<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1/A
AMENDMENT NO. 6
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 7 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. 6, 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. Five 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, one on September 17, 1999, entitled Lee Brenin vs. Mark
Hughes, et al., Case No. BC 216932, and one on September 23, 1999, entitled
Michael Vaupel vs. Mark Hughes, et al., Case No. BC217257. 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.
Item 10(f) of the Schedule 14D-1 is hereby amended as follows:
The Purchaser has extended the expiration date of the Offer until 5:00
p.m., New York City time, on Wednesday, November 24, 1999. The Offer was
extended on October 13, 1999 by a press release. A copy of such press release is
attached as Exhibit (a)(12) hereto and is hereby incorporated by reference.
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.*
(a)(12) Press Release, dated October 13, 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).*
(g)(11) Complaint in Michael Vaupel vs. Mark Hughes, et al.,
Case No. BC217257 (CA Sup. Ct., September 23, 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: October 13, 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.*
(a)(12) Press Release, dated October 13, 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).*
(g)(11) Complaint in Michael Vaupel vs. Mark Hughes, et al.,
Case No. BC217257 (CA Sup. Ct., September 23, 1999).**
- --------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 99.(a).(12)
[HERBALIFE LETTERHEAD]
Contact: Investor Relations
Herbalife International
(310) 410-9600 ext. 32202
[email protected]
TENDER OFFER PERIOD EXTENDED FOR HERBALIFE BUY-OUT
LOS ANGELES, CA - October 13, 1999 -- Herbalife International, Inc.
(Nasdaq NM: HERBA, HERBB) reported today that MH Millennium Acquisition Corp.,
an entity controlled and beneficially owned by Mark Hughes, the Founder,
Chairman, President and Chief Executive Officer of Herbalife, has extended the
expiration of its previously announced tender offer to 5:00 p.m., New York City
time, on Wednesday, November 24, 1999. The tender offer, which commenced on
September 17, 1999, was initially set to expire on October 15, 1999 and was
extended to October 29, 1999. In addition, Herbalife was informed by Mr. Hughes
that he may further extend the expiration time. The companies' advisors have
indicated that certain holders, including certain institutional holders, of
shares generally do not tender until near the end of the tender period. However,
as of the close of business on October 11, 1999, approximately 328,227 shares of
Herbalife's Class A stock and 467,500 shares of Herbalife's Class B stock had
been validly tendered and not withdrawn in response to the tender offer.
On September 13, 1999, Herbalife announced that its Board of Directors
accepted a definitive offer from Mark Hughes to purchase all company shares not
owned by Mr. Hughes for $17.00 per share in cash.
Herbalife International, Inc. markets nutritional, weight-management
and personal care products in 44 countries worldwide. Herbalife products are
available only through a network of independent distributors who purchase the
products directly from the Company.
<PAGE> 1
EXHIBIT (g)(11)
Kevin J. Yourman (147159) ORIGINAL FILED
Vahn Alexander (167373)
Ronald T. Theda (193223) SEP 23, 1999
WEISS & YOURMAN
10940 Wilshire Boulevard LOS ANGELES
24th Floor SUPERIOR COURT
Los Angeles, CA 90024
Tel: (310) 208-2800
Michael D. Braun (167416)
STULL, STULL & BRODY
10940 Wilshire Boulevard
Suite 2300
Los Angeles, CA 90024
Tel: (310) 209-2468
Attorneys for Plaintiff
CASE ASSIGNED TO CLASS ACTION DEPARTMENT 58
FOR ALL PRETRIAL PROCEEDINGS, CASE IS ASSIGNED
FOR TRIAL AS FOLLOWS
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
MICHAEL VAUPEL, on Behalf of Himself ) CASE NO.: B C217257
and All Others Similarly Situated, ) "BY FAX"
)
Plaintiff, ) CLASS ACTION
) ------------
)
vs. ) COMPLAINT FOR BREACH OF
) FIDUCIARY DUTIES AND
) INJUNCTIVE RELIEF
MARK HUGHES, CHRISTOPHER PAIR, )
MICHAEL E. ROSEN, EDWARD J. HALL ) JURY TRIAL DEMAND
ALAN LIKER, CHRISTOPHER M. MINER, )
HERBALIFE INTERNATIONAL INC. and )
DOES I-50, Inclusive, )
)
Defendants. )
- ---------------------------------------
1
- -------------------------------------------------------------------------------
COMPLAINT FOR BREACH OF FIDUCIARY DUTIES
AND INJUNCTIVE RELIEF
<PAGE> 2
Plaintiff, by his undersigned attorneys, for his complaint against
defendants, alleges upon knowledge as to himself and his own acts, and upon
information and belief, as to all other matters, as follows:
1. Plaintiff brings this action, individually and as a class action on
behalf of all persons, other than defendants, who own the common stock of
Herbalife International Inc. ("Herbalife" or the "Company") and who are
similarly situated, to enjoin the consummation of the proposed acquisition of
Herbalife by defendant Mark Hughes ("Hughes"), through MH Millennium
Acquisition Corp. ("Millennium"). Defendant Hughes, Herbalife's founder and
chief executive officer, currently owns approximately 57% of the Company's
voting stock. In a definitive merger agreement, defendant Hughes has offered to
purchase the remaining shares of Herbalife, which he does not already own, for
$17 a share in cash in an attempt to take the Company private. The deal is
valued at approximately $500 million and is to take place through a tender
offer that commenced on September 17, 1999. Alternatively, in the event that
the transaction is consummated, plaintiff seeks to recover damages caused by
the breach of fiduciary duties of care, candor and loyalty, described herein,
owed by all defendants.
2. The proposed transaction and the acts of defendants constitute a
breach of defendants' fiduciary duties to plaintiff and the class to take all
necessary and appropriate steps to obtain the maximum value realizable for the
shareholders of Herbalife.
PARTIES
3. Plaintiff Michael Vaupel is, and has been since prior to the
announcement of the proposed transaction described herein, the owner of shares
of common stock of Herbalife.
4. Defendant Herbalife is a Nevada corporation headquartered at 1800
Century Park East, Los Angeles, California 90067. The Company was incorporated
in 1981 and trades on the NASDAQ. The Company uses two ticker symbols: "HERBA."
for a class of voting common stock and "HERBB" for a class of nonvoting common
stock. Herbalife is a network marketing company that sells a wide range of
weight management products, food and dietary supplements and personal care
products worldwide. As of December 31, 1998, the Company conducted business in
42 countries located in Asia/Pacific Rim, Europe and the Americas. The Company
has experienced
2
<PAGE> 3
substantial growth in retail sales in recent years. From 1994 to 1998, the
Company's retail sales grew from $884.1 million to $1.64 billion.
5. Defendant Mark Hughes ("Hughes") founded the Company's business in
1980. Since that time, Hughes has controlled the operations of the business. In
November 1986, Hughes became Chairman of the Board, Chief Executive Officer and
President of the Company when it acquired Herbalife International of America,
Inc. in a stock-for-stock reorganization and has continued in those positions
since that time. He currently owns approximately 59% of the company's common
stock, including 57% of the voting class "A" common stock.
6. Defendant Christopher Pair ("Pair") has been the Company's Executive
Vice President and Chief Operating Officer since November 1996. Pair has been a
director of the Company since May 1990 and is the Corporate Secretary. Pair
joined the Company's predecessor in March 1985 as Executive Assistant to the
President. From May 1991 to November 1996, Mr. Pair served as the Company's
Executive Vice President -- International and Corporate Administration and
Secretary.
7. Defendant Michael E. Rosen ("Rosen") joined the Company in August 1993
and is currently Executive Vice President, and Chief Executive Corporate
Marketing and Corporate Development. Rosen has served as a director of the
Company since May 1996.
8. Defendant Edward J. Hall ("Hall") has served as a director of the
Company since 1992 and is an outside director.
9. Defendant Alan Liker ("Liker") has served as a director of the Company
since November of 1993 and is an outside director.
10. Christopher M. Miner ("Miner") was elected a director of the Company
in March 1996 and is an outside director.
11. Each outside director is paid $45,000 per year. In addition, each
outside director is paid $5,000 for each committee membership they hold and
$10,000 for each committee they chair. The board has five possible committees
and all directors attended 75% of meetings in 1998.
12. In 1993, Hall received stock appreciation rights covering 25,000
shares of common stock with an exercise price of $9.00 a share. In 1995, Hall
and Liker received stock appreciation
3
<PAGE> 4
rights covering 10,000 shares of common stock at an exercise price of $7.373 a
share. In 1996, Hall, Liker and Miner received stock appreciation rights
covering 25,000 shares of common stock. The preceding stock appreciation rights
would automatically cash out in five equal installments over a five year period.
In 1997 and 1998, Hall, Liker and Miner received stock options on an additional
75,000 shares. The lavish value of these awards to outside directors is evident
considering the following: in 1995, Herbalife's common shares traded as high as
$17 a share. In 1996, Herbalife's common shares traded as high as $28 a share;
in 1997, Herbalife's common shares traded as high as almost $40 a share; and in
1998, Herbalife's common shares traded as high as $27 a share. This lavish
compensation scheme for outside directors calls into question the independence
of the non-employee board members.
13. The true names and capacities of defendants sued herein under
California Code of Civil Procedure Section 474 as Does 1 through 50, inclusive,
are presently not known to plaintiff, who therefore sues these defendants by
such fictitious names. Plaintiff will seek to amend this Complaint and include
these Doe defendants' true names and capacities when they are ascertained. Each
of the fictitiously named defendants is responsible in some manner for the
conduct alleged herein and for the injuries suffered by the Class.
14. Defendants Hughes, Pair, Rosen, Hall, Liker and Miner (collectively
the "Individual Defendants"), by reason of their corporate directorship and/or
executive positions, stand in a fiduciary position relative to Herbalife's
shareholders, which fiduciary relationship, at all times relevant herein,
required the Individual Defendants to exercise their best judgment and to act
in a prudent manner and in the best interests of Herbalife's shareholders. A
director is not permitted to act in his/her own self-interest to the
detriment of the shareholders.
15. Defendant Hughes, as a controlling shareholder of the Company, also
stands in a fiduciary position relative to Herbalife's other shareholders,
which fiduciary relationship, at all times relevant herein, required Hughes to
exercise her best judgment and to act in a prudent manner and in the best
interests of all of Herbalife's shareholders. A controlling shareholder is not
permitted to act in its own self-interest to the detriment of the shareholders.
4
<PAGE> 5
16. Each defendant herein is sued individually as a conspirator and aider
and abettor, as well as in such defendant's capacity as an officer and/or
director or majority shareholder of Herbalife, and the liability of each arises
from the fact that he, she, or it has engaged in all or part of the unlawful
acts, plans, schemes, or transactions complained of herein.
JURISDICTION AND VENUE
17. This Court has proper jurisdiction over this action pursuant to
Section 410.10 of the California Code of Civil Procedure. The violations of law
complained of herein occurred in this county. Furthermore, the amounts in
controversy exceed the jurisdictional minimum of this Court.
18. Venue is proper in the Superior Court of the County of Los Angeles
pursuant to California Code of Civil Procedure Section 395 and 395.5.
CLASS ACTION ALLEGATIONS
19. Plaintiff brings this action individually on his own behalf and as a
class action, on behalf of all stockholders of Herbalife (except defendants
herein, and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who
are or will be threatened with injury arising from defendants' actions as more
fully described herein (the "Class").
20. This action is properly maintained as a class action.
21. The class is so numerous that joinder of all members is
impracticable. As of March 1999, there were over 28,000,000 shares of Herbalife
common stock outstanding. The disposition of their claims in a class action
will be of benefit to the parties and the Court. The record holders of
Herbalife's common stock can be easily determined from the stock transfer
journals maintained by Herbalife or its agents.
22. A class action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted, and no unusual
difficulties are likely to be encountered in the management of this action as a
class action.
23. There is a well-defined community of interests in the questions of
law and fact involved affecting the members of the Class. Among the questions
of law and fact which are
5
<PAGE> 6
common to the Class, which predominate over questions affecting any individual
class member are, inter alia, the following:
a. whether the proposed transaction is fair or unfair to the public
stockholders of Herbalife;
b. whether defendants have failed to disclose all material facts
relating to the proposal including the potential positive future financial
benefits which they expect to derive from Herbalife;
c. whether defendants willfully and wrongfully failed or refused to
obtain or attempt to obtain a purchaser for the assets of Herbalife at a higher
price than the Millennium proposal;
d. whether plaintiff and the other members of the Class would be
irreparably damaged were the transaction complained of herein consummated;
e. whether defendants have breached or aided and abetted the breach
of the fiduciary and other common law duties owed by them to plaintiff and the
members of the Class; and
f. whether plaintiff and the members of the Class have been damaged
and what is the proper measure of damages.
24. Plaintiff is a member of the Class and is committed to prosecuting
this action and has retained competent counsel experienced in litigation of
this nature. Plaintiff's claims are typical of the claims of the other members
of the Class and plaintiff has the same interests as the other members of the
Class. Plaintiff does not have interests antagonistic to or in conflict with
those they seek to represent. Plaintiff is an adequate representative of the
Class.
25. The likelihood of individual class members prosecuting separate
individual actions is remote due to the relatively small loss suffered by each
Class member as compared to the burden and expense of prosecuting litigation of
this nature and magnitude. Absent a class action, defendants are likely to
avoid liability for their wrongdoing, and Class members are unlikely to obtain
redress for their wrongs alleged herein. This Court is an appropriate forum
for this dispute.
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SUBSTANTIVE ALLEGATIONS
26. Herbalife is a network marketing company that sells a wide range of
weight management products, food and dietary supplements and personal care
products worldwide. As of December 31, 1998, the Company conducted business in
42 countries located in Asia/Pacific Rim, Europe and the Americas. The Company
has experienced substantial growth in retail sales in recent years. From 1994
to 1998, the Company's retail sales grew from $884.1 million to $1.64 billion,
representing a compound annual growth rate of 17%. Herbalife was founded in
1980 by Mark Hughes, who is currently its Chairman of the Board, President and
CEO.
27. Herbalife has been an very successful company, growing from its
inception in 1980 to $1.64 billion in sales in 1998. Also, Herbalife has been
successful as a public company, with its stock climbing from a low of almost $7
a share in 1995 to a high of nearly $40 a share in 1997. This growth was
largely driven by strong foreign sales in this period: for example, sales to
Japan increased from zero in 1993 to over $500 million by 1998.
28. Currency fluctuations and losses in Russia temporarily impacted the
company's growth in late 1998. As the company stated on July 22, 1998, in
Business Wire:
Herbalife International, Inc. (Nasdaq NM: HERBA)(Nasdaq NM:HERBB) today
reported a 14 percent increase in earnings per share for the second quarter
ended June 30, 1998, representing the company's eleventh consecutive
quarter of comparable period increases in sales and earnings.
* * *
Retail sales in Russia declined 21 percent to $30.9 million, as economic
uncertainty in the country contributed to a sluggish consumer spending
environment.
* * *
The company believes the challenging currency environment, particularly in
Asia, and economic uncertainty in Russia will continue into the second half
of the year and is expected to contribute to slower sales growth in U.S.
dollar terms.
29. The company's shares declined to $7 a share, after reaching as high
as $28 a share in July 1998, when the company announced the following on
October 21, 1998, in Business Wire:
Herbalife International Inc. (Nasdaq/NM:HERBA)(Nasdaq/NM:HERBB) Wednesday
reported financial results for its third quarter and nine months ended
Sept. 30, 1998.
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Retail sales increased 2 percent to $402.7 million from $393.9 million in
the third quarter of 1997.
* * *
Herbalife President and Chief Executive Officer Mark Hughes commented: "The
third quarter proved challenging for Herbalife, as severe uncertainty in
Russia and the effects of the strong U.S. dollar impacted results. In spite
of these external pressures, our business fundamentals remained strong
across much of the world, as evidenced by our sales gains in the United
States and most of Europe."
30. The international turmoil soon subsided and by January 1999 the
company's shares had recovered to more than $16 a share. In fact, Defendant
Hughes was more confident than ever about the future, as he stated on February
24, 1999 in a company press release over Business Wire:
Herbalife President and Chief Executive Officer Mark Hughes commented: "We
achieved solid results across most of our markets in the fourth quarter.
While profitability continued to be impacted by the considerable slowdown
in Russia, our sales momentum across Asia, Europe and the U.S. gives us
confidence in Herbalife's long-term outlook."
31. By the first quarter of 1999, Herbalife's recovery was well under
way. As the company stated in Business Wire on April 21, 1999:
Herbalife International Inc. (Nasdaq/NM:HERBA)(Nasdaq/NM:HERBB) Wednesday
reported financial results for the first quarter ended March 31, 1999.
Retail sales for the quarter increased 7.6 percent to $428.8 million from
$398.4 million for the corresponding prior-year period.
* * *
Herbalife President and CEO Mark Hughes said, "Although we continue to face
the challenge of a global economy, we are taking the steps necessary in
each of our regions that we believe will enable us to continue to grow our
overall business and position us for long-term success."
32. Shortly thereafter, as the company waited for the cyclical low in its
business to subside, the company's share price hovered around $12 a share.
During this temporary business downturn, defendants prepared a scheme to
purchase the company from the public shareholders at a depressed price.
33. On September 13, 1999, Herbalife announced in Business Wire, that it
had executed a definitive merger agreement with Millennium Corporation, a
closely held corporation formed by
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Mark Hughes, Herbalife's controlling shareholder. Under the terms of the
agreement, Millennium commenced a tender offer for all Herbalife common stock
for $17 in cash.
34. At the same time, a letter was posted on Herbalife's website,
Herbalife.com, from Defendant Hughes that stated the following:
I am writing to share some important information that was just released to
the press. Today, we are announcing that our Board of Directors has
accepted an offer I made to acquire all of the Company's outstanding
shares.
* * *
I have tremendous confidence in Herbalife's future and in our long-term
growth prospects. In part, that is the reason for my decision.
35. Herbalife and the Individual Defendants are effectively purchasing
the Company while its stock is temporarily depressed, without any indication
they have entertained competing offers and when, by Hughes own admission, the
company has tremendous long-term growth prospects. This purchase is to the
detriment of Herbalife's minority shareholders and to the benefit of Mark
Hughes, owner of approximately 59% of Herbalife's outstanding shares and the
Company's controlling shareholder. Defendants' intention to pursue the merger
transaction is in breach of their fiduciary duties of care, candor, and loyalty
owed to Herbalife's stockholders to take all necessary steps to ensure that
Herbalife's stockholders will receive the maximum value realizable for their
shares in any extraordinary transaction involving the Company.
36. The intrinsic value of the equity of the Company is materially
greater than the consideration proposed, taking into account, inter alia,
Herbalife's asset value, liquidation value, expected growth, full extent of its
future earnings potential, expected increase in profitability, strength of its
business, its revenues, cash flow, and earnings power. Herbalife is a very
valuable, growing and desirable health products company and defendants,
specifically Hughes, are attempting to exclude the minority shareholders from
these future gains.
37. The defendants' willingness to entertain the proposed offer requires
them to take all reasonable steps to assure the maximization of stockholder
value, including the implementation of a bidding mechanism to foster a fair
auction of the Company to the highest bidder or the exploration
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of strategic alternatives which will return greater or equivalent short-term
value to the plaintiff and the Class.
38. Defendants, knowing all of the above, have failed to take the
necessary and appropriate steps to obtain the maximum value realizable for the
public shareholders of Herbalife.
39. There is no indication that Herbalife's board of directors has
taken any steps to ensure that the interests of Herbalife's stockholders, in
maximizing the value of their holdings, were protected by conducting an auction
for Herbalife, soliciting other offers, otherwise seeking out other potential
purchasers or the highest possible bid for the Company, or exploring strategic
alternatives which will obtain the highest possible price for Herbalife's
stockholders or return greater or equivalent value to the plaintiff and the
class.
40. Further, by accepting the merger proposal without seeking out
other purchasers, defendants have inhibited the chances of receiving competing
offers. If the transaction is consummated, Herbalife's shareholders will be
deprived of the opportunity for substantial gains which the Company may have
realized.
41. By reason of the foregoing, defendants herein have willfully
participated in unfair dealing toward plaintiff and the other members of the
Class and have engaged in and substantially assisted and aided and abetted each
other in breach of the fiduciary duties owed by them to the Class.
42. Defendants have violated fiduciary and other common law duties
owed to the plaintiff and the other members of the Class in that they have not
and are not exercising independent business judgment, and have acted and are
acting to the detriment of the Class.
43. As a result of the actions of defendants, plaintiff and the
Class have been and will be damaged in that they are not receiving the fair
value of their Herbalife shares.
44. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class, and will succeed
in excluding the Class from its fair proportionate share of Herbalife's assets
and businesses, all to the irreparable harm of the Class.
45. Plaintiff and the Class have no adequate remedy of law.
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FIRST CAUSE OF ACTION
AGAINST ALL DEFENDANTS
FOR BREACH OF FIDUCIARY DUTIES OF CARE, CANDOR, AND LOYALTY
46. Plaintiff hereby incorporates by reference the foregoing paragraphs
as though fully set forth herein.
47. By virtue of plaintiff's purchase of Herbalife's common stock, and
the defendants' positions as directors and/or officers and majority shareholder
of the Company, and because plaintiff reposed trust and confidence in them, the
defendants owed to plaintiff fiduciary duties of care, candor and loyalty of
the highest good faith, integrity and fair dealing.
48. In taking and/or failing to take the actions heretofore alleged,
defendants violated their fiduciary obligations to plaintiff.
49. As a proximate result of defendants' aforesaid conduct, plaintiff
was damaged by injury to his property, lost profits, loss of future income, and
other general and specific damages.
WHEREFORE, plaintiff prays for judgment and relief as follows:
1. Declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representative of the Class;
2. Declaring that the defendants and each of them have committed or
aided and abetted in a breach of their fiduciary duties to
plaintiff and the other members of the Class;
3. Declaring the transaction to be a nullity;
4. Preliminary and permanently enjoining defendants and all persons
acting under, in concert with, or for them, from proceeding with,
consummating or closing the transaction;
5. In the event the transaction is consummated, rescinding it and
setting it aside;
6. Ordering defendants, jointly and severally, to account to plaintiff
and the Class for all profits realized and to be realized by them
as a result of the transaction complained of and, pending such
accounting, to hold such profits in a constructive trust for the
benefit of plaintiff and other members of the Class;
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7. Ordering defendants to permit a stockholders' committee comprised of
class members and their representatives only to ensure a fair
procedure, adequate procedural safe-guards, and independent input by
plaintiff and the Class in connection with any transaction for the
shares of Herbalife;
8. Awarding compensatory damages against defendants, jointly and
severally, in the amount to be determined at trial, together with
prejudgment interest at the maximum rate allowable by law;
9. Awarding plaintiff and the Class their costs and disbursements and
reasonable allowances for plaintiff's counsel and experts' fees and
expenses; and
10. Granting such other and further relief as may be just and proper.
JURY DEMAND
Plaintiff demands a trial by jury of all issues so triable.
Dated: September 23, 1999 Kevin J. Yourman
Vahn Alexander
Ronald T. Theda
WEISS & YOURMAN
By: /s/ Ronald T. Theda
---------------------------
Ronald T. Theda
10940 Wilshire Boulevard
24th Floor
Los Angeles, California 90024
Tel: (310) 208-2800
Michael D. Braun
STULL, STULL & BRODY
10940 Wilshire Boulevard
Suite 2300
Los Angeles, CA 90024
Tel: (310) 209-2468
Attorneys for Plaintiff
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