 - $26.00
Exercised.................. $7.38 - $19.88 $6.68 - $19.88
Weighted average fair value
of options granted during
the year................... $4.22 $3.67
1997
Outstanding at January 1..... 1,312,000 $10.92 62,000 2,627,000 $10.92 124,000
Granted.................... 933,000 17.29 -- 1,940,000 17.45 --
Exercised.................. (222,000) 7.39 (10,000) (448,000) 7.39 (20,000)
SAR's converted to
options.................. 52,000 15.55 (52,000) 104,000 15.55 (104,000)
Canceled................... (34,000) 15.56 -- (67,000) 15.56 --
--------------- ------ --------------- --------------- ------ --------
Outstanding at December 31... 2,041,000 $14.27 -- 4,156,000 $14.40 --
====== =============== ====== ========
Available for grant at
December 31................ 226,000 377,000
--------------- ---------------
Total reserved shares.... 2,267,000 4,533,000
=============== ===============
Exercisable at December 31... 389,000 778,000
=============== ===============
Option prices per share
Granted.................... $15.69 - $25.13 $15.69 - $25.13
Exercised.................. $0.88 - $13.00 $0.88 - $13.00
Weighted average fair value
of options granted during
the year................... $9.46 $9.56
1996
Outstanding at January 1..... 972,000 $6.69 20,000 1,944,000 $ 6.69 40,000
Granted.................... 638,000 14.96 58,000 1,277,000 14.96 117,000
Exercised.................. (280,000) 5.64 (5,000) (559,000) 5.64 (11,000)
Canceled................... (18,000) 7.38 (11,000) (35,000) 7.38 (22,000)
--------------- ------ --------------- --------------- ------ --------
Outstanding at December 31... 1,312,000 $10.92 62,000 2,627,000 $10.92 124,000
====== =============== ====== ========
Available for grant at
December 31................ 221,000 441,000
--------------- ---------------
Total reserved shares.... 1,533,000 3,068,000
=============== ===============
Exercisable at December 31... 256,000 513,000
=============== ===============
Option prices per share
Granted.................... $10.13 - $19.88 $10.13 - $19.88
Exercised.................. $0.88 - $15.25 $0.88 - $15.25
Weighted average fair value
of options granted during
the year................... $7.23 $7.23
</TABLE>

III-19
<PAGE> 76
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information regarding option groups
outstanding at December 31, 1998.

<TABLE>
<CAPTION>
WTD AVG
NUMBER REMAINING WTD AVG OPTIONS WTD AVG
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
AT 12/31/98 LIFE PRICE AT 12/31/98 PRICE
----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Range of Exercise Prices:
Class A
$0.88...................................... 19,000 3 Years $0.88 19,000 $0.88
$7.38...................................... 290,000 6 Years $7.38 238,000 $7.38
$7.50...................................... 25,000 7 Years $7.50 20,000 $7.50
$8.00...................................... 1,906,000 8 Years $8.00 459,000 $8.00
Class B
$0.88...................................... 38,000 3 Years $0.88 38,000 $0.88
$6.63...................................... 5,069,000 8 Years $6.63 1,424,000 $6.63
</TABLE>

11. SEGMENT INFORMATION

The Company is a network marketing company that sells a wide range of
weight management products, food and dietary supplements and personal care
products within one industry as defined under SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company's products are
manufactured by third party providers and then sold to independent distributors
who sell Herbalife products to retail consumers or other distributors.

III-20
<PAGE> 77
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has operations throughout the world (42 countries as of
December 31, 1998) and is organized and managed by geographic area. Transactions
between geographic segments generally represent export sales from the United
States to foreign operations. Information reviewed by the Company's chief
operating decision makers on significant geographic segments, as defined under
SFAS 131, is prepared on the same basis as the consolidated financial statements
and is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
TOTAL RETAIL SALES:
United States(1)........................... $ 893.4 $ 745.7 $ 656.7
Japan...................................... 547.7 525.7 311.1
Russia..................................... 96.7 157.8 142.1
All others(1).............................. 642.0 512.0 471.1
Elimination of intersegment sales(1)....... (535.0) (450.5) (380.9)
-------- -------- --------
TOTAL RETAIL SALES...................... 1,644.8 1,490.7 1,200.1
-------- -------- --------
DISTRIBUTOR ALLOWANCES:
United States(2)........................... 369.5 294.3 269.7
Japan...................................... 265.4 253.7 149.0
Russia..................................... 42.9 73.4 68.1
All others................................. 296.7 239.0 219.2
Elimination of intersegment allowance(2)... (196.3) (152.2) (137.8)
-------- -------- --------
TOTAL DISTRIBUTOR ALLOWANCES............ 778.2 708.2 568.2
-------- -------- --------
NET SALES.................................... $ 866.6 $ 782.5 $ 631.9
======== ======== ========
OPERATING INCOME(3):
United States.............................. $ 244.5 $ 206.2 $ 175.9
Japan...................................... 62.9 61.2 36.2
Russia..................................... 5.0 26.4 14.9
All others................................. 34.1 13.5 26.8
Elimination of intersegment gross profit... (232.5) (191.0) (160.7)
-------- -------- --------
TOTAL................................... 114.0 116.3 93.1
-------- -------- --------
Corporate expenses......................... (35.7) (30.3) (24.4)
Net interest income........................ 2.5 4.5 4.1
Income taxes............................... (31.1) (34.9) (28.0)
Minority interest.......................... (1.2) (1.0) --
-------- -------- --------
NET INCOME................................... $ 48.5 $ 54.6 $ 44.8
======== ======== ========
TOTAL ASSETS:
United States.............................. $ 116.2 $ 138.5 $ 143.2
Japan...................................... 69.4 57.9 29.6
Russia..................................... 11.0 16.2 10.6
All others................................. 123.0 83.6 68.8
Corporate(4)............................... 31.9 23.0 19.5
Elimination................................ (3.3) (4.6) (2.6)
-------- -------- --------
TOTAL ASSETS............................ $ 348.2 $ 314.6 $ 269.1
======== ======== ========
</TABLE>

III-21
<PAGE> 78
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CAPITAL EXPENDITURES:
United States.............................. $ 14.5 $ 10.5 $ 11.4
Japan...................................... 1.9 2.4 0.5
Russia..................................... 0.5 -- --
All others................................. 2.2 0.2 3.5
-------- -------- --------
TOTAL CAPITAL EXPENDITURES.............. $ 19.1 $ 13.1 $ 15.4
======== ======== ========
Notes:
(1) Includes intersegment sales of:
United States......................... $ 528.9 $ 447.0 $ 377.2
All others............................ 6.1 3.5 3.7
-------- -------- --------
Total.............................. $ 535.0 $ 450.5 $ 380.9
======== ======== ========
(2) Includes distributor allowance reclass
of:
United States......................... 196.3 152.2 137.8
Elimination........................... (196.3) (152.2) (137.8)
-------- -------- --------
Total.............................. -- -- --
======== ======== ========
(3) Includes depreciation and amortization
of:
United States......................... $ 11.5 $ 6.9 $ 5.9
Japan................................. 1.2 0.8 0.3
Russia................................ -- -- --
All Others............................ 3.1 3.3 4.4
-------- -------- --------
Total.............................. $ 15.8 $ 11.0 $ 10.6
======== ======== ========
(4) Corporate assets includes:
Goodwill.............................. $ 3.3 $ 3.5 $ 3.6
ST deferred taxes..................... 21.9 16.8 15.7
LT deferred taxes..................... 6.7 2.7 0.2
-------- -------- --------
Total.............................. $ 31.9 $ 23.0 $ 19.5
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUE BY PRODUCT LINE IS AS FOLLOWS:
Weight management............................ $ 512.8 $ 448.9 $ 358.3
Food and dietary supplements................. 865.2 805.8 666.0
Personal care products....................... 198.9 166.6 115.4
Literature, promotional and other............ 67.9 69.4 60.4
-------- -------- --------
Total retail sales................. $1,644.8 $1,490.7 $1,200.1
======== ======== ========
</TABLE>

12. INCOME TAXES

The components of income before income taxes were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Domestic............................ $28,082,000 $44,769,000 $23,298,000
Foreign............................. 52,781,000 45,751,000 49,533,000
----------- ----------- -----------
$80,863,000 $90,520,000 $72,831,000
=========== =========== ===========
</TABLE>

III-22
<PAGE> 79
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
CURRENT:
Foreign................................ $ 33,048,000 $25,397,000 $26,349,000
Federal................................ 6,133,000 9,858,000 8,774,000
State.................................. 2,754,000 2,579,000 2,600,000
DEFERRED:
Foreign................................ (395,000) 1,156,000 (3,367,000)
Federal................................ (9,814,000) (3,749,000) (5,589,000)
State.................................. (594,000) (391,000) (727,000)
------------ ----------- -----------
$ 31,132,000 $34,850,000 $28,040,000
============ =========== ===========
</TABLE>

The tax effects of temporary differences which gave rise to deferred income
tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
DEFERRED INCOME TAX ASSETS:
Intercompany profit in inventory.................... $ 1,131,000 $ 1,693,000
Accruals not currently deductible................... 15,479,000 11,798,000
Foreign tax credits and tax loss carryforwards of
certain foreign subsidiaries...................... 5,539,000 3,966,000
Less valuation allowance............................ (3,458,000) (1,601,000)
Depreciation/amortization........................... 201,000 --
Deferred compensation plan.......................... 6,786,000 2,960,000
Accrued state income taxes.......................... 630,000 640,000
Accrued vacation.................................... 1,670,000 --
Other............................................... 2,670,000 1,283,000
----------- -----------
30,648,000 20,739,000
----------- -----------
DEFERRED INCOME TAX LIABILITIES:
Depreciation/amortization........................... -- 975,000
Payments to former partners......................... 896,000 931,000
Inventory deductibles............................... 136,000 748,000
Unrealized foreign exchange......................... 1,050,000
Other............................................... -- 322,000
----------- -----------
2,082,000 2,976,000
----------- -----------
NET................................................. $28,566,000 $17,763,000
=========== ===========
</TABLE>

At December 31, 1998, the Company's deferred income tax asset for U.S.
foreign tax credits ($1,039,000) and tax loss carryforwards of certain foreign
subsidiaries totaling $5,539,000 was reduced by a valuation allowance of
$3,458,000. The tax loss carryforwards expire in varying amounts between 1999
and 2008. Realization of the income tax carryforwards is dependent on generating
sufficient taxable income prior to expiration of the carryforwards. Although
realization is not assured, management believes it is more likely than not that
the net carrying value of the income tax carryforwards will be realized. The
amount of the income tax carryforwards that is considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.

III-23
<PAGE> 80
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The tax expense differs from the "expected" income tax expense by applying
the United States statutory rate of 35% as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Tax expense at United States statutory
rate................................... $28,302,000 $31,682,000 $25,491,000
Increase (decrease) in tax resulting
from:
Foreign sales corporation.............. (194,000) (1,846,000) (332,000)
U.S. foreign tax credits............... (6,671,000) (7,926,000) (4,497,000)
Increase (decrease) in valuation
allowances.......................... 1,857,000 156,000 (626,000)
Differences between U.S. and foreign
tax rates on foreign income......... 8,380,000 10,541,000 6,556,000
State taxes, net of federal benefit.... 1,297,000 1,428,000 1,240,000
Other.................................. (1,839,000) 815,000 208,000
----------- ----------- -----------
TOTAL.......................... $31,132,000 $34,850,000 $28,040,000
=========== =========== ===========
</TABLE>

Cumulative undistributed earnings of foreign subsidiaries for which no
deferred taxes have been provided approximated $13,891,000 at December 31, 1998.
The additional taxes payable on the earnings of foreign subsidiaries, if
remitted, would be substantially offset by U.S. tax credits for foreign taxes
paid.

13. FINANCIAL INSTRUMENTS

The Company enters into foreign exchange derivatives in the ordinary course
of business primarily to reduce its exposures to currency fluctuations
attributable to inter-company transactions and translation of its local currency
revenue. Most of these foreign exchange contracts are designated for forecasted
transactions. The use of these derivative instruments allows the Company to
reduce its overall exposure to exchange rate movements, since the gains and
losses on these contracts substantially offset losses and gains on the assets,
liabilities, and forecasted transactions being hedged.

Foreign exchange option contracts are used primarily to hedge anticipated
Yen revenues resulting from product sales to Japan. The exchange rate at which
these contracts may be exercised is based upon the daily average exchange rate
for a particular month. The Company has guidelines which establish a $5 million
limit on the net amount of option premiums that can be purchased to hedge these
exposures.

The following table provides information about the details of the Company's
option contracts at 12/31/98:

<TABLE>
<CAPTION>
U.S. DOLLAR AVERAGE
EQUIVALENT STRIKE FAIR MATURITY UNREALIZED
FOREIGN CURRENCY COVERAGE PRICE VALUE DATE LOSS
---------------- ----------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Japanese Yen................. $90,000,000 120 $1,781,000 Jan-Dec 1999 $1,915,000
</TABLE>

Foreign exchange forward contracts are occasionally used to hedge
non-functional currency advances between subsidiaries. The objective of these
contracts is to neutralize the impact of foreign currency movements on the
subsidiary's operating results.

III-24
<PAGE> 81
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The table below describes the forward contracts that were outstanding at
12/31/1998:

<TABLE>
<CAPTION>
CONTRACT FORWARD POSITION MATURITY CONTRACT UNREALIZED
FOREIGN CURRENCY DATE IN US DOLLARS DATE RATE LOSS
---------------- ---------- ------------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Buy German Mark/sell Pound
Sterling........................ 12/14/1998 $1,807,000 03/31/1999 2.759 $ (2,000)
Buy Pound Sterling/sell Dutch
Guilders........................ 08/12/1998 1,243,000 02/26/1999 3.202 (33,000)
Buy Norwegian Kroner/sell French
Franc........................... 08/28/1998 912,000 06/30/1999 1.316 (7,000)
Buy Swedish Krona/sell French
Franc........................... 08/28/1998 345,000 06/30/1999 1.367 (28,000)
</TABLE>

All foreign subsidiaries excluding those operating in hyper-inflationary
environments designate their local currencies as their functional currency. In
anticipation of future intercompany or dividend payments, the Company has
instructed various subsidiaries to maintain most of their surplus cash in U.S.
dollars. At year end the total amount of subsidiary cash that was maintained or
invested in U.S. dollars was $11.5 million.

14. QUARTERLY INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
FIRST QUARTER ENDED MARCH 31
Retail sales.................................... $398,447,000 $323,944,000
Net sales....................................... 209,776,000 169,977,000
Operating margin................................ 92,674,000 73,351,000
Net income...................................... $ 14,788,000 $ 11,916,000
Net income per common share:
Basic........................................... $ 0.51 $ 0.39
Diluted......................................... $ 0.48 $ 0.38
Dividends per share paid........................ $ 0.15 $ 0.15
SECOND QUARTER ENDED JUNE 30
Retail sales.................................... $398,142,000 $350,020,000
Net sales....................................... 209,944,000 184,891,000
Operating margin................................ 96,223,000 81,636,000
Net income...................................... $ 15,328,000 $ 13,700,000
Net income per common share:
Basic........................................... $ 0.53 $ 0.45
Diluted......................................... $ 0.50 $ 0.44
Dividends per share paid........................ $ 0.15 $ 0.15
</TABLE>

III-25
<PAGE> 82
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
THIRD QUARTER ENDED SEPTEMBER 30
Retail sales.................................... $402,704,000 $393,894,000
Net sales....................................... 213,032,000 207,227,000
Operating margin................................ 94,041,000 92,113,000
Net income...................................... $ 7,052,000 $ 14,253,000
Net income per common share:
Basic........................................... $ 0.25 $ 0.47
Diluted......................................... $ 0.24 $ 0.45
Dividends per share paid........................ $ 0.15 $ 0.15
FOURTH QUARTER ENDED DECEMBER 31
Retail sales.................................... $445,544,000 $422,835,000
Net sales....................................... 233,890,000 220,357,000
Operating margin................................ 101,981,000 96,399,000
Net income...................................... $ 11,330,000 $ 14,798,000
Net income per common share:
Basic........................................... $ 0.40 $ 0.49
Diluted......................................... $ 0.38 $ 0.47
Dividends per share paid........................ $ 0.15 $ 0.15
</TABLE>

III-26
<PAGE> 83

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
JUNE 30,
1999
------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $112,528,000
Marketable securities.................................. 22,079,000
Receivables............................................ 30,028,000
Inventories............................................ 76,013,000
Prepaid income taxes................................... 2,601,000
Prepaid expenses and other current assets.............. 15,266,000
Deferred income taxes.................................. 18,789,000
------------
Total current assets........................................ 277,304,000
Property, at cost, net of accumulated depreciation and
amortization of $47,601,000............................... 39,751,000
Deferred compensation plan assets........................... 25,188,000
Other assets................................................ 4,063,000
Deferred income taxes....................................... 7,035,000
Goodwill, net of accumulated amortization of $1,688,000..... 3,200,000
------------
TOTAL....................................................... $356,541,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 15,110,000
Royalty overrides......................................... 65,666,000
Accrued compensation...................................... 19,554,000
Accrued expenses.......................................... 26,584,000
Dividends payable......................................... 4,280,000
Current portion of contracts payable and bank loans....... 3,465,000
Advance sales deposits.................................... 10,909,000
Income taxes payable...................................... 4,680,000
------------
Total current liabilities................................... 150,248,000
NON-CURRENT LIABILITIES:
Contracts payable, net of current portion................. 1,657,000
Accrued deferred compensation plan liability.............. 22,216,000
Other non-current liabilities and deferred credits........ 5,054,000
------------
Total liabilities........................................... 179,175,000
------------
MINORITY INTEREST........................................... 1,950,000
------------
STOCKHOLDERS' EQUITY:
Common stock A, $0.01 par value; 33,333,333 shares
authorized, 9,982,488 shares issued and outstanding.... 100,000
Common stock B, $0.01 par value; 66,666,667 shares
authorized, 18,605,037 shares issued and outstanding... 186,000
Paid-in-capital in excess of par value.................... 54,860,000
Retained earnings......................................... 126,285,000
Accumulated other comprehensive loss...................... (6,015,000)
------------
Total stockholders' equity.................................. 175,416,000
------------
TOTAL............................................. $356,541,000
============
</TABLE>

See the accompanying notes to consolidated financial statements
III-27
<PAGE> 84

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Retail sales................................................ $854,563,000 $796,589,000
Less: Distributor allowances on product purchases......... 401,774,000 376,869,000
------------ ------------
Net sales................................................... 452,789,000 419,720,000
Cost of sales............................................. 116,116,000 108,146,000
Royalty overrides......................................... 134,940,000 122,676,000
Marketing, distribution & administrative expenses......... 163,011,000 140,645,000
Interest income -- net.................................... 837,000 1,675,000
------------ ------------
Income before income taxes and minority interest............ 39,559,000 49,928,000
Income taxes.............................................. 15,230,000 19,222,000
------------ ------------
Income before minority interest............................. 24,329,000 30,706,000
Minority interest......................................... 424,000 590,000
------------ ------------
Net Income.................................................. $ 23,905,000 $ 30,116,000
============ ============
Earnings Per Share:
Basic..................................................... $ 0.84 $ 1.03
Diluted................................................... $ 0.79 $ 0.99
Cash Dividends Per Common Share............................. $ 0.30 $ 0.30
Weighted Average Shares Outstanding:
Basic..................................................... 28,586,000 29,110,000
Effect of stock options................................... 1,715,000 1,455,000
------------ ------------
Diluted................................................... 30,301,000 30,565,000
============ ============
</TABLE>

See the accompanying notes to consolidated financial statements
III-28
<PAGE> 85

HERBALIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 23,905,000 $30,116,000
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization............................. 7,183,000 5,992,000
Deferred income taxes..................................... 2,564,000 601,000
Amortization of unearned compensation..................... -- 130,000
Stock Grant............................................... -- 88,000
Unrealized foreign exchange loss.......................... 2,352,000 1,723,000
Minority interest in earnings............................. 424,000 590,000
Other..................................................... -- (19,000)
Changes in operating assets and liabilities:
Receivables............................................ 12,196,000 5,931,000
Inventories............................................ 8,975,000 (22,136,000)
Prepaid expenses and other current assets.............. (1,879,000) (7,395,000)
Other assets........................................... 441,000 (999,000)
Accounts payable....................................... 1,034,000 7,382,000
Royalty overrides...................................... 9,528,000 (8,412,000)
Accrued expenses and accrued compensation.............. 1,996,000 430,000
Advance sales deposits................................. 3,457,000 (3,281,000)
Income taxes payable................................... (16,594,000) 2,835,000
Deferred compensation liability........................ 4,972,000 4,656,000
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 60,554,000 18,232,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property..................................... (9,888,000) (4,980,000)
Proceeds from sale of property............................ 49,000 68,000
Net changes in marketable securities...................... (16,902,000) 16,364,000
Deferred compensation plan assets......................... (7,129,000) (9,401,000)
------------ -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES......... (33,870,000) 2,051,000
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to minority interests........................ (1,069,000) (505,000)
Dividends paid............................................ (8,592,000) (8,853,000)
Additions to loans payable................................ 1,000,000 858,000
Principal payments on loans payable....................... (914,000) (946,000)
Exercise of stock options................................. 37,000 4,589,000
Stock repurchases......................................... -- (28,558,000)
Recapitalization costs.................................... -- (616,000)
------------ -----------
NET CASH USED IN FINANCING ACTIVITIES....................... (9,538,000) (34,031,000)
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (5,339,000) (2,870,000)
------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................... 11,807,000 (16,618,000)
CASH AND CASH EQUIVALENTS AT JANUARY 1...................... 100,721,000 78,913,000
------------ -----------
CASH AND CASH EQUIVALENTS AT JUNE 30........................ $112,528,000 $62,295,000
============ ===========
</TABLE>

See the accompanying notes to consolidated financial statements
III-29
<PAGE> 86

HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. INTERIM FINANCIAL INFORMATION

The unaudited interim financial information of Herbalife International,
Inc. and subsidiaries (the "Company") has been prepared in accordance with
Article 10 of the Securities and Exchange Commission's Regulation S-X. In the
opinion of management, the accompanying interim financial information contains
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the Company's financial statements as of June 30, 1999 and for
the six month periods ended June 30, 1999 and 1998.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities and
will be effective January 1, 2001. The Company has not yet analyzed the impact
of adopting this statement.

RECLASSIFICATIONS

Certain reclassifications were made to prior year statements to conform to
current year presentation.

2. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding. Diluted earnings per share includes the
dilutive effect of stock options.

3. CONTINGENCIES

The Company's French and Italian subsidiaries have been subject to tax
audits by governmental authorities in those countries, each of whom are
proposing that material value added, withholding, and income taxes are due. The
Company and its tax advisors believe that the Company has substantial defenses
and the Company is vigorously contesting the additional proposed taxes and
related charges. However, the ultimate resolution of these matters is unknown
and may take several years.

On December 16, 1998, Moshe and Dorit Miron, two Israeli distributors of
the Company, filed a lawsuit in the United States District Court for the
Northern District of California, in which the Company is the named defendant
(the "Miron Suit"). Although the Miron Suit is in its early pleading stages and
it is difficult to ascertain what causes of action the plaintiffs are attempting
(or have the right) to allege against the Company, the case appears to be
primarily a claim for breach of contract. In addition, the Miron Suit appears to
attempt to challenge the legality of the company's marketing system. The Company
believes that it has meritorious defenses to the allegations that appear to be
asserted against the Company. Due to the uncertainty inherent in any litigation
and the early stage of this proceeding, however, there can be no assurances that
the Company will obtain a favorable resolution of the Miron Suit or that an
adverse disposition of the case would not have a material adverse effect on the
Company.

Shortly after the September 13, 1999 public announcement of the proposed
purchase of the outstanding common shares by entities controlled by the
Company's CEO/principal shareholder (the "Purchaser"), putative class action
suits were filed challenging the fairness of the proposed transaction to the
Company's shareholders. In substance, the complaints challenge the fairness of
the proposed transaction to the Company's public stockholders, alleging, among
other things, that the price to be paid does not reflect the value of the
Company's assets, and that the transaction is unfair because it will deprive the
public stockholders of the ability to share proportionately in the Company's
future growth in profits and earnings. The lawsuits also allege that the Special
Committee of the Board formed to evaluate the transaction was not independent,
and that the Company's directors breached their fiduciary duties to the public
stockholders in approving the proposed transaction. The plaintiffs have
requested an injunction prohibiting the defendants from proceeding with the
proposed transaction, unspecified damages, costs and attorneys' fees, and other
relief.
III-30
<PAGE> 87
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

The Company and the Purchaser plan to vigorously defend against the
lawsuits and any other actions that may be brought in connection with the
proposed transaction. There can be no assurances, however, with regard to the
ultimate outcome of such suits or to the impact that an adverse result would
have on the Company's and the Purchaser's ability to consummate the proposed
transaction.

Furthermore, the Company is from time to time engaged in routine litigation
incidental to the conduct of its business. The Company regularly reviews all
pending litigation matters in which it is involved and, estimating the impact of
such litigation matters, establishes reserves considered appropriate by
management. The Company's estimates of the impact of these matters may change as
the matters progress and are ultimately resolved.

4. COMPREHENSIVE INCOME

Comprehensive income is summarized as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net Income.................................................. $23,905,000 $30,116,000
Foreign currency translation adjustment..................... (3,773,000) (2,134,000)
Unrealized gain/(loss) on marketable securities............. (3,000) 75,000
----------- -----------
Comprehensive income........................................ $20,129,000 $28,057,000
=========== ===========
</TABLE>

5. SEGMENT INFORMATION

The Company has operations throughout the world (44 countries as of June
30, 1999) and is organized and managed by geographic segments. Information
reviewed by the Company's chief operating decision

III-31
<PAGE> 88
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

makers on significant geographic segments, as defined under SFAS 131, is
prepared on the same basis as the consolidated financial statements and is as
follows:

FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1999 1998
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
TOTAL RETAIL SALES:
United States(1).......................................... $ 415.9 $ 427.5
Japan..................................................... 245.8 251.0
Russia.................................................... 19.4 77.0
All others(1)............................................. 392.9 293.4
Elimination of intersegment sales(1)...................... (219.4) (252.3)
------- -------
TOTAL RETAIL SALES................................ $ 854.6 $ 796.6
------- -------
DISTRIBUTOR ALLOWANCES:
United States............................................. $ 162.2 $ 178.3
Japan..................................................... 119.6 121.6
Russia.................................................... 9.0 34.7
All others................................................ 178.3 135.7
Elimination of intersegment allowance (U.S.).............. (67.3) (93.4)
------- -------
TOTAL DISTRIBUTOR ALLOWANCES...................... $ 401.8 $ 376.9
------- -------
NET SALES................................................... $ 452.8 $ 419.7
======= =======
OPERATING INCOME:
United States............................................. $ 104.7 $ 108.4
Japan..................................................... 31.5 35.3
Russia.................................................... (4.0) 13.8
All others................................................ 23.9 17.7
Elimination of intersegment gross profit.................. (91.2) (107.8)
------- -------
TOTAL............................................. $ 64.9 $ 67.4
------- -------
Corporate expenses........................................ (26.2) (19.2)
Net interest income....................................... 0.8 1.7
Income taxes.............................................. (15.2) (19.2)
Minority interest......................................... (0.4) (0.6)
------- -------
NET INCOME.................................................. $ 23.9 $ 30.1
======= =======
NOTES:
(1) Includes intersegment sales of:
United States..................................... $ 214.6 $ 248.8
All others........................................ 4.8 3.5
------- -------
Total............................................. $ 219.4 $ 252.3
======= =======
SALES BY PRODUCT LINE
Food & Dietary Supplement.............................. $ 388.7 $ 348.9
Weight Management...................................... 346.9 307.0
Personal Care Products................................. 94.7 101.1
Literature/Promotional/Other........................... 24.3 39.6
------- -------
Total Sales....................................... $ 854.6 $ 796.6
======= =======
</TABLE>

III-32
<PAGE> 89
HERBALIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

6. SUBSEQUENT EVENT

On September 13, 1999, an entity controlled by the Company's CEO/principal
shareholder offered to purchase the outstanding Class A and Class B common stock
that he does not either directly or indirectly control for $17 per share,
subject to certain terms and conditions. The offer expires on October 15, 1999,
unless the offer is extended.

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ANNEX A

AGREEMENT AND PLAN OF MERGER

DATED

SEPTEMBER 13, 1999

AMONG

MH MILLENNIUM HOLDINGS LLC,
MH MILLENNIUM ACQUISITION CORP.
MARK HUGHES,
THE MARK HUGHES FAMILY TRUST

AND

HERBALIFE INTERNATIONAL, INC.

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AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this "AGREEMENT") is entered into on
September 13, 1999, by and among MH Millennium Holdings LLC, a Delaware limited
liability company, located at 1800 Century Park East, Los Angeles, California
90067 ("PARENT"), MH Millennium Acquisition Corp., a Nevada corporation and
wholly-owned subsidiary of Parent, located at 1800 Century Park East, Los
Angeles, California 90067 ("PURCHASER"), Mark Hughes, a natural person residing
in Los Angeles, California ("MR. HUGHES"), The Mark Hughes Family Trust, a trust
of which Mr. Hughes is the sole trustee ("FAMILY TRUST"), and Herbalife
International, Inc., a Nevada corporation, located at 1800 Century Park East,
Los Angeles, CA 90067 (the "COMPANY").

RECITALS

WHEREAS, the Board of Directors of the Company has formed a special
committee (the "SPECIAL COMMITTEE") comprised exclusively of independent
directors of the Board to consider and act upon a proposal received from Mr.
Hughes, the founder, president, chief executive officer and principal
stockholder of the Company (including entities controlled and beneficially owned
by him, directly and indirectly, the "CONTINUING STOCKHOLDER"), to acquire the
Company in a "going private" transaction; and, among other things, the Board of
Directors of the Company has delegated to the Special Committee full and
exclusive responsibility and authority on behalf of the Company and the Board of
Directors to accept, reject or seek to modify, amend or otherwise change this
Agreement, or any of its terms or provisions (including modifications,
amendments or changes subsequent to the Closing (as defined below)); and

WHEREAS, having received the advice of its own independent financial and
legal advisors, and following detailed negotiation of the terms of the "going
private" transaction proposal and this Agreement, the Special Committee has
unanimously determined that the terms of the proposed acquisition of the Company
by Parent, upon the terms and subject to the conditions hereinafter provided,
are fair to, and in the best interest of, the Company and the stockholders of
the Company other than the Continuing Stockholder (the "PUBLIC STOCKHOLDERS");
and

WHEREAS, in furtherance of the acquisition of the Company, Parent proposes
to cause Purchaser to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "OFFER") to purchase all of the
Company's issued and outstanding shares of Class A Common Stock, par value $.01
per share (the "CLASS A STOCK") and Class B Common Stock, par value $.01 per
share (the "CLASS B STOCK" and, together with the Class A Stock, the "COMPANY
COMMON STOCK" or the "SHARES") at a price per share of Common Stock of $17.00,
net to the seller in cash, upon the terms and subject to the conditions set
forth in this Agreement; and

WHEREAS, the Continuing Stockholder has agreed pursuant to a letter to the
Company dated September 13, 1999, among other things, not to tender any shares
owned by any of the persons and entities comprising the Continuing Stockholder
in connection with the Offer, and to ensure that none of such shares shall be
subject to cancellation in exchange for the cash Merger Consideration (as
defined below) in the Merger (as defined below) (such letter and the commitments
contained therein, the "EQUITY COMMITMENT");

WHEREAS, the managing member of Parent and the Boards of Directors of
Purchaser and the Company have approved the merger (the "MERGER") of Purchaser
into the Company, upon the terms and subject to the conditions set forth in this
Agreement, whereby (i) each issued and outstanding share of Company Common Stock
owned by the Company as treasury stock and any shares of Company Common Stock
owned by Parent or Purchaser shall be cancelled and retired for no
consideration, (ii) each issued and outstanding share of Company Common Stock
that is owned by one or more limited liability companies owned by Mr. Hughes and
which hold a portion of Mr. Hughes's Shares (all of such entities collectively,
"DEBTOR LLC") will remain outstanding or be converted into a different class of
securities of the Surviving Corporation (as hereinafter defined), (iii) all
other Shares issued and outstanding (excluding Shares held by Dissenting
Stockholders (as defined below)) shall be converted into the right to receive
the Merger

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Consideration (as hereinafter defined) in cash (which is the same per share
consideration paid pursuant to the Offer), and (iv) each issued and outstanding
share of capital stock of Purchaser held by Parent shall be converted into one
share of Class A Stock of the Surviving Corporation;

WHEREAS, the Continuing Stockholder has executed and delivered a written
consent (the "STOCKHOLDER CONSENT") as the Company's majority holder of Class A
Stock, whereby the Continuing Stockholder has approved and adopted this
Agreement and the Merger, such Stockholder Consent being sufficient to
constitute stockholder approval of this Agreement and the Merger under
applicable law;

WHEREAS, the Company has agreed to grant certain dissenters' rights to the
Public Stockholders in the Merger, notwithstanding that such rights are not
required by the applicable laws contained in the Nevada Revised Statutes
("NRS");

WHEREAS, the Special Committee has unanimously approved this Agreement and
has unanimously recommended that the Company's Board of Directors approve this
Agreement, the Offer and the Merger; and

WHEREAS, the Special Committee and the Board of Directors have each adopted
resolutions recommending that the Public Stockholders accept the Offer;

WHEREAS, the Company's Board of Directors also granted full responsibility
and authority on behalf of the Company and the Company's Board of Directors to
the Special Committee to take all action and to execute all documents necessary
or desirable to consummate the transactions contemplated by this Agreement, to
give and receive consents and all notices on behalf of the Company hereunder, to
negotiate and settle claims on behalf of the Company hereunder, and to perform
any other act arising under or pertaining to this Agreement and the transactions
contemplated hereby on behalf of the Company; and

WHEREAS, (i) the managing member of Parent and the Boards of Directors of
Purchaser and the Company have each approved this Agreement, the Offer and the
Merger, upon the terms and subject to the conditions hereinafter provided, and
(ii) the Board of Directors of Purchaser has determined that the Offer and the
Merger are fair to, and deem it advisable and in the best interests of, its sole
stockholder to consummate the acquisition of the Company by Parent pursuant
hereto, and (iii) the Board of Directors of the Company has determined that the
Offer and the Merger are fair to, and deem it advisable and in the best
interests of the Public Stockholders to consummate the acquisition of the
Company by Parent pursuant hereto;

NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

THE OFFER AND MERGER

1.1 The Offer.

(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII, then (i) not later than the first Business Day
(for purposes of this Agreement, such term having the meaning given in Rule
14d-1 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")) after execution of this Agreement, Parent and the Company shall issue a
public announcement of the execution of this Agreement, and (ii) Purchaser
shall, as promptly as practicable, but in no event later than five Business Days
after the date of such public announcement, and Parent shall cause Purchaser to,
commence (within the meaning of Rule 14d-2 under the Exchange Act), the Offer to
purchase all of the issued and outstanding Shares at a price per share of
$17.00, net to the seller in cash. The Offer shall be made pursuant to the Offer
to Purchase and related Letter of Transmittal in form reasonably satisfactory to
the Company and containing the terms and conditions set forth in this Agreement.
The obligation of Purchaser to, and of Parent to cause Purchaser to, commence
the Offer, conduct and consummate the Offer and accept for payment, and pay for,
any Shares properly tendered and not withdrawn pursuant to the Offer shall be
subject only to the conditions set forth in Exhibit A (the "OFFER CONDITIONS")
(any of which may be waived

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in whole or in part by Purchaser in its sole discretion, provided, however, that
Purchaser shall not waive the Minimum Condition without the prior written
consent of the Company). Purchaser expressly reserves the right, subject to
compliance with the Exchange Act, to modify the terms of the Offer, except that,
without the express written consent of the Company, neither Parent nor Purchaser
shall (i) reduce the number of Shares subject to the Offer, (ii) reduce the
Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as
provided in the next sentence, change the expiration date of the Offer, (v)
change the form of consideration payable in the Offer or (vi) amend, alter, add
or waive any term of the Offer in any manner adverse to the holders of the
Shares. Notwithstanding the foregoing, if on any scheduled expiration date of
the Offer, which shall initially be 20 Business Days after the commencement date
of the Offer, all Offer Conditions have not been satisfied or waived, Purchaser
may, without the consent of the Company, and at the request of the Company
shall, from time to time, extend the expiration date of the Offer, and Purchaser
may, without the consent of the Company, extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the SEC staff applicable to the Offer.
Subject only to the conditions set forth in Exhibit A, Purchaser shall, and
Parent shall cause Purchaser to, as soon as practicable after the expiration of
the Offer, accept for payment, and pay for all Shares validly tendered and not
withdrawn that Purchaser becomes obligated to accept for payment pursuant to the
Offer.

(b) On the date of commencement of the Offer, Parent and Purchaser shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (as supplemented or
amended from time to time, the "SCHEDULE 14D-1") and Schedule 13E-3 (as
supplemented or amended from time to time, the "SCHEDULE 13E-3") with respect to
the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1, the Schedule 13E-3,
and the documents included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "OFFER DOCUMENTS").
Parent and Purchaser agree that the Offer Documents shall comply as to form and
content in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder, and the Offer Documents, at the time filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Parent or Purchaser with respect to written information supplied by the Company
or any of its stockholders (other than the Continuing Stockholder) specifically
for inclusion or incorporation by reference in the Offer Documents. Parent,
Purchaser and the Company each agrees promptly to correct any written
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and Parent and Purchaser further agree to take all steps necessary to
cause the Schedule 14D-1 and Schedule 13E-3 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to holders
of Shares, in each case as and to the extent required by applicable Federal
securities laws. The Company, the Special Committee and their respective counsel
shall be given reasonable opportunity to review and comment upon the Offer
Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company, and Parent and Purchaser shall consider such
comments in good faith. Parent and Purchaser agree to provide the Company, the
Special Committee and their respective counsel any comments Parent, Purchaser or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.

(c) Parent shall provide or cause to be provided to Purchaser on a
timely basis the funds sufficient to accept for payment, and pay for, any and
all Shares that Purchaser becomes obligated to accept for payment, and pay for,
pursuant to the Offer.

(d) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Offer such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "CODE"), or under any
provision of state, local or foreign tax law; provided, however, that Purchaser
shall promptly pay any amounts deducted and withheld hereunder to the applicable
governmental authority, shall promptly file all tax returns

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and reports required to be filed in respect of such deductions and withholding,
and shall promptly provide to the Company proof of such payment and a copy of
all such tax returns and reports.

1.2 Company Actions

(a) The Company hereby approves of and consents to the Offer.

(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (as supplemented or amended from time to time,
the "SCHEDULE 14D-9") containing the recommendation described in Section 1.2(a)
(subject to the fiduciary obligations of the Special Committee and the Board, as
advised by their counsel) and shall mail the Schedule 14D-9 to the stockholders
of the Company. The Schedule 14D-9 shall comply as to form and content in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by the Company
with respect to written information supplied by Parent, Purchaser or the
Continuing Stockholder specifically for inclusion in the Schedule 14D-9. The
Company, Parent and Purchaser each agree promptly to correct any written
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Parent shall be given reasonable opportunity to review and
comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to stockholders of the Company, and the Company shall consider
such comments in good faith. The Company agrees to provide Parent any comments
the Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments.

(c) In connection with the Offer and the Merger, the Company shall cause
its transfer agent to furnish Purchaser promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Purchaser such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Parent may reasonably request in communicating
the Offer to the Company's stockholders. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Purchaser and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will, upon request, promptly deliver, and will use their best
efforts to cause their agents promptly to deliver, to the Company all copies of
such information (and all copies of information derived therefrom) then in their
possession or control.

1.3 The Merger.

(a) Subject to the terms and conditions of this Agreement, and pursuant
to Section 92A.250 of the NRS, at the Effective Time (as defined in Section 1.4)
the Company and Purchaser shall consummate the Merger pursuant to which (i)
Purchaser shall be merged with and into the Company and the separate corporate
existence of Purchaser shall thereupon cease, (ii) the Company shall be the
successor or surviving corporation in the Merger (the "SURVIVING CORPORATION")
and shall continue to be governed by the laws of the State of Nevada, and (iii)
the separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger.

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(b) Pursuant to the Merger, (i) the articles of incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation, until amended in
accordance with such articles and the NRS, and (ii) the bylaws of Purchaser, as
in effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter amended as provided by law, the articles
of incorporation and such bylaws.

(c) The Merger shall have the effects set forth in the NRS (including
without limitation Section 92A.250 thereof). Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.

1.4 Effective Time. On the date of Closing (as defined in Section 1.5),
the parties shall cause articles of merger or other appropriate documents (in
any such case, the "ARTICLES OF MERGER") to be executed and filed with the
Secretary of State of the State of Nevada in accordance with the provisions of
Chapter 92A of the NRS, and make all other filings and recordings required by
the NRS in connection with the Merger. The Merger shall become effective at the
time and on the date on which the Articles of Merger have been duly filed with
the Secretary of State of the State of Nevada or such later time as is agreed
upon by the parties and specified in the Articles of Merger, and such time is
hereinafter referred to as the "EFFECTIVE TIME".

1.5 Closing. The Closing of the Merger (the "CLOSING") will take place at
9:00 a.m., Los Angeles time, on a date to be specified by the parties, which
shall be as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VII (or on such other date as Parent and the
Company may agree), but in any event no later than the second Business Day after
satisfaction or waiver of all of the conditions set forth in Article VII hereof
(the "CLOSING DATE"), at the offices of Irell & Manella LLP at 333 South Hope
Street, Suite 3300, Los Angeles, California 90071, unless another date or place
is agreed to in writing by the parties hereto.

1.6 Directors and Officers of the Surviving Corporation. The directors and
officers of Purchaser at the Effective Time shall, from and after the Effective
Time, be the directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's articles of incorporation and bylaws.

1.7 Consent of Continuing Stockholder.

(a) Concurrently with the commencement of the Offer, the Company shall
prepare and file with the SEC an Information Statement on Schedule 14C (as
supplemented or amended from time to time, the "SCHEDULE 14C") reflecting the
action taken pursuant to the Stockholder Consent and relating to the Merger and
this Agreement, such Schedule 14C to include the information required to be
included pursuant to the rules and regulations of the SEC and shall use its
commercially reasonable best efforts, after consultation with Parent, to respond
to any comments made by the SEC with respect to the Schedule 14C and, as
promptly as practicable after satisfying applicable SEC rules and regulations,
cause the Schedule 14C to be mailed to its stockholders. If required by the
rules and regulations of the SEC, the Schedule 14C filing shall include a filing
of a Schedule 13E-3. The Offer Documents and, if required, the Schedule 14C,
shall contain a notification conforming to Section 92A.430(d) of the NRS
advising stockholders of (i) the Stockholder Consent and (ii) the date by which
the Company must receive the demand for payment in order for Shares to qualify
for the dissenters' rights provided for hereunder, which date shall be approved
by Parent. The Schedule 14C, including any amendments or supplements thereto,
shall not, at the time filed with the SEC or as of the date mailed to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading, except that the Company makes no representation or
warranty with respect to any information provided by Parent, Purchaser or the
Continuing Stockholder specifically for use in the Schedule 14C. The Schedule
14C shall comply as to form in all material respects with the provisions of the
Exchange Act.
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(b) Provided that this Agreement has not been terminated in accordance
with Article VIII, Mr. Hughes agrees not to, and to cause the other persons and
entities included within the Continuing Stockholder not to, revoke or withdraw
the Stockholder Consent.

1.8 Short Form Merger. Notwithstanding Section 1.7 or anything else in
this Agreement to the contrary, at Parent's election, in the event that
Purchaser shall acquire Shares, including Shares accepted for purchase pursuant
to the Offer, in a number sufficient to consummate a merger of the Company into
Purchaser pursuant to Section 92A.180 of the NRS, the parties hereto agree, at
the request of Parent or Purchaser, to take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after such
acquisition, without approval of the Company's stockholders, in accordance with
Section 92A.180.

ARTICLE II

CONVERSION OF SHARES

2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any shares of
Company Common Stock (as defined below) or Purchaser's common stock, par value
$.001 per share ("PURCHASER COMMON STOCK"):

(a) Purchaser Common Stock. Each issued and outstanding share of
Purchaser Common Stock shall be converted into and become one (1) fully paid and
nonassessable share of Class A Stock of the Surviving Corporation.

(b) Treatment of Treasury Stock, Parent-Owned Stock and Other Non-Public
Stockholder Stock.

(i) All shares of Class A Stock and all shares of Class B Stock that
are owned by the Company as treasury stock and any shares of Company Common
Stock owned by Parent or Purchaser shall be canceled and retired and shall cease
to exist and no consideration shall be delivered in exchange therefor.

(ii) Each issued and outstanding share of Class A Stock that is owned
by Debtor LLC shall be converted into and become one (1) fully paid and
nonassessable share of Class B Stock of the Surviving Corporation, and each
issued and outstanding share of Class B Stock that is owned by Debtor LLC shall
remain outstanding.

(c) Conversion of Shares. Each issued and outstanding share of Company
Common Stock (excluding shares to be cancelled or converted in accordance with
Section 2.1(b) and shares of Company Common Stock held by Dissenting
Stockholders as described in Section 2.1(e)) shall be converted into the right
to receive $17.00 in cash, payable to the holder thereof, without interest (the
"MERGER CONSIDERATION"), upon surrender of the certificate formerly representing
such share of Company Common Stock in the manner provided in Section 2.2. All
such shares of Company Common Stock, at the Effective Time, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in the manner
prescribed in Section 2.2, without interest.

(d) Stock Options. At the Effective Time, all issued and outstanding
warrants, options and other rights to acquire Company Securities (as defined in
Section 3.2(a)), but excluding all such options, warrants and rights held by the
Continuing Stockholder, shall, to the extent not theretofore vested, become
vested and shall terminate as of the Effective Time. Each holder of any such
warrant, option or other right shall only be entitled to receive from the
Company, in cancellation and settlement of such warrant, option or other right,
the Option/Warrant Spread (as defined in Section 3.2(b)), if any. All options,
warrants or other rights to acquire Company Securities held by the Continuing
Stockholder shall, at the Effective Time, be cancelled for no consideration or
contributed to capital of the Company.

(e) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement or Section 92A.390 of the NRS to the contrary, holders of shares of
Company Common Stock shall have rights

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pursuant to Section 92A.380 of the NRS, provided such holders comply with the
provisions of such Section as if such Section otherwise applied to the Merger.
Each holder who so complies shall be referred to as a "DISSENTING STOCKHOLDER."
For purposes of applying the foregoing provisions of the NRS, the date of the
corporate action triggering the obligation to provide notice of dissenters
rights to the holders of shares of Company Common Stock shall be the date of the
Stockholder Consent. Any issued and outstanding shares of Company Common Stock
held by a Dissenting Stockholder shall not be converted as described in Section
2.1(c) but shall instead represent the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to, and to
the extent provided by, the laws of the State of Nevada (notwithstanding Section
92A.390 of the NRS); provided, however, that the shares of Company Common Stock
outstanding immediately prior to the Effective Time and held by a Dissenting
Stockholder who shall, after the Effective Time, fail to perfect his right to
appraisal, withdraw his demand for appraisal or lose his right of appraisal, in
any case pursuant to Sections 92A.400 through 92A.440 (inclusive) of the NRS,
shall be deemed to have been converted as of the Effective Time into the right
to receive the Merger Consideration. The Company shall give Parent (i) prompt
notice of any written demands for appraisal of shares of Company Common Stock
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to any such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, voluntarily make
any payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.

2.2 Exchange of Certificates.

(a) Paying Agent. Parent shall designate a bank or trust company to act
as agent for the holders of shares of Company Common Stock in connection with
the Merger (the "PAYING AGENT") to receive the funds to which holders of shares
of Company Common Stock shall become entitled pursuant to Section 2.1(c). Prior
to the filing of the Articles of Merger with the Secretary of State of the State
of Nevada, Parent or Purchaser shall deposit with the Paying Agent cash in an
amount equal to the product of (i) the number of shares of Company Common Stock
required to be converted pursuant to Section 2.1(c), multiplied by (ii) the
Merger Consideration. The deposit made by Parent pursuant to the preceding
sentence is hereinafter referred to as the "Payment Fund." The Paying Agent
shall cause the Payment Fund to be (i) held for the benefit of the holders of
shares of Company Common Stock, and (ii) promptly applied to making the payments
provided for in Section 2.1(c). The Payment Fund shall not be used for any
purpose that is not provided for herein. Such funds shall be invested by the
Paying Agent as directed by Parent or the Surviving Corporation.

(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES"),
whose shares of Company Common Stock will have been converted pursuant to
Section 2.1 into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and related
materials, including, without limitation, a Substitute Form W-9 and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal and related
materials, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for each share of Company
Common Stock formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be canceled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any

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time after the Effective Time to represent only the right to receive the Merger
Consideration in cash, without interest, as contemplated by this Section 2.2.

(c) Transfer Books; No Further Ownership Rights in Company Common
Stock. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason (other
than pursuant to exercise of dissenters' rights granted hereunder), they shall
be canceled and exchanged as provided in this Article II.

(d) Termination of Fund; No Liability. At any time following twelve
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

(e) Lost Certificates. In the event any Certificates shall have been
lost, stolen or destroyed, the Paying Agent shall pay in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, the Merger Consideration, if any, as may be required
pursuant to Section 2.1(c); provided, however, that Parent may, in its
discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct against any claim that may be made against
Parent, the Surviving Corporation or the Paying Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.

2.3 Further Assurances. If, at any time after the Effective Time, any
further action is necessary or desirable to consummate the Merger, to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Purchaser, the officers and directors of the
Company, Parent and Purchaser are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Purchaser as follows,
except as previously disclosed in writing to Parent and Purchaser or as
otherwise actually known by Parent, Purchaser or the Continuing Stockholder
(collectively, "EXCLUDED Matters")(provided that such exception shall not be
applicable to the representation and warranty contained in Section 3.4(a)):

3.1 Organization and Qualification.

(a) The Company and each of its "Significant Subsidiaries" (within the
meaning of Regulation S-X of the Securities Act of 1933, as amended (the
"SECURITIES ACT")) is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the its respective
jurisdiction of incorporation or organization, and has all requisite corporate
or other legal power and authority to own, lease and operate its properties and
to carry on its respective business as now being conducted.

(b) The Company and each of its Significant Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the respective property owned, leased or operated by it or the nature
of the respective business conducted by it makes such qualification or licensing
necessary, and to
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perform all of its respective obligations under any contract under which the
Company and each of its Significant Subsidiaries (A) has or may acquire any
rights, (B) has or may become subject to any obligation or liability or (C) is
or may, or any of the assets used or owned by it are or may, become bound,
except where the failure to be so duly qualified or licensed and in good
standing or to effect such performance would not, individually or in the
aggregate, have a Company Material Adverse Effect. When used in this Agreement,
the term "COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that would
(i) be materially adverse to the business, assets (tangible or intangible),
results of operations, liabilities, condition (financial or other) or prospects
of the Company and its Subsidiaries taken as a whole, or (ii) prevent, delay or
otherwise impair the ability of the Company to perform its obligations under
this Agreement or to consummate the transactions contemplated hereby.

3.2 Capitalization of the Company.

(a) As of the date hereof, the authorized capital stock of the Company
consists of (i) 33,333,333 shares of Class A Stock, of which 9,982,300 shares
are currently issued and outstanding, (ii) 66,666,667 shares of Class B Stock,
of which 18,604,515 are currently issued and outstanding and (iii) 100,000,000
shares of preferred stock, no par value, of which zero (0) shares are currently
issued and outstanding. All outstanding shares of capital stock of the Company
have been validly issued, and are fully paid, nonassessable and free of, and not
issued in violation of, preemptive rights. As of the date hereof, there are
2,238,703 shares of Class A Stock and 5,303,162 shares of Class B Stock subject
to issuance upon exercise of outstanding options, warrants, or other rights to
purchase capital stock of the Company from the Company. Except as set forth
above, there are outstanding (A) no shares of capital stock or other securities
of the Company, (B) no securities of the Company convertible into or
exchangeable for shares of capital stock or securities of the Company, (C) no
options, subscriptions, warrants, convertible securities, calls or other rights
to acquire from the Company, and no obligation of the Company or any of its
Subsidiaries to issue, deliver or sell, any capital stock, securities or
securities convertible into or exchangeable for capital stock or securities of
the Company, and (D) no equity equivalents, performance shares, interests in the
ownership or earnings of the Company or other similar rights issued by the
Company (the items referred to in clauses (A)-(D) are referred to herein as
"COMPANY SECURITIES"). As of the date hereof, (i) there are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
Company Securities, (ii) no agreement, other document or other obligation that
grants or imposes on any Company Securities any right, preference, privilege or
restriction with respect to the transactions contemplated hereby (including,
without limitation, any rights of first refusal), other than any applicable
right to dissent from the Merger as provided in Section 2.1(e) above, (iii)
there are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) of the Company
issued and outstanding and (iv) the Company is not a party or bound to, and to
the Company's knowledge there are no other, voting agreements, lock-up
agreements or similar agreements or arrangements restricting or affecting
outstanding Company Securities (excluding (x) arrangements governing 5,000,000
shares of Class B Stock pledged by affiliates of Mr. Hughes to secure
obligations owed by them to DECS Trust III, a Delaware business trust, as
described in the final prospectus dated March 25, 1998 relating to the offering
and sale of 5,000,000 DECS by DECS Trust III (the "DECS") and (y) a related
share borrow arrangement between Salomon Smith Barney and Mr. Hughes with
respect to 1,000,000 shares of Class B Stock held by Mr. Hughes).

(b) All issued and outstanding warrants, options and other rights to
acquire Company Securities will, as of or prior to the Effective Time, terminate
or will thereafter constitute only the right to receive the excess, if any, of
the per share Merger Consideration over the per share exercise price of such
warrant, option or such other right, multiplied by the number of shares for
which such warrant or option is exercisable immediately prior to the Effective
Time (in the case of Company Securities other than Company Common Stock and
options or other rights to acquire Company Securities other than Company Common
Stock, if any, computed on a Company Common Stock equivalent basis) (the
"OPTION/WARRANT SPREAD"), without obligation of any other payment. The aggregate
dollar amount of the Option/Warrant Spread, excluding the Option/Warrant Spread
related to options, warrants and other rights to acquire Company Securities held
by the Continuing Stockholder, does not exceed $57,100,000.

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3.3 Power and Authority. The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against it in accordance with its terms, except (a) as
such enforcement may be subject to bankruptcy, insolvency or similar laws now or
hereafter in effect relating to creditors rights generally, and (b) as the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought (clauses (a) and (b)
collectively, the "ENFORCEABILITY EXCEPTIONS").

3.4 Board Recommendations; Anti-takeover Provisions.

(a) At a Special Committee meeting duly called and held on September 13,
1999, the Special Committee, based in part upon the opinion of the Independent
Advisor, duly and validly (i) determined that this Agreement and the Offer and
the Merger contemplated hereby are fair to and in the best interest of the
Public Stockholders, (ii) approved, authorized and adopted this Agreement, the
Offer, the Merger and the other transactions contemplated hereby; and (iii)
resolved to recommend that the Public Stockholders accept the Offer and tender
their Shares pursuant to the Offer. On September 13, 1999, the Special Committee
received an opinion from Bear, Stearns & Co. Inc. (the "INDEPENDENT ADVISOR")
addressed to the Special Committee to the effect that the consideration to be
received in the Offer and the Merger is fair from a financial point of view to
the Public Stockholders, and a complete and correct signed copy of such opinion
has been delivered by the Special Committee to Parent for purposes of inclusion
in SEC filings.

(b) The Company's Board of Directors, at a meeting duly called and held
on September 13, 1999, has duly and validly (i) determined that this Agreement
and the Offer and the Merger contemplated hereby are fair to and in the best
interest of the Public Stockholders, (ii) approved, authorized and adopted this
Agreement, the Offer, the Merger and the other transactions contemplated hereby;
(iii) resolved to recommend that the Public Stockholders accept the Offer and
tender their Shares pursuant to the Offer; (iv) taken the action required to
cause all issued and outstanding warrants, options and other rights to acquire
Company Securities, as of or prior to the Effective Time, to terminate or
constitute only the right to receive the Option/Warrant Spread; (v) taken all
action necessary to ensure that (A) the provisions of Sections 78.378 through
78.3793, inclusive, of the NRS do not apply to the Company and to ensure that
the prohibitions contained in Sections 78.411 through 78.444, inclusive, of the
NRS applicable to "combinations" (as defined in Section 78.416) do not apply to
the transactions contemplated by this Agreement; and (B) any other
anti-takeover, control-share, business combination, moratorium or like laws of
any state do not and will not apply to the transactions contemplated by this
Agreement or otherwise impair, restrict or prohibit the performance of this
Agreement; and (vi) resolved not to alter, amend, repeal, modify or otherwise
restrict the effect of any action described in clause (v) above, other than an
action to ensure compliance with such clause (v).

3.5 Consents and Approvals; No Violation. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and the performance by the Company of its obligations hereunder will not:

(a) conflict with or violate any provision of the Company's articles of
incorporation or bylaws or the equivalent organizational documents of any of its
Significant Subsidiaries; or

(b) require on the part of the Company or any Significant Subsidiary of
the Company any consent, approval, order, authorization or permit of, or
registration, filing or notification to, any Governmental Authority, except for
(i) the filing with the SEC of (A) the Schedule 14C, and (B) such reports under
Sections 13, 14 and 16(a) of the Exchange Act, as may be required in connection
with this Agreement (including, without limitation, the Schedule 14D-9 and the
Schedule 13E-3), and the transactions contemplated hereby, (ii) the filing of
the Articles of Merger with the Secretary of State of the State of Nevada, and
(iii) such additional actions or filings which, if not taken or made, would not,
singly or in the aggregate, have a Company Material Adverse Effect.

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3.6 Information Supplied. None of the information supplied or to be
supplied by the Company specifically for use in the Offer Documents will, at the
time filed with the SEC or as of the date mailed to the Company's stockholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.

3.7 Brokers and Finders. Except for payments required to be made to
Donaldson Lufkin & Jenrette Securities Corporation ("DLJ") as the Company's and
Mr. Hughes's financial advisor pursuant to an engagement letter dated April 23,
1999, and to the Independent Advisor, neither the Company nor any of its
affiliates will or has, directly or indirectly, become obligated to pay any
person or entity any brokerage fee, finder's fee, investment banking fee or
agent's fee as a result of the entering into of this Agreement and/or closing of
the Merger or any of the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER

Parent and Purchaser represent and warrant to the Company as follows:

4.1 Organization. Parent is a limited liability company and Purchaser is a
corporation, in each case duly organized, validly existing and in good standing
under the laws of their jurisdiction of organization, and each has the requisite
limited liability company or corporate power to carry on its business. Parent
and Purchaser have made available to the Company a complete and correct copy of
their respective certificate of formation, operating agreement, articles of
incorporation and bylaws, each as amended to date and as in full force and
effect. Neither Parent nor Purchaser is in default in the performance,
observation or fulfillment of any provision of its certificate of formation,
operating agreement, articles of incorporation or bylaws. Purchaser is a
wholly-owned subsidiary of Parent.

4.2 Authority Relative to this Agreement. Each of Parent and Purchaser has
all requisite limited liability company or corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the part of Parent and
Purchaser have been duly and validly authorized by the managing member of Parent
and the Board of Directors of Purchaser and by Parent as the sole stockholder of
Purchaser and no other limited liability or corporate proceedings on the part of
Parent and Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming this Agreement
constitutes a valid and binding obligation of the Company and the requisite
approval of the Company's stockholders has been obtained, this Agreement
constitutes a valid and binding agreement of Parent and Purchaser, enforceable
against each of them in accordance with its terms, except as such enforcement
may be subject to the Enforceability Exceptions.

4.3 Consent and Approvals; No Violation. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and the performance by Parent and Purchaser of their obligations
hereunder will not:

(a) conflict with any provision of the respective certificate of
formation, operating agreement, articles of incorporation or bylaws of Parent or
Purchaser;

(b) require on the part of Parent or Purchaser any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except (i) such reports under Sections 13, 14 and 16(a) of the
Exchange Act as may be required in connection with this Agreement (including,
without limitation, the Schedule 14D-1 and Schedule 13E-3), and the transactions
contemplated hereby, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada, and (iii) such additional actions or
filings which, if not taken or made, would not, singly or in the aggregate, have
a Parent Material Adverse Effect (as defined below); or

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(c) result in any conflict with or violation of or the breach of or
constitute a default (with notice or lapse of time or both) under, or give rise
to any right of termination, cancellation or acceleration or guaranteed payments
under or to a loss of a material benefit under, any of the terms, conditions or
provisions of any note, bond, indenture, lease, mortgage, license, franchise,
agreement or other instrument or obligation to which the Parent or Purchaser is
a party or by which the Parent or Purchaser or any of their properties or assets
may be bound, except for such conflicts, violations, breaches, defaults, or
rights of termination, cancellation or acceleration, or losses as to which
requisite waivers or consents have been obtained or will be obtained prior to
the Effective Time or which, singly or in the aggregate, would not result in any
change or effect that would prevent, delay or otherwise impair the ability of
Parent or Purchaser to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby (a "PARENT MATERIAL ADVERSE
EFFECT").

4.4 Information Supplied. None of the information supplied or to be
supplied by Parent, Purchaser or the Continuing Stockholder specifically for use
in the Schedule 14C or Schedule 14D-9 will, at the time filed with the SEC or as
of the date mailed to the Company's stockholders, contain any untrue statement
of a material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they are made, not misleading.

4.5 Purchaser's Operations. Purchaser was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than to facilitate the
transactions contemplated hereby.

4.6 Capitalization. All of the issued and outstanding shares of Purchaser
Common Stock have been duly and validly issued and are held of record and
beneficially solely by Parent. Purchaser has no other outstanding equity
interests or securities convertible, exchangeable or exercisable for any equity
interests.

4.7 Financing. The Company has received written assurances (the "DLJ
LETTER") from DLJ, dated September 13, 1999 relating to such firm's confidence
in being able to secure and/or arrange the financing of the Offer and the Merger
(the "DEBT FINANCING") and has received from the Continuing Stockholder the
Equity Commitment, true and complete copies of which have been provided to the
Special Committee and the Board of Directors of the Company. Funds from the Debt
Financing, together with Company cash and cash equivalents would be sufficient
to fund (i) the Offer, (ii) the Merger Consideration for all shares of Company
Common Stock subject to conversion in accordance with Section 2.1(c) hereof,
(iii) the other transactions contemplated by this Agreement (including, without
limitation, the cancellation of all outstanding warrants, options and other
rights to acquire Company Securities for their Option/Warrant Spread in
accordance with Section 2.1(d) hereof, and the loans to Debtor LLC described on
Exhibit B hereto), (iv) all fees and expenses of the Company, Parent and
Purchaser incurred in connection with the transactions contemplated by this
Agreement and (v) the working capital needs of the Company following the Merger,
including, without limitation, if applicable, letters of credit (collectively,
the funds required for the matters specified in clauses (i)-(v) are referred to
as the "USES OF FUNDS").

4.8 Solvency. Parent has no reason to believe that the financing to be
provided to Purchaser to effect the Offer and the Merger will cause (i) the fair
salable value of the Surviving Corporation's assets to be less than the total
amount of its existing liabilities and identified contingent liabilities, (ii)
the fair salable value of the assets of the Surviving Corporation to be less
than the amount that will be required to pay its probable liabilities on its
existing debts as they mature, (iii) the Surviving Corporation not to be able to
pay its existing debts as they mature or (iv) the Surviving Corporation to have
an unreasonably small capital with which to engage in its business.

4.9 Brokers and Finders. Except for payments required to be made to DLJ as
the Company's and Mr. Hughes's financial advisor, neither the Parent, Purchaser
nor any of their affiliates will or has, directly or indirectly, become
obligated to pay any person or entity any brokerage fee, finder's fee,
investment banking fee or agent's fee as a result of the entering into of this
Agreement and/or closing of the Offer or the Merger.

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ARTICLE V

COVENANTS OF THE COMPANY

The Company agrees that it shall, prior to the Effective Time, continue to
declare and pay its regular quarterly cash dividend on Company Common Stock, in
accordance with prior practice. In addition, the Company shall declare two
additional special dividends to the holders of its securities, the record dates
for which shall be the close of business on the date that the Offer is
consummated, and the close of business on the last Business Day prior to the
Effective Time, respectively. The amount of the first special dividend shall be
equal to the Company's most recent quarterly dividend rate for such security,
multiplied by the number of days elapsed since the last regular quarterly
dividend record date through and including the date of the consummation of the
Offer, and divided by 90. The amount of the second special dividend shall be
equal to the Company's most recently quarterly dividend rate for such security,
multiplied by the number of days elapsed since the last regular or special
dividend record date (including the first special dividend record date) through
and including the Effective Time, and divided by 90. Dividends payable hereunder
shall be paid in cash in the same manner that regular quarterly dividends are
paid.

ARTICLE VI

ADDITIONAL COVENANTS

The parties hereto further agree as follows:

6.1 Acquisition Proposals.

The Company, its subsidiaries and their affiliates will not, and the
Company, its subsidiaries and their affiliates will use their reasonable efforts
to ensure that their respective officers, directors, employees, investment
bankers, attorneys, accountants and other representatives and agents do not,
directly or indirectly, initiate, solicit, encourage or participate in
negotiations or discussions relating to, or provide any information to any
natural person, corporation, partnership, limited liability company or entity
(each, a "PERSON") concerning, or take any action to facilitate the making of,
any offer or proposal which constitutes or is reasonably likely to lead to any
Acquisition Proposal (as defined below) relating to the Company, its
subsidiaries or any affiliate, or any inquiry with respect thereto, or agree to
approve or recommend any Acquisition Proposal; provided, however, that if at any
time prior to the Effective Time, in the opinion of the Special Committee of the
Board of Directors after consultation with its counsel, the failure to take any
of the foregoing actions described in this Section 6.1 would be inconsistent
with the fiduciary duties of such Special Committee to the Public Stockholders
under applicable law, such Special Committee may take any such action; provided,
further, that if taking any such action involves, directly or indirectly,
providing access and/or furnishing information concerning the Company's
business, properties or assets to any corporation, partnership, person or other
entity or group, the access and/or information shall be provided only pursuant
to an appropriate confidentiality agreement.

The Company (acting through the Special Committee) shall promptly notify
Parent of any such offers, proposals or Acquisition Proposals (including without
limitation the terms and conditions thereof and the identity of the Person
making it), and will keep Parent apprised of all developments with respect to
any such Acquisition Proposal, including without limitation any modifications
thereof.

Nothing contained in this Section 6.1 shall prohibit the Company or the
Special Committee from (i) taking and disclosing to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to
the Company's stockholders which, in the opinion of the Special Committee, after
consultation with its counsel, may be required under applicable law.

As used in this Agreement, "Acquisition Proposal" shall mean any tender or
exchange offer involving the Company or its securities, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company, any proposal or
offer with respect to any recapitalization or
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restructuring with respect to the Company or any proposal or offer with respect
to any other transaction similar to any of the foregoing with respect to the
Company; provided, however, that, as used in this Agreement, the term
"ACQUISITION PROPOSAL" shall not apply to any transaction of the type described
in this subsection (d) involving Parent, Purchaser or their affiliates.

6.2 Access to Information. Between the date of this Agreement and the
Effective Time, upon reasonable notice the Company shall (i) give Parent,
Purchaser and their respective officers, employees, accountants, counsel,
financing sources and other agents and representatives full access to all
buildings, offices, and other facilities and to all contracts, internal reports,
data processing files and records, Federal, state, local and foreign tax returns
and records, commitments, books, records and affairs of the Company, whether
located on the premises of the Company or at another location; (ii) furnish
promptly to Parent and Purchaser a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of Federal securities laws or regulations; (iii) permit
Parent and Purchaser to make such inspections as they may require; (iv) cause
its officers to furnish Parent and Purchaser such financial, operating,
technical and product data and other information with respect to the business
and properties of the Company as Parent and Purchaser from time to time may
request, including without limitation financial statements and schedules; (v)
allow Parent and Purchaser the opportunity to interview such employees and other
personnel and affiliates of the Company with the Company's prior written
consent, which consent shall not be unreasonably withheld; and (vi) assist and
cooperate with Parent and Purchaser in the foregoing; provided, however, that no
investigation pursuant to this Section 6.2 shall affect or be deemed to modify
any representation or warranty made by the Company herein.

6.3 Consents and Approvals.

(a) The parties hereto shall cooperate with each other and use
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties ("THIRD PARTY APPROVALS") and federal, state
and local governmental agencies and authorities ("GOVERNMENTAL AUTHORITIES")
which are necessary or advisable to consummate the transactions contemplated by
this Agreement (including without limitation the Offer and the Merger)
("GOVERNMENTAL APPROVALS" and, together with Third Party Approvals,
"APPROVALS"), and to comply with the terms and conditions of all such Approvals.
Each of the parties hereto and their respective officers, directors and
affiliates shall use their reasonable best efforts to file within 15 days after
the date hereof, and in all events shall file within 30 days after the date
hereof, all required initial applications and documents in connection with
obtaining the Governmental Approvals and shall act reasonably and promptly
thereafter in responding to additional requests in connection therewith; and
each party will use its reasonable best efforts to secure such Governmental
Approvals as expeditiously as practicable. Parent and the Company shall have the
right to review in advance, and to the extent practicable each will consult the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Parent or the Company, as the case
may be, and any of their respective subsidiaries, directors, officers and
stockholders which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. Without limiting the foregoing,
each of Parent and the Company (the "NOTIFYING PARTY") will notify the other
promptly of the receipt of comments or requests from Governmental Authorities
relating to Governmental Approvals, and will supply the other party with copies
of all correspondence between the Notifying Party or any of its representatives
and Governmental Authorities with respect to Governmental Approvals.

(b) Parent and the Company shall promptly advise each other upon
receiving any communication from any Governmental Authority whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any such consent or approval will not be obtained or that the
receipt of any such consent or approval will be materially delayed.

6.4 Notification of Certain Matters. The Company will give prompt notice
to Parent of (a) any notice of default received by it subsequent to the date of
this Agreement and prior to the Effective Time under any

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material instrument or material agreement to which it is a party or by which it
is bound, which default, if not remedied, would render materially incomplete or
untrue any representation or warranty made herein, (b) any suit, action or
proceeding instituted or, to the knowledge of the Company, threatened against or
affecting the Company subsequent to the date of this Agreement and prior to the
Effective Time which, if adversely determined, would render materially incorrect
any representation or warranty made herein and (c) any material breach of the
Company's covenants hereunder or the occurrence of any event that is reasonably
likely to cause any of its representations and warranties hereunder to become
incomplete or untrue in any material respect.

6.5 Additional Actions. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Offer, the Merger and the other transactions contemplated by this
Agreement.

6.6 Cooperation with Financing.

(a) Parent, Purchaser and Mr. Hughes shall use commercially reasonable
best efforts to obtain the Debt Financing. The Company agrees to provide, and
will use commercially reasonable efforts to cause its subsidiaries, its officers
and employees, representatives and advisors, including legal and accounting, to
provide all necessary cooperation reasonably requested by Parent, Purchaser and
Mr. Hughes in connection with the Debt Financing, including, without limitation,
using commercially reasonable best efforts to cause (a) appropriate officers and
employees to be available on a customary basis for "road show" appearances and
the preparation of disclosure documents in connection therewith and (b) its
independent accountants and counsel to provide assistance to Parent, Purchaser
and Mr. Hughes as reasonably required in connection with the Debt Financing;
provided, however, that the obligation of the Company to use its commercially
reasonable best efforts in connection with the foregoing shall only apply to
reasonable and customary activities in this regard and shall not include any
obligation to obtain any extraordinary waivers, consents or approvals to loan
agreements, leases or other contracts or to agree to an adverse modification of
the terms of any of such documents, to prepay or incur additional obligations to
any other parties or to incur or become liable for any other costs or expenses.
Parent and Purchaser shall keep the Company informed of the status of their
arrangements for the Debt Financing, including providing written notification to
the Company as promptly as possible (but in any event within forty-eight (48)
hours) with respect to (i) any indication that DLJ has withdrawn or will
withdraw or adversely modify the DLJ Letter, or that DLJ has indicated that
there has occurred a material adverse disruption or material adverse change in
the banking, financial or capital markets generally or in the market for senior
credit facilities or for new issuances of high yield securities which has caused
or could cause DLJ to withdraw the DLJ Letter, and (ii) any other material
adverse developments relating to the financing contemplated by the Debt
Financing. Parent shall provide written notice to the Company within twenty-four
(24) hours if DLJ has indicated to Parent or Purchaser that it will be unable to
arrange or secure the financing contemplated by the DLJ Letter. In the event
Parent and Purchaser are unable to arrange any portion of such financing in the
manner or from the sources contemplated by the DLJ Letter, Parent and Purchaser
shall use commercially reasonable best efforts (but without any requirement to
expend additional funds or modify in a manner adverse to Parent, Purchaser or
Mr. Hughes any of the terms of the Offer, the Merger or the other transactions
contemplated hereby) to arrange any such portion from alternative sources on
substantially the same terms and with substantially the same conditions as the
portion of the financing that Parent and Purchaser were unable to arrange.
Nothing in this Section shall require the Company to enter into any credit
agreement, indenture, guarantee or similar agreement related to the Debt
Financing (other than by operation of law upon consummation of the Merger)
without the consent of the Special Committee.

(b) Prior to the acceptance for purchase of shares of Company Common
Stock properly tendered in the Offer, Mr. Hughes shall, and shall have caused
the other persons and entities included within the Continuing Stockholder to,
have complied in all material respects with the Equity Commitment.

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6.7 Certain Use of Proceeds. Immediately after the Effective Time, the
Surviving Corporation will make the loans to Debtor LLC described on Exhibit B
to this Agreement, the form, terms and conditions thereof to be satisfactory to
Parent and Mr. Hughes in their sole reasonable discretion.

6.8 Indemnification, Exculpation And Insurance.

(a) Parent agrees that all rights to indemnification and exculpation
(including the advancement of expenses) from liabilities for acts or omissions
occurring at or prior to the Effective Time (including with respect to the
transactions contemplated by this Agreement) existing now or at the Effective
Time in favor of the current or former directors or officers of Company as
provided in the Company Certificate of Incorporation, the Company By-Laws and
any indemnification agreements (each as in effect on the date hereof) shall be
assumed by the Surviving Corporation in the Merger, without further action, as
of the Effective Time and shall survive the Merger and shall continue in full
force and effect without amendment, modification or repeal in accordance with
their terms; provided, however, that if any claims are asserted or made during
the continuance of such terms, all rights to indemnification (and to advancement
of expenses) hereunder in respect of any such claims shall continue, without
diminution, until disposition of any and all such claims.

(b) In the event that Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall expressly assume the
obligations set forth in this Section 6.8. In the event the Surviving
Corporation transfers any material portion of its assets, in a single
transaction or in a series of transactions, Parent will either guarantee the
indemnification obligations referred to in Section 6.8(a) or take such other
action to insure that the ability of the Surviving Corporation, legal and
financial, to satisfy such indemnification obligations will not be diminished in
any material respect.

(c) The Surviving Corporation shall (i) maintain for a period of not
less than six years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O INSURANCE"),
for all persons who are directors or officers of the Company on the date of this
Agreement (the "INSURED PARTIES") or (ii) cause to be provided coverage no less
advantageous to the Insured Parties than the D&O Insurance, in each case so long
as the annual premium therefor would not be in excess of 150% of the last annual
premium paid for the D&O Insurance prior to the date of this Agreement (such
150% amount, the "MAXIMUM PREMIUM"). If the existing D&O Insurance expires, is
terminated or canceled during such six-year period, the Surviving Corporation
will use all reasonable efforts to cause to be obtained as much D&O Insurance as
can be obtained for the remainder of such period for an annualized premium not
in excess of the Maximum Premium.

(d) The provisions of this Section 6.8 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified or insured party, his
or her heirs and his or her representatives and (ii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such person may have by contract or otherwise.

6.9 Solvency Matters.

(a) Parent and the Company will jointly agree to retain a mutually
satisfactory appraisal firm (the "APPRAISER") to provide a letter to the Special
Committee of the Board of Directors of the Company and the Board of Directors of
the Parent (the "SOLVENCY LETTER") to the effect that the financing to be
provided to Purchaser to effect the Offer and the Merger and the other
transactions contemplated hereby will not cause (i) the fair salable value of
the Surviving Corporation's assets to be less than the total amount of its
existing liabilities and identified contingent liabilities, (ii) the fair
salable value of the assets of the Surviving Corporation to be less than the
amount that will be required to pay its probable liabilities on its existing
debts as they mature, (iii) the Surviving Corporation not to be able to pay its
existing debts as they mature or (iv) the Surviving Corporation to have an
unreasonably small capital with which to engage in its business.

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(b) The Appraiser will be requested to deliver a Solvency Letter as
promptly as practicable. If the Appraiser is unable to deliver the Solvency
Letter prior to the acceptance of Shares pursuant to the Offer or the Solvency
Letter is not reasonably acceptable to the Special Committee of the Board of
Directors of the Company (after reasonable efforts are made to remedy any
deficiencies in the Solvency Letter), Parent and Purchaser covenant and agree
that they shall not consummate the Offer.

ARTICLE VII

CONDITIONS

7.1 Conditions to each Party's Obligations to Effect the Merger. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:

(a) Governmental Approvals. Other than the filing of the Articles of
Merger in accordance with the NRS, all material Governmental Approvals required
to be obtained and all material filings, notices or declarations with or to
Governmental Authorities required to be made by the parties and their
Subsidiaries, officers, directors and affiliates in order to consummate the
Merger shall have been obtained or made, and no such approval shall contain any
conditions, limitations or restrictions, other than any deviation from the
foregoing that does not have and may not reasonably be expected to have a
Company Material Adverse Effect or Parent Material Adverse Effect.

(b) Legal Action; Statutes. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of making the
Merger or the transactions contemplated hereby illegal or prohibits or imposes
material limitations on the ability of Purchaser to consummate the Merger or
otherwise prohibiting (directly or indirectly) consummation of the transactions
contemplated by this Agreement or prohibits or imposes material limitations on
the ability of Parent to own or operate all or a material portion of the
Company's and its subsidiaries' businesses or assets, taken as a whole.

(c) Closing of Tender Offer. Purchaser shall have (i) commenced the
Offer pursuant to Article I hereof and (ii) purchased, pursuant to the terms and
conditions of such Offer, all shares of the Company Common Stock duly tendered
and not withdrawn; provided, however, that neither Parent nor Purchaser shall be
entitled to rely on the condition in clause (ii) above if either of them shall
have failed to purchase shares of the Company Common Stock pursuant to the Offer
in breach of their obligations under this Agreement.

7.2 [Intentionally deleted]

7.3 Conditions to Obligations of the Company to Effect the Merger. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the additional following
conditions, unless waived by the Company:

(a) Representations and Warranties Accurate. The representations and
warranties of the Parent and Purchaser set forth in this Agreement that are
qualified as to materiality shall be true and correct, or any such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case at the date of the Agreement and
at the date of the Closing (unless a representation speaks as of an earlier
date, in which case it shall be true and correct as of such earlier date).

(b) No Material Breach. Parent and Purchaser shall have performed in all
material respects all obligations, and shall have complied in all material
respects with any agreement or covenant of Parent and/or Purchaser, to be
performed or complied with by either of them under this Agreement, prior to or
as of the date of the Closing, and the Company shall have received a certificate
signed by a senior officer of the Parent to such effect.

(c) Parent to Fund Paying Agent. Prior to the Effective Time, Parent
shall have deposited with the Paying Agent the funds to which holders of Company
Common Stock shall become entitled pursuant to Section 2.1(c) hereof.

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(d) Solvency Letter. The Solvency Letter shall have been delivered to
the Special Committee and the Board of Directors of the Company prior to the
acceptance of Shares pursuant to the Offer.

(e) Stockholder Consent. The Stockholder Consent shall remain in full
force and effect.

ARTICLE VIII

TERMINATION

8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:

(a) By Mutual Consent. By mutual consent of Parent and the Board of
Directors of the Company.

(b) By Any Party. By Parent or Purchaser, or by the Board of Directors
of the Company:

(i) if the Merger shall not have been consummated on or prior to
March 31, 2000; provided, however, that the right to terminate this Agreement
under this Section 8.1(b)(i) shall not be available to any party whose failure
to fulfill any material obligation under this Agreement has been the cause of,
or resulted in, the failure of the Merger to be consummated on or prior to such
date;

(ii) if a court of competent jurisdiction or other governmental
authority shall have issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties hereto shall use their
reasonable efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; or

(iii) if the Offer terminates or expires on account of the failure of
any condition specified in Exhibit A without Purchaser having purchased any
shares of the Company Common Stock thereunder; provided, however, that the right
to terminate this Agreement pursuant to this Section 8.1(b)(iii) shall not be
available to any party whose failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, the failure of any Offer
Condition.

(i) if the Board of Directors of the Company or the Special Committee
thereof shall have withdrawn, modified or changed in a manner adverse to Parent
or Purchaser its approval or recommendation of this Agreement, the Offer or the
Merger or shall have approved or recommended an Acquisition Proposal; or

(ii) the Independent Advisor shall have withdrawn, modified or
changed in a manner adverse to Parent or Purchaser its opinion as to the
fairness, from a financial point of view, of the consideration to be received in
the Offer and the Merger; or

(iii) if the Company breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
herein (including without limitation the covenants in Article VI), or breaches
any of its representations or warranties contained herein, in any material
respect, which breach shall not have been cured in the case of a representation
or warranty, prior to the Closing or, in the case of a covenant or agreement,
within ten (10) days following receipt by the Company of written notice
specifying such breach from Parent or Purchaser.

(d) By the Company. By the Company (acting through the Special
Committee): (i) if Parent or Purchaser breaches or fails in any material respect
to perform or comply with any of their respective material covenants and
agreements contained herein (including without limitation the covenants in
Article VI), or breaches any of their respective representations or warranties
contained herein, in any material respect, which breach shall not have been
cured in the case of a representation or warranty, prior to the Closing or, in
the case of a covenant or agreement, within ten (10) days following receipt by
Parent of written notice specifying such breach from the Company; or
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(ii) if Purchaser or Parent shall have (A) failed to commence the
Offer within five Business Days of the public announcement by Parent and the
Company of this Agreement, or (B) failed to pay for Shares pursuant to the Offer
in accordance with Section 1.1(a) hereof.

8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1 above, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void and there shall be no liability or obligation on the part of Parent and
Purchaser, or either of them, or the Company, or their respective officers,
directors or employees, except (a) for fraud, (b) as set forth in this Section
8.2 and in Section 9.1 hereof and (c) nothing herein shall relieve any party
from liability for any willful breach hereof.

ARTICLE IX

GENERAL PROVISIONS

9.1 Fees and Expenses. All costs and expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated hereby
(including, without limitation, all fees and expenses of the parties' respective
financial advisors and legal and accounting advisors, the Independent Advisor
and the legal and accounting advisors to the Special Committee) (collectively,
"COSTS") shall be paid by the Company, whether or not the Closing occurs;
provided, however, that if a Reimbursement Event occurs, Parent, Purchaser and
Mr. Hughes shall reimburse the Company for $2 million (or such lesser amount
actually incurred) of the Costs incurred by them in connection herewith. A
"REIMBURSEMENT EVENT" shall mean a failure to consummate the Offer or the Merger
as a result of the Financing Condition to the Offer (as defined in Exhibit A
hereto) not being satisfied for any reason, and then only if the
non-satisfaction of the Financing Condition is not principally the result of a
Company Material Adverse Effect. Notwithstanding anything in this Section 9.1 to
the contrary, in the event that this Agreement is terminated pursuant to Section
8.1(d), then Parent, Purchaser and Mr. Hughes shall be responsible fully for the
Costs incurred by them. For purposes of determining the Costs incurred by
Parent, Purchaser and Mr. Hughes, "Costs" shall include (i) the fees and
expenses of DLJ and its legal advisors and (ii) the fees and expenses of legal,
tax and accounting advisors to the Company, to the extent that their services
were provided to assist Mr. Hughes in the structuring and negotiation of the
transactions contemplated by this Agreement.

9.2 Amendment and Modification. Subject to applicable law and subject to
Section 9.13, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors at any time prior to the
Closing Date with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the stockholders of the
Company, no such amendment, modification or supplement shall reduce or change
the form of the Merger Consideration.

9.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time.

9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile transmission
(which is confirmed), telex or delivery by an overnight express courier service
(delivery, postage or freight charges prepaid), or on the fourth day following
deposit in the United States mail (if sent by registered or certified mail,
return receipt requested, delivery, postage or

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freight charges prepaid), addressed to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):

(a) if to Parent, Purchaser, Mr. Hughes or the Family Trust, to:

Mr. Hughes
c/o Herbalife International, Inc.
1800 Century Park East
Los Angeles, CA 90067
Telecopy No.: (310) 557-3904
Attention: Mr. Hughes

with a copy to:

Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, CA 90071
Telecopy No.: (213) 229-0516
Attention: Anthony T. Iler, Esq.

(b) if to the Company, to:

The Special Committee of the Board of Directors
of Herbalife International, Inc.
c/o John M. Newell, Esq.
Latham & Watkins
633 West Fifth Street
Los Angeles, CA 90071
Telecopy No.: (213) 891-8763
Attention: Messrs. Edward J. Hall and Christopher Miner

with a copy to:

Latham & Watkins
633 West Fifth Street
Los Angeles, CA 90071
Telecopy No.: (213) 891-8763
Attention: Randall C. Bassett, Esq. and John M. Newell, Esq.

9.5 Definitions; Interpretation. As used in this Agreement, the terms
"AFFILIATE(S)" and "ASSOCIATES" shall have the meanings set forth in Rule 12b-2
under the Exchange Act. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article,
Section, Exhibit or Schedule to this Agreement unless otherwise indicated. The
words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall be deemed in
each case to be followed by the words "WITHOUT LIMITATION." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

9.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof (including without limitation Section 6.1
hereof) in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.

9.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

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9.8 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein and therein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.8, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.

9.9 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.

9.10 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Nevada (without giving effect to the
principles of conflicts of law thereof).

9.11 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Purchaser may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to Parent or to any direct or
indirect subsidiary of Parent. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by, the parties
and their respective successors and assigns.

9.12 Extension; Waiver. Subject to Section 9.13, at any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto or (iii) subject to Section 9.2, waive compliance with
any of the agreements or conditions of the other parties hereto contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.

9.13 Procedure For Termination, Amendment, Extension Or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 9.2 or an extension or waiver pursuant to Section
9.12 shall, in order to be effective, require in the case of Parent, Purchaser
or Company, action by its respective managing member, Board of Directors or the
duly authorized designee thereof; provided, however, the affirmative vote of a
majority of the members of the Special Committee of the Board of Directors of
the Company shall be required in order for the Company or the Board of Directors
of the Company to act to (i) amend or terminate this Agreement, (ii) exercise or
waive any of Company's rights or remedies under this Agreement, (iii) extend the
time for performance of Parent's and Purchaser's respective obligations under
this Agreement or (iv) take any action to amend or otherwise modify the
Company's Certificate of Incorporation or By-Laws (each as in effect on the date
hereof).

9.14 Guarantee.

(a) In order to induce the Company to enter into this Agreement and for
other valuable consideration, each of Mr. Hughes and the Family Trust, jointly
and severally, hereby irrevocably guarantees (as primary obligor and not merely
as surety) to the Company and each person who controls the Company within the
meaning of the Securities Act or the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise (each of such persons, a
"BENEFICIARY") (i) the accuracy of the representations and warranties of Parent
and Purchaser contained in Article IV hereof and (ii) the performance by Parent
and Purchaser of the covenants and agreements contained in this Agreement.

(b) The obligations of Mr. Hughes and the Family Trust under this
Section 9.14 shall be unconditional, irrespective of the validity or
enforceability of any other provision of this Agreement.

(c) The obligations of Mr. Hughes and the Family Trust under this
Section 9.14 constitute guarantees of performance and of payment, and not merely
guarantees of collection, and shall remain in full

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force and effect until all obligations of and all amounts payable by Parent and
Purchaser in respect of the matters (the "GUARANTEED MATTERS") that are the
subject of the obligations of Mr. Hughes and the Family Trust under this Section
9.14 of this Agreement have been validly, finally and irrevocably performed or
paid in full, as the case may be, and shall not be affected in any way by the
absence of any action to obtain such performance or amounts, as the case may be,
from Parent or Purchaser hereunder or of any security from time to time
therefor. Each of Mr. Hughes and the Family Trust hereby waives all requirements
as to promptness, diligence, presentment, demand for payment, protest and notice
of any kind with respect to his or its obligations under this Section 9.14. Each
of Mr. Hughes and the Family Trust hereby agrees, jointly and severally, that
action may be taken directly against such person under this Section 9.14 without
any action being taken against Parent or Purchaser.

(d) The obligations of Mr. Hughes and the Family Trust under this
Section 9.14 shall not be affected by any change in applicable laws, rules or
regulations or by any present or future action of any governmental authority or
court amending, varying, reducing or otherwise affecting or purporting to amend,
vary, reduce or otherwise affect any of the obligations of Parent or Purchaser
under this Agreement or by any other circumstance (other than by complete,
irrevocable performance or payment) that might otherwise constitute a legal or
equitable discharge or defense of a surety or a guarantor. If Parent or
Purchaser merges or consolidates with or into another entity, loses its separate
legal identity or ceases to exist, Mr. Hughes and the Family Trust shall
nonetheless continue to be liable for the performance of all obligations or the
payment of all amounts, as the case may be, that would have been due or payable,
as the case may be, by Parent or Purchaser in respect of the Guaranteed Matters.

(e) The obligations of Mr. Hughes and the Family Trust under this
Section 9.14 shall remain in full force and effect or shall be reinstated (as
the case may be) if at any time any obligation or payment of Parent or Purchaser
in respect of the Guaranteed Matters, in whole or in part, is rescinded or must
otherwise be returned by a Beneficiary upon the insolvency, bankruptcy or
reorganization of Parent or Purchaser or otherwise, all as though such
performance or payment, as the case may be, had not been made.

(f) If at any time when any obligation of, or any amount payable by
Parent or Purchaser in respect of, the Guaranteed Matters is overdue and
unperformed or unpaid, as the case may be, Mr. Hughes and the Family Trust
receives any amount as a result of any action against Parent or Purchaser or any
of its property or assets or otherwise for or on account of any payment made by
Mr. Hughes and the Family Trust pursuant to this Section 9.14, Mr. Hughes or the
Family Trust, as the case may be, shall forthwith pay such amount received by it
to the Beneficiaries, without demand, to be credited and applied toward any such
amount payable by Parent or Purchaser.

(g) The guarantee agreements set forth in this Agreement shall be in
addition to any liability which Parent, Purchaser, Mr. Hughes or the Family
Trust may otherwise have.

9.15 Announcements. Neither the Company, Parent nor Purchaser shall make
any public announcement of the terms or existence of this Agreement without the
consent of the other parties hereto, unless required by law.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Parent, Purchaser, Mr. Hughes, the Family Trust and the
Company have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.

<TABLE>
<S> <C>
HERBALIFE INTERNATIONAL, INC.: MH MILLENNIUM HOLDINGS LLC:

By: /s/ MICHAEL E. ROSEN By: /s/ MARK HUGHES
- -------------------------------------------- --------------------------------------------
Mark Hughes
Name: Michael E. Rosen
- --------------------------------------------

Title: Executive Vice President Title: Managing Member
and Chief Executive Corporate
Marketing and Corporate Development

MH MILLENNIUM ACQUISITION CORP.:

By: /s/ MARK HUGHES
--------------------------------------------
Mark Hughes

Title: President

MARK HUGHES*:
/s/ MARK HUGHES
--------------------------------------------

THE MARK HUGHES FAMILY TRUST**:

By: /s/ MARK HUGHES
--------------------------------------------
Mark Hughes

Title: Sole Trustee
</TABLE>

- ---------------
* Signing only with respect to Sections 1.7(b), 6.6 and Section 9.14.

** Signing only with respect to Section 9.14.

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EXHIBIT A

CONDITIONS OF THE OFFER

Notwithstanding any other term of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless the number of Shares tendered and not withdrawn shall equal
more than 50% of each class of the Company Common Stock outstanding on the date
hereof excluding Company Common Stock owned by the Continuing Stockholder (the
"MINIMUM CONDITION") prior to the date which is 20 Business Days following the
commencement of the Offer in accordance with the terms hereof or such later date
as the Offer may be extended as provided in Section 1.1(a) of the Agreement or
by an amendment to this Agreement in accordance with the provisions of Section
9.13. Furthermore, notwithstanding any other term of the Offer, Purchaser shall
not be required to accept for payment or, subject as aforesaid, to pay for any
Shares not theretofore accepted for payment or paid for, and may terminate the
Offer, subject to the terms and conditions of the Agreement and Purchaser's
obligation to extend the Offer pursuant to Section 1.1(a), if, at any time on or
after the date of this Agreement and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exists:

(a) any material Governmental Approvals required to be obtained or any
material filings, notices or declarations with or to Governmental Authorities
required to be made by the parties or their Subsidiaries, officers, directors
and affiliates in order to consummate the Offer, shall fail to have been
obtained or made, or if obtained or made, any such approval does or would
contain any conditions, limitations or restrictions that have or would
reasonably be expected to have a Company Material Adverse Effect or Parent
Material Adverse Effect;

(b) a Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
which is in effect and has the effect of making the acquisition of Shares by
Purchaser, the Offer, the Merger or the other transactions contemplated by the
Agreement illegal or prohibits or imposes material limitations on the ability of
Purchaser to consummate the Offer, the Merger or the acquisition of the Shares
or otherwise prohibits(directly or indirectly) consummation of the transactions
contemplated by the Agreement or prohibits or imposes material limitations on
the ability of Parent to own or operate all or a material portion of the
Company's and its subsidiaries' businesses or assets, taken as a whole;

(c) any of the representations and warranties of the Company set forth
in the Agreement that are qualified as to materiality shall not be true and
correct, or any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case at the date
of the Agreement and at the scheduled or extended expiration of the Offer
(unless a representation speaks as of an earlier date, in which case if any such
representation is not true and correct as of such earlier date), which breaches
have not been cured within 10 Business Days after the giving of written notice
to the Company;

(d) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under this Agreement,
which breaches have not been cured within 10 Business Days after the giving of
written notice to the Company; or

(e) this Agreement shall have been terminated in accordance with its
terms;

(f) Parent, Purchaser and/or one or more of their respective
subsidiaries shall not have obtained the Debt Financing, on terms and conditions
satisfactory in form and substance to Parent and Purchaser in their sole
reasonable discretion (including the availability of funds for the loans
referred to in Section 6.7 of the Agreement, which loans shall be permitted to
be made immediately after the Effective Time) in amounts that, together with
cash and cash equivalents of the Company as of the Effective Date, is sufficient
to satisfy the Uses of Funds (the "FINANCING CONDITION");

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(g) the number of shares of Company Common Stock as to which the holders
thereof have properly exercised, or reasonably appear to have properly
exercised, dissenters' rights, if any, with respect to the Merger exceed three
percent (3%) of the total number of shares of Company Common Stock outstanding
as of the date of the Agreement, which, in the reasonable judgment of Parent or
Purchaser in any such case, and regardless of the circumstances (including any
action or omission by Parent or Purchaser) giving rise to any such condition,
makes it inadvisable to proceed with such acceptance for payment or payments
therefor.

The foregoing conditions in paragraphs (a) through (g) are for the sole
benefit of Purchaser and Parent and may, subject to the terms of this Agreement
and except for the Minimum Condition, be waived by Purchaser and Parent in whole
or in part at any time and from time to time in their sole discretion. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time. Terms used herein but not defined herein shall have the meanings
assigned to such terms in the Agreement of which this Exhibit A is a part.

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EXHIBIT B

LOANS TO MR. HUGHES

Immediately after the Closing of the Merger, the Company will make two
loans in the aggregate amount of approximately $214.25 million, comprised of a
loan in the aggregate amount of approximately $125 million ("Loan A") and a loan
in the aggregate amount of approximately $89.25 million ("Loan B" and, together
with Loan A, the "Loans") to Debtor LLC. The Loans will have a stated maturity
of seven years, will bear interest at a commercially reasonable rate (for loans
of similar nature and with similar terms) per annum, and will call for annual
interest-only payments until maturity, at which time the principal balance and
all accrued and unpaid interest will be due.

Debtor LLC will use the proceeds from Loan B to fund the required posting
of alternative collateral to secure the obligations of Mr. Hughes and related
entities under the forward purchase agreements with DECS Trust III. Repayment of
Loan B will not be secured; it will, however, be guaranteed as to repayment by
Mr. Hughes (the "Loan B Guarantee"). The proceeds of Loan A will be retained by
Debtor LLC and invested, and such proceeds and investments (collectively, the
"Collateral") will be pledged by Debtor LLC to secure that Loan. The Company
will pledge Loan A and the related Collateral to the bank anticipated to be the
lender to Purchaser (and, after the Merger, to the Company) under senior bank
financing constituting a portion of the Debt Financing. The secured note
evidencing and securing Loan A will serve as security for Purchaser's (and,
after the Merger, the Company's) obligations under such senior bank financing.
Initially, the value of the Collateral is expected to be approximately $125
million. Other than the Collateral, the only assets of Debtor LLC will consist
of substantially all of the outstanding shares of the Company's capital stock
(other than a small number of voting shares to be held by Parent); however,
under the terms of the agreements governing the Loans (the "Loan Agreements"),
there will be no restriction on the ability of Debtor LLC to make a distribution
of the Company capital stock at any time.

The terms of the Loan Agreements and the pledge of the Collateral may
impose restrictions on investments that Debtor LLC may make utilizing funds
constituting all of the Collateral. In particular, it is anticipated that Debtor
LLC would only be permitted to invest in investment grade government securities.
Provided only that Debtor LLC is not in default in making interest payments on
the Loans, and that the Company is not in default under the Debt Financing,
investment earnings on the Collateral will be released from the Collateral
pledge and are expected to be distributed by Debtor LLC to Mr. Hughes.
Consequently, provided no default is occurring on the Loans or on the Debt
Financing, investment earnings on the Collateral will not provide additional
security for the Loans. If the value of the investment portfolio constituting
all or a portion of the Collateral declines in value, there is no obligation on
the part of Debtor LLC or any other person or entity to post additional security
to restore the value of the Collateral to its initial value or any other amount,
and such a decline in value would not affect the treatment of investment
earnings derived from the Collateral. Such earnings would still be released from
the Collateral pledge (provided, however, that Debtor LLC was not in default in
interest payments on the Loans and the Company is not in default under the Debt
Financing) and available for distribution to Mr. Hughes.

Commencing not earlier than three years following the Closing, if certain
financial covenant criteria contained in the Debt Financing are satisfied, Mr.
Hughes and the Company contemplate causing the Company to redeem the capital
stock held by Debtor LLC (which may, at the Company's election, be recapitalized
into preferred stock), or otherwise make payments to the LLC, in order to permit
Debtor LLC to repay the principal of the Loans, although Mr. Hughes may cause
Debtor LLC to satisfy the Loans in another fashion that does not require any
payment by the Company. The covenants restricting these actions will be
negotiated in arms lengths transactions, in good faith, with the lenders
providing the Debt Financing. Following the redemption of the capital stock held
by Debtor (or such other payments), the Collateral will be released from the
pledge and will thereby cease to act as security for the senior bank facility.
In addition, repayment of the Loans in the foregoing manner will have the effect
of extinguishing the Loan B Guarantee.

The Company intends to make distributions on its capital stock (or
preferred stock, if the common stock held by Debtor LLC is recapitalized) in an
amount approximately equal to the aggregate required interest payments on the
Loans. Under the Loan Agreements and Debt Financing, such distributions would be
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permissible at any time (provided, however, that corresponding interest payments
are made on the Loans substantially contemporaneously by Debtor LLC to the
Company), regardless of whether the Company could then make a restricted payment
pursuant to the restricted payments covenant included in the Debt Financing, and
regardless of the general prohibition on such payments included in the Debt
Financing. However, such distributions could not be made during the existence of
a default or event of default under the Debt Financing.

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ANNEX B

[BEAR, STEARNS & CO. INC.]

September 13, 1999

The Special Committee of the Board of Directors
Herbalife International, Inc.
1800 Century Park East
Los Angeles, CA 90067

Gentlemen:

We understand that Herbalife International, Inc. ("Herbalife") and one or
more entities directly or indirectly controlled by Mark Hughes (the "Principal
Shareholder") propose to enter into a merger agreement dated September 13, 1999,
(the "Agreement") pursuant to which all outstanding shares of Class A and Class
B common stock of Herbalife other than those already owned by the Principal
Shareholder will receive $17.00 per share in cash (the "Consideration to be
Received") by means of a tender offer (the "Tender Offer") followed by a
subsequent merger (the "Merger"). The Agreement also provides for the cashing
out of each outstanding option to acquire Herbalife common stock (other than
those held by the Principal Shareholder) at a price equal to $17.00 per share
less the applicable exercise price of such option. Further, the Agreement calls
for Herbalife to make certain loans (which may be forgiven under certain
circumstances) to the Principal Shareholder in the aggregate amount of
approximately $215 million (such series of transactions herein collectively
referred to as the "Transaction"). You have provided us with a copy of the
Agreement in substantially final form. We note that although the Principal
Shareholder controls a majority of the Class A and Class B common stock, the
Agreement provides for a condition to the Transaction that requires holders of
at least a majority of the outstanding shares of each class of Herbalife common
stock not owned by the Principal Shareholder to tender such shares in the Tender
Offer. The Agreement also provides for the right for holders of Class A and
Class B common stock to dissent and receive appraised value for their shares.

You have asked us to render our opinion as to whether the Consideration to
be Received is fair, from a financial point of view, to the shareholders of
Herbalife, excluding the Principal Shareholder.

In the course of performing our review and analyses for rendering this
opinion, we have:

- reviewed the Agreement;

- reviewed certain operating and financial information, including
projections, provided to us by management relating to Herbalife's
business and prospects;

- met with certain members of Herbalife's senior management to discuss
Herbalife's business, operations, historical and projected financial
statements and future prospects;

- reviewed the historical prices, valuation parameters and trading volumes
of the Class A and Class B common stock of Herbalife;

- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which we deemed generally
comparable to Herbalife;

- reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Herbalife;

- performed discounted cash flow analyses based on the projections for
Herbalife furnished to us; and

- conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.

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The Special Committee of the Board of Directors of
Herbalife International, Inc.
Page 2

We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections provided to us by Herbalife. With respect to
Herbalife's projected financial results, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of Herbalife as to the expected future
performance of Herbalife. We have not assumed any responsibility for the
independent verification of any such information or of the projections provided
to us, and we have further relied upon the assurances of the senior management
of Herbalife that they are unaware of any facts that would make the information
and projections provided to us incomplete or misleading. In arriving at our
opinion, we have not performed or obtained any independent appraisal of the
assets or liabilities of Herbalife, nor have we been furnished with any such
appraisals.

We note that the Principal Shareholder owns a majority of the shares of
Class A and Class B common stock of Herbalife. We also note that the Principal
Shareholder has represented to us and to the Special Committee of the Board of
Directors of Herbalife (the "Special Committee") that he has no intention of
selling any of his holdings of Herbalife common stock. Accordingly, we have not
solicited, nor were we asked to solicit, third party acquisition interest in
Herbalife. We have assumed that the representations and warranties made in the
Agreement are true and that the Transaction (including the Merger) will be
completed in accordance with the terms of the Agreement. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.

We have acted as a financial advisor to the Special Committee in connection
with the Transaction and have received a fee for such services. In the ordinary
course of business, Bear Stearns may actively trade the equity and debt
securities of Herbalife for our own account and for the account of our customers
and, accordingly, may at any time hold a long or short position in such
securities.

It is understood that this letter is intended for the benefit and use of
the Special Committee and does not constitute a recommendation to the Special
Committee or any holders of Herbalife common stock as to whether to tender their
shares in the Tender Offer or how to vote in connection with the Merger. This
opinion does not address Herbalife's underlying business decision to pursue the
Transaction. This letter is not to be used for any other purpose, or reproduced,
disseminated, quoted to or referred to at any time, in whole or in part, without
our prior written consent; provided, however, that this letter may be included
in its entirety in any tender offer document or proxy statement to be
distributed to the holders of Herbalife common stock in connection with the
Transaction.

Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be Received is fair, from a financial point of
view, to the shareholders of Herbalife, excluding the Principal Shareholder.

Very truly yours,

BEAR, STEARNS & CO. INC.

By: /s/ DAVIES B. BELLER

----------------------------------
Davies B. Beller
Senior Managing Director

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ANNEX C

TEXT OF SECTIONS 92A.300 THROUGH 92A.500 OF THE NEVADA REVISED STATUTES

NRS 92A.300 Definitions. As used in NRS 92A.300 to 92A.500, inclusive,
unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those
sections.

NRS 92A.305 "Beneficial stockholder" defined. "Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or by
a nominee as the stockholder of record.

NRS 92A.310 "Corporate action" defined. "Corporate action" means the action
of a domestic corporation.

NRS 92A.315 "Dissenter" defined. "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.400 to
92A.480, inclusive.

NRS 92A.320 "Fair value" defined. "Fair value," with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.

NRS 92A.325 "Stockholder" defined. "Stockholder" means a stockholder of
record or a beneficial stockholder of a domestic corporation.

NRS 92A.330 "Stockholder of record" defined. "Stockholder of record" means
the person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.

NRS 92A.335 "Subject corporation" defined. "Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.

NRS 92A.340 Computation of interest. Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.

NRS 92A.350 Rights of dissenting partner of domestic limited partnership. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic limited partnership is a constituent
entity. NRS 92A.360 Rights of dissenting member of domestic limited-liability
company. The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.

NRS 92A.370 Rights of dissenting member of domestic nonprofit corporation.

1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.

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2. Unless otherwise provided in its articles of incorporation or bylaws, no
member of a domestic nonprofit corporation, including, but not limited to, a
cooperative corporation, which supplies services described in chapter 704 of NRS
to its members only, and no person who is a member of a domestic nonprofit
corporation as a condition of or by reason of the ownership of an interest in
real property, may resign and dissent pursuant to subsection 1.

NRS 92A.380 Right of stockholder to dissent from certain corporate actions
and to obtain payment for shares.

1. Except as otherwise provided in NRS 92A.370 and 92A.390, a
stockholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:

(a) Consummation of a plan of merger to which the domestic
corporation is a party:

(1) If approval by the stockholders is required for the merger
by NRS 92A.120 to 92A.160, inclusive, or the articles of
incorporation and he is entitled to vote on the merger; or

(2) If the domestic corporation is a subsidiary and is merged
with its parent under NRS 92A.180.

(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's
interests will be acquired, if he is entitled to vote on the plan.

(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of incorporation, bylaws or
a resolution of the board of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their
shares.

2. A stockholder who is entitled to dissent and obtain payment under
NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.

NRS 92A.390 Limitations on right of dissent: Stockholders of certain
classes or series; action of stockholders not required for plan of merger.

1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the
record date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or exchange is to
be acted on, were either listed on a national securities exchange, included
in the national market system by the National Association of Securities
Dealers, Inc., or held by at least 2,000 stockholders of record, unless:

(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or

(b) The holders of the class or series are required under the plan
of merger or exchange to accept for the shares anything except:

(1) Cash, owner's interests or owner's interests and cash in
lieu of fractional owner's interests of:

(I) The surviving or acquiring entity; or

(II) Any other entity which, at the effective date of the
plan of merger or exchange, were either listed on a national
securities exchange, included in the national market system by
the National Association of Securities Dealers, Inc., or held of
record by a least 2,000 holders of owner's interests of record;
or

(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of
paragraph (b).

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2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require
action of the stockholders of the surviving domestic corporation under NRS
92A.130.

NRS 92A.400 Limitations on right of dissent: Assertion as to portions only
to shares registered to stockholder; assertion by beneficial stockholder.

1. A stockholder of record may assert dissenter's rights as to fewer
than all of the shares registered in his name only if he dissents with
respect to all shares beneficially owned by any one person and notifies the
subject corporation in writing of the name and address of each person on
whose behalf he asserts dissenter's rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which
he dissents and his other shares were registered in the names of different
stockholders.

2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:

(a) He submits to the subject corporation the written consent of
the stockholder of record to the dissent not later than the time the
beneficial stockholder asserts dissenter's rights; and

(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.

NRS 92A.410 Notification of stockholders regarding right of dissent.

1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the meeting
must state that stockholders are or may be entitled to assert dissenters'
rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a
copy of those sections.

2. If the corporate action creating dissenters' rights is taken by
written consent of the stockholders or without a vote of the stockholders,
the domestic corporation shall notify in writing all stockholders entitled
to assert dissenters' rights that the action was taken and send them the
dissenter's notice described in NRS 92A.430.

NRS 92A.420 Prerequisites to demand for payment for shares.

1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who wishes to
assert dissenter's rights:

(a) Must deliver to the subject corporation, before the vote is
taken, written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and

(b) Must not vote his shares in favor of the proposed action.

2. A stockholder who does not satisfy the requirements of subsection 1
and NRS 92A.400 is not entitled to payment for his shares under this
chapter.

NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to assert
rights; contents.

1. If a proposed corporate action creating dissenters' rights is
authorized at a stockholders' meeting, the subject corporation shall
deliver a written dissenter's notice to all stockholders who satisfied the
requirements to assert those rights.

2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:

(a) State where the demand for payment must be sent and where and
when certificates, if any, for shares must be deposited;

(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the
demand for payment is received;

(c) Supply a form for demanding payment that includes the date of
the first announcement to the news media or to the stockholders of the
terms of the proposed action and requires that the

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person asserting dissenter's rights certify whether or not he acquired
beneficial ownership of the shares before that date;

(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60 days
after the date the notice is delivered; and

(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.

NRS 92A.440 Demand for payment and deposit of certificates; retention of
rights of stockholder.

1. A stockholder to whom a dissenter's notice is sent must:

(a) Demand payment;

(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for
this certification; and

2. The stockholder who demands payment and deposits his certificates,
if any, before the proposed corporate action is taken retains all other
rights of a stockholder until those rights are canceled or modified by the
taking of the proposed corporate action.

3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.

NRS 92A.450 Uncertificated shares: Authority to restrict transfer after
demand for payment; retention of rights of stockholder.

1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.

2. The person for whom dissenter's rights are asserted as to shares
not represented by a certificate retains all other rights of a stockholder
until those rights are canceled or modified by the taking of the proposed
corporate action.

NRS 92A.460 Payment for shares: General requirements.

1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced
by the district court:

(a) Of the county where the corporation's registered office is
located; or

(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the dissenter
resides or has its registered office. The court shall dispose of the
complaint promptly.

2. The payment must be accompanied by:

(a) The subject corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available interim
financial statements, if any;

(b) A statement of the subject corporation's estimate of the fair
value of the shares;

(d) A statement of the dissenter's rights to demand payment under
NRS 92A.480; and

(e) A copy of NRS 92A.300 to 92A.500, inclusive.

NRS 92A.470 Payment for shares: Shares acquired on or after date of
dissenter's notice.

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1. A subject corporation may elect to withhold payment from a
dissenter unless he was the beneficial owner of the shares before the date
set forth in the dissenter's notice as the date of the first announcement
to the news media or to the stockholders of the terms of the proposed
action.

2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment
pursuant to NRS 92A.480.

NRS 92A.480 Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.

1. A dissenter may notify the subject corporation in writing of his
own estimate of the fair value of his shares and the amount of interest
due, and demand payment of his estimate, less any payment pursuant to NRS
92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of
the fair value of his shares and interest due, if he believes that the
amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is
less than the fair value of his shares or that the interest due is
incorrectly calculated.

2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for
his shares.

NRS 92A.490 Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.

1. If a demand for payment remains unsettled, the subject corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it
shall commence the proceeding in the county where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign entity was located.

3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the
proceeding as in an action against their shares. All parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.

4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or any amendment thereto. The dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.

5. Each dissenter who is made a party to the proceeding is entitled to
a judgment:

(a) For the amount, if any, by which the court finds the fair value
of his shares, plus interest, exceeds the amount paid by the subject
corporation; or

(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject corporation elected to
withhold payment pursuant to NRS 92A.470.

NRS 92A.500 Legal proceeding to determine fair value: Assessment of costs
and fees.

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1. The court in a proceeding to determine fair value shall determine
all of the costs of the proceeding, including the reasonable compensation
and expenses of any appraisers appointed by the court. The court shall
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment.

2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:

(a) Against the subject corporation and in favor of all dissenters
if the court finds the subject corporation did not substantially comply
with the requirements of NRS 92A.300 to 92A.500, inclusive; or

(b) Against either the subject corporation or a dissenter in favor
of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in
good faith with respect to the rights provided by NRS 92A.300 to
92A.500, inclusive.

3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the subject
corporation, the court may award to those counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefited.

4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding.

5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P.
68 or NRS 17.115.

C-6
<PAGE> 126

Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent by each stockholder of the Company
or the stockholder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:

The Depositary for the Offer is:

U.S. STOCK TRANSFER CORPORATION

<TABLE>
<S> <C> <C>
By Registered or Certified Facsimile Transmission: By Hand or Overnight
Mail: Delivery:
(for Eligible Institutions
U.S. Stock Transfer Only) U.S. Stock Transfer
Corporation Corporation
1745 Gardena Avenue 818-502-1737 1745 Gardena Avenue
Glendale, CA 91204 Glendale, CA 91204
Attn: Reorganization Attn: Reorganization
Department Department

For Confirmation Telephone:
818-502-1404
</TABLE>

Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent at the telephone numbers and location
listed below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495

Banks and Brokerage Firms Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 928-0153

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
2121 Avenue of the Stars
Los Angeles, California 90067
(310) 282-7667 (call collect)

<PAGE> 1

LETTER OF TRANSMITTAL

TO TENDER SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK

HERBALIFE INTERNATIONAL, INC.
AT
$17.00 NET PER SHARE
IN RESPONSE TO THE OFFER TO PURCHASE DATED SEPTEMBER 17, 1999
OF

MH MILLENNIUM ACQUISITION CORP.

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

The Depositary:

U.S. STOCK TRANSFER CORPORATION

<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile Transaction: By Hand or
(For Eligible Institutions Only) Overnight Courier:
U.S. Stock Transfer Corporation 818-502-1737 U.S. Stock Transfer Corporation
1745 Gardena Avenue For Confirmation Telephone: 1745 Gardena Avenue
Glendale, CA 91204 Glendale, CA 91204
Attn: Reorganization Department 818-502-1404 Attn: Reorganization Department
</TABLE>

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A TELEX OR FACSIMILE NUMBER OTHER THAN THE ONES
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS INSTRUMENT
WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.

This Letter of Transmittal is to be used to tender shares of common stock
("Shares") of Herbalife International, Inc. (the "Company") in response to a
solicitation of tenders by MH Millennium Acquisition Corp. (the "Purchaser"). It
must be used whether certificates evidencing Shares are to be forwarded with
this Letter of Transmittal or whether delivery of Shares is to be made by
book-entry transfer to the account maintained by the Depositary at The
Depository Trust Company (the "Book-Entry Facility") as described in Section 3
of the Offer to Purchase. Stockholders whose certificates are not immediately
available or who cannot deliver their confirmation of the book-entry transfer of
their Shares into the Depositary's account at the Book-Entry Facility
("Book-Entry Confirmation") on or before the Expiration Time may use the
guaranteed delivery procedure described in Section 3 of the Offer to Purchase to
tender their Shares. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY FACILITY AND
COMPLETE THE FOLLOWING:

Name of Tendering Institution:
Account Number:
Transaction Code Number:

[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
Date of Execution of Notice of Guaranteed Delivery:
<PAGE> 2

Name of Institution which Guaranteed Delivery:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) AND SHARES(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering Shares by book-entry transfer.
** Unless otherwise indicated it will be assumed that all Shares described above are being tendered. See Instruction
4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3

NOTE: SIGNATURE MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

Ladies and Gentlemen:

The undersigned hereby tenders to MH Millennium Acquisition Corp. (the
"Purchaser"), a Nevada corporation, the shares of Class A Common Stock and Class
B Common Stock (collectively, the "Shares") of Herbalife International, Inc.
(the "Company"), a Nevada corporation, listed above, in response to the
Purchaser's offer to purchase all outstanding Shares at a price of $17.00 net
per Share, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated September 17, 1999 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which terms and
conditions constitute the "Offer").

Subject to, and effective upon, acceptance of the Shares tendered with this
Letter of Transmittal for payment in accordance with the Offer, the undersigned
hereby sells, assigns, and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all the Shares that are being tendered with
this Letter of Transmittal (and any other Shares or other securities issued or
issuable in respect of those Shares on or after September 17, 1999) and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to those Shares (and any
such other Shares or securities) with full power of substitution, (that power of
attorney being an irrevocable power coupled with an interest) to (a) deliver
certificates for the Shares (and any such other Shares or securities) or
transfer ownership of the Shares (and any such other Shares or securities) on
the account books maintained by the Book-Entry Facility, together in either case
with all accompanying evidences of transfer and authenticity, to or upon the
order of the Purchaser upon receipt by the Depositary, as the undersigned's
agent, of the purchase price (adjusted, if appropriate, as provided in the Offer
to Purchase), (b) present those Shares (and any such other Shares or securities)
for transfer on the books of the Company and (c) otherwise exercise all rights
of beneficial ownership of the Shares (and any such other Shares or securities),
all in accordance with the terms and conditions of the Offer.

The undersigned irrevocably appoints the Purchaser, its officers and its
designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney-in-fact and proxy or his or its substitute, in his or its
sole discretion deems proper, and otherwise act (including acting by written
consent without a meeting) with respect to, all the Shares tendered by this
Letter of Transmittal which have been accepted for payment by the Purchaser
prior to the time of the vote or action (and any other Shares or securities
issued in respect of those Shares on or after September 17, 1999). This proxy is
irrevocable and is granted in consideration of, and is effective upon, the
deposit by the Purchaser with the Depositary of the purchase price for the
Shares to which it relates, and acceptance of those Shares for payment, in
accordance with the Offer. That acceptance for payment will revoke all prior
proxies granted by the undersigned with regard to those Shares (and any such
other Shares or other securities) and the undersigned will not give any
subsequent proxies with respect to those Shares.

The undersigned represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Shares tendered by this
Letter of Transmittal (and any other Shares or other securities issued in
respect of those Shares on or after September 17, 1999) and that, when those
Shares are accepted for payment by the Purchaser, the Purchaser will acquire
good and unencumbered titled to the Shares (and any such other Shares or
securities), free and clear of all liens, restrictions, charges, encumbrances or
adverse claims. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered by this Letter of Transmittal (and any such other Shares or other
securities) to the Purchaser.

The authority conferred in this Letter of Transmittal will not be affected
by, and will survive, the death or incapacity of the undersigned, and any
obligation of the undersigned under this Letter of Transmittal or otherwise
resulting from the tender of the Shares to which this Letter of Transmittal
relates will be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated in
the Offer to Purchase, the tender made by this Letter of Transmittal is
irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions to this Letter of Transmittal will constitute a binding agreement
between the undersigned and the Purchaser upon the terms and subject to the
conditions of the Offer.
<PAGE> 4

Unless otherwise indicated in the box below captioned "Special Payment
Instructions," please issue the check for the purchase price of the Shares
tendered by this Letter of Transmittal, and cause any Shares represented by
certificates accompanying this Letter of Transmittal which are not being
tendered, or are not accepted for payment, in the name(s) of the undersigned.
Similarly, unless otherwise indicated in the box below captioned "Special
Delivery Instructions," please mail the check for the purchase price and deliver
certificates representing any Shares which are not being tendered or are not
accepted for payment (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature. If both the
Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and certificates for
any Shares which are not being tendered, or are not accepted for payment, in the
name of, and deliver the check and certificates, or confirmation of transfer of
the Shares at the Book-Entry Facility, to the person or persons indicated.
Stockholders delivering Shares by book-entry transfer may request that any
Shares not accepted for payment be returned by crediting an account at the
Book-Entry Facility, by making an appropriate entry under "Special Payment
Instructions." The undersigned recognizes that the Purchaser has no obligation
pursuant to the Special Payment Instructions or otherwise to transfer any
tendered Shares which are not accepted for payment from the name of the
registered holder of the Shares to the name of another person.
<PAGE> 5

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

SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if certificates for Shares which are not
tendered or not purchased and the check for the purchase price of Shares
which are purchased are to be issued in the name of someone other than the
undersigned, or if Shares delivered by book-entry which are not purchased
are to be returned by credit to an account maintained at a Book-Entry
Facility other than that designated above.

Issue: [ ] Check and/or [ ] Certificate(s) to:

Name
----------------------------------------------------
(PLEASE PRINT)

Address
--------------------------------------------------

------------------------------------------------------------
(INCLUDE ZIP CODE)

------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)

[ ] Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Facility account set forth below:

------------------------------------------------------------
(ACCOUNT NUMBER)

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

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if certificates for Shares which are not
tendered or are not purchased and the check for the purchase price of
Shares which are purchased are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown
after the undersigned's signature below.

Mail: [ ] Check and/or [ ] Certificate(s) to:

Name
----------------------------------------------------
(PLEASE PRINT)

Address
--------------------------------------------------

------------------------------------------------------------
(INCLUDE ZIP CODE)

------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)

---------------------------------------------------------------
<PAGE> 6

SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)

Dated:
--------------------- , ------------

(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted with this
Letter of Transmittal. If signature is by trustees, executors, administrators,
guardians, attorneys-at-fact, agents, officers of corporations or others acting
in a fiduciary or representative capacity, please provide the information
described in Instruction 5.)

Name(s) ------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(PLEASE PRINT)

Capacity (Full Title)
-----------------------------------------------------------

Address-------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)

Area Code and Telephone Number ( )
--------------------------------------------

Tax Identification or Social Security No.
---------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)

GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)

Authorized Signature
------------------------------------------------------------

Name
----------------------------------------------------------------------------

Title
---------------------------------------------------------------------------

Name of Firm
--------------------------------------------------------------------

Address-------------------------------------------------------------------------

Area Code and Telephone Number ( )
--------------------------------------------

Dated:
--------------------------- , ------------
<PAGE> 7

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (i) if this Letter of Transmittal is signed by the
registered holder of the Shares tendered by it (which, for purposes of this
document, includes any participant in the Book-Entry Facility whose name appears
on a security position listing as the owner of Shares) unless the holder has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the reverse of this Letter of
Transmittal or (ii) if those Shares are tendered for the account of a member
firm of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
which has an office or correspondent in the United States (collectively,
"Eligible Institutions"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.

2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are being
forwarded with it or, unless an Agent's Message is utilized, tenders of Shares
are being made in accordance with the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares, or a Book-Entry Confirmation confirming book-entry
transfer of Shares to an account of the Depositary, as the case may be, together
with a properly completed and duly executed Letter of Transmittal (or facsimile
of one) and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth above on or prior
to the Expiration Time (as defined in the Offer to Purchase). Stockholders whose
certificates for Shares are not immediately available, or who cannot deliver
Book-Entry Confirmation of book entry transfer of the Shares to the Depositary
on or prior to the Expiration Time, may tender their Shares by properly
completing and executing a Notice of Guaranteed Delivery in accordance with the
guaranteed delivery procedure described in Section 3 of the Offer to Purchase.
Pursuant to that procedure, (i) the tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided with the Offer to
Purchase, must be received by the Depositary prior to the Expiration Time and
(iii) the certificates for all physically tendered Shares in proper form for
transfer, or Book-Entry Confirmation of Shares tendered by book-entry transfer,
as the case may be, together with a properly completed and duly executed Letter
of Transmittal (or facsimile of one) and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three New York
Stock Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.

The method of delivery of this Letter of Transmittal, the certificates for
Shares and all other required documents, including delivery through the
Book-Entry Facility, is at the option and risk of the tendering stockholder and,
except as otherwise provided in this Instruction 2, the delivery will be deemed
made only when actually received by the Depositary. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.

No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile of it), waive any right to receive
any notice of the acceptance of their Shares for payment.

3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal
is inadequate, the certificate numbers and numbers of Shares being tendered
should be listed on a separate signed schedule which should be attached to this
Letter of Transmittal.

4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by a certificate
are to be tendered, fill in the number of Shares which are to be tendered in the
box entitled "Number of Shares Tendered." In such case, new certificate(s) for
the remainder of the Shares that were evidenced by your old certificate(s) will
be sent to you, unless otherwise provided in the appropriate box on this Letter
of Transmittal, as soon as practicable after the Expiration Time. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.

5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
being tendered, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s), without any alteration, enlargement
or change whatsoever.
<PAGE> 8

If any of the tendered Shares are owned of record by two or more joint
owners, all the owners must sign this Letter of Transmittal.

IF TENDERED SHARES ARE REGISTERED IN DIFFERENT NAMES ON DIFFERENT
CERTIFICATES, IT WILL BE NECESSARY TO COMPLETE, SIGN AND SUBMIT AS MANY SEPARATE
LETTERS OF TRANSMITTAL AS THERE ARE DIFFERENT REGISTRATIONS ON CERTIFICATES.

If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, that person should so indicate when signing, and may be required to
submit evidence satisfactory to the Purchaser of the person's authority so to
act.

When this Letter of Transmittal is signed by the registered owner(s) of the
Shares being tendered, no endorsements of certificates or separate stock powers
are required, unless payment or certificates for Shares which are not tendered
or purchased are to be issued to a person other than the registered owner(s), in
which case, endorsements of certificates or separate stock powers are required
and signatures on those certificates or stock powers must be guaranteed by an
Eligible Institution.

If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares being tendered, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered owner(s) appear on the certificates.
Signatures on the certificates or stock powers must be guaranteed by an Eligible
Institution.

6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale to it of Shares it purchases pursuant to the Offer. If
payment of the purchase price is to be made to, or if certificates for Shares
which are not tendered or are not purchased are to be registered in the name of,
any person other than the registered holder, or if tendered certificates are
registered in the name of anyone other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes payable on account of the
transfer to another person (whether imposed on the registered holder or on the
other person) will be deducted from the purchase price unless satisfactory
evidence of the payment of, or an exemption from the need to pay, stock transfer
taxes is submitted.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES SUBMITTED WITH THIS LETTER
OF TRANSMITTAL.

7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check or certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal, or if a check is to be sent or
certificates are to be returned to someone other than the signer of this Letter
of Transmittal or to an address other than the signer's address shown above, the
appropriate boxes on this Letter of Transmittal must be completed. Stockholders
tendering Shares by book-entry transfer may request that any Shares which are
not purchased be credited to an account maintained at the Book-Entry Facility
which the stockholder designates. If no instructions are given, Shares tendered
by book-entry transfer which are not purchased will be returned by crediting the
account at the Book-Entry Facility designated above.

8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to, or additional copies of the Offer to Purchase and this
Letter of Transmittal may be obtained from, the Information Agent its address
set forth below or from your broker, dealer, commercial bank or trust company.

9. WAIVER OF CONDITIONS. The conditions to the Offer, except the Minimum
Condition (as defined in the Offer to Purchase), may be waived by the Purchaser,
in whole or in part, at any time and from time to time in the Purchaser's sole
discretion, as to any Shares which are tendered.

10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to indicate that the stockholder is not subject to backup withholding by
checking the box in Part 2 of the Substitute Form W-9. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% Federal income tax withholding from the payment of the purchase price. The
box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% from all payments of the purchase price to be made after expiration
of that 60 day period until a TIN is provided to the Depositary.
<PAGE> 9

Important: This Letter of Transmittal (or a facsimile of it), together with
certificates or confirmation of book-entry transfer and all other required
documents, or a Notice of Guaranteed Delivery, must be received by the
Depositary on or prior to the Expiration Time.

IMPORTANT TAX INFORMATION

Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with the
stockholder's correct TIN on Substitute Form W-9 below. If the stockholder is an
individual, the TIN is his or her social security number. If the Depositary is
not provided with the correct TIN, the stockholder may be subject, among other
things, to penalties imposed by the Internal Revenue Service. In addition,
payments that are made to the stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.

Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that individual must submit a statement, signed under penalties of
perjury, attesting to the individual's exempt status. A form of statement may be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.

If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's correct TIN by completing
the form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that the stockholder is awaiting a TIN).
<PAGE> 10

WHAT NUMBER TO GIVE THE DEPOSITARY

The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares being tendered are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
<TABLE>
<S> <C> <C>
PAYER'S NAME: U.S. STOCK TRANSFER CORPORATION
- ------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT Social security
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW number(s) or
Employer
identification
number(s)
--------------------------------------------------------------------------

PART II -- Certification -- Under penalty of perjury, I certify that: (1)
DEPARTMENT OF THE TREASURY the number shown on this form is my correct Taxpayer Identification
INTERNAL REVENUE SERVICE Number (or I am waiting for a number to be issued to me) and (2) I am not
PAYER'S REQUEST FOR TAXPAYER subject to backup withholding because (a) I am exempt from backup
IDENTIFICATION NUMBER (TIN) withholding or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup withholding.
--------------------------------------------------------------------------
Certification instructions -- You must cross out item (2) in Part II
above if you have been notified by the IRS that you are subject to backup
withholding because of a underreporting interest or dividends on your tax
returns. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the
IRS stating that you are no longer subject to backup withholding, do not
cross out such item (2).
- ------------------------------------------------------------------------------------------------------------------

PART III
Awaiting TIN [ ]
- ------------------------------------------------------------------------------------------------------------------
5 Signature
----------------------------------------------------------------------------------------------------------------- Date
---------------------------------------------------------------------------------------------------------------------------- 1
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART III OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, if I do not provide a taxpayer identification number to the
Depositary, 31% of all reportable payments made to me will be withheld, but
will be refunded if I provide a certified taxpayer identification number
within 60 days.

Signature
------------------------------------------------------------------------------
Date
--------------------------------
- --------------------------------------------------------------------------------

The Information Agent for the Offer is:

D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495

Banks and Brokerage Firms call collect: (212) 269-5550
All others call toll-free: (800) 928-0153

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
2121 Avenue of the Stars
Los Angeles, California 90067
(310) 282-7667 (call collect)

<PAGE> 1

NOTICE OF GUARANTEED DELIVERY

FOR

TENDER OF SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK

HERBALIFE INTERNATIONAL, INC.

(NOT TO BE USED FOR SIGNATURE GUARANTEES)

This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of Class A Common Stock, par value
$0.01 per share (the "Class A Shares"), and Class B Common Stock, par value
$0.01 per share (the "Class B Shares," and together with the Class A Shares, the
"Shares"), of Herbalife International, Inc., a Nevada corporation (the
"Company"), are not immediately available, (ii) if Share Certificates and all
other required documents cannot be delivered to U.S. Stock Transfer Corporation,
as Depositary (the "Depositary"), prior to the Expiration Time (as defined in
the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram
or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.

The Depositary for the Offer is:

U.S. STOCK TRANSFER CORPORATION

By Facsimile Transmission
(for Eligible Institutions only):

818-502-1737

Confirm by Telephone: 818-502-1404

<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Courier:
U.S. Stock Transfer Corporation U.S. Stock Transfer Corporation
1745 Gardena Avenue 1745 Gardena Avenue
Glendale, CA 91204 Glendale, CA 91204
Attn: Reorganization Department Attn: Reorganization Department
</TABLE>

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2

LADIES AND GENTLEMEN:

The undersigned hereby tenders to MH Millennium Acquisition Corp., a Nevada
corporation, which is a wholly owned subsidiary of MH Millennium Holdings LLC, a
Delaware limited liability company, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated September 17, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (the terms and conditions of
which, as amended or supplemented from time to time, together constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedures described in
Section 3 of the Offer to Purchase.

Number of Class A Shares: Number of Class B Shares:

Name(s) of Record Holder(s):
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)

Address(es):
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)

Area Code and Tel. No:
- --------------------------------------------------------------------------------

Certificate Nos. (if available):
- --------------------------------------------------------------------------------

Check box if Shares will be tendered by book-entry transfer:

[ ] The Depository Trust Company

Signature(s):
- --------------------------------------------------------------------------------

Account Number:
- --------------------------------------------------------------------------------

Dated:
- ------------------------------------, ------------

2
<PAGE> 3

GUARANTEE

(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible Institution"),
guarantees the delivery to the Depositary of the Shares tendered hereby,
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any other required documents, or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry transfer of Shares, all within three Nasdaq National Market trading
days of the date hereof.

The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in financial loss to such Eligible Institution.

Name of Firm:
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)

Address:
- --------------------------------------------------------------------------------
(ZIP CODE)

Area Code and Tel. No.:
- --------------------------------------------------------------------------------

Name:
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)

Title:
- --------------------------------------------------------------------------------

Date:
- ------------------, ------

NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

<PAGE> 1

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK

HERBALIFE INTERNATIONAL, INC.

$17.00 NET PER SHARE

MH MILLENNIUM ACQUISITION CORP.

A WHOLLY OWNED SUBSIDIARY OF

MH MILLENNIUM HOLDINGS LLC

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

We have been appointed by MH Millennium Acquisition Corp., a Nevada
corporation (the "Purchaser"), a wholly owned subsidiary of MH Millennium
Holdings LLC, a Delaware limited liability company (the "Parent"), to act as
Information Agent in connection with the Purchaser's offer to purchase all
outstanding shares of Class A Common Stock, par value $0.01 per share (the
"Class A Shares"), and Class B Common Stock, par value $0.01 per share (the
"Class B Shares," and together with the Class A Shares, the "Shares"), of
Herbalife International, Inc., a Nevada corporation (the "Company"), at a price
of $17.00 per Share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated September 17, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (the terms and conditions of which, as amended or supplemented from
time to time, together constitute the "Offer") enclosed herewith. Please furnish
copies of the enclosed materials to those of your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee.

Enclosed for your information and use are copies of the following
documents:

1. Offer to Purchase;

2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;

3. A printed form of a letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;

4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and

5. Return envelope addressed to the Depositary.
<PAGE> 2

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

The Offer is conditioned upon, among other things, (1) there being tendered
and not withdrawn prior to the expiration date of the Offer, at least a majority
of the Class A Shares and at least a majority of the Class B Shares outstanding
as of September 13, 1999, excluding shares owned by Mr. Hughes and entities
controlled and beneficially owned by him, directly and indirectly (the
"Continuing Stockholder"), (the "Minimum Condition") and (2) the Purchaser
obtaining financing for the Offer, the Merger and related transactions. The
Minimum Condition is not waivable by the Purchaser or the Parent without the
consent of the Company, acting through a Special Committee of the Company's
Board of Directors.

If the Minimum Condition is met and the Offer is consummated, the Purchaser
and Parent will, subject to certain conditions, cause the Purchaser to be merged
with the Company (the "Merger") in a transaction in which the Company will be
the surviving corporation, the Continuing Stockholder will own all the stock of
the surviving corporation in the Merger, and the other stockholders of the
Company other than the Continuing Stockholder will receive $17.00 per Share in
cash (unless particular stockholders elect to exercise dissenters' rights with
respect to their Shares as described in Section 10 of the Offer to Purchase). If
the Minimum Condition is not met and not waived by the Company, then the
Purchaser is not obligated, or permitted, under the Merger Agreement to
consummate the Offer or the Merger. The Offer is also subject to other
conditions described in Section 5 of the Offer to Purchase.

In connection with the Offer and the Merger, stockholders are entitled to
exercise dissenters' rights. See Section 10 of the Offer to Purchase.

In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility (as defined in the Offer to Purchase) pursuant to the procedures set
forth in the Offer to Purchase, a Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry transfer, and any other documents required by the
Letter of Transmittal.

If a holder of Shares wishes to tender Shares, but cannot deliver such
holder's certificates or other required documents, or cannot comply with the
procedure for book-entry transfer, prior to the expiration of the Offer, a
tender of Shares may be effected by following the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.

The Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Information Agent as described in the Offer to
Purchase) in connection with the solicitation of tenders of Shares pursuant to
the Offer. However, the Purchaser will reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Purchaser will pay or cause to be paid any stock transfer
taxes payable with respect to the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.

Any questions or requests for assistance may be directed to the Information
Agent at its telephone numbers and address set forth on the back cover of the
Offer to Purchase. Additional copies of the enclosed material may be obtained
from the Information Agent at its address and telephone numbers set forth on the
back cover of the Offer to Purchase.

Very truly yours,

D. F. King & Co., Inc.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE COMPANY, THE
INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.

<PAGE> 1

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK

HERBALIFE INTERNATIONAL, INC.

$17.00 NET PER SHARE

MH MILLENNIUM ACQUISITION CORP.

A WHOLLY OWNED SUBSIDIARY OF

MH MILLENNIUM HOLDINGS LLC

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

To Our Clients:

Enclosed for your consideration is an Offer to Purchase, dated September
17, 1999 (the "Offer to Purchase"), and a related Letter of Transmittal (the
terms and conditions of which, together with any supplements or amendments
thereto, collectively constitute the "Offer") relating to the offer by MH
Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"), a wholly
owned subsidiary of MH Millennium Holdings LLC, a Delaware limited liability
company, to purchase all outstanding shares of Class A Common Stock, par value
$.01 per share (the "Class A Shares"), and Class B Common Stock, par value $.01
per share (the "Class B Shares," and together with the Class A Shares, the
"Shares"), of Herbalife International, Inc. (the "Company"), a Nevada
corporation, at a price of $17.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase and the
related Letter of Transmittal.

WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.

Accordingly, we request instructions as to whether you wish to have us
tender, on your behalf, any or all Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.

Please note the following:

1. The Offer Price is $17.00 per Share, net to you in cash without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.

2. The Board of Directors of the Company, based upon the
recommendation of a Special Committee consisting solely of independent
directors, has approved the Offer and the Merger (as defined below) and
determined that the terms of the Offer and the Merger are fair to, and in
the best interests of, the stockholders of the Company and recommends that
the stockholders of the Company accept the Offer and tender their Shares in
response to the Offer.

3. The Offer is being made for all outstanding Shares.

4. The Offer is being made in accordance with an Agreement and Plan
of Merger (the "Merger Agreement"), dated as of September 13, 1999, among
the Company, MH Millennium Holdings LLC (the "Parent"), Purchaser,
<PAGE> 2

the Company's founder, Chief Executive Officer, President and Chairman of
the Board, Mark Hughes ("Mr. Hughes") and The Mark Hughes Family Trust (the
"Family Trust"). Mr. Hughes and the Family Trust, which directly and
indirectly own all of the common stock of the Purchaser, have guaranteed
all of the Purchaser's obligations to make payments under the Merger
Agreement.

5. The Offer is conditioned upon, among other things, (1) there being
tendered and not withdrawn prior to the expiration date of the Offer at
least a majority of the Class A Shares and at least a majority of the Class
B Shares outstanding as of September 13, 1999, excluding Shares owned by
Mr. Hughes and companies controlled and beneficially owned by him, directly
and indirectly, (2) the Purchaser obtaining financing for the Offer, the
Merger and related transactions, and (3) the satisfaction or waiver of
certain conditions to the obligations of the Purchaser and the Company to
consummate the Offer and the transactions contemplated by the Merger
Agreement.

6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Purchaser pursuant to the Offer.

7. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, October 15, 1999, unless the Offer is extended
in accordance with the terms of the Merger Agreement.

If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. You should read and
consider the information contained in the enclosed Offer to Purchase, Letter of
Transmittal and Solicitation/Recommendation Statement on Schedule 14D-9 in
making your decision with respect to tendering your Shares pursuant to the
Offer. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE TO ALLOW
US AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.

The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. In any jurisdiction where securities, blue-sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers that are licensed under the laws of such jurisdiction.

2
<PAGE> 3

INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK

HERBALIFE INTERNATIONAL, INC.

The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated September 17, 1999, and the related Letter of
Transmittal in connection with the offer by MH Millennium Acquisition Corp., a
Nevada corporation (the "Purchaser"), a wholly owned subsidiary of MH Millennium
Holdings LLC, a Delaware limited liability company, to purchase all outstanding
shares of Class A Common Stock, par value $.01 per share (the "Class A Shares")
and Class B Common Stock, par value $.01 per share (the "Class B Shares," and
together with the Class A Shares, the "Shares") of Herbalife International,
Inc., a Nevada corporation.

This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.

Number of Shares to Be Tendered:* Date:
- --------------------------------------------------- -----------------
Class A Shares ________
Class B Shares ________

SIGN HERE

Signature(s)
- --------------------------------------------------------------------------------

Print Name(s)
- --------------------------------------------------------------------------------

Print Address(es)
- --------------------------------------------------------------------------------

Area Code and Telephone Number(s)
- ------------------------------------------------------------------------------

Taxpayer Identification
or Social Security Numbers(s)
- --------------------------------------------------------------------------------

* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.

<PAGE> 1

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
SOCIAL SECURITY NUMBERS HAVE NINE DIGITS SEPARATED BY TWO HYPHENS: I.E.
000-00-0000. EMPLOYER IDENTIFICATION NUMBERS HAVE NINE DIGITS SEPARATED BY ONLY
ONE HYPHEN: I.E. 00-0000000. THE TABLE BELOW WILL HELP DETERMINE THE NUMBER TO
GIVE THE PAYER.

<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------

1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
9. A valid trust, estate, or pension The legal entity
trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)

10. Corporate account The corporation

11. Religious, charitable or The organization
educational organization account

12. Partnership account held in the The partnership
name of the partnership or
business

13. Association, club, or other tax- The organization
exempt organization

14. A broker or registered nominee The broker or
nominee

15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>

(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show the name of the individual owner, but you may also enter your
business or "doing business as" name. You may use either your social
security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension trust.

NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.

To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and
continue until you furnish your taxpayer identification number to the requester.

PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding. For interest
and dividends, all listed payees are exempt except item (9). For broker
transactions, payees listed in items (1) through (13) and a person registered
under the Investment Advisers Act of 1940 who regularly acts as a broker are
exempt. Payments subject to reporting under sections 6041 and 6041A are
generally exempt from backup withholding only if made to payees described in
items (1) through (7), except a corporation that provides medical and health
care services or bills and collects payments for such services is not exempt
from backup withholding. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnership not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER. FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.

Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(a), 6042, 6044, 6045, 6049 and
6050A and 6050N of the Code and the regulations promulgated therein.

PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, interest, or
other payments to give taxpayer identification numbers to payers who must report
the payments to IRS. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.

PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE

<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 17, 1999, and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the making or acceptance of the Offer would not be in
compliance with the laws of such jurisdiction or any administrative or judicial
action pursuant thereto. In any jurisdiction where securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed made on behalf of MH Millennium Acquisition Corp. by one or more
registered brokers or dealers licensed as required by the laws of such
jurisdiction.

Notice of Offer to Purchase for Cash
All Outstanding Shares of Class A Common Stock and Class B Common Stock

Herbalife International, Inc.

$17.00 Net Per Share

MH Millennium Acquisition Corp.

a wholly owned subsidiary of

MH Millennium Holdings LLC

MH Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"), which
is wholly owned by MH Millennium Holdings LLC, a Delaware limited liability
company (the "Parent"), is offering to purchase for cash all outstanding shares
of Class A Common Stock, par value $.01 per share (the "Class A Shares") and
Class B Common Stock, par value $.01 per share (the "Class B Shares" and,
together with the Class A Shares, the "Shares"), of Herbalife International,
Inc., a Nevada corporation (the "Company"), at a price (the "Offer Price") of
$17.00 per Share, net to the seller in cash, without interest, on the terms and
subject to the conditions set forth in the Offer to Purchase, dated September
17, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (the
terms and conditions of which, together with any supplements or amendments
thereto, collectively constitute the "Offer").

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.

<PAGE> 2

The Offer is conditioned upon, among other things, (i) there being tendered and
not withdrawn prior to the expiration date of the Offer at least a majority of
the Class A Shares and at least a majority of Class B Shares outstanding as of
September 13, 1999, excluding Shares beneficially owned by the Continuing
Stockholder (defined as Mark Hughes, the Company's founder, Chief Executive
Officer, President, Chairman of the Board, and indirect owner of Parent and
Purchaser and other entities controlled and beneficially owned by him, directly
and indirectly) (the "Minimum Condition"), and (ii) Parent, Purchaser and/or one
or more of their respective subsidiaries having obtained the Debt Financing (as
defined in the Offer to Purchase) on terms and conditions satisfactory in form
and substance to Parent and Purchaser in their sole reasonable discretion
(including the availability of funds for certain loans to be made to the
Continuing Stockholder, as further described in the Offer to Purchase). The
Minimum Condition is not waivable by the Purchaser or the Parent without the
consent of the Company, acting through a Special Committee of the Company's
Board of Directors, composed solely of independent directors (the "Special
Committee").

The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
September 13, 1999 (the "Merger Agreement"). Pursuant to the Merger Agreement,
provided that the Purchaser accepts for payment the Shares which are tendered in
response to the Offer and other customary conditions are satisfied, the
Purchaser will be merged (the "Merger") into the Company in a transaction in
which the Company will become wholly owned by the Continuing Stockholder, and
the Shares not owned by Parent, the Purchaser, the Continuing Stockholder, the
Company or those Public Stockholders (as defined below) who have perfected their
dissenters' rights pursuant to the terms of the Merger Agreement, will be
converted into the right to receive $17.00 per Share in cash. The Continuing
Stockholder owns a majority of the outstanding voting Class A Shares and has
acted by written consent to approve and adopt the Merger Agreement. As a result,
assuming that the Offer is consummated, no additional stockholder action is
required to consummate the Merger.

Before approving the transactions contemplated by the Merger Agreement, the
Board of Directors of the Company appointed the Special Committee to evaluate
the proposed transactions. On September 13, 1999, the Special Committee
unanimously determined that the Merger Agreement and the Offer and the Merger
are fair to and in the best interests of the holders of Shares other than the
Continuing Stockholder (the "Public Stockholders"), approved, authorized and
adopted the Merger Agreement, the Offer, the Merger and the other transactions
contemplated thereby, and resolved to recommend that the Public Stockholders
accept the Offer and tender their Shares pursuant to the Offer.

The Board of Directors of the Company, having received the recommendation of the
Special Committee, (1) has unanimously (with Mr. Hughes abstaining) resolved
that the Offer, the Merger, and the Merger Agreement are fair to and in the best
interests of the Public Stockholders and (2) recommends that the Public
Stockholders accept the Offer and tender their Shares pursuant to the Offer. The
Offer will expire at 12:00 midnight, New York City time, on October 15, 1999,
unless it is extended. In the event that any conditions to the Offer are not
satisfied, the Purchaser has the right to extend the Offer, and the Company may
require the Purchaser to extend the Offer, on one or more occasions as specified
in the Merger Agreement. The Purchaser will make a public announcement of any
extension not later than 9:00 a.m. New York City time on the business day after
the previously scheduled Expiration Time. During any extension, all Shares which
had previously been tendered and not withdrawn will remain tendered, subject to
the right of a tendering stockholder to withdraw tendered Shares.

"Expiration Time" means 12:00 midnight, New York City time, on October 15, 1999,
unless and until the Offer is extended, in which event "Expiration Time" shall
mean the latest time and date at which the Offer, as so extended, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable except that such
Shares may be withdrawn at any time prior to the Expiration Time and, unless
they have been accepted for payment by the Purchaser, may also be withdrawn at
any time after November 15, 1999. For a withdrawal to be effective, a written
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover page of the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in the Offer to Purchase), unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility and otherwise comply with the Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including the
time of receipt) of any notice of withdrawal will be determined by the Purchaser
in its sole discretion, which determination will be final and binding. None of
the Company, the Purchaser, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.

<PAGE> 3

For purposes of the Offer, the Purchaser will be deemed to accept for payment,
and thereby purchase, all the Shares which are properly tendered and not
properly withdrawn when and if the Purchaser gives oral or written notice to
U.S. Stock Transfer Corporation (the "Depositary") that the Purchaser is
accepting those Shares for payment. Payment for Shares purchased pursuant to the
Offer will be made by deposit of the purchase price with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving the
payment from the Purchaser and transmitting payment to tendering stockholders
whose Shares have been accepted for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of (a) certificates representing Shares (or a timely Book-Entry
Confirmation of transfer of Shares into an account maintained by the Depositary
at The Depository Trust Company, pursuant to the procedures set forth in Section
3 of the Offer to Purchase), (b) a Letter of Transmittal (or a facsimile of
one), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase), in
connection with a book-entry delivery, and (c) any other documents required by
the Letter of Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time, depending upon when certificates or Book-Entry
Confirmations are actually received by the Depositary. Under no circumstances
will interest be paid on the purchase price of the Shares, regardless of any
extension of the Offer or any delay in paying for Shares.

One of the purposes of the Offer is to enable the Continuing Stockholder to
acquire the entire equity ownership of the Company. For a complete discussion of
the purposes of the Offer and related transactions, see "Special
Factors--Purposes of the Offer and the Merger." Following consummation of the
Offer and the Merger, the Shares will no longer be traded on the Nasdaq National
Market and registration of the Shares will be terminated under the Securities
Exchange Act of 1934, as amended.

The Offer to Purchase, and the related Letter of Transmittal and other relevant
documents will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.

The information required to be disclosed by Rules 14d-6(e)(1)(vii) and
13e-3(e)(1) under the Exchange Act is contained in the Offer to Purchase and is
incorporated herein by reference.

THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

Questions and requests for assistance may be directed to the Information
Agent as set forth below. Requests for copies of the Offer to Purchase and the
related Letter of Transmittal and all other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below, and
copies will be furnished promptly at the Purchaser's expense. The Purchaser will
not pay any fees or commissions to any broker or dealer or any other person for
soliciting tenders of Shares pursuant to the Offer.

The Information Agent for the Offer is:

D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: (800) 928-0153

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
2121 Avenue of the Stars, Suite 3000
Los Angeles, California 90067
CALL COLLECT: (310) 282-7667

September 17, 1999

<PAGE> 1
Exhibit (a)(8)

Contact: Herbalife International
Investor Relations
(310) 410-9600 ext. 32202
[email protected]
Media Contact: Donna Walters
Sitrick And Company
(310) 788-2850

HERBALIFE BOARD APPROVES BUY-OUT OFFER FROM FOUNDER

LOS ANGELES, CA - September 13, 1999 - Herbalife International, Inc.
(NASDAQ/NM: HERBA, HERBB) today announced that its Board of Directors has
accepted a definitive offer from company Founder, Chairman, President and Chief
Executive Officer, Mark Hughes, for a transaction in which all of the
outstanding Class A and Class B company shares not currently owned by Mr. Hughes
will be acquired by entities controlled by Mr. Hughes for $17.00 per share in
cash. The buy-out is structured as a cash tender offer to be followed by a cash
merger. Herbalife, Mr. Hughes and entities controlled by Mr. Hughes have entered
into a definitive merger agreement governing the transactions.

Before acting on the buy-out proposal, Herbalife's Board appointed a
Special Committee consisting solely of independent directors to evaluate the
proposal. The Special Committee retained its own financial and legal advisors.
The Special Committee's financial advisor, Bear, Stearns & Co. Inc., has
rendered an opinion to the Special Committee to the effect that the
consideration to be paid in the tender offer and the merger is fair, from a
financial point of view, to Herbalife's public stockholders. Herbalife noted
that the $17.00 per share price represents a premium of approximately 42 percent
over today's closing price of $12 for the Class A shares and 86 percent over
today's closing price of $9 5/32 for the Class B shares.

Mr. Hughes currently owns 5.4 million Class A shares, or approximately
54 percent of the voting Class A shares, and 10.8 million Class B shares, or
approximately 58 percent of the non-voting Class B shares. Mr. Hughes' Class B
shares include 5 million shares posted as collateral to secure his obligations
in connection with the Debt Exchangeable for Common Stock (DECS) securities
issued last year.

The transaction is subject to customary closing conditions, including
the securing of third party financing. The initial tender period is expected to
expire on October 15, 1999, but is subject to extension under certain
circumstances to permit the satisfaction of closing conditions. Mr. Hughes
indicated that he currently expects to extend the initial tender period.

In addition to the unanimous recommendation of the Special Committee and
the fairness opinion from Bear, Stearns & Co. Inc. addressed to the Special
Committee, the Board has received a highly confident letter from its financial
advisor, Donaldson Lufkin & Jenrette Securities Corporation, regarding Mr.
Hughes' ability to secure the financing necessary to fund the transaction.

<PAGE> 2
Herbalife noted that, in order for the transaction to proceed, at least
a majority of the outstanding Class A shares and a majority of the outstanding
Class B shares, in each case excluding shares held by Mr. Hughes, must be
tendered in the cash tender offer. In addition, Herbalife indicated that the
merger agreement makes dissenters rights available.

Mr. Hughes stated, "This transaction is in the best interests of our
public stockholders and Herbalife. The price being offered is substantially
higher than our current and recent trading prices, and I am pleased to be able
to make this premium price available to our public stockholders. Herbalife has
not been rewarded by the public equity markets in recent periods, and I believe
that the conditions that may have contributed to this situation are not likely
to change in the near future."

Herbalife indicated that the transaction, valued at $500 million, calls
for raising $440 million in a combination of senior bank debt and high-yield
debt, and will utilize approximately $60 million of company cash. In addition to
funding the purchase of shares from public stockholders, the external financing
will be used by Herbalife to make two loans to entities controlled by Mr.
Hughes. The proceeds of the first loan, in the amount of approximately $89
million, will be used to post alternative cash equivalent collateral required to
secure the obligations to the trust that issued the DECS securities placed in
March 1998. The proceeds of this loan, which will be personally guaranteed by
Mr. Hughes, will be used to provide for the buy-out price for the DECS
securities. The proceeds of the second loan, in the amount of $125 million, will
be retained by the Hughes-controlled entity. However, this loan will be secured
by a pledge of the investment securities purchased with the loan proceeds, so
that the loan is expected to be fully or nearly fully secured for the entire
period that it remains outstanding. Under the documentation governing the third
party financing, the ability of Herbalife to release the collateral pledge
securing the second loan, release the Hughes guaranty supporting the first loan
and provide funds to Mr. Hughes sufficient to enable him to repay the loans is
expected to be subject to covenant restrictions. In any event, such releases and
repayment will not be permitted any earlier than the third anniversary of the
closing. Until released, Herbalife may declare dividend payments to the
Hughes-controlled entities in amounts expected to be sufficient to enable the
entities to make interest payments on the loans to Herbalife, but such dividends
will be conditioned on declaration by Herbalife's Board and the absence of any
defaults by Herbalife under its third party financing and certain other
conditions.

Herbalife International, Inc. markets nutritional, weight management and
personal care products worldwide. Herbalife products are available only through
a network of independent distributors who purchase the products directly from
the Company.

Forward-looking statements in this press release involve material risks
and uncertainties that could cause actual results and events to differ
materially from those set forth in the forward-looking statements, including the
company's ability to continue to attract, maintain and motivate its
distributors, changes in the regulatory environment affecting network marketing
sales and sales of foods and dietary supplements, the effects of adverse
publicity on sales, volatility in the company's earnings, and other risks and
uncertainties detailed from time to time in

<PAGE> 3
the company's SEC filings in recent years. For further information, refer to the
Company's final prospectus filed in March, 1998 and the Company's Form 10-K for
the year ended December 31, 1998.

<PAGE> 1
EXHIBIT (C)(2)

MARK HUGHES
1800 CENTURY PARK EAST
CENTURY CITY, CALIFORNIA 90067

September 10, 1999

PRIVATE AND CONFIDENTIAL

The Special Committee appointed by
the Board of Directors of
Herbalife International, Inc.

Re: Equity Commitment

Dear Sirs:

By separate letter dated the same date as this letter, I am revising
the offer contained in my letter dated July 8, 1999 (as such offer was amended
in my letter dated August 19, 1999). The purpose of this letter is to separately
set forth my equity commitment in connection with the proposed transaction. All
capitalized terms used herein without definition have the meanings given in the
revised draft Agreement and Plan of Merger (the "AGREEMENT") accompanying my
revised offer letter dated the same date as this letter.

This will confirm that, subject to the conditions to the obligations of
the Parent and the Purchaser to accept for purchase the shares tendered in the
Offer and to complete the Merger, and provided that the Agreement has not been
terminated in accordance with its terms, I will, prior to the acceptance by the
Purchaser of shares properly tendered in the Offer, cause all shares of Company
Common Stock owned, beneficially or of record, by me (including through my
controlled and related entities and specifically including, without limitation,
all shares owned, beneficially or of record, by the Mark Hughes Family Trust)
(collectively, "MY SHARES") to be contributed to Parent, Purchaser or Debtor
LLC. Further, none of my shares will be tendered in the Offer, nor shall they be
subject to cancellation in exchange for the cash Merger Consideration, nor shall
they be sold in the public market or otherwise transferred (excluding solely
transfers between and among me and my controlled and related entities) prior to
the earlier of the consummation of the Merger or the termination of the
Agreement in accordance with its terms.

Very truly yours,

/s/ MARK HUGHES
------------------------
Mark Hughes