<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1/A
AMENDMENT NO. 10
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
CALCULATION OF FILING FEE
Transaction Valuation*: $267,834,554 Amount of Filing Fee**: $53,557
* For purposes of calculating the fee only. This amount assumes the
purchase of all shares of Class A common stock, par value $.01 per
share, and all shares of Class B common stock, par value $.01 per
share, (collectively, the "Common Shares") of Herbalife International,
Inc. (the "Company") from stockholders other than the Continuing
Stockholder (as defined herein) at a price per share of $17.00,
plus the payment of the aggregate spread value of the outstanding
options to purchase Common Shares to be cancelled in the transactions
(based upon the applicable strike price and the per share transaction
price), estimated at $57,054,733. The amount of the filing fee,
calculated in accordance with Section 14(g)(3) and Rule 0-11(d) under
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate transaction value.
<PAGE> 2
** A filing fee of $53,557 was paid in connection with the initial filing
of this Schedule 14D-1 with the Securities and Exchange Commission on
September 17, 1999.
/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or registration no.: N/A Date Filed: N/A
(Continued on following pages)
(Page 1 of 9 pages)
<PAGE> 3
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> 4
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> 5
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> 6
MH Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"),
hereby amends and supplements, as set forth in this Amendment No. 10, its Tender
Offer Statement relating to its Offer 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. The tender offer is being
made upon the terms and subject to the conditions set forth in the Offer to
Purchase dated September 17, 1999 (the "Offer to Purchase"), as supplemented by
the First Supplement to the Offer to Purchase dated January 11, 2000 (the
"First Supplement") (which together with any amendments or supplements to the
Offer to Purchase, collectively constitute the "Offer"). A copy of the Offer to
Purchase was attached as Exhibit (a)(1) to the initial filing of the Tender
Offer Statement. The First Supplement is attached as Exhibit (a)(15) to this
Amendment No. 10.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
The response to Items 3(a) and 3(b) of the Tender Offer Statement is
supplemented as follows: The information set forth under "ADDITIONAL INFORMATION
- - SPECIAL FACTORS - BACKGROUND OF THE OFFER AND THE MERGER" in the First
Supplement is hereby incorporated by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The response to Item 4(a) of the Tender Offer Statement is supplemented
as follows: The Information set forth under "ADDITIONAL INFORMATION - THE
TENDER OFFER - FINANCING OF THE OFFER AND THE MERGER" in the First
Supplement is hereby incorporated by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
The response to Items 5(a) through (e) of the Tender Offer Statement is
supplemented as follows: The information set forth under "ADDITIONAL INFORMATION
- - THE TENDER OFFER - THE MERGER AGREEMENT" in the First Supplement is hereby
incorporated by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The response to Item 7 of the Tender Offer Statement is supplemented as
follows: The information set forth under "ADDITIONAL INFORMATION - SPECIAL
FACTORS - BACKGROUND OF THE OFFER AND THE MERGER" and "- THE TENDER OFFER - THE
MERGER AGREEMENT" in the First Supplement is hereby incorporated by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The response to Item 8 of the Tender Offer Statement is supplemented as
follows: The information set forth under "ADDITIONAL INFORMATION - THE TENDER
OFFER - FEES AND EXPENSES" in the First Supplement is hereby incorporated
by reference.
ITEM 10. ADDITIONAL INFORMATION.
The response to Item 10(e) of the Tender Offer Statement is supplemented
as follows: The information set forth under "ADDITIONAL INFORMATION - SPECIAL
FACTORS - CERTAIN LITIGATION" and "- SETTLEMENT OF LITIGATION" in the First
Supplement is hereby incorporated by reference.
The response to Item 10(f) of the Tender Offer Statement is supplemented
as follows: The information set forth in the First Supplement, a copy of which
is attached as Exhibit (a)(15) to this Amendment No. 10, is hereby incorporated
by reference.
<PAGE> 7
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS:
Item 11 of the Tender Offer Statement is supplemented by adding the
following information thereto:
(a)(15) First Supplement to Offer to Purchase, dated as of January 11, 2000.
(a)(16) Press Release, dated as of January 10, 2000.
(g)(13) Stipulation of Settlement, dated as of January 6, 2000.
(g)(14) Notice of Pendency.
<PAGE> 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: January 11, 2000
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> 9
EXHIBIT INDEX
(a)(15) First Supplement to Offer to Purchase, dated as of January 11, 2000.
(a)(16) Press Release, dated as of January 10, 2000.
(g)(13) Stipulation of Settlement, dated as of January 6, 2000.
(g)(14) Notice of Pendency.
<PAGE> 1
FIRST SUPPLEMENT TO THE OFFER TO PURCHASE FOR CASH
DATED JANUARY 11, 2000
MH MILLENNIUM ACQUISITION CORP.,
A WHOLLY-OWNED SUBSIDIARY OF
MH MILLENNIUM HOLDINGS LLC,
HAS AMENDED ITS
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF
HERBALIFE INTERNATIONAL, INC.
AT
$17.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS FURTHER EXTENDED.
MH Millennium Acquisition Corp., a Nevada corporation (the "Purchaser"),
hereby amends and supplements, as set forth herein, its Offer to Purchase, filed
on September 17, 1999 (as amended, the "Offer to Purchase"), pursuant to which
the Purchaser offered to purchase all outstanding shares of Class A common stock
and Class B common stock of Herbalife International, Inc., a Nevada corporation,
for $17.00 in cash. This first supplement to the Offer to Purchase (the "First
Supplement") provides information with respect to the making of a supplemental
payment, equal to $0.81 per share to stockholders that are members of the
Settlement Class (as defined below) (the "Supplemental Payment") pursuant to the
terms of a Stipulation of Settlement (the "Stipulation of Settlement").
Stockholders who are not members of the Settlement Class are not entitled to
receive the Supplemental Payment. The Supplemental Payment is contingent on the
Judgment (as defined below) becoming Final (as defined below). For a description
of the Stipulation of Settlement, see "Additional Information -- Special
Factors -- Settlement of Litigation".
This First Supplement should be read in conjunction with the Offer to
Purchase. Except as set forth in this First Supplement, the terms and conditions
previously set forth in the Offer to Purchase remain applicable in all respects
to the Offer. Terms used but not defined in this First Supplement have the
meanings set forth in the original Offer to Purchase.
Questions and requests for assistance, or for additional copies of this
First Supplement or other tender offer materials, may be directed to the
Information Agent or the Dealer Manager at the addresses and telephone numbers
set forth on the back cover. Holders of Shares may also contact brokers, dealers
or banks for additional copies of this First Supplement or other tender offer
materials.
THE OFFER TO PURCHASE AND THIS FIRST SUPPLEMENT CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
January 11, 2000
<PAGE> 2
TENDERING SHARES
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either: (a) complete and sign the Letter of Transmittal previously
delivered by Purchaser or Parent (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to such Letter of Transmittal,
and mail or deliver the Letter of Transmittal (or such facsimile) together with
the certificate(s) representing such Shares and any other required documents to
U.S. Stock Transfer Corporation (the "Depositary") or tender such Shares
pursuant to the procedures for book-entry transfer set forth under "The Tender
Offer -- 3. Procedures for Tendering Shares" in the Offer to Purchase or (b)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such stockholder. A stockholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such stockholder desires to tender such
Shares.
Any stockholder who desires to tender such stockholder's Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis may
tender such Shares by following the procedures for guaranteed delivery set forth
under "The Tender Offer -- 3. Procedures for Tendering Shares" in the Offer to
Purchase.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED SHARES PURSUANT TO THE
OFFER AND WHO HAVE NOT WITHDRAWN THOSE SHARES NEED NOT TAKE ANY FURTHER ACTION
IN ORDER TO (I) TENDER SHARES PURSUANT TO THE OFFER, AND (II) IF THEY ARE
MEMBERS OF THE SETTLEMENT CLASS, RECEIVE THE SUPPLEMENTAL PAYMENT. STOCKHOLDERS
WHO HAVE TENDERED SHARES PURSUANT TO THE GUARANTEED DELIVERY PROCEDURE SHOULD
COMPLY WITH THE REQUIRED PROCEDURES. SEE "THE TENDER OFFER -- 3. PROCEDURES FOR
TENDERING SHARES" IN THE OFFER TO PURCHASE.
ADDITIONAL INFORMATION
SPECIAL FACTORS
BACKGROUND OF THE OFFER AND THE MERGER. The discussion set forth in
"Special Factors -- Background of the Offer and the Merger" in the Offer to
Purchase is hereby amended as follows:
To amend the third paragraph on page 3 to read in its entirety as follows:
Beginning in September 1998, senior executives of Herbalife and Mr.
Hughes began to have preliminary communications with several investment
banking firms concerning possible alternatives to increase shareholder
value. Certain of these firms addressed the advantages and disadvantages of
various capital-markets transactions, including a going private
transaction, a leveraged recapitalization transaction financed in part by a
private equity sponsor and a "Dutch auction" self-tender by Herbalife.
Based on the discussions with these investment banks and the factors
discussed above, Mr. Hughes and Herbalife's senior management determined
that a going private transaction was superior to the other alternatives in
terms of enhancing shareholder value. From September 1998 through March
1999, senior executives of Herbalife interviewed several investment banking
firms to obtain their views concerning the advisability of, and their
qualifications to advise senior executives of Herbalife on the structuring
and financing of, such a transaction.
During this period, senior executives of Herbalife were approached by
the private equity sponsor firm of Saunders, Karp & Megrue regarding a
possible going private transaction. After an initial meeting in October
1998, Herbalife entered into a confidentiality agreement with Saunders,
Karp & Megrue and provided information to that firm pursuant to the
agreement. In early April 1999, Saunders, Karp & Megrue presented
management with a preliminary proposed structure for a possible going
private transaction in which the Company's public stockholders would
receive $16.50 per share. As part of this proposed structure, Saunders,
Karp & Megrue would provide $35 million to purchase preferred stock
representing over twenty percent of the equity of Herbalife. Saunders, Karp
& Megrue had not arranged for the financing of the proposed structure nor
had it obtained any financing commitments. Following its
2
<PAGE> 3
presentation of the proposed structure to Herbalife management, Saunders,
Karp & Megrue did not submit an offer to purchase.
Representatives of Donaldson, Lufkin & Jenrette Securities Corporation
("Donaldson, Lufkin & Jenrette") were first interviewed on March 31, 1999.
At that time and in subsequent meetings and conversations, representatives
of Donaldson, Lufkin & Jenrette provided preliminary views concerning the
feasibility and financing of a going private transaction, as well as other
possible transaction structures. On April 23, 1999, Herbalife formally
engaged Donaldson, Lufkin & Jenrette to advise Herbalife and to arrange for
the financing for a possible transaction. Such engagement did not include a
request to render, and Donaldson, Lufkin & Jenrette has not at any time
rendered, an opinion with respect to the fairness of any price proposed in
connection with the going private transaction.
To insert the following immediately after the second full paragraph on page
10:
Following public announcement of the execution of the Merger
Agreement, several putative class action lawsuits were filed challenging
the proposed transactions. During the period from November 1999 through
January 2000, counsel for the Company and the Company's directors and
counsel for the plaintiffs in these lawsuits engaged in discussions
regarding the possible settlement of these lawsuits. On or about January 6,
2000, the parties entered into a definitive Stipulation of Settlement. See
"Special Factors -- Certain Litigation" and "-- Settlement of Litigation"
for a description of the lawsuits and the settlement. On January 7, 2000,
the parties presented the Stipulation of Settlement to the District Court
of Clark County, Nevada (the "Court"). On the same date, the Court signed
the order granting preliminary approval of the Stipulation of Settlement.
For a description of the Stipulation of Settlement, including the
conditions to its effectiveness and the making of the Supplemental Payment,
see "Special Factors -- Settlement of Litigation". There can be no
assurance that final court approval of the settlement will be obtained or
that the Supplemental Payment will be made.
CERTAIN FINANCIAL PROJECTIONS. The discussion set forth in "Special
Factors -- Certain Financial Projections" in the Offer to Purchase is hereby
amended as follows:
To insert the following after the carry-over paragraph on page 25:
Following the completion of company projections for the fiscal years
1999 through 2006 referred to above, the Company published actual results
for the nine months ended September 30, 1999, and revised the estimates of
its results for the last quarter of 1999. These actual and revised
estimated results exceeded the results originally projected for 1999. Based
on these actual and revised estimated results, the Company has revised its
projections for fiscal year 1999 as follows: total retail sales of $1,793
million, net income of $56 million, and EBITDA of $105.5 million. The
assumptions underlying the company projections remain the same as described
above, except that the projections for the fiscal years 2000 through 2006
are based on the higher than projected 1999 actual and revised estimated
results. Accordingly, for the years 2000 through 2006, the revised Company
Projections are as follows: total retail sales of $1,877 million, $1,969
million, $2,063 million, $2,169 million, $2,274 million, $2,387 million and
$2,507 million; net income of $58 million, $64.7 million, $66.2 million,
$65.8 million, $69.7 million, $74 million and $78.6 million; and EBITDA of
$108.7 million, $120.5 million, $123.5 million, $123.1 million, $127.5
million, $132.4 million and $138.7 million.
CERTAIN LITIGATION. The discussion set forth in "Special Factors -- Certain
Litigation" in the Offer to Purchase is hereby amended to read in its entirety
as follows:
On September 14, 1999, a putative class action lawsuit entitled
Colleen M. Tharp vs. Herbalife International, Inc., et al., Case No.
A408158 was filed in the District Court, Clark County, Nevada, challenging
the fairness of the proposed transaction. Three similar lawsuits were later
filed in the same court, one on September 15, 1999 entitled Kenneth
Schweitzer v. Herbalife International, Inc. et al.,
3
<PAGE> 4
Case No. BC 216823, 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. On October 6, 1999, the District Court, Clark County,
Nevada entered an order consolidating these lawsuits under the caption In
re: Herbalife International, Inc., Litigation, Case No. A408158 (the "Class
Action"). In addition, eight similar lawsuits were filed in the Superior
Court of the State of California, County of Los Angeles. On September 14,
1999, three putative class action lawsuits were filed, 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. One other was filed on September 15, 1999
entitled Kenneth Schweitzer v. Herbalife International, Inc., et al., Case
No. BC 216823. Two others were filed 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 was filed on September 17, 1999, entitled Lee Brenin vs. Mark
Hughes, et al., Case No. BC 216932, and one was filed on September 23,
1999, entitled Michael Vaupel vs. Mark Hughes, et al., Case No. BC 217257.
By stipulation of the parties, all California proceedings have been stayed
pending the outcome of the Class Action. The lawsuits referred to in this
paragraph 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.
SETTLEMENT OF LITIGATION. Immediately following the discussion set forth in
"Special Factors -- Certain Litigation" on page 25 the Offer to Purchase, insert
the following:
SETTLEMENT OF LITIGATION
As of January 6, 2000, the parties to the Class Action entered into a
Stipulation of Settlement setting forth the terms of a settlement of the
Class Action (the "Stipulation of Settlement"). Pursuant to the terms of
the Stipulation of Settlement, members of the Settlement Class will receive
the Supplemental Payment. The "Settlement Class" is defined to mean all
persons, except Defendants (as defined in the Stipulation of Settlement),
members of the immediate family of any Defendant, any entity in which any
Defendant has a controlling ownership interest, Herbalife employees who
have been awarded stock options pursuant to the Company's stock option plan
(in their capacity as holders of such stock options), and the legal
representatives, heirs, successors or assigns of any such excluded party
who own Herbalife stock that is purchased in the Proposed Transaction (as
defined in the Stipulation of Settlement), or who exercise dissenters'
rights, and all holders of DECS securities issued by DECS Trust III, a
Delaware business trust, as of the date of the Closing. Stockholders who
are not members of the Settlement Class are not entitled to receive the
Supplemental Payment.
The Stipulation of Settlement provides that (i) the Purchaser shall
cause the Settlement Class to receive a payment of $0.81 for each Class A
or Class B share or DECS security under the terms and conditions of the
Stipulation of Settlement which are described below; (ii) the Defendants
are to request an opinion from Bear Stearns that $17.00 per share, plus the
Supplemental Payment of $0.81 per share, for total compensation of $17.81
per share is fair, from a financial point of view to the public
stockholders of Herbalife; (iii) the Defendants will reopen the period for
the exercise of dissenters rights until January 28, 2000, the current
expiration date for the tender offer, and, if the tender offer is extended,
the deadline for the exercise of dissenters' rights will be similarly
extended, but in no event later than February 14, 2000; (iv) with respect
to the condition to the Offer regarding the maximum number of dissenting
shares, the Purchaser may cancel the Offer only if dissenters' rights are
exercised with respect to more than 5% of the Company's outstanding stock;
(v) if an initial public offering of Herbalife of
4
<PAGE> 5
Japan is completed on or before July 6, 2001, Herbalife shall pay to the
Settlement Class for distribution in accordance with their Herbalife
holdings as of the time of the purchase of their securities pursuant to the
Proposed Transaction, the greater of $15,000,000 or 20% of the net proceeds
of the initial public offering within 30 days of the closing of the initial
public offering; (vi) the Offer to Purchase will be amended to contain
additional disclosure (such additional disclosure is contained herein)
describing (a) discussions held with the firm of Saunders, Karp & Megrue
concerning a possible transaction; and (b) the Company's projections of
future financial results and how Herbalife's actual results for 1999
compare with its projected 1999 results, and to recirculate the First
Supplement to the Settlement Class at Herbalife's expense; and (vii)
Herbalife will pay the costs of providing notice of the terms of this
settlement to the members of the Settlement Class.
In addition, pursuant to the Stipulation of Settlement the Company
will pay the sum of $8,500,000, plus interest, to Representative Plaintiffs
Counsel (as defined in the Stipulation of Settlement) as payment for
attorneys' fees, expenses and costs (the "Fee and Expense Payment")
incurred in the Lawsuits. Payment of the Fee and Expense Payment is
contingent on the closing of the Merger.
The Stipulation of Settlement provides for the dismissal of the Class
Action with prejudice. The Stipulation of Settlement also provides for the
release of all claims of members of the Settlement Class, whether known or
unknown, against the Defendants in the Lawsuits and any of their past or
present directors, officers, employees, partners, principals, agents,
underwriters, insurers, co-insurers, reinsurers, controlling shareholders,
any entity in which the Defendant and/or any member(s) of any Defendant's
immediate family has or have a controlling interest, attorneys,
accountants, auditors, banks, investment banks or investment bankers,
advisors, personal or legal representatives, insurers, reinsurers,
predecessors, successors, parents, subsidiaries, divisions, joint ventures,
assigns, spouses, heirs, associates, related or affiliated entities, and
any members of their immediate families (collectively, the "releasees"),
whether under state or federal law, and based upon or related to the Offer
or to the facts, transactions, events, occurrences, acts, disclosures,
statements, omissions or failures to act which were or could have been
alleged in the Lawsuits, or in any other forum, based upon, relating to or
arising from the facts which were alleged in any papers filed in the
Lawsuits.
The settlement contemplated by the Stipulation of Settlement is
subject to the Judgment becoming Final. The "Judgment" is defined to mean
the judgment to be rendered by the court dismissing the Class Action with
prejudice. "Final" is defined to mean (i) the date of final affirmance on
an appeal from the Judgment, the expiration of the time for a petition for
a writ of certiorari to review the Judgment and, if certiorari be granted,
the date of final affirmance of the Judgment following review pursuant to
that grant; or (ii) the date of final dismissal of any appeal from the
Judgment or the final dismissal of any proceeding on certiorari to review
the Judgment; or (iii) if no appeal is filed, the expiration date of the
time for the filing or noticing of any appeal from the Court's judgment
approving the Stipulation of Settlement.
There can be no assurance that the Judgment will become Final.
Consequently, there can be no assurance, among other things, that the
Supplemental Payment will be made.
The Supplemental Payment will be made as follows:
If the Judgment becomes Final before the Expiration Date, the
Supplemental Payment shall be made (i) to any Settlement Class members
whose Herbalife shares have been accepted for payment in the Offer,
simultaneously with the payment of the Offer Price by delivery of the
Supplemental Payment to the Depositary for transmission to the tendering
Settlement Class members; (ii) to any other member of the Settlement Class
(other than holders seeking to perfect dissenters' rights, unless and until
dissenters' rights have been waived or relinquished), except as provided in
clause (iii) following, simultaneously with the payment of the Merger
Consideration by delivery of the Supplemental Payment to the Paying Agent
for transmission to such Settlement Class members whose shares are
cancelled in the Merger; and (iii) to the Settlement Class members with
respect to their holdings of DECS, by delivery of the Supplemental Payment
to the trustee of DECS Trust III for transmission to such Settlement Class
members in accordance with the terms of the trust governing DECS Trust III.
5
<PAGE> 6
If the Judgment becomes Final after the Expiration Date, but before
the Closing of the Merger, the Supplemental Payment shall be made to all
Settlement Class members (other than holders seeking to perfect dissenters'
rights unless and until dissenters' rights have been waived or
relinquished) at the same time as the Merger Consideration is paid to
members of the Settlement Class who did not tender their Herbalife shares
in the Offer by delivery of the Supplemental Payment (i) in the case of
Settlement Class members whose Herbalife shares were accepted for payment
in the Offer, to the Depositary, which shall be instructed to make a
supplemental payment, in the amount of the Supplemental Payment, to such
Settlement Class members; (ii) in the case of any other Settlement Class
member (other than holders seeking to perfect dissenters' rights unless and
until dissenters' rights have been waived or relinquished), except as
provided in clause (iii) following, to the Paying Agent for transmission to
such Settlement Class members whose shares are cancelled in the Merger; and
(iii) to the Settlement Class members with respect to their holdings of
DECS, to the trustee of DECS Trust III for transmission to such Settlement
Class members in accordance with the terms of the trust governing DECS
Trust III.
If the Judgment becomes Final after the Closing of the Merger, the
Supplemental Payment shall be made to all Settlement Class members (other
than holders seeking to perfect dissenters' rights unless and until
dissenters' rights have been waived or relinquished) within 10 business
days of the date upon which the Judgment becomes Final by delivery of the
Supplemental Payment (i) in the case of Settlement Class members whose
Herbalife shares were accepted for payment in the Offer, to the Depositary,
which shall be instructed to make a supplemental payment, in the amount of
the Supplemental Payment, to such Settlement Class members; (ii) in the
case of any other Settlement Class member (other than holders seeking to
perfect dissenters' rights unless and until dissenters' rights have been
waived or relinquished), except as provided in clause (iii) following, to
the Paying Agent, which shall be instructed to make a supplemental payment,
in the amount of the Supplemental Payment, to such Settlement Class
members; and (iii) to the Settlement Class members with respect to their
holdings of DECS, to the trustee of DECS Trust III for transmission to such
Settlement Class members in accordance with the terms of the trust
governing DECS Trust III.
The Defendants have denied that they have engaged in any wrongdoing
whatsoever, and have agreed to the settlement to eliminate the burden and
expense of further litigation and to permit the Offer and the Merger to
proceed without the risk of injunctive or other relief.
The foregoing summary of the Stipulation of Settlement is qualified in
its entirety by reference to the Stipulation of Settlement, a copy of which
has been filed as an exhibit to this Amendment No. 10 to the Schedule
14D-1.
THE TENDER OFFER
CONDITIONS OF THE OFFER. The discussion set forth in "The Tender
Offer -- 5. Conditions of the Offer" in the Offer to Purchase is hereby amended
as follows:
To amend the first paragraph on page 33 to read in its entirety as follows:
(g) the number of Shares as to which the holders thereof have properly
exercised, or reasonably appear to have properly exercised, dissenters'
rights, if any, with respect to the Merger exceed five percent (5%) of the
total number of Shares outstanding as of the date of the Merger Agreement,
FINANCING OF THE OFFER AND THE MERGER. The discussion set forth in "The
Tender Offer -- 9. Financing of the Offer and the Merger" in the Offer to
Purchase is hereby amended as follows:
To insert the following paragraph after the carry-over paragraph on page
37:
Approximately $22.6 million will be required to fund the Supplemental
Payment and the Fee and Expense Payment agreed to under the Stipulation of
Settlement. For a description of the Stipulation of Settlement, see
"Special Factors -- Settlement of Litigation."
6
<PAGE> 7
THE MERGER AGREEMENT. The discussion set forth in "The Tender Offer -- 10.
The Merger Agreement" in the Offer to Purchase is hereby amended as follows:
To insert the following paragraph after the fifth paragraph on page 45.
Pursuant to the Stipulation of Settlement, the period for the exercise
of dissenters' rights will be reopened until January 28, 2000, the current
expiration date for the tender offer, and, if the tender offer is extended,
the deadline for the exercise of dissenters' rights will be similarly
extended, but in no event later than February 14, 2000.
CERTAIN TRANSACTIONS. The discussion set forth in "The Tender Offer -- 13.
Certain Transactions" in the Offer to Purchase is hereby amended as follows:
To insert the following paragraph after the second full paragraph on page
49:
Pursuant to the Stipulation of Settlement, dated January 6, 2000, the
Defendants have agreed that if an initial public offering of Herbalife of
Japan is completed on or before July 6, 2001, Herbalife shall pay to the
Settlement Class for distribution in accordance with their Herbalife
holdings as of the time of the purchase of their securities pursuant to the
Proposed Transaction, the greater of $15,000,000 or 20% of the net proceeds
of the initial public offering within 30 days of the closing of the initial
public offering. For a description of the Stipulation of Settlement, see
"Special Factors -- Settlement of Litigation".
FEES AND EXPENSES. The discussion set forth in "The Tender Offer -- 15.
Fees and Expenses" in the Offer to Purchase is hereby amended as follows:
To insert the following paragraph after the last paragraph under the
heading "Fees and Expenses" on page 50:
For a description of the payment of fees and expenses related to the
lawsuits, see "Special Factors -- Settlement of Litigation".
7
<PAGE> 8
Facsimile copies of the Letter of Transmittal previously delivered properly
completed and duly signed, will be accepted. The Letter of Transmittal
previously delivered, certificates for Shares and any other required documents
should be sent by each stockholder of the Company or the stockholder's broker,
dealer, commercial bank, trust company or other nominee to the Depositary as
follows:
The Depositary for the Offer is:
U.S. STOCK TRANSFER CORPORATION
<TABLE>
<S> <C> <C>
By Registered or Certified Facsimile Transmission: By Hand or Overnight
Mail: Delivery:
(for Eligible Institutions
U.S. Stock Transfer Only) U.S. Stock Transfer
Corporation Corporation
1745 Gardena Avenue 818-502-1737 1745 Gardena Avenue
Glendale, CA 91204 Glendale, CA 91204
Attn: Reorganization Attn: Reorganization
Department Department
For Confirmation Telephone:
818-502-1404
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal previously delivered or the Notice of
Guaranteed Delivery may be directed to the Information Agent at the telephone
numbers and location listed below. You may also contact your broker, dealer,
commercial bank or trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Banks and Brokerage Firms Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 928-0153
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
2121 Avenue of the Stars
Los Angeles, California 90067
(310) 282-7667 (call collect)
<PAGE> 1
EXHIBIT 99.A.16
Contact: Investor Relations
Herbalife International
(310) 410-9600 ext. 32202
[email protected]
HERBALIFE ANNOUNCES TENTATIVE
SETTLEMENT OF LAWSUITS CHALLENGING BUY-OUT
LOS ANGELES -- (BUSINESS WIRE) -- Jan. 10, 2000 -- Herbalife International Inc.
(Nasdaq: HERBA; Nasdaq: HERBB) today reported that it has reached a tentative
settlement with the representative plaintiffs' counsel in the litigation
opposing the buy-out proposed by Mark Hughes, the company's founder, president
and chief executive officer.
As previously announced, Hughes has offered to purchase all of the company's
Class A and Class B shares not already owned by him for $17 per share in cash,
pursuant to a pending tender offer.
Following the announcement in September 1999 of the tender offer and a related
merger, the company, its directors and certain of its executive officers were
named as defendants in several putative class action lawsuits challenging the
proposed transactions. The tentative settlement being announced today would
provide for a release of the claims asserted in the lawsuits.
Under the terms of the tentative settlement agreement, members of the settlement
class (which includes, generally, the company's public stockholders and the
holders of the DECS securities issued by DECS Trust III) would become entitled
to a supplemental cash payment in an amount equal to $.81 per share or DECS
security.
The supplemental payment would be in addition to the $17 per share in cash
payable pursuant to the tender offer and the merger. In addition, under the
terms of the tentative settlement agreement, the company would re-open
dissenters' rights for an additional period of time expiring on January 28,
2000. If the tender offer is extended, the deadline for the exercise of
dissenters' rights would be similarly extended, but in no event to a date later
than February 14, 2000.
The tentative settlement agreement includes additional terms, which the company
indicated will be described in supplemental tender offer materials to be
distributed to stockholders during the next several days.
The company indicated that it and the representative plaintiffs' counsel have
executed a Stipulation of Settlement and have obtained preliminary court
approval of the settlement. The terms of the settlement, including the making of
the supplemental payment, are subject to a number of conditions, including
completion of the buy-out transaction and final court approval. There can be no
assurance that these conditions will be satisfied; consequently, there can be no
assurance that the supplemental payment will be made.
Herbalife International markets nutritional, weight-management and personal care
products in 46 countries worldwide. Herbalife products are available only
through a network of independent distributors who purchase the products directly
from the company.
<PAGE> 1
EXHIBIT 99.G.13
JOINTLY SUMBITTED BY
THE UNDERSIGNED COUNSEL
DISTRICT COURT
CLARK COUNTY, NEVADA
IN RE HERBALIFE INTERNATIONAL, ) Case No. A408158
INC. LITIGATION ) Dept. XVIII
)
This Document Relates to: )
All Actions ) DATE: 1/7/2000
) TIME: 5:00 p.m.
- --------------------------------------------------------------
STIPULATION OF SETTLEMENT
This Stipulation of Settlement (the "Stipulation"), dated as of January 6,
2000, is made and entered into by and among the following parties (as defined
further in Section V herein) to the above-entitled action: (i) the
Representative Plaintiffs (as defined below), on behalf of themselves and each
of the Settlement Class Members (as defined below), by and through their counsel
of record in the action; and (ii) the Defendants (as defined below), by and
through their counsel of record in the Class Action (collectively, the "Settling
Parties"). This Stipulation is intended by the Settling Parties to fully,
finally and forever resolve, discharge and settle the Released Claims (as
defined herein), upon and subject to the terms and conditions thereof.
I. THE CLASS ACTION AND RELATED LITIGATION
A. The Class Actions
On September 14, 15, and 22, 1999, the plaintiffs filed four separate but
related class action lawsuits in this Court challenging a proposed transaction
that was publicly announced on September 13, 1999, pursuant to which Mark Hughes
(through entities controlled by him) was to purchase all publicly held shares of
Herbalife International, Inc. ("Herbalife" or the "Company") for $17.00 in cash
per share (the "Proposed Transaction"). The four lawsuits were (1) Tharp, et al.
v. Herbalife International, Inc., et al., Case No. A 408158; (2) MacFarlan, et
al. v. Herbalife International, Inc., et al., Case No. A 408159; (3) Fruscone,
et al. v. Herbalife International, Inc., et al., Case No. A 408478; and (4)
Coyle, et al. v. Herbalife International, Inc., et al., Case No. 408466.
Pursuant to a stipulation of the parties that was entered by the Court as
Pre-Trial Order No. 1 on or about October 6, 1999, the lawsuits were
consolidated, and the plaintiffs filed a consolidated complaint (the
"Complaint") on or about October 11, 1999, under the caption In re: Herbalife
International, Inc., Litigation, Case No. A 408158 (the "Class Action").(1)
The Class Action is brought on behalf of the public stockholders of
Herbalife and the holders of DECS securities relating to Herbalife that were
issued by DECS Trust III, a Delaware business trust, in March 1998. The
Complaint alleges breach of fiduciary duty by certain Company executives for
pursuing, and by the Company's board of directors for approving, the Proposed
Transaction. Named as defendants in the Class Action are Herbalife, Mark Hughes,
Michael E. Rosen, Christopher Pair, Edward J. Hall, Christopher M. Miner, Alan
D. Liker, Timothy Gerrity and Robert Sandler.
The Complaint alleges, among other things, that the price to be paid to
Herbalife's public stockholders in the Proposed Transaction is inadequate. Under
the terms of the Proposed Transaction, Mark Hughes (through entities controlled
by him) would acquire all of the Herbalife shares not already owned by him or
his affiliated entities at $17.00 per share in cash, and thereby become the sole
owner of the Company. Herbalife has two classes of common stock, Class A stock
and Class B stock. Mr. Hughes currently owns over 50% of both classes:
approximately 54% of the Class A stock and 58% of the Class B stock.
- ------------
(1) In addition to the four lawsuits that were filed in this Court,
eight class action lawsuits were filed in Los Angeles County Superior Court
challenging the Proposed Transaction (the "California Actions"). By stipulation
of the parties to those actions, all California proceedings have been stayed
pending the outcome of the Class Action in this Court. The Class Action and the
California lawsuits are referred to collectively herein as the "Litigation."
<PAGE> 2
On September 13, 1999, the Company announced the Proposed Transaction,
pursuant to which Mr. Hughes (through entities controlled by him) has made a
tender offer for all Herbalife shares owned by the public at a price of $17.00
per share in cash, to be followed by a merger transaction, in which the
stockholders (other than those who properly exercise state law dissenters'
rights) who do not tender will receive $17.00 per share in cash in exchange for
their shares. The Proposed Transaction is conditioned on over 50% of the public
holders of both the Class A and Class B stock tendering their shares in the
tender offer. Additionally, pursuant to the Proposed Transaction Mr. Hughes
would pay to DECS Trust III approximately $89 million to release approximately 5
million Class B Herbalife shares pledged to DECS Trust III for the benefit of
DECS holders.
The Complaint alleges that the Proposed Transaction is unfair to
Herbalife's public stockholders. Plaintiffs allege that the transaction was
timed to unfairly take advantage of the fact that the Company's stock price had
been adversely affected by global economic trends. Plaintiffs further allege
that the committee of directors (the "Special Committee") that was formed by
Herbalife's board of directors to negotiate the terms of the Proposed
Transaction with Mr. Hughes was not independent. Additionally, plaintiffs allege
that the projections of the Company's future financial performance that were
provided to the Special Committee were unduly conservative. Plaintiffs further
allege that the fairness opinion rendered by the Special Committee's financial
advisor is illusory because the opinion is based in part on Herbalife's
projections. Additionally, plaintiffs allege that defendants failed to disclose
to the Company's public stockholders: (1) that the projections provided to the
Special Committee were unduly conservative; (2) that the Company plans to
conduct an initial public offering of its Japanese subsidiary in the near
future; and (3) that an outside firm had expressed interest in pursuing a
different transaction in which the Company's public stockholders would be bought
out. Plaintiffs further allege that the defendants have engaged in self-dealing
in that the exercise price of certain stock options was lowered to prevailing
market prices in late 1998, which had the effect of increasing the value of
their stock options in the Proposed Transaction.
II. PRE-TRIAL PROCEEDINGS AND INVESTIGATION
A. Discovery, Investigation, And Research Conducted By Plaintiffs
Representative Plaintiffs Counsel has conducted discovery and investigation
during the prosecution of the Litigation. This discovery and investigation has
included, inter alia, (i) service of expedited discovery requests, and review
and inspection of voluminous documents produced by Defendants in response
thereto; (ii) the expedited depositions of the Chairman of the Special
Committee, Mr. Hughes, two members of Herbalife's senior management, Mr. Hughes'
financial advisor, and the Special Committee's financial advisor; (iii) service
of subpoenas on non-parties, and review of documents produced in response
thereto; (iv) consultations with a valuation expert; (v) review of Herbalife's
public filings, annual reports, and other public statements; and (vi) research
of the applicable law with respect to the claims asserted in the Litigation and
the potential defenses thereto.
B. Pre-Trial Proceedings
On October 6, 1999, the Court entered Pre-Trial Order No. 1. Pursuant to
that Order, as amended, the parties engaged in expedited discovery that included
Defendants' production of documents, and the depositions in October 1999 of the
Chairman of the Special Committee, the Special Committee's financial advisor,
and two members of Herbalife's senior management. Additionally, in November
1999, plaintiffs took the depositions of Mr. Hughes and of his financial
advisor.
On December 7, 1999, plaintiffs filed their Motion for Preliminary
Injunction and supporting papers seeking an order from this Court enjoining the
Proposed Transaction. The parties have agreed to take the hearing on the Motion
for Preliminary Injunction off calendar in light of the proposed settlement.
C. Settlement Negotiations
From November 1999 through January 2000, the Parties conducted extensive
arms' length settlement discussions, in which the Parties, among other things,
presented their respective views regarding the merits of the Litigation and
related defenses, the evidence, and valuation analyses.
Based on the prosecution of the Class Action, including plaintiffs' Motion
for a Preliminary Injunction, Defendants have agreed to provide the Settlement
Class Members with the benefits described in this Stipulation in exchange for
the Releases set forth in P. 5 below.
-1-
<PAGE> 3
III. CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OF SETTLEMENT
The Representative Plaintiffs believe that the claims asserted in the
Litigation have merit and that the evidence developed to date in the Litigation
supports the claims asserted. The Representative Plaintiffs assert, and believe
they would present supporting evidence at trial, that the Proposed Transaction
is unfair to Herbalife's public stockholders.
However, Representative Plaintiffs Counsel recognize and acknowledge the
expense and length of continued proceedings necessary to prosecute the
Litigation against the Defendants through trial and through appeals.
Representative Plaintiffs Counsel also have taken into account the uncertain
outcome and the risk of any litigation, especially in complex actions such as
the Litigation, as well as the difficulties and delays inherent in such
litigation. Representative Plaintiffs Counsel also are mindful of the inherent
problems of proof under and possible defenses to the claims asserted in the
Litigation.
In light of the foregoing, Representative Plaintiffs Counsel believe that
the settlement set forth in this Stipulation confers substantial benefits upon
the Settlement Class (as defined below) and Settlement Class Members. As
described below, Defendants have agreed to pay an additional $0.81 per share to
Herbalife's public stockholders (and the holders of the DECS securities). Based
on the Settlement Class Members owning approximately 17.36 million Herbalife
shares (including DECS), the $0.81 additional payment represents a benefit to
the Settlement Class Members of over $14 million. The Individual Defendants will
not receive this additional payment, nor will other Herbalife employees with
respect to stock options that were repriced in 1998. Defendants have also agreed
to request an opinion by the Special Committee's financial advisor that the
consideration to be received by the Company's public stockholders is fair, from
a financial point of view, and the proposed settlement is contingent on
Defendants receiving such an opinion. Furthermore, although the period for
Herbalife stockholders to exercise dissenters' rights expired on October 25,
1999, Defendants have agreed to reopen the period for the exercise of
dissenters' rights until January 28, 2000, the current expiration date for the
tender offer. If the tender offer is extended, the deadline for the exercise of
dissenters' rights will be similarly extended, but in no event later than
February 14, 2000. The settlement further protects the interests of Herbalife's
public stockholders because Defendants, who have stated that the Company has no
current plans to conduct an initial public offering of its Japanese subsidiary,
have agreed to share the proceeds of any such offering with the Company's
current stockholders should one occur on or before July 6, 2001. Additionally,
Defendants have agreed to supplement their disclosures concerning certain
discussions that occurred with the firm of Saunders, Karp & Megrue in 1998 and
1999, and concerning the Company's projections of future earnings and how the
Company's 1999 projections compare with actual results, so that Herbalife
stockholders will be better informed in deciding whether to tender their shares
in the tender offer. Based on their evaluation, Representative Plaintiffs
Counsel have determined that the settlement set forth in this Stipulation is in
the best interests of the Representative Plaintiffs and the Settlement Class.
IV. DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY
The Defendants have denied and continue to deny each and all of the claims
and contentions alleged by the Representative Plaintiffs on behalf of the
Settlement Class. The Defendants have also denied and continue to deny, inter
alia, the allegation that the price to be paid in the Proposed Transaction is
unfair to Herbalife's public stockholders, and that the Representative
Plaintiffs or the Settlement Class were harmed by the conduct alleged in the
Litigation. Defendants believe that they followed the proper procedures in
negotiating the Proposed Transaction, and that the Proposed Transaction is
entirely fair to the Representative Plaintiffs and the Settlement Class.
Nonetheless, the Defendants have concluded that further conduct of the
Litigation would be protracted and expensive, and that it is desirable that the
Litigation be fully and finally settled in the manner and upon the terms and
conditions set forth in this Stipulation in order to limit further expense,
inconvenience and distraction, to dispose of the burden of protracted
litigation, to permit the operation of the Company's business without further
distraction and diversion of the Company's executive personnel with respect to
matters at issue in this Litigation, and to allow the Proposed Transaction to go
forward as modified by this Stipulation in order that the Company's public
stockholders may have the opportunity to choose whether to accept Mr. Hughes'
tender offer. The Defendants also have taken into account the uncertainty and
risks inherent in any litigation, especially in complex cases like this
Litigation.
-2-
<PAGE> 4
The Defendants have, therefore, determined that it is desirable and
beneficial to them that the Litigation be settled in the manner and upon the
terms and conditions set forth in this Stipulation. The Defendants enter into
this Stipulation and settlement without in any way acknowledging any fault,
liability, or wrongdoing of any kind. There has been no adverse determination by
any court or otherwise against any of the Defendants on the merits of the claims
asserted by the Representative Plaintiffs. Neither this Stipulation, nor any of
its terms or provisions, nor any of the negotiations or proceedings connected
with it, shall be construed as an admission or concession by any of the
Defendants of the merit or truth of any of the allegations or wrongdoing of any
kind on the part of any of the Defendants. The Defendants enter into this
Stipulation and settlement based upon, among other things, the parties'
agreement herein that, to the fullest extent permitted by law, neither this
Stipulation nor any of its terms or provisions, nor any of the negotiations or
proceedings connected therewith, shall be offered as evidence in the Litigation
or in any pending or future civil, criminal, or administrative action or other
proceeding to establish any liability or admission by any of the Defendants or
any of their respective Related Entities or any other matter adverse to any of
the Defendants or any of their respective Related Entities, except as expressly
set forth herein.
V. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the
Representative Plaintiffs (for themselves and the Settlement Class Members), and
the Defendants, by and through their respective counsel of record, that, subject
to the approval of the Court, the Litigation and the Released Claims shall be
finally and fully compromised, settled and released, and the Litigation shall be
dismissed with prejudice, upon and subject to the terms and conditions of this
Stipulation as follows:
1. Definitions
As used in this Stipulation the following terms have the meanings specified
below:
1.1 "Closing" shall have the meaning given in the Merger Agreement.(2)
1.2 "Company" or "Herbalife" means defendant Herbalife International, Inc.,
a Nevada corporation, and all of its predecessors, successors, present and
former parents, subsidiaries, divisions and related or affiliated entities.
1.3 "DECS" means the DECS securities issued by DECS Trust III, a Delaware
business trust, pursuant to an underwritten registered offering in 1998.
1.4 "Defendants" means Herbalife, Mark Hughes, Michael E. Rosen,
Christopher Pair, Edward J. Hall, Christopher M. Miner, Alan D. Liker, Timothy
Gerrity and Robert Sandler.
1.5 "Depositary" shall have the meaning given in the Offer to Purchase.
1.6 "Effective Date" means the first date by which all of the events and
conditions specified in Section V, P. 6.1(a)-(e) of this Stipulation have been
met and have occurred.
1.7 "Expiration Date" shall have the meaning given in the Offer to
Purchase.
1.8 "Final" means: (i) The date of final affirmance on an appeal from the
Judgment, the expiration of the time for a petition for a writ of certiorari to
review the Judgment and, if certiorari be granted, the date of final affirmance
of the Judgment following review pursuant to that grant; or (ii) the date of
final dismissal of any appeal from the Judgment or the final dismissal of any
proceeding on certiorari to review the Judgment; or (iii) if no appeal is filed,
the expiration date of the time for the filing or noticing of any appeal from
the Court's judgment approving this Stipulation substantially in the form and
content of Exhibit "B" attached hereto.
1.9 "Individual Defendants" means Mark Hughes, Michael E. Rosen,
Christopher Pair, Edward J. Hall, Christopher M. Miner, Alan D. Liker, Timothy
Gerrity and Robert Sandler.
1.10 "Judgment" means the judgment to be rendered by the Court dismissing
the Class Action with prejudice, substantially in the form and content attached
hereto as Exhibit "BA."
1.11 "Merger" shall have the meaning given in the Merger Agreement.
- ---------------
(2) The Merger Agreement is included as Annex A to the Offer to
Purchase, a true and correct copy of which is attached hereto as Exhibit "C."
-3-
<PAGE> 5
1.12 "Merger Agreement" shall mean the Agreement and Plan of Merger dated
September 13, 1999, among MH Millennium Holdings LLC, MH Millennium Acquisition
Corp., Mark Hughes, the Mark Hughes Family Trust and Herbalife International,
Inc.
1.13 "Merger Consideration" shall have the meaning given in the Offer to
Purchase.
1.14 "Offer Price" shall have the meaning given in the Offer to Purchase.
1.15 "Offer to Purchase" shall mean the Offer to Purchase for Cash All
Outstanding Shares of Class A Common Stock and Class B Common Stock of Herbalife
International, Inc. by MH Millennium Acquisition Corp., a wholly owned
subsidiary of MH Millennium Holdings LLC for $17.00 Net Per Share dated
September 17, 1999, as amended.
1.16 "Parties" means, collectively, each of the Defendants and the
Representative Plaintiffs on behalf of themselves and the members of the
Settlement Class.
1.17 "Paying Agent" shall have the meaning given in the Merger Agreement.
1.18 "Person" means an individual, corporation (including all divisions and
subsidiaries), partnership, limited partnership, association, joint stock
company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or
legal entity and their spouses, heirs, predecessors, successors,
representatives, or assigns.
1.19 "Plaintiffs' Settlement Counsel" means: Milberg Weiss Bershad Hynes &
Lerach LLP, Robert A. Wallner, One Pennsylvania Plaza, New York, New York 10119,
Telephone: 212/594-5300; Abbey, Gardy & Squitieri, LLP, Stephen J. Fearon, Jr.,
212 East 39th Street, New York, New York 10016, Telephone: 212/889-3700.
1.20 "Purchaser" shall have the meaning given in the Offer to Purchase.
1.21 "Related Parties" means each of a Defendant's past or present
directors, officers, employees, partners, principals, agents, underwriters,
insurers, co-insurers, reinsurers, controlling shareholders, any entity in which
the Defendant and/or any member(s) of any Defendant's immediate family has or
have a controlling interest, attorneys, accountants, auditors, banks, investment
banks or investment bankers, advisors, personal or legal representatives,
insurers, reinsurers, predecessors, successors, parents, subsidiaries,
divisions, joint ventures, assigns, spouses, heirs, associates, related or
affiliated entities, any members of their immediate families, or any trust of
which any Defendant is the trustee or settlor or which is for the benefit of any
Defendant and/or member(s) of his family.
1.22 "Released Claims" shall collectively mean all claims (including
"Unknown Claims" as defined in P. 1.29 hereof), demands, rights, liabilities and
causes of action of every nature and description whatsoever, known or unknown,
whether in contract, tort, equity or otherwise, whether or not concealed or
hidden, asserted or that might have been asserted in this or any other forum or
proceeding, including, without limitation, claims for negligence, gross
negligence, indemnification, breach of duty of care and/or breach of duty of
loyalty, fraud, misrepresentation, breach of fiduciary duty, negligent
misrepresentation, unfair competition, insider trading, professional negligence,
mismanagement, corporate waste, breach of contract, or violations of any state
or federal statutes, rules or regulations, by or on behalf of the Representative
Plaintiffs, the Settlement Class, or any Settlement Class Member against the
Released Persons (as defined below) which are based upon or related to the
Proposed Transaction or to the facts, transactions, events, occurrences, acts,
disclosures, statements, omissions or failures to act which were or could have
been alleged in the Litigation, or in any other forum, based upon, relating to
or arising from the facts which were alleged in any papers filed in the
Litigation except (i) dissenters' rights under state law by Settlement Class
Members who have validly asserted and perfected dissenters' rights claims, and
(ii) claims relating to the enforcement of this Stipulation.
1.23 "Released Persons" means each and all of the Defendants and their
respective Related Parties.
1.24 "Representative Plaintiffs" means Colleen M. Tharp, Francis MacFarlan,
Patricia Lisa, Harbor Finance Partners, Stuart H. Savett, Kevin Coyle, Kenneth
Schweitzer, Rae Ellen Plattus, Lee Brenin, Michael Vaupel, and John Hedderman.
1.25 "Representative Plaintiffs Counsel" means each counsel who has
appeared as counsel for any of the plaintiffs in the Litigation.
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1.26 "Settlement Class" means all Persons (except Defendants, members of
the immediate family of any Defendant, any entity in which any Defendant has a
controlling ownership interest, Herbalife employees who have been awarded stock
options pursuant to the Company's stock option plan (in their capacity as
holders of such stock options), and the legal representatives, heirs, successors
or assigns of any such excluded party) who own Herbalife stock that is purchased
in the Proposed Transaction, or who exercise dissenters' rights, and all holders
of DECS securities issued by DECS Trust III, a Delaware business trust, as of
the date of the Closing.
1.27 "Settlement Class Member" or "Member of the Settlement Class" means a
Person who falls within the definition of the Settlement Class as set forth in
P. 1.26, above.
1.28 "Tender Offer" shall mean the tender offer contained in the Offer to
Purchase.
1.29 "Unknown Claims" means any Released Claims which the Representative
Plaintiffs or any Settlement Class Member does not know or suspect to exist in
his, her or its favor at the time of the release of the Released Persons which,
if known by him, her or it, might have affected his, her or its settlement with
and release of the Released Persons, or might have affected his, her or its
decision not to object to this settlement or to exercise dissenters' rights.
With respect to any and all Released Claims, the Parties stipulate and agree
that, upon the Effective Date, the Representative Plaintiffs expressly waive and
relinquish, and the Settlement Class Members shall be deemed to have, and by
operation of the Judgment shall have expressly waived and relinquished, to the
fullest extent permitted by law, the provisions, rights, and benefits of Section
1542 of the California Civil Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
The Representative Plaintiffs expressly waive and the Settlement Class Members
shall be deemed to, and upon the Effective Date and by operation of the Judgment
shall have waived any and all provisions, rights and benefits conferred by any
law of the United States or of any state or territory of the United States, or
principle of common law, which is similar, comparable or equivalent to Section
1542 of the California Civil Code. The Representative Plaintiffs and the
Settlement Class Members may hereafter discover facts in addition to or
different from those which he, she or it now knows or believes to be true with
respect to the subject matter of the Released Claims, but each of them hereby
stipulate and agree that the Representative Plaintiffs do settle and release,
and each Settlement Class Member shall be deemed to, upon the Effective Date and
by operation of the Judgment shall have, fully, finally, and forever settled and
released any and all Released Claims upon any theory of law or equity, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or not
concealed or hidden, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or
additional facts. The Parties acknowledge that the foregoing waiver was
bargained for and a key element of the settlement of which this release is a
part.
2. The Settlement
In consideration of the Releases provide for in P. 5 herein, Defendants
agree to the following terms:
2.1 Price Increase
In addition to the $17.00 per share to be received in the Proposed
Transaction, the Purchaser shall cause the Settlement Class (except for holders
of Herbalife Class A or Class B common stock who have provided or subsequently
provide the Company with written notice asserting dissenters' rights) to receive
a payment of $0.81 for each Class A or Class B share or DECS security (the
"Settlement Payment") as follows:
(a) If the Judgment becomes Final before the Expiration Date of the
Tender Offer, the Settlement Payment shall be made (i) to any Settlement Class
Members whose Herbalife shares have been accepted for payment in the Tender
Offer, simultaneously with the payment of the Offer Price by delivery of the
Settlement Payment to the Depositary for transmission to the tendering
Settlement Class Members; (ii) to any other Member of the Settlement Class
(other than holders seeking to perfect dissenters' rights, unless and until
dissenters' rights have been waived or relinquished), except as provided in
clause (iii) following, simultaneously with the payment of the Merger
Consideration by delivery of the Settlement Payment to the Paying Agent for
transmission to such Settlement Class Members whose shares are cancelled in the
Merger; and (iii) to the Settlement Class Members with respect to their holdings
of DECS, by delivery of the Settlement Payment to the trustee of DECS Trust III
for transmission to such Settlement Class Members in accordance with the terms
of the trust governing DECS Trust III;
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<PAGE> 7
(b) If the Judgment becomes Final after the Expiration Date of the
Tender Offer, but before the Closing of the Merger, the Settlement Payment shall
be made to all Settlement Class Members (other than holders seeking to perfect
dissenters' rights unless and until dissenters' rights have been waived or
relinquished) at the same time as the Merger Consideration is paid to members of
the Settlement Class who did not tender their Herbalife shares in the Tender
Offer by delivery of the Settlement Payment (i) in the case of Settlement Class
Members whose Herbalife shares were accepted for payment in the Tender Offer, to
the Depositary, which shall be instructed to make a supplemental payment, in the
amount of the Settlement Payment, to such Settlement Class Members; (ii) in the
case of any other Settlement Class Member (other than holders seeking to perfect
dissenters' rights unless and until dissenters' rights have been waived or
relinquished), except as provided in clause (iii) following, to the Paying Agent
for transmission to such Settlement Class Members whose shares are cancelled in
the Merger; and (iii) to the Settlement Class Members with respect to their
holdings of DECS, to the trustee of DECS Trust III for transmission to such
Settlement Class Members in accordance with the terms of the trust governing
DECS Trust III;
(c) If the Judgment becomes Final after the Closing of the Merger, the
Settlement Payment shall be made to all Settlement Class Members (other than
holders seeking to perfect dissenters' rights unless and until dissenters'
rights have been waived or relinquished) within 10 business days of the date
upon which the Judgment becomes Final by delivery of the Settlement Payment (i)
in the case of Settlement Class Members whose Herbalife shares were accepted for
payment in the Tender Offer, to the Depositary, which shall be instructed to
make a supplemental payment, in the amount of the Settlement Payment, to such
Settlement Class Members; (ii) in the case of any other Settlement Class Member
(other than holders seeking to perfect dissenters' rights unless and until
dissenters' rights have been waived or relinquished), except as provided in
clause (iii) following, to the Paying Agent, which shall be instructed to make a
supplemental payment, in the amount of the Settlement Payment, to such
Settlement Class Members; and (iii) to the Settlement Class Members with respect
to their holdings of DECS, to the trustee of DECS Trust III for transmission to
such Settlement Class Members in accordance with the terms of the trust
governing DECS Trust III.
2.2 Bringdown Of Fairness Opinion By The Special Committee's Independent
Financial Advisor
Defendants have obtained an opinion from the Special Committee's financial
advisor that $17.00 per share is fair, from a financial point of view, to the
stockholders of Herbalife as of September 13, 1999.
Defendants hereby agree to request an opinion from the Special Committee's
independent financial advisor that $17.00 per share, plus the Settlement Payment
of $0.81 per share, for total compensation of $17.81 per share, is fair, from a
financial point of view, to the public stockholders of Herbalife.
2.3 Reopening And Modification Of Appraisal Rights
Although Nevada law did not require Herbalife to provide stockholders with
dissenters' rights in connection with the Merger, the Company agreed in the
Merger Agreement to grant stockholders the right to dissent from the Merger by
delivery of a written notice to the Company prior to October 25, 1999. The
Merger Agreement further provides that if dissenters' rights are exercised with
respect to more than 3% of the Company's outstanding stock, then the Purchaser
may cancel the Proposed Transaction.
Defendants hereby agree to reopen the period for the exercise of dissenters
rights until January 28, 2000, the current expiration date for the tender offer.
If the tender offer is extended, the deadline for the exercise of dissenters'
rights will be similarly extended, but in no event later than February 14, 2000.
Additionally, Defendants agree that the Purchaser may cancel the Proposed
Transaction only if dissenters' rights are exercised with respect to more than
5% of the Company's outstanding stock.
2.4 Initial Public Offering Of Herbalife Of Japan
Defendants have stated that Herbalife has no current intention to conduct
an initial public offering ("IPO") of Herbalife of Japan. Plaintiffs have
questioned this statement.
Defendants hereby agree that if an IPO of Herbalife of Japan is completed
on or before July 6, 2001, Herbalife shall pay to the Settlement Class for
distribution in accordance with their Herbalife holdings as of the time of the
purchase of their securities pursuant to the Proposed Transaction, the greater
of $15 million or 20% of the net proceeds of the IPO within 30 days of the
closing of the IPO.
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<PAGE> 8
2.5 Disclosure Issues
Plaintiffs have asserted that Defendants have failed to make adequate
disclosure concerning (a) discussions held with the firm of Saunders, Karp &
Megrue concerning a possible transaction; and (b) the Company's projections of
future financial results and how Herbalife's actual results for 1999 compare
with its projected 1999 results. Defendants hereby agree to revise the Offer to
Purchase to contain additional disclosure on these issues, and to recirculate
the Offer to Purchase to the Settlement Class at Herbalife's expense.
2.6 Payment Of Notice Costs
Herbalife agrees to pay the costs of providing notice of the terms of this
settlement to the Settlement Class Members.
2.7 Fees Of Representative Plaintiffs Counsel
(a) Herbalife shall pay the sum of $8.5 million to Representative
Plaintiffs Counsel as payment for attorneys' fees, expenses and costs (the "Fee
and Expense Payment") incurred in the Litigation. Payment of the Fee and Expense
Payment is contingent on the Closing of the Merger. Herbalife shall cause the
Fee and Expense Payment to be transferred to Plaintiffs' Settlement Counsel
within five business days of the Closing of the Merger. Interest shall accrue on
the Fee and Expense Payment commencing on the date of the entry of the Judgment
by this Court at the rate of 5.8%, simple interest.
(b) Plaintiffs' Settlement Counsel shall allocate the Fee and Expense
Payment among Representative Plaintiffs Counsel in a manner in which Plaintiffs'
Settlement Counsel in good faith believe reflects the contributions of such
counsel to the prosecution and settlement of the Litigation; provided, however,
that in the event that this Stipulation and the settlement set forth herein does
not become effective for any reason, or the Judgment is reversed or modified on
appeal, and in the event that the Fee and Expense Payment has been paid to any
extent, then Representative Plaintiffs Counsel shall within five (5) business
days from the event which precludes the Effective Date from occurring or such
reversal or modification, refund to Herbalife the fees, expenses, costs and
interest previously paid to them, including accrued interest on any such amount
at 5.8%, simple interest. Each such Representative Plaintiffs Counsel's law
firm, as a condition of receiving such fees and expenses, on behalf of itself
and each partner and/or stockholder of it, agrees that the law firm and its
partners and/or stockholders are subject to the jurisdiction of the Court for
the purpose of enforcing this P. 2.7(b) of this Stipulation. Without limitation,
each such law firm and its partners and/or stockholders agree that the Court
may, upon application of Defendants, or Plaintiffs' Settlement Counsel, on
notice to counsel to the Representative Plaintiffs, summarily issue orders,
including, but not limited to, judgments and attachment orders, and may make
appropriate findings of or sanctions for contempt, against them or any of them
should such law firm fail timely to repay fees and expenses pursuant to this P.
2.7(b) of this Stipulation.
(c) The Released Persons shall have no responsibility for, and no
liability whatsoever with respect to, the allocation of the Fee and Expense
Payment among Representative Plaintiffs Counsel, or any other Person who may
assert some claim thereto.
(d) The Fee and Expense Payment is a material term of the settlement
set forth in this Stipulation.
3. Certification of the Settlement Class.
3.1 For the sole purpose of implementation, approval and consummation of
the settlement, the Settling Parties stipulate and agree that the Court may
enter an order certifying the Settlement Class, appointing the Representative
Plaintiffs as the representatives of the Settlement Class, and appointing the
following counsel as counsel for the Settlement Class:
MILBERG WEISS BERSHAD HYNES & LERACH LLP
Robert A. Wallner
One Pennsylvania Plaza
New York, New York 10119
ABBEY, GARDY & SQUITIERI, LLP
Stephen J. Fearon, Jr.
212 East 39th Street
New York, New York 10016
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<PAGE> 9
3.2 Certification of the Settlement Class and appointment of the class
representatives and Settlement Counsel by the Court, as set forth herein, shall
be binding only with respect to the settlement set forth in this Stipulation. In
the event that this Stipulation is terminated or cancelled or that the Effective
Date does not occur for any reason, the stipulated certification of the
Settlement Class shall be vacated and the Class Action shall proceed as though
the Settlement Class had never been certified. Except to effectuate the
settlement, neither the Settling Parties, their respective counsel, nor any
member of the Settlement Class shall cite, present as evidence or legal
precedent, rely upon, make reference to or otherwise make any use whatsoever of
this stipulated certification of the Settlement Class, in this Class Action or
in any other proceeding.
4. Notice Order And Settlement Hearing
4.1 Promptly after execution of this Stipulation, but in no event later
than five (5) days after this Stipulation is signed (unless such time is
extended by the written agreement of Plaintiffs' Settlement Counsel and counsel
for the Defendants), the Parties shall submit this Stipulation together with its
Exhibits to the Court and shall jointly apply for entry of an order (the "Notice
Order"), substantially in the form and content of Exhibit "A" attached hereto,
requesting that the Settlement Class be certified, the preliminary approval of
the settlement set forth in this Stipulation, and approval for the mailing and
publication of a Notice of Pendency and Proposed Settlement of Class Action
which shall include the general terms of the settlement set forth in this
Stipulation and the date of the Settlement Hearing (as defined below in P. 4.2).
4.2 The Parties shall request that, after notice is given, the Court hold a
hearing (the "Settlement Hearing") and finally approve this settlement as set
forth herein.
5. Releases
5.1 Upon the Effective Date, the Representative Plaintiffs shall release,
relinquish and discharge, and each of the Settlement Class Members shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and
forever released, relinquished and discharged all Released Claims (including
Unknown Claims) against each and all of the Released Persons.
5.2 Upon the Effective Date, each of the Defendants shall be deemed to
have, and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished and discharged the Representative Plaintiffs, the
Settlement Class Members, and Representative Plaintiffs Counsel from all claims
(including Unknown Claims), arising out of, relating to, or in connection with
the institution, prosecution, assertion or resolution of the Litigation or the
Released Claims.
5.3 Upon the Effective Date, the Representative Plaintiffs, the Settlement
Class Members, and Representative Plaintiffs Counsel shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished and discharged the Released Persons from all claims
(including Unknown Claims), arising out of, relating to, or in connection with
the defense, or resolution of the Litigation or the Released Claims.
5.4 Except as otherwise expressly provided for in this Stipulation, the
Settling Parties shall each bear their own respective attorneys' fees, expenses
and costs incurred in connection with the conduct and settlement of the
Litigation, and the preparation, implementation and performance of the terms of
this Stipulation.
6. Conditions Of Settlement, Effect Of Disapproval, Cancellation Or
Termination
6.1 The Effective Date of this Stipulation shall be conditioned on the
occurrence of all of the following events:
(a) The Court has entered the Notice Order and certified the
Settlement Class, as required by P. P. 3.1 and 4.1, above;
(b) The Court has entered the Judgment, or a judgment substantially in
the form and content of Exhibit "B" attached hereto;
(c) Defendants have obtained from the Special Committee's independent
financial advisor an opinion that $17.00 per share, plus the Settlement Payment
of $0.81 per share is fair, from a financial point of view to the public
stockholders of Herbalife as of January 23, 2000;
(d) The Judgment has become Final, as defined in P. 1.8, above; and
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<PAGE> 10
(e) The Closing has occurred.
6.2 If any of the conditions specified in P. 6.1, above, are not met, then
this Stipulation shall be cancelled and terminated unless Plaintiffs' Settlement
Counsel and counsel for Defendants mutually agree in writing to proceed with
this Stipulation.
6.3 In the event that this Stipulation is not approved by the Court or the
settlement set forth in this Stipulation is terminated or fails to become
effective in accordance with its terms, this Stipulation and all negotiations
and proceedings relating hereto shall be without prejudice to any or all
Settling Parties who shall be restored to their respective positions in the
Class Action as of the date of execution of this Stipulation. In such event, the
terms and provisions of this Stipulation, with the exception of P. P. 1.1-1.29,
2.7, 3.2, 6.1, 6.2, 6.3 & 6.5 herein, shall have no further force and effect
with respect to the Settling Parties and shall not be used in the Litigation or
in any other proceeding for any purpose and any Judgment or order entered by the
Court in accordance with the terms of this Stipulation shall be treated as
vacated, nunc pro tunc.
6.4 If a case is commenced in respect of any Defendant under Title 11 of
the United States Code (Bankruptcy), or a trustee, receiver or conservator is
appointed under any similar law, and in the event of the entry of a final order
of a court of competent jurisdiction determining the transfer of the Settlement
Payment or the Fee and Expense Payment, or any portion thereof, by or on behalf
of such Defendant to be a preference, voidable transfer, fraudulent conveyance
or similar transaction, then, as to such Defendant only, the releases given and
Judgment entered in favor of such Defendant pursuant to this Stipulation shall
be null and void.
6.5 In the event this Stipulation shall be cancelled as set forth in P. 6.3
above, the Settling Parties shall, within two weeks of such cancellation,
jointly request a status conference with the Court to be held on the Court's
first available date. At such status conference, the Settling Parties shall ask
the Court's assistance in scheduling continued proceedings in the Class Action
as between the Settling Parties.
7. Miscellaneous Provisions
7.1 The Parties (a) acknowledge that it is their intent to consummate this
settlement and Stipulation; and (b) agree to cooperate to the extent necessary
to effectuate and implement all terms and conditions of this Stipulation and to
exercise their best efforts to accomplish the foregoing terms and conditions of
this Stipulation. Representative Plaintiffs' Counsel and Defendants' counsel
agree to cooperate to seek dismissal of the California Actions promptly after
entry of the Judgment, all claims in the California Actions then having been
released by this settlement and the entry of the Judgment.
7.2 Each Defendant warrants as to himself or itself that, at the time any
of the payments provided for herein are made on behalf of himself or itself, he
or it is not insolvent and the payment will not render him or it insolvent. This
representation is made by each Defendant as to himself or itself and is not made
by counsel for the Defendants.
7.3 Neither this Stipulation nor the settlement contained herein, nor any
act performed or document executed pursuant to or in furtherance of this
Stipulation or the settlement: (i) is or may be deemed to be or may be used as
an admission of, or evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of the Released Persons; or (ii) is or may be deemed to
be or may be used as an admission of, or evidence of, any fault or omission of
any of the Released Persons in any civil, criminal or administrative proceeding
in any court, administrative agency or other tribunal. Released Persons may file
this Stipulation and/or the Judgment from this action in any other action that
may be brought against them in order to support a defense or counterclaim based
on principles of res judicata, collateral estoppel, release, good faith
settlement, judgment bar or reduction or any theory of claim preclusion or issue
preclusion or similar defense or counterclaim.
7.4 All of the Exhibits to this Stipulation are material and integral parts
hereof and are fully incorporated herein by this reference.
7.5 This Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Parties or their
successors-in-interest.
7.6 This Stipulation and the Exhibits attached hereto constitute the entire
agreement among the Parties and no representations, warranties or inducements
have been made to any party concerning this Stipulation or its Exhibits other
than the representations, warranties and covenants contained and memorialized in
such documents. Except as otherwise provided herein, each party shall bear its
own costs.
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<PAGE> 11
7.7 Plaintiffs' Settlement Counsel, on behalf of the Settlement Class, are
expressly authorized by the Representative Plaintiffs to take all appropriate
action required or permitted to be taken by the Settlement Class pursuant to
this Stipulation to effectuate its terms and also are expressly authorized to
enter into any modifications or amendments to this Stipulation on behalf of the
Settlement Class which they deem appropriate.
7.8 Each counsel or other Person executing this Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such person has the
full authority to do so.
7.9 All orders and agreements entered during the course of the Class Action
relative to the confidentiality of information shall survive this Stipulation.
7.10 This Stipulation may be executed by facsimile and in one or more
counterparts. All executed counterparts and each of them shall be deemed to be
one and the same instrument. Counsel for the Parties to this Stipulation shall
exchange among themselves original signed counterparts and a complete set of
original executed counterparts shall be filed with the Court.
7.11 This Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the Settling Parties hereto.
7.12 The Court shall retain jurisdiction with respect to implementation and
enforcement of the terms of this Stipulation, and all Parties hereto and their
counsel submit to the jurisdiction of the Court for purposes of implementing and
enforcing the settlement embodied in this Stipulation.
7.13 This Stipulation and the Exhibits hereto shall be considered to have
been negotiated, executed and delivered, and to be wholly performed, in the
State of California, and the rights and obligations of the parties to this
Stipulation shall be construed and enforced in accordance with, and governed by,
the laws of the State of California without giving effect to that state's choice
of law principles.
7.14 Plaintiffs' Settlement Counsel shall have the option to terminate this
Stipulation if the Closing has not occurred by June 1, 2000. The Settling
Parties may agree in writing to extend this option.
IN WITNESS WHEREOF, the parties hereto have caused this Stipulation to be
executed, by their duly authorized attorneys, as of January 6, 2000.
Dated: January 7, 2000
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
Robert A. Wallner
One Pennsylvania Plaza
New York, New York 10119-0165
(212) 594-5300
By: /s/ Robert A. Wallner
-------------------------------------
Robert A. Wallner
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
William S. Lerach
Keith F. Park
600 West Broadway, Suite 1800
San Diego, California 92101
(619) 231-1058
ABBEY, GARDY & SQUITIERI, LLP
Stephen J. Fearon, Jr.
212 East 39th Street
New York, New York 10016
(212) 879-3700
By: /s/ Stephen J. Fearon, Jr.
-------------------------------------
Stephen J. Fearon, Jr.
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<PAGE> 12
Co-Lead Counsel for Plaintiffs
ALBRIGHT, STODDARD, WARNICK & ALBRIGHT
G. Mark Albright, Bar Number 1394
801 South Rancho Drive, Quail Park Suite D-4
Las Vegas, Nevada 89106
(702) 384-7111
Liaison Counsel for Plaintiffs
LAW OFFICES OF RICHARD B. BRUALDI
Richard B. Brualdi
29 Broadway, Suite 1515
New York, New York 10006
(212) 952-0602
GENE MESH & ASSOCIATES
Gene Mesh
2605 Burnet Avenue
Cincinnati, Ohio 45219
(513) 221-8800
WOLF HALDENSTEIN ADLER FREEMAN & HERZ, LLP
Jeff Smith
270 Madison Avenue
New York, New York 10016
(212) 545-4600
RABIN & PECKEL LLP
Brian Murray
275 Madison Avenue
New York, New York 10016
(212) 682-1818
SHEPHERD & GELLER, LLC
Paul Geller
7200 W. Camino Real, Suite 203
Boca Raton, Florida 33433
(561) 750-3000
LAW OFFICES OF LAWRENCE G. SOICHER
Lawrence G. Soicher
300 Park Avenue, 20th Floor
New York, New York 10022
(212) 980-7000
LAW OFFICES OF JAMES V. BASHIAN
500 Fifth Avenue,
New York, New York 10110
(212) 921-4110
LAVELLE-STUBBERUD & ASSOCIATES
Eleissa C. Lavelle
Laura E. Stubberud
3016 West Charleston Boulevard, Suite 210
Las Vegas, Nevada 89102
(702) 822-2640
11
<PAGE> 13
Attorneys for Plaintiffs
Dated: January 7, 2000
IRELL & MANELLA LLP
David Siegel
Daniel P. Lefler
Richard H. Zelichov
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
(310) 277-1010
By: /s/ Daniel P. Lefler
------------------------------------
Daniel P. Lefler
SCHRECK MORRIS
Kristina Pickering, Nevada Bar No. 992
Denise Michaelides, Nevada Bar No. 5579
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
(702) 382-2101
Attorneys for Defendants Herbalife
International, Inc., Timothy Gerrity, Mark
Hughes, Alan D. Liker, Christopher Pair,
Michael E. Rosen and Robert Sandler
Dated: January 7, 2000
LATHAM & WATKINS
Peter J. Wilson
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
(714) 540-1235
By: /s/ Peter J. Wilson
-----------------------------------
Peter J. Wilson
JOLLEY, URGA, WIRTH & WOODBURY
William R. Urga, Nevada Bar No. 1195
3800 Howard Hughes Parkway, 16th Floor
Las Vegas, NV 89109
(702) 385-5161
Attorneys for Defendants Edward J. Hall and
Christopher M. Miner
12
<PAGE> 14
CERTIFICATE OF SERVICE
Pursuant to Nev. R. Civ. P. 5(b), I certify that I am an employee of
SCHRECK MORRIS, and that on this day I deposited for mailing in the U.S. Mail at
Las Vegas, Nevada, a true copy of the following enclosed in a sealed envelope
upon which first class postage was prepaid: STIPULATION OF SETTLEMENT
TO:
<TABLE>
<S> <C>
G. Mark Albright Gene Mesh
Albright, Stoddard, Warnick & Gene Mesh & Associates
Albright 2605 Burnet Avenue
801 S. Rancho Drive, Quail Park #D-4 Cincinnati, OH 45219
Las Vegas, NV 89106
Jeff Smith
Steven G. Schulman Wolf Haldenstein Adler
Samuel H. Rudman Freeman & Herz, Llp
Milberg Weiss Bershad 270 Madison Avenue
Hynes & Lerach LLP New York, NY 10016
One Pennsylvania Plaza
New York, NY 10119-0165 Brian Murray
Rabin & Peckel LLP
William S. Lerach 275 Madison Avenue
Randall S. Steinmeyer New York, NY 10016
Milberg Weiss Bershad
Hynes & Lerach LLP Paul Geller
600 West Broadway, Suite 1800 Shepherd & Geller, LLC
San Diego, CA 92101 7200 W. Camino Real, Suite 203
Boca Raton, FL 33433
James J. Serimarco
Abbey, Gardy & Squitieri, LLP Lawrence G. Soicher
595 Market Street, Suite 2500 Law Offices of Lawrence G. Soicher
San Francisco, CA 94105 300 Park Avenue, 20th Floor
New York, NY 10022
Richard B. Brualdi
Law Offices of Richard B. Brualdi Eleissa C. Lavelle
29 Broadway, Suite 1515 Laura E. Stubberud
New York, NY 10006 Lavelle-Stubberud & Associates
3016 West Charleston Blvd., Suite 210
Las Vegas, NV 89102
William R. Urga
Jolley, Urga, Wirth & Woodbury
3800 Howard Hughes Prkwy, 16th Flr
Las Vegas, NV 89109
Peter J. Wilson
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
</TABLE>
/s/ Linda Spates
------------------------------------
Linda Spates
13
<PAGE> 1
<TABLE>
<S> <C>
DISTRICT COURT
CLARK COUNTY, NEVADA
IN RE HERBALIFE INTERNATIONAL, ) Case No. A408158
INC. LITIGATION ) Dept. XVIII
)
This Document Relates to: )
All Actions )
)
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</TABLE>
NOTICE OF PENDENCY AND PROPOSED
-------------------------------
SETTLEMENT OF CLASS ACTION
--------------------------
TO: ALL PERSONS WHO OWN STOCK OF HERBALIFE INTERNATIONAL, INC. ("HERBALIFE") AND
ALL HOLDERS OF DECS SECURITIES ISSUED BY DECS TRUST III
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS MAY BE
AFFECTED BY PROCEEDINGS IN THIS LITIGATION. PLEASE NOTE THAT IF YOU ARE A
SETTLEMENT CLASS MEMBER AND IF THE TRANSACTION PROPOSED BY ENTITIES AFFILIATED
WITH MARK HUGHES IN AN OFFER TO PURCHASE CIRCULATED ON OR ABOUT SEPTEMBER 17,
1999, IS CONSUMMATED, IN ADDITION TO THE $17.00 PER SHARE TO BE RECEIVED BY
HERBALIFE'S SHAREHOLDERS IN THE PROPOSED TRANSACTION (AS WELL AS HOLDERS OF DECS
PURSUANT TO CONTRACTS AND ARRANGEMENTS ENTERED INTO BY DECS TRUST III) YOU ARE
ENTITLED TO RECEIVE AN ADDITIONAL PAYMENT OF $0.81 FOR EACH SHARE OF HERBALIFE
CLASS A AND CLASS B COMMON STOCK (OR UNIT OF DECS) THAT YOU OWN.
This Notice has been sent to you pursuant to an Order of the District
Court, Clark County, Nevada (the "Court"). The purpose of this Notice is to
inform you of (1) the proposed settlement of this class action litigation for
the payment of an additional $0.81 per share of Herbalife Class A and Class B
common stock (and for each unit of DECS) in the transaction proposed by Mark
Hughes on or about September 13, 1999 (the "Proposed Transaction"), and (2) the
hearing to be held by the Court to consider the fairness, reasonableness, and
adequacy of the settlement. This Notice describes the rights you may have in
connection with the settlement and what steps you may take in relation to the
settlement and this class action litigation.
Plaintiffs and Defendants do not agree on the damages per share that would
have been recoverable had Plaintiffs prevailed on each claim alleged. The issues
on which the Parties disagree include (1) whether the price offered in the
Proposed Transaction is fair to the public stockholders; (2) whether the
procedures followed by Herbalife's management, board of directors and the
Special Committee of the board of directors in negotiating, approving and
recommending the transaction to the public stockholders were fair; (3) whether
the projections in Herbalife's strategic business plan represent management's
best estimate of the future growth prospects of Herbalife; and (4) whether the
disclosures made to the Company's stockholders in connection with the Proposed
Transaction were adequate.
Plaintiffs believe that the proposed settlement is in the best interests of
the Settlement Class. In Plaintiffs' view, because of the inherent risks
associated with continuing to litigate and proceeding to trial, there was a
danger that Plaintiffs would not have prevailed on any of their claims, in which
case the Settlement Class would receive nothing beyond Mr. Hughes' offer of
$17.00 per Class A share, Class B share, and each unit of DECS. The proposed
settlement eliminates this risk and provides the Settlement Class with a
specific recovery in the event that the Proposed Transaction is consummated.
This Notice is not an expression of any opinion by the Court about the
merits of any of the claims or defenses asserted by any party in this Litigation
or the fairness or adequacy of the proposed settlement.
<PAGE> 2
For further information regarding this settlement you may contact: Robert
A. Wallner, Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza,
New York, New York 10119, Telephone:
212/594-5300; or Stephen J. Fearon, Jr., Abbey, Gardy & Squitieri, LLP, 212 East
39th Street, New York, New York 10016, Telephone: 212/889-3700.
I. NOTICE OF HEARING ON PROPOSED SETTLEMENT
A settlement hearing will be held on February 9, 2000, at 8:00 a.m., before
the Honorable Nancy M. Saitta, District Court Judge for the State of Nevada, at
the District Court, Clark County, Nevada, 200 South Third Street, Las Vegas,
Nevada 89101 (the "Settlement Hearing"). The purpose of the Settlement Hearing
will be to determine: (1) whether terms of the settlement, including the payment
of an additional $0.81 for each share of Herbalife Class A and Class B common
stock and for each unit of DECS in the Proposed Transaction, and payment of
attorneys' fees, costs and expenses should be approved as fair, just, reasonable
and adequate; (2) whether a Settlement Class should be certified; and (3)
whether the Class Action should be dismissed with prejudice. The Court may
adjourn or continue the Settlement Hearing without further notice to the
Settlement Class.
II. DEFINITIONS USED IN THIS NOTICE
A. "Closing" shall have the meaning given in the Merger Agreement.(1)
B. "Company" or "Herbalife" means defendant Herbalife International, Inc.,
a Nevada corporation, and all of its predecessors, successors, present and
former parents, subsidiaries, divisions and related or affiliated entities.
C. "DECS" means the DECS securities issued by DECS Trust III, a Delaware
business trust, pursuant to an underwritten registered offering in 1998.
D. "Defendants" means Herbalife, Mark Hughes, Michael E. Rosen, Christopher
Pair, Edward J. Hall, Christopher M. Miner, Alan D. Liker, Timothy Gerrity and
Robert Sandler.
E. "Depositary" shall have the meaning given in the Offer to Purchase.
F. "Effective Date" means the first date by which all of the events and
conditions specified in Section V, para. 6.1(a)-(e) of the Stipulation have been
met and have occurred.
G. "Expiration Date" shall have the meaning given in the Offer to Purchase.
H. "Final" means: (i) The date of final affirmance on an appeal from the
Judgment, the expiration of the time for a petition for a writ of certiorari to
review the Judgment and, if certiorari be granted, the date of final affirmance
of the Judgment following review pursuant to that grant; or (ii) the date of
final dismissal of any appeal from the Judgment or the final dismissal of any
proceeding on certiorari to review the Judgment; or (iii) if no appeal is filed,
the expiration date of the time for the filing or noticing of any appeal from
the Court's judgment approving the Stipulation.
I. "Individual Defendants" means Mark Hughes, Michael E. Rosen, Christopher
Pair, Edward J. Hall, Christopher M. Miner, Alan D. Liker, Timothy Gerrity and
Robert Sandler.
J. "Judgment" means the judgment to be rendered by the Court dismissing the
Class Action with prejudice.
K. "Merger" shall have the meaning given in the Merger Agreement.
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(1)The Merger Agreement is included as Annex A to the Offer to Purchase, which
was transmitted to shareholders on or about September 17, 1999. In addition, the
text of the Offer to Purchase is contained in the Tender Offer Statement on
Schedule 14D-1 filed by the Company with the United States Securities and
Exchange Commission ("SEC") on or about September 17, 1999. The text of this
document may reviewed on the internet web site maintained by the SEC at
http//www.sec.gov.
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<PAGE> 3
L. "Merger Agreement" shall mean the Agreement and Plan of Merger dated
September 13, 1999, among MH Millennium Holdings LLC, MH Millennium Acquisition
Corp., Mark Hughes, the Mark Hughes Family Trust and Herbalife International,
Inc.
M. "Merger Consideration" shall have the meaning given in the Offer to
Purchase.
N. "Offer Price" shall have the meaning given in the Offer to Purchase.
O. "Offer to Purchase" shall mean the Offer to Purchase for Cash All
Outstanding Shares of Class A Common Stock and Class B Common Stock of Herbalife
International, Inc. by MH Millennium Acquisition Corp., a wholly owned
subsidiary of MH Millennium Holdings LLC for $17.00 Net Per Share dated
September 17, 1999, as amended.
P. "Parties" means, collectively, each of the Defendants and the
Representative Plaintiffs on behalf of themselves and the members of the
Settlement Class.
Q. "Paying Agent" shall have the meaning given in the Merger Agreement.
R. "Person" means an individual, corporation (including all divisions and
subsidiaries), partnership, limited partnership, association, joint stock
company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or
legal entity and their spouses, heirs, predecessors, successors,
representatives, or assigns.
S. "Plaintiffs' Settlement Counsel" means: Milberg Weiss Bershad Hynes &
Lerach LLP, Robert A. Wallner, One Pennsylvania Plaza, New York, New York 10119,
Telephone: 212/594-5300; Abbey, Gardy & Squitieri, LLP, Stephen J. Fearon, Jr.,
212 East 39th Street, New York, New York 10016, Telephone: 212/889-3700.
T. "Purchaser" shall have the meaning given in the Offer to Purchase.
U. "Related Parties" means each of a Defendant's past or present directors,
officers, employees, partners, principals, agents, underwriters, insurers,
co-insurers, reinsurers, controlling shareholders, any entity in which the
Defendant and/or any member(s) of any Defendant's immediate family has or have a
controlling interest, attorneys, accountants, auditors, banks, investment banks
or investment bankers, advisors, personal or legal representatives, insurers,
reinsurers, predecessors, successors, parents, subsidiaries, divisions, joint
ventures, assigns, spouses, heirs, associates, related or affiliated entities,
any members of their immediate families, or any trust of which any Defendant is
the trustee or settlor or which is for the benefit of any Defendant and/or
member(s) of his family.
V. "Released Claims" shall collectively mean all claims (including "Unknown
Claims" as defined in para. II.CC hereof), demands, rights, liabilities and
causes of action of every nature and description whatsoever, known or unknown,
whether in contract, tort, equity or otherwise, whether or not concealed or
hidden, asserted or that might have been asserted in this or any other forum or
proceeding, including, without limitation, claims for negligence, gross
negligence, indemnification, breach of duty of care and/or breach of duty of
loyalty, fraud, misrepresentation, breach of fiduciary duty, negligent
misrepresentation, unfair competition, insider trading, professional negligence,
mismanagement, corporate waste, breach of contract, or violations of any state
or federal statutes, rules or regulations, by or on behalf of the Representative
Plaintiffs, the Settlement Class, or any Settlement Class Member against the
Released Persons (as defined below) which are based upon or related to the
Proposed Transaction or to the facts, transactions, events, occurrences, acts,
disclosures, statements, omissions or failures to act which were or could have
been alleged in the Litigation, or in any other forum, based upon, relating to
or arising from the facts which were alleged in any papers filed in the
Litigation except (i) dissenters' rights under state law by Settlement Class
Members who have validly asserted and perfected dissenters' rights claims, and
(ii) claims relating to the enforcement of the Stipulation.
W. "Released Persons" means each and all of the Defendants and their
respective Related Parties.
X. "Representative Plaintiffs" means Colleen M. Tharp, Francis MacFarlan,
Patricia Lisa, Harbor Finance Partners, Stuart H. Savett, Kevin Coyle, Kenneth
Schweitzer, Rae Ellen Plattus, Lee Brenin, Michael Vaupel, and John Hedderman.
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<PAGE> 4
Y. "Representative Plaintiffs Counsel" means each counsel who has appeared
as counsel for any of the plaintiffs in the Litigation.
Z. "Settlement Class" means all Persons (except Defendants, members of the
immediate family of any Defendant, any entity in which any Defendant has a
controlling ownership interest, Herbalife employees who have been awarded stock
options pursuant to the Company's stock option plan (in their capacity as
holders of such stock options), and the legal representatives, heirs, successors
or assigns of any such excluded party) who own Herbalife stock that is purchased
in the Proposed Transaction, or who exercise dissenters' rights, and all holders
of DECS securities issued by DECS Trust III, a Delaware business trust, as of
the date of the Closing.
AA. "Settlement Class Member" or "Member of the Settlement Class" means a
Person who falls within the definition of the Settlement Class as set forth in
para. II.Z, above.
BB. "Tender Offer" shall mean the tender offer contained in the Offer to
Purchase.
CC. "Unknown Claims" means any Released Claims which the Representative
Plaintiffs or any Settlement Class Member does not know or suspect to exist in
his, her or its favor at the time of the release of the Released Persons which,
if known by him, her or it, might have affected his, her or its settlement with
and release of the Released Persons, or might have affected his, her or its
decision not to object to this settlement or to exercise dissenters' rights.
With respect to any and all Released Claims, the Parties stipulate and agree
that, upon the Effective Date, the Representative Plaintiffs expressly waive and
relinquish, and the Settlement Class Members shall be deemed to have, and by
operation of the Judgment shall have expressly waived and relinquished, to the
fullest extent permitted by law, the provisions, rights, and benefits of Section
1542 of the California Civil Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
The Representative Plaintiffs expressly waive and the Settlement Class
Members shall be deemed to, and upon the Effective Date and by operation of the
Judgment shall have waived any and all provisions, rights and benefits conferred
by any law of the United States or of any state or territory of the United
States, or principle of common law, which is similar, comparable or equivalent
to Section 1542 of the California Civil Code. The Representative Plaintiffs and
the Settlement Class Members may hereafter discover facts in addition to or
different from those which he, she or it now knows or believes to be true with
respect to the subject matter of the Released Claims, but each of them hereby
stipulate and agree that the Representative Plaintiffs do settle and release,
and each Settlement Class Member shall be deemed to, upon the Effective Date and
by operation of the Judgment shall have, fully, finally, and forever settled and
released any and all Released Claims upon any theory of law or equity, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or not
concealed or hidden, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or
additional facts. The Parties acknowledge that the foregoing waiver was
bargained for and a key element of the settlement of which this release is a
part.
III. THE CLASS ACTION AND RELATED LITIGATION
On September 14, 15, and 22, 1999, the plaintiffs filed four separate but
related class action lawsuits in the District Court, Clark County, Nevada
challenging a proposed transaction that was publicly announced on September 13,
1999, pursuant to which Mark Hughes (through entities controlled by him) was to
purchase all publicly held shares of Herbalife International, Inc. ("Herbalife"
or the "Company") for $17.00 in cash per share (the "Proposed Transaction"). The
four lawsuits were (1) Tharp, et al. v. Herbalife International, Inc., et al.,
Case No. A 408158; (2) MacFarlan, et al. v. Herbalife International, Inc., et
al., Case No. A 408159; (3) Fruscone, et al. v. Herbalife International, Inc.,
et al., Case No. A 408478; and (4) Coyle, et al. v. Herbalife International,
Inc., et al., Case No. 408466. Pursuant to a stipulation of the parties that was
entered by the Court as Pre-Trial Order No. 1 on or about October 6, 1999, the
lawsuits were consolidated, and the
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<PAGE> 5
plaintiffs filed a consolidated complaint (the "Complaint") on or about October
11, 1999, under the caption In re: Herbalife International, Inc., Litigation,
Case No. A 408158 (the "Class Action").(2)
The Class Action is brought on behalf of the public stockholders of
Herbalife and the holders of DECS securities relating to Herbalife that were
issued by DECS Trust III, a Delaware business trust, in March 1998. The
Complaint alleges breach of fiduciary duty by certain Company executives for
pursuing, and by the Company's board of directors for approving, the Proposed
Transaction. Named as defendants in the Class Action are Herbalife, Mark Hughes,
Michael E. Rosen, Christopher Pair, Edward J. Hall, Christopher M. Miner, Alan
D. Liker, Timothy Gerrity and Robert Sandler.
The Complaint alleges, among other things, that the price to be paid to
Herbalife's public stockholders in the Proposed Transaction is inadequate. Under
the terms of the Proposed Transaction, Mark Hughes (through entities controlled
by him) would acquire all of the Herbalife shares not already owned by him or
his affiliated entities at $17.00 per share in cash, and thereby become the sole
owner of the Company. Herbalife has two classes of common stock, Class A stock
and Class B stock. Mr. Hughes currently owns over 50% of both classes:
approximately 54% of the Class A stock and 58% of the Class B stock. On
September 13, 1999, the Company announced the Proposed Transaction, pursuant to
which Mr. Hughes (through entities controlled by him) has made a tender offer
for all Herbalife shares owned by the public at a price of $17.00 per share in
cash, to be followed by a merger transaction, in which the stockholders (other
than those who properly exercise state law dissenters' rights) who do not tender
will receive $17.00 per share in cash in exchange for their shares. The Proposed
Transaction is conditioned on over 50% of the public holders of both the Class A
and Class B stock tendering their shares in the tender offer. Additionally,
pursuant to the Proposed Transaction Mr. Hughes would pay to DECS Trust III
approximately $89 million to release approximately 5 million Class B Herbalife
shares pledged to DECS Trust III for the benefit of DECS holders.
The Complaint alleges that the Proposed Transaction is unfair to
Herbalife's public stockholders. Plaintiffs allege that the transaction was
timed to unfairly take advantage of the fact that the Company's stock price had
been adversely affected by global economic trends. Plaintiffs further allege
that the committee of directors (the "Special Committee") that was formed by
Herbalife's board of directors to negotiate the terms of the Proposed
Transaction with Mr. Hughes was not independent. Additionally, plaintiffs allege
that the projections of the Company's future financial performance that were
provided to the Special Committee were unduly conservative. Plaintiffs further
allege that the fairness opinion rendered by the Special Committee's financial
advisor is illusory because the opinion is based in part on Herbalife's
projections. Additionally, plaintiffs allege that defendants failed to disclose
to the Company's public stockholders: (1) that the projections provided to the
Special Committee were unduly conservative; (2) that the Company plans to
conduct an initial public offering of its Japanese subsidiary in the near
future; and (3) that an outside firm had expressed interest in pursuing a
different transaction in which the Company's public stockholders would be bought
out. Plaintiffs further allege that the defendants have engaged in self-dealing
in that the exercise price of certain stock options was lowered to prevailing
market prices in late 1998, which had the effect of increasing the value of
their stock options in the Proposed Transaction.
Representative Plaintiffs Counsel has conducted discovery and investigation
during the prosecution of the Litigation. This discovery and investigation has
included, inter alia, (i) service of expedited discovery requests, and review
and inspection of voluminous documents produced by Defendants in response
thereto; (ii) the expedited depositions of the Chairman of the Special
Committee, Mr. Hughes, two members of Herbalife's senior management, Mr. Hughes'
financial advisor, and the Special Committee's financial advisor; (iii) service
of subpoenas on non-parties, and review of documents produced in response
thereto; (iv) consultations with a valuation expert; (v) review of Herbalife's
public filings, annual reports, and other public statements; and (vi) research
of the applicable law with respect to the claims asserted in the Litigation and
the potential defenses thereto.
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(2)In addition to the four lawsuits that were filed in the District Court,
Clark County, Nevada, eight class action lawsuits were filed in Los Angeles
County Superior Court challenging the Proposed Transaction (the "California
Actions"). By stipulation of the parties to those actions, all California
proceedings have been stayed pending the outcome of the Class Action. The Class
Action and the California lawsuits are referred to collectively herein as the
"Litigation."
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<PAGE> 6
On October 6, 1999, the Court entered Pre-Trial Order No. 1. Pursuant to
that Order, as amended, the parties engaged in expedited discovery that included
Defendants' production of documents, and the depositions in October 1999 of the
Chairman of the Special Committee, the Special Committee's financial advisor,
and two members of Herbalife's senior management. Additionally, in November
1999, plaintiffs took the depositions of Mr. Hughes and of his financial
advisor.
On December 7, 1999, plaintiffs filed their Motion for Preliminary
Injunction and supporting papers seeking an order from this Court enjoining the
Proposed Transaction. The parties have agreed to take the hearing on the Motion
for Preliminary Injunction off calendar in light of the proposed settlement.
IV. REASONS FOR SETTLEMENT
The Representative Plaintiffs believe that the claims asserted in the Class
Action have merit and that the evidence developed to date in the Class Action
supports the claims asserted. The Representative Plaintiffs assert, and believe
they would present supporting evidence at trial, that the Proposed Transaction
is unfair to Herbalife's public stockholders.
However, Representative Plaintiffs Counsel recognize and acknowledge the
expense and length of continued proceedings necessary to prosecute the Class
Action against the Defendants through trial and through appeals. Representative
Plaintiffs Counsel also have taken into account the uncertain outcome and the
risk of any litigation, especially in complex actions such as the Litigation, as
well as the difficulties and delays inherent in such litigation. Representative
Plaintiffs Counsel also are mindful of the inherent problems of proof under and
possible defenses to the claims asserted in the litigation.
In light of the foregoing, Representative Plaintiffs Counsel believe that
the settlement set forth in the Stipulation confers substantial benefits upon
the Settlement Class (as defined below) and Settlement Class Members. As
described below, Defendants have agreed to pay an additional $0.81 per share to
Herbalife's public shareholders (and the holders of the DECS securities). Based
on the Settlement Class Members owning approximately 17.36 million Herbalife
shares (including DECS), the $0.81 additional payment represents benefit to the
Settlement Class Members of over $14 million. The Individual Defendants will not
receive this additional payment, nor will other Herbalife employees with respect
to their stock options. Defendants have also agreed to request an opinion by the
Special Committee's independent financial advisor that the consideration to be
received by the Company's public shareholders is fair, from a financial point of
view. Furthermore, although the period for Herbalife shareholders to exercise
dissenters' rights expired on October 25, 1999, Defendants have agreed to reopen
the period for the exercise of dissenters' rights until January 28, 2000, the
current expiration date for the tender offer. If the tender offer is extended,
the deadline for the exercise of dissenters' rights will be similarly extended,
but in no event later than February 14, 2000. The settlement further protects
the interests of Herbalife's public shareholders because Defendants, who have
stated that the Company has no current plans to conduct an initial public
offering of its Japanese subsidiary, have agreed to share the proceeds of any
such offering with the Company's current shareholders should one occur on or
before July 6, 2001. Additionally, Defendants have agreed to supplement their
disclosures concerning certain discussions that occurred with the firm of
Saunders, Karp & Megrue in 1998 and 1999, and concerning the Company's
projections of future earnings and how the Company's 1999 projections compare
with actual results, so that Herbalife shareholders will be better informed in
deciding whether to tender their shares in the tender offer. Based on their
evaluation, Representative Plaintiffs Counsel have determined that the
settlement set forth in the Stipulation is in the best interests of the
Representative Plaintiffs and the Settlement Class.
V. DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY
The Defendants have denied and continue to deny each and all of the claims
and contentions alleged by the Representative Plaintiffs on behalf of the
Settlement Class. The Defendants have also denied and continue to deny, inter
alia, the allegation that the price to be paid in the Proposed Transaction is
unfair to Herbalife's public stockholders, or that the Representative Plaintiffs
or the Settlement Class were harmed by the conduct alleged in the Litigation.
Defendants believe that they followed the proper procedures in negotiating the
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<PAGE> 7
Proposed Transaction, and that the Proposed Transaction is entirely fair to the
Representative Plaintiffs and the Settlement Class.
Nonetheless, the Defendants have concluded that further conduct of the
Litigation would be protracted and expensive, and that it is desirable that the
Litigation be fully and finally settled in the manner and upon the terms and
conditions set forth in the Stipulation in order to limit further expense,
inconvenience and distraction, to dispose of the burden of protracted
litigation, to permit the operation of the Company's business without further
distraction and diversion of the Company's executive personnel with respect to
matters at issue in this Litigation, and to allow the Proposed Transaction to go
forward as modified by the Stipulation in order that the Company's public
stockholders may have the opportunity to choose whether to accept Mr. Hughes'
tender offer. The Defendants also have taken into account the uncertainty and
risks inherent in any litigation, especially in complex cases like this
Litigation.
The Defendants have, therefore, determined that it is desirable and
beneficial to them that the Litigation be settled in the manner and upon the
terms and conditions set forth in the Stipulation. The Defendants enter into the
Stipulation and settlement without in any way acknowledging any fault,
liability, or wrongdoing of any kind. There has been no adverse determination by
any court or otherwise against any of the Defendants on the merits of the claims
asserted by the Representative Plaintiffs. Neither the Stipulation, nor any of
its terms or provisions, nor any of the negotiations or proceedings connected
with it, shall be construed as an admission or concession by any of the
Defendants of the merit or truth of any of the allegations or wrongdoing of any
kind on the part of any of the Defendants. The Defendants enter into the
Stipulation and settlement based upon, among other things, the parties'
agreement herein that, to the fullest extent permitted by law, neither the
Stipulation nor any of its terms or provisions, nor any of the negotiations or
proceedings connected therewith, shall be offered as evidence in the Litigation
or in any pending or future civil, criminal, or administrative action or other
proceeding to establish any liability or admission by any of the Defendants or
any of their respective Related Entities or any other matter adverse to any of
the Defendants or any of their respective Related Entities, except as expressly
set forth herein.
VI. TERMS OF THE PROPOSED SETTLEMENT
A. Price Increase
In addition to the $17.00 per share to be received in the Proposed
Transaction, the Purchaser has agreed in the Stipulation to cause the Settlement
Class (except for holders of Herbalife Class A or Class B common stock who have
provided or subsequently provide the Company with written notice asserting
dissenters' rights) to receive a payment of $0.81 for each Class A or Class B
share or DECS security (the "Settlement Payment") as follows:
(1) If the Judgment becomes Final before the Expiration Date of the
Tender Offer, the Settlement Payment shall be made (a) to any Settlement
Class Members whose Herbalife shares have been accepted for payment in the
Tender Offer, simultaneously with the payment of the Offer Price by
delivery of the Settlement Payment to the Depositary for transmission to
the tendering Settlement Class Members; (b) to any other Member of the
Settlement Class (other than holders seeking to perfect dissenters' rights,
unless and until dissenters' rights have been waived or relinquished),
except as provided in clause (c) following, simultaneously with the payment
of the Merger Consideration by delivery of the Settlement Payment to the
Paying Agent for transmission to such Settlement Class Members whose shares
are cancelled in the Merger; and (c) to the Settlement Class Members with
respect to their holdings of DECS, by delivery of the Settlement Payment to
the trustee of DECS Trust III for transmission to such Settlement Class
Members in accordance with the terms of the trust governing DECS Trust III;
(2) If the Judgment becomes Final after the Expiration Date of the
Tender Offer, but before the Closing of the Merger, the Settlement Payment
shall be made to all Settlement Class Members (other than holders seeking
to perfect dissenters' rights unless and until dissenters' rights have been
waived or relinquished) at the same time as the Merger Consideration is
paid to members of the Settlement Class who did not tender their Herbalife
shares in the Tender Offer by delivery of the Settlement Payment
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<PAGE> 8
(a) in the case of Settlement Class Members whose Herbalife shares were
accepted for payment in the Tender Offer, to the Depositary, which shall be
instructed to make a supplemental payment, in the amount of the Settlement
Payment, to such Settlement Class Members; (b) in the case of any other
Settlement Class Member (other than holders seeking to perfect dissenters'
rights unless and until dissenters' rights have been waived or
relinquished), except as provided in clause (c) following, to the Paying
Agent for transmission to such Settlement Class Members whose shares are
cancelled in the Merger; and (c) to the Settlement Class Members with
respect to their holdings of DECS, to the trustee of DECS Trust III for
transmission to such Settlement Class Members in accordance with the terms
of the trust governing DECS Trust III;
(3) If the Judgment becomes Final after the Closing of the Merger, the
Settlement Payment shall be made to all Settlement Class Members (other
than holders seeking to perfect dissenters' rights unless and until
dissenters' rights have been waived or relinquished) within 10 business
days of the date upon which the Judgment becomes Final by delivery of the
Settlement Payment (a) in the case of Settlement Class Members whose
Herbalife shares were accepted for payment in the Tender Offer, to the
Depositary, which shall be instructed to make a supplemental payment, in
the amount of the Settlement Payment, to such Settlement Class Members; (b)
in the case of any other Settlement Class Member (other than holders
seeking to perfect dissenters' rights unless and until dissenters' rights
have been waived or relinquished), except as provided in clause (c)
following, to the Paying Agent, which shall be instructed to make a
supplemental payment, in the amount of the Settlement Payment, to such
Settlement Class Members; and (c) to the Settlement Class Members with
respect to their holdings of DECS, to the trustee of DECS Trust III for
transmission to such Settlement Class Members in accordance with the terms
of the trust governing DECS Trust III.
B. Bringdown Of Fairness Opinion By The Special Committee's Independent
Financial Advisor
Defendants have obtained an opinion from the Special Committee's financial
advisor that $17.00 per share is fair, from a financial point of view, to the
stockholders of Herbalife as of September 13, 1999.
Defendants have agreed in the Stipulation to request an opinion from the
Special Committee's independent financial advisor that $17.00 per share, plus
the Settlement Payment of $0.81 per share, for total compensation of $17.81 per
share, is fair, from a financial point of view, to the public stockholders of
Herbalife.
C. Reopening And Modification Of Appraisal Rights
Although Nevada law did not require Herbalife to provide stockholders with
dissenters' rights in connection with the Merger, the Company agreed in the
Merger Agreement to grant stockholders the right to dissent from the Merger by
delivery of a written notice to the Company prior to October 25, 1999. The
Merger Agreement further provides that if dissenters' rights are exercised with
respect to more than 3% of the Company's outstanding stock, then the Purchaser
may cancel the Proposed Transaction.
Defendants have agreed in the Stipulation to reopen the period for the
exercise of dissenters rights until January 28, 2000, the current expiration
date for the tender offer. If the tender offer is extended, the deadline for the
exercise of dissenters' rights will be similarly extended, but in no event later
than February 14, 2000. Additionally, Defendants agree that the Purchaser may
cancel the Proposed Transaction only if dissenters' rights are exercised with
respect to more than 5% of the Company's outstanding stock.
D. Initial Public Offering Of Herbalife Of Japan
Defendants have stated that Herbalife has no current intention to conduct
an initial public offering ("IPO") of Herbalife of Japan. Plaintiffs have
questioned this statement.
Defendants have agreed in the Stipulation that if an IPO of Herbalife of
Japan is completed on or before July 6, 2001, Herbalife shall pay to the
Settlement Class for distribution in accordance with their Herbalife holdings as
of the time of the purchase of their services pursuant to the Proposed
Transaction, the greater of $15 million or 20% of the net proceeds of the IPO
within 30 days of the closing of the IPO.
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E. Disclosure Issues
Plaintiffs have asserted that Defendants have failed to make adequate
disclosure concerning (a) discussions held with the firm of Saunders, Karp &
Megrue concerning a possible transaction; and (b) the Company's projections of
future financial results and how Herbalife's actual results for 1999 compare
with its projected 1999 results. Defendants have agreed in the Stipulation to
revise the Offer to Purchase to contain additional disclosure on these issues,
and to recirculate the Offer to Purchase to the Settlement Class.
F. Payment of Notice Costs
Herbalife has agreed in the Stipulation to pay the costs of providing
notice of the terms of this settlement to the Settlement Class Members.
G. Fees Of Representative Plaintiffs Counsel
Herbalife has agreed in the Stipulation to pay the sum of $8.5 million to
Representative Plaintiffs Counsel as payment for attorneys' fees, expenses and
costs (the "Fee and Expense Payment") incurred in the Litigation, plus interest.
Payment of the Fee and Expense Payment is contingent on the Closing of the
Merger.
To date, Representative Plaintiffs Counsel have not received any payment
for their services in conducting this Litigation on behalf of Representative
Plaintiffs and the members of the class, nor have counsel been reimbursed for
their out-of-pocket expenses. The fee requested by Representative Plaintiffs
Counsel would compensate counsel for their efforts in achieving the Settlement
Payment and the other benefits to be received by the class in the settlement,
and for their risk in undertaking this representation on a contingency basis.
VII. ORDER CERTIFYING A CLASS FOR PURPOSES OF SETTLEMENT
On January 7, 2000, the Court certified a class, for settlement purposes
only. The Settlement Class is defined above.
VIII. PARTICIPATION IN THE CLASS
If you fall within the definition of the Settlement Class, you are a
Settlement Class Member. You will be bound by any judgment entered in the Class
Action, including the dismissal with prejudice of any Released Claims against
the Defendants you may possess under Federal law, Nevada law, or the law of any
state. Your interests will be represented by Representative Plaintiffs Counsel.
If you choose, you may enter an appearance individually or through your own
counsel at your own expense.
IX. DISMISSAL AND RELEASES
If the proposed Settlement is approved, the Court will enter a Final
Judgment and Order of Dismissal ("Judgment"). The Judgment will dismiss the
Released Claims with prejudice as to all Defendants. Thereafter, the Class
Action will be dismissed.
The Judgment will provide that all Settlement Class Members shall be deemed
to have released and forever discharged all Released Claims (to the extent
members of the Settlement Class have such claims) against all Released Persons.
X. CONDITIONS FOR SETTLEMENT
The Settlement is conditioned upon the occurrence of certain events. Those
events include, among other things: (1) entry of the Judgment by the Court, as
provided for in the Stipulation; and (2) the Judgment becoming Final. If, for
any reason, any one of the conditions described in the Stipulation is not met,
the Stipulation might be terminated and, if terminated, will become null and
void, and the parties to the Stipulation will be restored to their respective
positions as of the date of execution of the Stipulation.
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<PAGE> 10
XI. THE RIGHT TO BE HEARD AT THE HEARING
Any Settlement Class Member who objects to any aspect of the Settlement or
the adequacy of representation by Representative Plaintiffs Counsel may appear
and be heard at the Settlement Hearing. Any such Person must submit a written
notice of objection, postmarked on or before February 3, 2000, to each of the
following:
Clerk of the Court
District Court
Clark County, Nevada
200 South Third Street
Las Vegas, Nevada 89101
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
Robert A. Wallner
One Pennsylvania Plaza
New York, New York 10119
ABBEY, GARDY & SQUITIERI LLP
Stephen J. Fearon, Jr.
212 East 39th Street
New York, New York 10016
Plaintiffs' Settlement Counsel
IRELL & MANELLA LLP
David Siegel
Daniel P. Lefler
Richard H. Zelichov
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Attorneys for Defendants
Herbalife International, Inc., Mark Hughes, Michael E. Rosen, Christopher
Pair, Alan D. Liker, Timothy Gerrity and Robert Sandler
LATHAM & WATKINS
H. Steven Wilson
Peter J. Wilson
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626-1918
Attorneys for Defendants
Edward J. Hall and Christopher M. Miner
The notice of objection must demonstrate the objecting Person's membership in
the Settlement Class, including the number of Herbalife Class A shares and Class
B shares and units of DECS owned, and contain a statement of the reasons for
objection. Only members of the Settlement Class who have submitted written
notices of objection in this manner will be entitled to be heard at the
Settlement Hearing, unless the Court orders otherwise.
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<PAGE> 11
XII. SPECIAL NOTICE TO NOMINEES
If you hold any Herbalife common stock as nominee for a beneficial owner,
then, within five (5) days after you receive this Notice, you must either: (1)
send a copy of this Notice by first class mail to all such Persons; or (2)
provide a list of the names and addresses of such Persons to:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
If you choose to mail the Notice yourself, you may obtain from the foregoing
(without cost to you) as many additional copies of these documents as you will
need to complete the mailing. You may obtain these copies by calling D.F. King &
Co., Inc. collect at (212) 269-5550.
Regardless of whether you choose to complete the mailing yourself or elect
to have the mailing performed for you, you may obtain reimbursement for or
advancement of reasonable administrative costs actually incurred in connection
with forwarding the Notice and which would not have been incurred but for the
obligation to forward the Notice, upon submission of appropriate documentation.
XIII. EXAMINATION OF PAPERS
This Notice is a summary and does not describe all of the details of the
Stipulation. For full details of the matters discussed in this Notice, you may
desire to review the Stipulation filed with the Court, which may be inspected
during business hours, at the office of the Clerk of the Court, District Court,
Clark County, Nevada, 200 South Third Street, Las Vegas, Nevada 89101.
If you have any questions about the settlement of the Litigation, you may
contact Representative Plaintiffs Counsel by writing:
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
Robert A. Wallner
One Pennsylvania Plaza
New York, New York 10119
ABBEY, GARDY & SQUITIERI LLP
Stephen J. Fearon, Jr.
212 East 39th Street
New York, New York 10016
DO NOT TELEPHONE THE COURT OR ANY
REPRESENTATIVE OF HERBALIFE REGARDING THIS NOTICE.
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