Exhibit 10.31
MONITORING FEE AGREEMENT
This Monitoring Fee Agreement (this "Agreement") is made and
entered into as of July 31, 2002, by and among Herbalife International, Inc., a
Nevada corporation, on behalf of itself and each of its subsidiaries
(collectively, the "Company"), and Whitney & Co., LLC, a Delaware limited
liability company ("Sponsor").
The Company, WH Holdings (Cayman Islands) Ltd., a company
organized under the laws of the Cayman Islands ("Parent"), and Parent's
subsidiary, WH Acquisition Corp., a Nevada corporation ("Merger Corp.") are
parties to an Agreement and Plan of Merger dated as of April 10, 2002 (as the
same may be amended or modified from time to time, the "Merger Agreement"),
pursuant to which Merger Corp. will be merged with and into Herbalife
International, Inc. This Agreement shall only become effective (the "Effective
Date") upon the consummation of the transactions contemplated by the Merger
Agreement.
WHEREAS, the Company desires to retain Sponsor with respect to
the activities described herein, for which Sponsor shall be entitled to the fees
set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term
commencing on the Effective Date and ending on the tenth anniversary of the
Effective Date (the "Term"), and shall be automatically extended thereafter on a
year to year basis unless Parent or Sponsor provides written notice of its
desire to terminate this Agreement to the other parties 90 days prior to the
expiration of the Term or any extension thereof.
2. Activities. Sponsor shall perform or cause to be performed
such activities related to the Company as determined by Sponsor in its sole
discretion. Such activities may include, without limitation, the following:
(a) activities related to the general management of the
Company and its subsidiaries;
(b) identification, support, negotiation and analysis of
acquisitions and dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing
alternatives for the Company and its subsidiaries; and
(d) other activities determined by Sponsor in its sole
discretion, including any activities determined by Sponsor in its sole
discretion to be necessary or advisable with respect to the monitoring of the
Company.
Nothing contained in this Agreement shall require Sponsor to perform
any minimum level of activities pursuant to this Agreement.
3. Monitoring Fee.
(a) During the Term of this Agreement, the Company will pay
Sponsor or its designee for actual activities conducted by Sponsor and/or its
affiliates (charged on an hourly basis for actual activities conducted) pursuant
to this Agreement, it being agreed that subject to the terms and conditions of
the following sentence, such fees will not be less than $1,625,000 (the "Minimum
Amount") (regardless of the level of services performed) but will not exceed
$3,250,000 on an annual basis, plus reasonable out-of-pocket expenses of Sponsor
and/or its affiliates in connection with the activities rendered by Sponsor
and/or its affiliates pursuant to this Agreement. Notwithstanding the foregoing,
the Company shall not be obligated to pay Sponsor the aforementioned fees (but
will be obligated to pay Sponsor for its reasonable out-of-pocket expenses in
any event) (a) if there is, or if such payment would result in, a default under
the Senior Credit Agreement (as defined below), or if the Senior Credit
Agreement otherwise prohibits such payment, which shall result in such fees
accruing until such time as such default is cured or waived or (b) until such
time as Parent and its consolidated subsidiaries achieve LTM Adjusted EBITDA (as
defined below) equal to or greater than $125.8 million (it being agreed that the
aforementioned LTM Adjusted EBITDA threshold need only be achieved once, and
thereafter, shall not operate as a limitation on the Company's obligation to pay
the fees specified herein). "LTM Adjusted EBITDA" means, for Parent and its
consolidated subsidiaries (including, for avoidance of doubt, the pre-Effective
Date LTM Adjusted EBITDA of the Company and its consolidated subsidiaries), for
any trailing twelve month period ending on any calendar quarter following the
Effective Date, "Adjusted EBITDA" calculated in a manner consistent with the
calculation thereof set forth under the caption "Summary unaudited pro forma and
historical consolidated financial data" set forth in that certain Offering
Memorandum dated June 21, 2002 pursuant to which WH Acquisition Corp. privately
placed an aggregate of $165 million of its 11.75% Senior Subordinated Notes due
2010. The Company shall pay the aforementioned fees and expenses to Sponsor or
its designee on a quarterly (calendar year) basis, in arrears. "Senior Credit
Agreement" means that certain Credit Agreement (as the same may be amended,
restated or otherwise modified from time to time) to be dated on or about July
31, 2002, among the Company, the subsidiaries of Parent listed therein as
guarantors, the lenders listed therein, UBS Warburg LLC, as arranger, UBS AG,
Stamford Branch, as administrative agent and collateral agent, and the other
parties listed therein as agents.
(b) Notwithstanding any provision contained herein to the
contrary, so long as there are any unpaid Obligations (as such term is defined
in the Senior Credit Agreement) pursuant to the Senior Credit Agreement (other
than contingent indemnity obligations), the Company shall not pay any monitoring
fees pursuant to Section 3(a) of this Agreement in excess of the Minimum Amount.
Any monitoring fees due and payable pursuant to Section 3(a) of this Agreement
in excess of the Minimum Amount shall be accrued as a general unsecured
obligation of the Company, and shall accrue interest at a rate of 12% per annum,
compounded quarterly, and shall be due and payable upon the first date on which
(i) all Obligations (other than contingent indemnity obligations) pursuant to
the Credit Agreement have been paid in full in cash or otherwise satisfied in
full and (ii) following the satisfaction of the condition in the
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aforementioned clause (i) of this sentence, Parent and its consolidated
subsidiaries achieve LTM Adjusted EBITDA equal to or greater than $100 million
(it being agreed that the aforementioned LTM Adjusted EBITDA threshold need only
be achieved once, and thereafter, shall not operate as a limitation on the
Company's obligation to pay the fees specified in this Section 3(b)).
4. Transaction Fees.
(a) The Company shall pay Sponsor or its designee upon the
Effective Date a fee in the amount of $10,500,000 for activities rendered in
connection with the structuring of the Company's debt financing for the
transactions contemplated by the Merger Agreement. Such fee will be payable to
Sponsor or its designee by wire transfer of immediately available funds. In
addition, the Company shall pay Sponsor or its designee, by wire transfer or
immediately available funds, the reasonable out-of-pocket expenses incurred by
Sponsor and/or its affiliates in connection with the foregoing.
(b) In addition, during the Term, the Company will pay Sponsor
or its designee a transaction fee in connection with the consummation of each
transaction resulting in a Change in Control (as defined below), acquisition,
divestiture or financing (whether debt or equity financing) by or involving
Parent or its subsidiaries in an amount equal to 1.5% of the aggregate value of
each such transaction (in each case, whether such transaction is by way of
merger, purchase or sale of stock, purchase or sale or other disposition of
assets, recapitalization, reorganization, consolidation, tender offer, public or
private offering or otherwise, and whether consummated directly by Parent or its
subsidiaries or indirectly by their respective stockholders). "Change in
Control" means (i) any sale or transfer by Parent or its subsidiaries of all or
substantially all of their assets on a consolidated basis, (ii) any
consolidation, merger or reorganization of Parent or any subsidiary with or into
any other entity or entities as a result of which the holders of Parent's or
such subsidiary's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the board or directors
immediately prior to such consolidation, merger or reorganization cease to own
the outstanding capital stock of the surviving corporation possessing the voting
power (under ordinary circumstances) to elect a majority of the surviving
corporation's board of directors or (iii) issuance by Parent or any subsidiary
or sale or transfer to any third party of shares of Parent's or such
subsidiary's capital stock by the holders thereof as a result of which the
holders of Parent's or such subsidiary's outstanding capital stock possessing
the voting power (under ordinary circumstances) to elect a majority of the board
of directors immediately prior to such sale or transfer cease to own the
outstanding capital stock of Parent or such subsidiary possessing the voting
power (under ordinary circumstances) to elect a majority of the board of
directors.
5. Personnel. Sponsor will provide and devote to the
performance of this Agreement such partners, employees and agents of Sponsor as
Sponsor shall deem appropriate to the conduct of the activities contemplated
hereunder.
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6. Liability. Neither Sponsor nor any of its affiliates, nor
any of their respective partners, members, employees or agents (collectively,
the "Sponsor Group") shall be liable to the Company, Parent, their subsidiaries
or any of their affiliates for any loss, liability, damage or expense (including
attorney's fees and expenses) (collectively a "Loss") arising out of or in
connection with the performance of activities contemplated by this Agreement.
Sponsor makes no representations or warranties, express or implied, in respect
of the activities provided by any member of the Sponsor Group. Except as Sponsor
may otherwise agree in writing after the date hereof: (i) each member of the
Sponsor Group shall have the right to, and shall have no duty (contractual or
otherwise) not to, directly or indirectly: (A) engage in the same or similar
business activities or lines of business as the Company, Parent, their
subsidiaries or any of their affiliates and (B) do business with any client or
customer of the Company, Parent, their subsidiaries or any of their affiliates;
(ii) no member of the Sponsor Group shall be liable to the Company, Parent,
their subsidiaries or any of their affiliates for breach of any duty
(contractual or otherwise) by reason of any such activities or of such person's
participation therein; and (iii) in the event that any member of the Sponsor
Group acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for both the Company, Parent, their subsidiaries or any of
their affiliates on the one hand, and any member of the Sponsor Group, on the
other hand, or any other person, no member of the Sponsor Group shall have any
duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Company, Parent, their subsidiaries or any of their
affiliates and, notwithstanding any provision of this Agreement to the contrary,
shall not be liable to the Company, Parent, their subsidiaries or any of their
affiliates for breach of any duty (contractual or otherwise) by reason of the
fact that any member of the Sponsor Group directly or indirectly pursues or
acquires such opportunity for itself, directs such opportunity to another
person, or does not present such opportunity to the Company, Parent, their
subsidiaries or any of their affiliates. In no event will any of the parties
hereto be liable to any other party hereto for (i) any indirect, special,
incidental or consequential damages, including lost profits or savings, whether
or not such damages are foreseeable or (ii) in respect of any liabilities
relating to any third party claims (whether based in contract, tort or
otherwise), except as set forth in Section 7 below.
7. Indemnity. The Company, Parent and their subsidiaries shall
defend, indemnify and hold harmless each member of the Sponsor Group from and
against any and all Losses arising from any claim by any person or entity with
respect to, or in any way related to, this Agreement (collectively, "Claims")
resulting from any act or omission of any member of the Sponsor Group. The
Company, Parent and their subsidiaries shall defend at their own cost and
expense any and all suits or actions (just or unjust) which may be brought
against the Company, Parent, their subsidiaries or any of their affiliates, or
any member of the Sponsor Group or in which any member of the Sponsor Group may
be impleaded with others upon any Claims, or upon any matter, directly or
indirectly related to or arising out of this Agreement or the performance hereof
by any member of the Sponsor Group.
8. Notices. All notices hereunder shall be in writing and
shall be delivered personally or mailed, postage prepaid, addressed to the
parties as follows:
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To Parent or the Company:
WH Holdings (Caymans Islands) Ltd.
Herbalife International, Inc.
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Attention: Chief Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Sponsor:
Whitney & Co., LLC
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
9. Successors. This Agreement and all the obligations and
benefits hereunder shall inure to the successors and assigns of the parties.
10. Assignment. No party may assign any obligations hereunder
to any other party without the prior written consent of each of the other
parties (which consent shall not be unreasonably withheld); provided that
Sponsor may, without consent of Parent or the Company, assign its rights and
obligations under this Agreement to any of its affiliated investment funds. The
assignor shall remain liable for the performance of any assignee.
11. Counterparts. This Agreement may be executed and delivered
by each party hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms
and conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
any party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
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13. Guarantee. Parent hereby (i) unconditionally guarantees
the full, complete and timely performance of, and compliance with, all of the
covenants, agreements, obligations and other liabilities of the Company under
this Agreement; and (ii) agrees to the obligations of it set forth in this
Agreement, including, without limitation, set forth in Sections 6 and 7.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
HERBALIFE INTERNATIONAL, INC.
By: _______________________________
Its: _______________________________
WHITNEY & CO., LLC
By: _______________________________
Its: _______________________________
Acknowledged and agreed to
for purposes of Section 13 hereof:
WH HOLDINGS (CAYMAN ISLANDS) LTD.
By: _________________________________
Its: _________________________________