<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1/A
AMENDMENT NO. 4
TO
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
(Continued on following pages)
(Page 1 of 6 pages)
<PAGE> 2
CUSIP No. 426908208 14D-1/A 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/A 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
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)/X/
(b)/ /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
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/A Page 4
426908307
================================================================================
1. Name of Reporting Persons Mark Hughes
S.S. or I.R.S. Identification Nos. of Above Persons
- --------------------------------------------------------------------------------
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
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
Page 5
MH Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"),
hereby amends and supplements, as set forth in this Amendment No. 4, its Tender
Offer Statement on Schedule 14D-1, filed on September 17, 1999 (as amended, the
"Schedule 14D-1"), relating to the offer by the Purchaser to purchase all
outstanding shares of Class A common stock and Class B common stock of Herbalife
International, Inc., a Nevada corporation. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Schedule 14D-1.
ITEM 10. ADDITIONAL INFORMATION
Item 10(c) of the Schedule 14D-1 is hereby amended to read as follows:
On September 14, 1999, three putative class action lawsuits, one entitled
Patricia Lisa and Harbor Finance Partners v. Mark Hughes, et al., Case No. BC
216711, one entitled Kevin Coyle v. Mark Hughes, et al., Case No. BC 216759 and
one 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. Four
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, two others on September 16, 1999, entitled Frances Longstreth v.
Herbalife International, Inc., et al., Case No. BC 216911 and Rae Ellen Plattus
vs. Christopher Pair, et al., Case No. BC 16904 and one on September 17, 1999,
entitled Lee Brenin vs. Mark Hughes, et al., Case No. BC 216932. In addition,
three similar lawsuits were filed in the District Court, Clark County, Nevada,
one on September 14, 1999, entitled Colleen M. Tharp vs. Herbalife
International, Inc., et al., Case No. A408158II, one on September 15, 1999,
entitled Francis Mcfarlain, IRA vs. Herbalife International, Inc., et al., Case
No. A408159I, and one on September 22, 1999, entitled Kevin Coyle vs. Mark
Hughes, et al., Case No. A408466. 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 an additional lawsuit may have been filed but the
Company has not yet been served with such lawsuit.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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) Summary Advertisement, dated September 17, 1999.*
(a)(8) Press Release, dated September 13, 1999.*
(a)(9) Intentionally omitted.
(a)(10) Press Release, dated September 17, 1999.*
(a)(11) Press Release, dated September 28, 1999.*
(b)(1) Letter from Donaldson, Lufkin & Jenrette Securities
Corporation to The Board of Directors and the Special
Committee of Herbalife International, Inc., dated September
13, 1999.*
(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.
(g)(1) Complaint in Patricia Lisa and Harbor Finance Partners vs.
Mark Hughes, et al., Case No. BC 216711 (CA Sup. Ct.,
September 14, 1999).*
(g)(2) Complaint in Stuart H. Savett vs. Herbalife International,
Inc., et al., Case No. BC 216761 (CA Sup. Ct., September 14,
1999).*
(g)(3) Complaint in Kenneth Schweitzer vs. Herbalife
International, Inc., et al., Case No. BC 216823 (CA Sup.
Ct., September 15, 1999).*
(g)(4) Complaint in Frances Longstreth vs. Herbalife
International, Inc., Case No. BC 216911 (CA Sup. Ct.,
September 16, 1999).*
(g)(5) Complaint in Rae Ellen Plattus vs. Christopher Pair, et
al., Case No. BC 216904 (CA Sup. Ct., September 16, 1999).*
(g)(6) Complaint in Colleen M. Tharp vs. Herbalife International,
Inc., Case No. A408158II (NV Dist. Ct., September 14,
1999).*
(g)(7) Complaint in Francis Mcfarlain, IRA vs. Herbalife
International, Inc., Case No. A408159I (NV Dist. Ct.,
September 15, 1999).*
(g)(8) Complaint in Lee Brenin vs. Mark Hughes, et al., Case No.
BC 216932 (CA Sup. Ct., September 17, 1999).*
(g)(9) Complaint in Kevin Coyle vs. Mark Hughes, et al., Case No.
BC216759 (CA Sup. Ct., September 14, 1999).**
(g)(10) Complaint in Kevin Coyle vs. Mark Hughes, et al., Case No.
A408466 (NV Dist. Ct., September 22, 1999).**
- --------------
* Previously filed.
** Filed herewith.
<PAGE> 6
Page 6
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 30, 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
/s/ MARK HUGHES
------------------------------------------
MARK HUGHES
<PAGE> 7
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) Summary Advertisement, dated September 17, 1999.*
(a)(8) Press Release, dated September 13, 1999.*
(a)(9) Intentionally omitted.
(a)(10) Press Release, dated September 17, 1999.*
(a)(11) Press Release, dated September 28, 1999.*
(b)(1) Letter from Donaldson, Lufkin & Jenrette Securities
Corporation to The Board of Directors and the Special
Committee of Herbalife International, Inc., dated September
13, 1999.*
(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.
(g)(1) Complaint in Patricia Lisa and Harbor Finance Partners vs.
Mark Hughes, et al., Case No. BC 216711 (CA Sup. Ct.,
September 14, 1999).*
(g)(2) Complaint in Stuart H. Savett vs. Herbalife International,
Inc., et al., Case No. BC 216761 (CA Sup. Ct., September 14,
1999).*
(g)(3) Complaint in Kenneth Schweitzer vs. Herbalife
International, Inc., et al., Case No. BC 216823 (CA Sup.
Ct., September 15, 1999).*
(g)(4) Complaint in Frances Longstreth vs. Herbalife
International, Inc., Case No. BC 216911 (CA Sup. Ct.,
September 16, 1999).*
(g)(5) Complaint in Rae Ellen Plattus vs. Christopher Pair, et
al., Case No. BC 216904 (CA Sup. Ct., September 16, 1999).*
(g)(6) Complaint in Colleen M. Tharp vs. Herbalife International,
Inc., Case No. A408158II (NV Dist. Ct., September 14,
1999).*
(g)(7) Complaint in Francis Mcfarlain, IRA vs. Herbalife
International, Inc., Case No. A408159I (NV Dist. Ct.,
September 15, 1999).*
(g)(8) Complaint in Lee Brenin vs. Mark Hughes, et al., Case No.
BC 216932 (CA Sup. Ct., September 17, 1999).*
(g)(9) Complaint in Kevin Coyle vs. Mark Hughes, et al., Case No.
BC216759 (CA Sup. Ct., September 14, 1999).**
(g)(10) Complaint in Kevin Coyle vs. Mark Hughes, et al., Case No.
A408466 (NV Dist. Ct., September 22, 1999).**
- --------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT (g)(9)
ORIGINAL FILED
JAMES JAY SEIRMARCO (194307) SEP 14, 1999
ABBEY, GARDY & SQUITIERI, LLP LOS ANGELES
535 Market Street, Suite 2500 SUPERIOR COURT
San Francisco, CA 94105
(415) 538-3725
CASE ASSIGNED TO CLASS ACTION DEPARTMENT 59
FOR ALL PRETRIAL PROCEEDINGS, CASE IS ASSIGNED
FOR TRIAL AS FOLLOWS:
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
CENTRAL DISTRICT
ORIGINAL FILED
SEP 14, 1999
LOS ANGELES
SUPERIOR COURT
KEVIN COYLE, on behalf of himself )
and all others similarly situated. ) Civ. No. RC216759
)
Plaintiff, ) CLASS ACTION
) ------------
) Department 59
- against - )
)
MARK HUGHES, CHRISTOPHER PAIR, )
MICHAEL E. ROSEN, EDWARD J. HALL, ) JURY TRIAL DEMANDED
ALLEN LIKER, CHRISTOPHER M. MINER, ) -------------------
and HERBALIFE INTERNATIONAL, INC. )
)
Defendants. )
)
- ------------------------------------
CLASS ACTION COMPLAINT
----------------------
<PAGE> 2
Plaintiff, as and for his class action complaint, alleges upon personal
knowledge as to himself and his own acts, and upon information and belief
derived from, inter alia, a review of documents filed with the Securities
Exchange Commission and publicly available new sources, such as newspaper
articles, as to all other matters, as follows:
NATURE OF THE ACTION
1. This is a shareholder class action on behalf of the stockholders of
Herbalife International, Inc. ("HI" or the "Company") against its directors to
enjoin defendants' actions related to the sale of HI to defendant Mark Hughes.
HI's Chairman and CEO, and to obtain other appropriate relief.
PARTIES
2. Plaintiff, Kevin Coyle, owned shares of HI common stock at all
relevant times and continues to own such shares.
3. Defendant, HI is a network marketing company that sells a wide range
of weight management products, food and dietary supplements and personal care
products worldwide. As of December 31, 1998, HI conducted business in 42
countries located in Asia and the Pacific Rim, Europe and the Americas. It is
incorporated in Nevada, and has its headquarters at 1800 Century Boulevard
East, Los Angeles, California, 90067.
4. Defendant Mark Hughes is HI's Chairman and CEO. As of March 1, 1999,
Hughes owned 57 percent of HI's Class A common stock and 60.7 percent of HI's
class B common stock.
5. Defendants Christopher Pair, Michael E. Rosen, Edward Hall, Allen
Liker, and Christopher Miner (together with defendant Hughes the "Individual
Defendants") are all members of
-2-
<PAGE> 3
HI's board of directors. In addition, defendants Pair and Rosen are Executive
Vice-Presidents of HI.
6. By virtue of their positions as directors, and where applicable,
officers of HI and/or their exercise of control and ownership over the business
and corporate affairs of HI, the Individual Defendants have, and at all
relevant times had, the power to control and influence and did control and
influence and cause HI to engage in the practices complained of herein. Each
Individual Defendant owed and owes HI and its shareholders fiduciary
obligations and were and are required to: (1) use their ability to control and
manager HI in a fair, just and equitable manner; (2) act in furtherance of the
best interests of HI and its shareholders; (3) act to maximize shareholder
value in connection with any change in ownership and control; (4) govern HI in
such a manner as to heed the expressed views of its public shareholders; (5)
refrain from abusing their positions of control; and (6) not to favor their own
interests at the expense of HI and its public shareholders.
7. Each defendant herein is sued individually and/or as a conspirator and
aider and abettor. The Individual Defendants are also sued in their capacity as
directors of HI. The liability of each defendant arises from the fact that
they have engaged in all or part of the unlawful acts, plans, schemes, or
transactions complained of herein.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this action as a class action pursuant to Section 382
of the California Code of Civil Procedure on behalf of all HI common stock
holders. Excluded from the Class
-3-
<PAGE> 4
are defendants, members of the immediate families of the defendants, their heirs
and assigns, and those in privity with them.
9. The members of the Class are so numerous that joinder of all of them
would be impracticable. While the exact number of Class members is unknown to
plaintiff, and can be ascertained only through appropriate discovery, plaintiff
believes there are many hundreds, if not thousands, of Class members. HI has
millions of shares of common stock outstanding.
10. Plaintiff's claims are typical of the claims of the Class, since
plaintiff and the other members of the Class have and will sustain damages
arising out of defendant's breaches of their fiduciary duties. Plaintiff does
not have any interests that are adverse or antagonistic to those of the Class.
Plaintiff will fairly and adequately protect the interests of the Class.
Plaintiff is committed to the vigorous prosecution of this action and has
retained counsel competent and experienced in this type of litigation.
11. There are questions of law and fact common to the members of the
Class that predominate over any questions which, if they exist, may affect
individual class members. The predominant questions of law and fact include,
among others, whether:
a. the defendants have and are breaching their fiduciary duties to
the detriment of HI shareholders;
b. the class is entitled to an injunction and other equitable
relief; and
- 4 -
<PAGE> 5
c. the Class has been damaged and the extent to which members of
the Class have sustained damages, and what is the proper measure of those
damages.
12. A class action is superior to all other available methods for the
fair and efficient adjudication of this controversy, since joinder of all
members is impracticable. Further, as individual damages may be relatively
small for most members of the Class, the burden and expense of prosecuting
litigation of this nature makes it unlikely that members of the Class would
prosecute individual actions. Plaintiff anticipates no difficulty in the
management of this action as a class action. Further, the prosecution of
separate actions by individual members of the class would create a risk of
inconsistent or varying results, which may establish incompatible standards of
conduct for defendants.
SUBSTANTIVE ALLEGATIONS
-----------------------
13. On September 14, 1999 the Wall Street Journal reported that HI had
announced that defendant Hughes is planning to take HI private, and that HI's
board had approved the transaction. It reported that he would make a tender
offer at $17 per share for the 46 percent of Class A and 42 percent of Class B
shares he did not already own, and that HI would "raise $440 million in senior
bank debt and high yield debt and use a further $60 million of its own cash to
finance the tender offer" and that "Herbalife would make loans totaling $214
million to two entities controlled by Hughes as part of the transaction."
14. The Wall Street Journal also quoted Michael Crawford, an analyst
with B. Riley & Co., a Los Angeles brokerage
- 5 -
<PAGE> 6
firm, as stating that this was "a cheap price for the company" and "Herbalife
was probably undervalued by the market because of the control exerted by Mark
Hughes."
15. By entering the agreement with Hughes, the Individual Defendants
have allowed the price of HI stock to be capped, thereby depriving plaintiff
and the Class of the opportunity to realize any increase in the value of HI
shares. Despite the long-term value of the HI acquisition for Hughes, HI
shareholders will be receiving an inadequate takeover premium over HI's stock
price immediately prior to announcement of the transaction, and inadequate
value given the true value of HI.
16. By entering into the agreement to sell HI to Hughes, HI's board
initiated a process to sell HI, which imposes heightened fiduciary
responsibilities and requires enhanced scrutiny by the Court. However, the
terms of the proposed transaction were not the result of an auction process or
active market check. Rather, they were arrived at without a full and through
investigation by the Individual Defendants; and the price and process was
intrinsically unfair and inadequate from the standpoint of HI shareholders.
17. The Individual Defendants failed to make an informed decision, as
no auctioning off of HI was undertaken. In agreeing to sell HI to Hughes, the
Individual Defendants failed to properly inform themselves of HI's highest
transactional value.
18. The Individual Defendants have violated the fiduciary duties they
owe to the shareholders of HI. The Individual Defendants' agreement to the
terms of the transaction, its timing, and the failure to auction HI and invite
other bidders, and defendants failure to provide a market check, demonstrates a
- 6 -
<PAGE> 7
clear absence of the exercise of due care and of loyalty to HI's public
shareholders.
19. The Individual Defendants' fiduciary obligations under the
circumstances of Hughes' offer obligated them to:
a. Undertake a comprehensive evaluation of HI's net worth as a
merger/acquisition candidate;
b. Actively evaluate the proposed transaction and engage in a
meaningful auction with third parties in an attempt to obtain the
best value for HI's public shareholders;
c. Act independently so that the interests of HI's public
shareholders would be protected and enhanced; and
d. Adequately ensure that no conflicts on interest exist between
the Individual Defendants' own interests and their fiduciary
obligations to maximize shareholder value or, if such conflicts exist,
to ensure that all conflicts are resolved in the best interests of
HI's public shareholders.
20. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to sell HI to Hughes without making the requisite effort to obtain the
best offer possible.
21. Plaintiff and other members of the class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of HI's assets and business, will be largely divested from their right to
share in HI's future growth and development and have been and will be prevented
from
-7-
<PAGE> 8
obtaining a fair and adequate price for their shares of HI common stock.
22. The consideration to be paid to class members in the proposed
sale to Hughes is unfair and inadequate because, inter alia:
a. the intrinsic value of HI'S common stock is in excess
of the amount offered by Hughes, giving due consideration to the
anticipated operating results, net asset value, cash flow, profitability
and established markets of HI: and
b. The sale price is not the result of an appropriate
consideration of the value of HI because the HI board approved the
proposed sale without undertaking steps to accurately ascertain HI's
value through open bidding or at least a market check mechanism; and
23. The Individual Defendants did not appoint or retain any truly
independent person or entity to negotiate for or on behalf of HI's public
shareholders to promote their best interests in the proposed sale.
24. The Individual Defendants have and are breaching their duty of
loyalty to HI's public shareholders by using their control of HI to force
plaintiff and the class to exchange their equity interest in HI for unfair
consideration, and to deprive HI's public shareholders of the maximum value to
which they are entitled.
25. The terms of the proposed sale are grossly unfair to the class,
and the unfairness is compounded by the gross disparity between the knowledge
and information possessed by the Individual
- 8 -
<PAGE> 9
Defendants by virtue of their positions of control of HI and that possessed by
HI's public shareholders. Defendants' intent is to take advantage of this
disparity and to induce class members to relinquish their HI shares to Hughes
at an unfair exchange ratio on the basis of incomplete or inadequate
information.
26. By reason of the foregoing, plaintiff and each member of the class is
suffering irreparable injury and damages.
27. Plaintiff and other members of the class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgments as follows:
A. determining that this action is a proper class action, and that
plaintiff is a proper class representative;
B. declaring that defendants have breached their fiduciary duties to
plaintiff and the Class and aided and abetted such breaches;
C. enjoining the proposed sale to Hughes and, if the proposed sale to
Hughes is consummated, rescinding it;
D. awarding plaintiff and the class compensatory and/or rescissory
damages as allowed by law;
E. awarding interest, attorney's fees, expert fees and other costs, in
an amount to be determined; and
-9-
<PAGE> 10
F. granting such other relief as the Court may find just and proper.
Dated: September 14, 1999
ABBEY GARDY & [Illegible], LLP
/s/ JAMES JAY [Illegible]
-------------------------------
JAMES JAY [Illegible]
5x5 Market Street, Suite 2500
San Francisco, CA 94105
(415) [Illegible]
Attorneys for Plaintiff
OF COUNSEL:
LAW OFFICES OF RICHARD B. BRUALDI
29 Broadway, Suite 1515
New York, New York 10006
(212) xxx-xxxx
GENE MESH AND ASSOCIATES
2605 Burnet Avenue
Cincinnati, Ohio 45219
(xxx) 221-xxxx
<PAGE> 1
EXHIBIT (g)(10)
FILED
Sep 22 1 06 PM '99
[Signature Illegible]
CLERK
COMP
Richard B. Brualdi
LAW OFFICES OF RICHARD BRUALDI
29 Broadway, Suite 1515
New York, New York 10006
GENE MESH AND ASSOCIATES
2605 Burnet Avenue
Cincinnati, Ohio 45219
Eleissa C. Lavelle, Esq.
Nevada Bar No. 000293
Laura E. Stubberud, Esq.
Nevada Bar No. 004765
LAVELLE-STUBBERUD & ASSOCIATES
3016 West Charleston Blvd., Suite 210
Las Vegas, Nevada 89102
(702) 822-2640
Attorneys for Plaintiff,
KEVIN COYLE
DISTRICT COURT
CLARK COUNTY, NEVADA
KEVIN COYLE on behalf of himself )
and all others similarly situated, )
) Case No.: A408466
Plaintiff, ) Dept No.: XVIII
)
v. )
)
MARK HUGHES, CHRISTOPHER PAIR, ) CLASS ACTION COMPLAINT
MICHAEL E. ROSEN, EDWARD J. ) JURY TRIAL DEMANDED
HALL, ALLEN LIKER, CHRISTOPHER )
M. MINER, AND HERBALIFE )
INTERNATIONAL, INC. )
)
Defendants. )
Plaintiff, as and for his class action complaint, alleges upon personal
knowledge as to himself and his own acts, and upon information and belief
derived from, inter alia, a review of documents filed with the Securities
Exchange Commission and publicly available news sources, such as newspaper
articles, as to all other matters, as follows:
NATURE OF THE ACTION
1. This is a shareholder class action on behalf of the stockholders of
Herbalife International, Inc. ("HI" or the "Company") against the directors to
enjoin Defendants' actions related to the sale of HI to Defendant Mark Hughes,
HI's Chairman and CEO, and to obtain other
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appropriate relief.
PARTIES
2. Plaintiff, Kevin Coyle, owned shares of HI common stock at all
relevant times and continues to own such shares.
3. Defendant, HI is network marketing company that sells a wide range
of weight management products, food and dietary supplements and personal care
products worldwide. As of December 31, 1998, HI conducted business in 42
countries located in Asia and the Pacific Rim, Europe and the Americas. It is
incorporated in Nevada and has its headquarters at 1800 Century Boulevard East,
Los Angeles, California 90067.
4. Defendant Mark Hughes is HI's Chairman and CEO. As of March 1, 1999,
Hughes owned 57 percent of HI's Class A common stock and 60.7 percent of HI's
class B common stock.
5. Defendants Christopher Pair, Michael E. Rosen, Edward Hall, Allen
Liker and Christopher Miner (together with Defendant Hughes the "Individual
Defendants") are all members of HI's board of directors. In addition,
Defendants Pair and Rosen are Executive Vice-Presidents of HI.
6. By virtue of their positions as directors, and where applicable,
officers of HI and/or their exercise of control and ownership over the business
and corporate affairs of HI, the Individual Defendants have, at all relevant
times had, the power to control and influence and did control and influence and
cause HI to engage in the practices complained of herein. Each Individual
Defendant owed and owes HI and its shareholders fiduciary obligations and were
and are required to: (1) use their ability to control and manage HI in a fair,
just and equitable manner; (2) set in furtherance of the best interests of HI
and its shareholders; (3) act to maximize shareholder value in connection with
any change in ownership and control; (4) govern HI in such a manner as to heed
the expressed views of its public shareholders; (5) refrain from abusing their
positions of control; and (6) not to favor their own interests at the expense
of HI and its public shareholders.
7. Each Defendant herein is sued individually and/or as a conspirator
and aider and abettor. The Individual Defendants are also sued in their
capacity as directors of HI. The liability
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of each Defendant arises from the fact that they have engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action as a class action pursuant to Nevada
Rule of Civil Procedure 23 on behalf of all HI common stockholders. Excluded
from the Class are Defendants, members of the immediate families of the
Defendants, their heirs and assigns, and those in privity with them.
9. The members of the Class are so numerous that joinder of all of them
would be impracticable. While the exact number of Class members is unknown to
Plaintiff, and can be ascertained only through appropriate discovery, Plaintiff
believes there are many hundreds, if not thousands, of Class members. HI has
millions of shares of common stock outstanding.
10. Plaintiff's claims are typical of the claims of the Class, since
Plaintiff and the other members of the Class have and will sustain damages
arising out of Defendant's breaches of their fiduciary duties. Plaintiff does
not have any interests that are adverse or antagonistic to those of the Class.
Plaintiff will fairly and adequately protect their interests of the Class.
Plaintiff is committed to the vigorous prosecution of this action and has
retained counsel competent and experienced in this type of litigation.
11. There are questions of law and fact common to the members of the
Class that predominate over any questions which, if they exist, may affect
individual class members. The predominant questions of law and fact include,
among others, whether:
(a) the Defendants have and are breaching fiduciary duties to the
detriment of HI shareholders;
(b) the Class is entitled to an injunction and other equitable relief; and
(c) the Class has been damaged and the extent to which members of the
Class have sustained damages, and what is the proper measure of those
damages.
12. A class action is superior to all other available methods for the
fair and efficient adjudication of this controversy, since joinder of all
members is impracticable. Further, as individual
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damages may be relatively small for most members of the Class, the burden and
expense of prosecuting litigation of this nature makes it unlikely that members
of the Class would prosecute individual actions. Plaintiff anticipates no
difficulty in the management of this action as a Class Action. Further, the
prosection of separate actions by individual members of the Class would create
a risk of inconsistent or varying results, which may establish incompatible
standards of conduct for Defendants.
SUBSTANTIVE ALLEGATIONS
13. On September 14, 1999, the Wall Street Journal reported that HI had
announced that Defendant Hughes is planning to take HI private, and that HI's
board had approved the transaction. It reported that he would make a tender
offer at $17 per share for the 46 percent of Class A and 42 percent of Class B
shares he did not already own, and that HI would "raise $440 million in senior
bank debt and high yield debt and use a further $60 million of its own cash to
finance the tender offer" and that "Herbalife would make loans totaling $214
million to two entities controlled by Hughes as part of the transaction."
14. The Wall Street Journal also quoted Michael Crawford, an analyst with
B. Riley & Co., a Los Angeles brokerage firm, as stating that this was "a cheap
price for the company" and "Herbalife was probably undervalued by the market
because of the control exerted by Mark Hughes."
15. By entering into the agreement with Hughes, the Individual Defendants
have allowed the price of HI stock to be capped, thereby depriving Plaintiff
and the Class of the opportunity to realize any increase in the value of HI
shares. Despite the long-term value of the HI acquisition for Hughes, HI
shareholders will be receiving an inadequate takeover premium over HI's stock
price immediately prior to announcement of the transaction, and inadequate
value given the true value of HI.
16. By entering into the agreement to sell HI to Hughes, HI's board
initiated the process to sell HI, which imposes heightened fiduciary
responsibilities and requires enhanced scrutiny by the Court. However, the terms
of the proposed transaction were not the result of an auction process
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or active market check. Rather, they were arrived at without a full and through
investigation by the Individual Defendants; and the price and process was
intrinsically unfair and inadequate from the standpoint of HI shareholders.
17. The Individual Defendants failed to make an informed decision,
as no auctioning off of HI was undertaken. In agreeing to sell HI to Hughes,
the Individual Defendants failed to properly inform themselves of HI's highest
transaction value.
18. The Individual Defendants have violated the fiduciary duties
they owe to the shareholders of HI. The Individual Defendants' agreement to the
terms of the transaction, its timing, and the failure to auction HI and invite
other bidders, and Defendants' failure to provide a market check, demonstrate a
clear absence of the exercise of due care and of loyalty to HI's public
shareholders.
19. The Individual Defendants' fiduciary obligations under the
circumstances of Hughes' offer obligated them to:
a. Undertake a comprehensive evaluation of HI's net worth
as a merger/acquisition candidate;
b. Actively evaluate the proposed transaction and engage in
a meaningful auction with third parties in an attempt to
obtain the best value for HI's public shareholders;
c. Act independently so that the interests of HI's public
shareholders would be protected and enhanced; and
d. Adequately ensure that no conflicts on interest exist
between the Individual Defendants' own interests and
their fiduciary obligations to maximize shareholder
value or, if such conflicts exist, to ensure that all
conflicts are resolved in the best interests of HI's
public shareholders.
20. The Individual Defendants have breached their fiduciary duties
by reason of the acts and transactions complained or herein, including their
decision to sell HI to Hughes without making the requisite effort to obtain the
best offer possible.
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21. Plaintiff and other members of the class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of HI's assets and business, will be largely divested from their right to
share in HI's future growth and development and have been and will be prevented
from obtaining a fair and adequate price for their shares of HI common stock.
22. The consideration to be paid to class members in the proposed sale
to Hughes is unfair and inadequate because, inter alia:
a. the intrinsic value of HI's common stock is in excess of the
amount offered by Hughes, giving due consideration to the
anticipated operating results, net asset value, cash flow,
profitability and established markets of HI; and
b. the sale price is not the result of an appropriate consideration
of the value of HI because the HI board approved the proposed
sale without undertaking steps to accurately ascertain HI's
value through open bidding or at least a market check mechanism.
23. The Individual Defendants did not appoint or retain any truly
independent person or entity to negotiate for or on behalf of HI's public
shareholders to promote their best interests in the proposed sale.
24. The Individual Defendants have and are breaching their duty of
loyalty to HI's public shareholders by using their control of HI to force
Plaintiff and the class to exchange their equity interest in HI for unfair
consideration, and to deprive HI's public shareholders of the maximum value to
which they are entitled.
25. The terms of the proposed sale are grossly unfair to the class, and
the unfairness is compounded by the gross disparity between the knowledge and
information possessed by the Individual Defendants by virtue of their positions
of control of HI and that possessed by HI's public shareholders. Defendants'
intent is to take advantage of this disparity and to induce class members to
relinquish their HI shares to Hughes at an unfair exchange ratio on the basis of
incomplete or inadequate information.
26. By reasons of the foregoing, Plaintiff and each member of the class
is suffering
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irreparable injury and damages.
27. Plaintiff and other members of the class have no adequate remedy at
law.
WHEREFORE, Plaintiff prays for judgment as follows:
1. Determining that this action is a proper class action, and that
Plaintiff is a proper class representative;
2. Declaring that Defendants have breached their fiduciary duties to
Plaintiff and the Class and aided and abetted such breaches;
3. Enjoining the proposed sale to Hughes and, if the proposed sale to
Hughes is consummated, rescinding it;
4. Awarding Plaintiff and the class compensatory and/or rescissory
damages as allowed by law;
5. Awarding interest, attorneys' fees, expert fees and other costs, in
an amount to be determined; and
6. Granting such other relief as the Court may find just and proper.
DATED this 21st day of September, 1999
LAVELLE-STUBBERUD & ASSOCIATES
By: /s/ [SIGNATURE ILLEGIBLE]
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ELEISSA C. LAVELLE, ESQ.
Nevada Bar No. 000293
LAURA E. STUBBERUD, ESQ.
Nevada Bar No. 004765
3016 W. Charleston Blvd., #210
Las Vegas, Nevada 89102
(702) 822-2640
Attorneys for Plaintiff,
KEVIN COYLE
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