<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1/A
AMENDMENT NO. 9
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. (310) 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. 9, 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. BC 217257. In addition,
four 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 two on September 22, 1999, one entitled Kevin Coyle
vs. Mark Hughes, et al., Case No. A408466 and another entitled Charles
Fruscione and Jerome Glowacki vs. Herbalife International, Inc., et al.,
Case No. A408478. 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 Friday, January 28, 2000. The Offer was extended on
November 9, 1999 by a press release. A copy of such press release is attached
as Exhibit (a)(14) hereto and is hereby incorporated by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
The exhibits to the Schedule 14D-1 are amended and restated as follows:
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.*
(a)(13) Press Release, dated October 21, 1999.*
(a)(14) Press Release, dated November 9, 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).*
(g)(12) Complaint in Charles Fruscione and Jerome Glowacki vs.
Herbalife International, Inc., et al., Case No. A408478 (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: November 10, 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.*
(a)(13) Press Release, dated October 21, 1999.*
(a)(14) Press Release, dated November 9, 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).*
(g)(12) Complaint in Charles Fruscione and Jerome Glowacki vs.
Herbalife International, Inc., et al., Case No. A408478 (NV
Dist. Ct., September 22, 1999).**
- --------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 99.A.14
Contact: Investor Relations
Herbalife International
(310) 410-9600 ext. 32202
[email protected]
TENDER OFFER PERIOD EXTENDED FOR HERBALIFE BUY-OUT
LOS ANGELES, CA - November 9, 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
Friday, January 28, 2000.
In light of the current conditions in the debt capital markets, Mr. Hughes
indicated that he is extending the tender offer into next year in the hope that
the necessary debt financing to complete the transaction will be available on
more attractive terms. In addition, Herbalife was informed by Mr. Hughes that he
may further extend the expiration time. As of the close of business on November
5, 1999, approximately 1,016,920 shares of Herbalife's Class A stock and
1,738,637 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
ALBRIGHT, STODDARD, WARNICK
& ALBRIGHT
G. MARK ALBRIGHT
Nevada State Bar No. 001394 FILED
801 S. Rancho Drive, Suite D-4 SEP 22 3:37 PM '99
Las Vegas, NV 89106 [signature illegible]
(702) 384-7111 CLERK
Attorneys for Plaintiff
DISTRICT COURT
CLARK COUNTY, NEVADA
CHARLES FRUSCIONE and )
JEROME GLOWACKI on )
behalf of themselves and all others )
similarly situated, ) A408478
) XIX
) CLASS ACTION COMPLAINT
)
Plaintiff, )
)
- against - ) ARBITRATION EXEMPTION
) CLAIMED AMOUNT IN QUESTION
HERBALIFE INTERNATIONAL INC., ) EXCEEDS $40,000.00 AND
ROBERT SANDLER, CHRISTOPHER M. ) CLASS ACTION
MINER, MICHAEL E. ROSEN, ALAN D. )
LIKER, EDWARD J. HALL, )
CHRISTOPHER PAIR, MARK HUGHES )
and TIMOTHY GERRITY, )
)
)
Defendants. )
____________________________________)
Plaintiff, by their undersigned attorneys, for their complaint against
defendants, alleges upon personal knowledge with respect to paragraph 2, and
upon information and belief based, inter alia, upon the investigation of
counsel, as to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a stockholder's class action on behalf of the public
stockholders of Herbalife International Inc. ("Herbalife" or the "Company"),
against certain of its officers and directors and the principal shareholder of
Herbalife to enjoin certain actions of defendants related to the proposed
acquisition of the outstanding shares of Herbalife common stock by its principal
shareholder, to the exclusion of other bona fide bidders.
<PAGE> 2
THE PARTIES
2. Plaintiffs Charles Fruscione and Jerome Glowacki are, and at all
relevant times have been, the owners of common stock of defendant Herbalife.
3. Defendant Herbalife is a Nevada corporation with its principal
executive offices located at 1800 Century Park East, Los Angeles, California.
Herbalife has two classes of common stock issued and outstanding: Class A
voting stock; and non-voting Class B common stock.
4. Defendants Robert Sandler, Christopher M. Miner, Michael E. Rosen,
Alan D. Liker, Edward J. Hall, Christopher Pair, Mark Hughes and Timothy Gerrity
are all members of the Company's Board of Directors. In addition, defendant
Sandler is Executive Vice President and General Counsel of the Company,
defendant Miner is Executive Vice President and Chief Executive-Development and
Marketing of the Company, defendant Pair is Chief Operating Officer of the
Company, defendant Hughes is Chairman, President, Founder and CEO of the Company
and defendant Gerrity is Chief Financial Officer of the Company.
5. Defendant Hughes owns and controls 54% of the Company's Class A
common stock and 58% of the Company's non-voting Class B common stock.
6. By virtue of their positions as directors and/or officers of
Herbalife and/or their exercise of control and dominant ownership over the
business and corporate affairs of Herbalife, each and every of the Individual
Defendants (especially Hughes) has, and at all relevant times had, the power to
control and influence, and did control and influence and cause Herbalife to
engage in the practices complained of herein. Each Individual Defendant owed
and owes Herbalife and its stockholders fiduciary obligations and was and is
required to: use his ability to control and manage Herbalife in a fair, just
and equitable manner; act in furtherance of the best interests of Herbalife and
its stockholders; govern Herbalife in such a manner as to heed the expressed
views of its public shareholders; refrain from abusing his positions of
control; and not to favor his own interests at the expense of Herbalife and its
stockholders.
7. As discussed in detail below, Hughes, in concert with the
Individual Defendants, who together control the actions of Herbalife, have
breached their fiduciary duties to Herbalife's
2
<PAGE> 3
public stockholders by acting to cause or facilitate Hughes's acquisition of
the publicly-held shares of Herbalife, to the exclusion of all other bidders,
for unfair and inadequate consideration, and colluding in Hughes's coercive
tactics in accompanying such buy-out.
8. Each defendant herein is sued individually as a conspirator and aider
and abettor, as well as in the case of the Individual Defendants, in their
capacity as directors and/or officers of Herbalife and the liability of each
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
9. Plaintiff brings this action individually and as a class action on
behalf of all stockholders of Herbalife (excluding from the Class the
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, pursuant to Rule 23 of the Rules of Civil Procedure for the Nevada
District Courts (the "Class").
10. This action is properly maintainable as a class action.
11. The Class is so numerous that joinder of all members is
impracticable. As of July 31, 1999, Herbalife had 9,982,300 shares of Class A
common stock issued and outstanding and 18,604,515 shares of Class B common
stock issued and outstanding.
12. There are questions of law and fact which are common to the Class and
which predominate over questions affecting any individual class member. The
common questions include, inter alia, the following:
(a) Whether defendants have engaged in and are continuing to engage
in conduct which unfairly benefits Hughes at the expense of the members of the
Class;
(b) Whether the Individual Defendants, as officers and/or directors
of the Company, and Hughes, the principal stockholder of Herbalife, are
violating their fiduciary duties to plaintiff and the other members of the
Class;
(c) Whether plaintiff and the other members of the Class would be
irreparably damaged were defendants not enjoined from the conduct described
herein; and
3
<PAGE> 4
(d) Whether defendants have initiated and timed their buy-out of
Herbalife shares to unfairly benefit Hughes at the expense of Herbalife's
public shareholders.
13. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of other members of the Class and plaintiff
has the same interests as the other members of the Class. Plaintiff is an
adequate representative of the Class.
14. Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making it appropriate to render final
injunctive, or corresponding declaratory relief, with respect to the Class.
15. 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 class
action. Since the damages suffered by individual class members may be
relatively small, the expense and burden of individual litigation makes it
impossible for members of the Class to individually seek redress for the
wrongful conduct alleged.
SUBSTANTIVE ALLEGATIONS
16. On September 13, 1999, after the close of the markets, Herbalife
issued a press release announcing that its Board of Directors had accepted a
definitive offer from Hughes for a transaction in which all of the outstanding
Class A and Class B shares not presently owned by Hughes will be acquired by
entities controlled by Hughes for $17 per share cash.
17. According to the press release, a "Special Committee" composed of
purportedly independent directors reviewed the terms of the transaction and
approved it. Given Hughes
4
<PAGE> 5
stranglehold over the Company and its operations, any review by the Special
Committee is a sham.
18. Hughes, by reason of his substantial ownership of Herbalife's voting
common stock, is in a position to ensure effectuation of the management led
leveraged buy-out without regard to its fairness to Herbalife's public
shareholders. Hughes and his allies on Herbalife's Board are acting to force
Herbalife's public shareholders to relinquish their Herbalife share without an
adequate process to ensure that these shareholders receive the highest price
attainable under the circumstances for such shares.
19. Thus, Hughes has the power and is exercising his power to acquire
Herbalife's shares and dictate terms which are in Hughes's best interest,
regardless of the wishes or best interests of the class members or the
intrinsic value of Herbalife's stock.
20. Because Hughes is in possession of proprietary corporate information
concerning Herbalife's future financial prospects, the degree of knowledge and
economic power between Hughes and the class members is unequal, making it
grossly and inherently unfair for Hughes to obtain the remaining Herbalife's
shares without an adequate process.
21. By using his domination and control as a means to force the
consummation of the leveraged buy-out transaction, Hughes is violating his
duties as the Company's principal shareholder.
22. Defendants, acting in concert, are violating their fiduciary duties
owed to the public shareholders of Herbalife and are putting their own personal
interests ahead of the interests of Herbalife's public shareholders. To act
consistent with their fiduciary duties, the Individual Defendants should
evaluate all available alternatives, including negotiating with any other
potential suitors, which they have failed to do.
23. Defendants have initiated an active sales process and, thus, have
assumed enhanced duties to maximize shareholder value. In that regard,
defendants must adequately ensure that no conflict of interest exists between
their own interests and their fiduciary obligations to maximize stockholder
value and act in the shareholders' best interests or, if such conflicts exist,
to ensure that they will be resolved in the best interests of the Company's
public stockholders.
5
<PAGE> 6
24. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize a full and fair
value for their stock at a substantial premium over the market price and to
compel defendants to carry out their fiduciary duties to maximize shareholder
value in selling Herbalife.
25. Defendants' fiduciary obligations require them to:
(a) act independently so that the interests of Herbalife's public
stockholders will be protected;
(b) adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation of entire fairness or,
if such conflicts exist, to ensure that all the conflicts are resolved in the
best interests of Herbalife's public stockholders; and
(c) provide Herbalife's stockholders with truly independent
representation in the negotiations with Hughes and the other bidders for the
Company.
26. By reason of the foregoing, defendants have breached and will
continue to breach their duties to the public shareholders of Herbalife and are
engaging in improper, unfair dealing and wrongful and coercive conduct.
27. Plaintiff and the Class will suffer irreparable harm unless
defendants are enjoined from breaching their fiduciary duties and from carrying
out the aforesaid plan and scheme.
28. By reason of the foregoing, defendants have violated the fiduciary
duties which each of them owes to plaintiff and the other members of the Class.
29. Each of the defendants has colluded in and rendered substantial
assistance in the accomplishment of the wrongdoing complained of herein. In
taking the actions, as particularized herein, to aid and abet and substantially
assist the wrongs complained of, all defendants acted with an awareness of the
primary wrongdoing and realized that their conduct would substantially assist
the accomplishment of that wrongdoing and were aware of their overall
contribution to the conspiracy, common scheme and course of wrongful conduct.
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30. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class,
and are prepared to consummate a buy-out on unfair and inadequate terms which
will exclude the Class from its fair proportionate share of Herbalife's
valuable assets and businesses, all to the irreparable harm of the Class, as
aforesaid.
31. Plaintiff and the other class members are immediately threatened
by the acts and transactions complained of herein, and lack and adequate remedy
at law.
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, in his favor and in favor of the Class and
against defendants as follows:
A. Declaring that this action is properly maintainable as a
class action, and certifying plaintiff as a class representative;
B. Declaring that the defendants and each of them have committed
or participated in a gross abuse of trust and have breached their fiduciary
duties to plaintiff and other members of the Class or aided and abetted such
breaches;
C. Enjoining the leveraged buy-out transaction and, if such
transaction is consummated, rescinding the transaction;
D. Requiring defendants to abide by and uphold their fiduciary
responsibilities in selling the Company and to fully insulate themselves from
any conflicts of interest that interfere with that would interfere with their
duties;
E. Awarding plaintiff and the Class compensatory damages and/or
rescissory damages;
F. Awarding plaintiff the costs and disbursements of this
action, including allowance for plaintiff's attorney's and experts' fees; and
G. Granting such other, and further relief as this Court may
deem to be just and proper.
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JURY DEMAND
Plaintiff demands a trial by jury of all issues so triable.
DATED: September 22, 1999
ALBRIGHT, STODDARD, WARNICK
& ALBRIGHT
By: /s/ G. MARK ALBRIGHT
-----------------------
G. Mark Albright
Nevada Bar No. 001394
William H. Stoddard
Nevada Bar No. 001477
Quail Park Suite D-4
801 South Rancho Drive
Las Vegas, Nevada 89106
(702) 384-7111
Of Counsel:
RABIN & PECKEL LLP
Brian Murray
275 Madison Avenue
New York, New York 10016
(212) 682-1818
SHEPPARD & GELLER LLC
7200 W. Camineo Real #203
Boca Raton, Florida 33437
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