Exhibit 9.1
SHAREHOLDERS' AGREEMENT
AGREEMENT (this "AGREEMENT"), dated as of July 31, 2002, by
and among WH HOLDINGS (CAYMAN ISLANDS) LTD. (the "COMPANY"), a Cayman Islands
company, WHITNEY V, L.P., a Delaware limited partnership, WHITNEY STRATEGIC
PARTNERS V, L.P., a Delaware limited partnership, and WH INVESTMENTS LTD., a
Cayman Islands company (together, "WHITNEY V"), and CCG INVESTMENTS (BVI), L.P.,
a British Virgin Islands limited partnership, CCG ASSOCIATES-QP, LLC, a Delaware
limited liability company, CCG ASSOCIATES-AI, LLC, a Delaware limited liability
company, CCG INVESTMENT FUND-AI, LP, a Delaware limited partnership, CCG AV, LLC
- - SERIES C, a Delaware limited liability company and CCG AV, LLC - SERIES E, a
Delaware limited liability company (collectively, "GOLDEN GATE FUND"), and
certain other persons who may, from time to time, become party to this
Agreement. The parties above are sometimes hereinafter collectively referred to
as the "SHAREHOLDERS" and each individually as a "SHAREHOLDER."
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Share Purchase Agreement
(the "PURCHASE AGREEMENT"), dated as of the date hereof, by and among the
Company, Whitney V and Golden Gate Fund, (A) Whitney V will purchase from the
Company certain 12% Series A Cumulative Convertible Preferred Shares, $0.001 par
value per share, of the Company (the "PREFERRED SHARES") and (B) Golden Gate
Fund will purchase from the Company certain Preferred Shares;
WHEREAS, pursuant to the terms of the subscription agreements
(the "SUBSCRIPTION AGREEMENTS") between the Company and the Other Shareholders,
the Other Shareholders will purchase from the Company certain Preferred Shares;
WHEREAS, as a condition precedent to consummation of the
transactions in the Purchase Agreement and the Subscription Agreements, the
Shareholders are required to duly execute and deliver this Agreement; and
WHEREAS, the Shareholders believe that it is in the best
interests of the Company and the Shareholders that provision be made for the
continuity and stability of the business and policies of the Company, and,
accordingly, desire to make certain arrangements among themselves with respect
to the election of directors of the Company and with respect to certain other
matters.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and obligations hereinafter set forth, the parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following respective meanings, and all capitalized terms used herein which
are not otherwise defined shall have the meaning assigned thereto in the
Purchase Agreement:
(a) "AFFILIATE" shall mean any Person who or which, directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, any specified Person and shall include the
partners, members or shareholders of such Person for the purposes of any
distribution of Shares by an Institutional Shareholder.
(b) "ARTICLES OF ASSOCIATION" shall mean the Amended and
Restated Memorandum and Articles of Association of the Company, as amended, as
in effect from time to time.
(c) "BONA FIDE PURCHASER" shall mean any Person (other than a
Disposing Shareholder's Affiliates) who or which has delivered a good faith
written offer to purchase all or any portion of such Shareholder's Shares.
(d) "COMMON SHARES" shall mean, collectively, the common
shares, $0.001 par value per share, of the Company and any class or series of
common shares of the Company authorized after the date hereof, or any other
class or series of shares resulting from successive changes or reclassifications
of any class or series of common shares of the Company.
(e) "COMPETITIVE POSITION" shall mean serving in a senior
management capacity, as an employee, consultant, advisor or otherwise, for any
Person that engages in the business of selling products through a multi-level
marketing system or the sale of weight management products, nutritional
supplements or personal care products anywhere in the United States or any other
country in which Herbalife International, Inc. or one of its Subsidiaries
operates.
(f) "CONFIDENTIAL INFORMATION" shall mean information of a
confidential nature created, discovered, prepared or otherwise developed by the
Company or any of its Subsidiaries, which is generally unavailable to the public
and has actual or potential economic value in the business in which the Company
or any of its Subsidiaries is engaged. Such Confidential Information includes,
but is not limited to, customer and supplier lists, pricing, marketing and sales
strategies, employee and consultant rosters and other business or financial
information developed by or disclosed to the Company or any of its Subsidiaries,
which has actual or potential economic value to the Company or any of its
Subsidiaries and which is generally unavailable to the public.
(g) "COST" of a Share shall mean the U.S. dollar amount paid
by a Shareholder for such Share.
(h) "CURRENT MARKET PRICE" shall mean, with respect to each
equity security, on any date, the average of the daily closing prices per equity
security for the 10 consecutive trading days commencing immediately prior to any
date of determination. If on any such date such equity security is not listed or
admitted for trading on any national securities exchange or quoted on NASDAQ or
a similar service, the Current Market Price for such equity security shall be
the fair market value of such equity security on such date as determined in good
faith by the Board of Directors of the Company and shall be the value which is
agreed upon by at least 66% of the members thereof, or if such percentage of the
members of the Board of Directors of the
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Company are unable to agree upon the value of such consideration, the value
thereof shall be determined by an independent investment bank of a nationally
recognized stature that is agreed upon by not less than 66% of the members of
the Board of Directors of the Company.
(i) "DISPOSE" or "DISPOSITION" (and any derivatives thereof)
shall mean (i) a voluntary or involuntary sale, assignment, mortgage, grant,
pledge, hypothecation, exchange, transfer, conveyance or other disposition of a
Shareholder's Shares, and (ii) any agreement, contract or commitment to do any
of the foregoing.
(j) "ENCUMBRANCE" or "ENCUMBER" shall mean or refer to any
lien, claim, charge, pledge, mortgage, encumbrance, security interest,
preferential arrangement, restriction on voting or alienation of any kind,
adverse interest, or the interest of a third party under any conditional sale
agreement, capital lease or other title retention agreement but shall not
include restrictions created by this Agreement.
(k) "FAMILY MEMBER" shall mean, with respect to an individual
(i) the spouse, children, grandchildren or parents of such individual, (ii) any
trust whose sole beneficiary is not more than one of the foregoing persons,
(iii) a Person whose sole beneficial owner is such individual, or (iv) the
estate of such individual or a trust whose sole beneficiary is the estate and,
(v) with respect to a Person whose sole beneficial owner is an individual, that
individual.
(l) "FORMULA PRICE" per Share shall mean the price calculated
as set forth in Exhibit A hereto.
(m) "GOLDEN GATE" shall mean Golden Gate Private Equity, Inc.
(n) "INITIAL PUBLIC OFFERING" shall mean the underwritten
public offering by the Company of its common shares pursuant to a registration
statement (other than a registration statement relating solely to an employee
benefit plan or transaction covered by Rule 145 of the Securities Act) that has
been filed under the Securities Act and declared effective by the Commission;
provided, however, that for this purpose any offering under Rule 144A under the
Securities Act or any similar rule or regulation promulgated under the
Securities Act shall not be deemed to be an Initial Public Offering.
(o) "INSTITUTIONAL SHAREHOLDER" shall mean (i) Whitney V and
its Affiliates, (ii) Golden Gate Fund and its Affiliates and (iii) any Qualified
Transferee of the foregoing Persons, provided, that, the Person or Persons
referred to in clause (i) or (ii) shall continue to own at least 10% of the
outstanding share capital of the Company.
(p) "OTHER SHAREHOLDER" shall mean any Shareholder other than
an Institutional Shareholder.
(q) "PERMITTED TRANSFEREES" shall mean (i) with respect to
Other Shareholders, (A) one Family Member where all of the Other Shareholder's
Shares are transferred to such Family Member, (B) Whitney V, Golden Gate Fund
and their respective Affiliates, (C) any Other Shareholder or a trust whose sole
beneficiary is an Other Shareholder, and (D) the heirs and beneficiaries of an
Other Shareholder (provided that transfers to such heirs
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and beneficiaries must comply with and are subject to the provisions of Section
6(c)), (ii) with respect to Whitney V, (A) Whitney and its Affiliates, (B)
Golden Gate, Golden Gate Fund and their Affiliates, (C) Other Shareholders,
(iii) with respect to Golden Gate Fund, (A) Golden Gate and its Affiliates, (B)
Whitney, Whitney V and their Affiliates and (C) Other Shareholders and (iv) with
respect to a Qualified Transferee, (A) any Other Shareholder, (B) Whitney,
Whitney V and their Affiliates and (C) Golden Gate, Golden Gate Fund and their
Affiliates, provided, however, that in each case such Person shall agree in
writing with the parties hereto to be bound by and to comply with all applicable
provisions of this Agreement.
(r) "PERSON" shall mean any individual, partnership,
corporation, limited liability company, joint venture, trust, firm, association,
unincorporated organization or other entity.
(s) "PURCHASE PRICE" shall mean the U.S. dollar amount paid
for each Preferred Share in the Purchase Agreement and the Subscription
Agreements.
(t) "QUALIFIED TRANSFEREE" shall mean a transferee of Whitney
V, the Golden Gate Fund or their Affiliates who is an institutional investor and
owns 20% or more of the Preferred Shares.
(u) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(v) "SENIOR NOTES" shall mean the Company's 15.5% Senior Notes
Due July 15, 2011.
(w) "SHARES" shall mean, with respect to any Shareholder, (i)
the share capital of the Company, including, without limitation, any Common
Shares or Preferred Shares, held at any time by such Shareholder, (ii) any
option, warrant, or other right held at any time by any Shareholder, exercisable
for share capital of the Company, and (iii) any other security, including,
without limitation, Preferred Shares, held at any time by such Shareholder,
convertible or exchangeable for share capital of the Company.
(x) "SHAREHOLDER" shall mean each Person so identified in the
preamble hereto and shall include any other Person who agrees in writing with
the parties hereto to be bound by and to comply with all applicable provisions
of this Agreement and all Permitted Transferees thereof.
(y) "SUBSIDIARIES" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company or to Subsidiaries thereof.
(z) "TERMINATION" shall mean (i) with respect to an employee
or independent director of the Company or its Subsidiaries, (A) voluntary
termination of his or her employment
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relationship or resignation as an independent director, (B) termination by the
Company or Subsidiary of the employment relationship or dismissal as an
independent director or (C) termination of his or her employment relationship or
as an independent director because of death, retirement or disability, or (ii)
with respect to a distributor of the Company or its Subsidiaries, where a
distributor is terminated pursuant to Section 5 of the Distributor Agreement and
the appeal process set forth in such section has been completed without the
distributor having been reinstated or where the distributor terminates the
distribution agreement, and, in either case, such termination shall be treated
as a termination for cause.
(aa) "TRADE ASSOCIATION" shall mean any Person, group or
bargaining unit which is formed (other than by the Company or its Subsidiaries)
for the purpose of representing distributors of the Company or its Subsidiaries
in their relationship with the Company and has among its membership (i) at least
35% of the distributors in the Chairman's Club or at least 20% in the
President's Team or the Millionaire Team or (ii) at least 35% of the Distributor
Shareholders (by number). For purposes of this definition, membership shall mean
such distributors shall have given their written agreement to become a member,
or demonstrated their membership by participation, in such Person, group or
bargaining unit. For the purposes of calculating the percentage thresholds
above, membership shall be counted from the time such person becomes a member
and not by their attendance at any individual meeting or event. It is agreed and
understood that none of the following shall constitute a "Trade Association" for
purposes of this definition: (A) any Herbalife distributor tier in and of itself
(e.g., Chairman's Club, President's Team), (B) participation by any distributor
in or at any meeting, vacation, extravaganza, seminar, conference, telephone
call, gathering or event initiated, organized by or in which the Company or any
of its Subsidiaries participates or approves unless such participation was
demanded or initiated by such Person, group or bargaining unit and (C) any other
meetings, conference calls or other gatherings of distributors consistent with
past practice in the ordinary course of business, the primary purpose of which
involves distributor training and/or motivation, business development or sales
promotion of the products of the Company or any of its Subsidiaries or any
similar purpose.
(bb) "WHITNEY" shall mean Whitney & Co., LLC.
SECTION 2. TRANSFER OF SHARES. No Other Shareholder shall effect a
Disposition of any of his, her or its Shares, except (i) to a Permitted
Transferee or (ii) with the prior written consent of the Company and in any
event subject, in each case, to the rights and obligations provided for in this
Agreement. In no event shall (i) any Disposition or (ii) any transfer of shares,
beneficial, partnership or membership interests in any corporate Shareholder be
made if such Disposition or transfer would (A) cause the Company to be required
to register its Shares under Section 12(g)(1) of the Securities Exchange Act of
1934, as amended or (B) except as otherwise provided herein, increase the number
of holders of record of any class of equity securities of the Company without
the prior consent of the Company. Any purported Disposition or transfer in
violation of this Agreement shall be null and void ab initio, and the Company
shall not recognize any such Disposition or transfer or accord to any such
purported transferee any rights as a Shareholder. Each Shareholder that is not a
natural person agrees that it shall restrict its shareholders, members or
partners from making transfers which violate this Section 2.
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SECTION 3. PREEMPTIVE RIGHTS.
(a) If at any time the Company wishes to issue or sell any
Common Shares or any other equity securities or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase Common Shares or any other equity securities ("EQUITY EQUIVALENTS") at
a price per equity security lower than the Current Market Price to any Person or
Persons, the Company shall promptly deliver a notice of its intention to sell
(the "COMPANY'S NOTICE OF INTENTION TO SELL"). The Company's Notice of Intention
to Sell shall be delivered (i) to each Institutional Shareholder if the
offering, in the good faith opinion of the Company's Board of Directors, needs
to be completed on an expedited basis, or otherwise (ii) to each Shareholder
(such notified Shareholders, the "ELIGIBLE STOCKHOLDERS") setting forth a
description of the Equity Equivalents to be sold, the proposed purchase price
thereof, terms of sale and, in the case of a notice to Institutional
Shareholders only, the fact that the Equity Equivalents will be subject to
repurchase under Section 3(g). Upon receipt of the Company's Notice of Intention
to Sell, each Eligible Stockholder shall have the right to elect to purchase, at
the price and on the terms stated in the Company's Notice of Intention to Sell,
a number of the Equity Equivalents equal to the product of (i) a fraction, the
numerator of which is such Eligible Stockholder's aggregate ownership of the
Company's issued and outstanding Common Shares (calculated on an as-if converted
basis) and the denominator of which is the number of such Common Shares held by
all Eligible Stockholders, multiplied by (ii) the number of Equity Equivalents
to be issued. Such election may be made by the Eligible Stockholders by written
notice to the Company no more than 30 days after receipt by the Eligible
Stockholders of the Company's Notice of Intention to Sell (the "ACCEPTANCE
PERIOD FOR EQUITY EQUIVALENTS"). Each Eligible Stockholder shall also have the
option, exercisable by so specifying in such written notice, to purchase on a
pro rata basis similar to that described above (with respect to all such
Eligible Stockholders electing to purchase such unsubscribed Equity
Equivalents), any remaining Equity Equivalents not purchased by other Eligible
Stockholders, in which case the Eligible Stockholders exercising such further
option shall be deemed to have elected to purchase such remaining Equity
Equivalents on such pro rata basis, up to the aggregate number of Equity
Equivalents which such Eligible Stockholder shall have specified until either
(A) no Eligible Stockholder shall have elected to purchase any further amount of
the Equity Equivalents which are the subject of the Company's Notice of
Intention to Sell or (B) all the Equity Equivalents which are the subject of the
Company's Notice of Intention to Sell shall have been subscribed for by the
Eligible Stockholder(s). The Company shall promptly notify each electing
Eligible Stockholder in writing of each notice of election received from other
Eligible Stockholders pursuant to this paragraph 3(a).
(b) If effective acceptances shall not be received pursuant to
paragraph 3(a) above in respect of all the Equity Equivalents which are the
subject of the Company's Notice of Intention to Sell, then the Company may, at
its election, during a period of 120 days following the expiration of the
Acceptance Period for Equity Equivalents, sell and issue the remaining Equity
Equivalents to another Person at a price and upon terms not more favorable to
such Person than those stated in the Company's Notice of Intention to Sell. In
the event the Company has not sold the Equity Equivalents, or entered into an
agreement to sell the Equity Equivalents, within such 120 day period, the
Company shall not thereafter issue or sell any Equity Equivalents
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at a price per share lower than the Current Market Price without first offering
such securities to each Eligible Stockholder in the manner provided in Section
3(a) hereof.
(c) If an Eligible Stockholder gives the Company notice,
pursuant to the provisions of this Section 3, that such Eligible Stockholder
desires to purchase any of the Equity Equivalents, payment therefor shall be by
immediately available funds in U.S. dollars, against delivery of the securities
at the executive offices of the Company within 15 Business Days after giving the
Company such notice, or, if later, the closing date for the sale of such Equity
Equivalents. In the event that any such proposed issuance is for a consideration
other than cash, such Eligible Stockholder will be entitled to pay cash for each
share or other unit, in lieu of such other consideration, in the amount
determined in good faith by the Board of Directors of the Company to constitute
the fair value of such consideration other than cash to be paid per share or
other unit.
(d) The preemptive rights contained in this Section 3 shall
not apply to (i) Shares issued (A) as a stock dividend to holders of Shares or
upon any subdivision or combination of any Shares, (B) pursuant to an Initial
Public Offering, (C) upon the conversion of any equity security or debt security
of the Company issued on or prior to the date hereof, or (D) the exercise of any
option, warrant or other right to subscribe for, purchase or otherwise acquire
either Common Shares or any equity security or debt security convertible into
Common Shares, issued on or prior to the date hereof (including the warrants
issued in connection with the Senior Notes) or issued after the date hereof in
compliance with the terms and conditions of this Section 3, and (ii) (A) the
issuance by the Company of up to 18,717,546 Common required to be issued upon
the exercise of stock options ("OPTIONS"), granted or to be granted exclusively
to employees, officers, directors or consultants of the Company or its
Subsidiaries and/or Affiliates pursuant to the Company's employee stock option
plan(s) now in existence or, with the consent of the Institutional Shareholders,
to be established in the future, (B) the grant of the Options, (C) the issuance
by the Company of up to 2,040,816 Preferred Shares required to be issued upon
the exercise of warrants ("WARRANTS"), granted to the holders of the Company's
Senior Notes and (D) the grant of the Warrants.
(e) Notwithstanding any provision in this Agreement to the
contrary but in compliance with the Articles of Association, the Company shall
not issue or sell any shares of capital stock or securities (including Common
Shares issued upon exercise of stock options) to any Person who at the time of
such issuance or sale is not a party to this Agreement unless such Person agrees
in writing to be bound by all of the provisions of this Agreement as if such
Person were an Other Stockholder or a Qualified Transferee, as the case may be.
(f) If the Company shall sell or issue Equity Equivalents for
a consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per equity security" and the
"Consideration" received or receivable by or payable to the Company for purposes
of Section 3(a), the fair value of such property shall be determined in good
faith by the Board of Directors of the Company and shall be the value which is
agreed upon by at least a majority of the members thereof; provided, that if the
Institutional Shareholders object to such valuation as determined by the Board
of Directors within fifteen (15) days of receipt of written notice of such
valuation or if such percentage of the members of the Board of
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Directors of the Company are unable to agree upon the value of such
consideration, the value thereof shall be determined by an independent
investment bank of nationally recognized stature that is selected by a majority
of the members of the Board of Directors.
(g) If the Company elects not to include the Other
Shareholders as Eligible Stockholders in any offering under Section 3(a) then
the Company shall, to the extent legally permissible, offer the Other
Shareholders the opportunity to purchase the number of Equity Equivalents the
Other Shareholders would have been entitled to purchase had the offering been
open to all Shareholders ("EXCESS EQUITY EQUIVALENTS"). The Company shall notify
the Institutional Shareholders that it will repurchase the Excess Equity
Equivalents and, on the date specified in such notification, the Institutional
Shareholders shall deliver such securities to the executive offices of the
Company against payment thereof or the Institutional Shareholders may elect to
sell such securities directly to the Other Shareholders. The payment shall be
the aggregate purchase price originally paid by the Institutional Shareholders
("ORIGINAL PURCHASE PRICE") plus accrued and unpaid dividends, whether or not
declared, from the date of issuance to the date such Excess Equity Equivalents
were delivered to the Company or sold to the Other Shareholders. Promptly after
the notice is sent to the Institutional Shareholders, the Company or the
Institutional Shareholders shall offer to each Other Shareholder a number of
Equity Equivalents equal to the product of (i) a fraction, the numerator of
which is such Other Shareholder's aggregate ownership of the Company's issued
and outstanding Common Shares (calculated on an as-if converted basis) and the
denominator of which is the number of Common Shares (calculated on an as-if
converted basis) held by all Other Shareholders, multiplied by (ii) the number
of Excess Equity Equivalents. Such Excess Equity Equivalents shall be sold to
the Other Shareholders at a per share price equal to the Original Purchase Price
plus any accrued and unpaid dividends thereon as of the closing date of the sale
of such Excess Equity Equivalents to the Company or to the Other Shareholders.
The Excess Equity Equivalents issued or sold to the Other Shareholders shall
accrue dividends as if they were issued on the date the Institutional
Shareholders first purchased the Excess Equity Equivalents. Such Other
Shareholder ("ELECTING SHAREHOLDER") must accept such offer by giving written
notice to the Company within 30 days of receipt of notice from the Company. Each
Electing Shareholder shall also have the option, exercisable by so specifying in
such written notice, to purchase on a pro rata basis similar to that described
above (with respect to all such Electing Shareholders electing to purchase such
unsubscribed Excess Equity Equivalents), any remaining Excess Equity Equivalents
not purchased by Other Stockholders, in which case the Electing Shareholders
exercising such further option shall be deemed to have elected to purchase such
remaining Excess Equity Equivalents on such pro rata basis, up to the aggregate
number of Excess Equity Equivalents which such Electing Shareholder shall have
specified until either (A) no Electing Shareholder shall have elected to
purchase any further amount of the Excess Equity Equivalents which are the
subject of the Company's or the Institutional Shareholders' offer or (B) all the
Excess Equity Equivalents shall have been subscribed for by the Electing
Shareholder(s).
SECTION 4. TAG-ALONG RIGHTS.
(a) If an Institutional Shareholder shall desire at any time
to effect a Disposition of Shares ("TAG SHARES") and shall receive a purchase
offer therefor or the terms of a potential purchase offer therefor from a Bona
Fide Purchaser (such offers being hereinafter
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referred to as a "TAG OFFER"), then such selling Shareholder ("DISPOSING
SHAREHOLDER") shall promptly notify ("TAG NOTICE") the Company and the Company
will promptly thereafter notify the Other Shareholders ("NOTIFIED SHAREHOLDERS")
of the terms and conditions of such Tag Offer; provided, however, (i) that this
Section 4 shall not apply to any Disposition by the Disposing Shareholder to
such Shareholder's Permitted Transferees, and (ii) this Section 4 shall only
apply to a Disposition or portion of a Disposition by (a) Whitney V only to the
extent that after giving effect to such Disposition the number of Preferred
Shares (or the number of Common Shares into which such Preferred Shares have
been converted) held by Whitney V has an aggregate Cost to Whitney V of less
than U.S. $38.2 million and (b) in the case of a Disposition by Golden Gate Fund
only to the extent that after giving effect to such Disposition the number of
Preferred Shares (or the number of Common Shares into which such Preferred
Shares have been converted) held by Golden Gate Fund has an aggregate Cost to
Golden Gate Fund of less than U.S. $23.4 million.
(b) No Disposition subject to the requirements of this Section
4 shall be made to the Bona Fide Purchaser unless and until the Notified
Shareholders shall have been afforded the right (the "TAG-ALONG RIGHT"),
exercisable upon written notice to the Company and the Disposing Shareholder
within 30 days after receipt of the Tag Notice, to participate in the sale of
Shares at the same time and on the same terms and conditions under which the
Disposing Shareholder will sell the Disposing Shareholder's Tag Shares. Each
such Notified Shareholder may sell all or any part of that number of Shares held
by such Notified Shareholder equal to the product obtained by multiplying (x)
the aggregate number of Tag Shares covered by the Tag Offer by (y) a fraction
the numerator of which is the number of Common Shares (calculated on an as-if
converted basis) at the time owned by such Notified Shareholder and the
denominator of which is the aggregate number of Common Shares (calculated on an
as-if converted basis) owned by all Notified Shareholders plus the number of
Common Shares (calculated on an as-if converted basis) then owned by all other
Shareholders of the Company with similar co-sale rights plus the number of
Common Shares (calculated on an as-if converted basis) then owned by the
Disposing Shareholder. To the extent that Notified Shareholders participate in
the subject sale of Tag Shares hereunder, the Disposing Shareholder shall be
required to reduce the number of its Shares included in the Tag Shares.
(c) If the Company so requests, each Notified Shareholder
receiving a Tag Notice in accordance with Section 4(a) and exercising his, her
or its Tag Right shall deliver to the Company, as agent for such Notified
Shareholder, for transfer to the Bona Fide Purchaser one or more certificates,
properly endorsed for transfer, which represent the number of Shares of which
such Notified Shareholder is entitled to and elects to Dispose pursuant to this
Section 4. No Disposition of such Shares shall be made on terms and conditions,
including the form of consideration, different from those contained in the Tag
Offer unless the Disposing Shareholder re-offers the Tag Shares subject to the
Tag Offer to the Shareholders in accordance with this Section 4.
(d) The shares represented by the stock certificate or
certificates delivered by the Notified Shareholders to the Company pursuant to
Section 4(c) shall be transferred by the Company to the Bona Fide Purchaser in
consummation of the Disposition of the Shares pursuant to the terms and
conditions specified in Section 4(a) and the Company shall promptly thereafter
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remit to each Notified Shareholder that portion of the Disposition proceeds to
which such Notified Shareholder is entitled by reason of his, her or its
participation in such Disposition.
(e) Notwithstanding anything contained in this Section 4 or
any notice given hereunder, the provisions of this Section 4 shall be suspended
immediately upon delivery of the Sale Notice under Section 5(b).
SECTION 5. RIGHT OF BRING-ALONG.
(a) If the Institutional Shareholders (the "SELLING
INVESTORS") propose to Dispose of all (but not less than all) of the Shares then
owned by them to a Bona Fide Purchaser, other than any transfers by such Selling
Investors to an Institutional Shareholder or their Affiliates then,
notwithstanding anything in this Agreement to the contrary, the Selling
Investors may require the other Shareholders (the "NON-SELLING HOLDERS") to
Dispose of their Shares (the "BRING-ALONG RIGHT") to such Bona Fide Purchaser on
the same terms and conditions upon which the Selling Investors effect the
Disposition of their Shares and, in any event, for no less than the same
consideration such Non-Selling Holders would have received if the Company had
been liquidated in accordance with the provisions of the Articles of
Association.
(b) In the event that the Selling Investors desire to exercise
their rights pursuant to Section 5(a), the Selling Investors shall deliver to
the Company, and the Company shall deliver to the Non-Selling Holders written
notice ("SALE NOTICE") setting forth the consideration per share to be paid by
such Bona Fide Purchaser and the other terms and conditions of such Disposition.
Within ten (10) days following the date of such notice, each of the Non-Selling
Shareholders shall deliver to the Company, as agent for the Selling Investors
(i) a stock certificate or certificates evidencing such Non-Selling Holder's
Shares, together with an appropriate assignment separate from certificate duly
executed in a proper form to effect the Disposition of such Shares from the
Non-Selling Holders to the Bona Fide Purchaser on the register of members of the
Company, and (ii) a limited power-of-attorney authorizing one of the Selling
Investors to effect the Disposition of such Shares pursuant to the terms of such
Bona Fide Purchaser's offer as such terms may be modified by the Selling
Investors, provided, that all of the Non-Selling Holder's Shares are disposed of
for the same consideration per share (subject to appropriate adjustment to
reflect any differences in the rights and preferences of Shares of different
classes or series) and otherwise on the same terms and conditions upon which the
Selling Investors effect the Disposition of their Shares and provided however
that, in no event, shall the Non-Selling Holders receive less consideration per
Share than they could have if the Company had been liquidated in accordance with
the provisions of the Articles of Association. In the event that any Non-Selling
Holder shall fail to deliver such stock certificate(s), assignment separate from
certificate and limited power-of-attorney to the Selling Investors, the Company
shall cause a notation to be made on its register of members to reflect that the
Shares of such Non-Selling Holder are bound by the provisions of this Section 5
and that the Disposition of such Shares may be effected without such Non-Selling
Holder's consent or surrender of its certificates evidencing its Shares.
In addition, in the event the Selling Investors exercise their
rights under Section 5(a), the Non-Selling Holders shall be required to make to
a Bona Fide Purchaser such
10
representations and warranties with respect to all matters as are reasonably
requested by the Bona Fide Purchaser (including, but not limited to, unqualified
representations and warranties with respect to their Shares as are set forth in
Section 5(e) hereof), provided that the Non-Selling Holders will in all cases
only be required to provide representations and warranties on the same basis, no
more stringent than and subject to the same qualifications as the Selling
Investors and will only be required to indemnify the Bona Fide Purchaser against
breaches of such representations and warranties up to an aggregate dollar amount
not to exceed their respective consideration received other than with respect to
representations and warranties regarding ownership of stock and authority to
consummate the transaction in question.
(c) Promptly (but in no event later than the day of receipt)
after the consummation of the Disposition of Shares pursuant to this Section 5,
the Company, as agent for the Selling Investors shall (i) deliver notice thereof
to the Non-Selling Holders, (ii) remit to the Non-Selling Holders the total net
proceeds of their respective Shares Disposed of pursuant hereto, and (iii)
furnish such other evidence of the completion and time of completion of such
Disposition and the terms thereof as may be reasonably requested in writing by
the Non-Selling Holders.
(d) If, within ninety (90) days after the Selling Investors'
delivery of the Sale Notice required pursuant to Section 5(b), the Selling
Investors have not completed the Disposition of their Shares and that of the
Non-Selling Holders in accordance herewith, the Selling Investors shall return
to the Non-Selling Holders (i) the stock certificates and assignments of
certificates with respect to the Non-Selling Holders' Shares which the
Non-Selling Holder delivered pursuant to this Section 5 and (ii) the related
limited power-of-attorney delivered pursuant to this Section 5. No provision of
this Section 5 shall limit or impair any of the restrictions on Disposition
contained in this Agreement with respect to the Shares owned by the
Shareholders.
(e) All sales of Shares to be made pursuant to this Section 5
shall be subject to the following terms:
(i) the Non-Selling Holders shall deliver to the Bona
Fide Purchaser the Shares being sold, free and clear of Encumbrances, together
with duly executed share transfer powers in favor of the Bona Fide Purchaser or
its nominees and such other documents, including evidence of ownership and
authority, as the Bona Fide Purchaser may reasonably request;
(ii) except as otherwise specifically set forth in
Section 5(b), the Non-Selling Holders shall not be required to make any
representations or warranties to any Person in connection with such sale, except
as to (A) good title to the Shares being sold, (B) the absence of Encumbrances
with respect to the Shares being sold, (C) its valid existence and good standing
(if applicable), (D) the authority for, and validity and binding effect (subject
to customary qualifications) of (as against such Non-Selling Holders), any
agreement entered into by such Non-Selling Holders in connection with such sale,
(E) the fact that Non-Selling Holders' sale will not conflict with or result in
a breach of or constitute a default under, or violation of, its governing
documents or any indenture, lease, loan or other agreement or instrument by
which it is bound or affected, (F) all required material consents to Non-Selling
Holders' sale and material
11
governmental approvals having been obtained (excluding any securities laws), and
(G) the fact that no broker's commission is payable by the Non-Selling Holders
as a result of Non-Selling Holders' conduct in connection with the sale; and
(iii) the Non-Selling Holders shall not be required to
provide any indemnities in connection with such sale except for breach of the
representations and warranties specifically required by the terms of this
Agreement.
SECTION 6. REPURCHASE RIGHTS UPON CESSATION OF EMPLOYMENT OR
DISTRIBUTOR RELATIONSHIP.
(a) In the event that any employee or independent director of
the Company or any of its Subsidiaries who is or was a Shareholder (each such
employee, an "EMPLOYEE SHAREHOLDER"), is subject to a Termination during the
term of this Agreement, then the Institutional Shareholders, or the Company, if
the Institutional Shareholders decline to so purchase, shall have the right (but
not the obligation) to purchase, and to require (i) such Employee Shareholder,
(ii) such Employee Shareholder's Permitted Transferee who is a Family Member or
(iii) the Person through which the Employee Shareholder holds Shares (such
Shareholder, the "TERMINATED PARTY") to sell to the Company and/or the
Institutional Shareholders, as the case may be, up to all of the Shares then
owned by the Terminated Party. The Company shall deliver written notice to the
Institutional Shareholders of such Termination within five (5) business days of
such Employee Shareholder's Termination date (the "TERMINATION DATE"), which
notice shall specify, in reasonable detail, (A) the Termination Date, (B) the
circumstances of such Termination, (C) the number of Shares then held by the
Terminated Party and (D) the purchase price per Share payable under this Section
6, as determined below. The Company shall have the right to exercise its rights
under this Section 6 as to any or all Shares held by the Terminated Party that
the Institutional Shareholders do not ultimately purchase hereunder. Upon such
Termination by the Employee Shareholder, the Company and/or the Institutional
Shareholders, as the case may be, may exercise such right at any time within
ninety (90) days of the Termination Date (the "REPURCHASE PERIOD"). During such
Repurchase Period, a Terminated Party shall be prohibited from otherwise
Disposing of any Shares then owned by a Terminated Party. Such repurchase right
may be exercised by the Company and/or the Institutional Shareholders, as the
case may be, giving notice to such Employee Shareholder, with a copy to the
Institutional Shareholders or the Company, as the case may be.
(b) In the event that any distributor of the Company or any of
its Subsidiaries who is a Shareholder or who holds Shares through another Person
(each such distributor, a "DISTRIBUTOR SHAREHOLDER"), is subject to a
Termination with cause during the term of this Agreement, then within thirty
(30) days of such Termination, (i) such Distributor Shareholder, (ii) such
Distributor Shareholder's Permitted Transferee who is a Family Member or (iii)
the Person through which the Distributor Shareholder holds Shares (such
Shareholder, the "DISTRIBUTOR HOLDER") must sell the Shares then owned by the
Distributor Holder to one or more Distributor Shareholders who have not been the
subject of a Termination. Upon Termination of any Distributor Shareholder under
this Section 6(b), the Company shall give notice to each
12
Distributor Shareholder specifying: (A) the identity of the terminated
Distributor Shareholder whose shares will become available, (B) the number of
Shares held by such Distributor Shareholder, and (C) the fact that such Shares
may be subject to repurchase by the Company if not acquired by another
Distributor Shareholder within the 30-day period following Termination. If, at
the end of the thirty (30) day period, the Distributor Holder owns Shares, the
Company shall deliver written notice to the Distributor Holder which shall
specify: (A) the circumstances of such Termination, (B) the number of Shares
then held by the Distributor Holder, (C) the number of Shares then held by the
Distributor Holder that the Company shall elect to purchase hereunder, and (D)
the purchase price per Share payable under this Section 6(b) as determined
below. The Company shall have the right to exercise its rights under this
Section 6 as to any or all Shares held by the terminated Distributor Holder
after such thirty (30) day period, and may exercise such repurchase right at any
time within sixty (60) days of the expiration of the aforementioned thirty (30)
day period.
(c) In the event that (i) (A) a Distributor Shareholder dies
during the term of this Agreement or (B) the Permitted Transferee of a
Distributor Shareholder who is a Family Member and a natural person dies during
the term of this Agreement and (ii) the trustee, executor or administrator of
the estate or testamentary trust of such Distributor Shareholder or Permitted
Transferee proposes to distribute the Shares held by such estate or trust to
more than one Permitted Transferee who is not already a record holder of Shares,
then the trustee, administrator or executor shall notify the Company of such
proposal and the Company may, if the distribution shall cause there to be more
than 450 holders of record of Shares, inform the trustee, administrator or
executor that it must sell the Shares within ninety (90) days to one or more
Distributor Shareholders that have not been the subject of a Termination or the
Shares will be repurchased. If, at the end of such ninety (90) day period, the
trust or estate holds Shares, the Company shall deliver written notice to the
trustee, administrator or executor who notified the Company of the proposed
distribution, which shall specify, (A) the number of Shares then held by the
trust or estate, (B) the number of Shares then held by the trust or estate that
the Company shall have elected to purchase hereunder, and (C) the purchase price
per Share which shall be the fair market value of the shares as determined by
the Board of Directors. The Company shall have the right to exercise its rights
under this Section 6 as to any or all Shares held by the trust or estate. The
Company may exercise such repurchase right at any time within sixty (60) days of
the expiration of the aforementioned ninety (90) day period.
(d) The purchase price per Share payable under Section 6 (a)
or (b) where such Termination was voluntary, due to resignation or for cause
shall be an amount equal to (x) in respect of Preferred Shares, the lesser of
(i) the Formula Price or (ii) Cost or (y) in respect of Common Shares, the
lesser of (i) Current Market Price or (ii) Cost.
(e) The purchase price per Share payable under Section 6 (a)
where such Termination was without cause or because of death, retirement or
disability shall be an amount equal to (x) in respect of Preferred Shares, the
greater of (i) the Formula Price or (ii) Cost or (y) in respect of Common
Shares, the greater of (i) Current Market Price or (ii) Cost.
(f) Employees; Noncompetition and Nonsolicitation. In addition
to the general repurchase rights of the Company and the Institutional
Shareholders set forth above, if
13
following any Termination with the Company or any of its Subsidiaries for any
reason (except for a Termination without cause), such Employee Shareholder
serves in a Competitive Position, or such Employee Shareholder who was subject
to Termination engages in activities inimical, contrary or harmful to the
interests of the Company or any of its Subsidiaries, including, but not limited
to: (A) employing or recruiting any present, former or future employee of the
Company or any of its Subsidiaries to serve in a Competitive Position; (B) the
Employee Shareholder's equity ownership (other than as the holder of not more
than 5% of total outstanding stock of a publicly-held company) in any other
Person that is in the business of selling products through a multi-level
marketing system or the sale of weight management products, nutritional
supplements or personal care products anywhere in the United States or any other
country in which Herbalife International, Inc. or one of its Subsidiaries
operates; (C) disclosing or misusing any Confidential Information; or (D)
participating in a hostile takeover attempt of the Company or any of its
Subsidiaries; then the Institutional Shareholders and/or the Company (to the
extent the Institutional Shareholders do not elects not to fully exercise their
rights hereunder), shall have the following rights:
(i) If such activities occur during the Repurchase
Period, in addition to any other rights available to them at law or in equity
(including, without limitation, obtaining an injunction, as described in clause
(ii) below), the Company and/or Institutional Shareholders, as the case may be,
may purchase the Shares then owned by such Terminated Party at a purchase price
per Share which shall be equal to Cost; and
(ii) If such activities occur after the Repurchase
Period but within two years of Termination with the Company or such Subsidiary
as set forth above, the Company and its Subsidiaries shall be entitled to, in
addition to any other remedies, an injunction prohibiting the Employee
Shareholder from engaging in such activities, as the Employee Shareholder agrees
that the Company and its Subsidiaries would be irreparably harmed by any such
actual or threatened conduct.
The Company shall provide the alleged breaching Employee with
prompt written notice of its becoming aware of any event that would give rise to
the rights set forth in this Section 6(e), which notice shall specify, in
reasonable detail, (A) the nature of such event, (B) the number of Shares then
held by such Terminated Party, (C) the number of Shares then held by such
Terminated Party that the Company and/or the Institutional Shareholders may
elect to purchase hereunder, (D) the purchase price per Share payable under this
Section 6(e), as determined above, and (E) the nature of any other remedies the
Company or any of its Subsidiaries intends to exercise against such Employee
Shareholder. The repurchase right described in clause (i) above may be exercised
by the Company and/or the Institutional Shareholders, as the case may be,
delivering written notice to such Terminated Party with a copy to the
Institutional Shareholders or the Company, as the case may be.
(g) Closing Mechanics. The closing of any purchase and sale
under this Section 6 shall be held at the principal offices of the Company at
10:00 a.m. local time on a date specified by the Company and/or the
Institutional Shareholders, as the case may be, not later than 30 days after the
date of its repurchase notice. At such closing, the Terminated Party or
Distributor Holder shall deliver certificates representing the Shares to be
purchased, duly
14
endorsed for transfer and accompanied by all requisite stock transfer taxes, if
any, and such Shares shall be free and clear of any liens, claims or
encumbrances (other than restrictions imposed pursuant to this Agreement and
applicable federal and state securities laws), and the Distributor Holder or
Terminated Party shall so represent and warrant, and further represent and
warrant that he or she or it is the record and beneficial owner of such Shares.
The Company and/or the Institutional Shareholders, as the case may be, shall
deliver at such closing, payment for such Shares in such form and upon such
reasonable terms as the Company and/or the Institutional Shareholders, as the
case may be, shall specify.
SECTION 7. ELECTION OF DIRECTORS.
(a) At any annual or extraordinary shareholders' meeting
called for such purpose, or by written consent in lieu of a meeting, the
Shareholders agree to vote the Shares owned of record or beneficially by them to
maintain up to a thirteen-member Board of Directors (subject to Section 7(c)
below) and to elect (i) to the Board of Directors of the Company (A) four (4)
nominees designated by Whitney V (or Whitney) or if Whitney V ceases to be an
Institutional Shareholder, as determined by the vote of the majority of the
Shares held by the Institutional Shareholders, (B) four (4) nominees designated
by CCG Investments (BVI), L.P. (or Golden Gate) or if Golden Gate Fund ceases to
be an Institutional Shareholder, as determined by the vote of the majority of
the Shares held by the Institutional Shareholders, (C) the Chief Executive
Officer of the Company's Subsidiary, Herbalife International, Inc., (D) two (2)
"independent" nominees who are agreeable to each of the Institutional
Shareholders, and (E) up to two (2) nominees designated by Distributor
Shareholders as provided for in Section 7(b) so long as there is no Trade
Association in existence and (ii) one (1) nominee of each of Whitney V and CCG
Investments (BVI), L.P. to each of the Company's audit committee and
compensation committee, provided, however, if Whitney V or Golden Gate Fund
cease to be an Institutional Shareholder, then any such vacant committee seat
shall be determined by the vote of the majority of the Shares held by the
Institutional Shareholders. All such directors shall hold office until their
respective successors shall have been elected and shall have been qualified.
Whitney V and Golden Gate Fund have agreed to provide a Board seat to another
Institutional Shareholder if desired. By mutual agreement, Whitney V and Golden
Gate Fund will determine whether the Board seat will either be incremental or
represent one of the "independent" Board seats noted above. The Company shall
provide to such directors the same information concerning the Company and its
Subsidiaries, and access thereto, provided to other members of the Company's
Board of Directors and such committees. The reasonable travel expenses incurred
by any such director in attending any such meetings shall be reimbursed by the
Company to the extent consistent with the Company's then existing policy of
reimbursing directors generally for such expenses. The Company shall purchase
and maintain at all times directors' and officers' insurance upon terms and
pricing customary for a company of its size and operating in its industry.
(b) The Distributor Shareholders may: (i) designate one
nominee for the Board of Directors of the Company if the Distributor
Shareholders and their Permitted Transferees other than Institutional
Shareholders collectively hold at least 10% of the Company's Common Shares on a
diluted basis; (ii) designate one nominee for the Board of Directors of the
Company and have one person attend as an observer at the meetings of the Board
of Directors if the Distributor Shareholders and their Permitted Transferees
other than Institutional Shareholders
15
collectively hold at least 10% but less than 15% of the Company's Common Shares
on a diluted basis; or (iii) designate two nominees for the Board of Directors
of the Company if the Distributor Shareholders and their Permitted Transferees
other than Institutional Shareholders collectively hold at least 15% of the
Company's Common Shares on a diluted basis. The Distributor Shareholders shall
designate nominees through the procedure set forth in Section 8. For the
purposes of this paragraph, "on a diluted basis" shall mean the relevant
percentage (calculated on an as-converted basis) of 110,000,000 Common Shares
(adjusted to account for stock splits, combinations or reclassifications of
shares) plus any Common Shares or other securities convertible into Common
Shares (calculated on an as-converted basis) which, when issued, were subject to
the preemptive rights contained in Section 3 hereof.
(c) If the Company is in default on the payment of the cash
portion of the interest of the Company's Senior Notes for four consecutive
quarters then, during the period that such interest remains unpaid, GarMark
Partners, L.P. so long as it holds more than $10 million in principal amount of
the Senior Notes, may designate one (1) nominee to the Board of Directors of the
Company and the size of the Board of Directors during such period shall be
increased by one (1).
(d) In the event that the Institutional Shareholders shall not
have a designee serving on the Board of Directors of the Company for any reason,
the Company shall give the Institutional Shareholders notice of (in the same
manner as notice is given to directors), and permit one Person designated by
each Institutional Shareholder to attend as observer, all meetings of the
Company's Board of Directors and all executive and other committee meetings of
the Board of Directors and shall provide to such Institutional Shareholder the
same information concerning the Company, and access thereto, provided to members
of the Company's Board of Directors and such committees. The reasonable travel
expenses incurred by any such designee of an Institutional Shareholder in
attending any board or committee meetings shall be reimbursed by the Company to
the extent consistent with the Company's then existing policy of reimbursing
directors generally for such expenses.
(e) The parties hereto will cause the Company's Board of
Directors to meet at least once every quarter on as regular a basis as possible,
or more frequently to the extent that the directors designated by the
Institutional Shareholders, or in the event no such directors are then serving
on the Board of Directors, an observer designated thereby, reasonably wishes the
Board of Directors to meet.
(f) The Chairman of the Board of Directors of the Company
shall be a designee of Whitney V (or Whitney). The Chairman shall not have a
casting vote in the event of a deadlock of the representatives of the Company's
Board of Directors.
(g) At the request of the Institutional Shareholders, the
Company shall use its best efforts to cause the Board of Directors of the
Subsidiaries to be composed of the same nominees designated by such Persons
pursuant to paragraph (a) of this Section 7.
(h) The Shareholders agree only to vote the Shares held of
record or beneficially owned by them for the appointment of, or replacement or
removal of, a director as
16
instructed by the Shareholders who are entitled to designate such director
pursuant to paragraph (a) or (b) of this Section 7.
(i) If at any time a director or observer at the meetings of
the Board of Directors shall breach the duty of confidentiality, such director
or observer shall immediately be removed as a director or observer. The
replacement for such director or observer may be designated by the party or
parties originally designating such director or observer, provided, however,
that a Person removed as a director or observer may not be nominated or
selected.
SECTION 8. SELECTION OF DISTRIBUTOR DIRECTORS. The directors designated
by the Distributor Shareholders under Section 7, shall be chosen by the
Distributor Shareholders as follows:
(a) Thirty (30) days prior to any annual or extraordinary
shareholders' meeting at which directors designated by the Distributor
Shareholders may be elected or the circulation of a written consent in lieu of a
meeting pursuant to which such directors may be elected and immediately upon a
termination of the directorship of a director designated by the Distributor
Shareholders (or, if such termination is by way of resignation of such director,
immediately upon the Company receiving notice of such resignation, if such
notice of resignation is received earlier), the Company shall by written notice
to all Distributor Shareholders request nominations for a director to be
designated by the Distributor Shareholders.
(b) Directors may be nominated by any five (5) Distributor
Shareholders signing an instrument nominating a person for selection as a
director designated by the Distributor Shareholders and sending such instrument
to the Company such that it is received within ten (10) days of the notice being
given pursuant to paragraph (a) of this Section 8.
(c) On the eleventh day after notice is given nominating at
least two persons for selection as a director pursuant to paragraph (a) of this
Section 8 (or the next business day if the eleventh day is not a business day),
the Company shall send a ballot form containing the names of all persons
nominated in accordance with paragraph (b) of this Section 8 to all Distributor
Shareholders informing them of: (i) their right to cast one vote for each Common
Share (calculated on an as-converted basis) held by them towards the selection
of directors to be designated by the Distributor Shareholders; and (ii) the
requirement for them to complete the ballot form and send it to the Company such
that it is received within ten (10) days of the date the ballot form was sent
pursuant to this paragraph (c) in order for their vote to count.
(d) The Company shall determine the directors to be designated
by the Distributor Shareholders as a result of the votes cast by Distributor
Shareholders pursuant to all the ballot forms received in accordance with
paragraph (c) of this Section 8. In making this determination, each Distributor
Shareholder shall have one vote for each Common Share (calculated on an
as-converted basis) held by them and the director (or directors if more than one
director is to be designated by the Distributor Shareholders) receiving the
highest number of votes shall be the director (or directors) designated by the
Distributor Shareholders.
17
(e) The Company shall inform all Shareholders of the names of
directors designated pursuant to paragraph (d) of this Section 8 by written
notice given within fifteen (15) days of the date the ballot form was sent
pursuant to paragraph (c) of this Section 8.
SECTION 9. SELECTION OF DISTRIBUTOR OBSERVER. In the event that the
Distributor Shareholders may designate an observer to the Board of Directors and
there is a vacancy in such position at the same time as there is a selection of
a director under Section 8, the Distributor Shareholders' observer shall be the
runner up in the Distributor Shareholder vote held pursuant to Section 8. In
this event, the Company shall inform all Shareholders of the name of the
observer designated pursuant to this Section 9 in the written notice given to
all Shareholders under Section 8(e). If an observer resigns or is removed and no
shareholders' meeting is scheduled for the election of directors, a temporary
observer may attend until the next meeting and such observer shall be the next
runner-up in the last election of directors or, if there is no such person, an
observer selected by the director designated by Distributor Shareholders.
SECTION 10. REMOVAL OF DISTRIBUTOR DIRECTORS AND DISTRIBUTOR OBSERVERS.
The Distributor Shareholders may remove a director or observer designated by
them by forwarding a written instrument signed by a majority in interest of the
Distributor Shareholders to the Company. Upon receipt of such written
instrument, the Company shall immediately inform all Shareholders and such
designated director or observer shall immediately be removed as a director or
observer, as the case may be.
SECTION 11. LEGEND ON STOCK CERTIFICATES. Each certificate of the Other
Shareholders representing Shares shall bear the following legend until such time
as the Shares represented thereby are no longer subject to the provisions
hereof:
"THE SALE, TRANSFER OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
SHAREHOLDERS' AGREEMENT, DATED AS OF , 2002 AMONG WH HOLDINGS (CAYMAN ISLANDS)
LTD. AND CERTAIN HOLDERS OF ITS OUTSTANDING SHARE CAPITAL, AS SUCH AGREEMENT MAY
BE AMENDED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF WH
HOLDINGS (CAYMAN ISLANDS) LTD."
SECTION 12. DURATION OF AGREEMENT. Except with respect to the rights
and obligations set forth in Section 6(f) hereof, the rights and obligations of
each Shareholder under this Agreement shall terminate as to such Shareholder
upon the transfer of all Shares owned by such Shareholder in accordance with
this Agreement. Except with respect to the rights and obligations set forth in
Section 6(f) hereof, upon consummation of an Initial Public Offering, the rights
and obligations of each Shareholder under this Agreement shall terminate.
18
SECTION 13. REPRESENTATIONS AND WARRANTIES. Each Shareholder represents
and warrants to the other Shareholders as follows:
(a) The execution, delivery and performance of this Agreement
by such Shareholder will not violate any provision of law, any order of any
court or other agency of government, or any provision of any indenture,
agreement or other instrument to which such Shareholder or any of his, her or
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of such Shareholder.
(b) This Agreement has been duly executed and delivered by
such Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity relating to enforceability.
(c) The Shares of such Shareholder listed on Schedule I hereto
constitute all the shares of share capital of the Company owned by such
Shareholder and such Shareholder does not have any right or obligation to
acquire any additional shares of share capital of the Company.
(d) The representations and warranties contained in this
Section 13 shall survive the execution and delivery of this Agreement.
SECTION 14. GOVERNING LAW. This agreement shall be governed by,
construed in accordance with, and enforced under, the law of the State of New
York applicable to agreements or instruments entered into and performed entirely
within such state.
SECTION 15. SPECIFIC PERFORMANCE. Each party to this agreement hereby
irrevocably agrees that in the event of any breach of this Agreement, the
non-breaching party would be irreparably harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto will waive
the defense in any action for specific performance that a remedy at law would be
adequate and that the parties hereto, in addition to any other remedy to which
they may be entitled at law or in equity, shall be entitled to compel specific
performance of this Agreement.
SECTION 16. JURISDICTION.
(a) Each party to this agreement hereby irrevocably agrees
that the any legal action or proceeding arising out of or relating to this
Agreement, the Shares, or any agreements or transactions contemplated hereby may
be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York and hereby expressly submits to
the personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that the such courts
are an
19
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to its address set forth in Section 18 hereof, such service to
become effective 10 days after such mailing.
(b) Each of the Company and each of the Shareholders hereby
waives its right to a jury trial with respect to any action or claim arising out
of any dispute in connection with this Agreement or the Shares, any rights or
obligations hereunder or the performance of such rights and obligations. Except
as prohibited by law, each of the Company and each of the Shareholders hereby
waives any right it may have to claim or recover in any litigation referred to
in the preceding sentence any special, exemplary, punitive or consequential
damages or any damages other than, or in addition to, actual damages. Each party
(i) certifies that no representative, agent or attorney of the other parties has
represented, expressly or otherwise, that the other parties would not, in the
event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges
that other parties have been induced to enter into this Agreement by, among
other things, the waivers and certifications contained herein.
SECTION 17. BENEFITS OF AGREEMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, legal representatives and heirs. Any purported Disposition of the
Shares, in violation of the provisions of this Agreement shall be null and void
ab initio.
SECTION 18. NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier
(with receipt confirmed), courier service or personal delivery:
(a) if to the Company:
WH Holdings (Cayman Islands) Ltd.
c/o M&C Corporate Services Ltd.
P.O. Box 309GT
Ugland House
South Church Street
Georgetown, Grand Cayman
Cayman Islands
Telecopier: (345) 949-8080
Attention: Alasdair Robertson
with a copy to:
Whitney & Co., LLC
177 Broad Street
Stamford, Connecticut 06901
Telecopier: (203) 975-1422
20
Attention: Kevin Curley
and
Golden Gate Private Equity, Inc.
One Embarcadero Center
Suite 3300
San Francisco, CA 94111
Telecopier: (415) 627-4501
Attention: Jesse Rogers
(b) if to Whitney V:
Whitney V, L.P.
177 Broad Street
Stamford, Connecticut 06901
Telecopier: (203) 975-1422
Attention: Daniel J. O'Brien
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Telecopier: (212) 541-5369
Attention: Thomas C. Meriam
(c) if to Golden Gate Fund
c/o Golden Gate Private Equity, Inc.
One Embarcadero Center
Suite 3300
San Francisco, CA 94111
Telecopier: (415) 627-4501
Attention: Jesse Rogers
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Telecopier: (312) 861-2200
Attention: Gary M. Holihan
21
(d) if to any Other Shareholders, at the address for such
Person in the Company's records.
or to such other address or addresses as shall have been furnished in writing to
the other parties hereto. Each Shareholder agrees, at all times, to provide the
Company with an address for notices hereunder.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; if mailed,
five Business Days (as defined in the Purchase Agreement) after being deposited
in the mail, postage prepaid; or if telecopied, when receipt is acknowledged.
SECTION 19. MODIFICATION. Except as otherwise provided herein, neither
this Agreement nor any provision hereof shall be modified, changed, discharged
or terminated except by the agreement of the Institutional Shareholders,
provided such modification shall not adversely affect the Other Shareholders
without the consent of at least a majority in interest of the Other Shareholders
except in the case of Section 6 hereof, where an amendment shall affect an
Employee Shareholder or Distributor Shareholder, then only the consent of the
majority in interest of Employee Shareholders or Distributor Shareholders, as
the case may be, shall be required; provided, however, that no modification or
amendment shall be effective to reduce the requirements for the consent of the
holders of which is required under this Section 19.
SECTION 20. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the undersigned with respect to the subject matter contained
herein and supersedes any and all prior agreements or understandings, oral or
written, among any or all of the undersigned relating to such subject matter.
SECTION 21. SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of
any executed original document and/or retransmission of any executed
telefacsimile transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties hereto
shall confirm telefacsimile transmissions by executing duplicate original
documents and delivering the same to the requesting party or parties. This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
SECTION 22. SEVERABILITY. If any one or more of the provisions
contained in this Agreement, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions of this Agreement. The parties
hereto further agree to replace such invalid, illegal or unenforceable provision
of this Agreement with a valid, legal and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such invalid, illegal or unenforceable provision.
22
SECTION 23. INCONSISTENCY. To the extent there is any inconsistency
between this Agreement and the Articles then this Agreement shall control and
the parties hereto shall agree to amend the Articles only to the extent
necessary to eliminate such inconsistency.
(remainder of this page intentionally left blank -
signature page follows)
23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
WH HOLDINGS (CAYMAN ISLANDS) LTD.
By: /s/ Steven E. Rodgers
-------------------------------
Name: Steven E. Rodgers
Title: President
WH INVESTMENTS LTD.
By: /s/ Steven E. Rodgers
-------------------------------
Name: Steven E. Rodgers
Title: President
WHITNEY V, L.P.
By: Whitney Equity Partners V, LLC,
Its General Partner
By: /s/ Daniel J. O'Brien
-------------------------------
Name: Daniel J. O'Brien
A Managing Member
WHITNEY STRATEGIC PARTNERS V, L.P.
By: /s/ Daniel J. O'Brien
-------------------------------
Name: Daniel J. O'Brien
Title: Managing Member
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
24
CCG INVESTMENTS (BVI), L.P.
CCG ASSOCIATES - QP, LLC
CCG ASSOCIATES - AI, LLC
CCG INVESTMENT FUND - AI, LP
CCG AV, LLC - SERIES C
CCG AV, LLC - SERIES E
By: Golden Gate Capital Management,
L.L.C.
Its: Authorized Representative
By: /s/ Jesse Rogers
-------------------------------
Name: Jesse Rogers
Its: Managing Director
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
25
OTHER SHAREHOLDER
----------------------------------------
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
26
SCHEDULE I
[To Come.]
EXHIBIT A
FORMULA PRICE
The Formula Price shall be a price per Share equal to (i)(A) the Purchase Price
multiplied by (B) the last twelve month's Adjusted EBITDA calculated for the
last day of the month ending prior to the determination of the Formula Price,
multiplied by (C) the number of common shares of the Company calculated on a
fully diluted basis as of the date of this Agreement, divided by (ii) (A)
Adjusted EBITDA calculated as of the twelve month period ended June 30, 2002,
multiplied by (B) the number of common shares of the Company calculated on a
fully diluted basis as of the date of determination of the Formula Price.
Adjusted EBITDA is the net income of WH Holdings before minority interest,
income taxes, net interest (income) expense, depreciation and amortization.
Certain non-recurring items are eliminated from the Adjusted EBITDA calculation
and the calculation shall be made in a manner consistent with the calculations
set forth below for Herbalife International, Inc. ("Herbalife"):
YEAR ENDED THREE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED MARCH 31, ENDED MARCH 31,
2001 2001 2002 2002
--------- --------- --------- ---------
(dollars in Thousands)
Net income $ 42,588 $ 8,561 $ 19,913 $ 53,940
EBITDA Adjustments:
Interest Income, net (3,413) (487) (575) (3,501)
Income Taxes 28,875 5,850 13,369 36,394
Depreciation and Amortization 18,056 4,076 4,909 18,889
Minority Interest in earnings of
Herbalife 725 215 140 650
--------- --------- --------- ---------
EBITDA $ 86,831 $ 18,215 $ 37,756 $ 106,372
--------- --------- --------- ---------
Non-recurring items:
Severance and other employee related
expenses(a) 9,898 78 973 10,793
Product costs under previous supply
agreements(b) 5,666 2,785 -- 2,881
Other(c) 722 64 64 722
--------- --------- --------- ---------
Total non-recurring items 16,286 2,927 1,037 14,396
--------- --------- --------- ---------
Adjusted EBITDA $ 103,117 $ 21,142 $ 38,793 $ 120,768
========= ========= ========= =========
(a) In the year ended December 31, 2001 and the three months ended March
31, 2001 and March 31, 2002, Herbalife incurred approximately $9.9
million, $78,000 and $973,000, respectively, of severance costs related
to changes in senior management. Such changes have been completed and
such severance costs are non-recurring. Additionally, certain key
executives were replaced at lower salary levels.
(b) On December 31, 2000, Herbalife's long-term contract with its primary
supplier expired. In 2001, Herbalife entered into new supply contracts
which have resulted in product costs savings. Product costs under the
new supply contracts would have resulted in savings of
$5.7 million and $2.8 million for the year ended December 31, 2001 and
the three months ended March 31, 2001, respectively. It is anticipated
that the cost savings will continue on a going forward basis.
(c) In 2001, Herbalife incurred costs of $466,000 related to specific legal
and professional fees, not expected to recur. In addition, during the
year ended December 31, 2001 and the three months ended March 31, 2001
and 2002, Herbalife contributed services to the Herbalife Family
Foundation costing $256,000, $64,000 and $64,000, respectively.
Herbalife does not plan to continue to contribute such services on a
going forward basis.
2