AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 2001.
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 7299 11-6040273
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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175 CROSSWAYS PARK WEST
WOODBURY, NEW YORK 11797-2055
(516) 390-1400
ROBERT HOLLWEG, ESQ.
WEIGHT WATCHERS INTERNATIONAL, INC.
175 CROSSWAYS PARK WEST
WOODBURY, NEW YORK 11797-2055
(516) 390-1400
WITH COPIES TO:
RISE B. NORMAN, ESQ. KRIS F. HEINZELMAN, ESQ. SIMPSON THACHER & BARTLETT CRAVATH, SWAINE & MOORE 425 LEXINGTON AVENUE 825 EIGHTH AVENUE NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019 |
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _______________
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT PRICE(2) FEE(3)
Common stock, no par value................... 20,010,000 shares $23.00 $460,230,000 $90,058
Preferred stock purchase rights(4)........... -- -- -- --
Total.................................... 20,010,000 shares $23.00 $460,230,000 $90,058
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(1) Includes 2,610,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o).
(3) $25,000 of the total registration fee of $115,058 was paid on September 13, 2001, prior to the initial filing of the registration statement. Therefore, the total registration fee payable upon the filing of this Amendment No. 1, calculated in accordance with Rule 457(a), is $90,058.
(4) The preferred stock purchase rights initially will trade together with the common stock. The value attributable to the preferred stock purchase rights, if any, is reflected in the offering price of the common stock.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 2001
17,400,000 Shares
The shares of common stock are being sold by the selling shareholders named in this prospectus. We will not receive any of the proceeds from the shares of common stock sold by the selling shareholders.
Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $21.00 and $23.00 per share. We will apply to list our common stock on the New York Stock Exchange under the symbol "WTW".
The underwriters have an option to purchase a maximum of 2,610,000 additional shares from the selling shareholders to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" beginning on page 8.
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholders
----------------- ----------------- -----------------
Per
Share... $ $ $
Total... $ $ $
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Delivery of the shares of common stock will be made on or about , 2001.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Credit Suisse First Boston Goldman, Sachs & Co.
Merrill Lynch & Co.
Salomon Smith Barney
UBS Warburg
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The date of this prospectus is .
Picture of Weight Watchers Magazine Cover Picture of Classroom Meeting Weight Watchers Logo Picture of Program Materials Picture of Program Materials Picture of Woman Measuring Weight Loss Picture of Woman Measuring Weight Loss Picture of Spokeswoman at a press conference
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 8
CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS.......... 13
USE OF PROCEEDS....................... 14
DIVIDEND POLICY....................... 14
CAPITALIZATION........................ 15
PRO FORMA COMBINED FINANCIAL
INFORMATION......................... 16
SELECTED HISTORICAL FINANCIAL AND
OTHER INFORMATION................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 25
INDUSTRY.............................. 36
BUSINESS.............................. 38
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PAGE
--------
MANAGEMENT............................ 49
RELATED PARTY TRANSACTIONS............ 57
PRINCIPAL AND SELLING SHAREHOLDERS.... 64
DESCRIPTION OF INDEBTEDNESS........... 65
DESCRIPTION OF CAPITAL STOCK.......... 67
SHARES ELIGIBLE FOR FUTURE SALE....... 74
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES........................ 76
UNDERWRITING.......................... 78
NOTICE TO CANADIAN RESIDENTS.......... 82
LEGAL MATTERS......................... 83
EXPERTS............................... 83
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 83
INDEX TO FINANCIAL STATEMENTS......... F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT IS ACCURATE ONLY ON THE DATE OF THIS DOCUMENT.
In this prospectus, "Weight Watchers," "we," "us" and "our" refer to Weight Watchers International, Inc. and its subsidiaries, unless the context otherwise requires. We refer to our classroom operations that are run directly by us as company-owned and those run by our franchisees as franchised. Unless otherwise indicated, the information in this prospectus assumes the completion of the 4.70536-for-one split of our common stock that we anticipate will occur prior to the completion of this offering.
In January 2001, we acquired the business of one of our two largest franchisees, Weighco Enterprises, Inc. and its subsidiaries, which we collectively refer to as Weighco. When we state that information is presented on a pro forma basis, we have taken into account the Weighco acquisition on the pro forma basis described under "Pro Forma Combined Financial Information."
UNTIL , 2001 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION, ESPECIALLY THE INFORMATION PRESENTED UNDER THE HEADING "RISK FACTORS."
WEIGHT WATCHERS
We are a leading global branded consumer company and the leading provider of weight-loss services in 27 countries around the world. Our programs help people lose weight and maintain their weight loss and, as a result, improve their health, enhance their lifestyles and build self-confidence. At the core of our business are weekly meetings, which promote weight loss through education and group support in conjunction with a flexible, healthy diet. Each week more than one million members attend approximately 37,000 Weight Watchers meetings, which are run by over 13,000 classroom leaders. Our classroom leaders teach, inspire, motivate and act as role models for our members. Our members typically enroll to attend consecutive weekly meetings and have historically demonstrated a consistent re-enrollment pattern across many years.
We have experienced strong growth in sales and profits over the last five years since we made the strategic decision to re-focus our meetings exclusively on our group education approach. We discontinued the in-meeting sale of pre-packaged meals, added in 1990 in our North America company-owned operations by our previous owner, Heinz. We also modernized our diet to adapt it to contemporary lifestyles. Through these initiatives, combined with our strengthened management and strategic focus since our acquisition by Artal Luxembourg, we have grown our attendance at a compound annual rate of approximately 13% from fiscal 1997 through 2000 and our operating profit margin improved from 6.7% (before a restructuring charge) to 25.9% over the same period. Our pro forma revenues for the twelve months ended December 30, 2000 were $488.2 million. For the first six months of 2001, our pro forma revenues grew more than 28% over the comparable period in the prior year.
The number of overweight and obese people worldwide has been increasing due to improving living standards and changing eating patterns, as well as increasingly sedentary lifestyles. The proportion of U.S. adults who are overweight has grown from 47% to 61% over the last 20 years, and the number of overweight people worldwide now exceeds one billion. A growing number of overweight people are dieting not only because of a desire to improve their appearance but also due to a greater awareness of the health risks associated with being overweight.
Throughout our 40-year history, we have maintained that long-term behavior modification is the only effective way to achieve sustainable weight loss. Although approximately 70% of U.S. dieters try to lose weight by themselves, clinical studies have shown that people who attend Weight Watchers meetings are much more likely to lose weight than people who diet on their own. In contrast to our group education approach to long-term behavior modification, most weight-loss companies have focused on quick-fix methods, such as fad diets, meal replacements and diet drugs, and have typically experienced limited or short-lived success. We believe that our approach will continue to achieve success and that we will capture an increasing share of the growing worldwide market for weight-loss services.
OUR STRENGTHS
- BILLION DOLLAR GLOBAL BRAND. Our proven 40-year track record of safe and sensible weight loss has established WEIGHT WATCHERS as the leading global weight-loss brand. We believe that our brand conveys an image of effective, healthy and flexible weight loss in a supportive environment. Our brand is widely recognized throughout the world with retail sales of over $1.5 billion in 2000,
including sales by licensees and franchisees. Currently, over 97% of U.S. women recognize the WEIGHT WATCHERS brand. In addition, our program is the most widely recommended weight-loss program by U.S. doctors. Our credibility is further enhanced by the endorsement of the U.S. government.
- LEADING MARKET POSITION. We are the market leader in weight-loss services in every country in which we operate, other than Denmark, Poland and South Africa. In addition, we face no significant group education-based competition in any of our major markets except the United Kingdom, where we have faced group education-based competition for 30 years. Even there, we have a 50% market share and approximately twice the revenues of our largest competitor. The combination of our strong brand and our unparalleled network of over 13,000 classroom leaders, who have achieved their weight-loss goals on our program, provides us with a formidable competitive advantage.
- LOYAL MEMBER BASE. For many of our members, our classroom program is an inspirational experience that helps them address their life-long challenge of weight control. Our members have historically demonstrated a consistent pattern of repeat enrollment over a number of years. On average, in our North America company-owned, or NACO, operations, our members have enrolled in four separate program cycles.
- ATTRACTIVE VALUE TO MEMBERS. Our low meeting fees ($10 in our NACO operations) offer members an attractive value as compared to other alternatives. For their fee, our members gain access to our scientifically developed diet, detailed program materials and class instruction by one of our trained leaders, as well as group support where members contribute to each other's weight-loss success.
- UNIQUE BUSINESS MODEL. Our business model features high margins, a variable cost structure and low capital requirements.
- HIGH CONTRIBUTION MARGINS. During 2000, our meetings generated a contribution margin of approximately 50%. In that period, for example, our NACO meetings averaged attendance of 34 members and generated average revenues of over $440 per class, including product sales, while our cost of sales is primarily the compensation of two to three part-time employees, the hourly rental of the meeting location and the cost of products sold.
- VARIABLE COST STRUCTURE. Our staff is usually paid on a commission basis and space is typically rented as needed. Moreover, we adjust the number of meetings according to demand, including seasonal fluctuations. This variable cost structure enables us to maintain high margins across varying levels of demand.
- LOW MARKETING COSTS. Our marketing expenditures were less than 15% of our revenues in 2000. Our strong brand, together with the effectiveness of our program and our loyal member base, enable us to attract new and returning members efficiently through both word-of-mouth referrals and mass marketing programs.
- STRONG FREE CASH FLOW. In 2000, our operating income margin was over 25%, while our capital expenditures were less than 1% of revenues. Because we can add additional meetings with little or no capital expenditures and our members typically pay cash at each meeting or prepay for a series of meetings, we require little new capital to grow.
OUR GROWTH STRATEGY
The large and growing global weight-loss market provides us with significant growth potential. In addition, we believe we can increase our share of this market by:
- INCREASING PENETRATION IN EXISTING MAJOR MARKETS. In the United Kingdom, the penetration rate of our target demographic group, overweight women ages 25 to 64, by all group education-based commercial weight-loss programs now exceeds 20%. We believe that this demonstrates the potential for significant increases in penetration in our other major markets. Because we do not face
significant group education-based competition outside the United Kingdom, we believe that we are best positioned to capture this growth. In fact, we have reached a market penetration of 13% and 10% in Sweden and Finland, respectively. In our largest market, the United States, our market penetration was still only 7% in 2000.
- DEVELOPING LESS PENETRATED MARKETS AND ENTERING NEW MARKETS. We believe that we have significant long-term growth opportunities in countries where we have established a meeting infrastructure but where our penetration rates are relatively low. For example, in Germany, we have grown attendance by over 60% in the twelve months ended June 30, 2001, while still penetrating less than 2% of our target market. We have recently expanded into Spain and Denmark and believe we have the ability to enter other new markets as our program has proven adaptable in 27 countries.
- GROWING PRODUCT SALES. In 2000, sales of our proprietary products represented 26% of our revenues, up from 11% in fiscal 1997. We have grown our product sales per attendance by focusing on a core group of products that complement our program. We currently sell snack bars, books, CD-ROMs, POINTS calculators and other items primarily through classroom operations. We will continue to optimize our classroom product offerings by updating existing products and selectively introducing new products.
- GROWING LICENSING ROYALTIES. We currently license the WEIGHT WATCHERS brand in certain categories of food, apparel, books and other products. We derived less than 2% of our 2000 revenues from licensing and royalties but believe there are opportunities to take fuller advantage of the strength of our brand through additional licensing agreements. We also expect to generate royalties from our affiliate and licensee, WeightWatchers.com, Inc., which has recently developed two Internet-based paid subscription products.
- ADDRESSING NEW CUSTOMER SEGMENTS. We believe there are significant opportunities to expand our customer base by developing products and services designed to meet the needs of a broader audience. For example, while approximately 95% of our current members are women, we are actively researching and developing new products and services that are intended to have a greater appeal to men.
RECENT DEVELOPMENTS
On October 29, 2001, we reported net revenues for the three months and nine months ended September 29, 2001 of $144.1 million and $478.3 million, respectively. Our net revenues for the three months and nine months ended September 29, 2001 increased 19.5% and 25.2% compared with pro forma net revenues for the comparable prior year periods. Our operating income for the three months and nine months ended September 29, 2001 was $51.0 million and $160.1 million, respectively. Our operating income for the three months and nine months ended September 29, 2001 increased 63.5% and 46.5% compared with pro forma operating income for the comparable prior year periods.
The increases in our revenues and profitability reflect the continuing strong growth in attendance and product sales across our major markets. Attendance was 10.8 million for the third quarter of 2001, an increase from pro forma attendance of 9.1 million for the three months ended September 30, 2000. While our attendance growth was impacted negatively by the September 11 terrorist attacks, our business had largely returned to pre-September 11 trends by the end of our third quarter of 2001.
We are a Virginia corporation incorporated in 1974. Our principal executive offices are located at 175 Crossways Park West, Woodbury, New York 11797-2055. Our telephone number at that address is (516) 390-1400.
THE OFFERING
Common stock offered by the selling
shareholders............................... 17,400,000 shares (or 20,010,000 shares if
the underwriters exercise the over-allotment
option in full)
Total common stock outstanding after this
offering................................... 105,407,142 shares
Use of proceeds.............................. We will not receive any of the proceeds from
the sale of shares by the selling
shareholders. The selling shareholders will
receive all net proceeds from the sale of
shares of our common stock offered in this
prospectus.
Dividend policy.............................. We do not expect to pay any dividends on our
common stock for the foreseeable future.
Proposed New York Stock Exchange symbol...... WTW
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The number of shares of common stock shown to be outstanding after this offering is based on the number of shares outstanding as of September 29, 2001. This number excludes:
- 5,763,692 shares of our common stock issuable upon exercise of outstanding stock options and
- 1,294,348 shares of our common stock reserved for future issuance under our existing stock option plan.
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The summary pro forma combined financial information has been derived from the unaudited pro forma combined statements of operations and the related notes included elsewhere in this prospectus, which give effect to our acquisition on January 16, 2001 of the franchised territories and certain business assets of Weighco for $83.8 million and the related financing of the acquisition. We financed the acquisition with available cash of $23.8 million and additional borrowings of $60.0 million under our senior credit facilities.
The unaudited pro forma combined statements of operations give effect to the Weighco acquisition and the related financing as if each had occurred on April 25, 1999. Our pro forma results are for informational purposes only and do not purport to represent what actually would have occurred if the acquisition and the related financing had been consummated on April 25, 1999, nor are they necessarily indicative of our future operating results.
Effective April 30, 2000, we changed our fiscal year end from the last Saturday in April to the Saturday closest to December 31. As a result of this change in our reporting period, the significant growth in our business since the fiscal year ended April 29, 2000 and the Weighco acquisition, we have included unaudited pro forma combined results of operations for the twelve months ended December 30, 2000. Given these events, we believe the pro forma results of operations for the twelve months ended December 30, 2000 are more indicative of our current operations. Our results of operations for the twelve months ended December 30, 2000 have been derived from our historical results for the eight months ended December 30, 2000, plus our results for the four months ended April 29, 2000, which are derived from our results for the historical fiscal year ended April 29, 2000. We have included a comparison of the six months ended June 30, 2001 to the six months ended July 29, 2000, which, in the opinion of our management, is the available period most comparable to the six months ended June 30, 2001.
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
SIX MONTHS ENDED
FISCAL YEAR TWELVE MONTHS -----------------------------
ENDED APRIL 29, ENDED DECEMBER 30, JULY 29, JUNE 30,
2000 2000 2000 2001
---------------- ------------------- ------------- -------------
(53 weeks) (54 weeks) (27 weeks) (26 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS INFORMATION:
Revenues, net......................... $436.4 $488.2 $261.5 $336.1
Cost of revenues...................... 216.8 237.5 121.5 149.6
------ ------ ------ ------
Gross profit........................ 219.6 250.7 140.0 186.5
Marketing expenses.................... 55.0 58.9 27.5 40.9
Selling, general and administrative
expenses............................ 60.3 62.7 34.4 35.7
Transaction costs..................... 8.3 -- -- --
------ ------ ------ ------
Operating income.................... 96.0 129.1 78.1 109.9
Interest expense, net................. 40.1 66.8 33.6 27.7
Other (income) expense, net........... (10.5) 7.6 (6.5) 3.9
------ ------ ------ ------
Income before income taxes and
minority interest................. 66.4 54.7 51.0 78.3
Provision for income taxes............ 28.1 20.1 17.9 28.6
------ ------ ------ ------
Income before minority interest..... 38.3 34.6 33.1 49.7
Minority interest..................... 0.8 0.3 0.2 0.1
------ ------ ------ ------
Net income.......................... $ 37.5 $ 34.3 $ 32.9 $ 49.6
====== ====== ====== ======
Preferred stock dividends............. $ 0.9 $ 1.5 $ 0.8 $ 0.8
------ ------ ------ ------
Net income available to common
shareholders...................... $ 36.6 $ 32.8 $ 32.1 $ 48.8
====== ====== ====== ======
PER SHARE INFORMATION:
Basic earnings per share.............. $ 0.20 $ 0.29 $ 0.29 $ 0.44
====== ====== ====== ======
Diluted earnings per share............ $ 0.20 $ 0.29 $ 0.29 $ 0.44
====== ====== ====== ======
Basic weighted average number of
shares*............................. 182.1 112.0 112.0 111.0
====== ====== ====== ======
Diluted weighted average number of
shares*............................. 182.1 112.0 112.0 112.0
====== ====== ====== ======
OTHER FINANCIAL INFORMATION:
Depreciation and amortization......... $ 18.1 $ 14.0 $ 7.7 $ 7.5
Capital expenditures.................. 2.7 4.3 1.7 1.2
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* Prior to our acquisition by Artal Luxembourg on September 29, 1999, there were 4,705 shares of our common stock outstanding. In connection with the transactions related to our acquisition, we declared a stock split that resulted in 276,428,607 outstanding shares of our common stock. We have adjusted our historical statements to reflect the stock split. We then repurchased 164,441,039 shares in connection with the transactions so that upon completion of our acquisition, there were 111,987,568 shares of our common stock outstanding.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain of our historical financial information. The summary historical consolidated financial information as of and for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 and the eight months ended December 30, 2000 have been derived from, and should be read in conjunction with, our audited consolidated financial statements and the related notes, included elsewhere in this prospectus. The summary historical consolidated financial information as of and for the six months ended July 29, 2000 and June 30, 2001 have been derived from, and should be read in conjunction with, our unaudited consolidated financial statements and the related notes included elsewhere in this prospectus. Interim results for the six months ended June 30, 2001 are not necessarily indicative of, and are not projections for, the results to be expected for the full fiscal year.
FISCAL YEAR ENDED EIGHT MONTHS SIX MONTHS ENDED
------------------------------------ ENDED -----------------------
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, JULY 29, JUNE 30,
1998 1999 2000 2000 2000 2001
---------- ---------- ---------- ------------ ---------- ----------
(52 weeks) (52 weeks) (53 weeks) (35 weeks) (27 weeks) (26 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS INFORMATION:
Revenues, net................................. $297.2 $364.6 $399.5 $273.2 $235.9 $334.3
Cost of revenues.............................. 160.0 178.9 201.4 139.3 111.1 149.1
------ ------ ------ ------ ------ ------
Gross profit................................ 137.2 185.7 198.1 133.9 124.8 185.2
Marketing expenses............................ 49.2 52.9 51.5 27.0 25.3 40.6
Selling, general and administrative
expenses.................................... 44.1 48.9 50.7 32.2 28.7 35.5
Transaction costs............................. -- -- 8.3 -- -- --
------ ------ ------ ------ ------ ------
Operating income............................ 43.9 83.9 87.6 74.7 70.8 109.1
Interest (income) expense, net................ (4.9) (7.1) 31.1 37.1 29.0 27.4
Other expense (income), net................... 4.3 5.2 (10.4) 16.5 (6.5) 3.9
------ ------ ------ ------ ------ ------
Income before income taxes and minority
interest.................................. 44.5 85.8 66.9 21.1 48.3 77.8
Provision for income taxes.................... 19.9 36.4 28.3 5.9 16.9 28.4
------ ------ ------ ------ ------ ------
Income before minority interest............. 24.6 49.4 38.6 15.2 31.4 49.4
Minority interest............................. 0.8 1.5 0.8 0.2 0.2 0.1
------ ------ ------ ------ ------ ------
Net income.................................. $ 23.8 $ 47.9 $ 37.8 $ 15.0 $ 31.2 $ 49.3
====== ====== ====== ====== ====== ======
Preferred stock dividends..................... -- -- $ 0.9 $ 1.0 $ 0.8 $ 0.8
------ ------ ------ ------ ------ ------
Net income available to common
shareholders.............................. $ 23.8 $ 47.9 $ 36.9 $ 14.0 $ 30.4 $ 48.5
====== ====== ====== ====== ====== ======
PER SHARE INFORMATION:
Basic earnings per share...................... $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.27 $ 0.44
====== ====== ====== ====== ====== ======
Diluted earnings per share.................... $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.27 $ 0.43
====== ====== ====== ====== ====== ======
Basic weighted average number of shares*...... 276.2 276.2 182.1 112.0 112.0 111.0
====== ====== ====== ====== ====== ======
Diluted weighted average number of shares*.... 276.2 276.2 182.1 112.0 112.0 112.0
====== ====== ====== ====== ====== ======
OTHER FINANCIAL INFORMATION:
Net cash provided by (used in):
Operating activities........................ $ 36.4 $ 57.9 $ 49.9 $ 28.9 $ 39.6 $ 92.9
Investing activities........................ (4.9) (3.0) (19.6) (21.6) (8.9) (94.9)
Financing activities........................ (30.6) (47.7) 8.1 (8.0) (6.3) 4.7
Depreciation and amortization................. 8.8 9.6 10.4 7.9 5.7 7.4
Capital expenditures.......................... 3.4 2.5 1.9 3.6 1.3 1.2
BALANCE SHEET INFORMATION (AT END OF PERIOD):
Working capital (deficit)..................... $ 65.8 $ 91.2 $ (0.9) $ 10.2 $ 9.3 $(26.9)
Total assets.................................. 370.8 371.4 334.2 346.2 342.4 412.6
Total debt.................................... 41.1 39.6 476.1 472.4 474.0 478.7
Redeemable securities:
Preferred stock............................. -- -- 25.9 26.0 26.2 26.7
Common stock................................ -- -- -- -- -- 14.4
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* Prior to our acquisition by Artal Luxembourg on September 29, 1999, there were 4,705 shares of our common stock outstanding. In connection with the transactions related to our acquisition, we declared a stock split that resulted in 276,428,607 outstanding shares of our common stock. We have adjusted our historical statements to reflect the stock split. We then repurchased 164,441,039 shares in connection with the transactions so that upon completion of our acquisition, there were 111,987,568 shares of our common stock outstanding.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES RISKS. YOU SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS BEFORE DECIDING TO PURCHASE ANY SHARES OF OUR COMMON STOCK.
RISKS RELATING TO OUR COMPANY
COMPETITION FROM A VARIETY OF OTHER WEIGHT-LOSS METHODS COULD RESULT IN DECREASED DEMAND FOR OUR SERVICES.
The weight-loss business is highly competitive and we compete against a large number of alternative providers of various sizes, some of which may have greater financial resources than we. We compete against self-administered weight-loss regimens, other commercial weight-loss programs, Internet-based weight-loss programs, nutritionists, dietitians, the pharmaceutical industry, dietary supplements and certain government agencies and non-profit groups that offer weight control help by means of diets, exercise and weight-loss drugs. We also compete against food manufacturers and distributors that are developing and marketing meal replacement and diet products to weight-conscious consumers. In addition, new or different products or methods of weight control are continually being introduced. This competition and any increase in competition, including new pharmaceuticals and other technological and scientific developments in weight control, may result in decreased demand for our services.
OUR OPERATING RESULTS ARE DEPENDENT UPON THE EFFECTIVENESS OF OUR MARKETING AND ADVERTISING PROGRAMS.
Our business success depends upon our ability to attract new members to our classes and retain existing members. The effectiveness of our marketing practices, in particular our advertising campaigns, is important to our financial performance. If our marketing and advertising campaigns for classes do not generate a sufficient number of members, our results of operations will be adversely affected.
IF WE DO NOT CONTINUE TO DEVELOP NEW PRODUCTS AND SERVICES AND ENHANCE OUR EXISTING PRODUCTS AND SERVICES, OUR BUSINESS MAY SUFFER.
Our future success depends on our ability to continue to develop and market new products and services and to enhance our existing products and services on a timely basis to respond to new and evolving customer demands, achieve market acceptance and keep pace with new nutritional and weight-loss developments. We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced products and services, and we cannot assure you that any new or enhanced products or services will be accepted by the market. The failure of our products and services to be accepted by the market would have an adverse impact on us.
OUR DEBT SERVICE OBLIGATIONS COULD IMPEDE OUR OPERATIONS AND FLEXIBILITY.
Our financial performance could be affected by our level of debt. As of June 30, 2001, we had total debt, redeemable preferred stock and common stock which is subject to a repurchase right of $519.8 million. We also had additional availability under our revolving credit facility as of that date of $45.0 million. Our net interest expense for the eight months ended December 30, 2000 and for the six months ended June 30, 2001 was $37.1 million and $27.4 million, respectively.
Our level of debt could have important consequences for you, including the following:
- we will need to use a large portion of the money we earn to pay principal and interest on outstanding amounts due under our senior credit facilities, senior subordinated notes and other
debt, which will reduce the amount of money available to us for financing our operations and other business activities,
- we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage,
- we may have difficulty borrowing money in the future, and
- our debt level makes us more vulnerable to economic downturns and adverse developments in our business.
We expect to obtain the money to pay our expenses and to pay the principal and interest on our outstanding debt from our operations. Our ability to meet our expenses and debt service obligations thus depends on our future performance, which will be affected by financial, business, economic, demographic and other factors, such as attitudes toward weight loss and pressure from our competitors. If we do not have enough money to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or raise equity. In that event, we may not be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us or at all.
WE ARE SUBJECT TO RESTRICTIVE DEBT COVENANTS, WHICH MAY RESTRICT OUR OPERATIONAL FLEXIBILITY.
Our senior credit facilities contain covenants that restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock and make other restricted payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets. Our senior credit facilities also require us to maintain specified financial ratios and satisfy financial condition tests. These tests and financial ratios become more restrictive over the life of the credit facilities. Our ability to meet those financial ratios and tests can be affected by events beyond our control and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants, ratios, tests or restrictions could result in an event of default under the credit facilities. If an event of default exists under the credit facilities, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable. If the lenders under the credit facilities accelerate the payment of the indebtedness, we cannot assure you that our assets would be sufficient to repay in full that indebtedness and our other indebtedness that would become due as a result of any acceleration.
In addition, we have entered into indentures in connection with the issuance of our senior subordinated notes that contain covenants with respect to us and our subsidiaries. Those covenants restrict our ability to incur additional indebtedness and issue preferred stock, pay dividends on and redeem capital stock and make other restricted payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets.
ACTIONS TAKEN BY OUR FRANCHISEES AND LICENSEES MAY HARM OUR BRAND OR REPUTATION.
We believe that the WEIGHT WATCHERS brand is one of our most valuable assets and that our reputation provides us with a competitive advantage. Our franchisees operate their businesses under our brand. In addition, we license our brand to third-party manufacturers of a variety of goods, including food products. Further, when we were acquired from Heinz, Heinz retained a perpetual, royalty-free license to continue using the WEIGHT WATCHERS brand in its core food categories, including frozen dinners, frozen breakfasts, frozen desserts and frozen pizza. Because our franchisees and licensees are independent third parties with their own financial objectives, actions taken by them, including breaches of their contractual obligations, such as not following our diets or not maintaining our quality standards, could harm our brand or reputation. Also, the products we license to third parties may be subject to product recalls or other deficiencies. Any negative publicity associated with
these actions or recalls may adversely affect our reputation and thereby result in decreased classroom attendance and lower revenues.
DISPUTES WITH OUR FRANCHISE OPERATORS COULD DIVERT OUR MANAGEMENT'S ATTENTION.
In the past, we have had disputes with our franchisees regarding operations and revenue sharing. We continue to have disputes with a few of our franchisees regarding the interpretation of franchisee rights as they relate to the Internet and mail-order products. These disputes and any future disputes could divert the attention of our management from their ordinary responsibilities.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO ECONOMIC, POLITICAL AND SOCIAL RISKS IN THE COUNTRIES IN WHICH WE OPERATE.
The international nature of our existing and planned operations involves a number of risks, including changes in U.S. and foreign government regulations, tariffs, taxes and exchange controls, economic downturns, inflation and political and social instability in the countries in which we operate and our dependence on foreign personnel. Foreign governmental regulations may also restrict our ability to own or operate subsidiaries in those countries, acquire new businesses or repatriate dividends from foreign subsidiaries back to the United States. We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate.
WE ARE EXPOSED TO FOREIGN CURRENCY RISKS FROM OUR INTERNATIONAL OPERATIONS THAT COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS.
A significant portion of our revenues and operating costs are, and a portion of our indebtedness is, denominated in foreign currencies. We are therefore exposed to fluctuations in the exchange rates between the U.S. dollar and the currencies in which our foreign operations receive revenues and pay expenses, including debt service. Our consolidated financial results are denominated in U.S. dollars and therefore, during times of a strengthening U.S. dollar, our reported international revenues and earnings will be reduced because the local currency will translate into fewer U.S. dollars. In addition, the assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into U.S. dollars at the weighted average exchange rate for the period. The resulting translation adjustments are recorded in shareholders' equity as accumulated other comprehensive income (loss). Furthermore, we revalue our outstanding senior subordinated euro notes at the end of each period, and the resulting change in value is reflected in the income statement of the corresponding period. Accordingly, changes in currency exchange rates will cause our net income and shareholders' equity to fluctuate.
OUR RESULTS OF OPERATIONS MAY DECLINE AS A RESULT OF A DOWNTURN IN GENERAL ECONOMIC CONDITIONS.
Our results of operations are highly dependent upon the meeting fees we receive in our classroom operations and our product sales. A downturn in general economic conditions or consumer confidence and spending in any of our major markets caused by the recent terrorist attacks or other events outside of our control could result in people curtailing their discretionary spending, which, in turn, could reduce attendance at our meetings. Reduced meeting attendance would cause the meeting fees we receive and our product sales to decline, which would adversely affect our results of operations.
THE SEASONAL NATURE OF OUR BUSINESS COULD CAUSE OUR OPERATING RESULTS TO FLUCTUATE.
We have experienced and expect to continue to experience fluctuations in our quarterly results of operations. Our business is seasonal with revenues generally decreasing at year end and during the summer months. This seasonality could cause our share price to fluctuate as the results of an interim
financial period may not be indicative of our full year results. In addition, our classroom operations are subject to local conditions beyond our control, including the weather, natural disasters and other extraordinary events, that may prevent current or prospective members from attending or joining classes. The inability of prospective members to join our classes at the beginning of a diet season could adversely affect our results of operations throughout the entire diet season.
OUR ADVERTISING AND FRANCHISE OPERATIONS ARE SUBJECT TO LEGISLATIVE AND REGULATORY RESTRICTIONS.
A number of laws and regulations govern our advertising, franchise operations and relations with consumers. The Federal Trade Commission, or FTC, and certain states regulate advertising, disclosures to consumers and franchisees and other consumer matters. Our customers may file actions on their own behalf, as a class or otherwise, and may file complaints with the FTC or state or local consumer affairs offices and these agencies may take action on their own initiative or on a referral from consumers or others.
During the mid-1990s, the FTC filed complaints against a number of commercial weight-loss providers alleging violations of the Federal Trade Commission Act by the use and content of advertisements for weight-loss programs that featured testimonials, claims for program success and safety and statements as to program costs to participants. In 1997, we entered into a consent order with the FTC settling all contested issues raised in the complaint filed against us. The consent order requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services but does not contain any admission of guilt nor require us to pay any civil penalties or damages.
Our foreign operations and franchises are also generally subject to regulations of the applicable country regarding the offer and sale of franchises, the content of advertising and promotion of diet products and programs. Future legislation or regulations, including legislation or regulations affecting our marketing and advertising practices, relations with consumers or franchisees or our food products, could have an adverse impact on us.
RISKS RELATED TO THIS OFFERING
THERE IS NO EXISTING MARKET FOR OUR COMMON STOCK, AND WE DO NOT KNOW IF ONE WILL DEVELOP TO PROVIDE YOU WITH ADEQUATE LIQUIDITY.
There has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the New York Stock Exchange or otherwise or how liquid that market might become. The initial public offering price for the shares will be determined by negotiations between the selling shareholders and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering.
ARTAL LUXEMBOURG CONTROLS US AND MAY HAVE CONFLICTS OF INTEREST WITH OTHER SHAREHOLDERS IN THE FUTURE.
Artal Luxembourg S.A. controls us. After the offering, Artal Luxembourg will beneficially own 78.8% of our common stock or 76.5% if the underwriters exercise their over-allotment option in full. As a result, Artal Luxembourg will continue to be able to control the election and removal of our directors and determine our corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales and other significant corporate transactions. We cannot assure you that the interests of Artal Luxembourg will coincide with the interests of other holders of our common stock. In addition, Artal Luxembourg also owns 72.3% of the common stock, or 48.1% on a fully diluted basis, of our licensee, WeightWatchers.com. Artal Luxembourg's interests with respect to WeightWatchers.com may differ from the interests of our other shareholders.
FUTURE SALES OF OUR SHARES COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
There are 105,407,142 shares of our common stock outstanding. The 17,400,000 shares of common stock sold in this offering (20,010,000 shares if the underwriters exercise their over-allotment option in full) will be freely tradeable without restriction or further registration under the Securities Act of 1933, as amended, by persons other than our affiliates within the meaning of Rule 144 under the Securities Act.
Following this offering, Artal Luxembourg will own 83,062,423 shares of our common stock or 80,655,296 shares if the underwriters exercise their over-allotment option in full. Artal Luxembourg will be able to sell its shares in the public market from time to time, subject to certain limitations on the timing, amount and method of those sales imposed by SEC regulations. Artal Luxembourg and the underwriters have agreed to a "lock-up" period, meaning that Artal Luxembourg may not sell any of its shares without the prior consent of Credit Suisse First Boston Corporation for 180 days after the date of this prospectus. Artal Luxembourg has the right to cause us to register the sale of shares of common stock owned by it and to include its shares in future registration statements relating to our securities. If Artal Luxembourg were to sell a large number of its shares, the market price of our stock could decline significantly. In addition, the perception in the public markets that sales by Artal Luxembourg might occur could also adversely affect the market price of our common stock.
In addition to Artal Luxembourg's lock-up period, sales of our common stock are also restricted by lock-up agreements that our directors, executive officers and the selling shareholders have entered into with the underwriters. The lock-up agreements restrict our directors, executive officers and the selling shareholders, subject to specified exceptions, from selling or otherwise disposing of any shares for a period of 180 days after the date of this prospectus without the prior consent of Credit Suisse First Boston Corporation. Credit Suisse First Boston Corporation may, however, in its sole discretion and without notice, release all or any portion of the shares from the restrictions in the lock-up agreements.
In the future, we may issue our securities in connection with investments. The amount of our common stock issued in connection with an investment could constitute a material portion of our then outstanding common stock.
OUR ARTICLES OF INCORPORATION AND BYLAWS AND VIRGINIA CORPORATE LAW CONTAIN PROVISIONS THAT MAY DISCOURAGE A TAKEOVER ATTEMPT.
Provisions contained in our articles of incorporation and bylaws and the laws of Virginia, the state in which we are organized, could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. Provisions of our articles of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. For example, our articles of incorporation authorize our board of directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock, without any vote or action by our shareholders. Thus, our board of directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock. These rights may have the effect of delaying or deterring a change of control of our company. In addition, a change of control of our company may be delayed or deterred as a result of our having three classes of directors or as a result of the shareholders' rights plan adopted by our board of directors. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD CAUSE THE VALUE OF YOUR INVESTMENT TO DECLINE.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly. You may be unable to resell your shares of our common stock at or above the initial public offering price.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements including, in particular, the statements about our plans, strategies and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry" and "Business." We have used the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" and similar expressions in this prospectus to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:
- competition, including price competition and competition with self-help, medical and other weight-loss programs and products;
- risks associated with the relative success of our marketing and advertising;
- risks associated with the continued attractiveness of our programs;
- risks associated with our ability to meet our obligations related to our outstanding indebtedness;
- risks associated with general economic conditions;
- adverse results in litigation and regulatory matters, the adoption of adverse legislation or regulations, more aggressive enforcement of existing legislation or regulations or a change in the interpretation of existing legislation or regulations; and
- the other factors referenced under the heading "Risk Factors."
You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations," could cause our results to differ materially from those expressed or suggested in any forward-looking statements.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by the selling shareholders. The selling shareholders will receive all net proceeds from the sale of the shares of our common stock in this offering.
DIVIDEND POLICY
We do not intend to pay any dividends on our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors, after taking into account our financial results, capital requirements and other factors they may deem relevant. Our debt instruments impose restrictions on our ability to pay dividends.
CAPITALIZATION
The following table sets forth our cash and our capitalization as of June 30, 2001. You should read this table in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus and "Selected Historical Financial and Other Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
JUNE 30,
2001
--------------
(in millions)
Cash........................................................ $ 45.6
=======
Long-term debt (including current maturities):
Senior credit facilities(1)............................... $ 243.7
Senior subordinated notes due 2009(2)..................... 235.0
-------
Total long-term debt.................................... 478.7
-------
Redeemable preferred stock(3)............................... 26.7
-------
Common stock subject to mandatory repurchase(4)............. 14.4
-------
Shareholders' deficit:
Common stock, no par value (1,000,000,000 authorized,
111,987,568 issued and 108,950,278 outstanding)......... --
Treasury stock, at cost, 3,037,290 shares................. (12.2)
Accumulated (deficit)..................................... (182.4)
Accumulated other comprehensive (loss).................... (15.7)
-------
Total shareholders' (deficit)........................... (210.3)
-------
Total capitalization.................................. $ 309.5
=======
|
(1) The senior credit facilities consist of a $70.8 million term loan A facility, a $71.2 million term loan B facility, an $82.5 million transferable loan certificate facility, a $19.2 million term loan D facility and a $45.0 million revolving credit facility. As of June 30, 2001, $45.0 million was available under the revolving credit facility for additional borrowings.
(2) The senior subordinated notes due 2009 consist of two series of notes in aggregate principal amounts of $150.0 million and E100.0 million, respectively.
(3) The redeemable preferred stock is redeemable under certain conditions at the option of the holder thereof upon the completion of this offering.
(4) Pursuant to a Put/Call Agreement with Heinz, Heinz has the right to sell to us and we have an option to purchase all of our common stock held by Heinz. As of June 30, 2001, Heinz owned 3,566,663 shares of our common stock.
The above table does not reflect:
- 5,763,692 shares of our common stock issuable upon exercise of outstanding stock options as of September 29, 2001;
- 1,294,348 shares of our common stock available for future issuance under our existing stock option plan;
- our purchase of 3,566,663 shares of our common stock held by Heinz for $14.4 million; and
- 23,527 shares of our common stock sold to one of our employees.
PRO FORMA COMBINED FINANCIAL INFORMATION
On January 16, 2001, we acquired the franchised territories and certain business assets, including inventory, property and equipment, of Weighco for $83.8 million. We financed the acquisition with available cash of $23.8 million and additional borrowings of $60.0 million under our senior credit facilities. The acquisition has been accounted for under the purchase method of accounting and, accordingly, the results of operations of Weighco are included from the date of acquisition.
The unaudited pro forma combined statements of operations of Weight Watchers are based on the historical consolidated statements of operations of Weight Watchers, included elsewhere in this prospectus, adjusted to give effect to the Weighco acquisition and the related financing of the acquisition.
The unaudited pro forma combined statements of operations give effect to the Weighco acquisition and the related financing as if each had occurred on April 25, 1999. Our pro forma results are for informational purposes only and do not purport to represent what actually would have occurred if the acquisition and the related financing had been consummated on April 25, 1999, nor are they necessarily indicative of our future operating results.
Effective April 30, 2000, we changed our fiscal year end from the last Saturday in April to the Saturday closest to December 31. As a result of this change in our reporting period, the significant growth in our business since the fiscal year ended April 29, 2000 and the Weighco acquisition, we have included unaudited pro forma combined results of operations for the twelve months ended December 30, 2000. Given these events, we believe the pro forma results of operations for the twelve months ended December 30, 2000 are more indicative of our current operations. We have included a comparison of the six months ended June 30, 2001 to the six months ended July 29, 2000, which, in the opinion of our management, is the available period most comparable to the six months ended June 30, 2001.
The following pro forma adjustments are based upon available information and upon certain assumptions which we believe are reasonable. You should read the following unaudited pro forma combined statements of operations in conjunction with "Selected Historical Financial and Other Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," our historical consolidated financial statements and related notes and the historical consolidated financial statements of Weighco and related notes included elsewhere in this prospectus.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
(UNAUDITED)
WEIGHT WATCHERS
INTERNATIONAL, PRO FORMA
INC.* WEIGHCO ADJUSTMENTS PRO FORMA
--------------- ---------- ----------- ---------
(54 weeks) (53 weeks)
(in millions, except per share amounts)
Revenues, net................................. $439.4 $59.7 $(10.9)(A) $488.2
Cost of revenues.............................. 218.0 30.4 (10.9)(A) 237.5
------ ----- ------ ------
Gross profit................................ 221.4 29.3 250.7
Marketing expenses............................ 54.8 4.1 58.9
Selling, general and administrative
expenses.................................... 52.8 13.0 4.0 (B) 62.7
(7.1)(C)
------ ----- ------ ------
Operating income............................ 113.8 12.2 3.1 129.1
Interest expense, net......................... 57.6 2.2 7.0 (D,E) 66.8
Other expense, net............................ 7.0 9.2 (8.6)(C) 7.6
------ ----- ------ ------
Income before income taxes and minority
interest.................................. 49.2 0.8 4.7 54.7
Provision for income taxes.................... 18.1 -- 2.0 (F) 20.1
------ ----- ------ ------
Income before minority interest............. 31.1 0.8 2.7 34.6
Minority interest............................. 0.3 -- 0.3
------ ----- ------ ------
Net income.................................. $ 30.8 $ 0.8 $ 2.7 $ 34.3
====== ===== ====== ======
Preferred stock dividends..................... $ 1.5 $ 1.5
------ ------
Net income available to common
shareholders.............................. $ 29.3 $ 32.8
====== ======
PER SHARE INFORMATION:
Basic and diluted earnings per share.......... $ 0.26 $ 0.29
====== ======
Weighted average number of shares............. 112.0 112.0
====== ======
|
* The results of operations for Weight Watchers for the twelve months ended December 30, 2000 have been derived from Weight Watchers' historical results of operations for the eight months ended December 30, 2000, plus Weight Watchers' results of operations for the four months ended April 29, 2000, which are derived from the results of operations for the historical fiscal year ended April 29, 2000.
See accompanying notes to this unaudited statement.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. ADJUSTMENTS PRO FORMA
------------------- ----------- ---------
(26 weeks)
(in millions, except per share amounts)
Revenues, net.......................................... $334.3 $ 1.8 (G) $336.1
Cost of revenues....................................... 149.1 0.5 (G) 149.6
------ ----- ------
Gross profit......................................... 185.2 1.3 186.5
Marketing expenses..................................... 40.6 0.3 (G) 40.9
Selling, general and administrative expenses........... 35.5 0.2 (B) 35.7
(0.2)(C)
0.2 (G)
------ ----- ------
Operating income..................................... 109.1 0.8 109.9
Interest expense, net.................................. 27.4 0.3 (D,E) 27.7
Other expense, net..................................... 3.9 3.9
------ ----- ------
Income before income taxes and minority interest..... 77.8 0.5 78.3
Provision for income taxes............................. 28.4 0.2 (F) 28.6
------ ----- ------
Income before minority interest...................... 49.4 0.3 49.7
Minority interest...................................... 0.1 0.1
------ ----- ------
Net income........................................... $ 49.3 $ 0.3 $ 49.6
====== ===== ======
Preferred stock dividends.............................. $ 0.8 $ 0.8
------ ------
Net income available to common shareholders.......... $ 48.5 $ 48.8
====== ======
PER SHARE INFORMATION:
Basic earnings per share............................... $ 0.44 $ 0.44
====== ======
Diluted earnings per share............................. $ 0.43 $ 0.44
====== ======
Basic weighted average number of shares................ 111.0 111.0
====== ======
Diluted weighted average number of shares.............. 112.0 112.0
====== ======
|
See accompanying notes to this unaudited statement.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 29, 2000
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. WEIGHCO ADJUSTMENTS PRO FORMA
------------------- ---------- ----------- ---------
(27 weeks) (26 weeks)
(in millions, except per share amounts)
Revenues, net..................................... $235.9 $30.5 $(4.9)(A) $261.5
Cost of revenues.................................. 111.1 15.3 (4.9)(A) 121.5
------ ----- ----- ------
Gross profit.................................... 124.8 15.2 140.0
Marketing expenses................................ 25.3 2.2 27.5
Selling, general and administrative expenses...... 28.7 7.2 2.0(B) 34.4
(3.5)(C)
------ ----- ----- ------
Operating income................................ 70.8 5.8 1.5 78.1
Interest expense, net............................. 29.0 1.2 3.4 (D,E) 33.6
Other (income) expense, net....................... (6.5) -- (6.5)
------ ----- ----- ------
Income before income taxes and minority 48.3 4.6 (1.9) 51.0
interest......................................
Provision for income taxes........................ 16.9 -- 1.0 (F) 17.9
------ ----- ----- ------
Income before minority interest................. 31.4 4.6 (2.9) 33.1
Minority interest................................. 0.2 -- 0.2
------ ----- ----- ------
Net income...................................... $ 31.2 $ 4.6 $(2.9) $ 32.9
====== ===== ===== ======
Preferred stock dividends......................... $ 0.8 $ 0.8
------ ------
Net income available to common shareholders..... $ 30.4 $ 32.1
====== ======
PER SHARE INFORMATION:
Basic and diluted earnings per share.............. $ 0.27 $ 0.29
====== ======
Weighted average number of shares................. 112.0 112.0
====== ======
|
See accompanying notes to this unaudited statement.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 29, 2000
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. WEIGHCO(1) ADJUSTMENTS PRO FORMA
------------------- ---------- ----------- ---------
(53 weeks) (53 weeks)
(in millions, except per share amounts)
Revenues, net.............................. $399.5 $ 44.9 $(8.0)(A) $436.4
Cost of revenues........................... 201.4 23.4 (8.0)(A) 216.8
------ ------ ----- ------
Gross profit............................. 198.1 21.5 219.6
Marketing expenses......................... 51.5 3.5 55.0
Selling, general and administrative 50.7 11.2 4.0 (B) 60.3
expenses................................. (5.6)(C)
Transaction costs.......................... 8.3 -- 8.3
------ ------ ----- ------
Operating income......................... 87.6 6.8 1.6 96.0
Interest expense, net...................... 31.1 2.0 7.0 (D,E) 40.1
Other income, net.......................... (10.4) (0.1) (10.5)
------ ------ ----- ------
Income before income taxes and minority 66.9 4.9 (5.4) 66.4
interest...............................
Provision for income taxes................. 28.3 -- (0.2)(F) 28.1
------ ------ ----- ------
Income before minority interest.......... 38.6 4.9 (5.2) 38.3
Minority interest.......................... 0.8 -- 0.8
------ ------ ----- ------
Net income............................... $ 37.8 $ 4.9 $(5.2) $ 37.5
====== ====== ===== ======
Preferred stock dividends.................. $ 0.09 $ 0.9
------ ------
Net income available to common
shareholders........................... $ 36.9 $ 36.6
====== ======
PER SHARE INFORMATION:
Basic and diluted earnings per share....... $ 0.20 $ 0.20
====== ======
Weighted average shares outstanding(2)..... 182.1 182.1
====== ======
|
(1) The results of operations for Weighco for the year ended April 29, 2000 have been derived from the four months ended April 29, 2000, which are derived from the historical results of operations of Weighco for the year ended December 30, 2000, plus the eight months ended December 25, 1999, which have been derived from the historical results of operations of Weighco for the year ended December 25, 1999.
(2) Prior to our acquisition by Artal Luxembourg on September 29, 1999, there were 4,705 shares of our common stock outstanding. In connection with our acquisition, we declared a stock split that resulted in 276,428,607 outstanding shares of our common stock. We have adjusted our historical statements to reflect the stock split. We then repurchased 164,441,039 shares in connection with the transactions so that upon completion of our acquisition, there were 111,987,568 shares of our common stock outstanding.
See accompanying notes to this unaudited statement.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. WEIGHCO* ADJUSTMENTS PRO FORMA
------------------- ---------- ----------- ---------
(35 weeks) (35 weeks)
(in millions, except per share amounts)
Revenues, net................................ $273.2 $39.9 $(6.6)(A) $306.5
Cost of revenues............................. 139.3 21.0 (6.6)(A) 153.7
------ ----- ----- ------
Gross profit............................... 133.9 18.9 152.8
Marketing expenses........................... 27.0 2.0 29.0
Selling, general and administrative
expenses................................... 32.2 9.6 2.8 (B) 39.8
(4.8)(C)
------ ----- ----- ------
Operating income........................... 74.7 7.3 2.0 84.0
4.7 (D,
Interest expense, net........................ 37.1 1.6 E) 43.4
Other expense, net........................... 16.5 9.0 (8.6)(C) 16.9
------ ----- ----- ------
Income (loss) before income taxes and
minority interest........................ 21.1 (3.3) 5.9 23.7
Provision for (benefit from) income taxes.... 5.9 -- 0.7 (F) 6.6
------ ----- ----- ------
Income (loss) before minority interest..... 15.2 (3.3) 5.2 17.1
Minority interest............................ 0.2 -- 0.2
------ ----- ----- ------
Net income (loss).......................... $ 15.0 $(3.3) $ 5.2 $ 16.9
====== ===== ===== ======
Preferred stock dividends.................... $ 1.0 $ 1.0
------ ------
Net income available to common
shareholders............................... $ 14.0 $ 15.9
====== ======
PER SHARE INFORMATION:
Basic and diluted earnings per share......... $ 0.13 $ 0.15
====== ======
Weighted average shares outstanding.......... 112.0 112.0
====== ======
|
* The historical results of operations for Weighco for the eight months ended December 30, 2000 have been derived from the historical results of operations of Weighco for the year ended December 30, 2000.
See accompanying notes to this unaudited statement.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following is a summary of the estimated pro forma adjustments, based upon available information and upon certain assumptions we believe are reasonable, that are reflected in our unaudited pro forma condensed combined statements of operations:
TWELVE EIGHT
MONTHS MONTHS
ENDED SIX MONTHS SIX MONTHS FISCAL YEAR ENDED
DECEMBER 30, ENDED JUNE 30, ENDED JULY 29, ENDED APRIL 29, DECEMBER 30,
2000 2001 2000 2000 2000
------------- --------------- -------------- --------------- -------------
(in millions)
(A) Represents the elimination of
royalty revenues and expense and
product sales to Weighco......... $10.9 $4.9 $8.0 $6.6
(B) Represents the amortization of
acquisition goodwill of $80.8
million over 20 years utilizing
the straight-line method......... $ 4.0 $0.2 $2.0 $4.0 $2.8
(C) Represents the elimination of
non-recurring costs and charges
incurred by Weighco relating to
the sale to Weight Watchers:
Selling, general and
administrative expenses(1)... $ 7.1 $0.2 $3.5 $5.6 $4.8
Other expenses(2)................ $ 8.6 $8.6
(D) Represents a reduction of
interest income relating to
$23.8 million of cash used to
fund the acquisition at an
assumed interest rate of 5.5%.... $ 1.3 $0.1 $0.6 $1.3 $0.9
(E) Represents interest expense
related to acquisition borrowings
of $60.0 million at an assumed
interest rate of 9.5%............ $ 5.7 $0.2 $2.8 $5.7 $3.8
(F) Represents adjustment to
recognize income taxes at 37% for
the twelve months ended December
30, 2000, and the six months
ended June 30, 2001 and July 29,
2000, 42% for the fiscal year
ended April 29, 2000 and 28% for
the eight months ended December
30, 2000......................... $ 2.0 $0.2 $1.0 $0.2 $0.7
(G) Represents operating results for
Weighco during the first 15 days
of January 2001 as follows:
Revenues, net.................... $1.8
Cost of revenues................. $0.5
Marketing expense................ $0.3
Selling, general and
administrative expense..... $0.2
|
(1) Adjustments to selling, general and administrative expenses include the following:
Amortization of pre-existing
goodwill......................... $ 3.3 $0.2 $1.7 $2.4 $2.3
Management and incentive
compensation paid by Weighco
before acquisition............... $ 3.8 -- $1.8 $3.2 $2.5
----- ---- ---- ---- ----
Total selling, general and
administrative expenses.......... $ 7.1 $0.2 $3.5 $5.6 $4.8
===== ==== ==== ==== ====
|
(2) Adjustments to other expenses consist of costs incurred in connection with the Weighco acquisition, principally transaction-related incentive compensation of $5.4 million paid to Weighco management and the write-off of certain non-compete agreements of $3.4 million.
SELECTED HISTORICAL FINANCIAL AND OTHER INFORMATION
The following table sets forth our selected historical financial and other information and the related notes. The selected historical financial information as of and for the fiscal year ended April 27, 1996 has been derived from our unaudited combined financial statements, which are not included in this prospectus. The selected historical financial information as of and for the fiscal year ended April 26, 1997 has been derived from our audited combined financial statements, which are not included in this prospectus. The selected historical financial information as of and for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 and the eight months ended December 30, 2000 has been derived from our audited financial statements and the related notes, included elsewhere in this prospectus. The selected historical financial information as of and for six months ended July 29, 2000 and June 30, 2001 has been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. In our opinion, all adjustments (which consist only of normal recurring entries) considered necessary for a fair presentation have been included in our unaudited financial statements. Interim results for the six months ended June 30, 2001 are not necessarily indicative of, and are not projections for, the results to be expected for the full fiscal year. You should read the following selected historical financial and other information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.
EIGHT
FISCAL YEAR ENDED MONTHS SIX MONTHS ENDED
-------------------------------------------------------------- ENDED -----------------------
APRIL 27, APRIL 26, APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, JULY 29, JUNE 30,
1996 1997 1998 1999 2000 2000 2000 2001
---------- ---------- ---------- ---------- ---------- ------------ ---------- ----------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) (35 weeks) (27 weeks) (26 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS
INFORMATION:
Revenues, net............. $323.3 $292.8 $297.2 $364.6 $399.5 $273.2 $235.9 $334.3
Cost of revenues.......... 190.9 230.4(1) 160.0 178.9 201.4 139.3 111.1 149.1
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 132.4 62.4 137.2 185.7 198.1 133.9 124.8 185.2
Marketing expenses........ 53.9 48.9 49.2 52.9 51.5 27.0 25.3 40.6
Selling, general and
administrative
expenses................ 51.9 45.5(1) 44.1 48.9 50.7 32.2 28.7 35.5
Transaction costs......... -- -- -- -- 8.3 -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Operating income
(loss)................ 26.6 (32.0) 43.9 83.9 87.6 74.7 70.8 109.1
Interest expense (income),
net..................... 3.3 1.0 (4.9) (7.1) 31.1 37.1 29.0 27.4
Other expense (income),
net..................... 4.8 3.3 4.3 5.2 (10.4) 16.5 (6.5) 3.9
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes and
minority interests.... 18.5 (36.3) 44.5 85.8 66.9 21.1 48.3 77.8
(Benefit from) provision
for income taxes........ (3.6) (12.9) 19.9 36.4 28.3 5.9 16.9 28.4
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
minority interests.... 22.1 (23.4) 24.6 49.4 38.6 15.2 31.4 49.4
Minority interest......... 0.6 0.6 0.8 1.5 0.8 0.2 0.2 0.1
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ 21.5 $(24.0) $ 23.8 $ 47.9 $ 37.8 $ 15.0 $ 31.2 $ 49.3
====== ====== ====== ====== ====== ====== ====== ======
Preferred stock
dividends............... -- -- -- -- $ 0.9 $ 1.0 $ 0.8 $ 0.8
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)
available to common
shareholders.......... $ 21.5 $(24.0) $ 23.8 $ 47.9 $ 36.9 $ 14.0 $ 30.4 $ 48.5
====== ====== ====== ====== ====== ====== ====== ======
|
EIGHT
FISCAL YEAR ENDED MONTHS SIX MONTHS ENDED
-------------------------------------------------------------- ENDED -----------------------
APRIL 27, APRIL 26, APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, JULY 29, JUNE 30,
1996 1997 1998 1999 2000 2000 2000 2001
---------- ---------- ---------- ---------- ---------- ------------ ---------- ----------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) (35 weeks) (27 weeks) (26 weeks)
(in millions, except per share amounts)
PER SHARE INFORMATION:
Basic earnings (loss) per
share................... $ 0.08 $(0.09) $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.27 $ 0.44
====== ====== ====== ====== ====== ====== ====== ======
Diluted earnings (loss)
per share............... $ 0.08 $(0.09) $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.27 $ 0.43
====== ====== ====== ====== ====== ====== ====== ======
Basic weighted average
number of shares(2)..... 276.2 276.2 276.2 276.2 182.1 112.0 112.0 111.0
====== ====== ====== ====== ====== ====== ====== ======
Diluted weighted average
number of shares(2)..... 276.2 276.2 276.2 276.2 182.1 112.0 112.0 112.0
====== ====== ====== ====== ====== ====== ====== ======
OTHER FINANCIAL
INFORMATION:
Net cash provided by (used
in):
Operating activities.... $ 9.7 $ 36.4 $ 57.9 $ 49.9 $ 28.9 $ 39.6 $ 92.9
Investing activities.... (1.4) (4.9) (3.0) (19.6) (21.6) (8.9) (94.9)
Financing activities.... (4.4) (30.6) (47.7) 8.1 (8.0) (6.3) 4.7
Depreciation and
amortization............ $ 10.4 14.2 8.8 9.6 10.4 7.9 5.7 7.4
Capital expenditures...... 5.3 2.7 3.4 2.5 1.9 3.6 1.3 1.2
BALANCE SHEET INFORMATION
(AT END OF PERIOD):
Working capital
(deficit)............... $ 83.6 $ 64.9 $ 65.8 $ 91.2 $ (0.9) $ 10.2 $ 9.3 $(26.9)
Total assets.............. 393.4 373.0 370.8 371.4 334.2 346.2 342.4 412.6
Total debt................ 97.2 97.0 41.1 39.6 476.1 472.4 474.0 478.7
Redeemable securities:
Preferred stock......... -- -- -- -- 25.9 26.0 26.2 26.7
Common stock............ -- -- -- -- -- -- -- 14.4
|
(1) In connection with a restructuring and reorganization announced during fiscal 1997, we recorded a restructuring charge of $51.7 million, of which $49.6 million is included in costs of revenues and $2.1 million is included in selling, general and administrative expenses.
(2) Prior to our acquisition by Artal Luxembourg on September 29, 1999, there were 4,705 shares of our common stock outstanding. In connection with the transactions related to our acquisition, we declared a stock split that resulted in 276,428,607 outstanding shares of our common stock. We have adjusted our historical statements to reflect the stock split. We then repurchased 164,441,039 shares in connection with the transactions so that upon completion of our acquisition, there were 111,987,568 shares of our common stock outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH "SELECTED HISTORICAL FINANCIAL AND OTHER INFORMATION" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, REFERENCES TO THE 1997, 1998, 1999 AND 2000 FISCAL YEARS ARE TO OUR FISCAL YEARS ENDED APRIL 26, 1997, APRIL 25, 1998, APRIL 24, 1999 AND APRIL 29, 2000, RESPECTIVELY. AFTER THE FISCAL YEAR ENDED APRIL 29, 2000, WE CHANGED OUR FISCAL YEAR END TO THE SATURDAY CLOSEST TO DECEMBER 31. ACCORDINGLY, THE FISCAL YEAR ENDED DECEMBER 30, 2000 IS AN EIGHT-MONTH PERIOD.
OVERVIEW
We are the leading provider of weight-loss services in 27 countries around the world. We conduct our business through a combination of company-owned and franchise operations, with company-owned operations accounting for 67% of total worldwide attendance in the first six months of 2001. For the first six months of 2001, 61% of our revenues were derived from our U.S. operations, and the remaining 39% of our revenues were derived from our international operations. We derive our revenues principally from:
- MEETING FEES. Our members pay us a weekly fee to attend our classes.
- PRODUCT SALES. We sell proprietary products which complement our program, such as snack bars, books, CD-ROMs and POINTS calculators, to our members and franchisees.
- FRANCHISE ROYALTIES. Our franchisees typically pay us a royalty fee of 10% of their meeting fee revenues.
- OTHER. We license our brand for certain foods, clothing, books and other products. We also generate revenues from the publishing of books and magazines and third party advertising.
The following graph sets forth our revenues by category for the 1996, 1997, 1998, 1999 and 2000 fiscal years.
REVENUE SOURCES
(dollars in millions)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PRE-PACKAGED MEALS
NACO MEETING FEES INTERNATIONAL MEETING FEES PRODUCT SALES FRANCHISE ROYALTIES OTHER (Discontinued)
fiscal 1996 96.5 100.8 41.2 14.1 30.3 40.4 $323.3
fiscal 1997 86.5 113.6 30.8 13.9 14.1 34 $292.8
fiscal 1998 93.8 129.0 46.7 17.9 9.0 0.8 $297.2
fiscal 1999 122.3 143.8 57.3 23.2 18.0 0 $364.6
fiscal 2000 130.8 145.3 91.6 25.8 6 0 $399.5
|
In fiscal 1997, we made the strategic decision to discontinue the sale of pre-packaged meals in our NACO classroom meetings (which were added in 1990 by our former owner, Heinz) and to introduce to our NACO operations some of the best practices developed by our European managers. After our
acquisition by Artal Luxembourg in 1999, we reorganized our management and strengthened our strategic focus. Since 1997, our revenues and operating income have increased principally as a result of:
- INCREASED NACO CLASSROOM ATTENDANCE. As a result of our decision to re-focus our meetings exclusively on our group education approach and the introduction of our POINTS-based diet developed in the United Kingdom and our LIBERTY/LOYALTY meeting fee pricing strategy developed in France, our NACO classroom attendance increased by 83% to 14.3 million in 2000 from 7.8 million in fiscal 1997. This increase brought NACO's penetration in our target market to over 7%.
- OUR RETURN TO A VARIABLE COST STRUCTURE IN NACO OPERATIONS. The introduction of pre-packaged meals required us to invest in a fixed cost infrastructure. By abandoning pre-packaged meals, we returned our NACO operations to their historical variable cost structure. As a result, NACO's operating profit margin increased from being negative in fiscal 1997 to over 20% in 2000.
- ACCELERATED GROWTH IN CONTINENTAL EUROPE. In Continental Europe, we have accelerated growth by adapting our business model to local conditions, implementing more aggressive marketing programs tailored to the local markets and increasing the number of meetings ahead of anticipated demand. Our Continental Europe attendance increased by 79% to 7.0 million in 2000 from 3.9 million in fiscal 1997.
- INCREASED PRODUCT SALES. We have increased our product sales by 265% from
fiscal 1997 to 2000 by introducing new products and optimizing our product
mix. In our meetings, we have increased product sales per attendance from
$1.32 to $2.23 over the same period.
Our worldwide attendance has grown by 55% in our company-owned operations from 23.0 million in fiscal 1997 to 35.7 million in 2000, and our operating profit margin has grown from 6.7% (before a restructuring charge) in fiscal 1997 to 25.9% in 2000.
ATTENDANCE IN COMPANY-OWNED OPERATIONS
(in millions)
EIGHT TWELVE
FISCAL YEAR ENDED MONTHS MONTHS
----------------------------------------------------- ENDED ENDED
APRIL 26, APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, DECEMBER 30,
1997 1998 1999 2000 2000 2000*
----------- ----------- ----------- ----------- ------------ ------------
(52 weeks) (52 weeks) (52 weeks) (53 weeks) (35 weeks) (54 weeks)
United States......... 7.8 8.4 10.9 13.2 8.9 14.3
United Kingdom........ 9.1 10.4 9.8 10.6 7.0 11.2
Continental Europe.... 3.9 4.9 5.7 6.1 4.6 7.0
Other International... 2.2 2.5 3.4 3.3 1.9 3.2
----- ---- ---- ---- ---- ----
Total................. 23.0 26.2 29.8 33.2 22.4 35.7
===== ==== ==== ==== ==== ====
SIX MONTHS ENDED
------------------------
JULY 29, JUNE 30,
2000* 2001*
---------- -----------
(27 weeks) (26 weeks)
United States......... 8.0 12.4
United Kingdom........ 6.0 6.7
Continental Europe.... 3.4 4.8
Other International... 1.8 1.7
---- ----
Total................. 19.2 25.6
==== ====
|
* Attendance for these periods does not include Weighco attendance of 4.4 million for 2000, 2.3 million for the six months ended July 29, 2000 and 0.2 million for the first two weeks of 2001 prior to the completion of the Weighco acquisition.
On January 16, 2001, we acquired the franchised territories and certain business assets of Weighco for $83.8 million. Pro forma for the acquisition, for the first six months of 2001 our revenues grew more than 28% over the comparable period in the prior year.
RESULTS OF OPERATIONS
The following table summarizes our historical income from operations as a percentage of revenues for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000, the eight months ended December 30, 2000 and the six months ended July 29, 2000 and June 30, 2001.
EIGHT SIX MONTHS
FISCAL YEAR ENDED MONTHS ENDED
--------------------------------- ENDED -------------------
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, JULY 29, JUNE 30,
1998 1999 2000 2000 2000 2001
--------- --------- --------- ------------ -------- --------
Total revenues, net...................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................................... 53.8 49.1 50.4 51.0 47.1 44.6
----- ----- ----- ----- ----- -----
Gross profit............................................. 46.2 50.9 49.6 49.0 52.9 55.4
Marketing expenses....................................... 16.6 14.5 12.9 9.9 10.7 12.1
Selling, general and administrative expenses............. 14.8 13.4 14.8 11.8 12.2 10.6
----- ----- ----- ----- ----- -----
Operating income......................................... 14.8% 23.0% 21.9% 27.3% 30.0% 32.6%
===== ===== ===== ===== ===== =====
|
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2001 (26 WEEKS) TO THE SIX
MONTHS ENDED JULY 29, 2000 (27 WEEKS).
We have included a comparison of the six months ended June 30, 2001 to the six months ended July 29, 2000, which, in the opinion of our management, is the available period most comparable to the six months ended June 30, 2001.
Net revenues were $334.3 million for the six months ended June 30, 2001, an increase of $98.3 million or 41.7% from $235.9 million for the six months ended July 29, 2001. Of the $98.3 million increase, $51.5 million was attributable to NACO classroom meeting fees, $7.7 million from our foreign company-owned classroom meeting fees, $0.8 million from franchise royalties, $35.7 million from product sales and $2.6 million from licensing, publications and other royalties.
NACO classroom meeting fee revenues were $134.2 million for the six months ended June 30, 2001, an increase of 62.2% from $82.7 for the six months ended July 29, 2000. Our acquisition of Weighco accounted for $32.8 million of the total increase. Our foreign company-owned classroom meeting fee revenues were $85.9 million for the six months ended June 30, 2001, an increase of 9.9% from $78.2 million for the six months ended July 29, 2000. The increase in NACO and foreign company-owned meeting fee revenues was the result of increased member attendance, the roll-out of new program innovations and price increases in select markets, offset by negative exchange rate variances.
Franchise royalties were $15.6 million for the six months ended June 30, 2001, an increase of 4.7% from $14.9 million for the six months ended July 29, 2000. Excluding Weighco, franchise royalties increased 24.2% for the six months ended June 30, 2001. This increase was primarily the result of an increase in member attendance, offset by negative exchange rate variances.
Product sales were $92.7 million for the six months ended June 30, 2001, an increase of 62.5% from $57.0 million for the six months ended July 29, 2000. The increase in product sales was primarily the result of increased member attendance and our strategy to focus sales efforts on core classroom products.
Royalties from licensing, publications and other were $5.8 million for the six months ended June 30, 2001, an increase of 89.6% from $3.1 million for the six months ended July 29, 2000.
Cost of revenues was $149.1 million for the six months ended June 30, 2001, an increase of 34.2% from $111.1 million for the six months ended July 29, 2000. Gross profit margin was 55.4% for the six months ended June 30, 2001, compared to 52.9% for the six months ended July 29, 2000. The increase
in gross profit margin was due to price increases in selected markets, improved operating efficiencies, higher margins generated by product sales and an increase in attendance per meeting.
Marketing expenses were $40.6 million for the six months ended June 30, 2001, an increase of 60.4% from $25.3 million for the six months ended July 29, 2000. The increase in marketing expenses was primarily the result of additional advertising to promote the new program innovations and timing differences related to our shift in fiscal calendars.
Selling, general and administrative expenses were $35.5 million for the six months ended June 30, 2001, an increase of 23.4% from $28.7 million for the six months ended July 29, 2000. As a percentage of revenues, selling general and administrative costs decreased from 12.2% for the six months ended July 29, 2000 to 10.6% for the six months ended June 30, 2001.
As a result of the above, operating income was $109.1 million for the six months ended June 30, 2001, an increase 54.2% from $70.8 million for the six months ended July 29, 2000. Our acquisition of Weighco accounted for $16.2 million of the total increase in operating income.
COMPARISON OF THE EIGHT MONTHS ENDED DECEMBER 30, 2000 TO THE EIGHT MONTHS
ENDED DECEMBER 18, 1999.
Consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. We eliminated all material intercompany accounts and transactions in the consolidation. In order to facilitate timely reporting in prior periods, some foreign subsidiaries ended their fiscal years one month prior to our fiscal year end with no material impact on our consolidated financial statements. The one month lag was eliminated effective April 30, 2000. The results of operations for those foreign subsidiaries have been adjusted for the eight months ended December 30, 2000. The effect on our net income of these subsidiaries for the period March 31, 2000 through April 29, 2000 was $1.1 million and was adjusted to the opening accumulated deficit at April 30, 2000.
Net revenues were $273.2 million for the eight months ended December 30, 2000, an increase of $36.2 million or 15.3% from $237.0 million for the eight months ended December 18, 1999. Of the $36.2 million increase, $19.5 million was attributable to NACO classroom meeting fees, $2.3 million from foreign company-owned classroom meeting fees, $2.5 million from franchise royalties, $11.7 million from product sales and $0.2 million from licensing, publications and other royalties.
NACO classroom meeting fee revenues were $96.8 million for the eight months ended December 30, 2000, an increase of 25.3% from $77.3 million for the eight months ended December 18, 1999. This increase in NACO classroom meeting fee revenues was the result of a 14.2% increase in member attendance as well as a price increase in meetings fees in the majority of our markets for our NACO operations. Our foreign company-owned classroom meeting fee revenues were $87.3 million for the eight months ended December 30, 2000, an increase of 2.7% from $85.0 million for the eight months ended December 18, 1999. This performance was a result of a 7.9% increase in attendance offset by negative exchange rate variances.
Franchise royalties were $17.7 million for the eight months ended December 30, 2000, an increase of 17.2% from $15.1 million for the eight months ended December 18, 1999. This increase was primarily the result of an increase in member attendance offset by negative exchange rate variances.
Product sales were $66.4 million for the eight months ended December 30, 2000, an increase of 21.4% from $54.7 million for the eight months ended December 18, 1999. This increase in product sales was primarily the result of increased member attendance and our strategy to focus sales efforts on core classroom products.
Royalties from licensing, publications and other were $5.1 million for the eight months ended December 30, 2000, an increase of 4% from $4.9 million for the eight months ended December 18, 1999.
Cost of revenues was $139.3 million for the eight months ended December 30, 2000, an increase of 13.8% from $122.4 million for the eight months ended December 18, 1999. This increase was primarily the result of an increased number of meetings to accommodate attendance growth and increased product sales. Gross profit margin was 49.0% for the eight months ended December 30, 2000, compared to 48.4% for the eight months ended December 18, 1999. The increase in gross profit margin was primarily due to an increase in attendance per meeting and a change in product mix with a greater focus on higher margin core products.
Marketing expenses were $27.0 million for the eight months ended December 30, 2000, a decrease of 3.1% from $27.8 million for the eight months ended December 18, 1999. As a percentage of revenues, marketing expenses decreased from 11.7% for the eight months ended December 18, 1999 to 9.9% for the eight months ended December 30, 2000 as a result of our efforts to improve the effectiveness of our marketing program.
Selling, general and administrative expenses were $32.2 million for the eight months ended December 30, 2000, an increase of 9.6% from $29.4 million for the eight months ended December 18, 1999. This increase was partly the result of an increase in incentive compensation as well as other professional fees incurred. As a percentage of net revenues, these costs decreased from 12.4% for the eight months ended December 18, 1999 to 11.8% for the eight months ended December 30, 2000.
As a result of the above, our operating income was $74.7 million for the eight months ended December 30, 2000, an increase of 34.4% from operating income of $55.6 million, excluding a one-time charge of $8.3 million for transaction costs and $1.8 million of discontinued food royalties for the eight months ended December 18, 1999.
COMPARISON OF THE FISCAL YEAR ENDED APRIL 29, 2000 (53 WEEKS) TO THE FISCAL
YEAR ENDED APRIL 24, 1999 (52 WEEKS).
Net revenues were $399.6 million for the fiscal year ended April 29, 2000, an increase of $35.0 million or 9.6% from $364.6 million for the fiscal year ended April 24, 1999. Of the $35.0 million increase, $8.5 million was attributable to our NACO classroom meeting fees, $8.8 million from our foreign company-owned classroom meeting fees, $2.6 million from franchise royalties and $26.9 million from product sales. These increases were offset by an $11.8 million decrease in royalties from licensing, publications and other. The $11.8 million decrease was primarily attributable to the discontinuation of food royalties from Heinz, offset in part by the recognition in the fiscal year ended April 24, 1999 of the present value of the guaranteed future payments from a licensing agreement. Adjusting for the discontinued food royalties of $1.8 million, net revenues were $397.8 million for the fiscal year ended April 29, 2000, an increase of 13.5% from $350.6 million (excluding $8.7 million from non-recurring revenue from the licensing agreement and $5.3 million from discontinued food royalties) for the fiscal year ended April 24, 1999.
NACO classroom meeting fee revenues were $130.8 million for the fiscal year ended April 29, 2000 an increase of 6.9% from $122.3 million for the fiscal year ended April 24, 1999, net of promotional allowances of $5.7 million and $23.0 million, respectively. This increase in our NACO classroom meeting fee revenues was the result of a 22% increase in member attendance, partially offset by lower average meeting fee revenues per attendee as a result of the rollout of the LIBERTY/LOYALTY pricing strategy. LIBERTY/LOYALTY provides members the option of committing to consecutive weekly attendance and paying a lower weekly fee with penalties for missed classes, or paying a higher weekly fee without the missed meeting penalties. Our revenues from foreign company-owned classroom meeting fees were $152.7 million for the fiscal year ended April 29, 2000, an increase of 6.1% from $143.9 million for the fiscal year ended April 24, 1999, net of promotional allowances of $17.4 million and $17.2 million, respectively. This increase in our foreign company-owned classroom meeting fee revenues was the result of a 6.1% increase in international attendance in the United Kingdom, Continental Europe and Australia.
Domestic franchise royalties were $21.3 million for the fiscal year ended April 29, 2000, an increase of 11.5% from $19.1 million for the fiscal year ended April 24, 1999. This increase in domestic franchise royalties was primarily the result of an increase in member attendance, due to improved training and support and increased marketing effectiveness. International franchise royalties were $4.5 million for the fiscal year ended April 29, 2000, an increase of 9.8% from $4.1 million for the fiscal year ended April 24, 1999. This increase was primarily the result of our strong performance in Canada and Ireland.
Product sales were $84.2 million for the fiscal year ended April 29, 2000, an increase of 47.0% from $57.3 million for the fiscal year ended April 24, 1999. This increase in product sales was primarily the result of increased member attendance and our strategy to focus sales efforts on core classroom products, including our newly introduced nutrition bars.
Royalties from licensing, publications and other were $6.1 million for the fiscal year ended April 29, 2000, a decrease of 66% from $17.9 million for the fiscal year ended April 24, 1999, which was primarily due to discontinued food royalties from Heinz, offset in part by an increase in royalties from licensing agreements.
Cost of revenues was $201.4 million for the fiscal year ended April 29, 2000, an increase of 12.6% from $178.9 million for the fiscal year ended April 24, 1999. This increase was primarily the result of an increased number of meetings to accommodate attendance growth and growing product sales. Our gross profit margin was 49.4% for the fiscal year ended April 29, 2000, excluding $1.8 million from discontinued food royalties, compared to 49.0% for the fiscal year ended April 24, 1999, excluding $8.7 million from non-recurring revenues from a licensing agreement and $5.3 million from discontinued food royalties.
Marketing expenses were $51.5 million for the fiscal year ended April 29, 2000, a decrease of 2.6% from $52.9 million for the fiscal year ended April 24, 1999, net of promotional allowances of $23.0 million and $40.2 million, respectively. Our marketing program remained unchanged. The decrease of $1.4 million was related to amounts expended under Heinz's marketing programs in the fiscal year ended April 24, 1999 and the discontinuation of food royalty related marketing rebate expenses.
Selling, general and administrative expenses were $50.7 million for the fiscal year ended April 29, 2000, an increase of 3.7% from $48.9 million for the fiscal year ended April 24, 1999. As a percentage of net revenues, excluding $1.8 million from discontinued food royalties in the fiscal year ended April 29, 2000 and excluding $8.7 million from non-recurring revenues from a licensing agreement and $5.3 million from discontinued food royalties in the fiscal year ended April 24, 1999, these costs were 12.7% for the fiscal year ended April 29, 2000, compared to 13.9% for the fiscal year ended April 24, 1999. This percentage decrease was due to the continued benefit of our restructuring and reorganization program.
As a result of the above, our operating income was $94.2 million, excluding a one-time charge of $8.3 million of transaction costs and $1.8 million in revenues from discontinued food royalties, for the year ended April 29, 2000, an increase of 34.8% from operating income of $69.9 million, excluding $8.7 million of non-recurring revenues from a licensing agreement and $5.3 million from discontinued food royalties, for the fiscal year ended April 24, 1999.
COMPARISON OF THE FISCAL YEAR ENDED APRIL 24, 1999 TO THE FISCAL YEAR ENDED
APRIL 25, 1998.
Net revenues were $364.6 million for the fiscal year ended April 24, 1999, an increase of $67.4 million or 22.7% from $297.2 million for the fiscal year ended April 25, 1998, net of promotional allowances of $40.2 million and $37.1 million, respectively. Of the $67.4 million increase, $28.5 million was attributable to our NACO classroom meeting fees, $14.8 million to our foreign company-owned classroom meeting fees, $5.3 million to franchise royalties, $9.8 million to product sales and
$9.0 million to royalties from licensing, publications and other. The increase in royalties was due to the recognition, in the fiscal year ended April 24, 1999, of the present value of the guaranteed future payments from a licensing agreement. Adjusting for non-recurring revenues of $8.7 million from that licensing agreement, net revenues were $355.9 million for the fiscal year ended April 24, 1999, an increase of $58.7 million, or 19.8%, from $297.2 million for the fiscal year ended April 25, 1998.
NACO classroom meeting fee revenues were $122.3 million for the fiscal year ended April 24, 1999, an increase of 30.4% from $93.8 million for the fiscal year ended April 25, 1998, net of promotional allowances of $23.0 million and $19.5 million, respectively. This increase in revenues from our NACO classroom meeting fees was the result of a 29% increase in member attendance. We believe the increase in member attendance was due to the continued improvement in member satisfaction, which resulted from the full year impact of 1'2'3 SUCCESS, the diet that preceded and was the foundation for WINNING POINTS, and the elimination of our pre-packaged meals program. Our revenues from foreign company-owned classroom meeting fees were $143.9 million for the fiscal year ended April 24, 1999, an increase of 11.5% from $129.0 million for the fiscal year ended April 25, 1998, net of promotional allowances of $17.2 million and $17.6 million, respectively. This increase in revenues from our foreign company-owned classroom meeting fees was the result of a 6% increase in international attendance in the United Kingdom, Continental Europe and Australia.
Domestic franchise royalties were $19.1 million for the fiscal year ended April 24, 1999, an increase of 32.9% from $14.4 million for the fiscal year ended April 25, 1998. This increase in domestic franchise royalties was primarily the result of an increase in member attendance, which was due to the full year impact of 1'2'3 SUCCESS, improved training and support and increased marketing effectiveness. Our foreign franchise royalties were $4.1 million for the fiscal year ended April 24, 1999, an increase of 15.3% from $3.5 million for the fiscal year ended April 25, 1998. This increase was primarily the result of our strong performance in Canada and Ireland.
Product sales were $57.3 million for the fiscal year ended April 24, 1999, an increase of 20.6% from $47.5 million for the fiscal year ended April 25, 1998. This increase in product sales was primarily the result of increased member attendance. In addition, we eliminated approximately two-thirds of the items in our NACO operations, allowing us to focus our sales efforts on our core products.
Royalties from licensing, publications and other were $9.3 million, excluding $8.7 million of non-recurring revenues from a licensing agreement, for the fiscal year ended April 24, 1999, an increase of 3.3% from $9.0 million for the fiscal year ended April 25, 1998.
Cost of revenues was $178.9 million for the fiscal year ended April 24, 1999, an increase of 11.8% from $160.0 million for the fiscal year ended April 25, 1998. This increase was attributable to the increased levels of attendance. Gross profit margin, net of promotional allowances of $40.2 million and $37.1 million, respectively, however, increased from 46.2% for the fiscal year ended April 25, 1998 to 49.7%, excluding $8.7 million of non-recurring revenues from a licensing agreement, for the fiscal year ended April 24, 1999. This increase in gross margin was due to various factors, including an increase in attendance per meeting, an increase in the ratio of third-party locations to total locations and a change in product mix with a focus on higher margin core products.
Marketing expenses were $52.9 million for the fiscal year ended April 24, 1999, an increase of 7.5% from $49.2 million for the fiscal year ended April 25, 1998, net of promotional allowances of $40.2 million and $37.1 million, respectively. This increase in marketing expenses was the result of an increase in advertising.
Selling, general and administrative expenses were $48.9 million for the fiscal year ended April 24, 1999, an increase of 10.9% from $44.1 million for the fiscal year ended April 25, 1998. As a percentage of total revenues, excluding $8.7 million of non-recurring revenues from a licensing agreement, these costs decreased from 14.8% for the fiscal year ended April 25, 1998 to 13.7% for the fiscal year ended April 24, 1999. This percentage decrease was due to the continued benefit of our restructuring and
reorganization program, which allowed us to eliminate certain costs that were not directly associated with our core business, classroom operations and related products.
As a result of the above, operating income was $75.2 million, excluding $8.7 million of non-recurring revenues from a licensing agreement, for the fiscal year ended April 24, 1999, an increase of 70.9% from operating income of $43.9 million for the fiscal year ended April 25, 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the eight months ended December 30, 2000 and for the six months ended June 30, 2001, our primary source of funds to meet working capital needs was cash from operations. For the eight months ended December 30, 2000 and the six months ended June 30, 2001, cash flows provided by operating activities were $28.9 million and $92.9 million, respectively. Cash and cash equivalents increased $0.5 million to $44.5 million and increased $1.1 million to $45.6 million, respectively, during the eight months ended December 30, 2000 and the six months ended June 30, 2001. These increases were driven by increased meeting revenue and strong product sales. For the eight months ended December 30, 2000, cash flows provided by operating activities of $28.9 million were used primarily to fund a loan of $16.8 million to WeightWatchers.com and repayments of principal on our outstanding senior credit facilities of $7.1 million. Cash flows used for investing activities of $21.6 million were primarily attributable to capital expenditures of $3.6 million and the loan made to WeightWatchers.com. Cash flows used for financing activities of $8.0 million were attributable to repayments of principal on our outstanding senior credit facilities of $7.1 million and the payment of dividends on our preferred stock of $0.9 million.
For the six months ended June 30, 2001, cash flows provided by operating activities were used primarily for investing activities. Cash flows used for investing activities of $94.9 million were attributable to $84.4 million in cash paid in connection with the Weighco acquisition, the loans of $7.8 million made to WeightWatchers.com and capital expenditures of $1.2 million. Net cash flows provided by financing activities of $4.7 million consisted of proceeds from borrowings under our senior credit facility of $60.0 million, offset by repayments of principal on our outstanding senior credit facilities of $42.7 million and the repurchase of 3,152,591 shares of our common stock held by Heinz for $12.7 million.
Capital spending has averaged approximately $3 million annually over the last four years and has consisted primarily of leasehold improvements for meeting locations and administrative offices, computer equipment for field staff and call centers and year 2000 upgrades.
As of December 30, 2000 and June 30, 2001, we had outstanding $470.7 million and $478.7 million, respectively, in aggregate indebtedness, with approximately $30 million and $45 million, respectively, of additional borrowing capacity available under our revolving credit facility. On January 16, 2001, we acquired certain business assets and the Weight Watchers franchised territories of Weighco for $83.8 million. We financed the acquisition with available cash of $23.8 million and additional borrowings of $60.0 million under our senior credit facilities.
We believe that cash flows from operating activities, together with borrowings available under our revolving credit facility, will be sufficient for the next twelve months to fund currently anticipated capital expenditure requirements, debt service requirements and working capital expenditure requirements. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital and we cannot be certain that any additional capital will be available on acceptable terms or at all.
On April 18, 2001, we entered into a Put/Call Agreement with Heinz. Under this agreement, Heinz has an option to sell and we have an option to purchase all of our common stock owned by Heinz. Heinz has sold to us all 6,719,254 shares of our common stock held by it for an aggregate purchase price of $27.1 million.
The balances under our senior credit facilities as of June 30, 2001 were $243.7 million, consisting of a $70.8 million term loan A facility, a $71.2 million term loan B facility, an $82.5 million transferable loan certificate facility, a $19.2 million term loan D facility and a $45.0 million revolving credit facility. As of June 30, 2001, $45.0 million was available under the revolving credit facility for additional borrowings. The term loan A facility matures on September 30, 2005, the term loan B facility matures on September 30, 2006, the transferable loan certificate facility matures on September 30, 2006, the term loan D facility matures on June 30, 2006 and the revolving credit facility matures on September 30, 2005.
The term loan A facility, the term loan B facility, the transferable loan certificate facility, the term loan D facility and the revolving credit facility bear interest, subject to performance based stepdowns applicable to the term loan A facility and the revolving credit facility, at a rate equal to (a) in the case of the term loan A facility and the revolving credit facility, LIBOR plus 1.75% or, at our option, the alternate base rate (as defined in the credit facilities) plus 0.75%, (b) in the case of the term loan B facility and the transferable loan certificate facility, LIBOR plus 4.00% or, at our option, the alternate base rate plus 3.00% or (c) in the case of the term loan D facility, LIBOR plus 3.25% or, at our option, the alternate base rate plus 2.25%. In addition to paying interest on outstanding principal under the senior credit facilities, we are required to pay a commitment fee to the lenders under the revolving credit facility with respect to the unused commitments at a rate equal to 0.50% per year.
Our senior credit facilities contain covenants that restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock and make other restricted payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets. Our senior credit facilities also require us to maintain specified financial ratios and satisfy financial condition tests. These tests and financial ratios become more restrictive over the life of the senior credit facilities.
We issued $150.0 million in aggregate principal amount of senior subordinated notes and E100.0 million in aggregate principal amount of senior subordinated notes in connection with our acquisition by Artal Luxembourg. Our senior subordinated notes mature in 2009 and bear interest at a rate of 13% per annum. Our obligations under the notes are subordinate and junior in right of payment to all of our existing and future senior indebtedness, including all indebtedness under the senior credit facilities. The indentures, pursuant to which the notes were issued, restrict our ability to incur additional indebtedness, issue shares of disqualified stock and preferred stock, pay dividends or make other restricted payments, including investments, create limitations on the ability of our subsidiaries to pay dividends or make certain payments to us, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets.
In addition, we have one million shares of Series A Preferred Stock issued and outstanding with a preference value of $25.0 million. Holders of the Series A Preferred Stock are entitled to receive dividends at an annual rate of 6% payable annually in arrears. If there is a liquidation, dissolution or winding up, the holders of shares of Series A Preferred Stock are entitled to be paid out of our assets available for distribution to shareholders an amount in cash equal to the $25 liquidation preference per share plus all accrued and unpaid dividends prior to the distribution of any assets to holders of shares of our common stock. Subject to the restrictions set forth in our debt instruments, holders of our Series A Preferred Stock will have the right to cause us to repurchase their shares upon completion of this offering. If we are required to repurchase the Series A Preferred Stock, we expect that we would finance the purchase with our available cash or borrowings under our revolving credit facility.
Our ability to fund our capital expenditure requirements, interest, principal and dividend payment obligations and working capital requirements and to comply with all of the financial covenants under our debt agreements depends on our future operations, performance and cash flow. These are subject
to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.
SEASONALITY
Our business is seasonal, with revenues generally decreasing at year end and during the summer months. Our advertising schedule supports the three key enrollment-generating seasons of the year: winter, spring and fall. Due to the timing of our marketing expenditures, particularly the higher level of expenditures in the first quarter, our operating income for the second quarter is generally the strongest, with the fourth quarter being the weakest.
The following table summarizes our historical quarterly results of operations for the periods indicated. We believe this presentation illustrates the seasonal nature of our business.
HISTORICAL QUARTER ENDED
------------------------------------------------------------------------------
TWO MONTHS
ENDED
APRIL 29, JULY 29, OCTOBER 28, DECEMBER 30, MARCH 31, JUNE 30,
2000 2000 2000 2000 2001 2001
---------- ---------- ----------- ------------ ---------- ----------
(14 weeks) (13 weeks) (13 weeks) (9 weeks) (13 weeks) (13 weeks)
(in millions)
Revenues, net.................... $132.8 $103.1 $107.6 $62.5 $172.0 $162.3
Gross profit..................... 70.0 54.8 51.5 27.6 94.6 90.6
Marketing expenses............... 18.6 6.7 11.8 8.5 27.1 13.5
Selling, general and
administrative expenses........ 17.2 11.5 12.0 8.7 17.7 17.8
Operating income................. 34.2 36.6 27.7 10.4 49.8 59.3
Net income (loss)................ 17.5 13.7 10.9 (9.6) 23.2 26.1
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As a result of the Weighco acquisition, we believe the following table summarizing our pro forma quarterly results of operations is more indicative of the impact of seasonality on our business than our historical quarterly results of operations.
PRO FORMA QUARTER ENDED
----------------------------------------------------------------- HISTORICAL
TWO MONTHS QUARTER
ENDED ENDED
APRIL 29, JULY 29, OCTOBER 28, DECEMBER 30, MARCH 31, JUNE 30,
2000 2000 2000 2000 2001 2001
---------- ---------- ----------- ------------ ---------- ----------
(14 weeks) (13 weeks) (13 weeks) (9 weeks) (13 weeks) (13 weeks)
(in millions)
Revenues, net.................... $145.4 $116.1 $120.6 $69.8 $173.8 $162.3
Gross profit..................... 77.9 62.1 58.8 31.9 95.9 90.6
Marketing expenses............... 20.1 7.4 12.8 8.8 27.4 13.5
Selling, general and
administrative expenses........ 20.1 14.3 14.9 10.6 17.9 17.8
Operating income................. 37.8 40.3 31.2 12.5 50.6 59.3
Net income (loss)................ 18.4 14.5 11.6 (9.2) 23.5 26.1
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Effective April 30, 2000, we changed our fiscal year end from the last Saturday in April to the Saturday closest to December 31. As a result of the change in our reporting period, beginning in 2001, we believe that our first quarter will typically have the highest revenue, followed by the second, third and fourth quarters, respectively.
ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 and 142, "Business Combinations" ("SFAS 141") and "Goodwill and Other Intangible Assets" ("SFAS 142"), respectively. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for by the purchase method of accounting. SFAS 142 specifies that goodwill and indefinite lived intangible assets will no longer be amortized but instead will be subject to annual impairment testing. We will adopt SFAS 142 on December 30, 2001. We are currently evaluating the effect that implementation of the new standards will have on our financial position, results of operations and cash flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to foreign currency fluctuations and interest rate changes. Our exposure to market risk for changes in interest rates relates to the fair value of long-term fixed rate debt and interest expense of variable rate debt. We have historically managed interest rates through the use of, and our long-term debt is currently composed of, a combination of fixed and variable rate borrowings. Generally, the fair market value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise.
Based on the overall interest rate exposure on our fixed rate borrowings at June 30, 2001, a 10% change in market interest rates would have less than a 5% impact on the fair value of our long-term debt. Based on variable rate debt levels at December 30, 2000, a 10% change in market interest rates would have less than a 5% impact on our interest expense, net.
Other than intercompany transactions between our domestic and foreign entities and the portion of our senior subordinated notes which are denominated in euros, we generally do not have significant transactions that are denominated in a currency other than the functional currency applicable to each entity.
We enter into forward and swap contracts to hedge transactions denominated in foreign currencies to reduce the currency risk associated with fluctuating exchange rates. These contracts are used primarily to hedge certain intercompany cash flows and for payments arising from some of our foreign currency denominated obligations. Realized and unrealized gains and losses from these transactions are included in net income for the period.
Fluctuations in currency exchange rates may also impact our shareholders' equity. The assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into U.S. dollars at the weighted average exchange rate for the period. The resulting translation adjustments are recorded in shareholders' equity as accumulated other comprehensive income (loss). In addition, fluctuations in the value of the euro will cause the U.S. dollar translated amounts to change in comparison to prior periods. Furthermore, we revalue our outstanding senior subordinated euro notes at the end of each period, and the resulting change in value will be reflected in the income statement of the corresponding period.
Each of our subsidiaries derives revenues and incurs expenses primarily within a single country, and consequently, does not generally incur currency risks in connection with the conduct of normal business operations.
We use foreign currency forward contracts to more properly align the underlying sources of cash flow with our debt servicing requirements. At June 30, 2001, we had long-term foreign currency forward contracts receivable with notional amounts of $44.0 million and L76.0 million offset by foreign currency forward contracts payable with notional amounts of L59.2 million and $21.9 million.
INDUSTRY
OVERVIEW
The number of overweight and obese people worldwide has been increasing due to improving living standards and changing eating patterns, as well as increasingly sedentary lifestyles. The World Health Organization has reported that the world's population is becoming overweight at a rapid pace. According to the organization, in 2000, over one billion people worldwide were overweight and there exists an urgent need to deal with this problem. In the United States, the proportion of U.S. adults who are overweight has increased from 47% to 61% over the last 20 years, and approximately 52 million Americans are currently dieting. The following table sets forth the percentage of overweight adults in the countries indicated.
PERCENTAGE OF OVERWEIGHT ADULTS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
UNITED STATES 61% Germany 60% United Kingdom 59% Australia 58% Spain 54% Brazil 36% |
SOURCES: NATIONAL HEALTH AND EXAMINATION SURVEY, 1999; ADIPOSITAS LEITLINIE FUR DEN BEHANDELNDEN ARZT, 1997; FACTS PACK, 1998; NATIONAL NUTRITION SURVEY, 1995; DOSSIER DE LA PRENSA, 2000; AND THE WORLD HEALTH ORGANIZATION, 1997, RESPECTIVELY.
This growing population of overweight people, motivated by both their desire to improve their appearance and their increasing awareness of the health risks associated with being overweight, is fueling the growth in demand for weight-loss programs. According to the National Institutes of Health, the economic cost of overweight and obesity in the United States was approximately $100 billion in 1995. Demand for weight-loss programs is also growing as a result of:
- greater awareness that achieving and maintaining a healthy weight will reduce the risk of serious medical problems and significantly improve the quality of life;
- the recognition that drugs are not an effective stand-alone remedy and may have undesirable side effects; and
- an increasing willingness of employers to promote and contribute towards the cost of weight-loss programs.
Weight control problems are affecting more children as well. The number of overweight youths has more than doubled during the past 20 years. Currently, over 13% of American children and teens are classified as overweight.
WEIGHT AND HEALTH CORRELATION
Being overweight is the second leading cause of preventable death in the United States. In addition, numerous diseases, including heart disease, high blood pressure and type II diabetes, are associated with being overweight or obese. According to The World Health Organization, there is strong evidence that weight loss reduces the risk of developing many of these diseases and benefits those patients already diagnosed with the conditions. The prevalence of disease, particularly cardiovascular disease, among overweight people increases with age.
COMPETITION
The weight-loss market includes commercial weight-loss programs, self-help weight-loss products, Internet-based weight-loss products, dietary supplements, weight-loss services administered by doctors, nutritionists and dieticians and weight-loss drugs. Competition among commercial weight-loss programs is largely based on program recognition and reputation and the effectiveness, safety and price of the program.
The following chart sets forth the diet attempts by method used by U.S. adults in 2000:
U.S. DIET ATTEMPTS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MEAL REPLACEMENTS 7%
Commercial
Programs*
7% 7%
Doctor/Health Professionals 11%
Other 4%
Self-help 71%
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SOURCE: 2000 GALLUP STUDY
* Includes group education and pre-packaged meal-based commercial weight-loss programs.
In the United States, we compete with several other companies in the commercial weight-loss industry, although we believe our businesses are not comparable. For example, many of our competitors' businesses are based on the sale of pre-packaged meals and meal replacements, while our classes use group support, education and behavior modification to help members change their eating habits, in conjunction with a flexible diet that allows our members the freedom to choose what they eat. Companies that sell pre-packaged meal programs, such as Jenny Craig, have for the most part experienced declining revenues. In addition to the lack of variety and the inflexible nature of pre-packaged meals, these weight-loss programs are expensive because of the premiums charged for the meals.
There are no significant group education-based competitors in any of our major markets, except in the United Kingdom. Even there, we have a 50% market share and approximately twice the revenues of our largest competitor, Slimming World, our competitor since the 1960s.
BUSINESS
OVERVIEW
We are a leading global branded consumer company and the leading provider of weight-loss services in 27 countries around the world. Our programs help people lose weight and maintain their weight loss and, as a result, improve their health, enhance their lifestyles and build self-confidence. At the core of our business are weekly meetings, which promote weight loss through education and group support in conjunction with a flexible, healthy diet. Each week, more than one million members attend approximately 37,000 Weight Watchers meetings, which are run by over 13,000 classroom leaders. Our classroom leaders teach, inspire, motivate and act as role models for our members.
We conduct our business through a combination of company-owned and franchise operations, with company-owned operations accounting for approximately 67% of total worldwide attendance in the first six months of 2001. In the 1960's we pursued an aggressive franchising strategy with respect to our classroom operations to rapidly grow our geographic presence and build market share. We believe that our early franchising strategy was very effective in establishing our brand as the world's leading weight-loss program.
We have experienced strong growth in sales and profits over the last five years since we made the strategic decision to re-focus our meetings exclusively on our group education approach. We discontinued the in-meeting sale of pre-packaged meals, added in 1990 in NACO by our previous owner, Heinz. We also modernized our diet to adapt it to contemporary lifestyles. Through these initiatives, combined with our strengthened management and strategic focus since our acquisition by Artal Luxembourg, we have grown our attendance.
The following table sets forth our NACO operations and international attendance for the 1997, 1998, 1999 and 2000 fiscal years and the twelve months ended April 28, 2001.
ATTENDANCE IN COMPANY-OWNED OPERATIONS
(in millions)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Classroom attendance in millions
NACO OPERATIONS INTERNATIONAL
Fiscal Year 1997 15.1 7.8 22.9
Fiscal Year 1998 17.8 8.4 26.2
Fiscal Year 1999 18.9 10.9 29.8
Fiscal Year 2000 20.1 13.2 33.3
Twelve months ended April 28, 2001 22.4 15.1 37.5
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* Attendance for the twelve months ended April 28, 2001 does not include Weighco attendance.
Our members typically enroll to attend consecutive weekly meetings and have historically demonstrated a consistent re-enrollment pattern across many years. Historically, in our NACO operations:
- our members attend an average of 8 to 10 weekly sessions in an enrollment cycle;
- approximately 75% of returning members re-enroll at least one more time in the future; and
- since 1991, our members have enrolled in an average of four separate enrollment cycles.
We believe that our members' repeat enrollment and attendance patterns and our large existing member base together with our growth in first-time members represent strong potential for future growth.
MARKET OPPORTUNITY
The large and growing global weight-loss market provides us with significant growth potential. In addition, we also believe that we can increase the penetration rate of our target demographic market of overweight women, ages 25 to 64, in our existing major markets as well as in our less developed markets.
The following chart illustrates our level of penetration of our target market, women ages 25 to 64, with a body mass index greater than 25 in 2000:
OUR TARGET MARKET PENETRATION IN SELECTED COUNTRIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Percent Penetration in 2000
SPAIN LESS THAN 0.1%
Denmark 0.1%
Germany 0.9%
Netherlands 1.4%
Switzerland 1.7%
France 3.2%
Belgium 3.6%
Australia 7.2%
United States 7.3%
New Zealand 7.6%
Finland 10.0%
United Kingdom 10.9%
Sweden 13.4%
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Relative Size of Target Market
In the United Kingdom, the penetration rate of our target demographic group by all education-based commercial weight-loss programs now exceeds 20%. We believe that this demonstrates potential for significant increases in penetration in our other markets. Since we do not face significant group education competitors outside the United Kingdom, we believe that we are best positioned to capture this growth.
We also believe that we have significant long-term growth opportunities in countries where we have established a meeting infrastructure but our market penetration rates are relatively low. For example, in Germany, we have grown our attendance by over 60% in the twelve months ended June 30, 2001, while still penetrating less than 2% of our target market.
We have demonstrated the ability to enter new markets as our program has proven adaptable in 27 countries. We customize our program for each geographic setting by tailoring the program for the local language, culture and food preferences. We believe that our international success proves that our core weight-loss program is effective worldwide and have recently begun operations in Spain and Denmark.
We also believe that we can expand our customer base by developing new products and services designed to meet the needs of a broader audience. For example, while approximately 95% of our current
members are women, we are actively researching and developing new products and services that are intended to have a greater appeal to men.
OUR BILLION DOLLAR BRAND
WEIGHT WATCHERS is the leading global weight-loss brand with retail sales of over $1.5 billion in 2000, including licensees and franchisees. Currently, over 97% of U.S. women recognize the WEIGHT WATCHERS brand. In addition, our program is the most widely recommended weight-loss program by U.S. doctors. Our credibility is further enhanced by the endorsement of the U.S. Department of Agriculture.
We have built our business and brand on the following core principles:
- Effective CLINICALLY PROVEN - Healthy MEDICALLY RECOMMENDED - Supportive HELPING MEMBERS HELP EACH OTHER - Flexible COMPATIBLE WITH MODERN LIFESTYLES - Balanced NOT JUST A DIET, AN APPROACH TO LIFE |
WEIGHT WATCHERS MEETINGS
We present our program in a series of weekly classes of approximately one hour in duration. Classes are conveniently scheduled throughout the day. Typically, we hold classes in either meeting rooms rented from civic or religious organizations or in leased locations.
In our classes, our leaders present our program, which combines group support and education about healthy eating patterns, behavior modification and physical activity with our scientifically developed diet. Our more than 13,000 classroom leaders run our meetings and educate members on the process of successful and sustained weight loss. Our leaders also provide inspiration and motivation for our members and are examples of our program's effectiveness because they have lost weight and maintained their weight loss on our program.
Classes typically begin with registration and a confidential weigh-in to track each member's progress. Leaders are trained to engage the members at the weigh-in to talk about their weight control efforts during the previous week and to provide encouragement and advice. Part of the class is educational, where the leader uses personal anecdotes, games or open questions to demonstrate some of our core strategies of weight-loss, such as self-belief and discipline. For the remainder of the class, the leader focuses on a variety of topics pre-selected by us, such as seasonal weight-loss topics, achievements people have made in the prior week and celebrating and applauding successes. Members who have reached their weight goal are singled out for their accomplishment. Discussions can range from dealing with a holiday office party to making time to exercise. The leader encourages substantial class participation and discusses supporting products and materials as appropriate. At the end of the class, new members are given special instruction in our current diet.
Our leaders help set a member's weight goal within a healthy range by using a body mass index. When members reach their weight goal and maintain it for six weeks, they achieve lifetime member status. This gives them the privilege to attend our meetings free of charge as long as they maintain their weight within a certain range. Successful members also become eligible to apply for positions as classroom leaders. Field management and current leaders constantly identify new leaders as members with strong interpersonal skills, personality and communication skills. Leaders are usually paid on a commission basis.
Our AT WORK program addresses the weight-loss needs of working people by holding classes at their place of employment. AT WORK is particularly popular in the United States as employees, and increasingly employers, are receptive to our classes in the work place. In many cases, employers subsidize employee participation and typically provide meeting space without charge. In 2000, approximately 10% of NACO attendance was through our AT WORK meetings.
OUR APPROACH
Our approach has always been based on four core elements:
- Group support
- Behavior modification
- Diet
- Exercise
GROUP SUPPORT
The group support system remains the cornerstone of our classes. Members provide each other support by sharing their experiences and their encouragement and empathy with other people enduring similar weight-loss challenges. This group support provides the reassurance that no one must overcome their weight-loss challenges alone. Group support assists members in dealing with issues such as depression-eating and habitual-eating behaviors. We facilitate this support through interactive meetings that encourage learning through group activities and discussions.
BEHAVIOR MODIFICATION
Behavior modification and education on eating habits have also always been key elements of our program. We use motivation, education and support to help members manage their weight and to change their habits. Discussions on topics such as staying motivated, how to avoid overeating and managing stress offer members valuable insight on how to stay on our program while dealing with the realities of everyday life. Our U.S. members also currently learn "Tools for Living," a program of eight fundamental goal-setting and motivational principles. In addition, our U.S. members currently receive a booklet titled "Managing Your Weight From the Inside Out" that teaches members how to develop a positive mind-set about weight control, new approaches to problem solving and specific ideas for handling some of the most common weight-loss issues. Our international members learn similar principles and receive similar publications.
DIET
Our diets allow our members to eat regular meals instead of pre-packaged meals. By giving members the freedom to choose what they eat, our diets are flexible and adjusted to modern lifestyles. In order to keep our diets at the forefront of weight-loss science, each is designed in consultation with doctors and other scientific advisors. We continually strive to improve our diets by periodically testing, then introducing, new features.
Our current diets feature the POINTS system, which assigns each food a POINTS value based on its nutritional content. Members are given a daily POINTS goal to use on whatever combination of food they prefer so long as the total does not exceed the goal. While no food is forbidden, our POINTS-based diets encourage members to eat a wide variety of foods in amounts that promote healthy weight loss. Our diets help members choose foods that are low in fat, high in complex carbohydrates and moderate in protein. We customize our diets from country to country in order to suit local tastes, as well as package labeling differences between countries. Our current U.S. diet,
WINNING POINTS, allows members to carry-back or carry-forward unused POINTS and thus gives members the flexibility to participate in special occasions and special meals. Our current U.K. diet is branded PURE POINTS, and our current diet in Continental Europe is marketed as THE POINTS PLAN.
EXERCISE
Exercise is an important component of weight loss and our overall program to lose weight. Our classroom leaders emphasize the importance of exercise to weight loss and to leading a healthy, balanced lifestyle. In addition, our WINNING POINTS diet promotes exercise by granting members additional POINTS for their diet based on the type and amount of exercise in which they engage. Our U.S. members currently receive THE WEIGHT WATCHERS ACTIVITY GUIDE, which is designed to promote exercise and activity outside of the classroom. It is consistent with the recommendations for physical activity outlined by both the Center for Disease Control and Prevention and the American College of Sports Medicine. International members receive similar information.
ADDITIONAL DELIVERY METHODS
We have developed additional delivery methods for people who, either through circumstance or personal preference, do not attend our classes. For example, we have developed program cookbooks and an AT HOME self-help product that provide information on our diet and guidance on weight loss, as well as CD-ROM versions of our diet for the United Kingdom, Continental Europe and Australia.
Our affiliate and licensee, WeightWatchers.com, recently introduced in the United States WEIGHT WATCHERS ONLINE, an online paid subscription product. This product offers information on WINNING POINTS, POINTS values, content on various weight-loss subjects, professionally-developed low-POINTS recipes and weekly meal plans for different POINTS ranges. In addition, WEIGHT WATCHERS ONLINE provides an online journal, an online POINTS calculator, a recipe POINTS calculator, a weight tracker and progress charts and preprogrammed messages to help subscribers achieve their weight-loss goals. This product targets self-help dieters.
PRODUCT SALES
We sell a range of proprietary products, including snack bars, books, CD-ROMS and POINTS calculators, that is consistent with our brand image. We sell our products primarily through our classroom operations and to our franchisees. In 2000, sales of our proprietary products represented 26% of our revenues, up from 11% in fiscal 1997. We have grown our product sales per attendance by focusing on a core group of products that complement the Weight Watchers program. We intend to continue to optimize our product offerings by updating existing products and selectively introducing new products.
[picture] [picture] [picture] Snack Bars Cookbooks POINTS Calculators |
FRANCHISE OPERATIONS
We have enjoyed a mutually beneficial relationship with our franchisees over many years. In our early years, we used an aggressive franchising strategy to quickly establish a meeting infrastructure throughout the world to pre-empt competition. After buying back a significant number of our franchisees, our franchised operations represented approximately 33% of our total worldwide attendance for the six months ended June 30, 2001. We estimate that, in 2000, these franchised operations attracted attendance of over 21 million. Franchisees typically pay us a fee equal to 10% of their meeting fee revenues.
Our franchisees are responsible for operating classes in their territory using the program we have developed. We provide a central support system for the program and our brand. We also produce and sell program and marketing materials to the franchisees. Franchisees also purchase products from us at wholesale prices for resale directly to members. Franchisees are obligated to adhere strictly to our program content guidelines, with the freedom to control pricing, meeting locations, operational structure and local promotions. Franchisees provide local operational expertise, advertising and public relations. Franchisees are required to keep accurate records that we audit on a periodic basis. Most franchise agreements are perpetual and can be terminated only upon a material breach or bankruptcy of the franchisee.
We do not intend to award new franchise territories. From time to time we repurchase franchise territories.
LICENSING
As a highly recognized global brand, WEIGHT WATCHERS is a powerful marketing tool for us and for third parties. We currently license the WEIGHT WATCHERS brand in certain categories of food, apparel, books and other products. We believe there are opportunities to further capitalize on the strength of our brand and the loyalty of our members by more aggressively licensing our brand while maintaining its integrity.
During the period that Heinz owned our company, it developed a number of food product lines under the WEIGHT WATCHERS brand, with hundreds of millions of dollars of retail sales, mostly in the United States and in the United Kingdom. Heinz, however, did not actively license the WEIGHT WATCHERS brand to other food companies. Heinz has retained a perpetual royalty-free license to continue using our brand in its core food categories. In addition, Heinz still continues to receive royalty payments of over $4 million per year from an existing portfolio of third-party licenses for various food products outside of Heinz's core categories. After 2004, these royalty payments will be payable to us, although we have the right to acquire them sooner.
We have begun focusing on proactively developing new licensing opportunities with a number of food companies and have hired a general manager to focus exclusively on this area. We also expect to generate royalties from our affiliate and licensee, WeightWatchers.com, which has recently developed two Internet-based paid subscription products.
MARKETING AND PROMOTION
MEMBER REFERRALS
An important source of new members is through word-of-mouth generated by our current and former members. Over our 40-year operating history, we have created a powerful referral network of loyal members. These referrals, combined with our strong brand and the effectiveness of our program, enable us to efficiently attract new and returning members.
MEDIA ADVERTISING
Our advertising enhances our brand image and awareness and motivates both
former members and potential new members to join our program. Our advertising
schedule supports the three key enrollment-generating diet seasons of the year:
winter, spring and fall. We allocate our media advertising on a market-by-market
basis, as well as by media vehicle (television, radio, magazines and
newspapers), taking into account the target market and the effectiveness of the
medium.
DIRECT MAIL
Direct mail is a critical element of our marketing because it targets potential returning members. We maintain a database of current and former members, which we use to focus our direct mailings. During 2000 our NACO operations sent over eight million pieces of direct mail. Most of these mailings are timed to coincide with the start of the diet seasons. Direct mail generally consists of special offers encouraging former members to re-enroll and related advertisements.
PRICING STRUCTURE AND PROMOTIONS
Our most popular payment structure is a "pay-as-you-go" arrangement. Typically, a new member pays an initial registration fee and then a weekly fee for each class attended, although free registration is often offered as a promotion. Our LIBERTY/LOYALTY payment plan provides members with the option of committing to consecutive weekly attendance with a lower weekly fee with penalties for missed classes or paying a higher weekly fee without the missed meeting penalties. We also offer discounted prepayment options.
PUBLIC RELATIONS AND CELEBRITY ENDORSEMENTS
The focus of our public relations efforts is through our current and former members who have successfully lost weight on our program. Classroom leaders and successful members engage in local promotions, information presentations and charity events to promote WEIGHT WATCHERS and demonstrate the program's efficacy.
For many years we have also used celebrities to promote and endorse the program. Since 1997, we have retained Sarah Ferguson, the Duchess of York, to promote and endorse the program in North America. Prior to the Duchess, we used Kathleen Sullivan and Lynn Redgrave as our North American celebrity spokespersons. We also use local celebrities to promote our program in other countries.
WEIGHT WATCHERS MAGAZINE
WEIGHT WATCHERS MAGAZINE is an important branded marketing channel which is experiencing strong growth. We re-acquired the rights to publish the magazine in February 2000. Since its U.S. re-launch in March 2000, circulation has grown from zero to over 500,000 in August 2001, and the magazine has a readership of over two million. In addition to generating revenues from subscription sales and advertising, WEIGHT WATCHERS MAGAZINE reinforces the value of our brand and serves as an important marketing tool to non-members.
[LOGO]
WEIGHTWATCHERS.COM
Our affiliate and licensee, WeightWatchers.com, runs the WEIGHT WATCHERS website which is an important global promotional channel for our brand and businesses. The website contributes value to our classroom business by promoting our brand, advertising Weight Watchers classes and keeping members involved with the program outside the classroom through useful offerings, such as a meeting locator, low calorie recipes, weight-loss news articles, success stories and on-line forums. Over 70,000 searches per week are conducted on the meeting locator, which helps consumers find the times and locations of Weight Watchers meetings near them. WeightWatchers.com now generates over 60 million page views and attracts over three million visits per month.
In the United States, WeightWatchers.com recently introduced two online paid subscription products, WEIGHT WATCHERS ETOOLS and WEIGHT WATCHERS ONLINE. WEIGHT WATCHERS ETOOLS is designed to supplement and strengthen the Weight Watchers classroom business. WEIGHT WATCHERS ETOOLS is a suite of electronic tools available only to Weight Watchers members designed to help them achieve greater success by making it even easier to follow WINNING POINTS and by reinforcing our weight-loss approach between meetings. WEIGHT WATCHERS ONLINE is a self-help product based on our current diet designed to attract consumers who cannot or choose not to attend Weight Watchers meetings. We believe that WEIGHT WATCHERS ONLINE will increase the popularity of our brand among dieters and strengthen our brand in the entire weight-loss market.
Under our agreement with WeightWatchers.com, we granted it an exclusive license to use our trademarks, copyrights and domain names on the Internet in connection with its online weight-loss business. The license agreement provides us with control of how our intellectual property is used. In particular, we have the right to approve WeightWatchers.com's e-commerce activities, strategies and operational plans, marketing programs, privacy policy and materials publicly displayed on the Internet.
We own 19.8% of WeightWatchers.com, or 38.1% on a fully diluted basis (including the exercise of all options and all warrants), and beginning in January 2002, we will receive royalties of 10% of WeightWatchers.com's net revenues.
ENTREPRENEURIAL MANAGEMENT
We run our company in a decentralized and entrepreneurial manner that allows us to develop and test new ideas on a local basis and then implement the most successful ideas across our network. We believe local country and regional managers are best able to develop new strategies and programs to meet the needs of their markets. For example, local managers in the United Kingdom were responsible for developing our POINTS-based diet. Local managers have also developed many of our customized pricing strategies such as the LIBERTY/LOYALTY plan, which started in France. In addition, many of our classroom products have been developed locally and then been introduced successfully in other countries. Local managers have strong incentives to adopt and implement the best practices of other regions and to continue to develop innovative new programs.
HISTORY
EARLY DEVELOPMENT
In 1961, Jean Nidetch, the founder of our company, attended a New York City obesity clinic and took what she learned from her personal experience at the obesity clinic and began weight-loss meetings with a group of her overweight friends in the basement of a New York apartment building. Under Ms. Nidetch's leadership, the group members supported each other in their weight-loss efforts, and word of the group's success quickly spread. Ms. Nidetch and Al and Felice Lippert, who all successfully lost weight, formally launched Weight Watchers.
HEINZ OWNERSHIP
Recognizing the power of the WEIGHT WATCHERS brand, Heinz acquired us in 1978 in large part to acquire the rights to our name for its food business. Through the 1980s, we operated autonomously under Heinz, maintaining our group education focus, and our business continued to grow.
In 1990, Heinz altered our successful model by introducing the sale of pre-packaged meals through our NACO operations in response to the initial success then experienced by some of our competitors who focused on meal replacements. These changes forced our classroom leaders to become food sales people and retail managers for food products, detracting from their function as role models and motivators for our members. This caused a significant drop in customer satisfaction and employee morale, and attendance in our NACO operations declined. Prior to the introduction of pre-packaged meals in fiscal 1990, annual attendance in our NACO operations was 12.9 million, but by fiscal 1997, attendance had dropped to 7.8 million. The introduction of pre-packaged meals also forced us to lease large fixed centers that could accommodate freezer cases, and the reduction in attendance combined with our increased fixed costs caused NACO's operating profit margin to decline from over 30% in fiscal 1989 to an operating loss in fiscal 1997. In contrast, in our international operations where the pre-packaged meals sales strategy was not implemented, our attendance remained stable until fiscal 1997 and our international business remained profitable. As we focused our NACO operations on promoting and selling our pre-packaged meals, our centrally-developed diets became outdated as they still focused on helping members prepare home-cooked meals. At the same time, more women entered the workplace and preferred to buy ready-to-eat groceries, including low-fat or low-calorie foods that became widely available in supermarkets in the 1990s.
In 1995, we shifted to a more decentralized management approach, allowing the management of our international operations to develop local business strategies and diet innovations. This approach was successful and by 1996 our international growth began to accelerate. Beginning in 1997, we
restructured our NACO operations by eliminating the pre-packaged meals program from our classroom operations, improving customer service, restoring employee morale and introducing a POINTS-based diet. Following this return to our core program approach in the United States, we have moved from a fixed cost structure back to a variable cost structure and grown attendance in our NACO operations by over 83% from 7.8 million in fiscal 1997 to 14.3 million in 2000.
ARTAL OWNERSHIP
In September 1999, Artal Luxembourg acquired us from Heinz. Following the acquisition, our senior management team was reorganized, key employees invested over $4 million in our company and a new performance-based stock option plan was put in place. The Invus Group, Ltd. is the exclusive investment advisor of Artal Luxembourg and has extensive experience with branded consumer businesses, including the turnaround of the Keebler Foods Company.
REGULATION AND LITIGATION
A number of laws and regulations govern our advertising, franchise operations and relations with consumers. The FTC and certain states regulate advertising, disclosures to consumers and franchisees and other consumer matters. Our customers may file actions on their own behalf, as a class or otherwise, and may file complaints with the FTC or state or local consumer affairs offices and these agencies may take action on their own initiative or on a referral from consumers or others.
During the mid-1990s, the FTC filed complaints against a number of commercial weight-loss providers alleging violations of the Federal Trade Commission Act by the use and content of advertisements for weight-loss programs that featured testimonials, claims for program success and safety and statements as to program costs to participants. In 1997, we entered into a consent order with the FTC settling all contested issues raised in the complaint filed against us. The consent order requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services but does not contain any admission of guilt nor require us to pay any civil penalties or damages.
Our foreign operations and franchises are also generally subject to regulations of the applicable country regarding the offer and sale of franchises, the content of advertising and promotion of diet products and programs. Future legislation or regulations, including legislation or regulations affecting our marketing and advertising practices, relations with consumers or franchisees or our food products, could have an adverse impact on us.
We are involved in legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, our management believes that none of these matters will have an adverse effect on our financial condition, results of operations or cash flows.
EMPLOYEES AND SERVICE PROVIDERS
As of June 30, 2001, we had approximately 32,600 employees and service providers, of which 12,200 were located in the United States, 12,900 were located in the United Kingdom, 3,300 were located in Continental Europe and 4,200 were located in Australia and New Zealand. 112 employees work full-time as management and support personnel in our Woodbury, New York offices, 222 employees work full-time as management and support personnel at four regional offices in our NACO operations, and 433 employees work full-time as management and support personnel in our international operations. Within our company-owned operations, approximately 8,800 service providers work part-time as leaders and approximately 23,000 work part-time as receptionists worldwide. None of our service providers or employees is represented by a labor union. We consider our employee relations to be satisfactory.
PROPERTIES
We are headquartered in Woodbury, New York in a leased office. Each of the four NACO regions has a small regional office. The Woodbury lease expires in 2005, the Paramus, New Jersey lease expires in 2007, and the New York, New York WEIGHT WATCHERS MAGAZINE lease expires in 2002. Our other North American office leases are short-term. Each country operation also has one head office.
We typically hold our classes in third-party locations (typically meeting rooms in well-located civic or religious organizations or space leased in shopping centers). As of June 30, 2001, there were approximately 2,400 NACO meeting locations, including approximately 1,900 third-party locations and 500 retail centers. In the United Kingdom, there were approximately 4,200 meeting locations, with approximately 97% in third-party locations. In Continental Europe, there were approximately 2,800 meeting locations, with approximately 96% in third-party locations. In Australia and New Zealand, there were approximately 1,100 meeting locations, with approximately 97% in third-party locations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages as of June 30, 2001 and current positions with us and our subsidiaries of our executive officers and directors. Directors are elected at the annual meeting of shareholders. Executive officers are appointed by, and hold office at, the discretion of the directors.
NAME AGE POSITION ---- -------------------------- --------------------------------------------------- Linda Huett............................... 56 President and Chief Executive Officer, Director Richard McSorley.......................... 57 Chief Operating Officer, NACO Clive Brothers............................ 47 Chief Operating Officer, Europe Scott R. Penn............................. 30 Vice President, Australasia Thomas S. Kiritsis........................ 57 Vice President, Chief Financial Officer Robert W. Hollweg......................... 58 Vice President, General Counsel and Secretary Raymond Debbane(1)(2)..................... 46 Chairman of the Board Jonas M. Fajgenbaum....................... 29 Director Sacha Lainovic(1)......................... 44 Director Christopher J. Sobecki(2)................. 43 Director |
(1) Member of our compensation and benefits committee.
(2) Member of our audit committee.
LINDA HUETT. Ms. Huett has been the President and a director of our company since September 1999. She became our Chief Executive Officer in December 2000. Ms. Huett joined our company in 1984 as a classroom leader. Ms. Huett was promoted to U.K. Training Manager in 1986. In 1990, Ms. Huett was appointed Director of the United Kingdom operation and in 1993 was appointed Vice President of Weight Watchers U.K. Ms. Huett graduated from Gustavas Adolphus College and received her Masters in Theater from Yale University. Ms. Huett is also a director of WeightWatchers.com, Inc.
RICHARD MCSORLEY. Mr. McSorley has served as our Chief Operating Officer for North America since January 2001. From 1992 until our purchase of Weighco, Mr. McSorley served in various capacities with Weighco Enterprises, Inc., including as President since 1995 and Chief Executive Officer since 1996. Mr. McSorley received his B.A. degree from Villanova University, and an M.B.A. from the University of Pittsburgh.
CLIVE BROTHERS. Mr. Brothers has served as our Chief Operating Officer for Europe since February 2001. Mr. Brothers joined our company in 1985 as a marketing manager in the United Kingdom. In 1990, Mr. Brothers was appointed General Manager, France and was appointed Vice President, Continental Europe in 1993. Mr. Brothers received a B.A. from Leeds Polytechnic in England and a diploma in Marketing from the Chartered Institute of Marketing.
SCOTT R. PENN. Scott Penn has been a Vice President of our Australasia operations since September 1999. Mr. Penn joined our company in 1994 as a Marketing Services Manager in Australia. In 1996, he was promoted to Group Marketing Manager in Australia and in 1997 he was promoted to General Manager--Marketing and Finance.
THOMAS S. KIRITSIS. Mr. Kiritsis has served as our Vice President, Chief Financial Officer since joining our company in May 2000. From June 1994 to April 2000, he was Senior Vice President of Finance of Olsten Corporation. Mr. Kiritsis received a B.B.A. in Accounting from Hofstra University and is a certified public accountant.
ROBERT W. HOLLWEG. Mr. Hollweg has served as our Vice President, General Counsel and Secretary since January 1998. He joined our company in 1969 as an Assistant Counsel in the law department. He transferred to the Heinz law department subsequent to Heinz's acquisition of our company in 1978 and served there in various capacities. He rejoined us after Artal Luxembourg acquired our company in September 1999. Mr. Hollweg graduated from Fordham University and received his Juris Doctor degree from Fordham University School of Law. He is a member of the American and New York State Bar Associations and a former President of the International Trademark Association.
RAYMOND DEBBANE. Mr. Debbane has been our Chairman of the Board of Directors since our acquisition by Artal Luxembourg on September 29, 1999. Mr. Debbane is a co-founder and President of The Invus Group, Ltd. Prior to forming The Invus Group, Ltd. in 1985, Mr. Debbane was a manager and consultant for The Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate School of Business, an M.S. in Food Science and Technology from the University of California, Davis and a B.S. in Agricultural Sciences and Agricultural Engineering from American University of Beirut. Mr. Debbane is a director of Artal Group, Ceres, Inc., Financial Technologies International Inc. and Nellson Nutraceutical, Inc. Mr. Debbane is also the Chairman of the Board of Directors of WeightWatchers.com, Inc. and served as a director of Keebler Foods Company from 1996 to 1999.
JONAS M. FAJGENBAUM. Mr. Fajgenbaum has been a director of our company since our acquisition by Artal Luxembourg on September 29, 1999. Mr. Fajgenbaum is a Managing Director at The Invus Group, Ltd., which he joined in 1996. Prior to joining The Invus Group, Ltd., Mr. Fajgenbaum was a consultant for McKinsey & Company in New York from 1994 to 1996. He graduated with a B.S. from the Wharton School of Business and a B.A. in Economics from the University of Pennsylvania in 1994.
SACHA LAINOVIC. Mr. Lainovic has been a director of our company since our acquisition by Artal Luxembourg on September 29, 1999. Mr. Lainovic is a co-founder and Executive Vice President of The Invus Group, Ltd. Prior to forming The Invus Group, Ltd. in 1985, Mr. Lainovic was a manager and consultant for the Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate School of Business and an M.S. in engineering from Insa de Lyon in Lyon, France. Mr. Lainovic is a director of WeightWatchers.com, Inc., Financial Technologies International Inc., Nellson Nutraceutical, Inc. and Unwired Australia Pty Limited, and also served as a director of Keebler Foods Company from 1996 to 1999.
CHRISTOPHER J. SOBECKI. Mr. Sobecki has been a director of our company since our acquisition by Artal Luxembourg on September 29, 1999. Mr. Sobecki, a Managing Director of The Invus Group, Ltd., joined the firm in 1989. He received an M.B.A. from Harvard Business School. He also obtained a B.S. in Industrial Engineering from Purdue University. Mr. Sobecki is a director of WeightWatchers.com, Inc., Nellson Nutraceutical, Inc., Financial Technologies International Inc. and iLife, Inc. He also served as a director of Keebler Foods Company from 1996 to 1998.
BOARD OF DIRECTORS
Our board of directors is currently comprised of five directors. We expect our board of directors to consist of nine members within twelve months of this offering. We expect to add two independent members to our board of directors within three months after the consummation of this offering and a third independent member to our board of directors within 12 months after the consummation of this offering.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION PROGRAMS
Our board of directors oversees the compensation programs of our company, with particular attention to the compensation for our Chief Executive Officer and the other executive officers. It is the responsibility of our board of directors to review, recommend and approve changes to our compensation policies and benefits programs, to administer our stock plans, including approving stock option grants to executive officers and other stock option grants, and to otherwise ensure that our compensation philosophy is consistent with the best interests of our company and is properly implemented.
Our compensation philosophy is to (a) provide a competitive total compensation package that enables us to attract and retain key executive and employee talent needed to accomplish our goals and (b) directly link compensation to improvements in our company's financial and operational performance.
Total compensation is comprised of a base salary plus both cash and non-cash incentive compensation, and is based on our financial performance and other factors, and is delivered through a combination of cash and equity-based awards. This approach results in overall compensation levels which follow our financial performance.
Our board of directors reviews each senior executive officer's base salary annually. In determining appropriate base salary levels, consideration is given to the officer's impact level, scope of responsibility, prior experience, past accomplishments and data on prevailing compensation levels in relevant executive labor markets.
Our board of directors believes that granting stock options provides officers with a strong economic interest in maximizing shareholder returns over the longer term. We believe that the practice of granting stock options is critical to retaining and recruiting the key talent necessary at all employee levels to ensure our continued success.
Our board of directors will continue to monitor our compensation program in order to maintain the proper balance between cash compensation and equity-based incentives and may consider further revisions in the future, although it is expected that equity-based compensation will remain one of the principal components of compensation.
COMMITTEES OF OUR BOARD OF DIRECTORS
The standing committees of our board of directors will consist of an audit committee and a compensation and benefits committee.
AUDIT COMMITTEE
The principal duties of our audit committee are as follows:
- to oversee that our management has maintained the reliability and integrity of our accounting policies and financial reporting and our disclosure practices;
- to oversee that our management has established and maintained processes to assure that an adequate system of internal control is functioning;
- to oversee that our management has established and maintained processes to assure our compliance with all applicable laws, regulations and corporate policy;
- to review our annual and quarterly financial statements prior to their filing or prior to the release of earnings; and
- to review the performance of the independent accountants and make recommendations to the board of directors regarding the appointment or termination of the independent accountants.
The audit committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate.
We plan to appoint two independent members of the audit committee within three months following this offering and the third independent member within twelve months after the consummation of this offering.
COMPENSATION AND BENEFITS COMMITTEE
The principal duties of the compensation committee and benefits are as follows:
- to review key employee compensation policies, plans and programs;
- to monitor performance and compensation of our employee-director, officers and other key employees;
- to prepare recommendations and periodic reports to the board of directors concerning these matters; and
- to function as the committee which administers the incentive programs referred to in "Executive Compensation" below.
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers has served as a director or member of the compensation and benefits committee, or other committee serving an equivalent function, of any entity of which an executive officer is expected to serve as a member of our compensation and benefits committee.
CLASSES AND TERMS OF DIRECTORS
Our board of directors is divided into three classes, as nearly equal in number as possible, with each director serving a three-year term and one class being elected at each year's annual meeting of shareholders. As of the date of this prospectus, the following individuals are directors and will serve for the terms indicated:
Class 1 Directors (term expiring in 2002)
Raymond Debbane
Jonas M. Fajgenbaum
Class 2 Directors (term expiring in 2003)
Sacha Lainovic
Christopher J. Sobecki
Class 3 Director (term expiring in 2004)
Linda Huett
EXECUTIVE COMPENSATION
The following table sets forth for the twelve months ended December 30, 2000, and for the fiscal years ended April 29, 2000 and April 24, 1999, the compensation paid to our President and Chief Executive Officer and to each of the next four most highly compensated executive officers whose total annual salary and bonus was in excess of $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------------------------------------
AWARDS
-------------------------------------------
SECURITIES UNDERLYING OPTIONS (NO.
TWELVE MONTH PERIOD AWARDED)
COMPENSATION -------------------------------------------
------------------- WEIGHT
NAME AND PRINCIPAL POSITION TWELVE MONTHS ENDED SALARY BONUS WATCHERS WEIGHTWATCHERS.COM(4) HEINZ(4)
--------------------------- ------------------- -------- -------- -------- --------------------- --------
Linda Huett December 30, 2000(3) $236,565 $283,351 141,161 -- --
President and April 29, 2000 183,750 215,159 282,322 11,385 --
Chief Executive Officer April 24, 1999 138,574 219,435 -- -- 40,000
Clive Brothers December 30, 2000(3) 170,148 154,215 -- -- --
Chief Operating Officer, April 29, 2000 143,423 158,597 282,322 11,385 --
Europe April 24, 1999 138,574 219,435 -- -- 40,000
Scott R. Penn December 30, 2000(3) 124,758 78,059 -- -- --
Vice President, April 29, 2000 63,508 86,134 282,322 11,385 --
Australasia April 24, 1999 47,756 18,600 -- -- --
Thomas S. Kiritsis(1) December 30, 2000(3) 130,798 160,035 282,322 11,385 --
Vice President and
Chief Financial Officer
Robert W. Hollweg(2) December 30, 2000(3) 142,510 100,013 -- -- --
Vice President, General April 29, 2000 70,500 67,349 282,322 11,385 --
Counsel and Secretary
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(5)
--------------------------- ---------------
Linda Huett $84,531
President and 288,905
Chief Executive Officer --
Clive Brothers 29,639
Chief Operating Officer, 12,908
Europe --
Scott R. Penn 28,484
Vice President, 15,930
Australasia 16,391
Thomas S. Kiritsis(1) 26,747
Vice President and
Chief Financial Officer
Robert W. Hollweg(2) 43,519
Vice President, General 11,325
Counsel and Secretary
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(1) Mr. Kiritsis joined our company on May 1, 2000.
(2) Mr. Hollweg rejoined our company in September 1999. Prior to that time, he was an employee of Heinz.
(3) Effective April 30, 2000, we changed our fiscal year end from the last Saturday in April to the Saturday closest to December 31. To accurately reflect annual compensation, the compensation reported for the twelve months ended December 30, 2000 has been derived from the compensation for the eight months ended December 30, 2000, plus the compensation for the four months ended April 29, 2000, except that we have not included the shares underlying the options issued in respect of WeightWatchers.com shares in the executive officer's compensation for the twelve months ended December 30, 2000 because this grant of options is reflected in the executive officer's compensation for the twelve months ended April 29, 2000. As a result, there is overlap in the compensation reported for the twelve months ended December 30, 2000 and the twelve months ended April 29, 2000.
(4) Awards of options with respect to shares of WeightWatchers.com common stock owned by us were made to the named executives under our WeightWatchers.com 1999 Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries. Awards of options with respect to Heinz common stock were made to the named executives under the Heinz 1996 Stock Option Plan prior to our acquisition by Artal Luxembourg from Heinz on September 29, 1999.
(5) Includes amounts contributed under our 401(k) savings plan and our non-qualified executive profit sharing plan of $61,642 for Ms. Huett, $10,394 for Mr. Brothers, $17,466 for Mr. Penn, $22,159 for Mr. Kiritsis and $32,575 for Mr. Hollweg. Includes contributions to the U.K. Pension Plan of $10,281 for Mr. Brothers. Also includes auto lease expense for named executives.
In December 1999, our board of directors adopted the "1999 Stock Purchase and Option Plan of Weight Watchers International, Inc. and Subsidiaries" under which selected employees were afforded the opportunity to purchase shares of our common stock and/or were granted options to purchase shares of our common stock. The number of shares available for grant under this plan is 7,058,040 shares of our authorized common stock. The following table sets forth information regarding options granted during the twelve months ended December 30, 2000 to the named executive officers under our stock purchase and option plan.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES OPTION GRANTS
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
INDIVIDUAL GRANTS
---------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS
GRANTED TO
NUMBER OF EMPLOYEES IN
SECURITIES TWELVE MONTHS EXERCISE OR
UNDERLYING ENDED BASE PRICE GRANT DATE
OPTIONS DECEMBER 30, (PER EXPIRATION PRESENT
NAME GRANTED(1) 2000(2) SHARE) DATE VALUE(3)
---- ---------- ------------- ----------- ------------- ----------
Linda Huett...................... 141,161 28.6% $2.13 July 4, 2010 $138,600
Thomas S. Kiritsis............... 282,322 57.1% $2.13 June 14, 2010 $279,000
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(1) Options were granted during the twelve months ended December 30, 2000 under the terms of our option plan. No options under the plan were exercised during the twelve months ended December 30, 2000. Options are exercisable based on vesting provisions outlined in the agreement.
(2) Percentage of total options granted are based on total grants made to all employees during the twelve months ended December 30, 2000.
(3) The estimated grant date's present value is determined using the Black-Scholes model. The adjustments and assumptions incorporated in the Black-Scholes model in estimating the value of the grants include the following: (a) the exercise price of the options equals the fair market value of the underlying stock on the date of grant; (b) an option term of 10 years; (c) dividend yield and volatility of 0%; and (d) a risk free interest rate ranging from 6.20% to 6.26%. The ultimate value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of our common stock over the exercise price on the date the option is granted.
Under our 1999 Stock Purchase and Option Plan, we have the ability to grant stock options, restricted stock, stock appreciation rights and other stock-based awards. Generally, stock options granted under this plan vest and become exercisable in annual increments over five years with respect to one-third of options granted, and the remaining two-thirds of the options vest on the ninth anniversary of the date the options were granted, subject to accelerated vesting upon our achievement of certain performance targets. In any event, the options that vest over five years automatically become fully vested upon the occurrence of a change in control of our company.
In April 2000, our board of directors adopted the "WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries" pursuant to which selected employees were granted options to purchase shares of WeightWatchers.com common stock. The number of shares available for grant under this plan is 400,000 shares of authorized common stock of WeightWatchers.com. The following table sets forth information regarding options granted during the twelve months ended December 30, 2000 to the named executive officers under the WeightWatchers.com option plan.
WEIGHTWATCHERS.COM OPTION GRANTS FOR THE
TWELVE MONTHS ENDED DECEMBER 30, 2000
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS
GRANTED TO
NUMBER OF EMPLOYEES IN
SECURITIES THE TWELVE MONTHS EXERCISE OR
UNDERLYING ENDED BASE PRICE GRANT DATE
OPTIONS DECEMBER 30, (PER EXPIRATION PRESENT
NAME GRANTED(1) 2000(2) SHARE) DATE VALUE (3)
---- ---------- ----------------- ----------- ------------- ----------
Linda Huett................... 11,385 7.0% $0.50 June 14, 2010 $2,619
Clive Brothers................ 11,385 7.0% $0.50 June 14, 2010 $2,619
Scott R. Penn................. 11,385 7.0% $0.50 June 14, 2010 $2,619
Thomas S. Kiritsis............ 11,385 7.0% $0.50 June 14, 2010 $2,619
Robert W. Hollweg............. 11,385 7.0% $0.50 June 14, 2010 $2,619
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(1) Options were granted during the twelve months ended December 30, 2000 under the terms of the option plan. Options are exercisable based on vesting provisions outlined in the agreement.
(2) Percentage of total options granted are based on total grants made to our employees during the twelve months ended December 30, 2000.
(3) The estimated grant date's present value is determined using the Black-Scholes model. The adjustments and assumptions incorporated in the Black-Scholes model in estimating the value of the grants include the following: (a) price paid per share of $0.50; (b) an option term of 10 years; (c) dividend yield and volatility of 0%; and (d) a risk free interest rate of 6.26%. The ultimate value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of WeightWatchers.com common stock over the exercise price on the date the option is granted.
Under our WeightWatchers.com Stock Incentive Plan, we have the ability to grant stock options, restricted stock, stock appreciation rights and other stock-based awards on shares of WeightWatchers.com common stock. Generally, stock options vest with respect to 25% of shares subject to the options on the first anniversary of the date of grant, with the remaining 75% vesting annually on a ratable basis over three years. These options are not exercisable until the earlier to occur of (x) six months after the tenth anniversary of the date the option was granted and (y) a public offering of WeightWatchers.com common stock or a private sale of the stock in which an employee holding stock is entitled to participate under the terms of the sale participation agreement entered into with Artal Luxembourg.
The following tables set forth the number and value of securities underlying unexercised options held by each of our executive officers listed on the Summary Compensation Table above as of the twelve months ended December 30, 2000. None of our executive officers exercised any options in the twelve months ended December 30, 2000, and we do not have any stock appreciation rights.
AGGREGATED OPTIONS/SAR
VALUES AS OF THE TWELVE MONTHS ENDED
DECEMBER 30, 2000
NUMBER OF WEIGHT WATCHERS VALUE OF WEIGHT WATCHERS
SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED IN VALUE TWELVE MONTHS ENDED TWELVE MONTHS ENDED
NAME EXERCISE (#) REALIZED DECEMBER 30, 2000 DECEMBER 30, 2000
---- ------------ -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE
(#) (#) EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Linda Huett............................... -- -- 105,871 317,612 $202,500 $607,500
Clive Brothers............................ -- -- 70,581 211,742 $135,000 $405,000
Scott R. Penn............................. -- -- 70,581 211,742 $135,000 $405,000
Thomas S. Kiritsis........................ -- -- 70,581 211,742 $135,000 $405,000
Robert W. Hollweg......................... -- -- 70,581 211,742 $135,000 $405,000
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NUMBER OF
WEIGHTWATCHERS.COM VALUE OF NUMBER OF
SECURITIES WEIGHTWATCHERS.COM HEINZ SECURITIES
UNDERLYING UNEXERCISED IN-THE-MONEY UNDERLYING UNEXERCISED
OPTIONS/SARS AT OPTIONS/SARS AT OPTIONS/SARS AT
TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
NAME DECEMBER 30, 2000 DECEMBER 30, 2000 DECEMBER 30, 2000
---- --------------------------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) (#) EXERCISABLE UNEXERCISABLE (#) (#)
----------- ------------- ----------- ------------- ----------- -------------
Linda Huett............ 2,846 8,539 -- -- 40,000 --
Clive Brothers......... 2,846 8,539 -- -- 40,000 --
Scott R. Penn.......... 2,846 8,539 -- -- -- --
Thomas S. Kiritsis..... 2,846 8,539 -- -- -- --
Robert W. Hollweg...... 2,846 8,539 -- -- -- --
VALUE OF HEINZ
IN-THE-MONEY
OPTIONS/SARS AT
TWELVE MONTHS ENDED
NAME DECEMBER 30, 2000
---- ---------------------------
EXERCISABLE UNEXERCISABLE
----------- -------------
Linda Huett............ -- --
Clive Brothers......... -- --
Scott R. Penn.......... -- --
Thomas S. Kiritsis..... -- --
Robert W. Hollweg...... -- --
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DIRECTOR COMPENSATION
Our executive directors and our directors who are associated with The Invus Group, Ltd. do not receive compensation except in their capacity as officers or employees. We have not yet determined our compensation policy with respect to our independent directors.
EMPLOYMENT AGREEMENTS AND SEVERANCE POLICIES
We are in the process of establishing a severance policy to cover all full-time salaried employees. It is intended that the severance policy will provide continuation of base salary for employees for some period of time after an individual's employment is terminated under specified circumstances. We are still in the process of establishing the guidelines for this policy.
EXECUTIVE SAVINGS AND PROFIT SHARING PLAN
We sponsor a savings plan for salaried and eligible hourly employees. This defined contribution plan provides for employer matching contributions up to 100% of the first 3% of an employee's eligible compensation. The savings plan also permits employees to contribute between 1% percent and 13% of eligible compensation on a pre-tax basis.
The savings plan also contains a profit sharing component for full time salaried employees that are not key management personnel, which provides for a guaranteed monthly employer contribution for each participant based on the participant's age and a percentage of the participant's eligible compensation. In addition, the profit sharing plan has a supplemental employer contribution component, based on our achievement of certain annual performance targets, and a discretionary contribution component.
We also established an executive profit sharing plan, which provides a non-qualified profit sharing plan for key management personnel who are not eligible to participate in our profit sharing plan. This non-qualified profit sharing plan has similar features to our profit sharing plan.
RELATED PARTY TRANSACTIONS
THE SUMMARIES OF THE AGREEMENTS DESCRIBED BELOW ARE NOT COMPLETE. YOU SHOULD READ THE AGREEMENTS IN THEIR ENTIRETY, WHICH HAVE BEEN FILED WITH THE SEC AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
SHAREHOLDERS' AGREEMENTS
Simultaneously with the closing of our acquisition by Artal Luxembourg, we entered into a shareholders' agreement with Artal Luxembourg and Heinz that governs our relationship surrounding our common stock. Subsequent transferees of Artal Luxembourg and Heinz must, subject to limited exceptions, agree to be bound by the terms and provisions of the agreement. Heinz has sold all shares of our common stock held by it and accordingly no longer has any rights or obligations under this agreement. We and Artal Luxembourg recently terminated this agreement.
Shortly after our acquisition by Artal Luxembourg, we entered into a shareholders' agreement with Artal Luxembourg and Merchant Capital, Inc., Richard and Heather Penn, Longisland International Limited, Envoy Partners and Scotiabanc, Inc. that governs our relationship surrounding our common stock held by these parties other than Artal Luxembourg. Without the consent of Artal Luxembourg, transfers of our common stock by these shareholders are restricted with certain exceptions. Subsequent transferees of our common stock must, subject to limited exceptions, agree to be bound by the terms and provisions of the agreement. Additionally, this agreement provides the shareholders with the right to participate pro rata in certain transfers of our common stock by Artal Luxembourg and grants Artal Luxembourg the right to require other shareholders to participate on a pro rata basis in certain transfers of our common stock by Artal Luxembourg.
REGISTRATION RIGHTS AGREEMENT
Simultaneously with the closing of our acquisition by Artal Luxembourg, we entered into a registration rights agreement with Artal Luxembourg and Heinz. The registration rights agreement grants Artal Luxembourg the right to require us to register its shares of our common stock for public sale under the Securities Act (1) upon demand and (2) in the event that we conduct certain types of registered offerings. Heinz has sold all shares of our common stock held by it and accordingly no longer has any rights under this agreement. Merchant Capital, Inc., Richard and Heather Penn, Longisland International Limited, Envoy Partners and Scotiabanc, Inc. became parties to this registration rights agreement under joinder agreements, and each acquired the right to require us to register and sell their stock in the event that we conduct certain types of registered offerings.
PREFERRED SHAREHOLDERS' AGREEMENT
Simultaneously with the closing of our acquisition by Artal Luxembourg, we entered into a preferred shareholders' agreement with Heinz that governs our relationship concerning our Series A Preferred Stock. Subsequent transferees of Heinz, subject to limited exceptions, must agree to be bound by the terms and provisions of this agreement. Artal Luxembourg and we have a preemptive right to acquire the preferred stock from Heinz if Heinz receives an offer to purchase any or all of its preferred stock from a third party and it wishes to accept the offer. As a result of this offering, Heinz has the right to require us to redeem any or all of its shares of our preferred stock. This right, however, is limited by the provisions contained in our credit agreement and the indentures pursuant to which our senior subordinated notes were issued.
PUT/CALL AGREEMENT
On April 18, 2001, we entered into a Put/Call Agreement with Heinz. Under this agreement, Heinz has an option to sell and we have an option to purchase all of our common stock currently
owned by Heinz. Heinz has sold to us all 6,719,254 shares of our common stock held by it for an aggregate purchase price of $27.1 million.
LIMITED LIABILITY COMPANY AGREEMENT
Simultaneously with the closing of our acquisition by Artal Luxembourg, we contributed $2,500 in exchange for a 50% membership interest in WW Foods, LLC, a Delaware limited liability company. Heinz owns the remaining 50% interest. The purpose of WW Foods is to own, maintain and preserve WEIGHT WATCHERS food and beverage trademarks that were contributed to it by Heinz. WW Foods serves as the vehicle for licensing rights in those food and beverage trademarks to us and to Heinz, and for the licensing of program information by our company to Heinz.
LICENSING AGREEMENTS
The licensing agreements govern the ownership and rights to use the WEIGHT WATCHERS and other trademarks, service marks and related rights among our company, Heinz and WW Foods. As described below, the licensing agreements address the parties' respective ownership and rights to use food and beverage trademarks, service marks, program standards, program information, program information trademarks and third party licenses. Heinz is also a party to the operating agreement, which helps preserve and enhance these trademarks, service marks and related rights and facilitates their orderly use by each party.
FOOD AND BEVERAGE TRADEMARKS
Under the licensing agreements, we distributed to Heinz and Heinz contributed to WW Foods all WEIGHT WATCHERS trademarks and other trademarks we owned relating to food and beverage products. However, Heinz retained certain trademarks previously used by Heinz in connection with those food and beverage trademarks that do not include the WEIGHT WATCHERS name (including, for example, SMART ONES), which we distributed to Heinz. At the closing of our acquisition by Artal Luxembourg, WW Foods granted an exclusive, worldwide, royalty-free, perpetual license to use the food and beverage trademarks:
- to Heinz, for worldwide use on food products in specified product categories (including frozen dinners, frozen breakfasts, frozen desserts (excluding ice cream), frozen pizza and pizza snacks, frozen potatoes, frozen rice products, ketchup, tomato sauce, gravy, canned tuna or salmon products, soup, noodles (excluding pasta), and canned beans and pasta products), and for use only in Australia and New Zealand in specified additional food product categories (including mayonnaise, frozen vegetables, canned fruits and canned vegetables); and
- to us, for use on all other food and beverage products.
We may promote, endorse and sell any of these licensed products through our classroom business and related activities, subject to non-competition provisions with Heinz. Additionally, we may continue to sell any food and beverage product (or comparable product) sold by us in a particular country within the year preceding the closing of our acquisition by Artal Luxembourg, even if that product has been exclusively licensed to Heinz. However, we may do so only within that country and by using the same channels of distribution through which the product was sold during that one-year period.
Some of the food and beverage trademarks and trademark applications were not distributed to Heinz for contribution to WW Foods. These trademarks and trademark applications include:
- trademarks consisting of registrations in multiple trademark classes, where the classes include both food and beverage product classes and classes relating to other types of products or services;
- pending applications that could not be transferred until a registration is granted;
- trademark registrations and applications in countries that do not recognize ownership of trademarks by an entity such as WW Foods;
- trademark registrations and applications in countries where the local law imposes restrictions or limitations on the ownership or registration of similar trademarks by unrelated parties; and
- program information trademarks (as defined below).
We retained legal ownership of these types of food and beverage trademarks, which we hold in custody for the benefit of WW Foods.
At the closing of our acquisition by Artal Luxembourg, we granted to Heinz an exclusive, worldwide, royalty-free license to use those food and beverage trademarks (or any portion covering food and beverage products) that we hold in custody for the benefit of WW Foods in connection with the other products licensed to Heinz by WW Foods. We have undertaken to contribute any of these custodial trademarks (or any portion covering food and beverage products) to WW Foods if WW Foods determines that the transfer may be achieved under local law. If local law does not permit an existing registration in multiple trademark classes to be severed so as to reflect separate ownership of registrations in food and beverage product classes from registrations in classes covering other types of products or services, (1) WW Foods will apply for new registrations to cover the food and beverage products, (2) we will cancel the portion of the multi-class registration covering food and beverage products upon issuance of the new registrations and (3) we will retain ownership of all remaining portions of the multi-class registration. Heinz will pay us an annual fee of $1.2 million until September 2004 in exchange for our serving as the custodian of the food and beverage trademarks held for the benefit of WW Foods.
OTHER MARKS
We retain exclusive ownership of all service marks and trademarks other than food and beverage trademarks and, except for the rights granted to WW Foods and to Heinz, we have the exclusive right to use all these marks for any purpose, including their use as trademarks for all products other than food and beverage products.
PROGRAM STANDARDS
We have exclusive control of the dietary principles to be followed in any eating or lifestyle regimen to facilitate weight loss or weight control employed by the classroom business such as WINNING POINTS. Except for specified limitations concerning products currently sold and extensions of existing product lines, Heinz may use the food and beverage related trademarks only on Heinz licensed products that have been specially formulated to be compatible with our dietary principles. We have exclusive responsibility for enforcing compliance with our dietary principles.
PROGRAM INFORMATION AND PROGRAM INFORMATION TRADEMARKS
We retain exclusive ownership of all program information, consisting of:
- all information and know-how relating to any weight-loss program;
- all terminology; and
- all trademarks or service marks used to identify the programs or terminology.
We granted an exclusive, worldwide, royalty-free license to WW Foods (for sublicense to Heinz) to use the terminology and the related trademarks and service marks, and we provided WW Foods (and through it, Heinz) with access to and a right to use this information as may be reasonably necessary to
develop, manufacture or market food and beverage products in accordance with our dietary principles. Heinz granted a worldwide, royalty-free license to WW Foods to use improvements that Heinz may develop in the course of its use of our dietary principles or weight-loss program, which WW Foods sublicensed in turn to us.
THIRD PARTY LICENSES
Under the licensing agreements, we assigned to Heinz all licenses that we previously granted to third parties, and Heinz retained all existing sublicenses granted by it to third parties under a license previously granted to Heinz, that relate to the manufacture, distribution or sale of food and beverage products. Heinz assumed our obligations under these third party licenses, and has the right to collect and keep all proceeds from them until September 2004. Ownership of these licenses, to the extent they pertain to products licensed to us by WW Foods, will be transitioned to us over the five-year period following our acquisition by Artal Luxembourg. All proceeds from any of these licenses that cannot be transitioned to us by September 2004 will be collected by Heinz and paid over to us. Any sublicense that we or Heinz grant after the closing of our acquisition by Artal Luxembourg relating to use of our food and beverage related trademarks must conform to the terms of the WW Foods licenses granted to Heinz and our company.
Effective May 3, 2001, we agreed to manage these third party licenses under an agreement with Heinz dated April 30, 2001 for a fee equal to 5% of the royalties from these licenses. This agreement also grants us an option, exercisible in our sole discretion, to buy the royalty stream from these licenses prior to September 29, 2004 at a price computed using a formula which adjusts for the then current royalty base, an assumed growth rate over the balance of the period, the 5% management fee, the custodial fee, an agreed discount rate and a tax rate.
HEINZ LICENSES
Subsequent to our acquisition by Artal Luxembourg, we entered into three short-term licenses with Heinz and its affiliates regarding the manufacture and marketing of certain food products (not licensed to Heinz by WW Foods) under our brand in the United Kingdom, Australia and in New Zealand through WW Foods as described above. These products were ones that were manufactured and marketed by Heinz prior to our acquisition by Artal Luxembourg.
MANAGEMENT AGREEMENT
Simultaneously with the closing of our acquisition by Artal Luxembourg, we entered into a management agreement with The Invus Group, Ltd., the independent investment advisor to Artal Luxembourg. Under this agreement, The Invus Group provides us with management, consulting and other services in exchange for an annual fee equal to the greater of one million dollars or one percent of our EBITDA (as defined in the indentures relating to our senior subordinated notes), plus any related out-of-pocket expenses. This agreement is terminable at the option of The Invus Group at any time or by us at any time after Artal Luxembourg owns less than a majority of our voting stock.
CORPORATE AGREEMENT
We have entered into a corporate agreement with Artal Luxembourg. We have agreed that, so long as Artal Luxembourg beneficially owns 10% or more, but less than a majority of our then outstanding voting stock, Artal Luxembourg will have the right to nominate a number of directors approximately equal to that percentage multiplied by the number of directors on our board. This right to nominate directors will not restrict Artal Luxembourg from nominating a greater number of directors.
We have agreed with Artal Luxembourg that both Weight Watchers and Artal Luxembourg have the right to:
- engage in the same or similar business activities as the other party;
- do business with any customer or client of the other party; and
- employ or engage any officer or employee of the other party.
Neither Artal Luxembourg nor we, nor our respective related parties, will be liable to each other as a result of engaging in any of these activities.
Under the corporate agreement, if one of our officers or directors who also serves as an officer, director or advisor of Artal Luxembourg becomes aware of a potential transaction related primarily to the group education-based weight-loss business that may represent a corporate opportunity for both Artal Luxembourg and us, the officer, director or advisor has no duty to present that opportunity to Artal Luxembourg, and we will have the sole right to pursue the transaction if our board so determines. If one of our officers or directors who also serves as an officer, director or advisor of Artal Luxembourg becomes aware of any other potential transaction that may represent a corporate opportunity for both Artal Luxembourg and us, the officer or director will have a duty to present that opportunity to Artal Luxembourg, and Artal Luxembourg will have the sole right to pursue the transaction if Artal Luxembourg's board so determines. If one of our officers or directors who does not serve as an officer, director or advisor of Artal Luxembourg becomes aware of a potential transaction that may represent a corporate opportunity for both Artal Luxembourg and us, neither the officer nor the director nor we have a duty to present that opportunity to Artal Luxembourg, and we may pursue the transaction if our board so determines.
If Artal Luxembourg transfers, sells or otherwise disposes of our then outstanding voting stock, the transferee will generally succeed to the same rights that Artal Luxembourg has under this agreement by virtue of its ownership of our voting stock, subject to Artal Luxembourg's option not to transfer those rights.
WEIGHTWATCHERS.COM NOTE
On September 10, 2001, we amended and restated our loan agreement with WeightWatchers.com, increasing the aggregate commitment thereunder to $34.5 million. The principal amount may be advanced at any time or from time to time prior to July 31, 2003. The note bears interest at 13% per year, beginning on January 1, 2002, which interest shall be paid semi-annually starting on March 31, 2002. All principal outstanding under this note will be payable in six semi-annual installments, starting on March 31, 2004. The note may be prepaid at any time in whole or in part, without penalty. As of September 29, 2001, $26.2 million of principal was outstanding under this note.
WEIGHTWATCHERS.COM WARRANT AGREEMENTS
Under the warrant agreements that we entered with WeightWatchers.com, we have received warrants to purchase an additional 6,394,997 shares of WeightWatchers.com's common stock in connection with the loans that we made to WeightWatchers.com under the note described above. These warrants will expire from November 24, 2009 to September 10, 2011 and may be exercised at a price of $7.14 per share of WeightWatchers.com's common stock until their expiration. We own 19.8% of the outstanding common stock of WeightWatchers.com, or 38.1% on a fully diluted basis (including the exercise of all options and all the warrants we own in WeightWatchers.com).
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
In connection with the WeightWatchers.com note, we entered into a collateral assignment and security agreement whereby we obtained a security interest in the assets of WeightWatchers.com. Our security interest in those assets will terminate when the note has been paid in full.
WEIGHTWATCHERS.COM INTELLECTUAL PROPERTY LICENSE
We have entered into an amended intellectual property license agreement with WeightWatchers.com that governs WeightWatchers.com's right to use our trademarks and materials related to the Weight Watchers program.
The amended license agreement grants WeightWatchers.com the exclusive right
to (1) use any of our trademarks, service marks, logos, brand names and other
business identifiers as part of a domain name for a website on the Internet;
(2) use any of the domain names we own; (3) use any of our trademarks on the
Internet and any other similar or related forms of interactive digital
transmission that now exists or may be developed later (provided that we and our
affiliates, franchisees, and licensees other than WeightWatchers.com can
continue using the trademarks in connection with online advertising and
promotion of activities conducted offline) and (4) use any materials related to
the Weight Watchers program, including any text, artwork and photographs, and
advertising, marketing and promotional materials on the Internet. The license
agreement also grants WeightWatchers.com a non-exclusive right to (1) use any of
our trademarks to advertise any approved activities that relate to its online
weight-loss business and (2) create derivative works. All rights granted to
WeightWatchers.com must be used solely in connection with the conduct of its
online weight-loss business.
Beginning in January 2002, WeightWatchers.com will pay us a royalty of 10% of the net revenues it earns through its online activities.
We retain exclusive ownership of all of the trademarks and materials that we license to WeightWatchers.com and of the derivative works created by WeightWatchers.com.
All of the rights granted to WeightWatchers.com in the license agreement are subject to our pre-existing agreements with third parties, including franchisees.
The license agreement provides us with control over the use of our intellectual property. We will have the right to approve any e-commerce activities, any materials, sublicense, communication to consumers, products, privacy policy, strategies, marketing and operational plans WeightWatchers.com intends to use or implement in connection with its online weight-loss business. WeightWatchers.com is obligated to adhere to strict quality standards, usage guidelines and business criteria provided to WeightWatchers.com by us.
WeightWatchers.com and we will jointly own user data collected through the website and both parties are required to adhere to the site's privacy policy.
WEIGHTWATCHERS.COM SERVICE AGREEMENT
Simultaneously with the signing of the amended intellectual property license, we entered into a service agreement with WeightWatchers.com, under which WeightWatchers.com provides the following types of services:
- information distribution services, which include the hosting, displaying and distributing on the Internet of information relating to us and our affiliates and franchisees;
- marketing services, which include the hosting, displaying and distributing on the Internet of information relating to our products and services such as our classroom meetings, the WEIGHT
WATCHERS MAGAZINE and AT HOME and similar products and services from our affiliates and franchisees; and
- customer communication services, which include establishing a means by which customers can communicate with us on the Internet to ask questions related to our products and services and the products and services of our affiliates and franchisees.
We are required to pay for all expenses incurred by WeightWatchers.com directly attributable to the services it performs under this agreement, plus a fee of 10% of those expenses.
WEIGHTWATCHERS.COM SHAREHOLDERS' AGREEMENT
We entered into a shareholders' agreement with WeightWatchers.com, Inc., Artal Luxembourg and Heinz that governs our and Artal Luxembourg's relationship with WeightWatchers.com as holders of its common stock. Heinz has sold all of its shares in WeightWatchers.com back to WeightWatchers.com and thus no longer has any rights under this agreement. Subsequent transferees of ours and of Artal Luxembourg must, except for some limited exceptions, agree to be bound by the terms and provisions of the agreement.
The shareholders' agreement imposes on us restrictions on the transfer of
common stock of WeightWatchers.com until the earlier to occur of
(1) September 29, 2004 and (2) WeightWatchers.com's initial public offering of
common stock under the Securities Act, except for certain exceptions. We have
the right to participate pro rata in certain transfers of common stock of
WeightWatchers.com by Artal Luxembourg, and Artal Luxembourg has the right to
require us to participate on a pro rata basis in certain transfers of
WeightWatchers.com's common stock by it.
WEIGHTWATCHERS.COM REGISTRATION RIGHTS AGREEMENT
We entered into a registration rights agreement with WeightWatchers.com, Artal Luxembourg and Heinz with respect to our shares in WeightWatchers.com. Heinz has resold all of its shares in WeightWatchers.com back to WeightWatchers.com and thus no longer has any rights under this agreement. The registration rights agreement grants Artal Luxembourg the right to require WeightWatchers.com to register its shares of WeightWatchers.com common stock upon demand and also grants us and Artal Luxembourg rights to register and sell shares of WeightWatchers.com's common stock in the event it conducts certain types of registered offerings.
WEIGHTWATCHERS.COM LEASE GUARANTEE
We have guaranteed the performance of WeightWatcher.com's lease of its office space at 888 Seventh Avenue, New York, New York. The annual rental rate is $459,000 plus increases for operating expenses and real estate taxes. The lease expires in September 2003.
NELLSON CO-PACK AGREEMENT
We entered into an agreement with Nellson Nutraceutical, a subsidiary of Artal Luxembourg, to purchase nutrition bar and powder products manufactured by Nellson Nutraceutical for sale at our meetings. Under the agreement, Nellson Nutraceutical agreed to produce sufficient nutrition bar products to fill our purchase orders within 30 days of Nellson Nutraceutical's receipt of these purchase orders, and we are not bound to purchase a minimum quantity of nutrition bar products. We purchased $4.9 million and $4.3 million, respectively, of products from Nellson Nutraceutical during the eight months ended December 30, 2000 and the twelve months ended April 29, 2000. The term of the agreement runs through December 31, 2004, and we have the option to renew the agreement for successive one-year periods by providing written notice to Nellson Nutraceutical.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock by (1) all persons known by us to own beneficially more than 5% of our common stock, (2) our chief executive officer and each of the named executive officers, (3) each director, (4) all directors and executive officers as a group and (5) each selling shareholder.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of the date of this prospectus are deemed issued and outstanding. These shares, however, are not deemed outstanding for purposes of computing percentage ownership of each other shareholder.
Our capital stock consists of our common stock and our preferred stock. As of September 29, 2001, there were 105,407,142 shares of our common stock and 1,000,000 shares of our preferred stock outstanding.
IMMEDIATELY AFTER
AS OF SEPTEMBER 29, 2001 SHARES TO THIS OFFERING
NAME OF -------------------------- BE SOLD IN -------------------------
BENEFICIAL OWNER SHARES PERCENT OFFERING SHARES(6) PERCENT
---------------- ----------- -------- ---------- ---------- --------
Artal Luxembourg S.A.(1)............ 99,109,939 94.0% 16,047,516 83,062,423 78.8%
Linda Huett(2)(3)................... 199,978 * -- 199,978 *
Richard McSorley(2)................. 94,108 * -- 94,108 *
Clive Brothers(2)(3)................ 164,688 * -- 164,688 *
Scott R. Penn(2)(3)(4).............. 299,967 * -- 299,967 *
Thomas S. Kiritsis(2)(3)............ 164,688 * -- 164,688 *
Robert W. Hollweg(2)(3)............. 188,215 * -- 188,215 *
Raymond Debbane(5)(6)............... -- -- -- -- --
Sacha Lainovic(6)................... -- -- -- -- --
Christopher J. Sobecki(6)........... -- -- -- -- --
Jonas M. Fajgenbaum(6).............. -- -- -- -- --
All directors and executive officers
as a group (10 people)............ 1,111,644(3) 1.1% -- 1,111,644 1.1%
Richard and Heather Penn(3)(7)...... 1,246,921 1.2% 941,072 305,849 *
Merchant Capital, Inc.(8)........... 941,072 * 152,375 788,697 *
Scotiabanc, Inc.(9)................. 941,072 * 152,375 788,697 *
Longisland International
Limited(10)....................... 658,751 * 106,662 552,089 *
|
* Less than 1.0%
(1) Artal Luxembourg may be contacted at 105, Grand-Rue, L-1661 Luxembourg, Luxembourg. The parent entity of Artal Luxembourg S.A. is Artal Group S.A. The address of Artal Group S.A. is the same as the address of Artal Luxembourg S.A.
(2) Our officers may be contacted c/o Weight Watchers International, Inc., 175 Crossways Park West, Woodbury, New York, 11797.
(3) Includes shares subject to purchase upon exercise of options exercisable within 60 days after September 29, 2001, as follows: Ms. Huett 105,871 shares; Mr. Brothers 70,581 shares; Mr. Scott Penn 88,226 shares (includes 17,646 shares subject to options held by Mr. Scott Penn's spouse); Mr. Kiritsis 70,581 shares; Mr. Hollweg 70,581 shares; and Mr. Richard Penn 70,581 shares.
(4) Includes 70,581 shares of our common stock and vested options to purchase 17,646 shares of our common stock held by Mr. Scott Penn's spouse.
(5) Includes all shares of common stock owned by Artal Luxembourg. Mr. Debbane is also a director of Artal Luxembourg. Mr. Debbane disclaims beneficial ownership of all shares owned by Artal Luxembourg.
(6) Our non-executive directors may be contacted c/o The Invus Group, Ltd., 135 East 57th Street, New York, New York 10022.
(7) From September 1999 to September 2001, Mr. Penn was a director of our company. Richard and Heather Penn may be contacted c/o Logo Incorporated Pty. Ltd., 502/1 Kirribilli Avenue, Kirribilli, N.S.W. 2061, Australia.
(8) Merchant Capital, Inc. may be contacted c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, New York 10010-3629.
(9) Scotiabanc, Inc. may be contacted at 600 Peachtree Street, NE, Atlanta, Georgia 30308.
(10) Longisland International Limited may be contacted at c/o Altus Management, Le Regina, 13 Boulevard des Moulins, MC 98000 Monaco.
In addition, the selling shareholders have granted the underwriters the right to purchase up to an additional 2,610,000 shares of common stock to cover over-allotments. If the underwriters exercise this over-allotment option in full, Artal Luxembourg will beneficially own 76.5% of our common stock after this offering.
DESCRIPTION OF INDEBTEDNESS
The following are summaries of the material terms and conditions of our principal indebtedness.
SENIOR CREDIT FACILITIES
Our senior credit facilities are provided by a syndicate of banks and other financial institutions led by The Bank of Nova Scotia, as administrative agent, letter of credit issuer, co-lead arranger and co-book manager, and Credit Suisse First Boston, New York branch, as syndication agent, co-lead arranger and co-book manager. We and one of our subsidiaries are the borrowers under the senior credit facilities.
Our senior credit facilities provide senior secured financing of up to $317.0 million, with outstanding borrowings, as of June 30, 2001, of $243.7 million, consisting of a $70.8 million term loan A facility, a $71.2 million term loan B facility, an $82.5 million transferable loan certificate facility, a $19.2 million term loan D facility and a $45.0 million revolving credit facility. As of June 30, 2001, $45.0 million was available under the revolving credit facility for additional borrowings. The term loan A facility matures on September 30, 2005, the term loan B facility matures on September 30, 2006, the transferable loan certificate facility matures on September 30, 2006, the term loan D facility matures on June 30, 2006 and the revolving credit facility matures on September 30, 2005.
In addition to paying interest on outstanding principal under the senior credit facilities, we pay a commitment fee to the lenders under the revolving credit facility in respect of unused commitments at a rate equal to 0.50% per year.
The credit facilities are subject to mandatory prepayment with, in general:
- 100% of the proceeds of asset sales,
- 75% of our excess cash flow (as defined in the agreements establishing the senior credit facilities) and
- 50% of the proceeds of equity offerings by us.
We may voluntarily repay outstanding loans under the senior credit facilities without penalty.
The obligations under the senior credit facilities and the related documents are secured by a first priority lien upon substantially all of our domestic subsidiaries' real and personal property, and a pledge of substantially all of our domestic subsidiaries' common stock, as well as the common stock of certain of our significant foreign subsidiaries. Our obligations under the senior credit facilities are guaranteed by substantially all of our domestic subsidiaries, as well as certain of our significant foreign subsidiaries to the extent guarantees would not result in material increases in our taxes or liabilities.
The senior credit facilities contain a number of covenants that, among other things, restrict our ability to:
- dispose of assets,
- incur additional indebtedness and issue preferred stock,
- incur guarantee obligations,
- repay other indebtedness,
- make specified restricted payments and dividends,
- create liens on assets,
- make investments, loans or advances,
- make specified acquisitions,
- engage in mergers or consolidations,
- make capital expenditures, or
- enter into sale and leaseback transactions.
In addition, under the senior credit facilities, we are required to comply with specified financial ratios and tests, including minimum fixed charge coverage and interest coverage ratios and maximum leverage ratios. The senior credit facilities also contain customary events of default.
SENIOR SUBORDINATED NOTES
On September 29, 1999, we sold $150,000,000 aggregate principal amount of 13% senior subordinated notes due 2009 and E100,000,000 aggregate principal amount of 13% senior subordinated notes due 2009 to initial purchasers, Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. Interest on the notes is due on April 1 and October 1 of each year, and the maturity date of the notes is October 1, 2009.
Each of our subsidiaries that is a guarantor under our senior credit facilities jointly and severally guarantees the notes on a full and unconditional basis.
The notes are unsecured and subordinated in right of payment to all of our existing and future senior indebtedness, including all of our borrowings under our senior credit facilities. The note guarantees are unsecured and subordinated in right of payment to all existing and future senior indebtedness of our subsidiary guarantors, including all guarantees of our subsidiary guarantors under our senior credit facilities.
We cannot redeem the notes until October 1, 2004, except as described below. After October 1, 2004, we can redeem some or all of the notes at specified redemption prices, plus accrued interest to the redemption date. In addition, at any time and from time to time before October 1, 2002, we can redeem up to 35% of the original principal amount of each series of notes with money that we raise in equity offerings, as long as we pay holders a redemption price of 113% of the principal amount of the notes we redeem, plus accrued interest and at least 65% of the original principal amount of each series of notes issued remains outstanding after each redemption.
If there is a change of control (as defined in the indentures), we must give holders of the notes the opportunity to sell us their notes at a purchase price of 101% of their principal amount, plus accrued interest, unless (a) we have previously provided to the trustee under the indentures governing the notes an irrevocable notice of redemption to redeem all outstanding notes at a time when redemption is permitted under the indentures or (b) we have exercised our option, upon a change of control, to call the notes at a redemption price equal to 100% of the principal amount thereof, plus a premium, plus accrued interest.
The indentures governing the notes contain covenants that limit our ability and that of our subsidiary guarantors, subject to important exceptions and qualifications, to, among other things:
- incur additional indebtedness and issue preferred stock,
- pay dividends or distributions on, or redeem or repurchase, our capital stock,
- make investments,
- transfer or sell assets, and
- consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of (1) 1.0 billion shares of common stock, no par value, of which 105,407,142 million shares are issued and outstanding and (2) 1.0 billion shares of preferred stock, no par value, of which 1,000,000 shares are issued and outstanding. As of September 29, 2001, there were 52 holders of our common stock. The following description of our capital stock and related matters is qualified in its entirety by reference to our articles of incorporation and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.
The following summary describes elements of our articles of incorporation and bylaws after giving effect to the offering.
COMMON STOCK
VOTING RIGHTS. The holders of our common stock are entitled to one vote per share on all matters submitted for action by the shareholders. There is no provision for cumulative voting with respect to the election of directors. Accordingly, a holder of more than 50% of the shares of our common stock can, if it so chooses, elect all of our directors. In that event, the holders of the remaining shares will not be able to elect any directors.
DIVIDEND RIGHTS. All shares of our common stock are entitled to share equally in any dividends our board of directors may declare from legally available sources. Our senior credit facilities and indentures impose restrictions on our ability to declare dividends with respect to our common stock.
LIQUIDATION RIGHTS. Upon liquidation or dissolution of our company, whether voluntary or involuntary, all shares of our common stock are entitled to share equally in the assets available for distribution to shareholders after payment of all of our prior obligations, including our preferred stock.
OTHER MATTERS. The holders of our common stock have no preemptive or conversion rights and our common stock is not subject to further calls or assessments by us. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of our common stock, including the common stock offered in this offering, are fully paid and non-assessable.
PREFERRED STOCK
We have one million shares of Series A Preferred Stock issued and outstanding. Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 6% payable annually in arrears. The liquidation preference of our Series A Preferred Stock is $25 per share. In the event of a liquidation, dissolution or winding up of our company, the holders of shares of our Series A Preferred Stock will be entitled to be paid out of our assets available for distribution to our shareholders an amount in cash equal to the $25 liquidation preference per share plus all accrued and unpaid dividends prior to the distribution of any assets to holders of shares of our common stock.
Except as required by law, the holders of our preferred stock have no voting rights with respect to their shares of preferred stock other than that the approval of holders of a majority of the outstanding shares of our preferred stock, voting as a class, will be required to amend, repeal or change any of the provisions of our articles of incorporation in any manner that would alter or change the powers, preferences or special rights of our preferred stock in a way that would affect them adversely. Without the consent of each holder of the Series A Preferred Stock, no amendment may reduce the dividend payable on or the liquidation value of the Series A Preferred Stock.
We may redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, at our option, at a price per share equal to 100% of the liquidation value of the preferred stock plus all accrued and unpaid dividends.
Subject to the restrictions set forth in our debt instruments, holders of our Series A Preferred Stock will have the right to cause us to repurchase their shares upon completion of this offering or upon the occurence of a change of control. If that occurs, the redemption price will be equal to 100% of the liquidation value plus accrued and unpaid dividends. If we are required to repurchase the Series A Preferred Stock, we expect that we would finance the purchase with our available cash or borrowings under our revolving credit facility.
Our board of directors also has the authority, without any further vote or action by the shareholders, to designate and issue preferred stock in one or more additional series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any additional series of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of that series. However, the effects might include, among other things:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change in control without further action by the shareholders.
OPTIONS
As of September 29, 2001, there were outstanding 5,763,692 shares of our common stock issuable upon exercise of outstanding stock options and 1,294,348 shares of our common stock reserved for future issuance under our existing stock option plan.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
The listing requirements of the New York Stock Exchange, which would apply so long as the common stock remains listed on the New York Stock Exchange, require shareholder approval of certain issuances equal to or exceeding 20% of then-outstanding voting power or then-outstanding number of shares of common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.
CERTAIN PROVISIONS OF VIRGINIA LAW AND OUR CHARTER AND BYLAWS
Some provisions of Virginia law and our articles of incorporation and bylaws could make the following more difficult:
- acquisition of us by means of a tender offer;
- acquisition of us by means of a proxy contest or otherwise; or
- removal of our incumbent officers and directors.
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us and outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
ELECTION AND REMOVAL OF DIRECTORS
Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our shareholders. See "Management--Classes and Terms of Directors." This system of electing and removing directors may discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for shareholders to replace a majority of our directors.
Our articles of incorporation and bylaws do not provide for cumulative voting in the election of directors.
At any time that Artal Luxembourg beneficially owns a majority of our then outstanding voting stock, directors may be removed by Artal Luxembourg with or without cause. At all other times, directors may be removed only with cause.
BOARD MEETINGS
Our bylaws provide that the chairman of the board or any two of our directors may call special meetings of the board of directors.
SHAREHOLDER MEETINGS
Our articles of incorporation provide that special meetings of shareholders may be called by the chairman of our board of directors or by a resolution adopted by our board of directors. In addition, our articles of incorporation provide that Artal Luxembourg has the right to call special meetings of shareholders prior to the date it ceases to beneficially own 20% of our then outstanding voting stock.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF SHAREHOLDER NOMINATIONS AND PROPOSALS
Our bylaws establish advance notice procedures with respect to shareholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of the board of directors or by Artal Luxembourg when nominating its director designees. In addition, our bylaws provide that so long as Artal Luxembourg beneficially owns a majority of our then outstanding voting stock, the foregoing advance notice procedures for shareholder proposals will not apply to it.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Virginia law generally requires shareholder action to be taken only at a meeting of shareholders and permits shareholders to act only by written consent with the unanimous written consent of all shareholders.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAW PROVISIONS
Amendment of the provisions described above in our articles of incorporation or bylaws generally will require an affirmative vote of our directors, as well as the affirmative vote of at least 80% of our then outstanding voting stock, except that at any time that Artal Luxembourg owns a majority of our voting stock, the anti-takeover provisions of our articles of incorporation and bylaws may be amended by the affirmative vote of a majority of our then outstanding voting stock. Amendments to any other provisions of our articles of incorporation or bylaws require the affirmative vote of a majority of our then outstanding voting stock.
RIGHTS AGREEMENT
We intend to adopt, prior to consummation of this offering, a rights agreement, subject to the approval of our board. Under the rights agreement, one right will be issued and attached to each share of our common stock including all shares that are outstanding. Each right will entitle the holder, in the circumstances described below, to purchase from our company a unit consisting of one one-hundredth of a share of Series B preferred stock, no par value per share, at an exercise price of $ per right, subject to adjustment in certain events.
Initially, the rights will be attached to all certificates representing outstanding shares of common stock and will be transferred with and only with these certificates. The rights will become exercisable and separately certificated only upon the distribution date, which will occur upon the earlier of the following:
- ten days following a public announcement that a person or group other than certain exempt persons has acquired or obtained the right to acquire beneficial ownership of 10% or more of the shares of common stock then outstanding; and
- ten days, or later, if determined by our board prior to any person acquiring 10% or more of the shares of common stock then outstanding, following the commencement or announcement of an intention to commence a tender offer or exchange offer that would result in a person or group becoming an acquiring person.
As soon as practicable after the distribution date, certificates will be mailed to holders of record of common stock as of the close of business on the distribution date. From and after the distribution date, the separate certificates alone will represent the rights. Prior to the distribution date, all shares of common stock issued will be issued with rights. Shares of common stock issued after the distribution date will not be issued with rights, except that rights may be issued with shares of common stock issued pursuant to any of:
- the exercise of stock options that were granted or awarded prior to the distribution date;
- employee plans or arrangements we adopted prior to the distribution date;
- the exercise, conversion or exchange of securities issued prior to the distribution date; or
- our contractual obligations.
The final expiration date of the rights will be the close of business on November , 2011, unless earlier redeemed or exchanged by us as described below.
In the event that a person acquires 10% or more of the shares of common stock then outstanding, except pursuant to a tender offer or exchange offer for all the outstanding shares of our common stock approved by our board before the person acquires 10% or more of the shares of common stock then outstanding, each holder of a right other than that person and certain related parties, whose rights will automatically become null and void, will thereafter be entitled to receive, upon exercise of the right, a number of shares of common stock, or, in certain circumstances, cash, property or other securities of our company, having a current market price averaged over the previous 30 consecutive trading days equal to two times the exercise price of the right.
If, at any time on or after a person acquires 10% or more of the shares of common stock then outstanding, our company effects a merger or other business combination in which it is not the surviving entity, or any shares of our common stock are changed into or exchanged for other securities, or 50% or more of its assets, cash flow or earning power is sold or transferred, then each holder of a right, except rights owned by any person who has acquired 10% or more of the shares of common stock then outstanding or certain related parties, which will have become void as set forth above, will
thereafter have the right to receive, upon exercise, a number of shares of common stock of the acquiring company having a fair market value equal to two times the exercise price of the right.
The exercise price payable, and the number of shares of Series B preferred stock, shares of common stock or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution in the event of a stock dividend on the Series B preferred stock payable in shares of Series B preferred stock, a subdivision or combination of the Series B preferred stock, a grant or distribution to holders of the Series B preferred stock of certain subscription rights, warrants, evidence of indebtedness, cash or other assets, or other similar events. In addition, the number of rights associated with each share of our common stock is subject to adjustment in the event of a declaration of a dividend on our common stock payable in common stock or a subdivision or combination of our common stock.
No fractional rights or shares of Series B preferred stock will be issued. In lieu thereof, an adjustment in cash will be made based on the market price of the common stock, right or Series B preferred stock on the last trading date prior to the date of exercise. Pursuant to the rights agreement, we reserve the right to require that, prior to the occurrence of one of the events that triggers the ability to exercise the rights, upon any exercise of rights, a number of rights be exercised so that only whole shares of Series B preferred stock will be issued.
We will also have the option, at any time after a person acquires 10% and before a person acquires a majority of the shares of our common stock then outstanding to exchange some or all of the rights, other than rights owned by the acquiring person or certain related parties, which will have become void, at an exchange ratio of one share of common stock and/or other equity securities deemed to have the same value as one share of common stock, per right, subject to adjustment.
At any time prior to a person acquiring 10% or more of our common stock, our company, by vote of a majority of our board, may redeem the rights in whole, but not in part, at a price of $0.01 per right, payable, at our option, in cash, shares of common stock or other consideration as our board may determine. Upon redemption, the rights will terminate and holders of rights will receive only the redemption price.
For as long as the rights are redeemable, our company may amend the rights agreement in any manner, including extending the time period in which the rights may be redeemed. After the time the rights cease to be redeemable, we may amend the rights in any manner that does not materially adversely affect the interests of holders of the rights as such. Until a right is exercised, the holder, as such, will have no rights as a shareholder of our company, including the right to vote or to receive dividends.
Our articles of incorporation provide that each share of Series B preferred stock, that may be issued upon exercise of the rights will be entitled to receive, when, as and if declared, cash and non-cash dividends equal to the greater of:
- a dividend multiple of 100 times the aggregate per share amount of all cash and non-cash dividends declared or paid on the common stock, subject to adjustments for stock splits or dividends payable in common stock or reclassifications of common stock; or
- preferential quarterly cash dividends of $0.01 per share.
Holders of Series B preferred stock will have a vote multiple of 100 votes per share, subject to adjustments for dividends payable in common stock or subdivisions or combinations of common stock and, except as otherwise provided by the articles of incorporation, or applicable law, will vote together with holders of common stock as a single class. In the event that the preferential quarterly cash dividends are in arrears for six or more quarterly dividend payment periods, holders of Series B preferred stock will have the right to elect two additional members of our board.
In the event of the liquidation, dissolution or winding up of our company, after provision for liabilities and any preferential amounts payable with respect to any preferred stock ranking senior to the Series B preferred stock, the holders of any Series B preferred stock will be entitled to receive liquidation payments per share in an amount equal to the following:
- $1.00 plus an amount equal to accrued and unpaid dividends and distributions thereon to the date of payment; and
- a proportionate share, on equal terms with the holders of common stock, of the assets remaining after payment described above and a nominal payment to the holders of common stock.
The rights of the Series B preferred stock as to dividends, voting and liquidation are protected by antidilution provisions.
In the event of a consolidation, merger or other transaction in which the shares of capital stock are exchanged, holders of shares of Series B preferred stock will be entitled to receive an amount per share, equal to 100 times the amount of stock, securities, cash or other property for which each share of common stock is exchanged. The shares of Series B preferred stock are not redeemable at the option of our company or any holder thereof.
The rights will have certain anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire our company without the approval of our board. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire our company, even if that acquisition may be in the best interests of our shareholders. Because our board can redeem the rights or approve a permitted offer, the rights will not interfere with a merger or other business combination approved by our board.
The rights agreement excludes Artal Luxembourg, as well as transferees of at least 10% of our then outstanding common stock from Artal Luxembourg, from being considered an acquiring person.
LIABILITY OF OFFICERS AND DIRECTORS
Our articles of incorporation require us to indemnify any director, officer or employee who was or is a party to any claim, action or proceeding by reason of his being or having been a director, officer or employee of our company or any other corporation, entity or plan while serving at our request, unless he or she engaged in willful misconduct or a knowing violation of criminal law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, indemnification for liabilities under the Securities Act is against public policy and is unenforceable.
ANTI-TAKEOVER STATUTES
We have opted out of the Virginia anti-takeover law regulating "control share acquisitions." Under Virginia law, shares acquired in a control share acquisition have no voting rights unless granted by a majority vote of all outstanding shares other than those held by the acquiring person or any officer or employee director of the corporation, or the articles of incorporation or bylaws of the corporation provide that this regulation does not apply to acquisitions of its shares. An acquiring person that owns five percent or more of the corporation's voting stock may require that a special meeting of the shareholders be held, within 50 days of the acquiring person's request, to consider the grant of voting rights to the shares acquired in the control share acquisition. If voting rights are not granted and the corporation's articles of incorporation or bylaws permit, the acquiring person's shares may be repurchased by the corporation, at its option, at a price per share equal to the acquiring person's cost. Virginia law grants dissenters' rights to any shareholder who objects to a control share acquisition that is approved by a vote of disinterested shareholders and that gives the acquiring person control of a
majority of the corporation's voting shares. This regulation was designed to deter certain takeovers of Virginia public corporations.
We have opted out, effective May 2003, of the Virginia anti-takeover law regulating "affiliated acquisition transactions." Under this law, material acquisition transactions between a Virginia corporation and any holder of more than 10% of any class of its outstanding voting shares are required to be approved by the holders of at least two-thirds of the remaining voting shares. Affiliated transactions subject to this approval requirement include mergers, share exchanges, material dispositions of corporate assets not in the ordinary course of business, any dissolution of the corporation proposed by or on behalf of a 10% holder or any reclassification, including reverse stock splits, recapitalization or merger of the corporation with its subsidiaries, that increases the percentage of voting shares owned beneficially by a 10% holder by more than five percent.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the common stock is EquiServe Trust Company, N.A.
LISTING
We propose to list our common stock on the New York Stock Exchange, subject to official notice of issuance, under the symbol "WTW".
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common stock, and we cannot predict what effect, if any, market sales of shares of common stock or the availability of shares of common stock for sale will have on the market price of our common stock. Nevertheless, sales of substantial amounts of common stock, including shares issued upon the exercise of outstanding options, in the public market, or the perception that these sales could occur, could materially and adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate.
Upon the closing of this offering, we will have outstanding an aggregate of 105,407,142 shares of common stock. Of the outstanding shares, the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our "affiliates," as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described below. The remaining shares of common stock will be deemed "restricted securities" as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or 144(k) under the Securities Act, which we summarize below.
Subject to the lock-up agreements described below, the employee shareholders agreements and the provisions of Rules 144 and 144(k), additional shares of our common stock will be available for sale in the public market under exemptions from registration requirements as follows:
NUMBER OF SHARES DATE
---------------- ----
87,889,507 After 180 days from the date of this prospectus
117,635 At various times after 180 days from the date of this
prospectus
|
Artal Luxembourg, which will own 78.8% of our shares (or 76.5% if the underwriters exercise their over-allotment options in full) upon the closing of this offering, has the ability to cause us to register the resale of its shares.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after this offering, a person (or persons whose shares are required to be aggregated), including an affiliate, who has beneficially owned shares of our common stock for at least one year is entitled to sell in any three-month period a number of shares that does not exceed the greater of:
- 1% of then-outstanding shares of common stock, or 1,054,072 shares; and
- the average weekly trading volume in the common stock on the New York Stock Exchange during the four calendar weeks preceding the date on which notice of sale is filed, subject to restrictions.
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
RULE 144(K)
In addition, a person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, would be entitled to sell those shares under Rule 144(k) without regard to the manner of sale, public information, volume limitation or notice requirements of Rule 144. To the extent that our
affiliates sell their shares, other than pursuant to Rule 144 or a registration statement, the purchaser's holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate.
LOCK-UP AGREEMENTS
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus, except we may issue, and grant options to purchase, shares of common stock under our existing employee benefit plans referred to in this prospectus. In addition, we may issue shares of common stock in connection with any acquisition of another company if the terms of the issuance provide that the common stock may not be resold prior to the expiration of the 180-day period described above.
Our executive officers and directors and the selling shareholders have agreed, subject to limited exceptions, that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus.
Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act with respect to up to 7,058,040 shares of our common stock that are reserved for issuance pursuant to our stock option plan. This registration statement is expected to become effective immediately upon filing. However, shares received by employees upon exercise of their options will be subject to certain lock-up agreements. As a result, these shares will be eligible for resale by the holders in the public markets, subject to these lock-up agreements and Rule 144 limitations applicable to affiliates.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material U.S. federal income tax consequences as of the date hereof of the purchase, ownership and disposition of our common stock by a Non-U.S. Holder (as defined below) who holds our common stock as a capital asset. This discussion does not purport to be a comprehensive description of all aspects of U.S. federal income taxes and does not address foreign, state and local consequences that may be relevant to Non-U.S. Holders in light of their personal circumstances. Special rules may apply to certain Non-U.S. Holders, such as "controlled foreign corporations," "passive foreign investment companies," "foreign personal holding companies," corporations that accumulate earnings to avoid U.S. federal income tax, and U.S. expatriates that are subject to special treatment under U.S. federal income tax laws. Non-U.S. Holders should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. This summary also only addresses purchasers of the common stock pursuant to this offering who hold their shares as capital assets.
If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.
This discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and U.S. Treasury regulations, rulings and judicial decisions as of the date of this offering. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. Except where noted, this discussion does not address any aspect of U.S. federal gift or estate tax, or state, local or foreign tax laws. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE PARTICULAR U.S. INCOME TAX CONSEQUENCES TO YOU OF THE OWNERSHIP OF THE COMMON STOCK, AS WELL AS THE CONSEQUENCES TO YOU ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
NON-U.S. HOLDERS
As used in this offering circular, the term Non-U.S. Holder means a beneficial owner of common stock that, for U.S. federal income tax purposes, is not:
- a U.S. citizen or resident;
- a corporation created or organized in or under the laws of the United States or any political subdivision thereof;
- an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
- a trust if (1) it is subject to the primary supervision of a court within the U.S. and one or more U.S. persons has the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
TAXATION OF THE COMMON STOCK
DIVIDENDS. Distributions on or common stock will constitute dividends for United States federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. In general, distributions paid to you will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you wish to claim the benefit of an applicable treaty rate (and avoid backup withholding as discussed below under "Information Reporting and Backup Withholding"), you will be required to satisfy applicable certification and other requirements. However, dividends that are effectively connected with your conduct of a trade or business within the United States or, where a tax
treaty applies, are attributable to a U.S. permanent establishment, are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates. Certain certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. If you are a foreign corporation, any such effectively connected dividends may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
If you are eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK. You generally will not be subject to
U.S. federal income tax with respect to gain recognized on a sale or other
disposition of common stock unless (i) the gain is effectively connected with
your trade or business in the United States, and, where a tax treaty applies, is
attributable to a U.S. permanent establishment, (ii) you are an individual and
you are present in the United States for 183 or more days in the taxable year of
the sale or other disposition and certain other conditions are met, or
(iii) you hold (or held at any time within the shorter of the five-year period
preceding the sale or other disposition or the period you held our common stock)
more than 5% of our common stock and we are or have been at any such time a U.S.
real property holding corporation for U.S. federal income tax purposes.
If you are described in clause (i) above, you will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. If you are described in clause (ii) above, you will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses (even if you are not considered a resident of the United States). If you are a foreign corporation that falls under clause (i) above, you will be subject to tax on your gain under regular graduated U.S. federal income tax rates and, in addition, may be subject to the branch profits tax equal to 30% of your effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.
We believe we are not, and do not anticipate becoming, a U.S. real property holding corporation for U.S. federal income tax purposes.
U.S. FEDERAL ESTATE TAX
Common stock held by you at the time of death will be included in your gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the Internal Revenue Service and to you the amount of dividends paid to you and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty.
You will be subject to backup withholding unless applicable certification requirements are met.
Payment of the proceeds of a sale of the common stock within the United States or conducted through certain U.S. related financial intermediaries is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that you are a Non-U.S. Holder (and the payor does not have actual knowledge that you are a U.S. person) or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting agreement dated , 2001, the selling shareholders have agreed to sell to the underwriters named below, for whom Credit Suisse First Boston Corporation and Goldman, Sachs & Co. are acting as representatives, the following respective numbers of shares of common stock:
NUMBER OF
UNDERWRITER SHARES
----------- ----------
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Salomon Smith Barney Inc. ..................................
UBS Warburg LLC.............................................
----------
Total................................................. 17,400,000
==========
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The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that, if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
The selling shareholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to an aggregate of 2,610,000 additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers.
The following table summarizes the compensation the selling shareholders will pay and the estimated expenses we will pay:
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
Underwriting discounts and commissions
paid by selling shareholders.......... $ $ $ $
Expenses payable by us.................. $ $ $ $
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The representatives have informed us that the underwriters do not expect discretionary sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus.
Our executive officers and directors and the selling shareholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus.
We and the selling shareholders have agreed to indemnify the underwriters against liabilities under the Securities Act, or to contribute to payments which the underwriters may be required to make in that respect.
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiation between the selling shareholders and the representatives and will not necessarily reflect the market price of the common stock following the offering. The principal factors that will be considered in determining the public offering price will include:
- the information in this prospectus and otherwise available to the underwriters;
- market conditions for initial public offerings;
- the history and the prospects for the industry in which we compete;
- the ability of our management;
- the prospects for our future earnings;
- the present state of our development and our current financial condition;
- recent market prices of, and the demand for, publicly traded common stock of generally comparable companies; and
- the general condition of the securities markets at the time of this offering.
We offer no assurances that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to the offering or that an active trading market for the common stock will develop and continue after the offering.
We will apply to list the shares of common stock on the New York Stock Exchange.
In connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.
- Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
- Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option.
The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market.
- Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
- Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.
Each underwriter has represented and agreed that (1) it has not offered or sold and prior to the date six months after the date of issue of the shares will not offer or sell any shares to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (2) it has complied, and will comply with, all applicable provisions of the Financial Services Act 1986 of Great Britain with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom; and (3) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the shares to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 of Great Britain or is a person to whom the document may lawfully be issued or passed on.
The securities may not be offered, sold, transferred or delivered in or from The Netherlands, as part of their initial distribution or as part of any re-offering, and neither this prospectus nor any other document in respect of the offering may be distributed or circulated in The Netherlands, other than to individuals or legal entities which include, but are not limited to, banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.
Merchant Capital, Inc., an affiliate of Credit Suisse First Boston Corporation, beneficially owns 941,072 shares of our common stock, and will be selling 152,375 shares of our common stock in this offering. Upon completion of this offering, Merchant Capital, Inc. will beneficially own 788,697 shares of our common stock, 765,841 shares if the underwriters exercise their overallotment option in full.
In the ordinary course of business, Credit Suisse First Boston Corporation and its affiliates have provided and may in the future provide financial advisory, investment banking and general financing and banking services for us for customary fees. Credit Suisse First Boston, New York branch, an affiliate of Credit Suisse First Boston Corporation, is an agent and a lender under our senior credit
facilities, and Credit Suisse First Boston Corporation was one of the joint book-running managers for, and an initial purchaser of, our 13% senior subordinated notes due 2009. In addition, Credit Suisse First Boston, New York branch, was a joint lead arranger and joint book manager for our $50 million increase to our senior credit facilities.
Credit Suisse First Boston Corporation also served as financial advisor to Artal Luxembourg in its acquisition of us. The decision of Credit Suisse First Boston Corporation to underwrite our common stock offered hereby was made independent of Credit Suisse First Boston, New York branch, which had no involvement in determining whether to underwrite our common stock under this offering or the terms of this offering.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters participating in this offering. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations. Credit Suisse First Boston may effect an on-line distribution through its affiliate, CSFBDIRECT Inc., an on-line broker/dealer, as a selling group member.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we and the selling shareholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any resale of the common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the common stock.
REPRESENTATIONS OF PURCHASERS
By purchasing common stock in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling shareholders and the dealer from whom the purchase confirmation is received that
- the purchaser is entitled under applicable provincial securities laws to purchase the common stock without the benefit of a prospectus qualified under those securities laws,
- where required by law, that the purchaser is purchasing as principal and not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Ontario securities law. As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named herein and the selling shareholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and about the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
The validity of the issuance of the shares of common stock to be sold in the offering will be passed upon for us by our special Virginia counsel, Hunton & Williams, Richmond, Virginia. Certain legal matters in connection with the issuance of the common stock to be sold in the offering will be passed upon for us by Simpson Thacher & Bartlett, New York, New York. The underwriters have been represented by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements as of December 30, 2000, April 29, 2000 and April 24, 1999 and for each of the fiscal years ended April 29, 2000, April 24, 1999 and April 25, 1998, the eight months ended December 30, 2000 and the year ended December 30, 2000 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports and other information with the SEC. You may access and read our SEC filings, including the complete registration statement and all of the exhibits to it, through the SEC's Internet site at www.sec.gov. This site contains reports and other information that we file electronically with the SEC. You may also read and copy any document we file at the SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. While you may access our public filings by the methods described above, our public filings are not incorporated by reference in this prospectus.
We have filed with the SEC a registration statement under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information presented in the registration statement and its exhibits and schedules. Our descriptions in this prospectus of the provisions of documents filed as exhibits to the registration statement or otherwise filed with the SEC are only summaries of the terms of those documents that we consider material. If you want a complete description of the content of the documents, you should obtain the documents yourself by following the procedures described above.
You may request copies of the filings, at no cost, by telephone at (516) 390-1400 or by mail at: 175 Crossways Park West, Woodbury, New York 11797-2055, Attention: Secretary.
INDEX TO FINANCIAL STATEMENTS
PAGE
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WEIGHT WATCHERS INTERNATIONAL, INC.:
Report of PricewaterhouseCoopers LLP, Independent
Accountants............................................. F-2
Consolidated Balance Sheets at April 24, 1999, April 29,
2000, and December 30, 2000............................. F-3
Consolidated Statements of Operations for the Fiscal Years
Ended April 25, 1998, April 24, 1999 and April 29, 2000
and the Eight Months Ended December 30, 2000............ F-4
Consolidated Statements of Changes in Shareholders'
Deficit, Parent Company Investment and Comprehensive
Income for the Fiscal Years Ended April 25, 1998,
April 24, 1999 and April 25, 2000 and the Eight Months
Ended December 30, 2000................................. F-5
Consolidated Statements of Cash Flows for the Fiscal Years
Ended April 25, 1998, April 24, 1999 and April 29, 2000
and the Eight Months Ended December 30, 2000............ F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Consolidated Balance Sheets at December 30, 2000
and June 30, 2001....................................... F-41
Unaudited Consolidated Statements of Operations for the
Six Months Ended July 29, 2000 and June 30, 2001........ F-42
Unaudited Consolidated Statements of Shareholders Deficit,
Parent Company Investment and Comprehensive Income For
the Eight Months Ended December 30, 2000 and the Six
Months Ended June 30, 2001.............................. F-43
Unaudited Consolidated Statements of Cash Flows For the
Six Months Ended July 29, 2000 and June 30, 2001........ F-44
Unaudited Notes to Consolidated Financial Statements...... F-45
WEIGHCO ENTERPRISES INC. AND SUBSIDIARIES:
Report of PricewaterhouseCoopers LLP, Independent
Auditors................................................ F-58
Consolidated Balance Sheet at December 30, 2000........... F-59
Consolidated Statement of Operations For the Year Ended
December 30, 2000....................................... F-60
Consolidated Statement of Cash Flows For the Year Ended
December 30, 2000....................................... F-61
Consolidated Statement of Changes in Shareholders' Equity
For the Year Ended December 30, 2000.................... F-62
Notes to Consolidated Financial Statements................ F-63
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Weight Watchers International, Inc.:
The stock split described in Note 21 to the financial statements has not been consummated at October 29, 2001. When it has been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in shareholders' deficit, parent company investment and comprehensive income present fairly, in all material respects, the consolidated financial position of Weight Watchers International, Inc. and its subsidiaries at December 30, 2000, April 29, 2000 and April 24, 1999, and the results of their operations and their cash flows for the eight months ended December 30, 2000 and for each of the three years in the period ended April 29, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion."
PricewaterhouseCoopers LLP
New York, New York
March 2, 2001
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 24, 1999, APRIL 29, 2000 AND DECEMBER 30, 2000
(IN THOUSANDS)
APRIL 24, APRIL 29, DECEMBER 30,
1999 2000 2000
---------- ---------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 19,515 $ 44,043 $ 44,501
Receivables (net of allowances: April 24, 1999 -- $994;
April 29, 2000 -- $609; December 30, 2000 -- $797)...... 11,403 12,877 14,678
Notes receivable, current................................. 3,266 2,791 2,106
Foreign currency contract receivable...................... -- -- 5,364
Inventories............................................... 7,580 9,328 15,044
Prepaid expenses.......................................... 7,598 8,360 11,099
Deferred income taxes..................................... 3,609 94 648
Due from related parties.................................. 133,783 -- --
-------- --------- ---------
TOTAL CURRENT ASSETS.................................... 186,754 77,493 93,440
Property and equipment, net................................. 8,725 7,001 8,145
Notes and other receivables, noncurrent..................... 19,165 7,045 5,601
Goodwill (net of accumulated amortization:
April 24, 1999 -- $49,888; April 29, 2000 -- $55,430;
December 30, 2000 -- $59,216)........................... 143,714 152,565 150,901
Trademarks and other intangible assets (net of accumulated
amortization:
April 24, 1999 -- $18,982; April 29, 2000 -- $19,423;
December 30, 2000 -- $19,871)........................... 8,113 7,163 6,648
Deferred income taxes....................................... 4,133 67,574 67,207
Deferred financing costs.................................... -- 14,666 13,513
Other noncurrent assets..................................... 830 700 762
-------- --------- ---------
TOTAL ASSETS............................................ $371,434 $ 334,207 $ 346,217
======== ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND PARENT COMPANY'S INVESTMENT/SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Short-term borrowings and line of credit.................. $ 6,690 $ -- $ --
Short-term borrowings due to related party................ 16,250 1,489 1,730
Portion of long-term debt due within one year............. 1,164 14,120 14,120
Accounts payable.......................................... 12,710 12,362 11,989
Salaries and wages........................................ 11,285 10,125 10,544
Accrued interest.......................................... 2,176 4,082 9,662
Accrued restructuring costs............................... 7,690 4,786 2,485
Foreign currency contract payable......................... 7,169 486 --
Other accrued liabilities................................. 16,044 19,583 23,215
Income taxes.............................................. 7,962 6,786 3,660
Deferred revenue.......................................... 6,414 4,632 5,836
-------- --------- ---------
TOTAL CURRENT LIABILITIES............................... 95,554 78,451 83,241
Long-term debt.............................................. 15,500 460,510 456,530
Deferred income taxes....................................... 8,228 2,941 3,107
Other....................................................... 3,204 546 121
-------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER LIABILITIES.............. 26,932 463,997 459,758
Commitments and contingencies:
Redeemable preferred stock.................................. -- 25,875 25,996
Shareholders' deficit (Note 21):
Common stock, par value $0 per share (authorized:
1,000,000 shares; issued and outstanding: 276,429 shares
at April 24, 1999, 111,988 shares at April 29, 2000 and
December 30, 2000)
Accumulated deficit....................................... -- (231,663) (216,507)
Accumulated other comprehensive loss...................... -- (2,453) (6,271)
Parent company's investment............................... 248,948 -- --
-------- --------- ---------
TOTAL PARENT COMPANY'S INVESTMENT AND SHAREHOLDERS'
DEFICIT................................................ 248,948 (234,116) (222,778)
-------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, PARENT
COMPANY'S INVESTMENT AND SHAREHOLDERS' DEFICIT......... $371,434 $ 334,207 $ 346,217
======== ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED APRIL 25, 1998, APRIL 24, 1999 AND APRIL 29, 2000,
AND
THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED EIGHT MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (35 WEEKS)
Revenues, net.................................. $297,245 $364,608 $399,574 $273,175
Cost of revenues............................... 159,961 178,925 201,389 139,283
-------- -------- -------- --------
Gross profit................................. 137,284 185,683 198,185 133,892
Marketing expenses............................. 49,227 52,856 51,453 26,986
Selling, general and administrative expenses... 44,067 48,912 50,743 32,222
Transaction costs.............................. -- -- 8,345 --
-------- -------- -------- --------
Operating income............................. 43,990 83,915 87,644 74,684
Interest income................................ 13,452 16,027 5,792 3,119
Interest expense............................... 8,576 8,859 36,871 40,244
Other expense (income), net.................... 4,281 5,248 (10,351) 16,536
-------- -------- -------- --------
Income before income taxes and minority
interest................................... 44,585 85,835 66,916 21,023
Provision for income taxes..................... 19,969 36,360 28,323 5,857
-------- -------- -------- --------
Income before minority interest.............. 24,616 49,475 38,593 15,166
Minority interest.............................. 845 1,493 834 147
-------- -------- -------- --------
Net income................................... $ 23,771 $ 47,982 $ 37,759 $ 15,019
======== ======== ======== ========
Preferred stock dividends...................... -- -- $ 875 $ 1,000
-------- -------- -------- --------
Net income available to common
shareholders............................... $ 23,771 $ 47,982 $ 36,884 $ 14,019
======== ======== ======== ========
Net income per share:
Basic and diluted............................ $ 0.09 $ 0.17 $ 0.20 $ 0.13
======== ======== ======== ========
Weighted average common shares outstanding:
Basic........................................ 276,430 276,430 182,206 111,988
======== ======== ======== ========
Diluted...................................... 276,430 276,430 182,206 112,171
======== ======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT,
PARENT COMPANY INVESTMENT AND COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED APRIL 25, 1998, APRIL 24, 1999 AND APRIL 24, 2000,
AND
THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER PARENT
------------------- PAID TO COMPREHENSIVE ACCUMULATED COMPANY'S
SHARES AMOUNT CAPITAL LOSS DEFICIT INVESTMENT TOTAL
-------- -------- ---------- ------------- ----------- ---------- ---------
Balance April 26, 1997.......... 276,430 -- $ 188,936 $ 188,936
Comprehensive Income:
Net income...................... 23,771 23,771
Translation adjustment.......... (10,212) (10,212)
---------
Total Comprehensive Income...... 13,559
---------
Net Parent advances............. 29,115 29,115
Dividend........................ (2,521) (2,521)
--------- ---------
Balance at April 25, 1998....... 276,430 -- 229,089 229,089
Comprehensive Income:
Net income...................... 47,982 47,982
Translation adjustment.......... 19,660 19,660
---------
Total Comprehensive Income...... 67,642
---------
Net Parent settlements.......... (42,851) (42,851)
Dividend........................ (4,932) (4,932)
--------- ---------
Balance at April 24, 1999....... 276,430 -- 248,948 248,948
Net Parent settlements.......... (252,883) (252,883)
Recapitalization and settlement
of Parent company
investment.................... (164,442) $ -- $(72,100) $(12,764) $(268,547) 3,935 (349,476)
Deferred tax asset.............. 72,100 72,100
Comprehensive Income:
Net income...................... 37,759 37,759
Translation adjustment.......... 10,311 10,311
---------
Total Comprehensive Income...... 48,070
---------
Preferred stock dividend........ (875) (875)
-------- ------- -------- -------- --------- --------- ---------
Balance at April 29, 2000....... 111,988 (2,453) (231,663) (234,116)
Elimination of foreign
subsidiaries one month
reporting lag effective
April 30, 2000................ 1,137 1,137
Comprehensive Income:
Net income...................... 15,019 15,019
Translation adjustment.......... (3,818) (3,818)
---------
Total Comprehensive Income...... 11,201
---------
Preferred stock dividend........ (1,000) (1,000)
-------- ------- -------- -------- --------- --------- ---------
Balance at December 30, 2000.... 111,988 $ -- $ -- $ (6,271) $(216,507) $ -- $(222,778)
======== ======= ======== ======== ========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED APRIL 25, 1998, APRIL 24, 1999 AND APRIL 29, 2000,
AND
THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
FISCAL YEAR ENDED EIGHT MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (35 WEEKS)
Operating activities:
Net income......................................... $ 23,771 $ 47,982 $ 37,759 $ 15,019
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization...................... 8,775 9,586 10,398 7,889
Deferred tax provision............................. 15,563 9,279 8,541 104
Accounting for equity investment................... -- -- -- 17,604
Elimination of foreign subsidiaries one month
reporting lag.................................... -- -- -- 1,206
Allowance for doubtful accounts.................... (143) (118) 385 (188)
Reserve for inventory obsolescence, other.......... (3,489) 2,525 (121) (975)
Other items, net................................... 415 38 (2,492) (954)
Changes in cash due to:
Receivables...................................... (2,348) (7,041) 12,654 (8,210)
Inventories...................................... 664 (2,451) (1,696) (4,771)
Prepaid expenses................................. 1,913 (1,454) (801) (2,755)
Due from related parties......................... (8,610) 3,693 (14,765) 241
Accounts payable................................. (2,250) 3,083 (1,512) (303)
Accrued liabilities.............................. (414) (10,076) 5,780 6,897
Deferred revenue................................. 1,872 (716) (1,753) 1,043
Income taxes..................................... 647 3,571 (2,492) (2,975)
-------- -------- --------- --------
Cash provided by operating activities............ 36,366 57,901 49,885 28,872
-------- -------- --------- --------
Investing activities:
Capital expenditures............................... (3,389) (2,474) (1,874) (3,626)
Advances and interest to equity investment......... -- -- -- (15,604)
Acquisitions, net of cash acquired................. (1,412) -- -- --
Acquisitions of minority interest.................. -- -- (15,900) (2,400)
Other items, net................................... (121) (565) (1,867) 3
-------- -------- --------- --------
Cash used for investing activities............... (4,922) (3,039) (19,641) (21,627)
-------- -------- --------- --------
Financing activities:
Net (decrease) increase in short-term borrowings... (2,174) 856 (5,455) (34)
Proceeds from borrowings........................... -- -- 491,260 --
Repurchase of common stock......................... -- -- (324,476) --
Payment of dividends............................... (8,470) (10,368) (2,796) (879)
Payments on long-term debt......................... (1,368) (1,081) (3,530) (7,060)
Deferred financing cost............................ -- -- (15,861) --
Net Parent settlements............................. (18,630) (37,076) (131,030) --
-------- -------- --------- --------
Cash (used for) provided by financing
activities..................................... (30,642) (47,669) 8,112 (7,973)
-------- -------- --------- --------
Effect of exchange rate changes on cash and cash
equivalents........................................ (44) 493 (13,828) 1,186
Net increase in cash and cash equivalents............ 758 7,686 24,528 458
Cash and cash equivalents, beginning of period/fiscal
year............................................... 11,071 11,829 19,515 44,043
-------- -------- --------- --------
Cash and cash equivalents, end of period/fiscal
year............................................... $ 11,829 $ 19,515 $ 44,043 $ 44,501
======== ======== ========= ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
Weight Watchers International, Inc. (the "Company") operates and franchises territories offering weight loss and control programs through the operation of classroom type meetings to the general public in the United States, Canada, Mexico, the United Kingdom, Continental Europe, Australia, New Zealand, South Africa, Latin America and South America.
RECAPITALIZATION
On September 29, 1999, the Company entered into a recapitalization and stock purchase agreement (the "Transaction") with its former parent, H.J. Heinz Company ("Heinz"). In connection with this Transaction, the Company effectuated a stock split of 58,747.6 shares for each share outstanding. The Company then redeemed 276.43 million shares of common stock from Heinz for $349.5 million. The number of shares of the Company's common stock that was authorized and outstanding prior to the Transaction has been adjusted to reflect the stock split. The $349.5 million consisted of $324.5 million of cash and $25.0 million of the Company's redeemable Series A Preferred Stock. After the redemption, Artal Luxembourg S.A. purchased 94% of the Company's remaining common stock from Heinz for $223.7 million. The recapitalization and stock purchase was financed through borrowings under credit facilities amounting to approximately $237.0 million and by issuing Senior Subordinated Notes amounting to $255.0 million, due 2009. The balance of the borrowings was utilized to refinance debt incurred prior to the Transaction relating to the transfer of ownership and acquisition of the minority interest in the Weight Watchers businesses that operate in Australia and New Zealand. The acquisition of the minority interest resulted in approximately $15.9 million of goodwill. In connection with the Transaction, the Company incurred approximately $8.3 million in transaction costs which were expensed and $15.9 million in deferred financing costs. For U.S. Federal and State tax purposes, the Transaction was treated as a taxable sale under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. As a result, for tax purposes, the Company recorded a step-up in the tax basis of net assets. For financial reporting purposes, a valuation allowance of approximately $72.1 million was established against the corresponding deferred tax asset of $144.2 million. Management concluded, more likely than not, this amount would not be utilized to reduce future tax payments. The Company will continue to monitor the need to maintain the valuation allowance in the future periods.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CHANGE IN FISCAL YEAR:
The Company changed its fiscal year from the last Saturday of April, to the Saturday closest to December 31st effective with the eight months commencing April 30, 2000.
CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. In order to facilitate timely reporting in prior periods, certain foreign subsidiaries ended their fiscal years one month prior to the Company's fiscal year end with no material impact on the consolidated financial statements. The one month lag has now been eliminated effective April 30, 2000.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) The effect on net income of these subsidiaries for the period March 31, 2000 through April 29, 2000 was $1.1 million and was adjusted to opening accumulated deficit at April 30, 2000.
USE OF ESTIMATES:
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
TRANSLATION OF FOREIGN CURRENCIES:
For all foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income.
CASH EQUIVALENTS:
Cash and cash equivalents are defined as highly liquid investments with original maturities of three months or less.
INVENTORIES:
Inventories, which consist of finished goods, are stated at the lower of cost or market on a first-in, first-out basis, net of reserves. The net reserve for inventory and prepaid program materials as of April 24, 1999, April 29, 2000 and December 30, 2000 was $1.4 million, $1.6 million and $2.5 million, respectively.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. For financial reporting purposes, equipment is depreciated on the straight-line method over the estimated useful lives of the assets (5 to 10 years). Leasehold improvements are amortized on the straight-line method over the shorter of the term of the lease or the useful life of the related assets (5 to 10 years). Expenditures for new facilities and improvements that substantially extend the useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income.
INTANGIBLES:
Goodwill, trademarks and other intangibles arising from acquisitions, including the acquisition of previously franchised areas, are being amortized on a straight-line basis over periods ranging from 3 to 40 years. Amortization of goodwill, trademarks and other intangibles for the fiscal years ended
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) April 25, 1998, April 24, 1999 and April 29, 2000 and for the eight months ended December 30, 2000 was $5.6 million, $6.0 million, $6.4 million and $4.5 million, respectively.
The Company accounts for software costs under the AICPA Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP No. 98-1 requires capitalization of certain costs incurred in connection with developing or obtaining internally used software. Software costs are amortized over 3 to 5 years.
IMPAIRMENT OF LONG LIVED ASSETS:
The Company follows the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This statement requires that certain assets be reviewed for impairment and, if impaired, remeasured at fair value whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
REVENUE RECOGNITION:
The Company earns revenue by conducting meetings, selling products and aids in its own facilities, by collecting commissions from franchisees operating under the Weight Watchers name and by collecting royalties related to licensing agreements. Revenue is recognized when registration fees are paid, services are rendered, products are sold and commissions and royalties are earned. Deferred revenue, consisting of prepaid lecture income, is amortized into income over the period earned. Effective April 30, 2000, the Company adopted Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," which does not change existing revenue recognition rules, but rather, addresses and clarifies existing rules and their application. Adoption of SAB 101 did not impact the Company's financial position or results of operations.
ADVERTISING COSTS:
Advertising costs consist primarily of national and local direct mail, television, and spokesperson's fees. All costs related to advertising are expensed in the period incurred. Total advertising expenses for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 and for the eight months ended December 30, 2000 were approximately $45.7 million, $48.8 million, $48.0 million and $25.8 million, respectively.
INCOME TAXES:
The Company provides for taxes based on current taxable income and the future tax consequences of temporary differences between the financial reporting and income tax carrying values of its assets and liabilities. Under SFAS No. 109, assets and liabilities acquired in purchase business combinations are assigned their fair values and deferred taxes are provided for lower or higher tax bases.
FOREIGN CURRENCY CONTRACTS:
The Company enters into forward and swap contracts to hedge transactions denominated in foreign currencies in order to reduce the currency risk associated with fluctuating exchange rates. Such contracts are used primarily to hedge certain intercompany cash flows and for payments arising from
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) certain foreign currency denominated obligations. Realized and unrealized gains and losses from instruments qualifying as hedges are included in net income for the period.
INVESTMENTS:
The Company uses the cost method to account for investments in which the Company holds 20% or less of the investee's voting stock. Where the Company holds 50% or less of the investee's voting stock or where the Company has the ability to exercise significant influence over operating and financial policies of the investee, the investment is accounted for under the equity method.
DEFERRED FINANCING COSTS:
Deferred financing costs consists of costs associated with the establishment of the Company's credit facilities resulting from the Transaction. Such costs are being amortized using the interest rate method over the term of the related debt. Amortization expense for the fiscal year ended April 29, 2000 and for the eight months ended December 30, 2000 was approximately $1.1 million and $1.3 million, respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement established accounting and reporting standards for derivative instruments. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative instruments and Hedging Activities-Deferral of the Effective Date of Statement 133," which postponed the adoption date of SFAS No. 133. As such, the Company is required to adopt the statement effective January 1, 2001. Management has not yet determined the impact adoption will have on the Company's financial position or results of operations.
RECLASSIFICATION:
Certain amounts for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 have been reclassified to conform to the eight months ended December 30, 2000 presentation.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. TRANSITION PERIOD COMPARATIVE DATA:
The following table presents certain financial information for the eight months ended December 18, 1999 and December 30, 2000.
EIGHT MONTHS ENDED
---------------------------------------
DECEMBER 18, 1999 DECEMBER 30, 2000
(34 WEEKS) (35 WEEKS)
------------------ ------------------
(UNAUDITED)
Revenues, net............................................... $236,974 $273,175
Gross profit................................................ $114,592 $133,892
Income before income taxes and minority interest............ $ 39,020 $ 21,023
Provision for income taxes.................................. $ 15,150 $ 5,857
Income before minority interest............................. $ 23,870 $ 15,166
Minority interest........................................... $ 694 $ 147
Net income.................................................. $ 23,176 $ 15,019
|
4. REDEEMABLE PREFERRED STOCK:
The Company issued one million shares of Series A Preferred Stock in conjunction with the Transaction. Holders of the Series A Preferred Stock are entitled to receive dividends at an annual rate of 6% payable annually in arrears. The liquidation preference of the Series A Preferred Stock is $25 per share. If there is a liquidation, dissolution or winding up, the holders of shares of Series A Preferred Stock are entitled to be paid out of the Company assets available for distribution to shareholders an amount in cash equal to the $25 liquidation preference per share plus all accrued and unpaid dividends prior to the distribution of any assets to holders of shares of common stock.
Except as required by law, the holders of the preferred stock have no voting rights with respect to their shares of preferred stock, except that (1) the approval of holders of a majority of the outstanding shares of preferred stock, voting as a class, is required to amend, repeal or change any of the provisions of the Company's articles of incorporation in any manner that would alter or change the powers, preferences or special rights of the shares of preferred stock in a way that would affect them adversely and (2) the consent of each holder of Series A Preferred Stock is required for any amendment that reduces the dividend payable on or the liquidation value of the Series A Preferred Stock.
At the Company's option, the Company may redeem the Series A Preferred Stock, in whole or in part, at any time, at a price per share equal to 100% of its liquidation value plus all accrued and unpaid dividends.
In addition, the Series A Preferred Stock is redeemable at the option of its holders upon the occurrence of a change of control or upon a sale of the Company's common stock by Artal in a registered public offering. If that occurs, the redemption price will be equal to 100% of the liquidation value plus accrued and unpaid dividends.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. LONG-TERM DEBT:
APRIL 24, 1999 APRIL 29, 2000 DECEMBER 30, 2000
---------------------- -------------------- --------------------
EFFECTIVE EFFECTIVE EFFECTIVE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- ----------- -------- --------- -------- ---------
Euro 100.0 million 13% Senior Subordinated
Notes due 2009............................. $ -- $ 91,160 13.00% $ 94,240 13.00%
U.S. $150.0 million 13% Senior Subordinated
Notes due 2009............................. -- 150,000 13.00% 150,000 13.00%
Term A Loan due 2005......................... -- 71,875 9.22% 65,625 9.81%
Term B Loan due 2006......................... -- 74,813 10.04% 74,438 10.95%
Transferable Loan Certificate due 2006....... -- 86,782 10.04% 86,347 10.95%
Promissory Notes............................. 16,664 7-10% -- --
------- -------- --------
16,664 474,630 470,650
Less Current Portion......................... 1,164 14,120 14,120
------- -------- --------
$15,500 $460,510 $456,530
======= ======== ========
|
In connection with the Transaction, the Company entered into a credit facility ("Credit Facility") with the Bank of Nova Scotia, Credit Suisse First Boston and certain other lenders providing (i) a $75.0 million term loan A facility ("Term Loan A"), (ii) a $75.0 million term loan B facility ("Term Loan B"), (iii) an $87.0 million transferable loan certificate ("TLC") and (iv) a revolving credit facility with borrowings up to $30.0 million ("Revolving Credit Facility"). Borrowings under the Credit Facility are paid quarterly and initially bear interest at a rate equal to LIBOR plus (a) in the case of Term Loan A and the Revolving Credit Facility, 3.25% or, at the Company's option, the alternate base rate, as defined, plus 2.25% or (b) in the case of Term Loan B and the TLC, 4.00% or, at the Company's option, the alternate base rate plus 3.00%. At December 30, 2000, the interest rates were 9.6% for Term Loan A and 10.7% for Term Loan B and the TLC. All assets of the Company collateralize the Credit Facility.
The facility was amended on January 16, 2001 to provide for an additional $50.0 million in borrowings in connection with the acquisition (see Note 20) of certain Weight Watchers International, Inc. franchised territories.
In addition, the Company issued $150.0 million USD denominated and 100.0 million EUR denominated principal amount 13% Senior Subordinated Notes due 2009 (the "Notes") to qualified institutional buyers. At December 30, 2000, the 100.0 million EUR notes translated into $94.2 million USD denominated equivalent. The impact of the change in foreign exchange rates related to euro denominated debt are reflected in the income statement. Interest is payable on the Notes semi-annually on April 1 and October 1 of each year, commencing April 1, 2000. The Company uses interest rate swaps and foreign currency forward contracts in association with its debt (see Note 18). The Notes are uncollateralized senior subordinated obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company, including the Credit Facility. The notes are guaranteed by certain subsidiaries of the Company.
The credit facilities contain a number of covenants that, among other things, restrict the Company's ability to dispose of assets, incur additional indebtedness, or engage in certain transactions
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. LONG-TERM DEBT: (CONTINUED) with affiliates and otherwise restrict the Company's corporate activities. In addition, under the credit facilities, the Company is required to comply with specified financial ratios and tests, including minimum fixed charge coverage and interest coverage ratios and maximum leverage ratios.
The aggregate amounts of existing long-term debt maturing in each of the next five years and thereafter are as follows:
2001........................................................ $ 14,120
2002........................................................ 14,120
2003........................................................ 14,120
2004........................................................ 14,120
2005........................................................ 17,245
2006 and thereafter......................................... 396,925
--------
$470,650
========
|
Effective with the Transaction on September 29, 1999, outstanding lines of credit were $6.7 million and promissory notes of $16.7 million have been settled. The lines of credit had a weighted-average interest rate of 5.32% during 1999. The promissory notes represent amounts due various former franchisees as a result of the Company acquiring certain franchised operations.
The Company has guaranteed Term Loans and Letters of Credit of franchisees that originated as part of a franchisees' acquisition of certain franchised areas. The balance of the guaranteed indebtedness was $15.5 million as of April 24, 1999. No such guarantee continues as of December 30, 2000.
6. EARNINGS PER SHARE:
Basic earnings per share ("EPS") computations are calculated utilizing the weighted average number of common shares outstanding during the fiscal years and period presented. Diluted EPS
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. EARNINGS PER SHARE: (CONTINUED) includes the weighted average number of common shares outstanding and the effect of common stock equivalents. The following table sets forth the computation of basic and diluted EPS:
EIGHT
FISCAL YEAR ENDED MONTHS
--------------------------------- ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
--------- --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Numerator:
Net income...................................... $ 23,771 $ 47,982 $ 37,759 $ 15,019
Preferred stock dividends....................... -- -- 875 1,000
-------- -------- -------- --------
Numerator for basic EPS-income available to
common shareholders......................... $ 23,771 $ 47,982 $ 36,884 $ 14,019
======== ======== ======== ========
Numerator for diluted EPS-income available to
common shareholders......................... $ 23,771 $ 47,982 $ 36,884 $ 14,019
======== ======== ======== ========
Denominator:
Denominator for basic EPS-weighted-average
shares........................................ 276,430 276,430 182,206 111,988
Effect of dilutive securities:
Stock options................................. -- -- -- 39
-------- -------- -------- --------
Denominator for diluted EPS-adjusted weighted-
average shares.............................. 276,430 276,430 182,206 112,171
======== ======== ======== ========
EPS:
Basic and diluted EPS(*)........................ $ 0.09 $ 0.17 $ 0.20 $ 0.13
======== ======== ======== ========
|
* Prior to our acquisition by Artal Luxembourg on September 29, 1999, there were 4,705 shares of our common stock outstanding. In connection with the transactions related to our acquisition, we declared a stock split that resulted in 276,428,607 outstanding shares of our common stock. We have adjusted our historical statements to reflect the stock split. We then repurchased 164,441,039 shares in connection with the transactions so that upon completion of our acquisition, there were 111,987,568 shares of our common stock outstanding.
7. STOCK PLANS:
WEIGHT WATCHERS INCENTIVE COMPENSATION PLANS
On December 16, 1999, the Board of Directors adopted the 1999 Stock Purchase and Option Plan of Weight Watchers International, Inc. and Subsidiaries (the "Plan"). The Plan is designed to promote the long-term financial interests and growth of the Company and its subsidiaries by attracting and retaining management with the ability to contribute to the success of the business. The Plan is to be administered by the Board of Directors or a committee thereof.
Under the stock purchase component of the plan discussed above, 1,594,176 shares of common stock were sold to 44 members of the Company's management group at $2.13 per share.
Under the option component of the Plan, grants may take the following forms in the committee's sole discretion: Incentive Stock Options, Other Stock Options (other than incentive options), Stock
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED)
Appreciation Rights, Restricted Stock, Purchase Stock, Dividend Equivalent Rights, Performance Units, Performance Shares and Other Stock-Based Grants. The maximum number of shares available for grant under this plan shall be 7,058,040 shares of authorized common stock as of the effective date of the Plan.
Pursuant to the option component of the Plan, the Board of Directors authorized the Company to enter into agreements under which certain members of management received Non-Qualified Time and Performance Stock Options providing them the opportunity to purchase shares of the Company's common stock at an exercise price of $2.13 per share. The options are exercisable based on the terms outlined in the agreement.
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants for the fiscal year ended April 29, 2000 and for the eight months ended December 30, 2000: dividend yield of 0%; expected volatility of risk was 0%; risk free interest rate ranging from 5.91% to 6.65%; and expected life of 10 years. The exercise price was equivalent to the fair market value at the date of grant. A summary of the Company's stock option activity is as follows:
APRIL 29, 2000 DECEMBER 30, 2000
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
Options outstanding,
Beginning of year.......................... -- 4,933,570 $2.13
Granted.................................... 4,933,570 $2.13 494,063 $2.13
Exercised.................................. -- --
Cancelled.................................. -- 127,045 $2.13
Options outstanding, end of year............. 4,933,570 $2.13 5,300,588 $2.13
Options exercisable, end of year............. 164,452 $2.13 1,325,147 $2.13
Options available for grant, end of year..... 712,862 $2.13 345,844 $2.13
Weighted-average fair value of options
granted during the Year.................... -- $1.03 $0.98
|
The weighted average remaining contractual life of options outstanding at December 30, 2000 was 8.9 years.
WEIGHTWATCHERS.COM STOCK INCENTIVE PLAN OF WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
In April 2000, the Board of Directors adopted the WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries, pursuant to which selected employees were granted options to purchase shares of common stock of WeightWatchers.com, Inc. that are owned by the Company. The number of shares available for grant under this plan is 400,000 shares of authorized common stock of WeightWatchers.com, Inc. All options vest over a period of time, however, vesting of certain options may be accelerated if the Company achieves specified performance levels.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED) The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants for the fiscal year ended April 29, 2000 and for the eight months ended December 30, 2000: dividend yield of 0%; expected volatility of risk was 0%; risk free interest rate ranging from 5.91% to 6.49%; and expected life of ten years. A summary of the Company's stock option activity is as follows:
APRIL 29, 2000 DECEMBER 30, 2000
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
Options outstanding,
Beginning of year........................... -- 158,704 $0.50
Granted..................................... 158,704 $0.50 14,231 $0.50
Exercised................................... -- --
Cancelled................................... -- --
Options outstanding, end of year.............. 158,704 $0.50 172,935 $0.50
Options exercisable, end of year.............. -- $0.50 43,234 $0.50
Options available for grant, end of year...... 241,296 $0.50 227,065 $0.50
Weighted-average fair value of options granted
during the year/period...................... $0.16 $0.23
|
The weighted average remaining contractual life of options outstanding at December 30, 2000 was 9.3 years.
The pro forma effect of SFAS No. 123 on the Company's financial statements would have been as follows under the 1999 Stock Purchase and Option Plan of Weight Watchers International, Inc. and Subsidiaries and the WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries.
FISCAL YEAR EIGHT MONTHS
ENDED ENDED
APRIL 29, DECEMBER 30,
2000 2000
----------- -------------
Net Income:
As reported............................................... $37,759 $15,019
Pro forma................................................. $37,170 $14,984
|
HEINZ INCENTIVE COMPENSATION PLANS--PRIOR TO THE TRANSACTION
Certain qualifying employees of the Company were granted options to purchase Heinz common stock under Heinz's stock option plans. These options under the Plan have been granted at not less than market prices on the date of grant. Stock options granted have a maximum term of ten years. Vesting occurs from one to three years after the date of grant. Beginning in fiscal 1998, in order to place greater emphasis on creation of shareholder value, performance-accelerated stock options were
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED) granted to certain key executives. These options vest eight years after the grant date, subject to acceleration if predetermined share price goals are achieved.
The pro forma effect of SFAS No. 123 on the Company's financial statements would have been as follows:
FISCAL YEAR ENDED
---------------------------------
APRIL 25, 1998 APRIL 24, 1999
--------------- ---------------
As reported................................................ $23,771 $47,982
Pro forma.................................................. 23,485 47,621
|
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weight-average assumptions:
FISCAL YEAR ENDED
---------------------------------
APRIL 25, 1998 APRIL 24, 1999
--------------- ---------------
Dividend yield............................................. 2.5% 2.5%
Volatility................................................. 20.0 22.0
Risk-free interest rate.................................... 6.2 5.1
Expected term (years)...................................... 5.0 5.0
|
8. EMPLOYEE BENEFIT PLANS:
WEIGHT WATCHERS SPONSORED PLANS:
Effective September 29, 1999, the net assets of the Heinz sponsored employee savings plan were transferred to the Weight Watchers sponsored plan upon execution of the Transaction. The Company sponsors the Weight Watchers Savings Plan (the "Savings Plan") for salaried and hourly employees. The Savings Plan is a defined contribution plan which provides for employer matching contributions up to 100% of the first 3% of an employee's eligible compensation. The Savings Plan also permits employees to contribute between 1% and 13% of eligible compensation on a pre-tax basis. Company contributions for the fiscal year ended April 29, 2000 and the eight months ended December 30, 2000 were $1.0 million and $0.5 million respectively.
The Company sponsors the Weight Watchers Profit Sharing Plan (the "Profit Sharing Plan") for all full-time salaried employees who are eligible to participate in the Savings Plan (except for certain senior management personnel). The Profit Sharing Plan provides for a guaranteed monthly employer contribution on behalf of each participant based on the participant's age and a percentage of the participant's eligible compensation. The Profit Sharing Plan has a supplemental employer contribution component, based on the Company's achievement of certain annual performance targets, which are determined annually by the Company's Board of Directors. The Company also reserves the right to make additional discretionary contributions to the Profit Sharing Plan.
For certain senior management personnel, the Company sponsors the Weight Watchers Executive Profit Sharing Plan. Under the Internal Revenue Service ("IRS") definition this plan is considered a Nonqualified Deferred Compensation Plan. There is a promise of payment by the Company made on
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED) the employees' behalf instead of an individual account with a cash balance. The account is valued at the end of each fiscal month, based on an annualized interest rate of prime plus 2%, with an annualized cap of 15%.
The Company is currently applying for a determination letter to qualify the Savings Plan under Section 401(a) of the IRS Code. It is the Company's opinion that the IRS will issue a favorable determination letter as to the qualified status of the Savings Plan.
HEINZ SPONSORED PLANS--PRIOR TO THE TRANSACTION:
Domestic employees participate in certain defined pension plans, a defined contribution 401(k) savings plan and, for employees affected by certain IRS limits, a section 415 Excess Plan, all of which are sponsored by Heinz. The Company also provides post-retirement health care and life insurance benefits for employees who meet the eligibility requirements of the Heinz plans. Retirees share in the cost of these benefits based on age and years of service.
Company contributions to the Heinz Savings Plan include a qualified age-related contribution and a matching of the employee's contribution, up to a specified amount.
The following amounts were included in the Company's result of operations:
FISCAL YEAR ENDED
---------------------------------
APRIL 25, APRIL 24, APRIL 29,
1998 1999 2000
--------- --------- ---------
Defined Benefit Pension Plans............................. $ 726 $1,456 $421
Defined Benefit Postretirement Medical.................... $ 261 $ 577 $253
Savings Plan.............................................. $1,668 $2,170 $994
|
In addition, foreign employees participate in certain Company sponsored pension plans and such charges, which are included in the results of operations, are not material.
9. WEIGHTWATCHERS.COM WARRANT AND NOTE AGREEMENT:
On September 29, 1999, the Company entered into a subscription agreement with WeightWatchers.com, Artal and Heinz under which Artal, Heinz and the Company purchased common stock of WeightWatchers.com for a nominal amount. At that date, the Company owned approximately 19.8% of WeightWatchers.com's common stock while Artal and Heinz owned 72.1% and 4.8%, respectively, of WeightWatchers.com's common stock.
Under a warrant agreement dated November 24, 1999 entered into between WeightWatchers.com and the Company, the Company received warrants to purchase an additional 4,217,220 shares of WeightWatchers.com's common stock in connection with the loans that the Company has made to WeightWatchers.com under the WeightWatchers.com note described below. These warrants expire on November 24, 2009 and may be exercised at a price of $7.14 per share of WeightWatchers.com's common stock until then. The exercise price and the number of shares of WeightWatchers.com's common stock available for purchase upon exercise of the warrants may be adjusted from time to time upon the occurrence of certain events.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. WEIGHTWATCHERS.COM WARRANT AND NOTE AGREEMENT: (CONTINUED)
Under a warrant agreement dated October 1, 2000 entered into between WeightWatchers.com and the Company, the Company received warrants to purchase an additional 1,200,000 shares of WeightWatchers.com's common stock in connection with the loans that the Company made to WeightWatchers.com under the WeightWatchers.com note described below. These warrants expire on October 1, 2010 and may be exercised at a price of $7.14 per share of WeightWatchers.com's common stock until then. The exercise price and the number shares of WeightWatchers.com's common stock available for purchase upon exercise of the warrants may be adjusted from time to time upon the occurrence of certain events.
On October 1, 2000, the Company amended its loan agreement with Weight Watchers.com increasing the aggregate principal amount from $10.0 million to $23.5 million. On that date, the unpaid principal and accumulated interest was rolled over into the new loan. The amount may be advanced at any time or from time to time prior to July 31, 2003. The note bears interest at 13% per year. All principal and interest outstanding under the note are scheduled to be payable on September 30, 2003. The note may be prepaid at any time in whole or in part, without premium or penalty. Pursuant to the note the Company has advanced WeightWatchers.com $2.0 million during the fiscal year ended April 29, 2000 and $14.8 million during the eight months ended December 30, 2000. As of December 30, 2000, $16.8 million of principal and $0.8 million of interest was charged to other expenses.
10. RESTRUCTURING CHARGES:
During the fourth quarter of fiscal 1997, the Company announced a reorganization and restructuring program. The reorganization plan was designed to strengthen the Company's classroom business and improve profitability and global growth.
Charges related to the restructuring were recognized to reflect the exit from the Personal Cuisine Food Option in United States Company-owned locations, the relocation of classes from certain fixed retail outlets to traveling locations, and other initiatives involving the exit of certain under-performing business and product lines.
Restructuring and related costs recorded in fiscal 1997 totalled $51.7 million pretax. Pretax charges of $49.7 million were classified as classroom operating expenses and $2.0 million as selling, general and
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. RESTRUCTURING CHARGES: (CONTINUED) administrative expenses. The major components of the fiscal 1997 charges and the remaining accrual balances were as follows:
EMPLOYEE
TERMINATION EXIST COSTS
NON-CASH AND --------------------------------------
ASSET SEVERANCE ACCRUED IMPLEMENTATION
WRITE-DOWNS COSTS EXIT COSTS COSTS TOTAL
----------- ----------- ---------- -------------- --------
Accrued restructuring costs--
Initial charge--1997........................ $ 27,402 $ 4,723 $19,569 $ -- $ 51,694
Amounts utilized--1997...................... (27,402) (339) (46) -- (27,787)
-------- ------- ------- ----- --------
Accrued restructuring costs--April 26,
1997...................................... -- 4,384 19,523 -- 23,907
Implementation costs--1998.................. -- -- -- 999 999
Amounts utilized--1998...................... -- (3,709) (8,553) (999) (13,261)
-------- ------- ------- ----- --------
Accrued restructuring costs--April 25,
1998...................................... -- 675 10,970 -- 11,645
Implementation costs--1999.................. -- -- -- 32 32
Amounts utilized--1999...................... -- (186) (3,769) (32) (3,987)
-------- ------- ------- ----- --------
Accrued restructuring costs--April 24,
1999...................................... -- 489 7,201 -- 7,690
Amounts utilized--2000...................... -- -- (2,904) -- (2,904)
-------- ------- ------- ----- --------
Accrued restructuring costs--April 29,
2000...................................... -- 489 4,297 -- 4,786
Amounts utilized--Apr 30--Dec 30, 2000...... -- (489) (1,812) -- (2,301)
-------- ------- ------- ----- --------
Accrued restructuring costs--December 30,
2000...................................... $ -- $ -- $ 2,485 $ -- $ 2,485
======== ======= ======= ===== ========
|
Asset write-downs of $16.9 million consisted primarily of fixed assets and other long-term asset impairments that were recorded as a direct result of the Company's decision to exit businesses or facilities. Such assets were written down based on management's estimate of fair value. Write-downs of $10.5 million were also recognized for estimated losses from disposals of classroom inventories, packaging materials and other assets related to product line rationalizations and process changes as a direct result of the Company's decision to exit businesses or facilities.
Employee severance costs include charges related to both involuntary terminations and involuntary terminations. As part of the voluntary termination agreements, enhanced retirement benefits were offered to the affected employees. These amounts were included in the Employee Termination and Severance costs component of the restructuring charge.
Exit costs consist primarily of contract and lease termination costs associated with the Company's decision to exit the activities described above. The remaining accrued exit costs will be utilized through 2002.
The results for 1998 included costs related to the implementation of the restructuring program of $999 pretax, which were classified as selling, general and administrative expenses. These costs consist primarily of center relocation and training. The results for 1999 included costs related to the implementation of the restructuring program of $32 pretax, which were classified as selling, general and administrative expenses. These costs consist primarily of relocation and training costs.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. PROPERTY AND EQUIPMENT:
The components of property and equipment were:
APRIL 24, 1999 APRIL 29, 2000 DECEMBER 30, 2000
--------------- --------------- ------------------
Leasehold improvements...................... $18,343 $17,954 $19,218
Equipment................................... 36,559 30,900 31,921
------- ------- -------
54,902 48,854 51,139
Less: Accumulated depreciation and
amortization.............................. 46,428 41,911 43,006
------- ------- -------
8,474 6,943 8,133
Construction in progress.................... 251 58 12
------- ------- -------
$ 8,725 $ 7,001 $ 8,145
======= ======= =======
|
Depreciation and amortization expense of property and equipment for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 and for the eight months ended December 30, 2000 was $3.3 million, $3.6 million, $2.9 million and $2.1 million, respectively.
12. RELATED PARTY TRANSACTIONS:
On November 30, 1999, the Company entered into an agreement with Nellson Nutraceutical, Inc. ("Nellson"), a wholly-owned subsidiary of Artal, to purchase nutrition bar products manufactured by Nellson for sale at the Company's meetings. Under the agreement, Nellson agrees to produce sufficient nutrition bar products to fill the Company's purchase orders within 30 days of receipt. The Company is not bound to purchase a minimum quantity of nutrition bar products. The term of the agreement is one year and the Company may renew the agreement for successive one-year periods by providing written notice to Nellson. The provisions of the agreement are comparable to those the Company would receive from a third party. Total purchases from Nellson for the eight months ended December 30, 2000 and for the fiscal year ended April 29, 2000 were $4.9 million and $4.3 million, respectively.
At the closing of the Transaction, the Company granted to Heinz an exclusive, worldwide, royalty-free license to use the Custodial Trademarks (or any portion covering food and beverage products) in connection with Heinz licensed products. Heinz will pay the Company an annual fee of $1.2 million for five years in exchange for the Company serving as the custodian of the Custodial Trademarks.
Prior to the Transaction, the following related party transactions existed.
Certain of Heinz' general and administrative expenses were allocated to the Company. Total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. Total costs charged to the Company for these services were $1.8 million, $2.2 million and $1.0 million for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000, respectively.
In addition, Heinz charged the Company for its share of group health insurance costs for eligible Company employees based upon location specific costs, overall insurance costs and loss experience
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. RELATED PARTY TRANSACTIONS: (CONTINUED) incurred during a calendar year. In addition, various other insurance coverages were also provided to the Company through Heinz' consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on the Company's loss experience. Amounts charged to the Company for insurance costs were $4.2 million, $4.3 million and $3.8 million for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000, respectively, and are recorded in selling, general and administrative expenses in the accompanying statement of operations.
Total costs charged to the Company by Heinz for other miscellaneous services were $579 thousand, $520 thousand and $93 thousand for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000, respectively, and were recorded in selling, general and administrative expenses in the accompanying statement of operations.
The Company maintained a cash management arrangement with Heinz. On a daily basis, all available domestic cash was deposited and disbursements were withdrawn. Heinz charged the Company interest on the average daily balance maintained in an intercompany account. Net interest expense related to this arrangement included in the statement of operations was $965 thousand, $3.1 million and $1.7 million for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000, respectively. The interest rate charged to or received by the Company was 6.25% for fiscal years ended April 25, 1998 and April 24, 1999 and 5.5% for the fiscal year ended April 29, 2000.
Substantially all of the due from related parties of $133.8 million at April 24, 1999 represents a note receivable from an affiliate of Heinz which was repaid in June 1999. Interest income reflected in the statement of operations related to this note receivable was $9.6 million and $10.0 million, for the fiscal years ended April 25, 1998 and April 24, 1999 respectively. The interest rate charged by the Company was LIBOR plus 25 basis points in both years.
Short-term borrowings due to an affiliate of Heinz of $16.3 million at April 24, 1999 represented a note payable due April 28, 1999. Interest expense related to the note payable was $1.0 million for the fiscal year ended April 24, 1999 and $35 thousand for the fiscal year ended April 29, 2000.
Long-term borrowings of $52.5 million due to a related party were contributed to capital during the fiscal year ended April 25, 1998. Interest expense related to these long-term borrowings was $961 thousand and the interest rate was 10.5%.
Pension costs and postretirement costs are also charged to the Company based upon eligible employees participating in the Plans. See also Note 7.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. INCOME TAXES:
The following tables summarizes the provision (benefit) for U.S. federal, state and foreign taxes on income:
FISCAL YEAR ENDED EIGHT MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
Current:
U.S. federal....................................... $(4,798) $11,997 $ 5,727 $ 234
State.............................................. 346 3,247 2,464 200
Foreign............................................ 8,858 11,837 11,591 5,319
------- ------- ------- ------
4,406 27,081 19,782 5,753
------- ------- ------- ------
Deferred:
U.S. federal....................................... 10,493 6,368 7,800 --
State.............................................. 502 312 368 --
Foreign............................................ 4,568 2,599 373 104
------- ------- ------- ------
15,563 9,279 8,541 104
------- ------- ------- ------
Total tax provision.................................. $19,969 $36,360 $28,323 $5,857
======= ======= ======= ======
|
The components of income before income taxes and minority interest consist of the following:
FISCAL YEAR ENDED EIGHT MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
Domestic............................................. $13,143 $48,199 $33,538 $ 9,399
Foreign.............................................. 31,442 37,636 33,378 11,624
------- ------- ------- -------
$44,585 $85,835 $66,916 $21,023
======= ======= ======= =======
|
The difference between the U.S. federal statutory tax rate and the Company's consolidated effective tax rate are as follows:
FISCAL YEAR ENDED EIGHT MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
U.S. federal statutory rate........................... 35.0% 35.0% 35.0% 35.0%
Foreign income taxes.................................. 7.2 3.5 1.7 4.0
States' income taxes (net of federal benefit)......... 1.6 2.7 2.6 0.6
Goodwill amortization................................. 1.7 0.8 0.4 1.0
Other................................................. (0.7) 0.4 2.6 1.3
Valuation allowance................................... -- -- -- (14.0)
---- ---- ---- -----
Effective tax rate.................................... 44.8% 42.4% 42.3% 27.9%
==== ==== ==== =====
|
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. INCOME TAXES: (CONTINUED) The deferred tax assets and deferred tax (liabilities) recorded on the balance sheet as of April 24, 1999, April 29, 2000 and December 30, 2000 are as follows:
APRIL 24, APRIL 29, DECEMBER 30,
1999 2000 2000
---------- ---------- -------------
Depreciation........................................ $ -- $ 304 $ 333
Provision for estimated expenses.................... 3,288 1,771 2,702
Operating loss carryforwards........................ 4,430 4,369 953
Transaction expenses................................ -- 2,933 --
Benefits plans...................................... 5,878 -- --
WeightWatchers.com loan............................. -- -- 6,513
Other............................................... 1,998 216 143
Amortization........................................ -- 135,329 139,642
Less: Valuation allowance........................... (630) (71,979) (71,903)
-------- -------- --------
Total deferred tax assets........................... 14,964 72,943 78,383
-------- -------- --------
Transaction expenses................................ -- -- (4,374)
Depreciation/amortization........................... (9,620) -- --
Deferred income..................................... (3,767) (4,985) (5,764)
Other............................................... (2,063) (3,231) (3,497)
-------- -------- --------
Total deferred tax liabilities...................... (15,450) (8,216) (13,635)
-------- -------- --------
Net deferred tax assets (liabilities)............... $ (486) $ 64,727 $ 64,748
======== ======== ========
|
Having utilized approximately $9.2 million in the current year, remaining net operating loss carryforwards at December 30, 2000 totalled $2.6 million, all of which will expire by 2019. Further, the Company will be subject to the federal alternative minimum tax (AMT) for the current year, resulting in an AMT credit carryforward at December 30, 2000 of approximately $0.2 million, which can be carried forward indefinitely and used to offset taxable income in future years to the extent the Company is not subject to AMT.
As of December 30, 2000, the Company has provided for a valuation allowance for its deferred tax assets. Although realization is not assured, management believes it is more likely than not, that the net deferred tax assets will be realized. The determination of the net deferred tax assets deemed realizable was based on available historical evidence, and estimates of future taxable income. This amount may be subject to adjustment based on changes to those factors in future years.
On September 29, 1999 the Company effected a recapitalization and stock purchase agreement with its former parent, Heinz. For U.S. tax purposes, the transaction was treated as a taxable sale under IRC Section 338(h)(10), resulting in a step-up in the tax basis of net assets. The step-up in tax basis as finally determined upon filing of the Section 338(h)(10) election during the current year resulted in an additional deferred tax asset of approximately $3.3 million, with an offsetting adjustment to the valuation allowance.
Undistributed earnings of foreign subsidiaries considered to be reinvested permanently, for which no deferred taxes are provided, amounted to $27.2 million as of December 30, 2000.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. CASH FLOW INFORMATION:
EIGHT
FISCAL YEAR ENDED MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
Net cash paid during the year for:
Interest expense............................ $ 5,818 $2,748 $31,402 $31,639
Income taxes................................ $ 4,706 $5,380 $13,601 $ 8,405
Noncash investing and financing activities
were as follows:
Deferred tax asset recorded as a component
of shareholders' deficit in conjunction
with the recapitalization of the
Company................................... -- -- $72,100 --
Redeemable preferred stock issued to
Heinz..................................... -- -- $25,875 --
Contribution of related party debt to
capital................................... $52,500 -- -- --
Reduction of existing receivable in
connection with the acquisition of
minority interest......................... -- -- -- $ 1,124
|
15. COMMITMENTS AND CONTINGENCIES:
LEGAL:
Due to the nature of its activities, the Company is, at times, subject to pending and threatened legal actions which arise during the normal course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of such matters will not have a material effect on the consolidated financial statements.
LEASE COMMITMENTS:
Minimum rental commitments under non-cancelable operating leases, primarily for office and rental facilities at December 30, 2000, consists of the following:
2001........................................................ $12,677
2002........................................................ 7,922
2003........................................................ 5,241
2004........................................................ 3,659
2005........................................................ 3,373
2006 and thereafter......................................... 18,913
-------
Total....................................................... $51,785
=======
|
Total rent expense charged to operations under these leases for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 and for the eight months ended December 30, 2000 was approximately $10.3 million, $11.0 million, $12.3 million and $8.2 million, respectively.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. COMMITMENTS AND CONTINGENCIES: (CONTINUED) REPURCHASE AGREEMENTS:
The Company is a party to a repurchase agreement related to the 10% minority interest in the classroom operation of Finland. Pursuant to this agreement, the Company may elect or be required to repurchase the minority shareholders' interest in this operation. If the Company repurchases the minority interest within five years of the original sale, the repurchase price is based on the original sales price times the increase in the consumer price index since the date of the sale. If the Company repurchases the minority interest after five years from the original sale, the repurchase price is based on a multiple of the average operating income during the last three years. On August 1, 2000 the Company repurchased the remaining 10% minority interest of the Sweden. The acquisition was financed with $2.4 million of cash plus $1.1 million reduction of an existing receivable from the minority owner resulting in goodwill of $3.5 million.
16. FRANCHISE PROFIT SHARING FUND:
The Company's franchise agreement with certain North American franchisees provides for an annual franchise profit sharing distribution based upon specified formulas. In October 2000, the Company reached an agreement with certain franchisees regarding the sharing of profits of prior and future product sales. The settlement provided for a payment of approximately $3.8 million during the eight months ended December 30, 2000 and releases the Company from any future obligations to the franchisees under profit sharing arrangements dating back to 1969. Profit sharing expense under this arrangement for the fiscal years ended April 25, 1998, April 24, 1999 and April 29, 2000 was $0.7 million, $0.8 million and $0.4 million, respectively. Unpaid amounts are included in accrued liabilities.
17. SEGMENT AND GEOGRAPHIC DATA:
The Company is engaged principally in one line of business, i.e., weight control. The following table presents information about the Company by geographic area. There were no material amounts of sales or transfers among geographic areas and no material amounts of United States export sales.
EXTERNAL SALES
----------------------------------------------------
EIGHT
FISCAL YEAR ENDED MONTHS
------------------------------------ ENDED
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
United States............................. $143,765 $189,366 $207,256 $150,199
United Kingdom............................ 73,146 76,143 90,778 55,945
Continental Europe........................ 54,850 65,119 66,524 48,306
Other International....................... 25,484 33,980 35,016 18,725
-------- -------- -------- --------
$297,245 $364,608 $399,574 $273,175
======== ======== ======== ========
|
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
17. SEGMENT AND GEOGRAPHIC DATA: (CONTINUED)
LONG-LIVED ASSETS
----------------------------------------------------
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30,
1998 1999 2000 2000
---------- ---------- ---------- -------------
United States............................. $155,360 $149,054 $142,675 $142,641
United Kingdom............................ 1,272 1,198 949 2,737
Continental Europe........................ 2,463 2,422 1,973 1,914
Other International....................... 8,208 7,878 21,132 18,402
-------- -------- -------- --------
$167,303 $160,552 $166,729 $165,694
======== ======== ======== ========
|
18. FINANCIAL INSTRUMENTS:
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's significant financial instruments include cash and cash equivalents, short-and-long-term debt, current and noncurrent notes receivable, currency exchange agreements and guarantees.
In evaluating the fair value of significant financial instruments, the Company generally uses quoted market prices of the same or similar instruments or calculates an estimated fair value on a discounted cash flow basis using the rates available for instruments with the same remaining maturities. As of December 30, 2000, the fair value of financial instruments held by the Company approximated the recorded value. Based on the current interest rates, management believes that the carrying amount of the Company's debt approximates fair market value.
FOREIGN CURRENCY CONTRACTS:
As of April 29, 2000 and December 30, 2000, the Company held currency and interest rate swap contracts to purchase certain foreign currencies totalling $139.4 million and $158.1 million, respectively. The Company also held separate currency and interest rate swap contracts to sell foreign currencies of $138.9 million and $163.5 million, respectively. Net unrealized gains (losses) associated with the Company's foreign currency contracts were ($0.5) million and $5.9 million, respectively.
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The change in the Company's fiscal year end resulted in the elimination of the one month lag for certain foreign subsidiaries and is effective retroactive to April 30, 2000 which results in the quarterly data presented herein to differ from that previously reported on the July 29, 2000 and October 28, 2000 Form 10-Q's. The change from the previous Form 10-Q's for revenue is an increase of $469 and a decrease of $6,469 for the quarters ended July 29 and October 28, 2000, respectively. The change for operating income is an increase of $2,374 and an increase of $2,443 for the quarters ended July 29 and
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED) October 28, 2000, respectively. The change for net income is an increase of $1,736 and an increase of $1,816 for the quarters ended, July 29 and October 28, 2000, respectively.
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
FISCAL YEAR ENDED APRIL 24, 1999
Revenues................................... $84,036 $79,966 $89,403 $111,203
Operating income........................... $22,488 $14,505 $20,118 $ 26,804
Net income................................. $12,708 $ 8,227 $11,506 $ 15,541
FISCAL YEAR ENDED APRIL 29, 2000
Revenues................................... $92,174 $84,031 $90,507 $132,862
Operating income........................... $28,302 $10,508 $14,719 $ 34,115
Net income................................. $17,095 $ 2,239 $ 912 $ 17,513
|
TWO MONTHS
ENDED
FIRST QUARTER SECOND QUARTER DECEMBER 30, 2000
------------- -------------- ------------------
EIGHT-MONTH PERIOD ENDED DECEMBER 30, 2000
Revenues.............................................. $103,073 $107,582 $62,520
Operating income...................................... $ 36,626 $ 27,648 $10,410
Net income (loss)..................................... $ 13,705 $ 10,908 $(9,594)
|
20. SUBSEQUENT EVENT
On January 16, 2001 the Company completed the acquisition of the Weight Watchers franchised territories and certain business assets of Weighco Enterprises, Inc., Weighco of Northwest, Inc., and Weighco of Southwest, Inc. pursuant to the terms of the Asset Purchase Agreement, dated as of December 11, 2000 among Weighco Enterprises, Inc., Weighco of Northwest, Inc., and Weighco of Southwest, Inc., the Company and Weight Watchers North America, Inc., a wholly-owned subsidiary of the Company.
The transaction will be accounted for by the purchase method of accounting. Substantially all of the purchase price in excess of the net assets acquired will be recorded as goodwill.
The purchase price for the acquisition was $83.8 million. Of this amount, the Company obtained $60.0 million pursuant to the Amended and Restated Credit Agreement, dated as of January 16, 2001 among Weight Watchers International, Inc., WW Funding Corp. and various financial institutions.
21. STOCK SPLIT
On October 26, 2001, the Company's Board of Directors declared a 4.70536-for-one stock split to be effective concurrent with the effective date of the registration filed by the Company in connection with its initial public offering. In addition, the Company's Articles of Incorporation will be amended to authorize the issuance of up to one billion shares of common stock, no par value, upon filing of the registration statement.
All common share and per share amounts have been retroactively restated to account for the stock split. In addition, stock options and the respective exercise prices have been amended to reflect this split.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
22. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several basis by the following wholly-owned subsidiaries: 58 WW Food Corp.; Waist Watchers, Inc.; Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers Direct, Inc.; W/W Twenty first Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.; Weight Watchers UK Holdings Ltd.; Weight Watchers International Holdings Ltd.; Weight Watchers (U.K.) Limited; Weight Watchers (Exercise) Ltd.; Weight Watchers (Accessories & Publications) Ltd.; Weight Watchers (Food Products) Limited; Weight Watchers New Zealand Limited; Weight Watchers International Pty Limited; Fortuity Pty Ltd; and Gutbusters Pty Ltd. (collectively, the "Guarantor Subsidiaries"). The obligations of each Guarantor Subsidiary under its guarantee of the Notes are subordinated to such subsidiary's obligations under its guarantee of the new senior credit facility.
Presented below is condensed consolidating financial information for Weight Watchers International, Inc. ("Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries (primarily companies incorporated in European countries other than the United Kingdom). In the Company's opinion, separate financial statements and other disclosures concerning each of the Guarantor Subsidiaries would not provide additional information that is material to investors. Therefore, the Guarantor Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Parent Company on the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Parent Company's investments in subsidiaries' accounts. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF APRIL 24, 1999
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents...................... $ (74) $ 12,376 $ 7,213 $ -- $ 19,515
Receivables, net............................... 5,134 4,364 1,905 -- 11,403
Notes receivable, current...................... 3,266 -- -- -- 3,266
Inventories.................................... -- 5,775 1,805 -- 7,580
Prepaid expenses............................... 856 4,588 2,154 -- 7,598
Deferred income taxes.......................... 1,758 (1,949) 3,800 -- 3,609
Due from related parties....................... 1,034 242 132,507 -- 133,783
Intercompany receivables (payables)............ 103,588 (107,373) 3,785 -- --
-------- -------- -------- --------- --------
TOTAL CURRENT ASSETS......................... 115,562 (81,977) 153,169 -- 186,754
Investment in consolidated subsidiaries.......... 117,732 -- -- (117,732) --
Property and equipment, net...................... 1,981 5,231 1,513 -- 8,725
Notes and other receivables, noncurrent.......... 10,295 -- 8,870 -- 19,165
Goodwill, net.................................... 27,254 115,568 892 -- 143,714
Trademarks and other intangible assets, net...... 2,355 5,745 13 -- 8,113
Deferred income taxes............................ (22) 4,155 -- -- 4,133
Other noncurrent assets.......................... 138 510 182 -- 830
-------- -------- -------- --------- --------
TOTAL ASSETS................................. $275,295 $ 49,232 $164,639 $(117,732) $371,434
======== ======== ======== ========= ========
LIABILITIES AND PARENT COMPANY'S INVESTMENT
Current liabilities
Short-term borrowings and line of credit....... $ -- $ -- $ 6,690 $ -- $ 6,690
Short-term borrowings due to related party..... 16,638 (388) -- -- 16,250
Portion of long-term debt due within one
year......................................... 1,164 -- -- -- 1,164
Accounts payable............................... 631 9,192 2,887 -- 12,710
Salaries and wages............................. 4,189 7,096 -- -- 11,285
Accrued interest............................... 2,161 -- 15 -- 2,176
Accrued restructuring costs.................... 8 7,929 (247) -- 7,690
Foreign currency contract payable.............. -- -- 7,169 -- 7,169
Other accrued liabilities...................... 1,798 6,659 7,587 -- 16,044
Income taxes................................... (11,168) 17,118 2,012 -- 7,962
Deferred revenue............................... -- 5,680 734 -- 6,414
-------- -------- -------- --------- --------
TOTAL CURRENT LIABILITIES.................... 15,421 53,286 26,847 -- 95,554
Long-term debt................................... 15,500 -- -- -- 15,500
Deferred income taxes............................ (2,366) 10,338 256 -- 8,228
Other............................................ -- 2,659 545 -- 3,204
-------- -------- -------- --------- --------
TOTAL LONG-TERM DEBT AND OTHER LIABILITIES... 13,134 12,997 801 -- 26,932
Parent company's investment...................... 246,740 (17,051) 136,991 (117,732) 248,948
-------- -------- -------- --------- --------
TOTAL LIABILITIES AND PARENT COMPANY'S
INVESTMENT................................. $275,295 $ 49,232 $164,639 $(117,732) $371,434
======== ======== ======== ========= ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents..................... $ 10,984 $ 22,465 $10,594 $ -- $ 44,043
Receivables, net.............................. 6,006 5,606 1,265 -- 12,877
Notes receivable, current..................... 2,791 -- -- -- 2,791
Inventories................................... -- 7,827 1,501 -- 9,328
Prepaid expenses.............................. 748 6,240 1,372 -- 8,360
Deferred income taxes......................... 2,846 (2,752) -- -- 94
Intercompany receivables (payables)........... (32,114) 27,742 4,372 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS........................ (8,739) 67,128 19,104 -- 77,493
Investment in consolidated subsidiaries......... 162,320 -- -- (162,320) --
Property and equipment, net..................... 1,809 3,974 1,218 -- 7,001
Notes and other receivables, noncurrent......... 7,045 -- -- -- 7,045
Goodwill, net................................... 25,833 125,977 755 -- 152,565
Trademarks and other intangible assets, net..... 1,960 5,193 10 -- 7,163
Deferred income taxes........................... (9,854) 77,428 -- -- 67,574
Deferred financing costs........................ 14,749 (83) -- -- 14,666
Other noncurrent assets......................... 163 365 172 -- 700
--------- -------- ------- --------- ---------
TOTAL ASSETS................................ $ 195,286 $279,982 $21,259 $(162,320) $ 334,207
========= ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Short-term borrowings due to related party.... $ 1,489 $ -- $ -- $ -- $ 1,489
Portion of long-term debt due within one
year........................................ 13,250 870 -- -- 14,120
Accounts payable.............................. 1,438 9,084 1,840 -- 12,362
Salaries and wages............................ 2,301 4,256 3,568 -- 10,125
Accrued interest.............................. 3,521 561 -- -- 4,082
Accrued restructuring costs................... -- 4,786 -- -- 4,786
Foreign currency contract payable............. 486 -- -- -- 486
Other accrued liabilities..................... 6,387 9,049 4,147 -- 19,583
Income taxes.................................. (1,846) 5,965 2,667 -- 6,786
Deferred revenue.............................. -- 3,824 808 -- 4,632
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES................... 27,026 38,395 13,030 -- 78,451
Long-term debt.................................. 374,598 85,912 -- -- 460,510
Deferred income taxes........................... 1,903 390 648 -- 2,941
Other........................................... -- -- 546 -- 546
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES............................... 376,501 86,302 1,194 -- 463,997
Redeemable preferred stock...................... 25,875 2,507 254 (2,761) 25,875
Shareholders' equity (deficit).................. (234,116) 152,778 6,781 (159,559) (234,116)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE STOCK AND
SHAREHOLDERS' EQUITY (DEFICIT)............ $ 195,286 $279,982 $21,259 $(162,320) $ 334,207
========= ======== ======= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents..................... $ 26,699 $ 11,191 $ 6,611 $ -- $ 44,501
Receivables, net.............................. 7,390 5,941 1,347 -- 14,678
Notes receivable, current..................... 2,104 -- 2 -- 2,106
Foreign currency contracts receivable......... 5,364 -- -- -- 5,364
Inventories................................... -- 11,867 3,177 -- 15,044
Prepaid expenses.............................. 961 7,809 2,329 -- 11,099
Deferred income taxes......................... 2,846 (2,198) -- -- 648
Intercompany receivables (payables)........... (10,921) 3,147 7,774 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS........................ 34,443 37,757 21,240 -- 93,440
Investment in consolidated subsidiaries......... 175,876 -- -- (175,876) --
Property and equipment, net..................... 1,272 5,679 1,194 -- 8,145
Notes and other receivables, noncurrent......... 5,601 -- -- -- 5,601
Goodwill, net................................... 28,367 121,814 720 -- 150,901
Trademarks and other intangible assets, net..... 1,876 4,761 11 -- 6,648
Deferred income taxes........................... (44,713) 111,920 -- -- 67,207
Deferred financing costs........................ 13,513 -- -- -- 13,513
Other noncurrent assets......................... 163 271 328 -- 762
--------- -------- ------- --------- ---------
TOTAL ASSETS................................ $ 216,398 $282,202 $23,493 $(175,876) $ 346,217
========= ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Short-term borrowings due to related party.... $ 1,730 $ -- $ -- $ -- $ 1,730
Portion of long-term debt due within one
year........................................ 13,250 870 -- -- 14,120
Accounts payable.............................. 932 8,379 2,678 -- 11,989
Salaries and wages............................ 3,568 3,533 3,443 -- 10,544
Accrued interest.............................. 9,069 593 -- -- 9,662
Accrued restructuring costs................... -- 2,485 -- -- 2,485
Other accrued liabilities..................... 9,420 10,540 3,255 -- 23,215
Income taxes.................................. 1,677 (414) 2,397 -- 3,660
Deferred revenue.............................. -- 4,843 993 -- 5,836
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES................... 39,646 30,829 12,766 -- 83,241
Long-term debt.................................. 371,053 85,477 -- -- 456,530
Deferred income taxes........................... 2,481 -- 626 -- 3,107
Other........................................... -- -- 121 -- 121
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES............................... 373,534 85,477 747 -- 459,758
Redeemable preferred stock...................... 25,996 -- -- -- 25,996
Shareholders' equity (deficit).................. (222,778) 165,896 9,980 (175,876) (222,778)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE STOCK AND
SHAREHOLDERS' EQUITY (DEFICIT)............ $ 216,398 $282,202 $23,493 $(175,876) $ 346,217
========= ======== ======= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 25, 1998
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $28,465 $213,929 $54,851 $ -- $297,245
Cost of revenues...................... 3,264 122,148 34,549 -- 159,961
------- -------- ------- -------- --------
Gross profit........................ 25,201 91,781 20,302 -- 137,284
Marketing expenses.................... 7,916 33,499 7,812 -- 49,227
Selling, general and administrative
expenses............................ 21,154 16,578 6,335 -- 44,067
------- -------- ------- -------- --------
Operating (loss) income............. (3,869) 41,704 6,155 -- 43,990
Interest income....................... 831 2,297 10,641 (317) 13,452
Interest expense...................... 4,033 607 4,253 (317) 8,576
Other expense, net.................... 1,695 2,494 92 -- 4,281
Equity in income of consolidated
subsidiaries........................ 16,837 -- -- (16,837) --
Franchise commission income (loss).... 8,038 (5,984) (2,054) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................... 16,109 34,916 10,397 (16,837) 44,585
(Benefit from) provision for income
taxes............................... (1,979) 16,355 5,593 -- 19,969
------- -------- ------- -------- --------
Income before minority interest..... 18,088 18,561 4,804 (16,837) 24,616
Minority interest..................... -- 629 216 -- 845
------- -------- ------- -------- --------
Net income.......................... $18,088 $ 17,932 $ 4,588 $(16,837) $ 23,771
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 24, 1999
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $42,288 $257,202 $65,118 $ -- $364,608
Cost of revenues...................... 3,685 135,095 40,145 -- 178,925
------- -------- ------- -------- --------
Gross profit........................ 38,603 122,107 24,973 -- 185,683
Marketing expenses.................... 8,815 35,381 8,660 -- 52,856
Selling, general and administrative
expenses............................ 23,715 17,794 7,403 -- 48,912
------- -------- ------- -------- --------
Operating income.................... 6,073 68,932 8,910 -- 83,915
Interest income....................... 615 5,096 10,938 (622) 16,027
Interest expense...................... 3,537 357 5,587 (622) 8,859
Other expense, (income) net........... 1,930 3,361 (43) -- 5,248
Equity in income of consolidated
subsidiaries........................ 37,310 -- -- (37,310) --
Franchise commission income (loss).... 8,697 (6,072) (2,625) -- --
------- -------- ------- -------- --------
Income before income taxes and
Minority interest................. 47,228 64,238 11,679 (37,310) 85,835
Provision for income taxes............ 7,944 22,860 5,556 -- 36,360
------- -------- ------- -------- --------
Income before minority Interest..... 39,284 41,378 6,123 (37,310) 49,475
Minority interest..................... -- 1,108 385 -- 1,493
------- -------- ------- -------- --------
Net income.......................... $39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $32,836 $300,215 $66,523 $ -- $399,574
Cost of revenues...................... 4,911 155,251 41,227 -- 201,389
------- -------- ------- -------- --------
Gross profit........................ 27,925 144,964 25,296 -- 198,185
Marketing expenses.................... 7,417 35,707 8,329 -- 51,453
Selling, general and administrative
expenses............................ 23,066 20,357 7,320 -- 50,743
Transaction costs..................... 8,247 98 -- -- 8,345
------- -------- ------- -------- --------
Operating (loss) income............. (10,805) 88,802 9,647 -- 87,644
Interest income....................... 1,462 1,864 2,466 -- 5,792
Interest expense...................... 29,104 6,471 1,296 -- 36,871
Other (income) expense, net........... (10,997) 151 495 -- (10,351)
Equity in income of consolidated
subsidiaries........................ 44,441 -- -- (44,441) --
Franchise commission income (loss).... 21,686 (18,500) (3,186) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 38,677 65,544 7,136 (44,441) 66,916
Provision for income taxes............ 918 24,090 3,315 -- 28,323
------- -------- ------- -------- --------
Income before minority interest..... 37,759 41,454 3,821 (44,441) 38,593
Minority interest..................... -- 834 -- -- 834
------- -------- ------- -------- --------
Net income.......................... $37,759 $ 40,620 $ 3,821 $(44,441) $ 37,759
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $20,794 $204,074 $48,307 $ -- $273,175
Cost of revenues...................... 4,571 105,444 29,268 -- 139,283
------- -------- ------- -------- --------
Gross profit........................ 16,223 98,630 19,039 -- 133,892
Marketing expenses.................... 2,784 18,994 5,208 -- 26,986
Selling, general and administrative
expenses............................ 14,826 11,708 5,688 -- 32,222
------- -------- ------- -------- --------
Operating (loss) income............. (1,387) 67,928 8,143 -- 74,684
Interest income....................... 1,642 1,209 268 -- 3,119
Interest expense...................... 26,338 13,849 57 -- 40,244
Other expense (income), net........... 16,545 (2) (7) -- 16,536
Equity in income of consolidated
subsidiaries........................ 26,621 -- -- (26,621) --
Franchise commission income (loss).... 20,144 (17,647) (2,497) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 4,137 37,643 5,864 (26,621) 21,023
(Benefit from) provision for income
taxes............................... (10,882) 14,558 2,181 -- 5,857
------- -------- ------- -------- --------
Income before minority interest..... 15,019 23,085 3,683 (26,621) 15,166
Minority interest..................... -- -- 147 -- 147
------- -------- ------- -------- --------
Net income.......................... $15,019 $ 23,085 $ 3,536 $(26,621) $ 15,019
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED APRIL 25, 1998
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Operating activities:
Net income......................... $ 18,088 $ 17,932 $ 4,588 $(16,837) $ 23,771
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization...... 2,390 5,764 621 -- 8,775
Deferred tax provision............. 1,628 10,463 3,472 -- 15,563
Allowance for doubtful accounts.... 66 (209) -- -- (143)
Reserve for inventory obsolescence,
other............................ -- (3,489) -- (3,489)
Other items, net................... (120) 139 396 -- 415
Change in cash due to:
Receivables...................... 380 (3,069) 341 -- (2,348)
Inventories...................... -- 982 (318) -- 664
Prepaid expense.................. (298) 2,091 120 -- 1,913
Due from related parties......... (5,092) 1,546 (5,064) -- (8,610)
Accounts payable................. (45) (3,024) 819 -- (2,250)
Accrued liabilities.............. (1,311) (5,849) 6,746 -- (414)
Deferred revenue................. -- 1,872 -- -- 1,872
Income taxes..................... 12,315 (10,428) (1,240) -- 647
-------- -------- ------- -------- --------
Cash provided by operating
activities..................... 28,001 14,721 10,481 (16,837) 36,366
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures............... (170) (2,539) (680) -- (3,389)
Acquisitions, net of cash
acquired......................... -- (1,007) (405) -- (1,412)
Other items, net................... (627) 521 (15) -- (121)
-------- -------- ------- -------- --------
Cash used for investing
activities..................... (797) (3,025) (1,100) -- (4,922)
-------- -------- ------- -------- --------
Financing activities:
Net decrease in short-term
borrowings....................... (1,250) (133) (791) -- (2,174)
Payment of dividends............... (5,949) (8,378) (1,145) 7,002 (8,470)
Payments on long-term debt......... 2,382 (3,750) -- -- (1,368)
Net Parent settlements............. (21,818) (42) (6,373) 9,603 (18,630)
-------- -------- ------- -------- --------
Cash used for financing
activities..................... (26,635) (12,303) (8,309) 16,605 (30,642)
-------- -------- ------- -------- --------
Effect of exchange rate changes on
cash and cash equivalents.......... (229) 689 (736) 232 (44)
Net increase in cash and cash
equivalents........................ 340 82 336 -- 758
Cash and cash equivalents, beginning
of year............................ (444) 5,718 5,797 -- 11,071
-------- -------- ------- -------- --------
Cash and cash equivalents, end of
year............................... $ (104) $ 5,800 $ 6,133 $ -- $ 11,829
======== ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED APRIL 24, 1999
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Operating activities:
Net income......................... $ 39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization...... 2,378 6,609 599 -- 9,586
Deferred tax provision............. 1,735 4,345 3,199 -- 9,279
Allowance for doubtful accounts.... (84) (30) (4) -- (118)
Reserve for inventory obsolescence,
other............................ -- 2,528 (3) 2,525
Other items, net................... -- 153 (115) -- 38
Changes in cash due to:
Receivables...................... (7,219) 1,378 (1,200) -- (7,041)
Inventories...................... -- (2,476) 25 -- (2,451)
Prepaid expense.................. (20) (1,141) (293) -- (1,454)
Due from related parties......... 38,317 (35,394) 770 -- 3,693
Accounts payable................. (288) 3,698 (327) -- 3,083
Accrued liabilities.............. 1,003 (2,572) (8,507) -- (10,076)
Deferred revenue................. -- (1,450) 734 -- (716)
Income taxes..................... (36,393) 38,362 1,602 -- 3,571
-------- -------- ------- -------- --------
Cash provided by operating
activities..................... 38,713 54,280 2,218 (37,310) 57,901
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures............... (271) (1,612) (591) -- (2,474)
Other items, net................... (278) (286) (1) -- (565)
-------- -------- ------- -------- --------
Cash used for investing
activities..................... (549) (1,898) (592) -- (3,039)
-------- -------- ------- -------- --------
Financing activities:
Net increase (decrease) in
short-term borrowings............ -- 1,262 (406) -- 856
Payment of dividends............... (5,435) (14,446) (3,670) 13,183 (10,368)
Payments on long-term debt......... (1,081) -- -- -- (1,081)
Net Parent (settlements)
advances......................... (31,483) (32,903) 3,316 23,994 (37,076)
-------- -------- ------- -------- --------
Cash (used for) provided by
financing activities........... (37,999) (46,087) (760) 37,177 (47,669)
-------- -------- ------- -------- --------
Effect of exchange rate changes on
cash and cash equivalents.......... (135) 281 214 133 493
Net increase in cash and cash
equivalents........................ 30 6,576 1,080 -- 7,686
Cash and cash equivalents, beginning
of year............................ (104) 5,800 6,133 -- 11,829
-------- -------- ------- -------- --------
Cash and cash equivalents, end of
year............................... $ (74) $ 12,376 $ 7,213 $ -- $ 19,515
======== ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
Operating activities:
Net income............................ $ 37,759 $ 40,620 $ 3,821 $(44,441) $ 37,759
Adjustments to reconcile net income to
cash provided by (used for)
operating activities:
Depreciation and amortization......... 3,438 6,028 932 -- 10,398
Deferred tax provision................ 3,785 4,685 71 -- 8,541
Allowance for doubtful accounts....... 352 29 4 -- 385
Reserve for inventory obsolescence,
other............................... -- (93) (28) -- (121)
Other items, net...................... -- (2,492) -- -- (2,492)
Changes in cash due to:
Receivables......................... 4,501 (1,353) 9,506 -- 12,654
Inventories......................... -- (2,028) 332 -- (1,696)
Prepaid expense..................... 108 (1,691) 782 -- (801)
Due from related parties............ (15,149) 384 -- -- (14,765)
Accounts payable.................... 807 (1,272) (1,047) -- (1,512)
Accrued liabilities................. 4,538 (1,845) 3,087 -- 5,780
Deferred revenue.................... (1,827) 74 (1,753)
Income taxes........................ 90,650 (97,918) 4,776 -- (2,492)
--------- -------- -------- -------- ---------
Cash provided by (used for)
operating activities.............. 130,789 (58,773) 22,310 (44,441) 49,885
--------- -------- -------- -------- ---------
Investing activities:
Capital expenditures.................. (299) (1,004) (571) -- (1,874)
Acquisitions, net of cash acquired.... -- -- -- -- --
Acquisitions of minority interest..... -- (15,900) -- -- (15,900)
Other items, net...................... (2,067) 116 84 -- (1,867)
--------- -------- -------- -------- ---------
Cash used for investing
activities........................ (2,366) (16,788) (487) -- (19,641)
--------- -------- -------- -------- ---------
Financing activities:
Net increase (decrease) in short-term
borrowings.......................... -- 1,235 (6,690) -- (5,455)
Parent company investment in
subsidiaries........................ (34,693) -- -- 34,693 --
Proceeds from borrowings.............. 404,260 87,000 -- -- 491,260
Repurchase of common stock............ (324,476) -- -- -- (324,476)
Payment of dividends.................. (2,797) (3,120) (4,494) 7,615 (2,796)
Payments on long-term debt............ (3,312) (218) -- -- (3,530)
Deferred financing costs.............. (15,861) -- -- -- (15,861)
Net Parent (settlements) advances..... (138,998) 14,552 (7,175) 591 (131,030)
--------- -------- -------- -------- ---------
Cash (used for) provided by
financing activities.............. (115,877) 99,449 (18,359) 42,899 8,112
--------- -------- -------- -------- ---------
Effect of exchange rate changes on cash
and cash equivalents.................. (1,488) (13,799) (83) 1,542 (13,828)
Net increase in cash and cash
equivalents........................... 11,058 10,089 3,381 -- 24,528
Cash and cash equivalents, beginning of
year.................................. (74) 12,376 7,213 -- 19,515
--------- -------- -------- -------- ---------
Cash and cash equivalents, end of
year.................................. $ 10,984 $ 22,465 $ 10,594 $ -- 44,043
========= ======== ======== ======== =========
|
The accompanying notes are an integral part of the consolidated financial statements
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Operating activities:
Net income.............................. $15,019 $ 23,085 $ 3,536 $(26,621) $ 15,019
Adjustments to reconcile net income to
cash provided by (used for) operating
activities:
Depreciation and amortization........... 3,212 4,266 411 -- 7,889
Deferred tax provision.................. -- 104 -- -- 104
Accounting for equity investment........ 17,604 -- -- -- 17,604
Elimination of foreign subsidiaries one
month reporting lag................... 1,137 86 1,120 (1,137) 1,206
Allowance for doubtful accounts......... -- (188) -- -- (188)
Reserve for inventory obsolescence,
other................................. -- (1,024) 49 -- (975)
Other items, net........................ -- (532) (422) -- (954)
Changes in cash due to:
Receivables........................... (7,946) (180) (84) -- (8,210)
Inventories........................... -- (3,046) (1,725) -- (4,771)
Prepaid expense....................... (213) (1,585) (957) -- (2,755)
Intercompany receivables/payables..... (21,193) 24,595 (3,402) -- --
Due from related parties.............. 241 -- -- -- 241
Accounts payable...................... (1,072) (69) 838 -- (303)
Accrued liabilities................... 9,362 (1,450) (1,015) -- 6,897
Deferred revenue...................... 0 858 185 -- 1,043
Income taxes.......................... 38,960 (41,643) (292) -- (2,975)
-------- -------- ------- -------- --------
Cash provided by (used for) operating
activities.......................... 55,111 3,277 (1,758) (27,758) 28,872
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures.................... (100) (3,017) (509) -- (3,626)
Advances and interest to equity
investment............................ (15,604) -- -- -- (15,604)
Acquisitions of minority interest....... (2,400) -- -- -- (2,400)
Other items, net........................ (148) 147 4 -- 3
-------- -------- ------- -------- --------
Cash used for investing activities.... (18,252) (2,870) (505) -- (21,627)
-------- -------- ------- -------- --------
Financing activities:
Net increase (decrease) in short-term
borrowings............................ 566 (600) -- -- (34)
Parent company investment in
subsidiaries.......................... (13,556) -- -- 13,556 --
Payment of dividends.................... (879) (8,834) (1,968) 10,802 (879)
Payments on long-term debt.............. (6,625) (435) -- -- (7,060)
Net Parent advances (settlements)....... -- -- 421 (421) --
-------- -------- ------- -------- --------
Cash used for financing activities.... (20,494) (9,869) (1,547) 23,937 (7,973)
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents.................... (650) (1,812) (173) 3,821 1,186
Net increase (decrease) in cash and cash
equivalents............................. 15,715 (11,274) (3,983) -- 458
Cash and cash equivalents, beginning of
period.................................. 10,984 22,465 10,594 -- 44,043
-------- -------- ------- -------- --------
Cash and cash equivalents, end of
period.................................. $26,699 $ 11,191 $ 6,611 $ -- $ 44,501
======== ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 30, 2000 AND JUNE 30, 2001
(IN THOUSANDS)
DECEMBER 30, JUNE 30,
2000 2001
------------ -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 44,501 $ 45,620
Receivables, net.......................................... 14,678 18,009
Notes receivable, current................................. 2,106 608
Inventories............................................... 15,044 12,389
Prepaid expenses, other................................... 17,111 11,743
--------- ---------
TOTAL CURRENT ASSETS.................................... 93,440 88,369
Property and equipment, net................................. 8,145 9,500
Notes and other receivables, noncurrent..................... 5,601 240
Goodwill, net............................................... 150,901 225,514
Trademarks and other intangible assets, net................. 6,648 7,066
Deferred income taxes....................................... 67,207 67,207
Deferred financing costs, other............................. 14,275 14,685
--------- ---------
TOTAL ASSETS............................................ $ 346,217 $ 412,581
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Portion of long-term debt due within one year............. $ 14,120 $ 16,157
Accounts payable.......................................... 11,989 8,784
Accrued liabilities....................................... 47,636 55,559
Income taxes.............................................. 3,660 19,861
Deferred revenue.......................................... 5,836 14,928
--------- ---------
TOTAL CURRENT LIABILITIES............................... 83,241 115,289
Long-term debt.............................................. 456,530 462,548
Deferred income taxes....................................... 3,107 3,040
Other....................................................... 121 890
--------- ---------
TOTAL LONG-TERM DEBT AND OTHER LIABILITIES.............. 459,758 466,478
Redeemable preferred stock.................................. 25,996 26,746
Common stock subject to a Put............................... -- 14,402
Shareholders' deficit (Note 21):
Common stock, par value $0 per share, 1,000,000
authorized, issued 111,988 shares at December 30, 2000
and June 30, 2001; outstanding 111,988 shares at
December 30, 2000 and 108,950 shares at June 30,
2001.................................................... -- --
Treasury stock, at cost, 3,038 shares at June 30, 2001.... -- (12,265)
Accumulated deficit....................................... (216,507) (182,378)
Accumulated other comprehensive loss...................... (6,271) (15,691)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT............................. (222,778) (210,334)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT................. $ 346,217 $ 412,581
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 29, 2000 AND JUNE 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
-------------------
JULY 29, JUNE 30,
2000 2001
-------- --------
(UNAUDITED)
Revenues, net............................................... $235,935 $334,276
Cost of revenues............................................ 111,158 149,144
-------- --------
Gross profit.............................................. 124,777 185,132
Marketing expenses.......................................... 25,290 40,569
Selling, general and administrative expenses................ 28,747 35,481
-------- --------
Operating income.......................................... 70,740 109,082
Interest expense, net....................................... 29,018 27,368
Other (income), expenses net................................ (6,594) 3,871
-------- --------
Income before income taxes and minority interest.......... 48,316 77,843
Provision for income taxes.................................. 16,872 28,457
-------- --------
Income before minority interest........................... 31,444 49,386
Minority interest........................................... 226 70
-------- --------
Net income................................................ $ 31,218 $ 49,316
======== ========
Preferred stock dividends................................... $ 750 $ 750
-------- --------
Net income available to common shareholders............... $ 30,468 $ 48,566
======== ========
Net income per share:
Basic..................................................... $ 0.27 $ 0.44
======== ========
Diluted................................................... $ 0.27 $ 0.43
======== ========
Weighted average common shares outstanding:
Basic..................................................... 111,988 110,967
======== ========
Diluted................................................... 111,988 112,176
======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT,
PARENT COMPANY INVESTMENT AND COMPREHENSIVE INCOME
FOR THE FISCAL YEAR ENDED APRIL 29, 2000, THE EIGHT MONTHS ENDED
DECEMBER 30, 2000, AND THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
COMMON TREASURY ACCUMULATED
STOCK STOCK ADDITIONAL OTHER
-------------------- ------------------- PAID IN COMPREHENSIVE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS DEFICIT
--------- -------- -------- -------- ---------- ------------- -----------
Balance at April 24, 1999............. 276,430
Net Parent settlements..................
Recapitalization and settlement of
Parent Company investment............. (164,442) (72,100) (12,764) (268,547)
Deferred tax asset...................... 72,100
Comprehensive Income:
Net income............................ 37,759
Translation adjustment................ 10,311
Total Comprehensive Income............
Preferred stock dividend................ (875)
--------- ------ ----- -------- -------- -------- ---------
Balance at April 29, 2000............. 111,988 $ -- -- $ -- $ -- $ (2,453) $(231,663)
Elimination of foreign subsidiaries one
month reporting lag effective April
30, 2000.............................. 1,137
Comprehensive income:
Net Income............................ 15,019
Translation adjustment................ (3,818)
Total Comprehensive Income............
Preferred stock dividend................ (1,000)
--------- ------ ----- -------- -------- -------- ---------
Balance at December 30, 2000.......... 111,988 $ -- -- $ -- $ -- $ (6,271) $(216,507)
Comprehensive Income:
Net Income............................ 49,316
Foreign currency translation
adjustment.......................... (3,854)
Change in fair value of derivatives
accounted for as hedges............. (5,566)
Total Comprehensive Income............
Preferred Stock Dividend................ (750)
Transfer of common stock to common stock
subject to a Put...................... (14,402)
Purchase of Treasury Stock.............. 3,153 (12,730) -- --
Sale of Treasury Stock.................. (115) 465 -- (35)
--------- ------ ----- -------- -------- -------- ---------
Balance at June 30, 2001.............. 111,988 $ -- 3,038 $(12,265) $ -- $(15,691) $(182,378)
========= ====== ===== ======== ======== ======== =========
PARENT
COMPANY'S
INVESTMENT TOTAL
---------- ---------
Balance at April 24, 1999............. $ 248,948 $ 248,948
Net Parent settlements.................. (252,883) (252,883)
Recapitalization and settlement of
Parent Company investment............. 3,935 (349,476)
Deferred tax asset...................... 72,100
Comprehensive Income:
Net income............................ 37,759
Translation adjustment................ 10,311
---------
Total Comprehensive Income............ 48,070
---------
Preferred stock dividend................ (875)
--------- ---------
Balance at April 29, 2000............. $ -- $(234,116)
Elimination of foreign subsidiaries one
month reporting lag effective April
30, 2000.............................. 1,137
Comprehensive income:
Net Income............................ 15,019
Translation adjustment................ (3,818)
---------
Total Comprehensive Income............ 11,201
---------
Preferred stock dividend................ (1,000)
--------- ---------
Balance at December 30, 2000.......... $ -- $(222,778)
Comprehensive Income:
Net Income............................ 49,316
Foreign currency translation
adjustment.......................... (3,854)
Change in fair value of derivatives
accounted for as hedges............. (5,566)
---------
Total Comprehensive Income............ 39,896
---------
Preferred Stock Dividend................ (750)
Transfer of common stock to common stock
subject to a Put...................... (14,402)
Purchase of Treasury Stock.............. (12,730)
Sale of Treasury Stock.................. 430
--------- ---------
Balance at June 30, 2001.............. $ -- $(210,334)
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 29, 2000 AND JUNE 30, 2001
(IN THOUSANDS)
SIX MONTHS ENDED
-------------------
JULY 29, JUNE 30,
2000 2001
-------- --------
(UNAUDITED)
Cash provided by operating activities....................... $39,570 $ 92,869
------- --------
Investing activities:
Capital expenditures...................................... (1,314) (1,187)
Advances to equity investment............................. (4,800) (7,844)
Acquisition............................................... -- (84,353)
Other items, net.......................................... (2,839) (1,532)
------- --------
Cash used for investing activities...................... (8,953) (94,916)
------- --------
Financing activities:
Net decrease in short-term borrowings..................... (1,200) (257)
Proceeds from borrowings.................................. -- 60,000
Payments of long-term debt................................ (7,060) (42,735)
Deferred financing costs.................................. (165) --
Net Parent advances....................................... 2,171 --
Purchase of treasury stock................................ -- (12,730)
Proceeds from issuance of treasury stock.................. -- 430
------- --------
Cash (used for) provided by financing activities........ (6,254) 4,708
------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... (2,523) (1,542)
Net increase in cash and cash equivalents................... 21,840 1,119
Cash and cash equivalents, beginning of period.............. 34,446 44,501
------- --------
Cash and cash equivalents, end of period.................... $56,286 $ 45,620
======= ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. GENERAL
The accompanying consolidated financial statements include the accounts of Weight Watchers International, Inc. and Subsidiaries (the "Company"). The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts that are based on management's best estimates and judgments. While all available information has been considered, actual amounts could differ from those estimates. The consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. This report should be read in conjunction with the Company's Form 10K for the eight months ended December 30, 2000.
2. CHANGE IN FISCAL YEAR
The Company changed its fiscal year end from the last Saturday of April, to the Saturday closest to December 31st effective with the eight month period commencing April 30, 2000.
In the prior periods, in order to facilitate timely reporting, certain foreign subsidiaries ended their fiscal period one month prior to the Company's fiscal period with no material impact on the consolidated financial statements. Effective April 30, 2000, the one month lag has been eliminated.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 and 142, "Business Combinations" ("SFAS 141") and "Goodwill and Other Intangible Assets" ("SFAS 142"), respectively. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for by the purchase method of accounting. SFAS 142 specifies that goodwill and indefinite lived intangible assets will no longer be amortized but instead will be subject to annual impairment testing. The Company will adopt SFAS 142 on December 30, 2001. The Company is currently evaluating the effect that implementation of the new standards will have on its financial position, results of operations and cash flows.
4. ACQUISITION
On January 16, 2001, the Company completed the acquisition of Weight Watchers' franchised territories and certain business assets of Weighco Enterprises, Inc., Weighco of Northeast, Inc., and Weighco of Southwest, Inc. ("Weighco"), for an aggregate purchase price of approximately $83.8 million plus acquisition costs of approximately $0.6 million. The acquisition was financed through additional borrowings of $60.0 million obtained pursuant to the Company's Amended and Restated Credit Agreement, dated January 16, 2001, and cash from operations.
The acquisition has been accounted for under the purchase method of accounting and, accordingly, the results of operations are included in the financial statements from the date of the acquisition. Assets acquired include inventory ($2.0 million) and property and equipment ($1.8 million). The excess of investment over the net book value of assets acquired at the date of acquisition resulted in goodwill of $80.6 million which will be amortized over 20 years.
The following table presents unaudited pro forma financial information that reflects the consolidated results of operations of the Company and Weighco as if the acquisition had occurred as of the beginning of the respective periods. This pro forma information does not necessarily reflect the
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. ACQUISITION (CONTINUED) actual results that would have occurred, nor is it necessarily indicative of future results of operations of the consolidated companies.
PRO FORMA
----------------
SIX MONTHS ENDED
JULY 29, 2000
----------------
Revenues.................................................... $261,323
Net income.................................................. $ 34,477
|
5. RECAPITALIZATION
On September 29, 1999, the Company entered into a recapitalization and stock purchase agreement (the "Transaction") with its former parent, H.J. Heinz Company ("Heinz"). In connection with the Transaction, the Company effectuated a stock split of 58,747.6 shares for each share outstanding. The Company then redeemed 276.43 million shares of common stock from Heinz for $349.5 million. The number of shares of the Company's common stock that was authorized and outstanding prior to the Transaction has been adjusted to reflect the stock split. The $349.5 million consisted of $324.5 million of cash and $25.0 million of the Company's redeemable Series A Preferred Stock. After the redemption, Artal Luxembourg S.A. purchased 94% of the Company's remaining common stock from Heinz for $223.7 million. The recapitalization and stock purchase was financed through borrowings under credit facilities amounting to approximately $237.0 million and by issuing Senior Subordinated Notes amounting to $255.0 million, due 2009. The balance of the borrowings was utilized to refinance debt incurred prior to the Transaction relating to the transfer of ownership and acquisition of the minority interest in the Weight Watchers businesses that operate in Australia and New Zealand. The acquisition of the minority interest resulted in approximately $15.9 million of goodwill. In connection with the Transaction, the Company incurred approximately $8.3 million in transaction costs and $15.9 million in deferred financing costs. For U.S. Federal and State tax purposes, the Transaction is being treated as a taxable sale under Section 338(h)(10) of the Internal Revenue Code of 1986 as amended. As a result, for tax purposes, the Company recorded a step-up in the tax basis of net assets. For financial reporting purposes, a valuation allowance of approximately $72.1 million was established against the corresponding deferred tax asset of $144.2 million. Management concluded, more likely than not, that the valuation allowance would not be utilized to reduce future tax payments. The Company will continue to monitor the need to maintain the valuation allowance in the future periods.
6. EARNINGS PER SHARE
Basic earnings per share ("EPS") computations are calculated utilizing the weighted average number of common shares outstanding during the periods presented. Diluted EPS includes the
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. EARNINGS PER SHARE (CONTINUED) weighted average number of common shares outstanding and the effect of common stock equivalents. The following table sets forth the computation of basic and diluted EPS:
SIX MONTHS ENDED
---------------------
JULY 29, JUNE 30,
2000 2001
--------- ---------
Numerator:
Net income.............................................. $31,218 $49,316
Preferred stock dividends............................... 750 750
------- -------
Numerator for basic EPS-income available to common
shareholders........................................ $30,468 $48,566
------- -------
Numerator for diluted EPS-income available to common
shareholders........................................ $30,468 $48,566
------- -------
Denominator:
Denominator for basic EPS-weighted-average shares..... 111,988 110,967
Effect of dilutive securities:
Stock options....................................... -- 1,209
------- -------
Denominator for diluted EPS-adjusted weighted-average
shares 111,988 112,176
======= =======
EPS:
Basic EPS............................................... $ 0.27 $ 0.44
======= =======
Diluted EPS............................................. $ 0.27 $ 0.43
======= =======
|
7. TREASURY STOCK
On April 18, 2001, the Company entered into a Put/Call Agreement with Heinz. Under this agreement, Heinz has an option to sell and we have an option to purchase all of our common stock currently owned by Heinz. Heinz sold to the Company 3,152,591 shares ($12.7 million) on April 30, 2001. As of June 30, 2001, 3,566,663 shares of our common stock were still held by Heinz.
The Company expects that it will fund any future repurchases of its common stock held by Heinz with cash from operations.
8. COMPREHENSIVE INCOME
Comprehensive income for the Company includes net income, the effects of foreign currency translation and changes in fair value of derivative instruments.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMPREHENSIVE INCOME (CONTINUED) Comprehensive income is as follows:
SIX MONTHS ENDED
-----------------------
JULY 29, JUNE 30,
2000 2001
---------- ----------
Net income.................................................. $31,218 $49,316
Foreign currency translation adjustment..................... (2,974) (3,854)
Change in fair value of derivatives
Cumulative effect of the adoption of SFAS 133............. -- (5,086)
Current period changes in fair value of derivatives....... -- (480)
------- -------
Comprehensive income........................................ $28,244 $39,896
======= =======
|
9. LONG-TERM DEBT
In connection with the Transaction, the Company entered into a credit facility ("Credit Facility") with The Bank of Nova Scotia, Credit Suisse First Boston and certain other lenders providing (i) a $75.0 million term loan A facility ("Term Loan A"), (ii) a $75.0 million term loan B facility ("Term Loan B"), (iii) an $87.0 million transferable loan certificate ("TLC") and (iv) a revolving credit facility with borrowings up to $30.0 million ("Revolving Credit Facility"). The Credit Facility was amended and restated on January 16, 2001 to provide for an additional $50 million in borrowings in connection with the acquisition of Weighco (see Note 4) as follows: (i) Term Loan A was increased by $15.0 million, (ii) the Revolving Credit Facility was increased by $15.0 million to $45.0 million and (iii) a new $20.0 million term loan D facility ("Term Loan D"). Borrowings under the Credit Facility are paid quarterly and initially bear interest at a rate equal to LIBOR plus (a) in the case of Term Loan A and the Revolving Credit Facility, 3.25% or, at the Company's option, the alternate base rate, as defined, plus 2.25%, (b) in the case of Term Loan B and the TLC, 4.00% or, at the Company's option, the alternate base rate plus 3.00% and (c) in the case of Term Loan D, 3.25% or, at the Company's option, the alternate base rate plus 2.25%. At June 30, 2001, the interest rates were 7.58% for Term Loan A, 8.80% for Term Loan B, 8.02% for the TLC and 8.7% for Term Loan D. All assets of the Company collateralize the Credit Facility.
In addition, as part of the Transaction, the Company issued $150.0 million USD denominated and 100.0 million EUR denominated principal amount of 13% Senior Subordinated Notes due 2009 (the "Notes") to qualified institutional buyers. At June 30, 2001, the 100.0 million EUR notes translated into $85.0 million USD denominated equivalent. The impact of the change in foreign exchange rates related to euro denominated debt are reflected in the income statement. Interest is payable on the Notes semi-annually on April 1 and October 1 of each year, commencing April 1, 2000. The Company uses interest rate swaps and foreign currency forward contracts in association with its debt. The Notes are uncollateralized senior subordinated obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company, including the Credit Facility. The notes are guaranteed by certain subsidiaries of the Company.
The Credit Facility contains a number of covenants that, among other things, restrict the Company's ability to dispose of assets, incur additional indebtedness, or engage in certain transactions with affiliates and otherwise restrict the Company's corporate activities. In addition, under the Credit
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. LONG-TERM DEBT (CONTINUED) Facility, the Company is required to comply with specified financial ratios and tests, including minimum fixed charge coverage and interest coverage ratios and maximum leverage ratios.
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Effective December 31, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," and its related amendment, Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("SFAS 133"). These standards require that all derivative financial instruments be recorded on the consolidated balance sheets at their fair value as either assets or liabilities. Changes in the fair value of derivatives will be recorded each period in earnings or accumulated other comprehensive loss, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive loss will be included in earnings in the periods in which earnings are affected by the hedged item. As of December 31, 2000, the adoption of these new standards resulted in an adjustment of $5.1 million to accumulated other comprehensive loss.
The Company enters into forward and swap contracts to hedge certain transactions denominated in foreign currencies in order to reduce the currency risk associated with fluctuating exchange rates. Such contracts are used primarily to hedge certain intercompany cash flows and for payments arising from certain foreign denominated obligations. In addition, the Company enters into interest rate swaps to hedge a substantial portion of its variable rate debt which are accounted for as cash flow hedges.
As of June 30, 2001, losses of $0.5 million for effective hedges, were reported as a component of accumulated other comprehensive loss. For the six months ended June 30, 2001, ineffectiveness related to cash flow hedges was not material. In addition, fair value adjustments for non-qualifying hedges resulted in a reduction of net income of $1.2 million, for the six months ended June 30, 2001. The Company does not anticipate any reclassification to earnings from accumulated other comprehensive loss within the next twelve months.
11. WEIGHTWATCHERS.COM NOTE AND WARRANT AGREEMENTS
On May 3, 2001, the Company amended and restated its loan agreement with WeightWatchers.com increasing the aggregate principal amount from $23.5 million to $28.5 million. The principal amount may be advanced at any time or from time to time prior to July 31, 2003. The note bears interest at 13% per year. All principal and interest outstanding under the note is payable on September 30, 2003. The note may be prepaid at any time in whole or in part, without premium or penalty. During the three month and six month period ended June 30, 2001, the Company advanced WeightWatchers.com $2.6 million and $7.8 million, respectively, pursuant to the note. In addition to the advance, $0.7 million and $1.9 million, respectively, of interest, were classified in other expenses, net during the three month and six month period ended June 30, 2001. At June 30, 2001 the balance outstanding under the loan agreement was $25.0 million.
Under Warrant Agreements dated November 24, 1999, October 1, 2000 and May 3, 2001, each agreement entered into between WeightWatchers.com and the Company, the Company received warrants to purchase 5,861,664 shares of WeightWatchers.com's common stock in connection with the
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. WEIGHTWATCHERS.COM NOTE AND WARRANT AGREEMENTS (CONTINUED) loans that the Company has made to WeightWatchers.com under the WeightWatchers.com Note described above. These warrants will expire on November 24, 2009, October 1, 2010 and May 2, 2011, respectively and may be exercised at a price of $7.14 per warrant share. The exercise price and the number of shares of WeightWatchers.com's common stock available for purchase upon exercise of the warrants may be adjusted from time to time upon the occurrence of certain described events.
12. LEGAL
The Company is not a party to any material pending legal proceedings. The Company has had and continues to have disputes with the Company's franchisees regarding, among other things, operations and revenue sharing, including the interpretation of franchise territories as they relate to the internet and mail-order products. In addition, due to the nature of its activities, the Company is, at times, subject to pending and threatened legal actions that arise out of the normal course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of all such matters will not have a material effect on the consolidated results of operations, cash flows or financial position of the Company.
13. INCOME TAXES
As a result of the Transaction, the Company has provided for a valuation allowance for its deferred tax assets. The determination of the net deferred tax assets deemed realizable was based on available historical evidence, and estimates of future taxable income. This amount may be subject to adjustment based on changes to those factors in future periods.
The primary differences between the U.S. federal statutory tax rate and the Company's effective tax rate are the valuation allowance and state income taxes. The effective tax rate for the three month and six month period ended June 30, 2001 were 38.9% and 36.6%, respectively.
14. STOCK SPLIT
On October 26, 2001, the Company's Board of Directors declared a 4.70536-for-one stock split to be effective concurrent with the effective date of the registration statement filed by the Company in connection with its initial public offering. In addition, the Company's Articles of Incorporation was amended to authorize the issuance of up to one billion shares of common stock, no par value, upon filing of the registration statement.
All common share and per share amounts have been retroactively restated to account for the stock split. In addition, stock options and the respective exercise prices have been amended to reflect this split.
15. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several basis by the following wholly-owned subsidiaries: 58 WW Food Corp.; Waist Watchers, Inc.; Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.;
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. GUARANTOR SUBSIDIARIES (CONTINUED)
Weight Watchers UK Holdings Ltd.; Weight Watchers International Holdings Ltd.; Weight Watchers (U.K.) Limited; Weight Watchers (Exercise) Ltd.; Weight Watchers (Accessories & Publication) Ltd.; Weight Watchers (Food Products) Limited; Weight Watchers New Zealand Limited; Weight Watchers International Pty Limited; Fortuity Pty Ltd.; and Gutbusters Pty Ltd. (collectively, the "Guarantor Subsidiaries"). The obligations of each Guarantor Subsidiary under its guarantee of the Notes are subordinated to such subsidiary's obligations under its guarantee of the new senior credit facility.
Presented below is condensed consolidating financial information for Weight Watchers International, Inc. ("Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries (primarily companies incorporated in European countries other than the United Kingdom). In the Company's opinion, separate financial statements and other disclosures concerning each of the Guarantor Subsidiaries would not provide additional information that is material to investors. Therefore, the Guarantor Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Parent Company on the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Parent Company's investments in subsidiaries' accounts. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
16. SUBSEQUENT EVENT
Subsequent to June 30, 2001, the Company repurchased 3,566,663 shares of its common stock from Heinz for an aggregate purchase price of $14.4 million. This repurchase was funded with cash from operations.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 26,699 $ 11,191 $ 6,611 $ -- $ 44,501
Receivables, net.............................. 7,390 5,941 1,347 -- 14,678
Notes receivable, current..................... 2,104 -- 2 -- 2,106
Inventories................................... -- 11,867 3,177 -- 15,044
Prepaid expenses, other....................... 9,171 5,611 2,329 -- 17,111
Intercompany (payables) receivables........... (10,921) 3,147 7,774 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS........................ 34,443 37,757 21,240 -- 93,440
Investment in consolidated subsidiaries......... 175,876 -- -- (175,876) --
Property and equipment, net..................... 1,272 5,679 1,194 -- 8,145
Notes and other receivables, noncurrent......... 5,601 -- -- -- 5,601
Goodwill, net................................... 28,367 121,814 720 -- 150,901
Trademarks and other intangible assets, net..... 1,876 4,761 11 -- 6,648
Deferred income taxes........................... (44,713) 111,920 -- -- 67,207
Deferred financing costs, other................. 13,676 271 328 -- 14,275
--------- -------- ------- --------- ---------
TOTAL ASSETS................................ $ 216,398 $282,202 $23,493 $(175,876) $ 346,217
========= ======== ======= ========= =========
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES
Portion of long-term debt due within one
year........................................ $ 13,250 $ 870 $ -- $ -- $ 14,120
Accounts payable.............................. 932 8,379 2,678 -- 11,989
Accrued liabilities........................... 23,787 17,151 6,698 -- 47,636
Income taxes.................................. 1,677 (414) 2,397 -- 3,660
Deferred revenue.............................. -- 4,843 993 -- 5,836
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES................... 39,646 30,829 12,766 -- 83,241
Long-term debt................................ 371,053 85,477 -- -- 456,530
Deferred income taxes......................... 2,481 -- 626 -- 3,107
Other......................................... -- -- 121 -- 121
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES............................... 373,534 85,477 747 -- 459,758
Redeemable preferred stock.................... 25,996 -- -- -- 25,996
Shareholders' (deficit) equity................ (222,778) 165,896 9,980 (175,876) (222,778)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY.......................... $ 216,398 $282,202 $23,493 $(175,876) 346,217
========= ======== ======= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 12,306 $ 19,521 $13,793 $ -- $ 45,620
Receivables, net.............................. 4,960 11,650 1,399 -- 18,009
Notes receivable, current..................... 606 -- 2 -- 608
Inventories................................... -- 9,397 2,992 -- 12,389
Prepaid expenses, other....................... 419 9,593 1,731 -- 11,743
Intercompany receivables (payables)........... 24,074 (31,880) 7,806 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS........................ 42,365 18,281 27,723 -- 88,369
Investment in consolidated subsidiaries......... 213,923 -- -- (213,923) --
Property and equipment, net..................... 1,164 7,267 1,069 -- 9,500
Notes and other receivables, noncurrent......... 240 -- -- -- 240
Goodwill, net................................... 27,568 197,308 638 -- 225,514
Trademarks and other intangible assets, net..... 837 6,216 13 -- 7,066
Deferred income taxes........................... (44,713) 111,920 -- -- 67,207
Deferred financing costs, other................. 13,876 97 712 -- 14,685
--------- -------- ------- --------- ---------
TOTAL ASSETS................................ $ 255,260 $341,089 $30,155 $(213,923) $ 412,581
========= ======== ======= ========= =========
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES
Portion of long-term debt due within one
year........................................ $ 15,321 $ 836 $ -- $ -- $ 16,157
Accounts payable.............................. 492 6,437 1,855 -- 8,784
Accrued liabilities........................... 28,033 20,076 7,450 -- 55,559
Income taxes.................................. (2,739) 19,073 3,527 -- 19,861
Deferred revenue.............................. -- 13,723 1,205 -- 14,928
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES................... 41,107 60,145 14,037 -- 115,289
Long-term debt................................ 380,858 81,690 -- -- 462,548
Deferred income taxes......................... 2,481 -- 559 -- 3,040
Other......................................... -- 775 115 -- 890
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES............................... 383,339 82,465 674 -- 466,478
Redeemable preferred stock.................... 26,746 -- -- -- 26,746
Common stock subject to a Put................. 14,402 -- -- -- 14,402
Shareholders' (deficit) equity................ (210,334) 198,479 15,444 (213,923) (210,334)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY.......................... $ 255,260 $341,089 $30,155 $(213,923) $ 412,581
========= ======== ======= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $17,649 $183,716 $34,570 $ -- $235,935
Cost of revenues...................... 2,375 87,957 20,826 -- 111,158
------- -------- ------- -------- --------
Gross profit........................ 15,274 95,759 13,744 -- 124,777
Marketing expenses.................... 1,903 20,031 3,356 -- 25,290
Selling, general and administrative
expenses............................ 15,023 10,052 3,672 -- 28,747
------- -------- ------- -------- --------
Operating (loss) income............. (1,652) 65,676 6,716 -- 70,740
Interest expense (income), net........ 21,191 7,914 (87) -- 29,018
Other (income) expenses, net.......... (6,129) (484) 19 -- (6,594)
Equity in income of consolidated
subsidiaries........................ 27,390 -- -- (27,390) --
Franchise commission income (loss).... 17,100 (15,126) (1,974) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 27,776 43,120 4,810 (27,390) 48,316
(Benefit from) provision for income
taxes............................... (3,442) 18,381 1,933 -- 16,872
------- -------- ------- -------- --------
Income before minority interest..... 31,218 24,739 2,877 (27,390) 31,444
Minority interest..................... -- -- 226 -- 226
------- -------- ------- -------- --------
Net income.......................... $31,218 $ 24,739 $ 2,651 $(27,390) $ 31,218
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $ 2,830 $277,354 $54,092 $ -- $334,276
Cost of revenues...................... 563 119,883 28,698 -- 149,144
------- -------- ------- -------- --------
Gross profit........................ 2,267 157,471 25,394 -- 185,132
Marketing expenses.................... -- 33,769 6,800 -- 40,569
Selling, general and administrative
expenses............................ 9,669 20,929 4,883 -- 35,481
------- -------- ------- -------- --------
Operating (loss) income............. (7,402) 102,773 13,711 -- 109,082
Interest expense (income), net........ 18,919 8,809 (360) -- 27,368
Other expenses, net................... 1,178 2,677 16 -- 3,871
Equity in income of consolidated
subsidiaries........................ 53,193 -- -- (53,193) --
Franchise commission income (loss).... 26,336 (22,957) (3,379) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 52,030 68,330 10,676 (53,193) 77,843
Provision for income taxes............ 2,714 21,851 3,892 -- 28,457
------- -------- ------- -------- --------
Income before minority interest..... 49,316 46,479 6,784 (53,193) 49,386
Minority interest..................... -- -- 70 -- 70
------- -------- ------- -------- --------
Net income.......................... $49,316 $ 46,479 $ 6,714 $(53,193) $ 49,316
======= ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS JULY 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Cash provided by (used for) operating
activities............................ $ 54,914 $12,104 $ 1,079 $(28,527) $39,570
-------- ------- ------- -------- -------
Investing activities:
Capital expenditures.................. (235) (744) (335) -- (1,314)
Advances to equity investment......... (4,800) -- -- -- (4,800)
Other items, net...................... (2,143) (740) 44 -- (2,839)
-------- ------- ------- -------- -------
Cash (used for) provided by
investing activities.............. (7,178) (1,484) (291) -- (8,953)
-------- ------- ------- -------- -------
Financing activities:
Net increase (decrease) in short-term
borrowings.......................... 196 (1,396) -- -- (1,200)
Parent company investment in
subsidiaries........................ (25,208) -- -- 25,208 --
Proceeds from borrowings.............. -- -- -- -- --
Payment of dividends.................. -- -- (1,603) 1,603 --
Payments on long-term debt............ (6,625) (435) -- -- (7,060)
Deferred financing costs.............. (165) -- -- -- (165)
Net Parent (settlements) advances..... 2,177 -- 1,217 (1,223) 2,171
-------- ------- ------- -------- -------
Cash (used for) provided by
financing activities.............. (29,625) (1,831) (386) 25,588 (6,254)
-------- ------- ------- -------- -------
Effect of exchange rate changes on cash
and cash equivalents.................. (2,903) (1,686) (873) 2,939 (2,523)
Net increase (decrease) in cash and cash
equivalents........................... 15,208 7,103 (471) -- 21,840
Cash and cash equivalents, beginning of
year.................................. 3,880 21,847 8,719 -- 34,446
-------- ------- ------- -------- -------
Cash and cash equivalents, end of
year.................................. $ 19,088 $28,950 $ 8,248 $ -- $56,286
======== ======= ======= ======== =======
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Cash provided by operating activities... $ 27,388 $110,293 $ 8,381 $(53,193) $ 92,869
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures.................. (51) (867) (269) -- (1,187)
Advances to equity investment......... (7,844) -- -- -- (7,844)
Acquisition........................... -- (84,353) -- -- (84,353)
Other items, net...................... (406) (1,041) (85) -- (1,532)
-------- -------- ------- -------- --------
Cash used for investing activities.... (8,301) (86,261) (354) -- (94,916)
-------- -------- ------- -------- --------
Financing activities:
Net (decrease) increase in short-term
borrowings.......................... (566) 309 -- -- (257)
Parent company investment in
subsidiaries........................ (38,047) -- -- 38,047 --
Proceeds from borrowings.............. 60,000 -- -- -- 60,000
Payment of dividends.................. -- (11,585) -- 11,585 --
Payments on long-term debt............ (38,913) (3,822) -- -- (42,735)
Net parent settlements................ -- -- 330 (330) --
Payments to acquire treasury stock.... (12,730) -- -- -- (12,730)
Proceeds from issuance of treasury
stock............................... 430 -- -- -- 430
-------- -------- ------- -------- --------
Cash (used for) provided by financing
activities.......................... (29,826) (15,098) 330 49,302 4,708
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents.................. (3,654) (604) (1,175) 3,891 (1,542)
Net (decrease) increase in cash and cash
equivalents........................... (14,393) 8,330 7,182 -- 1,119
Cash and cash equivalents, beginning of
period................................ 26,699 11,191 6,611 -- 44,501
-------- -------- ------- -------- --------
Cash and cash equivalents, end of
period................................ $ 12,306 $ 19,521 $13,793 $ -- $ 45,620
======== ======== ======= ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Weight Watchers International, Incorporated
In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of operations, changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Weighco Enterprises, Incorporated and Subsidiaries (the "Company") at December 30, 2000, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
On December 11, 2000, the Company entered into an Asset Purchase Agreement with Weight Watchers International, Incorporated ("WWI"), under which WWI was to acquire substantially all of the assets of the Company. The acquisition was completed on January 16, 2001 and is more fully described in Note 15 to the consolidated financial statements.
PricewaterhouseCoopers, LLP
March 3, 2001
Charlotte, NC
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 30, 2000
ASSETS
Current assets
Cash...................................................... $ 6,172,489
Accounts receivable....................................... 25,226
Inventories............................................... 2,139,007
Prepaid member materials.................................. 476,619
Prepaid consulting and other expenses..................... 492,996
-----------
Total current assets.................................... 9,306,337
-----------
Property and equipment, net................................. 1,553,703
-----------
Other assets:
Cash surrender value--life insurance...................... 511,319
Intangible assets, net.................................... 35,647,444
Other non-current assets.................................. 196,254
-----------
Total other assets...................................... 36,355,017
-----------
Total assets............................................ $47,215,057
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable--current portion............................ $ 4,080,000
Accounts payable.......................................... 2,156,604
Accrued expenses.......................................... 6,456,142
Interest payable.......................................... 345,434
Deferred income........................................... 2,694,820
Deferred compensation..................................... 1,000,000
-----------
Total current liabilities............................... 16,733,000
-----------
Long-term liabilities:
Notes payable--net of current portion..................... 21,203,345
-----------
Shareholders' equity:
Common stock--$.331/3 par value, 30,000 shares authorized;
shares issued and 16,783 outstanding.................... 5,593
Additional paid-in capital................................ 3,107,941
Treasury stock--at cost, 2,189 shares..................... (2,189)
Retained earnings......................................... 6,167,367
-----------
Total shareholders' equity.............................. 9,278,712
-----------
Total liabilities and shareholders' equity.............. $47,215,057
===========
|
The accompanying notes are an integral part of these consolidated financial statements.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 30, 2000
REVENUES:
Meeting income............................................ $51,661,934
Product sales............................................. 8,027,742
-----------
Total revenue........................................... 59,689,676
-----------
COST OF REVENUE:
Meeting and facility expenses............................. 20,579,961
Cost of products sold..................................... 3,889,031
Franchise royalty fees.................................... 5,959,779
-----------
Total cost of revenue................................... 30,428,771
-----------
Gross profit............................................ 29,260,905
OPERATING EXPENSES:
General and administrative expenses....................... 5,934,717
Marketing expense......................................... 4,114,108
Management and incentive compensation (Note 13)........... 3,786,749
Amortization expense...................................... 3,307,040
Acquisition related expenses (Note 15).................... 8,929,493
-----------
Income from operations.................................. 3,188,798
-----------
Other income (expense):
Interest income........................................... 238,858
Interest expense.......................................... (2,430,107)
Loss on sale of franchise................................. (226,945)
Other..................................................... (24,154)
-----------
Total other expense..................................... (2,442,348)
-----------
Net income.............................................. $ 746,450
===========
|
The accompanying notes are an integral part of these consolidated financial statements.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 30, 2000
OPERATING ACTIVITIES:
Net income................................................ $ 746,450
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................. 6,847,022
Loss from sale of franchise............................... 226,945
Changes in:
Accounts receivable..................................... 6,313
Prepaid member materials and expenses................... (249,376)
Inventories............................................. (695,099)
Other non-current assets................................ (168,986)
Accounts payable and accrued expenses................... 4,175,075
Deferred compensation and revenue....................... 1,435,243
-----------
Net cash provided by operating activities................. 12,323,587
-----------
INVESTING ACTIVITIES:
Acquisition of franchises................................. (7,262,815)
Purchase of property and equipment........................ (793,316)
Proceeds from sale of franchise........................... 365,000
-----------
Net cash used by investing activities..................... (7,691,131)
-----------
FINANCING ACTIVITIES:
Shareholder distributions................................. (2,064,426)
Repayment of borrowings and line of credit................ (6,026,914)
Proceeds from borrowings and line of credit............... 3,976,462
Proceeds from common shares issued........................ 153,534
-----------
Net cash used by financing activities....................... (3,961,344)
-----------
Net increase in cash........................................ 671,112
Cash, beginning of year..................................... 5,501,377
-----------
Cash, end of year........................................... $ 6,172,489
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 2,227,423
===========
Cash paid for franchise taxes............................... $ 120,039
===========
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The accompanying notes are an integral part of these consolidated financial statements.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 30, 2000
ADDITIONAL TOTAL
COMMON COMMON PAID-IN TREASURY RETAINED SHAREHOLDERS'
SHARES STOCK CAPITAL STOCK EARNINGS EQUITY
-------- -------- ---------- -------- ----------- -------------
BALANCES, DECEMBER 25, 1999................ 16,400 $5,466 $2,954,534 $(2,189) $ 7,485,343 $10,443,154
Shares issued............................ 383 127 153,407 -- -- 153,534
Net income............................... -- -- -- -- 746,450 746,450
Shareholder distribution................. -- -- -- (2,064,426) (2,064,426)
------ ------ ---------- ------- ----------- -----------
BALANCES, DECEMBER 30, 2000................ 16,783 $5,593 $3,107,941 $(2,189) $ 6,167,367 $ 9,278,712
====== ====== ========== ======= =========== ===========
|
The accompanying notes are an integral part of these consolidated financial statements.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 2000
1. NATURE OF BUSINESS
Weighco Enterprises, Inc. (the "Company") was incorporated on January 26, 1988 and was organized under the laws of the State of Delaware. Weighco Enterprises, Inc., prior to April 28, 2000 was previously known as Weighco of Florida, Inc. The Company operates and conducts meetings as a Weight Watchers International ("WWI") franchise in the states of Florida, Georgia, Alabama, Texas, Oklahoma, North and South Carolina, Washington and Alaska.
On December 11, 2000, the Company entered into an Asset Purchase Agreement with Weight Watchers International, Inc. ("WWI"), under which WWI was to acquire substantially all of the assets of the Company. The acquisition was completed on January 16, 2001 and is further described in Note 15.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Weighco Enterprises, Inc. and its wholly-owned subsidiaries, Weighco of Southwest, Inc. and Weight Watchers Northwest, Inc., after elimination of all material intercompany accounts and transactions.
CASH EQUIVALENTS
The Company considers short-term, highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company invests excess cash reserves daily in Repurchase Agreements and Government Securities.
PREPAID MEMBER MATERIALS
Prepaid member materials consists of promotional and educational material provided to program participants.
INVENTORIES
Inventories, consisting principally of cookbooks, points managers, mugs and other resale items, are stated at the lower of cost, as determined on an average cost basis, or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated on the straight-line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income.
INTANGIBLES
Goodwill, franchise costs and other intangibles arising from acquisitions are amortized on a straight-line basis over the estimated useful lives of the assets.
The carrying values of intangible assets are reviewed for impairment by management at least annually, or whenever changes in circumstances or events indicate that such carrying values may not be
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED) recoverable, by assessing the recoverability of such assets through estimated undiscounted future net cash flows.
REVENUE RECOGNITION
The Company earns revenue by conducting meetings and by selling products and aids. Revenue is recognized when services are rendered and products are sold. Deferred revenue, consisting of prepaid lecture income, is recognized in income over the period earned.
ADVERTISING COSTS
It is the Company's policy to expense advertising costs as incurred. Advertising costs totalled approximately $3.4 million for the year ended December 30, 2000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. ACQUISITIONS
In December 1999, the Company acquired twenty-five (25%) percent of the outstanding stock of Weight Watchers of British Columbia, Ltd. ("British Columbia") for $25,000. In October 2000, this investment interest was sold at cost to a shareholder of the Company.
On March 28, 2000, the Company purchased certain assets and franchise rights of Weight Watchers of Greater Washington State, Inc. and Weight Watchers of Alaska, Inc. The transaction was accounted for as a purchase, and accordingly, the consolidated financial statements of Weighco Enterprises, Inc. include the results of operations of Weight Watchers of Greater Washington State, Inc. and Weight Watchers of Alaska, Inc. from the date of acquisition. The franchises were purchased for $9,330,000 and $650,000, respectively, paid through a combination of cash ($6,500,000) and the issuance of a note payable to the seller ($3,480,000). The purchase price was allocated to current assets ($110,000) and intangibles and other assets ($9,870,000) based on the estimated fair values of assets acquired and liabilities assumed, if any, at the date of acquisition.
Unaudited sales and operating income of the acquired franchises were approximately $2.3 million and $315,000, respectively, for the three months ended March 31, 2000.
The Company capitalized professional fees totaling approximately $113,000 related to these acquisitions. Other expenses, including travel and meals, totalled approximately $77,000 and were recorded as general and administrative expenses in the statement of operations.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2000 is summarized as follows:
USEFUL LIVES
Furniture and fixtures................................... 5--7 years $ 1,268,222
Machinery and equipment.................................. 5--10 years 880,544
Leasehold improvements................................... Term of lease 833,664
-----------
2,982,430
Less accumulated depreciation............................ (1,428,727)
-----------
$ 1,553,703
===========
|
Depreciation expense totalled $164,648 for the year ended December 30, 2000.
5. INTANGIBLES
Intangibles as of December 31, 2000 are summarized as follows:
USEFUL LIVES
Franchise costs and tradenames...................... 30--40 years $41,003,392
Goodwill............................................ 40 years 905,129
Noncompete agreements............................... Term of agreement 6,100,000
-----------
48,008,521
Less accumulated amortization....................... (12,361,077)
-----------
$35,647,444
===========
|
Amortization expense totalled $6,682,374 for the year ended December 30, 2000. Of this amount, $3,375,334 related to write-offs of non-compete agreements (see Note 15) and has been classified as part of acquisition related expenses.
6. COMMITMENTS
The Company entered into a management agreement with Weight Watchers of North Carolina, Inc. ("WWNC"). The agreement permits the Company to conduct all activities contained in the restated franchise agreement with Weight Watchers International, Inc. ("WWI"). This agreement provides for annual royalty fees of $350,000, payable in quarterly installments, without interest and secured by a bank letter of credit. The management agreement was terminated in conjunction with the acquisition, and WWNC was sold to the Company and included in assets purchased by WWI.
The Company is obligated, under franchise agreements with WWI, to pay monthly royalty fees of 10% of the gross receipts from meeting and certain product sales of the Company. Total royalty fees were approximately $5,182,864 in the year ended December 30, 2000. These agreements were terminated upon the sale of the Company to WWI.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
6. COMMITMENTS (CONTINUED) The Company is obligated under various deferred compensation, incentive bonus and consulting agreements entered into as part of various franchise acquisitions. As discussed in Note 15, these agreements were terminated and settled through various payments upon the sale of the Company to WWI.
7. INCOME TAXES
The Company has elected treatment as a small business corporation (S Corporation) for Federal and state income tax purposes and accordingly, the Company has not recorded an income tax provision for the year ended December 30, 2000 or for any prior periods.
8. CONCENTRATIONS
The Company maintains cash and cash equivalents balances at various financial institutions, which are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At certain times during the year, the Company's cash balances may exceed this limit. Cash and cash equivalents held with financial institutions exceeding FDIC limits was approximately $5,329,000 as of December 30, 2000. The Company has not experienced any losses associated with these balances.
In the course of its operations, the Company grants trade credits to its customers. Due to the number and geographic dispersion of its customers, the Company does not have any significant concentrations of business transacted with a particular customer. However, the Company purchases substantially all of its inventory from WWI under the provisions of their various franchise agreements.
9. LINE OF CREDIT
The Company has a revolving credit line of $2.1 million with a bank. Borrowings under the line of credit accrue interest at 3/4% below the prime rate (8.75% at December 30, 2000) and is payable on demand. The line of credit is collateralized by inventories, property and equipment, and customer contacts. The line of credit expires March 30, 2001. At December 30, 2000, the Company had no balances outstanding under the line of credit.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
10. NOTES PAYABLE
Notes payable consist of the following:
Note payable--H.J. Heinz Company, interest payable annually
each March at 9%, principal installments of $250,000
annually each March, note matures March 2003.............. $ 2,015,000
Bank note payable $33,333 per month, plus interest at prime
minus 1/2% (9% at December 30, 2000), maturing
January 2003 when all outstanding principal and interest
are due................................................... 1,688,345
Bank notes payable in escalating monthly principal payments,
plus interest at prime (9.5% at December 30, 2000),
maturing in October 2005.................................. 14,500,000
Various bank notes payable in monthly installments ranging
from $8,333 to $50,000, over their respective terms, plus
interest at prime minus 1/2% (9% at December 30, 2000),
maturing at various dates through August 2004............. 3,600,000
Note payable to former owners of acquired franchises in
annual installments of $580,000 through March 2006, plus
interest at 8%............................................ 3,480,000
-----------
25,283,345
Less: current portion....................................... 4,080,000
-----------
Long-term portion........................................... $21,203,345
===========
|
The various notes payable are collateralized by franchise agreements and various assets of the Company and certain guarantees as defined in the respective agreements. Certain of these notes contain restrictions, which include limitations on subsequent indebtedness, prohibitions against guarantees, limits on shareholder distributions, and future consolidation or merger of the Company.
Following are the maturities of notes payable for each for the next five years and in the aggregate as of December 30, 2000:
2001........................................................ $ 4,080,000
2002........................................................ 4,830,000
2003........................................................ 6,683,337
2004........................................................ 4,530,000
2005........................................................ 4,580,008
Thereafter.................................................. 580,000
-----------
$25,283,345
===========
|
The outstanding notes payable were paid in full subsequent to year-end in conjunction with the acquisition of the Company.
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
11. LEASING ARRANGEMENTS
The Company leases space for its executive offices and meeting facilities under operating leases expiring in various years through 2005. Certain of the leases contain provisions for renewal at the option of the Company upon expiration. Following are the approximate annual future minimum lease payments under noncancelable operating leases having a remaining term in excess of one year as of December 30, 2000:
2001........................................................ $2,476,760
2002........................................................ 1,603,661
2003........................................................ 967,129
2004........................................................ 470,986
2005........................................................ 163,029
----------
$5,681,565
==========
|
Rent expense was approximately $4,657,000 in the year ended December 30, 2000.
12. STOCK INCENTIVE PLAN
The Company has 1995 and 1998 share appreciation plans whereby share appreciation rights ("SARs") may be granted to officers and others. Under the terms of the plans, SARs are valued as specified in the Shareholders' Agreement. The SARs may be exercised in exchange for cash or a combination of cash and the Company's stock, not to exceed 50% in Company stock (at a value also specified in the Shareholders' Agreement). Upon grant, the SARs vest at a rate of 20% per year. The 1995 SARs were fully vested as of December 31, 1999. The 1995 and 1998 SARs may be paid on or before March 31, 2003. In March 2000, settlement for 482 of the 1995 SARs was made in the form of both cash and Company stock. Compensation expense under the terms of the plans included in operating expenses totalled $636,724 in the year ended December 30, 2000. In conjunction with the acquisition of the Company and related termination of these plans, an additional lump-sum payment was made and included in acquisition related expenses, as described in Note 15.
13. MANAGEMENT AND INCENTIVE COMPENSATION
Management and incentive compensation consists primarily of amounts paid to or for a certain shareholder of the Company, certain current and former franchise owners and a certain officer of the Company. For the year ended December 30, 2000, management and incentive compensation included in operating expenses consists of the following:
Office expense paid to a shareholder........................ $ 139,737
Management fees paid to a shareholder and a former franchise
owner..................................................... 240,000
Rental fees paid to an owner of a Company managed
franchise................................................. 350,004
Key man life insurance premiums............................. 79,284
Stock Appreciation Rights compensation expense.............. 636,724
Incentive compensation paid to a shareholder, a former
franchise owner and an officer of the Company............. 2,341,000
----------
$3,786,749
==========
|
WEIGHCO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 30, 2000
14. RELATED PARTY TRANSACTIONS
The Company has a management agreement with Grant Peacock & Company, Inc. for financial, management, and administrative services. Grant Peacock & Company, Inc. is owned by a shareholder of the Company. This agreement has no expiration date and can be terminated by either party at the end of any fiscal year. Fees incurred under this agreement totalled $120,000 for the year ended December 30, 2000. The Company also reimburses Grant Peacock & Company for certain expenses in performing its management and administrative duties. Expenses reimbursed for the year ended December 30, 2000 totalled $139,737. The management agreement was terminated subsequent to year-end upon the acquisition of the Company by WWI.
Grant Peacock & Company, Inc. is also entitled to an incentive management fee based on net income of the Company after certain adjustments. Incentive management fees included in operating results totalled $1,472,000 in the year ended December 30, 2000. No future payments will be made under this agreement.
Purchases from WWI of inventory and member materials totalled $4.7 million in the year ended December 30, 2000.
15. ACQUISITION OF THE COMPANY
On December 11, 2000, the Company entered into an Asset Purchase Agreement with Weight Watchers International, Inc. ("WWI"), under which WWI was to acquire substantially all of the assets of the Company. In connection with this agreement, the Company agreed to settle and/or cancel various employment, compensation and non-compete agreements, the cost of which totalled approximately $8,929,493 and is included in acquisition related expenses in the statement of operations for the year ended December 30, 2000 as follows:
Professional fees........................................... $ 167,638
Incentive compensation paid to an officer of the Company and
a former franchise owner.................................. 5,386,521
Additional amortization expense related to termination of
non-compete agreements.................................... 3,375,334
----------
$8,929,493
==========
|
The aforementioned acquisition was completed on January 16, 2001.
Picture of POINTS Calculator Picture of WeightWatchers.com website page Weight Watchers Logo Picture of recipe book Pictures of Just 2 POINTS snack bars Picture of Weight Watchers candies Picture of Weight Watchers book by Sarah Ferguson, the Duchess of York
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The actual and estimated expenses in connection with the offering, all of which will be borne by Weight Watchers International, Inc. are as follows:
SEC Registration Fee........................................ $ 115,058
Printing and Engraving Expenses............................. 275,000
Legal Fees.................................................. 1,000,000
Accounting Fees............................................. 500,000
NYSE Listing Fees........................................... 250,000
NASD Filing Fee............................................. 30,500
Miscellaneous............................................... 50,000
----------
Total....................................................... $2,220,558
==========
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our articles of incorporation provide for the indemnification of our directors and officers in a variety of circumstances, which may include indemnification for liabilities under the Securities Act. Under sections 13.1-697 and 13.1-702 of the Virginia Stock Corporation Act, a Virginia corporation generally is authorized to indemnify its directors and officers in civil and criminal actions if they acted in good faith and believed their conduct to be in the best interests of the corporation and, in the case of criminal actions, had no reasonable cause to believe that the conduct was unlawful. Our articles of incorporation require indemnification of directors and officers with respect to certain liabilities and expenses imposed upon them by reason of having been a director or officer, except in the case of willful misconduct or a knowing violation of criminal law. Weight Watchers also carries insurance on behalf of its directors, officers, employees or agents that may cover liabilities under the Securities Act. In addition, the Virginia Stock Corporation Act and our articles of incorporation eliminate the liability for monetary damages of a director officer in a shareholder or derivative proceeding. This elimination of liability will not apply in the event of willful misconduct or a knowing violation of criminal law or any federal or state securities law. Sections 13.1-692.1 and 13.1-696 through 704 of the Virginia Stock Corporation Act are incorporated into this paragraph by reference.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the three years preceding the filing of this registration statement, the Registrant sold shares of and issued options for its common stock and preferred stock in the amounts, at the times, and for the aggregate amounts of consideration listed below without registration under the Securities Act of 1933. Exemption from registration under the Securities Act for each of the following sales is claimed under Section 4(2) of the Securities Act because each of the transactions was by the issuer and did not involve a public offering:
On September 29, 1999, in connection with a stock split, H.J. Heinz Company received 276,423,607 shares of common stock of the Registrant.
On December 17, 1999, the Registrant issued to a number of its employees options to purchase a total of 3,723,822 shares of its common stock at an exercise price of $2.13 per share.
On December 17, 1999, the Registrant issued to a non-employee director options to purchase a total of 282,322 shares of its common stock at an exercise price of $2.13 per share.
On April 28, 2000, the Registrant issued to a number of its employees options to purchase a total of 927,426 shares of its common stock at an exercise price of $2.13 per share.
II-1
On June 15, 2000, the Registrant issued to an employee director options to purchase a total of 282,322 shares of its common stock at an exercise price of $2.13 per share.
On July 5, 2000, the Registrant issued to an employee options to purchase a total of 141,161 shares of its common stock at an exercise price of $2.13 per share.
On September 1, 2000, the Registrant issued 23,527 shares of common stock to an employee for an aggregate consideration of $50,000, and issued to that employee options to purchase a total of 70,580 shares of its common stock at an exercise price of $2.13 per share.
On October 1, 2000, the Registrant issued 21,174 shares of common stock to an employee for an aggregate consideration of $49,500 and issued to that employee options to purchase a total of 63,522 shares of its common stock at an exercise price of $2.34.
On February 21, 2001, the Registrant issued to a number of its employees options to purchase a total of 42,348 shares of its common stock at an exercise price of $4.04 per share.
On May 7, 2001, the Registrant issued 94,107 shares of common stock to an employee for an aggregate consideration of $380,000 and issued to that employee options to purchase a total of 282,322 shares of its common stock at an exercise price of $4.04.
On July 9, 2001, the Registrant issued to a number of its employees options to purchase a total of 272,440 shares of its common stock at an exercise price of $4.04 per share.
On August 16, 2001, the Registrant issued 23,527 shares of common stock to an employee for an aggregate consideration of $95,000 and issued to that employee options to purchase a total of 70,580 shares of its common stock at an exercise price of $4.04.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
1.1* Form of Underwriting Agreement.
3.1* Form of Second Amended and Restated Articles of
Incorporation of Weight Watchers International, Inc.
3.2* Form of Second Amended and Restated Bylaws of Weight
Watchers International, Inc.
4.1 Senior Subordinated Dollar Notes Indenture, dated as of
September 29, 1999, between Weight Watchers International,
Inc. and Norwest Bank Minnesota, National Association
(Incorporated by reference to Exhibit 4.1 of Weight Watchers
International, Inc.'s Form S-4 Registration Statement No.
333-92005).
4.2 Guarantee Agreement, dated as of March 3, 2000, given by 58
WW Food Corp., Waist Watchers, Inc., Weight Watchers Camps,
Inc. W.W. Camps and Spas, Inc., Weight Watchers Direct,
Inc., W/W Twentyfirst Corporation, W.W. Weight Reduction
Services, Inc., W.W.I. European Services, Ltd., W.W.
Inventory Service Corp., Weight Watchers North America,
Inc., Weight Watchers UK Holdings Ltd, Weight Watchers
International Holdings Ltd, Weight Watchers U.K. Limited,
Weight Watchers (Accessories & Publications) Ltd, Weight
Watchers (Food Products) Limited, Weight Watchers New
Zealand Limited, Weight Watchers International Pty Limited,
Fortuity Pty Ltd and Gutbusters Pty Ltd. (Incorporated by
reference to Exhibit 4.2 of Weight Watchers International,
Inc.'s Form S-4 Registration Statement No. 333-92005).
4.3 Senior Subordinated Euro Notes Indenture, dated as of
September 29, 1999, between Weight Watchers International
Inc. and Norwest Bank Minnesota, National Association
(Incorporated by reference to Exhibit 4.3 of Weight Watchers
International, Inc.'s Form S-4 Registration Statement No.
333-92005).
|
II-2
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
4.4 Guarantee Agreement, dated as of March 3, 2000, given by 58
WW Food Corp., Waist Watchers, Inc., Weight Watchers Camps,
Inc. W.W. Camps and Spas, Inc., Weight Watchers Direct,
Inc., W/W Twentyfirst Corporation, W.W. Weight Reduction
Services, Inc., W.W.I. European Services, Ltd., W.W.
Inventory Service Corp., Weight Watchers North America,
Inc., Weight Watchers UK Holdings Ltd, Weight Watchers
International Holdings Ltd, Weight Watchers U.K. Limited,
Weight Watchers (Accessories & Publications) Ltd, Weight
Watchers (Food Products) Limited, Weight Watchers New
Zealand Limited, Weight Watchers International Pty Limited,
Fortuity Pty Ltd and Gutbusters Pty Ltd. (Incorporated by
reference to Exhibit 4.4 of Weight Watchers International,
Inc.'s Form S-4 Registration Statement No. 333-92005).
4.5* Form of Shareholders' Rights Plan.
4.6* Specimen of stock certificate representing Weight Watchers
International, Inc.'s common stock, no par value.
5.1** Opinion of Hunton & Williams.
10.1* Amended and Restated Credit Agreement, dated as of
January 16, 2001, among Weight Watchers International, Inc.,
WW Funding Corp., Credit Suisse First Boston, BHF (USA)
Capital Corporation, The Bank of Nova Scotia and various
financial institutions.
10.2 Preferred Stockholders' Agreement, dated as of September 29,
1999, among Weight Watchers International, Inc., Artal
Luxembourg S.A. and H.J. Heinz Company (Incorporated by
reference to Exhibit 10.2 of Weight Watchers International,
Inc.'s Form S-4 Registration Statement No. 333-92005).
10.3 Stockholders' Agreement, dated as of September 29, 1999,
among Weight Watchers International, Inc., Artal Luxembourg
S.A. and H.J. Heinz Company (Incorporated by reference to
Exhibit 10.3 of Weight Watchers International, Inc.'s Form
S-4 Registration Statement No. 333-92005).
10.4 License Agreement, dated as of September 29, 1999, between
WW Foods, LLC and Weight Watchers International, Inc.
(Incorporated by reference to Exhibit 10.4 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.5 License Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and H.J. Heinz Company
(Incorporated by reference to Exhibit 10.5 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.6 License Agreement, dated as of September 29, 1999, between
WW Foods, LLC and H.J. Heinz Company (Incorporated by
reference to Exhibit 10.6 of Weight Watchers International,
Inc.'s Form S-4 Registration Statement No. 333-92005).
10.7 LLC Agreement, dated as of September 29, 1999, between H.J.
Heinz Company and Weight Watchers International Inc.
(Incorporated by reference to Exhibit 10.7 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.8 Operating Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and H.J. Heinz Company
(Incorporated by reference to Exhibit 10.8 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.9** Stockholders' Agreement, dated as of September 30, 1999,
among Weight Watchers International, Inc., Artal
Luxembourg S.A., Merchant Capital, Inc., Logo Incorporated
Pty. Ltd., Longisland International Limited, Envoy Partners
and Scotiabanc, Inc.
10.10 Registration Rights Agreement, dated as of September 29,
1999, among WeightWatchers.com, Inc., Weight Watchers
International, Inc., H.J. Heinz Company and Artal Luxembourg
S.A. (Incorporated by reference to Exhibit 10.10 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
|
II-3
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.11 Stockholders' Agreement, dated as of September 29, 1999,
among WeightWatchers.com, Weight Watchers International,
Inc., Artal Luxembourg S.A., H.J. Heinz Company
(Incorporated by reference to Exhibit 10.11 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.12 Letter Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and The Invus Group,
Ltd. (Incorporated by reference to Exhibit 10.12 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.13 Agreement of Lease, dated as of August 1, 1995, between
Industrial & Research Associates Co. and Weight Watchers
International, Inc. (Incorporated by reference to Exhibit
10.13 of Weight Watchers International, Inc.'s Form S-4
Registration Statement No. 333-92005).
10.14 Lease Agreement, dated as of April 1, 1997, between Junto
Investments and Weight Watchers North America, Inc.
(Incorporated by reference to Exhibit 10.14 of Weight
Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.15 Lease Agreement, dated as of August 31, 1995, between 89
State Line Limited Partnership and Weight Watchers North
America, Inc. (Incorporated by reference to Exhibit 10.15 of
Weight Watchers International, Inc.'s Form S-4 Registration
Statement No. 333-92005).
10.16 Weight Watchers Savings Plan, dated as of October 3, 1999
(Incorporated by reference to Exhibit 10.17 filed with
Weight Watchers International, Inc.'s Annual Report on
Form 10-K for the fiscal year ended April 29, 2000).
10.17 Weight Watchers Executive Profit Sharing Plan, dated as of
October 4, 1999 (Incorporated by reference to Exhibit 10.18
filed with Weight Watchers International, Inc.'s Annual
Report on Form 10-K for the fiscal year ended April 29,
2000).
10.18 1999 Stock Purchase and Option Plan of Weight Watchers
International, Inc. and Subsidiaries (Incorporated by
reference to Exhibit 10.19 filed with the Weight Watchers
International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended April 29, 2000).
10.19 Weight Watchers.com Stock Incentive Plan of Weight Watchers
International, Inc. and Subsidiaries (Incorporated by
reference to Exhibit 10.20 filed with Weight Watchers
International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended April 29, 2000).
10.20** Warrant Agreement, dated as of November 24, 1999, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc.
10.21** Warrant Certificate of WeightWatchers.com, Inc. No. 1, dated
as of November 24, 1999.
10.22 Warrant Agreement, dated as of October 1, 2000, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. (Incorporated by reference to Exhibit 10.2 filed with
Weight Watchers International, Inc.'s Quarterly Report on
Form 10-Q for the quarterly period ended October 28, 2000).
10.23 Warrant Certificate of WeightWatchers.com, Inc. No. 2, dated
as of October 1, 2000 (Incorporated by reference to
Exhibit 10.2 filed with Weight Watchers International,
Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended October 28, 2000).
10.24** Second Amended and Restated Note, dated as of September 10,
2001, by WeightWatchers.com, Inc. to Weight Watchers
International, Inc.
10.25 Warrant Agreement, dated as of May 3, 2001, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. (Incorporated by reference to Exhibit 10.2 filed with
Weight Watchers International, Inc.'s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2001).
10.26 Warrant Certificate of WeightWatchers.com, Inc., No. 3,
dated as of May 3, 2001 (Incorporated by reference to
Exhibit 10.3 filed with Weight Watchers International,
Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2001).
|
II-4
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.27 Put/Call Agreement, dated April 18, 2001, between Weight
Watchers International, Inc. and H.J. Heinz Company
(Incorporated by reference to Exhibit 10.4 filed with Weight
Watchers International, Inc.'s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2001).
10.28* Amendment No. 1 to Credit Agreement, dated as of April 26,
2001, among Weight Watchers International, Inc., WW Funding
Corp., Credit Suisse First Boston, BHF (USA) Capital
Corporation, The Bank of Nova Scotia and various financial
institutions.
10.29** Warrant Agreement, dated as of September 10, 2001, between
WeightWatchers.com, Inc. and WeightWatchers.com, Inc. and
Weight Watchers International, Inc.
10.30** Warrant Certificate of WeightWatchers.com, Inc., No. 4,
dated as of September 10, 2001.
10.31** Second Amended and Restated Collateral Assignment and
Security Agreement, dated as of September 10, 2001, by
WeightWatchers.com, Inc. in favor of Weight Watchers
International, Inc.
10.32* Termination Agreement between Weight Watchers International,
Inc. and Artal Luxembourg S.A.
10.33** Amended and Restated Co-Pack Agreement between Weight
Watchers International, Inc. and Nellson
Nutraceutical, Inc.
10.34* Form of Intellectual Property License Agreement between
Weight Watchers International, Inc. and WeightWatchers.com,
Inc.
10.35* Form of Service Agreement between Weight Watchers
International, Inc. and WeightWatchers.com, Inc.
10.36* Form of Corporate Agreement between Weight Watchers
International, Inc. and Artal Luxembourg S.A.
10.37** Guaranty of Sublease, dated as of September 12, 2000, by
Weight Watchers International, Inc. of the Agreement of
Sublease between RDR Associates, Inc. and
WeightWatchers.com, Inc.
10.38** Registration Rights Agreement, dated as of September 29,
1999, among Weight Watchers International, Inc., H.J. Heinz
Company and Artal Luxembourg S.A.
21** List of Subsidiaries.
23.1 Consent of Hunton & Williams (included in Exhibit 5.1).
23.2** Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to Weight Watchers International,
Inc.'s financial statements.
23.3** Consent of PricewaterhouseCoopers LLP, Independent
Accountants, relating to financial statements of Weighco
Enterprises, Inc. and Subsidiaries.
24 Power of Attorney (Previously filed).
|
* To be filed by amendment.
** Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULE
Schedule II--Valuation and Qualifying Accounts--Period from December 30, 2000, and years ended December 30, 2000, April 23, 2000 and April 24, 1999 on page II-7.
II-5
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Weight Watchers International, Inc.:
Our audits of the consolidated financial statements referred to in our report dated March 2, 2001 appearing elsewhere in this Registration Statement also included an audit of the financial statement schedule listed in Item 16(b) of this Form S-1. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
New York, New York
March 2, 2001
II-6
WEIGHT WATCHERS INTERNATIONAL, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
PERIOD EXPENSES DEDUCTIONS(1) PERIOD
------------ ---------- ------------- ----------
EIGHT MONTH PERIOD ENDED DECEMBER 30, 2000
Allowance for doubtful accounts............... $ 609 $ 198 $ (10) $ 797
Inventory reserves, other..................... 1,557 3,993 (3,018) 2,532
FISCAL YEAR ENDED APRIL 29, 2000
Allowance for doubtful accounts............... $ 994 $ (385) $ -- $ 609
Inventory reserves, other..................... 1,436 3,360 (3,239) 1,557
FISCAL YEAR ENDED APRIL 24, 1999
Allowance for doubtful accounts............... $ 876 $ 118 $ -- $ 994
Inventory reserves, other..................... 3,961 3,910 (6,435) 1,436
FISCAL YEAR ENDED APRIL 25, 1998
Allowance for doubtful accounts............... $ 733 $ 143 $ -- $ 876
Inventory reserves, other..................... 472 4,505 (1,016) 3,961
|
(1) Primarily represents the utilization of established reserves, net of recoveries.
II-7
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on October 29, 2001.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: *
-----------------------------------------
Linda Huett
President, Chief Executive Officer and
Director
|
Pursuant to the requirements of the Securities Act, as amended, this Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities indicated on the 29th day of October, 2001.
SIGNATURE TITLE
--------- -----
* President, Chief Executive Officer and
------------------------------------------- Director
Linda Huett (PRINCIPAL EXECUTIVE OFFICER)
*
------------------------------------------- Vice President and Chief Financial Officer
Thomas S. Kiritsis (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
*
------------------------------------------- Chairman of the Board of Directors
Raymond Debbane
/s/ SACHA LAINOVIC
------------------------------------------- Director
Sacha Lainovic
*
------------------------------------------- Director
Christopher J. Sobecki
*
------------------------------------------- Director
Jonas M. Fajgenbaum
|
*By: /s/ SACHA LAINOVIC
--------------------------------------
ATTORNEY-IN-FACT
|
II-9
EXHIBIT 5.1
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
(804) 788-8200
October 29, 2001
Board of Directors
Weight Watchers International, Inc.
175 Crossways Park West
Woodbury, New York 11797-2055
WEIGHT WATCHERS INTERNATIONAL, INC.
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-69362)
Ladies and Gentlemen:
We have acted as counsel for Weight Watchers International, Inc. (the "Company") in connection with the Registration Statement on Form S-1 (File No. 333-69362), as filed with the Securities and Exchange Commission (the "Commission") on September 14, 2001 (as amended and supplemented, the "Registration Statement") pursuant to the Securities Act of 1933, as amended (the "Act"). The Registration Statement relates to the sale in an underwritten public offering of 20,010,000 shares, giving effect to the issuance of shares in the 4.70536-for-1 stock split described in the Registration Statement (the "Stock Split"), (including 2,610,000 shares subject to the underwriters' over-allotment option) of the Company's common stock, no par value (the "Shares"), by certain of the Company's shareholders (the "Selling Shareholders").
This opinion is being furnished in accordance with the requirements of Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K.
In connection therewith, we have examined and relied upon the original or
a copy, certified to our satisfaction, of (i) the Articles of Incorporation and
the Bylaws of the Company, each as amended to date; (ii) actions of the Board of
Directors of the Company authorizing the offering and the issuance of the Shares
and related matters; (iii) the Registration Statement and exhibits thereto; and
(iv) such other documents, instruments or other information as we deemed
necessary or appropriate in rendering our opinion. In making the foregoing
examinations, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies. As to various questions of fact material to this opinion, we
have relied, to the extent we deem reasonably appropriate, upon representations
or certificates of officers or directors of the Company and upon documents,
records and instruments furnished to us by the Company, without independently
checking or verifying the accuracy of such documents, records and instruments.
October 29, 2001
We do not purport to express an opinion on any laws other than the laws of the Commonwealth of Virginia.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Virginia.
2. Upon (i) the valid completion of all corporate action by the Company necessary to amend the Company's Articles of Incorporation to authorize an increase in the number of authorized shares of the Company's common stock and to effect the Stock Split, as described in the Registration Statement, and (ii) the effectiveness of appropriate Articles of Amendment, the Shares will have been duly authorized, legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and reference to our firm under the heading "Legal Matters" in the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act or the rules and regulations promulgated thereunder by the Commission.
This opinion letter is rendered as of the date first above written and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company or the Shares.
Very truly yours,
/s/ Hunton & Williams |
Exhibit 10.1
[EXECUTION COPY]
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 16, 2001
(amending and restating
the Credit Agreement, dated as of September 29, 1999)
among
WEIGHT WATCHERS INTERNATIONAL, INC.,
as a Borrower
WW FUNDING CORP.,
as the SP1 Borrower
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders
CREDIT SUISSE FIRST BOSTON,
as the Syndication Agent,
a Lead Arranger and a Book Manager
BHF (USA) CAPITAL CORPORATION,
as the Documentation Agent
and
THE BANK OF NOVA SCOTIA,
as the Administrative Agent,
a Lead Arranger and a Book Manager
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms........................................................................3
SECTION 1.2. Use of Defined Terms................................................................39
SECTION 1.3. Cross-References....................................................................39
SECTION 1.4. Accounting and Financial Determinations.............................................40
SECTION 1.5. Currency Conversions................................................................40
ARTICLE II
CONTINUATION OF CERTAIN EXISTING LOANS, COMMITMENTS, BORROWING
AND ISSUANCE PROCEDURES, NOTES, LETTERS OF CREDIT AND TLC PROVISIONS
SECTION 2.1. Loan Commitments....................................................................40
SECTION 2.1.1. Continuation of Existing Term Loans; Term
Loan Commitments....................................................................40
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment............................41
SECTION 2.1.3. Letter of Credit Commitment.........................................................42
SECTION 2.1.4. Lenders Not Permitted or Required to Make the Loans.................................42
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.........................43
SECTION 2.2. Reduction of the Commitment Amounts.................................................44
SECTION 2.2.1. Optional............................................................................44
SECTION 2.2.2. Mandatory...........................................................................44
SECTION 2.3. Borrowing Procedures and Funding Maintenance........................................45
SECTION 2.3.1. Term Loans and Revolving Loans......................................................45
SECTION 2.3.2. Swing Line Loans....................................................................45
SECTION 2.4. Continuation and Conversion Elections...............................................47
SECTION 2.5. Funding.............................................................................47
SECTION 2.6. Issuance Procedures.................................................................48
SECTION 2.6.1. Other Lenders' Participation........................................................48
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans........................................49
SECTION 2.6.3. Reimbursement.......................................................................49
SECTION 2.6.4. Deemed Disbursements................................................................50
SECTION 2.6.5. Nature of Reimbursement Obligations.................................................50
SECTION 2.7. Notes...............................................................................51
SECTION 2.8. Registered Notes....................................................................51
SECTION 2.9. TLC Facility........................................................................52
-i-
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TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.............................................52
SECTION 3.1.1. Repayments and Prepayments..........................................................52
SECTION 3.1.2. Application.........................................................................58
SECTION 3.2. Interest Provisions.................................................................58
SECTION 3.2.1. Rates...............................................................................58
SECTION 3.2.2. Post-Maturity Rates.................................................................59
SECTION 3.2.3. Payment Dates.......................................................................60
SECTION 3.3. Fees................................................................................60
SECTION 3.3.1. Commitment Fee......................................................................60
SECTION 3.3.2. Administrative Agent's Fee..........................................................61
SECTION 3.3.3. Letter of Credit Fee................................................................61
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful..........................................................61
SECTION 4.2. Deposits Unavailable................................................................61
SECTION 4.3. Increased LIBO Rate Loan Costs, etc.................................................62
SECTION 4.4. Funding Losses......................................................................62
SECTION 4.5. Increased Capital Costs.............................................................63
SECTION 4.6. Taxes...............................................................................63
SECTION 4.7. Payments, Computations, etc.........................................................66
SECTION 4.8. Sharing of Payments.................................................................66
SECTION 4.9. Setoff..............................................................................67
SECTION 4.10. Mitigation..........................................................................67
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND TO FUTURE CREDIT EXTENSIONS
SECTION 5.1. Conditions Precedent to the Effectiveness of This Agreement and
Making of Credit Extensions.........................................................68
SECTION 5.2. All Credit Extensions...............................................................68
SECTION 5.2.1. Compliance with Warranties, No Default, etc.........................................68
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TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
SECTION 5.2.2. Credit Extension Request............................................................68
SECTION 5.2.3. Satisfactory Legal Form.............................................................69
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Organization, etc...................................................................69
SECTION 6.2. Due Authorization, Non-Contravention, etc...........................................69
SECTION 6.3. Government Approval, Regulation, etc................................................70
SECTION 6.4. Validity, etc.......................................................................70
SECTION 6.5. Financial Information...............................................................70
SECTION 6.6. No Material Adverse Change..........................................................71
SECTION 6.7. Litigation, Labor Controversies, etc................................................71
SECTION 6.8. Subsidiaries........................................................................71
SECTION 6.9. Ownership of Properties.............................................................71
SECTION 6.10. Taxes...............................................................................71
SECTION 6.11. Pension and Welfare Plans...........................................................71
SECTION 6.12. Environmental Warranties............................................................72
SECTION 6.13. Regulations U and X.................................................................73
SECTION 6.14. Accuracy of Information.............................................................73
SECTION 6.15. Seniority of Obligations, etc.......................................................74
SECTION 6.16. Solvency............................................................................74
SECTION 6.17. Contracts...........................................................................74
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants...............................................................75
SECTION 7.1.1. Financial Information, Reports, Notices, etc........................................75
SECTION 7.1.2. Compliance with Laws, etc...........................................................77
SECTION 7.1.3. Maintenance of Properties...........................................................77
SECTION 7.1.4. Insurance...........................................................................77
SECTION 7.1.5. Books and Records...................................................................78
SECTION 7.1.6. Environmental Covenant..............................................................78
SECTION 7.1.7. Future Subsidiaries.................................................................78
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real Property.....................79
SECTION 7.1.9. Use of Proceeds, etc................................................................80
-iii-
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TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
SECTION 7.1.10. U.S. Borrower as Pledged Interest Issuer............................................81
SECTION 7.2. Negative Covenants..................................................................81
SECTION 7.2.1. Business Activities.................................................................81
SECTION 7.2.2. Indebtedness........................................................................81
SECTION 7.2.3. Liens...............................................................................83
SECTION 7.2.4. Financial Condition.................................................................86
SECTION 7.2.5. Investments.........................................................................88
SECTION 7.2.6. Restricted Payments, etc............................................................90
SECTION 7.2.7. Capital Expenditures, etc...........................................................91
SECTION 7.2.8. Consolidation, Merger, etc..........................................................92
SECTION 7.2.9. Asset Dispositions, etc.............................................................92
SECTION 7.2.10. Modification of Certain Agreements..................................................93
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc.......................................94
SECTION 7.2.13. Stock of Subsidiaries...............................................................95
SECTION 7.2.14. Sale and Leaseback..................................................................95
SECTION 7.2.15. Fiscal Year.........................................................................95
SECTION 7.2.16. Designation of Senior Indebtedness..................................................96
SECTION 7.3. Maintenance of Separate Existence...................................................96
ARTICLE VIII
GUARANTY
SECTION 8.1. The Guaranty........................................................................98
SECTION 8.2. Guaranty Unconditional..............................................................99
SECTION 8.3. Reinstatement in Certain Circumstances.............................................100
SECTION 8.4. Waiver.............................................................................100
SECTION 8.5. Postponement of Subrogation, etc...................................................100
SECTION 8.6. Stay of Acceleration...............................................................101
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default.......................................................101
SECTION 9.1.1. Non-Payment of Obligations.........................................................101
SECTION 9.1.2. Breach of Warranty.................................................................101
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations...............................101
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations.................................102
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TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
SECTION 9.1.5. Default on Other Indebtedness......................................................102
SECTION 9.1.6. Judgments..........................................................................102
SECTION 9.1.7. Pension Plans......................................................................102
SECTION 9.1.8. Change in Control..................................................................102
SECTION 9.1.9. Bankruptcy, Insolvency, etc........................................................103
SECTION 9.1.10. Impairment of Security, etc........................................................103
SECTION 9.1.11. Senior Subordinated Notes..........................................................104
SECTION 9.1.12. Redemption.........................................................................104
SECTION 9.2. Action if Bankruptcy, etc..........................................................104
SECTION 9.3. Action if Other Event of Default...................................................104
ARTICLE X
THE AGENTS
SECTION 10.1. Actions............................................................................105
SECTION 10.2. Funding Reliance, etc..............................................................105
SECTION 10.3. Exculpation........................................................................106
SECTION 10.4. Successor..........................................................................106
SECTION 10.5. Credit Extensions by each Agent....................................................107
SECTION 10.6. Credit Decisions...................................................................107
SECTION 10.7. Copies, etc........................................................................107
SECTION 10.8. Reliance by the Administrative Agent...............................................107
SECTION 10.9. Defaults...........................................................................108
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.2. Notices............................................................................110
SECTION 11.3. Payment of Costs and Expenses......................................................110
SECTION 11.4. Indemnification....................................................................111
SECTION 11.6. Severability.......................................................................112
SECTION 11.7. Headings...........................................................................112
SECTION 11.8. [Reserved.]........................................................................112
SECTION 11.9. Governing Law; Entire Agreement....................................................112
SECTION 11.10. Successors and Assigns.............................................................113
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans, Notes
and TLCs...........................................................................113
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TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
SECTION 11.11.1. Assignments........................................................................113
SECTION 11.11.2. Participations.....................................................................116
SECTION 11.11.3. Register...........................................................................118
SECTION 11.12. Other Transactions.................................................................118
SECTION 11.13. Forum Selection and Consent to Jurisdiction........................................118
SECTION 11.14. Waiver of Jury Trial...............................................................119
SECTION 11.15. Confidentiality....................................................................119
SECTION 11.16. Judgment Currency..................................................................120
SECTION 11.17. Release of Security Interests......................................................120
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Commitments and Percentages
SCHEDULE III - Notice Information, Domestic Offices and LIBOR Offices
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Swing Line Note
EXHIBIT A-3 - Form of Term A Note
EXHIBIT A-4 - Form of TLC
EXHIBIT A-5 - Form of Term B-1 Note
EXHIBIT A-6 - Form of Term B-2 Note
EXHIBIT A-7 - Form of Term D Note
EXHIBIT A-8 - Form of Registered Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Issuance Request
EXHIBIT B-3 - Form of TLC Purchase Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - [Reserved]
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F-1 - Form of WWI Security Agreement
EXHIBIT F-2 - Form of Australian Security Agreement
EXHIBIT G-1 - Form of WWI Pledge Agreement
EXHIBIT G-2 - Form of ARTAL Pledge Agreement
EXHIBIT G-3 - Form of HJH Pledge Agreement
EXHIBIT G-4 - Form of Australian Pledge Agreement
EXHIBIT H - Form of Subsidiary Guaranty
EXHIBIT H-1 - Form of Australian Guaranty
EXHIBIT I - Form of Intercompany Subordination Agreement
EXHIBIT J - Form of Lender Assignment Agreement
EXHIBIT K - Form of Registration Certificate
EXHIBIT L - Form of TLC Deed Poll
-vi-
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 16, 2001 (amending and restating the Credit Agreement, dated as of September 29, 1999), is among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), WW FUNDING CORP., a Delaware corporation (the "SP1 BORROWER", and together with WWI, the "BORROWERS"), the various financial institutions as are or may become parties hereto (collectively, the "LENDERS"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as the syndication agent and as a lead arranger (in such capacities, the "SYNDICATION AGENT" and a "LEAD ARRANGER", respectively), BHF (USA) CAPITAL CORPORATION ("BHF"), as the documentation agent (in such capacity, the "DOCUMENTATION AGENT") and THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as (x) the administrative agent, paying agent and registration agent for the TLCs (as defined below) and (y) a lead arranger (in such capacities, the "ADMINISTRATIVE AGENT" and a "LEAD ARRANGER", respectively) and as Issuer (as defined below) for the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of September 29, 1999 (as amended by Amendment No. 1, dated as of December 15, 1999 and as otherwise amended, supplemented, amended and restated or otherwise modified prior to the date hereof, the "EXISTING CREDIT AGREEMENT"), among the Borrowers, certain financial institutions and other Persons from time to time party thereto (the "EXISTING LENDERS") and the Agents, the Existing Lenders committed to make extensions of credit to the Borrowers on the terms and conditions set forth therein and
(a) made term A loans (the "EXISTING TERM A LOANS"), term B loans (the "EXISTING TERM B LOANS", and together with the Existing Term A Loans, the "EXISTING TERM LOANS"), TLC facilities (the "EXISTING TLCS"), revolving loans (the "EXISTING REVOLVING LOANS"), swing line loans (the "EXISTING SWING LINE LOANS", and collectively with the Existing Term Loans, the Existing TLCs and the Existing Revolving Loans, the "EXISTING LOANS") to the Borrowers and
(b) issued or participated in letters of credit (the "EXISTING LETTERS OF CREDIT") for the account of the Borrower;
WHEREAS, WWI intends to consummate the acquisition (the "WEIGHCO
ACQUISITION") of substantially all of the assets and business ("WEIGHCO
BUSINESS") of Weighco Enterprises, Inc., a Delaware corporation ("WEI"), Weighco
of Northwest, Inc., a Delaware corporation ("WNI"), and Weighco of Southwest,
Inc., a Delaware corporation ("WSI", and together with WEI and WNI, "WEIGHCO"),
pursuant to the Asset Purchase Agreement (the "PURCHASE AGREEMENT"), dated
December 11, 2000, among Weighco, WWI and Weight Watchers North America, Inc.
("WWNA") (the "TRANSACTION");
WHEREAS, in connection with the Transaction and the ongoing working capital and general corporate needs of the Borrowers, the Borrowers desire to, among other things, continue the Existing Loans as Loans under this Agreement, to continue the Existing Letters of Credit as Letters of Credit under this Agreement and maintain and obtain the Commitments to make Credit Extensions set forth herein;
WHEREAS, the Borrowers have requested that the Existing Credit Agreement be amended and restated in its entirety to become effective and binding on the Borrowers pursuant to the terms of this Agreement and Amendment No.2 to the Existing Credit Agreement of even date herewith, and the Lenders (including the Existing Lenders) have agreed (subject to the terms of this Agreement) to amend and restate the Existing Credit Agreement in its entirety to read as set forth in this Agreement, and it has been agreed by the parties to the Existing Credit Agreement that (a) the commitments which the Existing Lenders have agreed to extend to the Borrower under the Existing Credit Agreement shall be extended or advanced upon the amended and restated terms and conditions contained in this Agreement, and (b) the Existing Loans, the Existing Letters of Credit and other Obligations (as defined in the Existing Credit Agreement) outstanding under the Existing Credit Agreement shall be governed by and deemed to be outstanding under the amended and restated terms and conditions contained in this Agreement, with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (each of which shall hereafter have no further effect upon the parties thereto, other than as referenced herein and other than for accrued fees and expenses, and indemnification provisions, accrued and owing under the terms of the Existing Credit Agreement on or prior to the date hereof or arising (in the case of an indemnification) under the terms of the Existing Credit Agreement, in each case to the extent provided for in the Existing Credit Agreement); PROVIDED, that any Rate Protection Agreements with any one or more Existing Lenders (or their respective Affiliates) shall continue unamended and in full force and effect;
WHEREAS, all Loans, Reimbursement Obligations and other Obligations shall continue to be and shall be guaranteed pursuant to the Subsidiary Guaranty executed and delivered by each Subsidiary party thereto required to do so under the Existing Credit Agreement and secured pursuant to the Security Agreements executed and delivered by the Borrowers and the applicable Subsidiaries pursuant to the Existing Credit Agreement; and
WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including ARTICLE V), to maintain such Loans and to maintain or extend such Commitments and make such Loans to the Borrowers and issue or maintain (or participate in) Letters of Credit for the account of the Borrowers;
NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Existing Credit Agreement, and the Existing Credit Agreement is amended and restated in its entirety as set forth herein:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):
"ADDITIONAL TERM A LOAN" is defined in CLAUSE (B) of SECTION 2.1.1.
"ADDITIONAL TERM A LOAN COMMITMENT" is defined in CLAUSE (B) of SECTION
2.1.1.
"ADDITIONAL TERM A LOAN COMMITMENT AMOUNT" means $15,000,000.
"ADDITIONAL TERM A LOAN COMMITMENT TERMINATION DATE" means the earliest
of:
(a) January 31, 2001, if the Additional Term A Loans have not been made on or prior to such date;
(b) the date of the making of the Additional Term A Loans (immediately after the making of such Additional Term A Loans on such date); and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSES (B) or (C), the Additional Term A Loan Commitments shall terminate automatically and without any further action.
"ADDITIONAL TERM A LOAN LENDER" means any Lender which has a Percentage of the Additional Term A Loan Commitment Amount.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to SECTION 10.4.
"AFFILIATE" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power
(a) to vote 15% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or
(b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
"AGENTS" means, collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent.
"AGREEMENT" means, on any date, this Credit Agreement, as amended and restated hereby and as further amended, supplemented, amended and restated, or otherwise modified from time to time and in effect on such date.
"ALTERNATE BASE RATE" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by the Administrative Agent at its Domestic Office as its base rate for U.S.
Dollar loans in the United States; and
(b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrowers and the Lenders of changes in the Alternate Base Rate.
"APPLICABLE MARGIN" means at all times,
(a) with respect to the unpaid principal amount of Term B Loans maintained as a
(i) Base Rate Loan, 3.00% per annum; and
(ii) LIBO Rate Loan, 4.00% per annum;
(b) with respect to the unpaid principal amount of Term D Loans maintained as a
(i) Base Rate Loan, 2.25% per annum; and
(ii) LIBO Rate Loan, 3.25% per annum;
(c) with respect to the unpaid principal amount of each Revolving Loan and Swing Line Loans and each Term A Loan maintained as a Base Rate Loan at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for Base Rate Loans"; and
(d) with respect to the unpaid principal amount of each Revolving Loan, and Swing Line Loan and each Term A Loan maintained as a LIBO Rate Loan, at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for LIBO Rate Loans":
APPLICABLE MARGIN FOR REVOLVING LOANS, SWING LINE LOANS AND TERM A
LOANS:
Applicable Margin Applicable Margin
Debt to EBITDA Ratio for Base Rate Loans for LIBO Rate Loans
-------------------- ------------------- -------------------
Greater than or equal to 4.75 to 1.00 2.250% 3.250%
Less than 4.75 to 1.00 and greater than or equal
to 4.25 to 1.00 1.875% 2.875%
Less than 4.25 to 1.00 and greater than or equal
to 3.75 to 1.00 1.500% 2.500%
Less than 3.75 to 1.00 and greater than or equal
to 3.25 to 1.00 1.125% 2.125%
Less than 3.25 to 1.00 0.750% 1.750%
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The Debt to EBITDA Ratio used to compute the Applicable Margin for Revolving Loans, Swing Line Loans and Term A Loans shall be the Debt to EBITDA Ratio set forth in the Compliance Certificate most recently delivered by WWI to the Administrative Agent pursuant to CLAUSE (C) of SECTION 7.1.1; changes in the Applicable Margin for Revolving Loans, Swing Line Loans, and Term A Loans resulting from a change in the Debt to EBITDA Ratio shall become effective upon delivery by WWI to the Administrative Agent of a new Compliance Certificate pursuant to CLAUSE (C) of SECTION 7.1.1. If WWI shall fail to deliver a Compliance Certificate within the number of days after the end of any Fiscal Quarter as required pursuant to CLAUSE (C) of SECTION 7.1.1 (without giving effect to any grace period), the Applicable Margin for Revolving Loans, Swing Line Loans, and Term A Loans from and including the first day after the date on which such Compliance Certificate was required to be delivered to but not including the date WWI delivers to the Administrative Agent a Compliance Certificate shall conclusively equal the highest Applicable Margin for Revolving Loans, Swing Line Loans, and Term A Loans set forth above.
The Applicable Margin for Designated New Term Loans shall be determined pursuant to SECTION 2.1.6.
"ARTAL" means ARTAL Luxembourg S.A., a corporation organized under the laws of Luxembourg.
"ARTAL PLEDGE AGREEMENT" means the Pledge Agreement, dated September 29, 1999, by ARTAL, in favor of the Administrative Agent as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"ASSIGNEE LENDER" is defined in SECTION 11.11.1.
"AUSTRALIAN DOLLAR" or "A$" means the lawful money of Australia.
"AUSTRALIAN GUARANTY" means the Guaranty, dated September 29, 1999, by WW Australia, FPL and GB in favor of the Administrative Agent, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.
"AUSTRALIAN PLEDGE AGREEMENT" means the Australian Share Mortgage Agreement, dated September 29, 1999, by WW Australia and FPL in favor of the Administrative Agent, together with each Supplement thereto delivered pursuant to CLAUSE (B) of SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"AUSTRALIAN SECURITY AGREEMENT" means the Security Agreement, dated
September 29, 1999, by WW Australia, FPL and GB in favor of the Administrative
Agent, together with each Supplement thereto delivered pursuant to CLAUSE (A) of
SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise
modified from time to time pursuant to the terms thereof.
"AUSTRALIAN SUBSIDIARY" means any Subsidiary that is organized under the laws of Australia or any territory thereof.
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders in writing from time to time.
"AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing:
(x) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment
by
(y) the sum of all such payments.
"BASE AMOUNT" is defined in SECTION 7.2.7.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate.
"BORROWERS" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by the relevant Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
SECTION 2.1.
"BORROWING REQUEST" means a loan request and certificate duly executed by an Authorized Officer of the applicable Borrower, substantially in the form of EXHIBIT B-1 hereto.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York City; and
(b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in U.S. Dollars are carried on in the London interbank market.
"CAPITAL EXPENDITURES" means for any period, the sum, without duplication, of
(a) the aggregate amount of all expenditures of WWI and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and
(b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period.
"CAPITAL SECURITIES" means, (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type.
"CAPITALIZED LEASE LIABILITIES" means, without duplication, all monetary obligations of WWI or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-l by S&P or P-l by Moody's, or
(ii) any Lender which is an Eligible Institution (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either
(i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or
(ii) any Lender;
(d) short-term tax-exempt securities rated not lower than MIG-1/1+ by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less;
(e) any money market or similar fund the assets of which are comprised exclusively of any of the items specified in CLAUSES (A) through (D) above and as to which withdrawals are permitted at least every 90 days; or
(f) in the case of any Subsidiary of WWI organized in a jurisdiction outside the United States: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof), (ii) investments of the type and maturity described in CLAUSES (A) through (E) above of foreign obligors, which investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign ratings agencies or (iii) investments of the type and maturity described in CLAUSES (A) through (E)
above of foreign obligors (or the parents of such obligors), which investments or obligors (or the parents of such obligors) are not rated as provided above but which are, in the reasonable judgment of WWI, comparable in investment quality to such investments and obligors (or the parents of such obligors); PROVIDED that the aggregate face amount outstanding at any time of such investments of all foreign Subsidiaries of WWI made pursuant to this clause (iii) does not exceed $25,000,000.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List.
"CHANGE IN CONTROL" means
(a) at any time prior to an Initial Public Offering, the failure of the Permitted ARTAL Investor Group, to directly own, free and clear of all Liens (other than in favor of the Administrative Agent pursuant to a Loan Document), 75% of the outstanding voting shares of Capital Securities of WWI on a fully diluted basis; PROVIDED that all owners of such Capital Securities of WWI (whether a member of the Permitted ARTAL Investor Group, HJH or any transferee, successor or assign thereof) shall have executed a pledge agreement in favor of the Administrative Agent, substantially in the form of EXHIBIT G-3 hereof PROVIDED FURTHER, that WWI Common Shares purchased in connection with a Local Management Plan need not be pledged;
(b) at any time after an Initial Public Offering, the failure of the Permitted ARTAL Investor Group to own, directly or indirectly through any Wholly-owned Subsidiaries, free and clear of all Liens, at least 51% of the outstanding voting shares of Capital Securities of WWI on a fully diluted basis;
(c) at any time after an Initial Public Offering, any "person" or "group" (as such terms are used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than the Permitted ARTAL Investor Group) becomes, directly or indirectly, in a single transaction or in a related series of transactions by way of merger, consolidation, or other business combination or otherwise, the "beneficial owner" (as such term is used in Rule 13d-3 of the Exchange Act) of more than 20% of the total voting power in the aggregate of all classes of Capital Securities of WWI then outstanding entitled to vote generally in elections of directors of WWI;
(d) at all times, as applicable, individuals who on September 29, 1999 constituted the Board of Directors of WWI (together with any new directors whose election to such Board or whose nomination for election by the stockholders of WWI was approved by a
member of the Permitted ARTAL Investor Group or a vote of 662/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of WWI then in office;
(e) at all times, as applicable, the failure of WWI to own, free and clear of all Liens (other than in favor of the Administrative Agent pursuant to a Loan Document), all of the outstanding shares of Capital Securities of each of (x) UKHC1, UKHC2 and WW Australia (other than shares of Capital Securities issued pursuant to a Local Management Plan), and (y) the SP1 Borrower, in each case on a fully diluted basis; or
(f) any other event constituting a Change of Control (as defined in the Senior Subordinated Note Indenture).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means, as the context may require, a Lender's Letter of Credit Commitment, Revolving Loan Commitment, Swing Line Loan Commitment, Additional Term A Loan Commitment or Term D Loan Commitment.
"COMMITMENT AMOUNT" means, as the context may require, the Letter of Credit Commitment Amount, the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount, the Additional Term A Loan Commitment Amount or the Term D Loan Commitment Amount.
"COMMITMENT TERMINATION DATE" means, as the context may require, the Revolving Loan Commitment Termination Date, the Additional Term A Loan Commitment Termination Date or the Term D Loan Commitment Termination Date.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Event of Default described in CLAUSES (A) through (D) of SECTION 9.1.9; or
(b) the occurrence and continuance of any other Event of Default and either
(i) the declaration of the Loans and the TLCs to be due and payable pursuant to SECTION 9.3, or
(ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to WWI that the Commitments have been terminated.
"COMPLIANCE CERTIFICATE" means a certificate duly completed and executed by the chief financial Authorized Officer of WWI, substantially in the form of EXHIBIT E hereto.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the applicable Borrower, substantially in the form of EXHIBIT C hereto.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with WWI, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"COPYRIGHT SECURITY AGREEMENT" means the Copyright Security Agreement, dated September 29, 1999, delivered by WWI and each of its U.S. Subsidiaries party thereto in favor of the Administrative Agent, as amended, supplemented, amended and restated or otherwise modified.
"CREDIT EXTENSION" means, as the context may require,
(a) the making of a Loan by a Lender;
(b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any previously issued Letter of Credit, by the Issuer; or
(c) the purchase of a TLC by a TLC Lender.
"CREDIT EXTENSION REQUEST" means, as the context may require, any Borrowing Request or Issuance Request.
"CURRENT ASSETS" means, on any date, without duplication, all assets (other than cash) which, in accordance with GAAP, would be included as current assets on a consolidated balance sheet of WWI and its Subsidiaries at such date as current assets (excluding, however, amounts
due and to become due from Affiliates of WWI which have arisen from transactions which are other than arm's-length and in the ordinary course of its business).
"CURRENT LIABILITIES" means, on any date, without duplication, all amounts which, in accordance with GAAP, would be included as current liabilities on a consolidated balance sheet of WWI and its Subsidiaries at such date, excluding current maturities of Indebtedness.
"DEBT" means the outstanding principal amount of all Indebtedness of WWI and its Subsidiaries of the type referred to in CLAUSES (A), (B), (C) and (E) of the definition of "Indebtedness" or any Contingent Liability in respect thereof.
"DEBT TO EBITDA RATIO" means, as of the last day of any Fiscal Quarter, the ratio of
(a) Debt outstanding on the last day of such Fiscal Quarter
TO
(b) EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters.
"DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.
"DESIGNATED ADDITIONAL REVOLVING LOAN COMMITMENTS" is defined in
SECTION 2.1.6.
"DESIGNATED ADDITIONAL TERM A LOANS" is defined in SECTION 2.1.6.
"DESIGNATED ADDITIONAL TERM B LOANS" is defined in SECTION 2.1.6.
"DESIGNATED ADDITIONAL TERM D LOANS" is defined in SECTION 2.1.6.
"DESIGNATED NEW TERM LOANS" is defined in SECTION 2.1.6.
"DESIGNATED SUBSIDIARY" means The Weight Watchers Foundation, Inc., a New York not- for-profit corporation.
"DISBURSEMENT" is defined in SECTION 2.6.2.
"DISBURSEMENT DATE" is defined in SECTION 2.6.2.
"DISBURSEMENT DUE DATE" is defined in SECTION 2.6.2.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as SCHEDULE I, as it may be amended, supplemented or otherwise modified from time to time by the Borrowers with the written consent of the Required Lenders.
"DISPOSITION" (or correlative words such as "Dispose") means any sale, transfer, lease contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, any of WWI's or its Subsidiaries', assets (including accounts receivable and Capital Securities of Subsidiaries) to any other Person (other than to another Obligor) in a single transaction or series of transactions.
"DOCUMENTATION AGENT" is defined in the preamble.
"DOMESTIC OFFICE" means, relative to any Lender, the office of such Lender designated as such on SCHEDULE III hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto.
"EBITDA" means, for any applicable period, the sum (without duplication) of
(a) Net Income,
PLUS
(b) the amount deducted, in determining Net Income, representing amortization of assets (including amortization with respect to goodwill, deferred financing costs, other non-cash interest and all other intangible assets),
PLUS
(c) the amount deducted, in determining Net Income, of all income taxes (whether paid or deferred) of WWI and its Subsidiaries,
PLUS
(d) Interest Expense,
PLUS
(e) the amount deducted, in determining Net Income, representing depreciation of assets,
PLUS
(f) an amount equal to all non-cash charges deducted in arriving at Net Income,
PLUS
(g) an amount equal to all minority interest charges deducted in determining Net Income (net of Restricted Payments made in respect of such minority interest),
PLUS
(h) an amount equal to the cash royalty payment received pursuant to the Warnaco Agreement, to the extent not included in the calculation of Net Income,
PLUS
(i) the amount deducted, in determining Net Income, due to foreign currency translation required by FASB 52 arising after June 30, 1997,
PLUS
(j) the amount deducted in determining Net Income of expenses incurred in connection with the Transaction,
MINUS
(k) an amount equal to the amount of all non-cash credits included in arriving at Net Income.
"ELIGIBLE INSTITUTION" means a financial institution that either (a) has combined capital and surplus of not less than $500,000,000 or its equivalent in foreign currency, whose long-term certificate of deposit rating or long-term senior unsecured debt rating is rated "BBB" or higher by S&P and "Baa2" or higher by Moody's or an equivalent or higher rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments or (b) is reasonably acceptable to the Administrative Agent and the Issuer.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"EURO" means the single currency of participating member States of the European Union.
"EVENT OF DEFAULT" is defined in SECTION 9.1.
"EXCESS CASH FLOW" means, for any Fiscal Year (or other period), the excess (if any), of
(a) EBITDA for such Fiscal Year (or other period)
OVER
(b) the sum, without duplication for such Fiscal Year (or other period) of
(i) Interest Expense;
PLUS
(ii) scheduled payments and optional and mandatory prepayments (other than such prepayments made under CLAUSE (C) of SECTION 3.1.1), to the extent actually made, of the principal amount of the Term Loans and TLCs or any other term Debt (including Capitalized Lease Liabilities) and mandatory prepayments of the principal amount of the Revolving Loans pursuant to CLAUSE (E) of SECTION 3.1.1 in connection with a reduction of the Revolving Loan Commitment Amount;
PLUS
(iii) all federal, state and foreign income taxes actually paid in cash by WWI and its Subsidiaries;
PLUS
(iv) Capital Expenditures actually made in such Fiscal Year (or other period) pursuant to SECTION 7.2.7 (other than CLAUSE (Z) therein) (excluding Capital Expenditures constituting Capitalized Leases and by way of the incurrence of Indebtedness to a vendor of any assets permitted to be acquired pursuant to SECTION 7.2.8 to finance the acquisition of such assets);
PLUS
(v) the amount of the net increase (or minus a net decrease), of Current Assets over Current Liabilities of WWI and its Subsidiaries from the last day of the immediately preceding Fiscal Year (or commencement of other period);
PLUS
(vi) Investments permitted and actually made pursuant to CLAUSES (D), (G), (H), (I) and (J) of SECTION 7.2.5;
PLUS
(vii) Restricted Payments permitted and actually made pursuant to SECTION 7.2.6;
PLUS
(viii) nonrecurring restructuring costs and costs and expenses incurred in connection with the Transaction, in an aggregate amount not to exceed $5,000,000;
PLUS
(ix) the aggregate amount of Permitted Acquisitions actually made during such Fiscal Year (or other period);
PLUS
(x) for the 20 month period ending December 31, 2001 the aggregate consideration for the Transaction in an amount not to exceed $35,000,000.
"EXCLUDED EQUITY PROCEEDS" means any proceeds received by WWI or any of
its Subsidiaries from the sale or issuance by such Person of its Capital Stock
or any warrants or options in respect of any such Capital Stock or the exercise
of any such warrants or options, in each case pursuant to any such sale,
issuance or exercise constituting or resulting from (i) capital contributions
to, or permitted Capital Stock issuances by, WWI (exclusive of any such
contribution or issuance resulting from an Initial Public Offering or a widely
distributed private offering exempted from the registration requirements of
Section 5 of the Securities Act of 1933, as amended), (ii) any subscription
agreement, incentive plan or similar arrangement with any officer, employee or
director of WWI or any of its Subsidiaries pursuant to a Local Management Plan
or (iii) the exercise of any options or warrants issued to any officer, employee
or director described in CLAUSE (II) above.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"EXISTING LENDERS" is defined in the FIRST RECITAL.
"EXISTING LETTERS OF CREDIT" is defined in the FIRST RECITAL.
"EXISTING LOANS" is defined in the FIRST RECITAL.
"EXISTING REVOLVING LOANS" is defined in the FIRST RECITAL.
"EXISTING SWING LINE LOANS" is defined in the FIRST RECITAL.
"EXISTING TERM A LOANS" is defined in the FIRST RECITAL.
"EXISTING TERM B LOANS" is defined in the FIRST RECITAL.
"EXISTING TERM LOANS" is defined in the FIRST RECITAL.
"EXISTING TLCS" is defined in the FIRST RECITAL.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
"FEE LETTERS" means, collectively, (a) the confidential fee letter, dated as of July 20, 1999, between Artal International S.A., a Luxembourg corporation ("AI"), and the Administrative Agent, as assumed by ARTAL, (b) the confidential fee letter, dated as of July 20, 1999, among AI, the Administrative Agent and the Syndication Agent, as assumed by ARTAL, and (c) the confidential fee letter, dated as of December 13, 2000 among the Borrower, the Administrative Agent and the Syndication Agent.
"FINAL TERMINATION DATE" means the later of:
(x) the Stated Maturity Date with respect to Term B Loans and the TLCs, and
(y) the date on which all Obligations are satisfied and paid in full.
"FISCAL QUARTER" means any three-month period ending on a Saturday closest to March 31, June 30, September 30, or December 31 of any Fiscal Year.
"FISCAL YEAR" means any year ending on the Saturday closest to December
31 (e.g., the "2000 FISCAL YEAR" refers to the Fiscal Year ending on December
30, 2000).
"FIXED CHARGE COVERAGE RATIO" means, as of the last day of any Fiscal Quarter, the ratio of, for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters,
(a) EBITDA MINUS Capital Expenditures made during such period
TO
(b) (i) Interest Expense for such period PLUS (ii) scheduled
repayments of Debt in respect of such period, whether or not paid PLUS
(iii) dividends paid in cash on the WWI Preferred Shares in respect of
such period.
"FNZ" means Weight Watchers New Zealand Unit Trust, a New Zealand trust which owns and operates the Weight Watchers classroom franchise and business in New Zealand.
"FNZ GUARANTY" means the Guaranty, dated December 16, 1999, made by FNZ in favor of the Administrative Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms.
"FNZ SECURITY AGREEMENT" means the Security Agreement, dated December 16, 1999, by FNZ in favor of the Administrative Agent, together with each Supplement thereto delivered pursuant to CLAUSE (C) of SECTION 7.1.13, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"FOREIGN CURRENCY" means any currency other than U.S. Dollars.
"FPL" means Fortuity Pty. Ltd. (ACN 007 148 683), an Australian company incorporated in the State of Victoria which operates the Weight Watchers classroom franchise and business in Victoria.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto.
"GAAP" is defined in SECTION 1.4.
"GB" means Gutbusters Pty. Ltd. (ACN 059 073 157), an Australian company incorporated in the State of New South Wales.
"GOVERNMENTAL AUTHORITY" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local (or the equivalent thereof), and any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
"GUARANTEED OBLIGATIONS" is defined in SECTION 8.1.
"GUARANTIES" means, collectively, (a) the WWI Guaranty, (b) the Australian Guaranty, (c) the Subsidiary Guaranty, (d) the FNZ Guaranty and (e) each other guaranty delivered from time to time pursuant to the terms of this Agreement.
"GUARANTOR" means any Person which has or may issue a Guaranty hereunder.
"HAZARDOUS MATERIAL" means
(a) any "hazardous substance", as defined by CERCLA or equivalent applicable foreign law;
(b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended or equivalent applicable foreign law;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended.
"HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates, including but not limited to Rate Protection Agreements.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.
"HJH" means H.J. Heinz Company, a Pennsylvania Corporation.
"HJH PLEDGE AGREEMENT" means the HJH Pledge Agreement, dated September 29, 1999, by HJH in favor of the Administrative Agent, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"IMMATERIAL SUBSIDIARY" means, at any date of determination, any Subsidiary or group of Subsidiaries of WWI having assets as at the end of or EBITDA for the immediately preceding four Fiscal Quarter period for which the relevant financial information has been delivered pursuant to CLAUSE (A) or CLAUSE (B) of SECTION 7.1.1 of less than 5% of total assets of WWI and its Subsidiaries or $2,000,000, respectively, individually or in the aggregate.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or certification of any independent public accountant as to any financial statement of any Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause such Obligor to be in default of any of its obligations under SECTION 7.2.4.
"INCLUDING" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments for borrowed money in respect thereof;
(b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services,
other than the WWI Preferred Shares, and indebtedness (excluding prepaid interest thereon and interest not yet due) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; PROVIDED, HOWEVER, that, for purposes of determining the amount of any Indebtedness of the type described in this clause, if recourse with respect to such Indebtedness is limited to specific property financed with such Indebtedness, the amount of such Indebtedness shall be limited to the fair market value (determined on a basis reasonably acceptable to the Administrative Agent) of such property or the principal amount of such Indebtedness, whichever is less; and
(f) all Contingent Liabilities of such Person in respect of any of the foregoing;
PROVIDED, that, Indebtedness shall not include unsecured Indebtedness incurred in the ordinary course of business in the nature of accrued liabilities and open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding the Indebtedness incurred through the borrowing of money or Contingent Liabilities in connection therewith. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer (to the extent such Person is liable for such Indebtedness).
"INDEMNIFIED LIABILITIES" is defined in SECTION 11.4.
"INDEMNIFIED PARTIES" is defined in SECTION 11.4.
"INITIAL PUBLIC OFFERING" means any sale of the Capital Securities of WWI to the public pursuant to an initial, primary offering registered under the Securities Act of 1933 and, for purposes of the Change in Control definition only, pursuant to which no less than 10% of the Capital Securities of WWI outstanding after giving effect to such offering was sold pursuant to such offering.
"INTERCOMPANY SUBORDINATION AGREEMENT" means the Intercompany Subordination Agreement, dated September 29, 1999, by WWI, the SP1 Borrower and each of the Guarantors in favor of the Administrative Agent.
"INTEREST COVERAGE RATIO" means, at the close of any Fiscal Quarter, the ratio computed (except as set forth in the proviso set forth below) for the period consisting of such Fiscal Quarter and each of the three immediately prior Fiscal Quarters of:
(a) EBITDA (for such period)
TO
(b) Interest Expense (for such period).
"INTEREST EXPENSE" means, for any Fiscal Quarter, the aggregate consolidated cash interest expense (net of interest income) of WWI and its Subsidiaries for such Fiscal Quarter, as determined in accordance with GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense.
"INTEREST PERIOD" means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3.1 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six or, with the consent of each applicable Lender, nine or twelve months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as WWI may select in its relevant notice pursuant to SECTION 2.3 or 2.4; PROVIDED, HOWEVER, that
(a) WWI shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates;
(b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and
(d) no Interest Period for any Loan may end later than the Stated Maturity Date for such Loan.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business);
(b) any ownership or similar interest held by such Person in any other Person; and
(c) any purchase or other acquisition of all or substantially all of the assets of any Person or any division thereof.
The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such transfer or exchange.
"ISSUANCE REQUEST" means a Letter of Credit request and certificate duly executed by an Authorized Officer of WWI, substantially in the form of EXHIBIT B-2 hereto.
"ISSUER" means, collectively, Scotiabank in its individual capacity hereunder as issuer of the Letters of Credit and such other Lender as may be designated by Scotiabank (and agreed to by WWI and such Lender) in its individual capacity as the issuer of Letters of Credit.
"LEAD ARRANGERS" means Scotiabank and CSFB.
"LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement substantially in the form of EXHIBIT J hereto.
"LENDERS" is defined in the PREAMBLE.
"LENDER'S ENVIRONMENTAL LIABILITY" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against the Administrative Agent, the Syndication Agent, any Lead Arranger, any Lender or any Issuer or any of such Person's Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or any portion of any property of WWI or any of its Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to the extent caused by Releases from WWI or any of its Subsidiaries' or any of their respective predecessors' properties;
(b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in SECTION 6.12;
(c) any violation or claim of violation by WWI or any of its Subsidiaries of any Environmental Laws; or
(d) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by WWI or any of its Subsidiaries, or in connection with any property owned or formerly owned by WWI or any of its Subsidiaries.
"LETTER OF CREDIT" is defined in SECTION 2.1.3.
"LETTER OF CREDIT COMMITMENT" means, with respect to the Issuer, the Issuer's obligation to issue Letters of Credit pursuant to SECTION 2.1.3 and, with respect to each of the other Lenders that has a Revolving Loan Commitment, the obligations of each such Lender to participate in such Letters of Credit pursuant to SECTION 2.6.1.
"LETTER OF CREDIT COMMITMENT AMOUNT" means, on any date, a maximum amount of $10,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.2.
"LETTER OF CREDIT OUTSTANDINGS" means, on any date, an amount equal to the sum of
(a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit,
PLUS
(b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations in respect of such Letters of Credit.
"LIBO RATE" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which U.S. Dollar deposits in immediately available funds are offered to the Administrative Agent's LIBOR Office in the London interbank market as at or about 11:00 a.m. London time two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of the Administrative Agent's LIBO Rate Loan and for a period approximately equal to such Interest Period.
"LIBO RATE LOAN" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted).
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula:
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect
on, and the applicable rates furnished to and received by the Administrative Agent from Scotiabank, two Business Days before the first day of such Interest Period.
"LIBOR OFFICE" means, relative to any Lender, the office of such Lender designated as such on SCHEDULE III hereto or designated in the Lender Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to WWI and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period.
"LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or any filing or recording of any instrument or document in respect of the foregoing, to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.
"LOAN" means, as the context may require, a Revolving Loan, a Swing Line Loan, a Term A Loan (including each Additional Term A Loan and Designated Additional Term A Loan), a Term B Loan (including each Designated Additional Term B Loan), a Term D Loan (including each Designated Additional Term D Loan) and each Designated New Term Loan of any type.
"LOAN DOCUMENT" means this Agreement, the Notes, the TLCs, the Letters of Credit, each Rate Protection Agreement under which that counterpart to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender relating to Hedging Obligations of WWI or any of its Subsidiaries, the Fee Letter, each Pledge Agreement, each Guaranty, each Security Agreement, the TLC Deed Poll, the Intercompany Subordination Agreement and each other agreement, document or instrument delivered in connection with this Agreement or any other Loan Document, whether or not specifically mentioned herein or therein.
"LOCAL MANAGEMENT PLAN" means an equity plan or program for (i) the sale or issuance of Capital Securities of a Subsidiary in an amount not to exceed 5% of the outstanding common equity of such Subsidiary to local management or a plan or program in respect of Subsidiaries of WWI whose principal business is conducted outside of the United States, (ii) the direct purchase from ARTAL by WWI management employees, in one transaction or a series of transactions, of not more than 3% in the aggregate of the WWI Common Shares owned by ARTAL or (iii) the
issuance by WWI to its management employees, in one transaction or a series of transactions, of stock options to purchase not more than 6% in the aggregate of the WWI Common Shares on a fully diluted basis.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the financial condition, operations, assets, business or properties of WWI and its Subsidiaries, taken as a whole, (b) a material impairment other than an event or set of circumstances described in CLAUSE (A) of the ability of any Obligor (other than any Immaterial Subsidiary) to perform its respective material obligations under the Loan Documents to which it is or will be a party, or (c) an impairment of the validity or enforceability of, or a material impairment of the rights, remedies or benefits available to the Administrative Agent, the Issuer or the Lenders under, this Agreement or any other Loan Document.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means, collectively, each Mortgage or Deed of Trust executed
and delivered pursuant to the terms of this Agreement, including CLAUSE (B) of
SECTION 7.1.8.
"NET DISPOSITION PROCEEDS" means, with respect to a Permitted Disposition of the assets of WWI or any of its Subsidiaries, the excess of
(a) the gross cash proceeds received by WWI or any of its Subsidiaries from any Permitted Disposition and any cash payments received in respect of promissory notes or other non-cash consideration delivered to WWI or such Subsidiary in respect of any Permitted Disposition,
LESS
(b) the sum of
(i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and all other reasonable fees, expenses and charges, in each case actually incurred in connection with such Permitted Disposition which have not been paid to Affiliates of WWI,
(ii) all taxes and other governmental costs and expenses actually paid or estimated by WWI (in good faith) to be payable in cash in connection with such Permitted Disposition, and
(iii) payments made by WWI or any of its Subsidiaries to retire Indebtedness (other than the Loans) of WWI or any of its Subsidiaries where
payment of such Indebtedness is required in connection with such Permitted Disposition;
PROVIDED, HOWEVER, that if, after the payment of all taxes with respect to such Permitted Disposition, the amount of estimated taxes, if any, pursuant to CLAUSE (B)(II) above exceeded the tax amount actually paid in cash in respect of such Permitted Disposition, the aggregate amount of such excess shall be immediately payable, pursuant to CLAUSE (B) of SECTION 3.1.1, as Net Disposition Proceeds.
Notwithstanding the foregoing, Net Disposition Proceeds shall not include fees or other amounts paid to WWI or its Subsidiaries in respect of a license of intellectual property (not related to the classroom business of WWI or its Subsidiaries) having customary terms and conditions for similar licenses.
"NET EQUITY PROCEEDS" means, with respect to the sale or issuance by WWI to any Person of any stock, warrants or options or the exercise of any such warrants or options, the EXCESS of:
(a) the gross cash proceeds received by WWI from such sale, exercise or issuance (other than Excluded Equity Proceeds),
OVER
(b) all reasonable and customary underwriting commissions and legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and all other reasonable fees, expenses and charges, in each case actually incurred in connection with such sale or issuance which have not been paid to Affiliates of WWI in connection therewith.
"NET INCOME" means, for any period, the net income of WWI and its Subsidiaries for such period on a consolidated basis, excluding extraordinary gains.
"NETCO" means Weight Watchers.com Inc., a Delaware corporation.
"NON-EXCLUDED TAXES" means any taxes other than (i) net income and franchise taxes imposed with respect to any Secured Party by a Governmental Authority under the laws of which such Secured Party is organized or in which it maintains its applicable lending office and (ii) any taxes imposed on a Secured Party by any jurisdiction as a result of any former or present connection between such Secured Party and such jurisdiction other than a connection arising from a Secured Party entering into this Agreement or making any loan hereunder.
"NON-GUARANTOR SUBSIDIARY" means the Designated Subsidiary and any other Subsidiary of WWI other than any Person which has or may issue a Guaranty hereunder.
"NON-U.S. LENDER" means any Lender (including each Assignee Lender) that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any state thereof, or (iii) any estate or trust that is subject to U.S. Federal income taxation regardless of the source of its income.
"NOTE" means, as the context may require, a Revolving Note, a Swing Line Note, a Registered Note, a Term A Note, a Term B Note or a Term D Note or any promissory note representing a Designated New Term Loan.
"OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrowers and each other Obligor arising under or in connection with this Agreement, the Notes, each Letter of Credit and each other Loan Document, and Hedging Obligations owed to a Lender or an Affiliate thereof (unless the Lender or such Affiliate otherwise agrees).
"OBLIGOR" means any Borrower or any other Person (other than any Agent, any Lender or the Issuer) obligated under any Loan Document.
"ORGANIC DOCUMENT" means, relative to any Obligor, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements (or the foreign equivalent thereof) applicable to any of its authorized shares of Capital Securities.
"OTHER TAXES" means any and all stamp, documentary or similar taxes, or any other excise or property taxes or similar levies that arise on account of any payment made or required to be made under any Loan Document or from the execution, delivery, registration, recording or enforcement of any Loan Document.
"PARTICIPANT" is defined in SECTION 11.11.2.
"PATENT SECURITY AGREEMENT" means the Patent Security Agreement, dated September 29, 1999, by WWI and each of its U.S. Subsidiaries in favor of the Administrative Agent, as amended, supplemented, amended and restated or otherwise modified.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor entity.
"PENSION PLAN" means a "PENSION PLAN", as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which WWI or any corporation, trade or business that is, along with WWI, a member of a Controlled Group, has or within the prior six years has had any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.
"PERCENTAGE" means, relative to any Lender, the applicable percentage relating to Additional Term A Loans, Term A Loans, Term B Loans, Term D Loans, Designated New Term Loans, Swing Line Loans, Revolving Loans or TLCs, as the case may be, as set forth opposite its name on SCHEDULE II hereto under the applicable column heading or set forth in Lender Assignment Agreement(s) under the applicable column heading, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to SECTION 11.11. A Lender shall not have any Commitment to make a particular Tranche of Loans or purchase TLCs (as the case may be) if its percentage under the respective column heading is zero (0%), and no Lender has a Commitment with respect to Existing Term A Loans or Existing Term B Loans as the Term A Loan Commitments and the Term B Loan Commitments (each as defined in the Existing Credit Agreement) have been terminated by the making of the Existing Term A Loans and the Existing Term B Loans.
"PERMITTED ACQUISITION" means an acquisition (whether pursuant to an acquisition of Capital Securities, assets or otherwise) by any Borrower or any of the Subsidiaries from any Person of a business in which the following conditions are satisfied:
(a) immediately before and after giving effect to such acquisition no Default shall have occurred and be continuing or would result therefrom (including under SECTION 7.2.1);
(b) if the acquisition is of Capital Securities of a Person such Person becomes a Subsidiary;
(c) (i) the consideration for such acquisition is the voting Capital Securities of WWI or (ii) the aggregate amount of other consideration (including cash) for all such acquisitions since the date hereof shall not exceed an amount equal to (x)(i) $25,000,000 in Fiscal Year 2001 plus (ii) an additional $10,000,000 added at the beginning of each Fiscal Year thereafter minus (y) the aggregate amount of all such Permitted Acquisitions made since the date hereof; and
(d) Holdings shall have delivered to the Agents a Compliance Certificate for the period of four full Fiscal Quarters immediately preceding such acquisition (prepared in good faith and in a manner and using such methodology which is consistent with the most recent financial statements delivered pursuant to SECTION 7.1.1) giving PRO FORMA effect to the consummation of such acquisition and evidencing compliance with the covenants set forth in SECTION 7.2.4.
"PERMITTED ARTAL INVESTOR GROUP" means ARTAL or any of its direct or indirect Wholly-owned Subsidiaries and ARTAL Group S.A., a Luxembourg corporation or any of its direct or indirect Wholly-owned Subsidiaries.
"PERMITTED DISPOSITION" means a Disposition in accordance with the terms of CLAUSE (B) (other than as permitted by CLAUSE (A)) of SECTION 7.2.9.
"PERSON" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency, limited liability company or any other entity, whether acting in an individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLEDGE AGREEMENTS" means, collectively, (a) the WWI Pledge Agreement,
(b) the ARTAL Pledge Agreement, (c) the HJH Pledge Agreement, (d) the Australian
Pledge Agreement, (e) the U.K. Pledge Agreement, and (f) each other pledge
agreement delivered from time to time pursuant to CLAUSE (B) of SECTION 7.1.7.
"PURCHASE AGREEMENT" is defined in the SECOND RECITAL.
"QUALIFIED ASSETS" is defined in CLAUSE (B) of SECTION 3.1.1.
"QUARTERLY PAYMENT DATE" means the last day of each March, June, September and December, or, if any such day is not a Business Day, the next succeeding Business Day.
"RATE PROTECTION AGREEMENTS" means, collectively, arrangements entered into by any Person designed to protect such Person against fluctuations in interest rates or currency exchange rates, pursuant to the terms of this Agreement.
"RECAPITALIZATION" means those transactions contemplated and undertaken pursuant to the Recapitalization Agreement.
"RECAPITALIZATION AGREEMENT" means that certain Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999 among WWI, ARTAL and HJH.
"REFINANCE" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any Indebtedness of WWI or any of its Subsidiaries existing on September 29, 1999 or otherwise permitted hereunder, including Indebtedness that Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that:
(i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced;
(ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and
(iii) such Refinancing Indebtedness has an aggregate principal amount (or if incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced;
PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (A) Indebtedness of a Subsidiary that Refinances Indebtedness of WWI or (B) Indebtedness of WWI or a Subsidiary that Refinances Indebtedness of another Subsidiary.
"REFUNDED SWING LINE LOANS" is defined in CLAUSE (B) of SECTION 2.3.2.
"REGISTER" is defined in SECTION 11.11.3.
"REGISTERED NOTE" means a promissory note of WWI payable to any Registered Noteholder, in the form of EXHIBIT A-8 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"REGISTERED NOTEHOLDER" means any Lender that has been issued a Registered Note.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 2.6.3.
"RELATED FUND" means, with respect to any Lender which is a fund that invests in loans, any other fund that invests in loans and is controlled by the same investment advisor of such Lender or by an Affiliate of such investment advisor.
"RELEASE" means a "RELEASE", as such term is defined in CERCLA.
"REQUIRED LENDERS" means, at any time, Lenders holding at least 51% of the Total Exposure Amount.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as in effect from time to time.
"RESTRICTED PAYMENTS" is defined in SECTION 7.2.6.
"REVOLVING LOAN" is defined in CLAUSE (A) of SECTION 2.1.2.
"REVOLVING LOAN COMMITMENT" is defined in CLAUSE (A) of SECTION 2.1.2.
"REVOLVING LOAN COMMITMENT AMOUNT" means, on any date, $45,000,000, as such amount may be (i) reduced from time to time pursuant to SECTION 2.2 or (ii) increased pursuant to SECTION 2.1.6.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the earliest of
(a) September 30, 2005;
(b) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to SECTION 2.2; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSES (B) or (C), the Revolving Loan Commitments shall terminate automatically and without any further action.
"REVOLVING NOTE" means a promissory note of WWI payable to a Lender, substantially in the form of EXHIBIT A-1 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED PARTIES" means, collectively, the Lenders, the Issuers, the Administrative Agent, the Syndication Agent, the Lead Arrangers, each counterparty to a Rate Protection Agreement that is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate thereof and (in each case) and each of their respective successors, transferees and assigns.
"SECURITY AGREEMENTS" means, collectively, (a) the WWI Security Agreement, (b) the Australian Security Agreement, (c) the U.K. Security Agreement, (d) the Patent Security Agreements, the Trademark Security Agreements and the Copyright Security Agreements, (e) the FNZ Security Agreement and (f) each other security agreement executed and delivered from time to time pursuant to CLAUSE (A) of SECTION 7.1.7, in each case, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"SENIOR DEBT" means all Debt other than Subordinated Debt.
"SENIOR DEBT TO EBITDA RATIO" means, as of the last day of any Fiscal Quarter, the ratio of
(a) Senior Debt outstanding on the last day of such Fiscal Quarter
TO
(b) EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters.
"SENIOR SUBORDINATED DEBT" means, collectively, debt of WWI under its 13% Senior Subordinated Notes in an aggregate principal amount of $150,000,000 and its 13% Senior Subordinated Notes in an aggregate principal amount of Euro 100,000,000, issued under the Senior Subordinated Note Indenture pursuant to a Rule 144A private placement.
"SENIOR SUBORDINATED NOTE INDENTURE" means, collectively, that certain Senior Subordinated Note Indenture, dated as of September 29, 1999 between WWI and Norwest Bank Minnesota, National Association, as trustee, related to the issuance of $150,000,000 Senior Subordinated Notes and that certain Senior Subordinated Note Indenture, dated as of September 29, 1999, between WWI and Norwest Bank Minnesota, National Association, as trustee, related to the issuance of Euro 100,000,000 Senior Subordinated Notes.
"SENIOR SUBORDINATED NOTEHOLDER" means, at any time, any holder of a Senior Subordinated Note.
"SENIOR SUBORDINATED NOTES" means those certain 13% Senior Subordinated Notes due 2009, issued pursuant to the Senior Subordinated Note Indenture.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and such person is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
"STATED AMOUNT" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof.
"STATED EXPIRY DATE" is defined in SECTION 2.6.
"STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).
"STATED MATURITY DATE" means
(a) in the case of any Revolving Loan, September 30, 2005;
(b) in the case of any Term A Loan, September 30, 2005;
(c) in the case of any Term B Loan, September 30, 2006;
(d) in the case of any Term D Loan, June 30, 2006;
(e) in the case of any TLC, September 30, 2006; and
(f) in the case of any Designated New Term Loan, as determined in accordance with SECTION 2.1.6.
"SUBORDINATED DEBT" means, as the context may require, (i) the unsecured Debt of WWI evidenced by the Senior Subordinated Notes and (ii) to the extent permitted by the Required Lenders, any other unsecured Debt of WWI subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Administrative Agent and Required Lenders.
"SUBORDINATED GUARANTY" means, collectively, (i) the Guaranty executed and delivered by certain Subsidiaries of WWI pursuant to Section 4.13 of the Senior Subordinated Note Indenture and (ii) each other guaranty, if any, executed from time to time by any Subsidiary of WWI pursuant to which the guarantor thereunder has any Contingent Liability with respect to any Subordinated Debt.
"SUBORDINATION PROVISIONS" is defined in SECTION 9.1.11.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership or other business entity of which more than 50% of the outstanding Capital Securities (or other ownership
interest) having ordinary voting power to elect a majority of the board of directors, managers or other voting members of the governing body of such entity (irrespective of whether at the time Capital Securities (or other ownership interest) of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term "Subsidiary" shall be a reference to a Subsidiary of WWI.
"SUBSIDIARY GUARANTY" means the Guaranty, dated September 29, 1999, by the U.S. Subsidiaries signatory thereto, UKHC1, UKHC2 and WWUK and its Subsidiaries in favor of the Administrative Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms.
"SWING LINE LENDER" means Scotiabank (or another Lender designated by Scotiabank with the consent of WWI, if such Lender agrees to be the Swing Line Lender hereunder), in such Person's capacity as the maker of Swing Line Loans.
"SWING LINE LOAN" is defined in CLAUSE (B) of SECTION 2.1.2.
"SWING LINE LOAN COMMITMENT" means, with respect to the Swing Line Lender, the Swing Line Lender's obligation pursuant to CLAUSE (B) of SECTION 2.1.2 to make Swing Line Loans and, with respect to each Lender with a Commitment to make Revolving Loans (other than the Swing Line Lender), such Lender's obligation to participate in Swing Line Loans pursuant to SECTION 2.3.2.
"SWING LINE LOAN COMMITMENT AMOUNT" means, on any date, $5,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.2.
"SWING LINE NOTE" means a promissory note of WWI payable to the Swing Line Lender, in substantially the form of EXHIBIT A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to the Swing Line Lender resulting from outstanding Swing Line Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"SYNDICATION AGENT" is defined in the PREAMBLE.
"TERM LOANS" means, collectively, the Term A Loans, the Term B Loans, the Designated New Term Loans and the Term D Loans.
"TERM A LOAN" is defined in CLAUSE (A) of SECTION 2.1.1.
"TERM A LOAN LENDER" means any Lender which has an outstanding Term A Loan.
"TERM A NOTE" means a promissory note of WWI, payable to the order of any Lender, in the form of EXHIBIT A-3 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term A Loans (including Additional Term A Loans), and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"TERM B LOAN" is defined in CLAUSE (A) of SECTION 2.1.1.
"TERM B LOAN LENDER" means any Lender which has an outstanding Term B Loan.
"TERM B NOTE" means promissory notes of WWI, payable to the order of any Lender, in the form of EXHIBITS A-5 and A-6 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term B Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"TERM D LOAN" is defined in CLAUSE (C) of SECTION 2.1.1.
"TERM D LOAN COMMITMENT" is defined in CLAUSE (C) of SECTION 2.1.1.
"TERM D LOAN COMMITMENT AMOUNT" means $20,000,000.
"TERM D LOAN COMMITMENT TERMINATION DATE" means the earliest of:
(a) January 31, 2001, if the Term D Loans have not been made on or prior to such date;
(b) the date of the making of the Term D Loans (immediately after the making of such Term D Loans on such date); and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSES (B) or (C), the Term D Loan Commitments shall terminate automatically and without any further action.
"TERM D LOAN LENDER" means any Lender which has a Percentage of the Term D Loan Commitment Amount or, after the making of the Term D Loan, has an outstanding Term D Loan.
"TERM D NOTE" means a promissory note of WWI, payable to the order of any Lender, in the form of EXHIBIT A-7 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term D Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
"TLC" means an instrument executed by the SP1 Borrower, which acknowledges the Indebtedness of the SP1 Borrower with respect to any Lender, in the form of EXHIBIT A-4 hereto (as such instrument may be amended, endorsed or otherwise modified from time to time), and also means all other instruments accepted from time to time in substitution therefor or renewal thereof.
"TLC COMMITMENT" is defined in SECTION 2.9.
"TLC DEED POLL" means the Deed Poll, dated as of September 29, 1999, among the SP1 Borrower and each TLC Holder (as defined therein), as amended, amended and restated, supplemented or otherwise modified from time to time.
"TLC LENDER" means any Lender which has an outstanding TLC Loan.
"TOTAL EXPOSURE AMOUNT" means, on any date of determination, the then outstanding principal amount of all Term Loans, the TLCs and the then effective Revolving Loan Commitment Amount.
"TRADEMARK SECURITY AGREEMENT" means the Trademark Security Agreement, dated September 29, 1999, by WWI and each of its U.S. Subsidiaries signatory thereto in favor of the Administrative Agent, as amended, supplemented, amended and restated or otherwise modified from time to time.
"TRANCHE" means, as the context may require, the (a) Loans constituting Term A Loans, Term B Loans, Term D Loans, Designated New Term Loans, Swing Line Loans or Revolving Loans or (b) TLCs.
"TRANSACTION" is defined in the SECOND RECITAL.
"TYPE" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York.
"UKHC1" means Weight Watchers UK Holding Ltd, a company incorporated under the laws of England.
"UKHC2" means Weight Watchers International Ltd, a company incorporated under the laws of England.
"U.K. PLEDGE AGREEMENT" means, collectively, (i) the Deeds of Charge
executed and delivered by WWI to UKHC1, UKHC2 and WWUK and its Subsidiaries and
(ii) each other
pledge agreement delivered pursuant to CLAUSE (B) of SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"U.K. SECURITY AGREEMENT" means, collectively, (i) the Debentures
executed and delivered by UKHC1, UKHC2 and WWUK and each of its Subsidiaries and
(ii) each other security agreement delivered pursuant to CLAUSE (A) of SECTION
7.1.7, as amended, amended and restated, supplemented or otherwise modified from
time to time pursuant to the terms thereof.
"U.K. SUBSIDIARY" means any Subsidiary that is incorporated under the laws of England.
"UNITED STATES" or "U.S." means the United States of America, its fifty States and the District of Columbia.
"U.S. DOLLAR" and the sign "$" mean lawful money of the United States.
"U.S. SUBSIDIARY" means any Subsidiary that is incorporated or organized under the laws of the United States or a state thereof or the District of Columbia.
"VOTING STOCK" means, with respect to any Person, Capital Securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
"WAIVER" means an agreement in favor of the Administrative Agent for the benefit of the Lenders and the Issuer in form and substance reasonably satisfactory to the Administrative Agent.
"WARNACO AGREEMENT" means that certain License Agreement, dated as of January 8, 1999, between Warnaco Inc., a Delaware corporation, and WWI.
"WEIGHCO ACQUISITION" is defined in the SECOND RECITAL.
"WEI" is defined in the SECOND RECITAL.
"WNI" is defined in the second recital.
"WSI" is defined in the second recital.
"WEIGHCO" is defined in the SECOND RECITAL.
"WEIGHCO BUSINESS" is defined in the SECOND RECITAL.
"WELFARE PLAN" means a "WELFARE PLAN", as such term is defined in section 3(1) of ERISA, and to which WWI or any of its Subsidiaries has any liability.
"WHOLLY-OWNED SUBSIDIARY" shall mean, with respect to any Person, any Subsidiary of such Person all of the Capital Securities (and all rights and options to purchase such Capital Securities) of which, other than directors' qualifying shares or shares sold pursuant to Local Management Plans, are owned, beneficially and of record, by such Person and/or one or more Wholly-owned Subsidiaries of such Person.
"WW AUSTRALIA" means Weight Watchers International Pty. Ltd. (ACN 070 836 449), an Australian company incorporated in the State of New South Wales and resident in Australia and the direct corporate parent of FPL and the SP1 Borrower.
"WWI COMMON SHARES" means shares of common stock of WWI, par value $1.00 per share.
"WWI GUARANTY" means the Guaranty made by WWI contained in ARTICLE
VIII.
"WWI PLEDGE AGREEMENT" means the Pledge Agreement, dated September 29, 1999, by WWI and its U.S. Subsidiaries signatory thereto in favor of the Administrative Agent, together with each Supplement thereto delivered pursuant to CLAUSE (B) of SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"WWI PREFERRED SHARES" means no par value preferred shares of WWI with an aggregate amount liquidation preference equal to $25,000,000.
"WWI SECURITY AGREEMENT" means the Security Agreement dated September 29, 1999, by WWI and all U.S. Subsidiaries of WWI (other than the Designated Subsidiary) in favor of the Administrative Agent, together with each Supplement thereto delivered pursuant to CLAUSE (A) of SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof.
"WWNA" is defined in the SECOND RECITAL.
"WWUK" means Weight Watchers UK Limited and its Subsidiaries.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each other Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and,
unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under SECTION 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles ("GAAP") as in effect as of April 24, 1999. For purposes of computing the covenants set forth in SECTION 7.2.4 (and any financial calculations required to be made or included within such ratios) as of the end of any Fiscal Quarter, all components of such ratios for the period of four Fiscal Quarters ending at the end of such Fiscal Quarter shall include (or exclude), without duplication, such components of such ratios attributable to any business or assets that have been acquired (or disposed of) by the Borrower or any of the Subsidiaries (including through mergers or consolidations) after the first day of such period of four Fiscal Quarters and prior to the end of such period, on a pro forma basis for such period of four Fiscal Quarters as if such acquisition or disposition had occurred on such first day of such period.
SECTION 1.5. CURRENCY CONVERSIONS. If it shall be necessary for purposes of this Agreement to convert an amount in one currency into another currency, unless otherwise provided herein, the exchange rate shall be determined by reference to the New York foreign exchange selling rates (such determination to be made as at the date of the relevant transaction), as determined by the Administrative Agent (in accordance with its standard practices).
ARTICLE II
CONTINUATION OF CERTAIN EXISTING LOANS, COMMITMENTS, BORROWING
AND ISSUANCE PROCEDURES, NOTES, LETTERS OF CREDIT AND TLC PROVISIONS
SECTION 2.1. LOAN COMMITMENTS. On the terms and subject to the conditions of this Agreement (including ARTICLE V), the Lenders, the Swing Line Lender and the Issuer severally agree to the continuation of Existing Loans and Existing Letters of Credit and to make Credit Extensions as set forth below.
SECTION 2.1.1. CONTINUATION OF EXISTING TERM LOANS; TERM LOAN COMMITMENTS. Subject to compliance by the Obligors with the terms of SECTIONS 2.1.4, 5.1 and 5.2:
(a) each of the parties hereto acknowledges and agrees that the Existing Term A Loans shall continue as Term A Loans (including the Additional Term A Loans and Designated Additional Term A Loans, being the "TERM A LOANS") and the Existing Term B Loans shall continue as Term B Loans (including any Designated Additional Term B Loans, being the "TERM B LOANS") for all purposes under this Agreement and the Loan
Documents, with each Lender's share of Term A Loans and Term B Loans being set forth opposite its name on SCHEDULE II hereto under the Term A Loan column or the Term B Loan column, as applicable, or set forth in a Lender Assignment Agreement under the Term A column or the Term B Loan column, as applicable, as such amount may be adjusted from time to time pursuant to the terms hereof;
(b) in a single Borrowing occurring on or prior to the Additional Term A Loan Commitment Termination Date, each Lender that has an Additional Term A Loan Commitment will make loans (relative to such Lender, its "ADDITIONAL TERM A LOANS") to the Borrower in an amount equal to such Lender's Percentage of the aggregate amount of the Borrowing of Additional Term A Loans requested by the Borrower to be made on such day (with the commitment of each such Lender described in this CLAUSE (B) herein referred to as its "ADDITIONAL TERM A LOAN COMMITMENT"); and
(c) in a single Borrowing occurring on or prior to the Term D Loan Commitment Termination Date, each Lender that has a Term D Loan Commitment will make loans (relative to such Lender, including any Designated Additional Term D Loans, its "TERM D LOANS") to the Borrower in an amount equal to such Lender's Percentage of the aggregate amount of the Borrowing of Term D Loans requested by the Borrower to be made on such day (with the commitment of each such Lender described in this CLAUSE (C) herein referred to as its "TERM D LOAN COMMITMENT").
No amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION 2.1.2. REVOLVING LOAN COMMITMENT AND SWING LINE LOAN COMMITMENT. Subject to compliance by the Obligors with the terms of SECTION 2.1.4, SECTION 5.1 and SECTION 5.2, the Revolving Loans and Swing Line Loans will be continued and/or made as set forth below:
(a) From time to time on any Business Day occurring concurrently with (or after) the making of the Term Loans but prior to the Revolving Loan Commitment Termination Date, each Lender that has a Revolving Loan Commitment will make loans (relative to such Lender, its "REVOLVING LOANS") to WWI in U.S. Dollars, equal to such Lender's Percentage of the aggregate amount of the Borrowing of the Revolving Loans requested by such Borrower to be made on such day. The Commitment of each Lender described in this CLAUSE (A) is herein referred to as its "REVOLVING LOAN COMMITMENT". On the terms and subject to the conditions hereof, any Borrower may from time to time borrow, prepay and reborrow the Revolving Loans. All Existing Revolving Loans shall be continued as Revolving Loans hereunder.
(b) From time to time on any Business Day occurring concurrently with (or after) the making of the Term Loans, but prior to the Revolving Loan Commitment Termination Date, the Swing Line Lender will make loans (relative to the Swing Line Lender, its
"SWING LINE LOANS") to WWI equal to the principal amount of the Swing Line Loans requested by WWI. On the terms and subject to the conditions hereof, WWI may from time to time borrow, prepay and reborrow such Swing Line Loans. All Existing Swing Line Loans shall be continued as Swing Line Loans hereunder.
SECTION 2.1.3. LETTER OF CREDIT COMMITMENT. Subject to compliance by the Obligors with the terms of SECTION 2.1.5, SECTION 5.1 and SECTION 5.2, from time to time on any Business Day occurring from and after September 29, 1999 but prior to the Revolving Loan Commitment Termination Date, the Issuer will
(a) issue one or more standby or documentary letters of credit (each referred to as a "LETTER OF CREDIT") for the account of WWI in the Stated Amount requested by WWI on such day; or
(b) extend the Stated Expiry Date of an existing standby
Letter of Credit previously issued hereunder to a date not later than
the earlier of (x) the Revolving Loan Commitment Termination Date and
(y) one year from the date of such extension.
All Existing Letters of Credit shall be maintained as Letters of Credit hereunder.
SECTION 2.1.4. LENDERS NOT PERMITTED OR REQUIRED TO MAKE THE LOANS. No Lender shall be permitted or required to, and WWI shall not request that any Lender, make
(a) any Additional Term A Loan or Term D Loan (as the case may be) if, after giving effect thereto, the aggregate original principal amount of all the Additional Term A Loans or Term D Loans (as the case may be):
(i) of all Lenders would exceed the Additional Term A Loan Commitment Amount (in the case of Additional Term A Loans), or Term D Loan Commitment Amount (in the case of Term D Loans); or
(ii) of such Lender would exceed such Lender's Percentage of the Additional Term A Loan Amount (in the case of Additional Term A Loans) or the Term D Loan Amount (in the case of Term D Loans);
(b) any Revolving Loan or Swing Line Loan if, after giving effect thereto, the aggregate outstanding principal amount of all the Revolving Loans and Swing Line Loans:
(i) of all the Lenders with Revolving Loan Commitments, together with the aggregate amount of all Letter of Credit Outstandings, would exceed the Revolving Loan Commitment Amount; or
(ii) of such Lender with a Revolving Loan Commitment (other than the Swing Line Lender), together with such Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings, would exceed such Lender's Percentage of the Revolving Loan Commitment Amount; or
(c) any Swing Line Loan if after giving effect to the making of such Swing Line Loan, the outstanding principal amount of all Swing Line Loans would exceed the then existing Swing Line Loan Commitment Amount.
SECTION 2.1.5. ISSUER NOT PERMITTED OR REQUIRED TO ISSUE LETTERS OF CREDIT. No Issuer shall be permitted or required to issue any Letter of Credit if, after giving effect thereto, (a) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b) the sum of the aggregate amount of all Letter of Credit Outstandings plus the aggregate principal amount of all Revolving Loans and Swing Line Loans then outstanding would exceed the Revolving Loan Commitment Amount.
SECTION 2.1.6. DESIGNATED ADDITIONAL LOANS. At any time that no Default
has occurred and is continuing, from time to time and on or before September 30,
2004, WWI may notify the Administrative Agent that WWI is requesting that, on
the terms and subject to the conditions contained in this Agreement, the Lenders
and/or other lenders not then a party to this Agreement provide up to an
aggregate amount of $30,000,000 in commitments to provide (i) additional
Revolving Loan Commitments ("DESIGNATED ADDITIONAL REVOLVING LOAN COMMITMENTS),
(ii) additional Term A Loans ("DESIGNATED ADDITIONAL TERM A LOANS"), (iii)
additional Term B Loans ("DESIGNATED ADDITIONAL TERM B LOANS"), (iv) additional
Term D Loans ("DESIGNATED ADDITIONAL TERM D LOANS" and/or (v) loans to be
provided under a new tranche of Term Loans ("DESIGNATED NEW TERM LOANS") which
have terms and conditions, (including interest rate and amortization schedule)
as mutually agreed to by WWI, the Agents and the Lenders providing such new
tranche of Loans. Upon receipt of any such notice, the Administrative Agent
shall use commercially reasonable efforts to arrange for the Lenders or other
Eligible Institutions to provide such additional commitments; PROVIDED that the
Administrative Agent will first offer each of the Lenders that then has a
Percentage of the Commitment or Loans of the type proposed to be obtained a pro
rata portion of any such additional commitment. Nothing contained in this
SECTION 2.1.6 or otherwise in this Agreement is intended to commit any Lender or
any Agent to provide any portion of any such additional commitments. If and to
the extent that any Lenders and/or other lenders agree, in their sole
discretion, to provide any such additional commitments, (i) in the case of
Designated Additional Revolving Loan Commitments, the Revolving Loan Commitment
Amount shall be increased by the amount of the additional Revolving Loan
Commitments agreed to be so provided, (ii) subject to compliance with the terms
of SECTION 5.2 and such other terms and conditions mutually agreed to among WWI,
the Agents and the Lenders providing any such other commitments, Loans of the
type requested by WWI will be made on the date as agreed among such Persons,
(iii) the Percentages of the respective Lenders in respect of the applicable
Commitment or type of Loan shall be proportionally adjusted (provided that the
Percentage of each Lender shall not be increased without the consent of such
Lender), (iv) in the
case of Designated Additional Revolving Loan Commitment at such time and in such manner as WWI and the Administrative Agent shall agree (it being understood that WWI and the Agents will use commercially reasonable efforts to avoid the prepayment or assignment of any LIBO Rate Loan on a day other than the last day of the Interest Period applicable thereto), the Lenders shall assign and assume outstanding Revolving Loans and participations in outstanding Letters of Credit so as to cause the amounts of such Revolving Loans and participations in Letters of Credit held by each Lender to conform to the respective Percentages of the Revolving Loan Commitment of the Lenders and (v) WWI shall execute and deliver any additional Notes or other amendments or modifications to this Agreement or any other Loan Document as the Administrative Agent may reasonably request. Any fees payable in respect of any commitment provided for in this SECTION 2.1.6 shall be as agreed to by WWI and the Administrative Agent. Any designation of a commitment hereunder (i) shall be irrevocable, (ii) shall reduce the amount of commitments that may be requested under the SECTION 2.1.6 PRO TANTO and (iii) shall be in a minimum principal amount of $5,000,000 and integral multiples of $1,000,000.
SECTION 2.2. REDUCTION OF THE COMMITMENT AMOUNTS. The Commitment Amounts are subject to reductions from time to time pursuant to this SECTION 2.2.
SECTION 2.2.1. OPTIONAL. WWI may, from time to time on any Business Day occurring after the time of the initial Credit Extension hereunder, voluntarily reduce the Swing Line Loan Commitment Amount, the Letter of Credit Commitment Amount or the Revolving Loan Commitment Amount; PROVIDED, HOWEVER, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $100,000. Any reduction of the Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment Amount below the sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit Commitment Amount shall result in an automatic and corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount (as directed by WWI in a notice to the Administrative Agent delivered together with the notice of such voluntary reduction in the Revolving Loan Commitment Amount) to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or the Issuer.
SECTION 2.2.2. MANDATORY. Following the prepayment in full of the Term Loans and the TLCs, the Revolving Loan Commitment Amount shall, without any further action, automatically and permanently be reduced on the date the Term Loans and the TLCs would otherwise have been required to be prepaid with any Net Disposition Proceeds, Net Equity Proceeds, or Excess Cash Flow, in an amount equal to the amount by which the Term Loans and the TLCs would otherwise be required to be prepaid if Term Loans and the TLCs had been outstanding. Any reduction of the Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment Amount below the sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit Commitment Amount shall result in an automatic and
corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount (as directed by WWI in a notice to the Administrative Agent) to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or the Issuer.
SECTION 2.3. BORROWING PROCEDURES AND FUNDING MAINTENANCE. Loans shall be made by the Lenders in accordance with this Section.
SECTION 2.3.1. TERM LOANS AND REVOLVING LOANS. By delivering a Borrowing Request to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, WWI may from time to time irrevocably request, on not less than one (in the case of Base Rate Loans) and three (in the case of LIBO Rate Loans) nor more than (in each case) five Business Days' notice, that a Borrowing be made, in the case of LIBO Rate Loans, in a minimum amount of $2,000,000, and an integral multiple of $500,000, and in the case of Base Rate Loans, in a minimum amount of $500,000 and an integral multiple thereof or, in either case, in the unused amount of the applicable Commitment. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 11:00 a.m., New York time, on such Business Day each Lender shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the applicable Borrower by wire transfer to the accounts such Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan.
SECTION 2.3.2. SWING LINE LOANS.
(a) By telephonic notice, promptly followed (within three Business Days) by the delivery of a confirming Borrowing Request, to the Swing Line Lender on or before 11:00 a.m., New York time, on a Business Day, WWI may from time to time irrevocably request that Swing Line Loans be made by the Swing Line Lender in an aggregate minimum principal amount of $200,000 and an integral multiple of $100,000. Each request by WWI for a Swing Line Loan shall constitute a representation and warranty by WWI that on the date of such request and (if different) the date of the making of the Swing Line Loan, both immediately before and after giving effect to such Swing Line Loan and the application of the proceeds thereof, the statements made in SECTION 5.2.1 are true and correct. All Swing Line Loans shall be made as Base Rate Loans and shall not be entitled to be converted into LIBO Rate Loans. The proceeds of each Swing Line Loan shall be made available by the Swing Line Lender, by its close of business on the Business Day telephonic notice is received by it as provided in the preceding sentences, to WWI by wire transfer to the accounts WWI shall have specified in its notice therefor.
(b) If (i) any Swing Line Loan shall be outstanding for more than four full Business Days or (ii) after giving effect to any request for a Swing Line Loan or a Revolving Loan the aggregate principal amount of Revolving Loans and Swing Line Loans outstanding to the Swing Line Lender, together with the Swing Line Lender's Percentage of all Letter of Credit Outstandings, would exceed the Swing Line Lender's Percentage of the Revolving Loan Commitment Amount, the Swing Line Lender, at any time in its sole and absolute discretion may request each Lender that has a Revolving Loan Commitment, and each such Lender, including the Swing Line Lender hereby agrees, to make a Revolving Loan (which shall always be initially funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of the amount of the Swing Line Loans ("REFUNDED SWING LINE LOANS") outstanding on the date such notice is given. On or before 11:00 a.m. (New York time) on the first Business Day following receipt by each Lender of a request to make Revolving Loans as provided in the preceding sentence, each such Lender (other than the Swing Line Lender) shall deposit in an account specified by the Administrative Agent to the Lenders from time to time the amount so requested in same day funds, whereupon such funds shall be immediately delivered to the Swing Line Lender (and not WWI) and applied to repay the Refunded Swing Line Loans. On the day such Revolving Loans are made, the Swing Line Lender's Percentage of the Refunded Swing Line Loans shall be deemed to be paid. Upon the making of any Revolving Loan pursuant to this clause, the amount so funded shall become due under such Lender's Revolving Note and shall no longer be owed under the Swing Line Note. Each Lender's obligation to make the Revolving Loans referred to in this clause shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, WWI or any other Person for any reason whatsoever; (ii) the occurrence or continuance of any Default; (iii) any adverse change in the condition (financial or otherwise) of WWI or any other Obligor, subsequent to the date of the making of a Swing Line Loan; (iv) the acceleration or maturity of any Loans or the termination of the Revolving Loan Commitment after the making of any Swing Line Loan; (v) any breach of this Agreement by WWI, any other Obligor or any other Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
(c) In the event that (i) WWI or any Subsidiary is subject to any bankruptcy or insolvency proceedings as provided in SECTION 9.1.9 or (ii) the Swing Line Lender otherwise requests, each Lender with a Revolving Loan Commitment shall acquire without recourse or warranty an undivided participation interest equal to such Lender's Percentage of any Swing Line Loan otherwise required to be repaid by such Lender pursuant to the preceding clause by paying to the Swing Line Lender on the date on which such Lender would otherwise have been required to make a Revolving Loan in respect of such Swing Line Loan pursuant to the preceding clause, in same day funds, an amount equal to such Lender's Percentage of such Swing Line Loan, and no Revolving Loans shall be made by such Lender pursuant to the preceding clause. From and after the date
on which any Lender purchases an undivided participation interest in a Swing Line Loan pursuant to this clause, the Swing Line Lender shall distribute to such Lender (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participation interest is outstanding and funded) its ratable amount of all payments of principal and interest in respect of such Swing Line Loan in like funds as received; PROVIDED, HOWEVER, that in the event such payment received by the Swing Line Lender is required to be returned to WWI, such Lender shall return to the Swing Line Lender the portion of any amounts which such Lender had received from the Swing Line Lender in like funds.
(d) Notwithstanding anything herein to the contrary, the Swing Line Lender shall not be obligated to make any Swing Line Loans if it has elected after the occurrence of a Default not to make Swing Line Loans and has notified WWI in writing or by telephone of such election. The Swing Line Lender shall promptly give notice to the Lenders of such election not to make Swing Line Loans.
SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering a Continuation/ Conversion Notice to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, WWI may from time to time irrevocably elect, on not less than one (in the case of a conversion of LIBO Rate Loans to Base Rate Loans) and three (in the case of a continuation of LIBO Rate Loans or a conversion of Base Rate Loans into LIBO Rate Loans) nor more than (in each case) five Business Days' notice that all, or any portion in an aggregate minimum amount of $2,000,000 and an integral multiple of $500,000, in the case of the continuation of, or conversion into, LIBO Rate Loans, or an aggregate minimum amount of $500,000 and an integral multiple thereof, in the case of the conversion into Base Rate Loans (other than Swing Line Loans as provided in CLAUSE (A) of SECTION 2.3.2) be, in the case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); PROVIDED, HOWEVER, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of the relevant Lenders, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. FUNDING. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan, so long as such action does not result in increased costs to WWI; PROVIDED, HOWEVER, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of WWI to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility; and PROVIDED FURTHER, HOWEVER, that such Lender shall cause such foreign
branch, Affiliate or international banking facility to comply with the applicable provisions of CLAUSE (B) of SECTION 4.6 with respect to such LIBO Rate Loan. In addition, WWI hereby consents and agrees that, for purposes of any determination to be made for purposes of SECTIONS 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing U.S. Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.6. ISSUANCE PROCEDURES. By delivering to the Administrative Agent an Issuance Request on or before 12:00 noon, New York time, on a Business Day, WWI may, from time to time irrevocably request, on not less than three nor more than ten Business Days' notice (or such shorter notice as may be acceptable to the Issuer), in the case of an initial issuance of a Letter of Credit, and not less than three nor more than ten Business Days' notice (unless a shorter notice period is acceptable to the Issuer) prior to the then existing Stated Expiry Date of a Letter of Credit, in the case of a request for the extension of the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable Letter of Credit for WWI's account or for the account of any wholly-owned U.S. Subsidiary of WWI that is a party to the Subsidiary Guaranty and the WWI Security Agreement and whose outstanding Capital Securities is pledged to the Administrative Agent for the benefit of the Lenders pursuant to the WWI Pledge Agreement, in such form as may be requested by WWI and approved by the Issuer, solely for the purposes described in SECTION 7.1.9. Notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, WWI hereby acknowledges and agrees that it shall be obligated to reimburse the Issuer upon each Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder (whether the account party on such Letter of Credit is WWI or a Subsidiary of WWI). Upon receipt of an Issuance Request, the Administrative Agent shall promptly notify the Issuer and each Lender thereof. Each Letter of Credit shall by its terms be stated to expire on a date (its "STATED EXPIRY DATE") no later than the earlier to occur of (i) the Revolving Loan Commitment Termination Date or (ii) one year from the date of its issuance. The Issuer will make available to the beneficiary thereof the original of each Letter of Credit which it issues hereunder.
SECTION 2.6.1. OTHER LENDERS' PARTICIPATION. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto (or the continuation of an
Existing Letter of Credit hereunder), and without further action, each Lender
(other than the Issuer) that has a Revolving Loan Commitment shall be deemed to
have irrevocably purchased from the Issuer, to the extent of its Percentage to
make Revolving Loans, and the Issuer shall be deemed to have irrevocably granted
and sold to such Lender a participation interest in such Letter of Credit
(including the Contingent Liability and any Reimbursement Obligation and all
rights with respect thereto), and such Lender shall, to the extent of its
Revolving Loan Commitment Percentage, be responsible for reimbursing promptly
(and in any event within one Business Day) the Issuer for Reimbursement
Obligations which have not been reimbursed by WWI in accordance with SECTION
2.6.3. In addition, such Lender shall, to the extent of its Percentage to make
Revolving Loans, be entitled to receive a ratable portion of the Letter of
Credit fees payable pursuant to
SECTION 3.3.3 with respect to each Letter of Credit and of interest payable pursuant to SECTION 3.2 with respect to any Reimbursement Obligation. To the extent that any Lender has reimbursed the Issuer for a Disbursement as required by this Section, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from WWI or otherwise) in respect of such Disbursement.
SECTION 2.6.2. DISBURSEMENTS; CONVERSION TO REVOLVING LOANS. The Issuer will notify WWI and the Administrative Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "DISBURSEMENT DATE") such payment shall be made (each such payment, a "DISBURSEMENT"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on the first Business Day following the Disbursement Date (the "DISBURSEMENT DUE DATE"), WWI will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at the rate per annum otherwise applicable to Revolving Loans (made as Base Rate Loans) from and including the Disbursement Date to but excluding the Disbursement Due Date and, thereafter (unless such Disbursement is converted into a Base Rate Loan on the Disbursement Due Date), at a rate per annum equal to the rate per annum then in effect with respect to overdue Revolving Loans (made as Base Rate Loans) pursuant to SECTION 3.2.2 for the period from the Disbursement Due Date through the date of such reimbursement; PROVIDED, HOWEVER, that, if no Default shall have then occurred and be continuing, unless WWI has notified the Administrative Agent no later than one Business Day prior to the Disbursement Due Date that it will reimburse the Issuer for the applicable Disbursement, then the amount of the Disbursement shall be deemed to be a Revolving Loan constituting a Base Rate Loan and following the giving of notice thereof by the Administrative Agent to the Lenders, each Lender with a commitment to make Revolving Loans (other than the Issuer) will deliver to the Issuer on the Disbursement Due Date immediately available funds in an amount equal to such Lender's Percentage of such Revolving Loan. Each conversion of Disbursement amounts into Revolving Loans shall constitute a representation and warranty by WWI that on the date of the making of such Revolving Loan all of the statements set forth in SECTION 5.2.1 are true and correct.
SECTION 2.6.3. REIMBURSEMENT. The obligation (a "REIMBURSEMENT OBLIGATION") of WWI under SECTION 2.6.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon) not converted into a Base Rate Loan pursuant to SECTION 2.6.2, and, upon the failure of WWI to reimburse the Issuer and the giving of notice thereof by the Administrative Agent to the Lenders, each Lender's (to the extent it has a Revolving Loan Commitment) obligation under SECTION 2.6.1 to reimburse the Issuer or fund its Percentage of any Disbursement converted into a Base Rate Loan, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which WWI or such Lender, as the case may be, may have or have had against the Issuer or any such Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such Disbursement is
determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; PROVIDED, HOWEVER, that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of WWI or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuer.
SECTION 2.6.4. DEEMED DISBURSEMENTS. Upon the occurrence and during the continuation of any Event of Default of the type described in SECTION 9.1.9 or, with notice from the Administrative Agent acting at the direction of the Required Lenders, upon the occurrence and during the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all Letters of Credit issued and outstanding shall, without demand upon or notice to WWI or any other Person, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and
(b) upon notification by the Administrative Agent to WWI of its obligations under this Section, WWI shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by the Issuer.
Any amounts so payable by WWI pursuant to this Section shall be deposited in cash with the Administrative Agent and held as collateral security for the Obligations in connection with the Letters of Credit issued by the Issuer. At such time when the Events of Default giving rise to the deemed disbursements hereunder shall have been cured or waived, the Administrative Agent shall return to WWI all amounts then on deposit with the Administrative Agent pursuant to this Section, together with accrued interest at the Federal Funds Rate, which have not been applied to the satisfaction of such Obligations.
SECTION 2.6.5. NATURE OF REIMBURSEMENT OBLIGATIONS. WWI and, to the extent set forth in SECTION 2.6.1, each Lender with a Revolving Loan Commitment, shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or willful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or
(e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender with a Revolving Loan Commitment hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon WWI, each Obligor and each such Lender, and shall not put the Issuer under any resulting liability to WWI, any Obligor or any such Lender, as the case may be.
SECTION 2.7. NOTES. Each Lender's Loans under a Commitment for a Loan shall be evidenced, if such Lender shall request, by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the original applicable Commitment Amount. All Swing Line Loans made by the Swing Line Lender shall be evidenced by a Swing Line Note payable to the order of the Swing Line Lender in a maximum principal amount equal to the Swing Line Loan Commitment Amount. WWI hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, INTER ALIA, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall be conclusive and binding on WWI absent manifest error; PROVIDED, HOWEVER, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of WWI or any other Obligor.
SECTION 2.8. REGISTERED NOTES. (a) Any Non-U.S. Lender that could become completely exempt from withholding of any taxes in respect of payment of any interest due to such Non-U.S. Lender under this Agreement if the Notes held by such Lender were in registered form for U.S. Federal income tax purposes may request WWI (through the Administrative Agent), and WWI agrees (i) to exchange for any Notes held by such Lender, or (ii) to issue to such Lender on the date it becomes a Lender, promissory notes(s) registered as provided in
CLAUSE (B) of this SECTION 2.8 (each a Registered Note). Registered Notes may not be exchanged for Notes that are not Registered Notes.
(b) The Administrative Agent shall enter, in the Register, the name of the registered owner of the Non-U.S. Lender Obligation(s) evidenced by a Registered Note.
(c) The Register shall be available for inspection by WWI and any Lender at any reasonable time upon reasonable prior notice.
SECTION 2.9. TLC FACILITY. Each TLC Lender has purchased, on September 29, 1999, TLCs from the SP1 Borrower (with the commitment of each such TLC Lender to purchase TLCs being, its "TLC COMMITMENT") equal to such TLC Lender's Percentage of the TLC Commitment Amount. No amounts paid or prepaid with respect to TLCs may be reborrowed.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. REPAYMENTS AND PREPAYMENTS; APPLICATION.
SECTION 3.1.1. REPAYMENTS AND PREPAYMENTS. The SP1 Borrower and WWI shall repay in full the unpaid principal amount of each Loan and TLC, as applicable, upon the Stated Maturity Date therefor. Prior thereto,
(a) any Borrower may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any
(i) Loan (other than Swing Line Loans) or TLC,
PROVIDED, HOWEVER, that
(A) any such prepayment of the Term A Loans or Term B Loans or Designated New Term Loans or Term D Loans or TLCs shall be made PRO RATA among such Term A Loans or Term B Loans or Designated New Term Loans or Term D Loans or TLCs of the same type and if applicable, having the same Interest Period as all Lenders that have made such Term A Loans or Term B Loans or Designated New Term Loans or Term D Loans or TLCs, and any such prepayment of Revolving Loans shall be made PRO RATA among the Revolving Loans of the same type and, if applicable, having the same Interest Period as all Lenders that have made such Revolving Loans;
(B) the Borrowers shall comply with SECTION 4.4 in the event that any LIBO Rate Loan is prepaid on any day other than the last day of the Interest Period for such Loan;
(C) all such voluntary prepayments shall require at least three but no more than five Business Days' prior written notice to the Administrative Agent; and
(D) all such voluntary partial prepayments shall be, in the case of LIBO Rate Loans or TLCs bearing interest with reference to the LIBO Rate, in an aggregate minimum amount of $2,000,000 and an integral multiple of $500,000 and, in the case of Base Rate Loans or TLCs bearing interest with reference to the Base Rate, in an aggregate minimum amount of $500,000 and an integral multiple thereof; or
(ii) Swing Line Loans, PROVIDED that all such voluntary prepayments shall require prior telephonic notice to the Swing Line Lender on or before 1:00 p.m., New York time, on the day of such prepayment (such notice to be confirmed in writing within 24 hours thereafter);
PROVIDED, that in the event such prepayment of Term B Loans or TLCs occurs (x) after September 29, 1999 and on any day prior to September 29, 2000 thereof, WWI shall pay to the Administrative Agent for the account of all Term B Lenders or TLC Lenders, as the case may be, a fee in the amount of 2% of such prepayment and (y) on and after September 29, 2000 and on or prior to September 29, 2001, WWI shall pay the Administrative Agent for the account of all Term B Lenders or TLC Lenders, as the case may be, a fee in the amount of 1% of such prepayment;
(b) the SP1 Borrower and WWI, as the case may be, shall no
later than one Business Day following the receipt by WWI or any of its
Subsidiaries of any Net Disposition Proceeds, deliver to the
Administrative Agent a calculation of the amount of such Net
Disposition Proceeds and, subject to the following PROVISO, make a
mandatory prepayment of the Term Loans and TLCs in an amount equal to
100% of such Net Disposition Proceeds, to be applied as set forth in
SECTION 3.1.2; PROVIDED, HOWEVER, that, at the option of WWI and so
long as no Default shall have occurred and be continuing, WWI may use
or cause the appropriate Subsidiary to use the Net Disposition Proceeds
to purchase assets useful in the business of WWI and its Subsidiaries
or to purchase a majority controlling interest in a Person owning such
assets or to increase any such controlling interest already maintained
by it; PROVIDED, THAT if such Net Disposition Proceeds arise from or
are related to a Disposition of assets of a Guarantor then any such
reinvestment must either be made by or in a Guarantor or a Person which
upon the making of such reinvestment becomes a Guarantor (with such
assets or interests collectively referred to as "QUALIFIED ASSETS")
within 365 days after the consummation
(and with the Net Disposition Proceeds) of such sale, conveyance or disposition, and in the event WWI elects to exercise its right to purchase Qualified Assets with the Net Disposition Proceeds pursuant to this clause, WWI shall deliver a certificate of an Authorized Officer of WWI to the Administrative Agent within 30 days following the receipt of Net Disposition Proceeds setting forth the amount of the Net Disposition Proceeds which WWI expects to use to purchase Qualified Assets during such 365 day period; PROVIDED FURTHER, that WWI and its Subsidiaries shall only be permitted to reinvest Net Disposition Proceeds in Qualified Assets to the extent permitted by SECTION 7.2.5 over the term of this Agreement. If and to the extent that WWI has elected to reinvest Net Disposition Proceeds as permitted above, then on the date which is 365 days (in the case of CLAUSE (B)(I) below) and 370 days (in the case of CLAUSE (B)(II) below) after the relevant sale, conveyance or disposition, WWI shall (i) deliver a certificate of an Authorized Officer of WWI to the Administrative Agent certifying as to the amount and use of such Net Disposition Proceeds actually used to purchase Qualified Assets and (ii) deliver to the Administrative Agent, for application in accordance with this clause and SECTION 3.1.2, an amount equal to the remaining unused Net Disposition Proceeds;
(c) the SP1 Borrower and WWI, as applicable, shall, no later than 5 Business Days following the delivery of WWI's annual audited financial reports required pursuant to CLAUSE (B) of SECTION 7.1.1 (beginning with the financial reports delivered in respect of the 2001 Fiscal Year), deliver to the Administrative Agent a calculation of the Excess Cash Flow for (i) the 2001 Fiscal Year the 20-month period ended December 31, 2001 and (ii) thereafter for such Fiscal Year and no later than 5 Business Days following the delivery of such calculation, make a mandatory prepayment of the Term Loans and TLCs in an aggregate amount equal to 50% of the Excess Cash Flow (if any) for such period, to be applied as set forth in SECTION 3.1.2;
(d) the SP1 Borrower and WWI, as applicable, concurrently with WWI's receipt of any Net Equity Proceeds, deliver to the Administrative Agent a calculation of the amount of such Net Equity Proceeds, and no later than 5 Business Days following the delivery of such calculation, make a mandatory prepayment of the Term Loans and TLCs in an aggregate amount equal to 50% of such Net Equity Proceeds, to be applied as set forth in SECTION 3.1.2; PROVIDED, that all such Net Equity Proceeds shall be deposited in a cash collateral account with the Administrative Agent upon receipt pending application to the Loans pursuant to this clause;
(e) WWI shall, on each date when any reduction in the Revolving Loan Commitment Amount shall become effective, including pursuant to SECTION 2.2 or SECTION 3.1.2, make a mandatory prepayment of Revolving Loans and (if necessary) Swing Line Loans, and (if necessary) deposit with the Administrative Agent cash collateral for Letter of Credit Outstandings) in an aggregate amount equal to the excess, if any, of the aggregate outstanding principal amount of all Revolving Loans, Swing Line
Loans and Letters of Credit Outstanding over the Revolving Loan Commitment Amount as so reduced;
(f) WWI shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term A Loans in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date (as such amounts may have otherwise been reduced pursuant to this Agreement), as applicable:
03/31/00 through (and including)
09/30/04 $3,750,000
10/01/04 through (and including)
06/30/05 $5,312,500
07/01/05 through (and including)
Stated Maturity Date $5,312,500, or the
then outstanding
principal amount of
all Term A Loans, if
different;
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PROVIDED, THAT each remaining amortization amount of Term A Loans occurring after the date of the making of a Designated Additional Term A Loan will be increased pro rata by the aggregate principal amount of any Designated Additional Term A Loan.
(g) WWI shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term B Loans in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date (as such amounts may have otherwise been reduced pursuant to this Agreement), as applicable:
03/31/00 through (and including)
09/30/05 $187,500
10/01/05 through (and including)
06/30/06 $17,671,875
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07/01/06 through (and including)
Stated Maturity Date $17,671,875, or the
then outstanding
principal amount of
all Term B Loans, if
different;
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PROVIDED, THAT each remaining amortization amount of Term B Loans occurring after the date of the making of a Designated Additional Term B Loan will be increased pro rata by the aggregate principal amount of any Designated Additional Term B Loan.
(h) WWI shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term D Loans in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date (as such amounts may have otherwise been reduced pursuant to this Agreement), as applicable:
03/31/01 through (and including)
09/30/05 $50,000
10/01/05 through (and including)
Stated Maturity Date $6,350,000, or the
then outstanding
principal amount of
all Term D Loans, if
different;
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PROVIDED, THAT each remaining amortization amount of Term D Loans occurring after the date of the making of a Designated Additional Term D Loan will be increased pro rata by the aggregate principal amount of any Designated Additional Term D Loan.
(i) the SP1 Borrower shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all TLCs in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date, as applicable (as such amounts may have otherwise been reduced pursuant to this Agreement):
03/31/00 through (and including)
09/30/05 $217,500
10/01/05 through (and including)
06/30/06 $20,499,375
07/01/06 through (and including)
Stated Maturity Date $20,499,375, or the
then outstanding
principal amount of
all TLCs, if
different;
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(j) the SP1 Borrower and WWI, as the case may be, shall, immediately upon any acceleration of the Stated Maturity Date of any Loans or Obligations pursuant to SECTION 9.2 or SECTION 9.3, repay all Loans and TLCs and provide the Administrative Agent with cash collateral in an amount equal to the Letter of Credit Outstandings, unless, pursuant to SECTION 9.3, only a portion of all Loans and TLCs and Obligations are so accelerated (in which case the portion so accelerated shall be so prepaid or cash collateralized with the Administrative Agent);
(k) the SP1 Borrower shall, immediately upon receipt of proceeds in connection with the repayment of any intercompany loan payable to the SP1 Borrower, make a mandatory prepayment of the TLCs, to be applied as set forth in SECTION 3.1.2, in an amount equal to the sum of such proceeds, other than (x) scheduled amortization payments thereof and (y) any other payment to the SP1 Borrower which would otherwise result in a mandatory prepayment under this SECTION 3.1.1; and
(l) WWI shall pay the principal amount of the Designated New
Term Loans at such times and in such amounts as determined pursuant to
SECTION 2.1.6;
provided that in the event such prepayment under CLAUSE (B) or (D) of this
Section occurs (x) after September 29, 1999 and on any day prior to September
29, 2000, WWI shall pay to the Administrative Agent for the account of all Term
B Lenders or TLC Lenders, as the case may be, a fee in the amount of 2% of such
prepayment and (y) on and after September 29, 2000 and on or prior to September
29, 2001, WWI shall pay the Administrative Agent for the account of all Term B
Lenders or TLC Lenders, as the case may be, a fee in the amount of 1% of such
prepayment.
Each prepayment of any Loans or TLCs made pursuant to this Section shall be without premium or penalty, except as may be required by SECTION 4.4. No prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to CLAUSES (A) of SECTION 3.1.1 shall cause a reduction in the Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as the case may be.
SECTION 3.1.2. APPLICATION.
(a) Subject to CLAUSE (B), each prepayment or repayment of the principal of the Loans or TLCs shall be applied, to the extent of such prepayment or repayment, FIRST, to the principal amount thereof being maintained as Base Rate Loans or bearing interest with reference to the Base Rate, as the case may be, and SECOND, to the principal amount thereof being maintained as LIBO Rate Loans or bearing interest with reference to the LIBO Rate, as the case may be.
(b) Each voluntary prepayment of Term Loans or TLCs and each prepayment of Term Loans and TLCs made pursuant to CLAUSES (B), (C) and (D) of SECTION 3.1.1 shall be applied PRO RATA to a mandatory prepayment of the outstanding principal amount of all Term Loans and TLCs (with the amount of such prepayment of the Term Loans or TLCs being applied to the remaining Term Loan and TLC amortization payments, as the case may be, required pursuant to CLAUSES (F), (G), (H) and (I) of SECTION 3.1.1, in each case PRO RATA in accordance with the amount of each such remaining amortization payment), until all such Term Loans and TLCs have been paid in full; PROVIDED, HOWEVER, that in the case of each prepayment of Term Loans and TLCs required pursuant to CLAUSES (B), (C), and (D) of SECTION 3.1.1, any Lender that has Term B Loans, Term D Loans and TLCs outstanding (at a time when any Term A Loans remain outstanding) may, by delivering a notice to the Administrative Agent at least one Business Day prior to the date that such prepayment is to be made, elect not to have its PRO RATA share of Term B Loans, Term D Loans or TLCs, as the case may be, prepaid, and upon any such election the Administrative Agent shall (x) apply 50% of the amount that otherwise would have prepaid such Lender's Term B Loans, Term D Loans or TLCs, as the case may be, to a mandatory prepayment of the Term A Loans (until repaid in full), and then to a reduction in the Revolving Loan Commitment Amount and (y) permit the remaining 50% of such amount to be retained by the applicable Borrower.
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this SECTION 3.2.
SECTION 3.2.1. RATES.
(a) Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, WWI may elect that Loans comprising a Borrowing accrue interest at a rate per annum:
(i) with respect to Revolving Loans and Term A Loans,
(A) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; and
(B) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin; and
(ii) with respect to Term B Loans, Designated New Term Loans and Term D Loans,
(A) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin for such Loans; and
(B) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin for such Loans; and
(iii) with respect to Swing Line Loans, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. POST-MATURITY RATES. After the date any principal amount
of any Loan shall have become due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), or any other monetary Obligation (other
than overdue Reimbursement Obligations which shall bear interest as provided in
SECTION 2.6.2) of WWI shall have become due and payable, WWI shall pay, but only
to the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to:
(a) in the case of any overdue principal amount of Loans, overdue interest thereon, overdue commitment fees or other overdue amounts owing in respect of Loans or other obligations (or the related Commitments) under a particular Tranche, the rate that would otherwise be applicable to Base Rate Loans under such Tranche pursuant to SECTION 3.2.1 plus 2%; and
(b) in the case of overdue monetary Obligations (other than as described in CLAUSE (A)), the Alternate Base Rate plus 4%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan;
(c) with respect to Base Rate Loans, in arrears on each Quarterly Payment Date occurring after the date of the initial Borrowing hereunder;
(d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the third month anniversary of such Interest Period);
(e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to CLAUSE (C), on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to SECTION 9.2 or SECTION 9.3, immediately upon such acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary Obligations (other than TLCs) arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. FEES. The Borrowers agree to pay the fees set forth in this SECTION 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. COMMITMENT FEE. WWI agrees to pay to the Administrative Agent for the account of each Lender that has a Revolving Loan Commitment, for the period (including any portion thereof when any of the Lender's Commitments are suspended by reason of any Borrower's inability to satisfy any condition of ARTICLE V) commencing on September 29, 1999 and continuing through the Revolving Loan Commitment Termination Date, a commitment fee at the rate of .50% per annum of the average daily unused portion of the Revolving Loan Commitment Amount. Such commitment fees shall be payable by WWI in arrears on each Quarterly Payment Date, and on the Revolving Loan Commitment Termination Date. The making of Swing Line Loans by the Swing Line Lender shall constitute the usage of the Revolving Loan Commitment with respect to the Swing Line Lender only and the commitment fees to be paid by WWI to the Lenders (other than the Swing Line Lender) shall be calculated and paid accordingly.
SECTION 3.3.2. ADMINISTRATIVE AGENT'S FEE. Each of the Borrowers agrees to pay to the Administrative Agent, for its own account, the non-refundable fees in the amounts and on the dates set forth in the Fee Letter.
SECTION 3.3.3. LETTER OF CREDIT FEE. WWI agrees to pay to the Administrative Agent, for the PRO RATA account of the Issuer and each other Lender that has a Revolving Loan Commitment, a Letter of Credit fee in an amount equal to the Applicable Margin per annum for Revolving Loans that are maintained as LIBO Rate Loans, multiplied by the aggregate Stated Amount of all outstanding Letters of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date. WWI further agrees to pay to the Issuer for its own account an issuance fee in an amount as agreed to by WWI and the Issuer.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO RATE LENDING UNLAWFUL. If any Lender shall determine (which determination shall, upon notice thereof to WWI and the Lenders, be conclusive and binding on WWI) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any Loans as LIBO Rate Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist (with the date of such notice being the "REINSTATEMENT DATE"), and (i) all LIBO Rate Loans previously made by such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion and (ii) all Loans thereafter made by such Lender and outstanding prior to the Reinstatement Date shall be made as Base Rate Loans, with interest thereon being payable on the same date that interest is payable with respect to corresponding Borrowing of LIBO Rate Loans made by Lenders not so affected.
SECTION 4.2. DEPOSITS UNAVAILABLE. If the Administrative Agent shall have determined that
(a) U.S. Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Administrative Agent in its relevant market; or
(b) by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to WWI and the Lenders, the obligations of all Lenders under SECTION 2.3 and SECTION 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify WWI and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. INCREASED LIBO RATE LOAN COSTS, ETC. WWI agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans (excluding any amounts, whether or not constituting taxes, referred to in SECTION 4.6) arising after the date of any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority that results in such increase in cost or reduction in amounts receivable, except for such changes with respect to increased capital costs and taxes which are governed by SECTIONS 4.5 and 4.6, respectively. Such Lender shall promptly notify the Administrative Agent and WWI in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by WWI directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on WWI.
SECTION 4.4. FUNDING LOSSES. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
SECTION 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to WWI (with a copy to the Administrative Agent), WWI shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on WWI.
SECTION 4.5. INCREASED CAPITAL COSTS. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of its Commitments, participation in Letters of Credit or the Loans made or continued by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to WWI shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on WWI. In determining such amount, such Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.
SECTION 4.6. TAXES. The Borrowers covenant and agree as follows with respect to taxes:
(a) Unless required by law, any and all payments made by the Borrowers under this Agreement and each other Loan Document shall be made without setoff, counterclaim or other defense, and free and clear of, and without deduction or withholding for or on account of, any taxes. In the event that any taxes are required by law to be deducted or withheld from any payment required to be made by any Borrower to or on behalf of any Secured Party under any Loan Document, then:
(i) subject to CLAUSE (F) below, if such taxes are Non-Excluded Taxes, the relevant Borrower shall together with such payment pay an additional amount so that each Secured Party receives free and clear of any Non-Excluded Taxes, the full amount which it would have received if no such deduction or withholding of such Non-Excluded Taxes had been required; and
(ii) the relevant Borrower shall pay to the relevant Governmental Authority imposing such taxes the full amount of the deduction or withholding made by it.
(b) In addition, the Borrowers shall pay any and all Other Taxes imposed to the relevant Governmental Authority imposing such Other Taxes in accordance with applicable law.
(c) As promptly as practicable after the payment of any taxes or Other Taxes, and in any event within 45 days of any such payment being due, the applicable Borrower shall furnish to the Administrative Agent a copy of an official receipt (or a certified copy thereof), evidencing the payment of such taxes or Other Taxes. The Administrative Agent shall make copies thereof available to any Lender upon request therefor.
(d) Subject to CLAUSE (F) below, the Borrowers shall indemnify each Secured Party for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed on (and whether or not paid directly by) such Secured Party that have not been paid previously by the Borrowers (whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the relevant Governmental Authority). Promptly upon having knowledge that any such Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and promptly upon notice thereof by any Secured Party, the applicable Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the relevant Governmental Authority (PROVIDED, HOWEVER, that no Secured Party shall be under any obligation to provide any such notice to any Borrower). In addition, provided that the Borrowers have been notified promptly by a relevant Secured Party which has determined in its sole discretion that a Non-Excluded Tax or Other Tax has been levied, imposed or assessed against such Secured Party, each Borrower shall indemnify each Secured Party for any incremental taxes that may become payable by such Secured Party as a result of any failure of any Borrower to pay any taxes when due to the appropriate Governmental Authority or to deliver to the Administrative Agent, pursuant to CLAUSE (C) above, documentation evidencing the payment of taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other Taxes actually paid by any Secured Party or the indemnification provided in the immediately preceding sentence, such indemnification shall be made within 30 days after the date such Secured Party makes written demand therefor. Each Borrower acknowledges that any payment made to any Secured Party or to any Governmental Authority in respect of the indemnification obligations of the Borrowers provided in this clause shall constitute a payment in respect of which the provisions of CLAUSE (A) above and this clause shall apply.
(e) Each Non-U.S. Lender, on or prior to the date on which such Non-U.S. Lender becomes a Lender hereunder (and from time to time thereafter upon the request of any Borrower or the Administrative Agent, but only for so long as such Non-U.S. Lender is legally entitled to do so), shall deliver to such Borrower and the Administrative Agent either
(i) (x) two duly completed copies of either (A) Internal Revenue Service Form W-8BEN or (B) Internal Revenue Service Form W-8EC1, or in either case an applicable successor form, establishing, in either case, a complete exemption from United States federal withholding taxes, and (y) for periods prior to
January 1, 2001, a duly completed copy of Internal Revenue Service Form W-8 or W-9 or applicable successor form; or
(ii) in the case of a Non-U.S. Lender that is not
legally entitled to deliver either form listed in CLAUSE
(E)(I)(X) above, (x) a certificate of a duly authorized
officer of such Non-U.S. Lender to the effect that such
Non-U.S. Lender is not (A) a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, (B) a "10 percent
shareholder" of WWI within the meaning of Section 881(c)(3)(B)
of the Code, or (C) a controlled foreign corporation receiving
interest from a related person within the meaning of Section
881(c)(3)(C) of the Code (such certificate, an "EXEMPTION
CERTIFICATE") and (y) two duly completed copies of Internal
Revenue Service Form W-8 or applicable successor form.
(f) None of the Borrowers shall be obligated to gross up any payments to any Lender pursuant to CLAUSE (A) ABOVE, or to indemnify any Lender pursuant to CLAUSE (D) above, in respect of United States federal withholding taxes to the extent imposed as a result of (i) the failure of such Lender to deliver to the applicable Borrower the form or forms and/or an Exemption Certificate, as applicable to such Lender, pursuant to CLAUSE (E), (ii) such form or forms and/or Exemption Certificate not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by the Lender being untrue or inaccurate on the date delivered in any material respect, or (iii) the Lender designating a successor lending office at which it maintains its Loans which has the effect of causing such Lender to become obligated for tax payments in excess of those in effect immediately prior to such designation; PROVIDED, HOWEVER, that a Borrower shall be obligated to gross up any payments to any such Lender pursuant to CLAUSE (A) above, and to indemnify any such Lender pursuant to CLAUSE (D) above, in respect of United States federal withholding taxes if (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or Exemption Certificate to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable statute, treaty, regulation or other applicable law or any interpretation of any of the foregoing occurring after the date hereof, which change rendered such Lender no longer legally entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or certifications made in such form or forms or Exemption Certificate untrue or inaccurate in a material respect, (ii) the redesignation of the Lender's lending office was made at the request of any of the Borrowers or (iii) the obligation to gross up payments to any such Lender pursuant to CLAUSE (A) above or to indemnify any such Lender pursuant to CLAUSE (D) is with respect to an Assignee Lender that becomes an Assignee Lender as a result of an assignment made at the request of any Borrower.
(g) If a Secured Party determines in its sole discretion that it has received a refund in respect of Non-Excluded Taxes that were paid by the Borrowers, it shall pay the
amount of such refund, together with any other amounts paid by the Borrowers in connection with such refunded Non-Excluded Taxes, to the Borrowers, net of any out-of- pocket expenses incurred by such Secured Party in obtaining such refund, PROVIDED, HOWEVER, that the Borrowers agree to promptly return the amount of such refund to such Secured Party to the extent that such Secured Party is required to repay such refund to the IRS or any other tax authority.
SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly provided, all payments by or on behalf of any Borrower pursuant to this Agreement, the Notes, each Letter of Credit, the TLCs or any other Loan Document shall be made by such Borrower to the Administrative Agent for the PRO RATA account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon, New York time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the applicable Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by CLAUSE (C) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.
SECTION 4.8. SHARING OF PAYMENTS. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan, TLC or Reimbursement Obligation (other than pursuant to the terms of SECTIONS 4.3, 4.4 and 4.5) in excess of its PRO RATA share of payments then or therewith obtained by all Lenders entitled thereto, such Lender shall purchase from the other Lenders such participation in Credit Extensions made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the purchasing Lender
TO
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to SECTION 4.9) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.
SECTION 4.9. SETOFF. Each Lender shall, upon the occurrence of any Default described in CLAUSES (A) through (D) of SECTION 9.1.9 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower then or thereafter maintained with or otherwise held by such Lender; PROVIDED, HOWEVER, that any such appropriation and application shall be subject to the provisions of SECTION 4.8. Each Lender agrees promptly to notify the applicable Borrower and the Administrative Agent after any such setoff and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have.
SECTION 4.10. MITIGATION. Each Lender agrees that if it makes any demand for payment under SECTIONS 4.3, 4.4, 4.5, or 4.6, or if any adoption or change of the type described in SECTION 4.1 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for WWI to make payments under SECTIONS 4.3, 4.4, 4.5, or 4.6, or would eliminate or reduce the effect of any adoption or change described in SECTION 4.1.
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND TO FUTURE CREDIT EXTENSIONS
SECTION 5.1. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT AND MAKING OF CREDIT EXTENSIONS. The conditions to effectiveness of this Agreement and the obligations of the Lenders to continue Existing Loans as Loans under this Agreement, to continue Existing Letters of Credit as Letters of Credit under this Agreement and to make the Additional Term A Loans and the Term D Loans were satisfied in full on January 16, 2001.
SECTION 5.2. ALL CREDIT EXTENSIONS. The obligation of each Lender and
the Issuer to make any Credit Extension (but subject to CLAUSES (B) and (C) of
SECTION 2.3.2) shall be subject to the satisfaction of each of the conditions
precedent set forth in this SECTION 5.2.
SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after giving effect to any Credit Extension the following statements shall be true and correct:
(a) both before and after giving effect to the Transaction, the representations and warranties set forth in ARTICLE VI and in each other Loan Document shall, in each case, be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);
(b) no material adverse development shall have occurred in any litigation, action, proceeding, labor controversy, arbitration or governmental investigation disclosed pursuant to SECTION 6.7;
(c) the sum of (x) the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans and (y) all Letter of Credit Outstandings does not exceed the Revolving Loan Commitment Amount; and
(d) no Default shall have then occurred and be continuing.
SECTION 5.2.2. CREDIT EXTENSION REQUEST. The Administrative Agent shall have received a Borrowing Request, if Loans (other than Swing Line Loans) are being requested, or an Issuance Request, if a Letter of Credit is being issued or extended or a TLC Purchase Request if TLCs are to be issued. Each of the delivery of a Borrowing Request, Issuance Request or TLC Purchase Request and the acceptance by any Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the applicable Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in SECTION 5.2.1 are true and correct.
SECTION 5.2.3. SATISFACTORY LEGAL FORM. All documents executed or submitted pursuant hereto by or on behalf of WWI or any of its Subsidiaries or any other Obligors shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel; the Administrative Agent and its counsel shall have received all information, as the Administrative Agent or its counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Administrative Agent to enter into this Agreement, continue the Existing Loans as Loans hereunder and the Existing Letters of Credit as Letters of Credit hereunder and to make Credit Extensions hereunder, each of the Borrowers, jointly and severally, represents and warrants unto the Administrative Agent, the Issuer and each Lender as set forth in this ARTICLE VI.
SECTION 6.1. ORGANIZATION, ETC. WWI and each of its Subsidiaries (a) is a corporation validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation (other than as listed in ITEM 6.1 ("Good Standing") on SCHEDULE I hereto), is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except to the extent that the failure to qualify would not reasonably be expected to result in a Material Adverse Effect, and (b) has full power and authority and holds all requisite governmental licenses, permits and other approvals to (x) enter into and perform its Obligations in connection with the Transaction and under this Agreement, the Notes and each other Loan Document to which it is a party and (y) own and hold under lease its property and to conduct its business substantially as currently conducted by it except, in the case of this CLAUSE (B)(Y), where the failure could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by each Borrower of this Agreement, the Notes, the TLCs and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it and the Borrowers and, where applicable, each such other Obligor's participation in the consummation of the Transaction are within each such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not
(a) contravene any such Obligor's Organic Documents;
(b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting any such Obligor, where such contravention,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; or
(c) result in, or require the creation or imposition of, any Lien on any of the Obligor's properties, except pursuant to the terms of a Loan Document.
SECTION 6.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person, is required for the due execution, delivery or performance by any Obligor of this Agreement, the Notes, the TLCs or any other Loan Document to which it is a party, or for each Obligor's participation in the consummation of the Transaction, except as have been duly obtained or made and are in full force and effect or those which the failure to obtain or make could not reasonably be expected to have a Material Adverse Effect. Neither WWI nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. VALIDITY, ETC. This Agreement constitutes, and the Notes and TLCs and each other Loan Document executed by any Obligor will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of such Obligor enforceable in accordance with their respective terms; in each case with respect to this SECTION 6.4 subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 6.5. FINANCIAL INFORMATION. The
(a) audited combined balance sheets and the related combined statements of income, comprehensive income and parent company's investment and cash flows of the Borrower and its Subsidiaries as at April 29, 2000, April 24, 1999 and April 25, 1998 and the related consolidated statements of earnings and cash flow of the Borrower; and
(b) unaudited interim condensed financial information of the Borrower as of the period ended October 28, 2000;
copies of which have been furnished to the Administrative Agent and each Lender, have, in each case, been prepared in accordance with GAAP consistently applied (in the case of CLAUSE (A)) and, in the case of CLAUSE (B), on a basis substantially comparable to the basis used to prepare the financial statements referred to in CLAUSE (A), and present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended, subject, in the case of CLAUSE (B), to normal year end audit adjustments.
SECTION 6.6. NO MATERIAL ADVERSE CHANGE. Since April 29, 2000, there has been no material adverse change in the financial condition, operations, assets, business or properties of WWI and its Subsidiaries, taken as a whole.
SECTION 6.7. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending or, to the knowledge of any Borrower, threatened litigation, action, proceeding, labor controversy arbitration or governmental investigation affecting any Obligor, or any of their respective properties, businesses, assets or revenues, which (a) could reasonably be expected to result in a Material Adverse Effect, or (b) purports to affect the legality, validity or enforceability of the issuance of the Senior Subordinated Notes, this Agreement, the Notes or any other Loan Document, except as disclosed in ITEM 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. SUBSIDIARIES. WWI has no Subsidiaries, except (after giving effect to the Transaction) those Subsidiaries
(a) which are identified in ITEM 6.8 ("Existing Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been acquired in accordance with SECTION 7.2.5 or 7.2.8.
SECTION 6.9. OWNERSHIP OF PROPERTIES. WWI and each of its Subsidiaries (both before and after giving effect to the Transaction) own good title to all of their properties and assets (other than insignificant properties and assets), real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens or material claims (including material infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to SECTION 7.2.3.
SECTION 6.10. TAXES. WWI and each of its Subsidiaries has filed all Federal, State, foreign and other material tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.
SECTION 6.11. PENSION AND WELFARE PLANS. No Pension Plan has been terminated that has resulted in a liability to any Borrower of more than $5,000,000, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in excess of $5,000,000. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by any Borrower of any material liability, fine or penalty other than such condition,
event or transaction which would not reasonably be expected to have a Material Adverse Effect. Except as disclosed in ITEM 6.11 ("Employee Benefit Plans") of the Disclosure Schedule, since the date of the last financial statement of WWI, WWI has not materially increased any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA.
SECTION 6.12. ENVIRONMENTAL WARRANTIES. Except as set forth in ITEM
6.12 ("Environmental Matters") of the Disclosure Schedule or as, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:
(a) all facilities and property (including underlying groundwater) owned or leased by WWI or any of its Subsidiaries have been, and continue to be, owned or leased by WWI and its Subsidiaries in compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) written claims, complaints, notices or requests for information received by WWI or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or
(ii) written complaints, notices or inquiries to WWI or any of its Subsidiaries regarding potential liability under any Environmental Law;
(c) to the best knowledge of WWI, there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries;
(d) WWI and its Subsidiaries have been issued and are in compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses;
(e) no property now or previously owned or leased by WWI or any of its Subsidiaries is listed or, to the knowledge of WWI or any of its Subsidiaries, proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up;
(f) to the best knowledge of WWI, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries;
(g) WWI and its Subsidiaries have not directly transported or directly arranged for the transportation of any Hazardous Material to any location (i) which is listed or to
the knowledge of WWI or any of its Subsidiaries, proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list, or (ii) which is the subject of federal, state or local enforcement actions or other investigations;
(h) to the best knowledge of WWI, there are no polychlorinated biphenyls or friable asbestos present in a manner or condition at any property now or previously owned or leased by WWI or any of its Subsidiaries; and
(i) to the best knowledge of WWI, no conditions exist at, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law.
SECTION 6.13. REGULATIONS U AND X. No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.
SECTION 6.14. ACCURACY OF INFORMATION. All material factual information concerning the financial condition, operations or prospects of WWI and its Subsidiaries heretofore or contemporaneously furnished by or on behalf of the Borrowers in writing to the Administrative Agent, the Issuer or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby or with respect to the Transaction is, and all other such factual information hereafter furnished by or on behalf of the Borrowers to the Administrative Agent, the Issuer or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.
Any term or provision of this Section to the contrary notwithstanding, insofar as any of the factual information described above includes assumptions, estimates, projections or opinions, no representation or warranty is made herein with respect thereto; PROVIDED, HOWEVER, that to the extent any such assumptions, estimates, projections or opinions are based on factual matters, each of the Borrowers has reviewed such factual matters and nothing has come to its attention in the context of such review which would lead it to believe that such factual matters were not or are not true and correct in all material respects or that such factual matters omit to state any material fact necessary to make such assumptions, estimates, projections or opinions not misleading in any material respect.
SECTION 6.15. SENIORITY OF OBLIGATIONS, ETC. WWI has the power and authority to incur the Indebtedness evidenced by the Senior Subordinated Notes as provided for under the Senior Subordinated Note Indenture and has duly authorized, executed and delivered the Senior Subordinated Note Indenture. WWI has issued, pursuant to due authorization, the Senior Subordinated Notes under the Senior Subordinated Note Indenture. The Senior Subordinated Note Indenture constitutes the legal, valid and binding obligation of WWI enforceable against WWI in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. The subordination provisions of the Senior Subordinated Notes and contained in the Senior Subordinated Note Indenture are enforceable against the holders of the Senior Subordinated Notes by the holder of any Senior Debt (or similar term referring to the Obligations, as applicable) in the Senior Subordinated Note Indenture, which has not effectively waived the benefits thereof. All monetary Obligations, including those to pay principal of and interest (including post-petition interest, whether or not permitted as a claim) on the Loans and Reimbursement Obligations, and fees and expenses in connection therewith, constitute Senior Debt (or similar term referring to the Obligations, as applicable) in the Senior Subordinated Note Indenture, and all such Obligations are entitled to the benefits of the subordination created by the Senior Subordinated Note Indenture. WWI acknowledges that the Administrative Agent and each Lender is entering into this Agreement, and is extending its Commitments, in reliance upon the subordination provisions of (or to be contained in) the Senior Subordinated Note Indenture, the Senior Subordinated Notes and this Section.
SECTION 6.16. SOLVENCY. The Transaction (including the incurrence of the related Credit Extensions hereunder, the incurrence by the Borrowers of the Indebtedness represented by the Notes and the execution and delivery by the Guaranties by the Obligors parties thereto), will not involve or result in any fraudulent transfer or fraudulent conveyance under the provisions of Section 548 of the Bankruptcy Code (11 U.S.C. ss.101 ET SEQ., as from time to time hereafter amended, and any successor or similar statute) or any applicable state law respecting fraudulent transfers or fraudulent conveyances. After giving effect to the Transaction, WWI and each of its Subsidiaries is Solvent.
SECTION 6.17. CONTRACTS. No termination provision in any material contract under which WWI or any of its Subsidiaries are obligated, shall be triggered by the consummation of the Transaction.
ARTICLE VII
COVENANTS
SECTION 7.1. AFFIRMATIVE COVENANTS. Each of the Borrowers, jointly and severally, agrees with the Administrative Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, each Borrower will perform its obligations set forth below.
SECTION 7.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. WWI will furnish to each Lender, the Issuer and the Administrative Agent copies of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 60 days after the end of each Fiscal Quarter of each Fiscal Year of WWI (or, if WWI is required to file such information on a Form 10-Q with the Securities and Exchange Commission, promptly following such filing), a consolidated balance sheet of WWI and its Subsidiaries as of the end of such Fiscal Quarter, together with the related consolidated statement of earnings and cash flow for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter (it being understood that the foregoing requirement may be satisfied by delivery of WWI's report to the Securities and Exchange Commission on Form 10-Q), certified by the chief financial Authorized Officer of WWI;
(b) as soon as available and in any event within 120 days after the end of each Fiscal Year of WWI (or, if WWI is required to file such information on a Form 10-K with the Securities and Exchange Commission, promptly following such filing), a copy of the annual audit report for such Fiscal Year for WWI and its Subsidiaries, including therein a consolidated balance sheet for WWI and its Subsidiaries as of the end of such Fiscal Year, together with the related consolidated statement of earnings and cash flow of WWI and its Subsidiaries for such Fiscal Year (it being understood that the foregoing requirement may be satisfied by delivery of WWI's report to the Securities and Exchange Commission on Form 10-K), in each case certified (without any Impermissible Qualification) by PricewaterhouseCoopers LLP or another "Big Five" firm, together with a certificate from such accountants to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default that has occurred and is continuing, or, if they have become aware of such Default, describing such Default and the steps, if any, being taken to cure it;
(c) together with the delivery of the financial information required pursuant to CLAUSES (A) and (B), a Compliance Certificate, in substantially the form of EXHIBIT E, executed by the chief financial Authorized Officer of WWI, showing (in reasonable detail
and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenants set forth in SECTION 7.2.4;
(d) as soon as possible and in any event within three Business Days after obtaining knowledge of the occurrence of each Default, a statement of the chief financial Authorized Officer of WWI setting forth details of such Default and the action which WWI has taken and proposes to take with respect thereto;
(e) as soon as possible and in any event within five Business Days after (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy described in SECTION 6.7 and the action which WWI has taken and proposes to take with respect thereto or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in SECTION 6.7, notice thereof and of the action which WWI has taken and proposes to take with respect thereto;
(f) promptly after the sending or filing thereof, copies of all reports and registration statements which WWI or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange or any foreign equivalent;
(g) as soon as practicable after the chief financial officer
or the chief executive officer of WWI or a member of WWI's Controlled
Group becomes aware of (i) formal steps in writing to terminate any
Pension Plan or (ii) the occurrence of any event with respect to a
Pension Plan which, in the case of (i) or (ii), could reasonably be
expected to result in a contribution to such Pension Plan by (or a
liability to) WWI or a member of WWI's Controlled Group in excess of
$5,000,000, (iii) the failure to make a required contribution to any
Pension Plan if such failure is sufficient to give rise to a Lien under
section 302(f) of ERISA, (iv) the taking of any action with respect to
a Pension Plan which could reasonably be expected to result in the
requirement that WWI furnish a bond to the PBGC or such Pension Plan or
(v) any material increase in the contingent liability of WWI with
respect to any post-retirement Welfare Plan benefit, notice thereof and
copies of all documentation relating thereto;
(h) promptly when available and in any event within 60 days following the last day of each Fiscal Year of WWI, financial projections for the current Fiscal Year, prepared in reasonable detail by the chief accounting, financial or executive Authorized Officer of WWI;
(i) promptly following the delivery or receipt, as the case may be, of any material written notice or communication pursuant to or in connection with the Senior Subordinated Note Indenture or any of the Senior Subordinated Notes, a copy of such notice or communication; and
(j) such other information respecting the condition or operations, financial or otherwise, of WWI or any of its Subsidiaries as any Lender or the Issuer may from time to time reasonably request.
SECTION 7.1.2. COMPLIANCE WITH LAWS, ETC. WWI will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence and qualification as a foreign corporation, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; and
(b) the payment, before the same become delinquent, of all material taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.
SECTION 7.1.3. MAINTENANCE OF PROPERTIES. WWI will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties (other than insignificant properties) in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless WWI determines in good faith that the continued maintenance of any of its properties is no longer economically desirable.
SECTION 7.1.4. INSURANCE. WWI will, and will cause each of its Subsidiaries to,
(a) maintain insurance on its property with financially sound and reputable insurance companies against loss and damage in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as the Borrower and its Subsidiaries; and
(b) maintain all worker's compensation, employer's liability insurance or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business.
Without limiting the foregoing, all insurance policies required pursuant to this
Section shall (i) name the Administrative Agent on behalf of Secured Parties as
mortgagee (in the case of property insurance) or additional insured (in the case
of liability insurance), as applicable, and provide that no cancellation or
modification of the policies will be made without thirty days' prior written
notice to the Administrative Agent and (ii) be in addition to any requirements
to maintain specific types of insurance contained in the other Loan Documents.
SECTION 7.1.5. BOOKS AND RECORDS. WWI will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect in all material respects all of its business affairs and transactions and permit the Administrative Agent, the Issuer and each Lender or any of their respective representatives, at reasonable times and intervals, and upon reasonable notice, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and WWI hereby authorizes such independent public accountant to discuss the Borrowers' financial matters with the Issuer and each Lender or its representatives whether or not any representative of WWI is present) and to examine, and photocopy extracts from, any of its books or other corporate records.
SECTION 7.1.6. ENVIRONMENTAL COVENANT. WWI will, and will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, in each case except where the failure to comply with the terms of this clause could not reasonably be expected to have a Material Adverse Effect;
(b) promptly notify the Administrative Agent and provide copies of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws which relate to environmental matters which would have, or would reasonably be expected to have, a Material Adverse Effect, and promptly cure and have dismissed with prejudice any material actions and proceedings relating to compliance with Environmental Laws, except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on their books; and
(c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this SECTION 7.1.6.
SECTION 7.1.7. FUTURE SUBSIDIARIES. Upon any Person becoming a Subsidiary of WWI, or upon WWI or any of its Subsidiaries acquiring additional Capital Securities of any existing Subsidiary, WWI shall notify the Administrative Agent of such acquisition, and
(a) WWI shall promptly cause such Subsidiary to execute and
deliver to the Administrative Agent, with counterparts for each Lender,
(i) if such Subsidiary is a U.S. Subsidiary or a U.K. Subsidiary, a
supplement to the Subsidiary Guaranty or, if such Subsidiary is an
Australian Subsidiary, a supplement to the Australian Guaranty, (ii) if
such a Subsidiary is a U.S. Subsidiary, a supplement to the WWI
Security Agreement or, if such Subsidiary is an Australian Subsidiary,
a supplement to the Australian Security Agreement or if such Subsidiary
is a U.K. Subsidiary, a security agreement substantially
in the form of the U.K. Security Agreement and (iii) if such Subsidiary is a U.S. Subsidiary, a U.K. Subsidiary or an Australian Subsidiary and owns any real property having a value as determined in good faith by the Administrative Agent in excess of $2,000,000, a Mortgage, together with acknowledgment copies of Uniform Commercial Code financing statements (form UCC-1) executed and delivered by the Subsidiary naming the Subsidiary as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code and any other applicable recording statutes, in the case of real property, of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interest of the Administrative Agent pursuant to the applicable Security Agreement or a Mortgage, as the case may be; and
(b) WWI shall promptly deliver, or cause to be delivered, to the Administrative Agent under a supplement to the WWI Pledge Agreement (or, if such Subsidiary is an Australian Subsidiary, a supplement to the Australian Pledge Agreement or if such Subsidiary is a U.K. Subsidiary, a pledge agreement substantially in the form of the U.K. Pledge Agreement), certificates (if any) representing all of the issued and outstanding shares of Capital Securities of such Subsidiary (to the extent required to be delivered pursuant to the applicable Pledge Agreement) owned by WWI or any of its Subsidiaries, as the case may be, along with undated stock powers for such certificates, executed in blank, or, if any securities subject thereto are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that appropriate book entries have been made in the relevant books or records of a financial intermediary or the issuer of such securities, as the case may be, under applicable law resulting in the perfection of the security interest granted in favor of the Administrative Agent pursuant to the terms of the applicable Pledge Agreement; PROVIDED, that notwithstanding anything to the contrary herein or in any Loan Document, in no event shall more than 65% of the Capital Securities of any non-Guarantor be required to be pledged and in no event shall non- Guarantors (other than the SP1 Borrower) be required to pledge Capital Securities of their Subsidiaries, together, in each case, with such opinions, in form and substance and from counsel satisfactory to the Administrative Agent, as the Administrative Agent may reasonably require.
SECTION 7.1.8. FUTURE LEASED PROPERTY AND FUTURE ACQUISITIONS OF REAL PROPERTY.
(a) Prior to entering into any new lease of real property or renewing any existing lease of real property, WWI shall, and shall cause each of its U.S. Subsidiaries and each of the other Guarantor's to, use its (and their) best efforts (which shall not require the expenditure of cash or the making of any material concessions under the relevant lease) to deliver to the Administrative Agent a Waiver executed by the lessor of any real property that is to be leased by WWI or any of its U.S. Subsidiaries or any of the other Guarantors for a term in excess of one year in any state which by statute grants such lessor a "landlord's" (or similar) Lien which is superior to the Administrative Agent's, to the
extent the value of any personal property of WWI or its U.S. Subsidiaries or any of the other Guarantors to be held at such leased property exceeds (or it is anticipated that the value of such personal property will, at any point in time during the term of such leasehold term, exceed) $5,000,000.
(b) In the event that WWI or any of its U.S. Subsidiaries or any of the other Guarantors shall acquire any real property having a value as determined in good faith by the Administrative Agent in excess of $2,000,000, WWI or the applicable Subsidiary shall, promptly after such acquisition, execute a Mortgage and provide the Administrative Agent with
(i) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of such Mortgage as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable effectively to create a valid, perfected first priority Lien, subject to Liens permitted by SECTION 7.2.3, against the properties purported to be covered thereby;
(ii) mortgagee's title insurance policies in favor of the Administrative Agent and the Lenders in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Administrative Agent, with respect to the property purported to be covered by such Mortgage, insuring that title to such property is marketable and that the interests created by the Mortgage constitute valid first Liens thereon free and clear of all defects and encumbrances other than as approved by the Administrative Agent, and such policies shall also include a revolving credit endorsement and such other endorsements as the Administrative Agent shall request and shall be accompanied by evidence of the payment in full of all premiums thereon; and
(iii) such other approvals, opinions, or documents as the Administrative Agent may reasonably request.
SECTION 7.1.9. USE OF PROCEEDS, ETC. The proceeds of the Credit Extensions shall be applied by the Borrowers as follows:
(a) the proceeds of the Additional Term A Loans and Term D Loans shall be applied by WWI to fund the Transaction; and
(b) the proceeds of all Revolving Loans, Swing Line Loans and any Term Loans incurred pursuant to SECTION 2.1.6, and the issuance of Letters of Credit from time to time, shall be used to fund the Transaction and for working capital and general corporate purposes of WWI and its U.S. Subsidiaries.
SECTION 7.1.10. U.S. BORROWER AS PLEDGED INTEREST ISSUER. WWI covenants and agrees that, in its capacity as Pledged Interest Issuer under (and as defined in) the ARTAL Pledge Agreement and the HJH Pledge Agreement, WWI agrees that it will cooperate in all reasonable respects necessary to enable the Administrative Agent to exercise its rights and remedies under the terms of the ARTAL Pledge Agreement and HJH Pledge Agreement and agrees to comply with the last sentence of Section 4.2 of the ARTAL Pledge Agreement and the last sentence of Section 4.2 of the HJH Pledge Agreement.
SECTION 7.2. NEGATIVE COVENANTS. Each of the Borrowers agrees with the Administrative Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, each of the Borrowers will perform the obligations set forth in this SECTION 7.2.
SECTION 7.2.1. BUSINESS ACTIVITIES. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, engage in any business activity, except business activities of the type in which WWI and its Subsidiaries are engaged on September 29, 1999 and such activities as may be incidental, similar or related thereto. The SP1 Borrower shall not engage in any business other than as permitted under SECTION 7.3.
SECTION 7.2.2. INDEBTEDNESS. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other Obligations;
(b) [intentionally omitted];
(c) Indebtedness existing as of September 29, 1999 which is identified in ITEM 7.2.2(C) ("Ongoing Indebtedness") of the Disclosure Schedule, and any Refinancing Indebtedness, but only in amounts not in excess of the outstanding amounts on the date of such refinancing (which shall not exceed the committed amount on September 29, 1999);
(d) to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture, Indebtedness incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) (i) (x) to any Person providing financing for the acquisition of any assets permitted to be acquired pursuant to SECTION 7.2.8 to finance its acquisition of such assets and (y) in respect of Capitalized Lease Liabilities (but only to the extent otherwise permitted by SECTION 7.2.7) in an aggregate amount for CLAUSES (X) and (Y) not to exceed $5,000,000 at any time and (ii) from time to time for general corporate purposes in a maximum aggregate amount of all Indebtedness incurred pursuant to this CLAUSE (II) not at any time to exceed $15,000,000 LESS the then aggregate outstanding Indebtedness of Subsidiaries which are not Guarantors permitted under clause (F)(III) below;
(e) Hedging Obligations of WWI or any of its Subsidiaries;
(f) intercompany Indebtedness of WWI owing to any of its Subsidiaries or any Subsidiary of WWI (other than the SP1 Borrower or the Designated Subsidiary) owing to WWI or any other Subsidiary of WWI or of WWI to any Subsidiary of WWI, which Indebtedness
(i) if between Guarantors shall be evidenced by one or more promissory notes in form and substance satisfactory to the Administrative Agent which have been duly executed and delivered to (and endorsed to the order of) the Administrative Agent in pledge pursuant to a supplement to the applicable Pledge Agreement;
(ii) if between Guarantors (other than Indebtedness incurred by WWI) shall, except in the case of Indebtedness of WWI owing to any of its Subsidiaries, not be forgiven or otherwise discharged for any consideration other than payment in cash in the currency in which such Indebtedness was loaned or advanced unless the Administrative Agent otherwise consents; and
(iii) owing by Subsidiaries which are not Guarantors to Guarantors shall not exceed $15,000,000 in the aggregate at any time outstanding;
(g) unsecured Subordinated Debt of WWI owing to the Senior Subordinated Noteholders in an initial aggregate outstanding principal amount not to exceed the sum of $150,000,000 and Euro 100,000,000;
(h) Indebtedness of Non-Guarantor Subsidiaries to Guarantors to the extent permitted as Investments under CLAUSE (H) of SECTION 7.2.5;
(i) the Subordinated Guaranty; and
(j) (i) guarantees by WWI or any Guarantor of any Indebtedness of WWI or any Guarantor and (ii) guarantees by any Subsidiary that is not a Guarantor of any Indebtedness of any other Subsidiary that is not a Guarantor and (iii) guarantees by WWI or any Guarantor of any unsecured Indebtedness of any Subsidiary that is not a Guarantor incurred pursuant to clause (d) (ii) of this Section; PROVIDED, that in each case, the Indebtedness being guaranteed is otherwise permitted by this Section;
PROVIDED, HOWEVER, that no Indebtedness otherwise permitted by CLAUSE (D) or (F) (as such clause relates to Loans made by WWI to its Subsidiaries) may be incurred if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing.
SECTION 7.2.3. LIENS. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted pursuant to any Loan Document;
(b) [intentionally omitted];
(c) Liens granted prior to September 29, 1999 to secure
payment of Indebtedness of the type permitted and described in CLAUSE
(C) of SECTION 7.2.2;
(d) Liens granted by WWI or any of its Subsidiaries (other
than the SP1 Borrower) to secure payment of Indebtedness of the type
permitted and described in (x) CLAUSE (D)(I) of SECTION 7.2.2;
PROVIDED, that the obligations secured thereby do not exceed in the
aggregate $5,000,000 at any time outstanding and (y) CLAUSE (D)(II) of
SECTION 7.2.2 owed by Subsidiaries which are not Guarantors to
non-Affiliates; PROVIDED that the obligations secured thereby do not
exceed $7,500,000 in the aggregate at any one time outstanding;
(e) Liens for taxes, assessments or other governmental charges or levies, including Liens pursuant to Section 107(l) of CERCLA or other similar law, not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, repairmen, materialmen and landlords or other like liens incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) in the ordinary course of business for sums not overdue for a period of more than 30 days or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(g) Liens incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, insurance obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds;
(h) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full by a bond or (subject to a customary deductible) by insurance maintained with responsible insurance companies;
(i) Liens with respect to recorded minor imperfections of title and easements, rights-of-way, restrictions, reservations, permits, servitudes and other similar encumbrances on real property and fixtures which do not materially detract from the value or materially impair the use by WWI or any such Subsidiary in the ordinary course of their business of the property subject thereto;
(j) leases or subleases granted by WWI or any of its Subsidiaries (other than the SP1 Borrower) to any other Person in the ordinary course of business; and
(k) Liens in the nature of trustees' Liens granted pursuant to any indenture governing any Indebtedness permitted by SECTION 7.2.2, in each case in favor of the trustee under such indenture and securing only obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof.
SECTION 7.2.4. FINANCIAL CONDITION.
(a) FIXED CHARGE COVERAGE RATIO. WWI will not permit the Fixed Charge Coverage Ratio, at any time during any period set forth below, to be less than the amount set forth opposite such period:
Fixed Charge
PERIOD COVERAGE RATIO
------ --------------
4th Fiscal Quarter of Fiscal Year 2000 1.15 to 1.00
1st Fiscal Quarter of Fiscal Year 2001 1.20 to 1.00
2nd Fiscal Quarter of Fiscal Year 2001 1.20 to 1.00
3rd Fiscal Quarter of Fiscal Year 2001 1.20 to 1.00
4th Fiscal Quarter of Fiscal Year 2001 1.20 to 1.00
1st Fiscal Quarter of Fiscal Year 2002 1.30 to 1.00
2nd Fiscal Quarter of Fiscal Year 2002 1.30 to 1.00
3rd Fiscal Quarter of Fiscal Year 2002 1.30 to 1.00
4th Fiscal Quarter of Fiscal Year 2002 1.30 to 1.00
1st Fiscal Quarter of Fiscal Year 2003 1.40 to 1.00
2nd Fiscal Quarter of Fiscal Year 2003 1.40 to 1.00
3rd Fiscal Quarter of Fiscal Year 2003 1.40 to 1.00
4th Fiscal Quarter of Fiscal Year 2003 1.40 to 1.00
1st Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00
2nd Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00
3rd Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00
4th Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00
1st Fiscal Quarter of Fiscal Year 2005 1.60 to 1.00
2nd Fiscal Quarter of Fiscal Year 2005 1.60 to 1.00
3rd Fiscal Quarter of Fiscal Year 2005 1.60 to 1.00
4th Fiscal Quarter of Fiscal Year 2005 0.45 to 1.00
and each Fiscal Quarter thereafter
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(b) DEBT TO EBITDA RATIO. WWI will not permit the Debt to EBITDA Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be greater than the ratio set forth opposite such period:
Debt to
Period EBITDA Ratio
------ ------------
4th Fiscal Quarter of Fiscal Year 2000 5.75 to 1.00
1st Fiscal Quarter of Fiscal Year 2001 5.00 to 1.00
2nd Fiscal Quarter of Fiscal Year 2001 5.00 to 1.00
3rd Fiscal Quarter of Fiscal Year 2001 5.00 to 1.00
4th Fiscal Quarter of Fiscal Year 2001 5.00 to 1.00
1st Fiscal Quarter of Fiscal Year 2002 4.50 to 1.00
2nd Fiscal Quarter of Fiscal Year 2002 4.50 to 1.00
3rd Fiscal Quarter of Fiscal Year 2002 4.50 to 1.00
4th Fiscal Quarter of Fiscal Year 2002 4.50 to 1.00
1st Fiscal Quarter of Fiscal Year 2003 4.00 to 1.00
2nd Fiscal Quarter of Fiscal Year 2003 4.00 to 1.00
3rd Fiscal Quarter of Fiscal Year 2003 4.00 to 1.00
4th Fiscal Quarter of Fiscal Year 2003 4.00 to 1.00
1st Fiscal Quarter of Fiscal Year 2004 3.50 to 1.00
2nd Fiscal Quarter of Fiscal Year 2004 3.50 to 1.00
3rd Fiscal Quarter of Fiscal Year 2004 3.50 to 1.00
4th Fiscal Quarter of Fiscal Year 2004 3.50 to 1.00
1st Fiscal Quarter of Fiscal Year 2005 3.00 to 1.00
2nd Fiscal Quarter of Fiscal Year 2005 3.00 to 1.00
3rd Fiscal Quarter of Fiscal Year 2005 3.00 to 1.00
4th Fiscal Quarter of Fiscal Year 2005 3.00 to 1.00
1st Fiscal Quarter of Fiscal Year 2006 2.50 to 1.00
and each Fiscal Quarter thereafter
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(c) INTEREST COVERAGE RATIO. WWI will not permit the Interest Coverage Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be less than the ratio set forth opposite such period:
Interest Coverage
Period Ratio
------ -----------------
4th Fiscal Quarter of Fiscal Year 2000 1.45 to 1.00
1st Fiscal Quarter of Fiscal Year 2001 1.60 to 1.00
2nd Fiscal Quarter of Fiscal Year 2001 1.60 to 1.00
3rd Fiscal Quarter of Fiscal Year 2001 1.60 to 1.00
4th Fiscal Quarter of Fiscal Year 2001 1.60 to 1.00
1st Fiscal Quarter of Fiscal Year 2002 1.75 to 1.00
2nd Fiscal Quarter of Fiscal Year 2002 1.75 to 1.00
3rd Fiscal Quarter of Fiscal Year 2002 1.75 to 1.00
4th Fiscal Quarter of Fiscal Year 2002 1.75 to 1.00
1st Fiscal Quarter of Fiscal Year 2003 1.90 to 1.00
2nd Fiscal Quarter of Fiscal Year 2003 1.90 to 1.00
3rd Fiscal Quarter of Fiscal Year 2003 1.90 to 1.00
4th Fiscal Quarter of Fiscal Year 2003 1.90 to 1.00
1st Fiscal Quarter of Fiscal Year 2004 2.10 to 1.00
2nd Fiscal Quarter of Fiscal Year 2004 2.10 to 1.00
3rd Fiscal Quarter of Fiscal Year 2004 2.10 to 1.00
4th Fiscal Quarter of Fiscal Year 2004 2.10 to 1.00
1st Fiscal Quarter of Fiscal Year 2005 2.30 to 1.00
2nd Fiscal Quarter of Fiscal Year 2005 2.30 to 1.00
3rd Fiscal Quarter of Fiscal Year 2005 2.30 to 1.00
4th Fiscal Quarter of Fiscal Year 2005 2.30 to 1.00
1st Fiscal Quarter of Fiscal Year 2006 2.50 to 1.00
and each Fiscal Quarter thereafter
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(d) SENIOR DEBT TO EBITDA RATIO. WWI will not permit the Senior Debt to EBITDA Ratio, as of the end of any Fiscal Quarter occurring during any period set forth below, to be greater than the ratio set forth opposite such period:
Senior Debt to
Period EBITDA Ratio
------ --------------
4th Fiscal Quarter of Fiscal Year 2000 3.50 to 1.00
1st Fiscal Quarter of Fiscal Year 2001 3.00 to 1.00
2nd Fiscal Quarter of Fiscal Year 2001 3.00 to 1.00
3rd Fiscal Quarter of Fiscal Year 2001 3.00 to 1.00
4th Fiscal Quarter of Fiscal Year 2001 3.00 to 1.00
1st Fiscal Quarter of Fiscal Year 2002 2.50 to 1.00
2nd Fiscal Quarter of Fiscal Year 2002 2.50 to 1.00
3rd Fiscal Quarter of Fiscal Year 2002 2.50 to 1.00
4th Fiscal Quarter of Fiscal Year 2002 2.50 to 1.00
1st Fiscal Quarter of Fiscal Year 2003 2.00 to 1.00
2nd Fiscal Quarter of Fiscal Year 2003 2.00 to 1.00
3rd Fiscal Quarter of Fiscal Year 2003 2.00 to 1.00
4th Fiscal Quarter of Fiscal Year 2003 2.00 to 1.00
1st Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00
and each Fiscal Quarter thereafter
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SECTION 7.2.5. INVESTMENTS. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except:
(a) Investments existing on the date hereof and identified in ITEM 7.2.5(A) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness pursuant to SECTION 7.2.2;
(d) without duplication, Investments permitted as Capital Expenditures pursuant to SECTION 7.2.7;
(e) Investments by WWI in any of its Subsidiaries which have executed Guaranties, or by any such Subsidiary (other than the SP1 Borrower) in any of its Subsidiaries, by way of contributions to capital;
(f) Investments made by WWI or any of its Subsidiaries (other than the SP1 Borrower), solely with proceeds which have been contributed, directly or indirectly, to such Subsidiary as cash equity from holders of WWI's common stock for the purpose of making an Investment identified in a notice to the Administrative Agent on or prior to the date that such capital contribution is made;
(g) Investments by WWI or any of its Subsidiaries (other than the SP1 Borrower) to the extent the consideration received pursuant to CLAUSE (B)(I) of SECTION 7.2.9 is not all cash;
(h) Investments by WWI or any of its Subsidiaries in Weight Watchers Sweden AB Vikt-Vaktarna and Weight Watchers Suomi Oy to the extent that such Investments are for the purpose of acquiring any Capital Securities of such Subsidiaries not owned by WWI and its Subsidiaries on September 29, 1999, in an aggregate amount not to exceed $10,000,000;
(i) other Investments (not constituting Capital Expenditures attributable to the expenditure of Base Amounts) made by WWI or any of the Guarantors (other than the SP1 Borrower) in an aggregate amount, not to exceed $30,000,000;
(j) other Investments made by any Non-Guarantor Subsidiary in another Non- Guarantor Subsidiary;
(k) other Investments made by WWI or any Subsidiary in Qualified Assets, to the extent permitted under CLAUSE (B) of SECTION 3.1.1;
(l) Investments made by WWI in the Designated Subsidiary in an aggregate amount not to exceed $1,500,000;
(m) Investments permitted under SECTION 7.2.6(B)(II)
(n) Investments by the Borrower or any Subsidiary constituting Permitted Acquisitions; and
(o) the Transaction;
PROVIDED, HOWEVER, that
(i) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements;
(ii) the Investments permitted above shall only be permitted to be made to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture;
(iii) no Investment otherwise permitted by CLAUSE (E), (F), (G) or (I) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing ; and
(iv) except as permitted under CLAUSE (A) above, no more than $2,000,000 of Investments may be made in the Designated Subsidiary unless the Designated Subsidiary shall have taken the actions set forth in SECTION 7.1.7.
SECTION 7.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after September 29, 1999.
(a) WWI will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of Capital Securities (now or hereafter outstanding) of WWI or on
any warrants, options or other rights with respect to any shares of any
class of Capital Securities (now or hereafter outstanding) of WWI
(other than dividends or distributions payable in its common stock or
warrants to purchase its common stock or splits or reclassifications of
its stock into additional or other shares of its common stock) or
apply, or permit any of its Subsidiaries to apply, any of its funds,
property or assets to the purchase, redemption, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to purchase
or redeem, any shares of any class of Capital Securities (now or
hereafter outstanding) of WWI, or warrants, options or other rights
with respect to any shares of any class of Capital Securities (now or
hereafter outstanding, including but not limited to the WWI Preferred
Shares) of WWI (collectively, "RESTRICTED PAYMENTS"); PROVIDED, that
(x) WWI may make dividend payments under the WWI Preferred Shares so
long as no Default has occurred under this Agreement or the Senior
Subordinated Note Indenture or would result therefrom, (y) WWI may use
50% of Net Equity Proceeds retained by WWI or its Subsidiaries under
CLAUSE (D) of SECTION 3.1.1, solely for the redemption, in whole or in
part, of such WWI Preferred Shares and (z) WWI may repurchase its stock
held by employees constituting management, in an amount not to exceed
$1,000,000 in any Fiscal Year and an aggregate amount of $4,000,000
(amounts unused in any Fiscal Year may be used in the immediately
succeeding Fiscal Year);
(b) WWI will not, and will not permit any of its Subsidiaries to
(i) make any payment or prepayment of principal of, or interest on, any Senior Subordinated Notes (A) on any day other than, in the case of interest only, the stated, scheduled date for such payment of interest set forth in the applicable Senior Subordinated Notes or in the Senior Subordinated Note Indenture, or
(B) which would violate the terms of this Agreement or the subordination provisions of the Senior Subordinated Note Indenture; or
(ii) redeem, purchase or defease, any Senior
Subordinated Notes, unless, so long as, both before and after
giving effect to any such redemption, purchase or defeasance,
(x) the Borrower's Senior Debt to EBITDA Ratio is less than
2.0 to 1.0, (y) the Borrower's Debt to EBITDA Ratio is less
than 3.5 to 1.0 and (z) the Borrower shall at the time of any
such redemption, purchase or defeasance (unless otherwise
consented to by the Required Lenders) maintain at least $30
million of unused Revolving Loan Commitments; and
(c) WWI will not, and will not permit any Subsidiary to, make any deposit for any of the foregoing purposes (except in connection with any permitted expenditure described in clauses (A) and (B) above).
SECTION 7.2.7. CAPITAL EXPENDITURES, ETC. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, make or commit to make Capital Expenditures (other than (w) Permitted Acquisitions, (x) investments under (1) CLAUSE (J) of SECTION 7.2.5 and (2) CLAUSE (I) of SECTION 7.2.5 to the extent, in the case of this CLAUSE (2), that the aggregate amount of such investments does not exceed $30,000,000 (it being understood that Capital Expenditures may be made pursuant to this CLAUSE (X) whether or not constituting "Investments", but shall be treated as such for the purposes of said Sections), (y) nonrecurring restructuring costs and Transaction and related expenses and (z) proceeds of capital contributions used for Capital Expenditures in any Fiscal Year by WWI and its Subsidiaries (other than the SP1 Borrower), except, to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture, Capital Expenditures which do not aggregate in excess of the amount set forth below opposite such Fiscal Year:
Maximum Capital
Fiscal Year Expenditures
----------- ------------
2000 $5,000,000
2001 $7,500,000
2002 $8,000,000
2003 $8,500,000
2004 $9,000,000
2005 and thereafter $9,500,000
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PROVIDED, HOWEVER, that (i) to the extent the amount of Capital Expenditures permitted to be made in any Fiscal Year pursuant to the table set forth above without giving effect to this CLAUSE (I) (the "BASE AMOUNT") exceeds the aggregate amount of Capital Expenditures actually made during such Fiscal Year, such excess amount may be carried forward to (but only to) the next succeeding Fiscal Year (any such amount to be certified by WWI to the Administrative Agent in the Compliance Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any such amount carried forward to a succeeding Fiscal Year shall be deemed to be used prior to WWI and its Subsidiaries using the Base Amount for such succeeding Fiscal Year, without giving effect to such carry-forward).
SECTION 7.2.8. CONSOLIDATION, MERGER, ETC. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except
(a) any such Subsidiary (other than the SP1 Borrower) may liquidate or dissolve voluntarily into, and may merge with and into, WWI (so long as WWI is the surviving corporation of such combination or merger) or any other Subsidiary (other than the SP1 Borrower), and the assets or stock of any Subsidiary may be purchased or otherwise acquired by WWI or any other Subsidiary (other than the SP1 Borrower); PROVIDED, that notwithstanding the above, (i) a Subsidiary may only liquidate or dissolve into, or merge with and into, another Subsidiary of WWI (other than the SP1 Borrower) if, after giving effect to such combination or merger, WWI continues to own (directly or indirectly), and the Administrative Agent continues to have pledged to it pursuant to a supplement to the WWI Pledge Agreement, a percentage of the issued and outstanding shares of Capital Securities (on a fully diluted basis) of the Subsidiary surviving such combination or merger that is equal to or in excess of the percentage of the issued and outstanding shares of Capital Securities (on a fully diluted basis) of the Subsidiary that does not survive such combination or merger that was (immediately prior to the combination or merger) owned by WWI or pledged to the Administrative Agent and (ii) if such Subsidiary is a Guarantor the surviving corporation must be a Guarantor;
(b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, WWI or any of their Subsidiaries (other than the SP1 Borrower) may make Investments permitted under SECTION 7.2.5 (including any Permitted Acquisition); and
(c) a Subsidiary may merge with another Person in a transaction permitted by CLAUSE (B) of SECTION 7.2.9.
SECTION 7.2.9. ASSET DISPOSITIONS, ETC. Subject to the definition of Change of Control, each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, Dispose
of all or any part of its assets, whether now owned or hereafter acquired (including accounts receivable and Capital Securities of Subsidiaries) to any Person, unless
(a) such Disposition is made by WWI or any of its Subsidiaries (other than the SP1 Borrower) and is (i) in the ordinary course of its business (and does not constitute a Disposition of all or a substantial part of WWI or such Subsidiary's assets) or is of obsolete or worn out property or (ii) permitted by CLAUSE (A) or (B) of SECTION 7.2.8;
(b) (i) such Disposition (other than of Capital Securities) is
made by WWI or any of its Subsidiaries (other than the SP1 Borrower)
and is for fair market value and the consideration consists of no less
than 75% in cash, (ii) the Net Disposition Proceeds received from such
Disposition, together with the Net Disposition Proceeds of all other
assets sold, transferred, leased, contributed or conveyed pursuant to
this CLAUSE (B) since September 29, 1999, does not exceed (individually
or in the aggregate) $20,000,000 over the term of this Agreement and
(iii) the Net Disposition Proceeds generated from such Disposition not
theretofore reinvested in Qualified Assets in accordance with CLAUSE
(B) of SECTION 3.1.1 (with the amount permitted to be so reinvested in
Qualified Assets in any event not to exceed $7,500,000 over the term of
this Agreement) is applied as Net Disposition Proceeds to prepay the
Loans pursuant to the terms of CLAUSE (B) of SECTION 3.1.1 and SECTION
3.1.2; or
(c) such Disposition is made pursuant to a Local Management Plan.
SECTION 7.2.10. MODIFICATION OF CERTAIN AGREEMENTS.
(a) Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, consent to any amendment, supplement, amendment and restatement, waiver or other modification of any of the terms or provisions contained in, or applicable to, the Recapitalization Agreement or the Purchase Agreement or any schedules, exhibits or agreements related thereto, in each case which would adversely affect the rights or remedies of the Lenders, or WWI's or any Subsidiary's ability to perform hereunder or under any Loan Document or which would increase the purchase price with respect to the Transaction.
(b) Except as otherwise permitted pursuant to the terms of this Agreement, without the prior written consent of the Required Lenders, WWI will not consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, any Subordinated Debt (including the Senior Subordinated Note Indenture or any of the Senior Subordinated Notes), or any guarantees delivered in connection with any Subordinated Debt (including any Subordinated Guaranty) (collectively, the "RESTRICTED AGREEMENTS"), or make any payment in order to obtain an amendment thereof or change thereto, if the effect of such amendment, supplement, modification or change is to (i) increase the principal amount of, or increase the interest
rate on, or add or increase any fee with respect to such Subordinated Debt or any such Restricted Agreement, advance any dates upon which payments of principal or interest are due thereon or change any of the covenants with respect thereto in a manner which is more restrictive to WWI or any of its Subsidiaries or (ii) change any event of default or condition to an event of default with respect thereto, change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof, or change any collateral therefor (other than to release such collateral), if (in the case of this CLAUSE (B)(II)), the effect of such amendment or change, individually or together with all other amendments or changes made, is to increase the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Debt, or any such Restricted Agreement (or a trustee or other representative on their behalf).
SECTION 7.2.11. TRANSACTIONS WITH AFFILIATES. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of their other Affiliates (other than any Obligor)
(a) unless (i) such arrangement or contract is fair and equitable to WWI or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrowers or such Subsidiary with a Person which is not one of their Affiliates; (ii) if such arrangement or contract involves an amount in excess of $5,000,000, the terms of such arrangement or contract are set forth in writing and a majority of directors of WWI have determined in good faith that the criteria set forth in clause (i) are satisfied and have approved such arrangement or contract as evidenced by appropriate resolutions of the board of directors of WWI or the relevant Subsidiary; or (iii) if such arrangement or contract involves an amount in excess of $25,000,000, the board of directors shall also have received a written opinion from an investment banking, accounting or appraisal firm of national prominence that is not an Affiliate of WWI to the effect that such arrangement or contract is fair, from a financial standpoint, to WWI and its Subsidiaries; and
(b) except that, so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, WWI and its Subsidiaries may pay (i) annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an aggregate total amount in any Fiscal Year not to exceed the greater of (x) $1,000,000 and (y) 1.0% of EBITDA for the relevant period, and any related out-of-pocket expenses and (ii) fees to The Invus Group, Ltd. and its Affiliates in connection with any acquisition or divestiture transaction entered into by WWI or any Subsidiary; PROVIDED, HOWEVER, that the aggregate amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of any acquisition or divestiture transaction shall not exceed 1% of the total amount of such transaction.
SECTION 7.2.12. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into any agreement
(excluding (i) any restrictions existing under the Loan Documents or, in the
case of CLAUSES (A)(I) and (B), any other agreements in effect on the date
hereof, (ii) in the case of CLAUSES (A)(I) and (B), any restrictions with
respect to a Subsidiary imposed pursuant to an agreement which has been entered
into in connection with the sale or disposition of all or substantially all of
the Capital Securities or assets of such Subsidiary pursuant to a transaction
otherwise permitted hereby, (iii) in the case of CLAUSE (A), restrictions in
respect of Indebtedness secured by Liens permitted by SECTION 7.2.3, but only to
the extent such restrictions apply to the assets encumbered thereby, (iv) in the
case of CLAUSE (A), restrictions under the Senior Subordinated Note Indenture or
(v) any restrictions existing under any agreement that amends, refinances or
replaces any agreement containing the restrictions referred to in CLAUSE (I),
(II) or (III) above; PROVIDED, that the terms and conditions of any such
agreement referred to in CLAUSE (I), (II) or (III) are not materially less
favorable to the Lenders or materially more restrictive to any Obligor a party
thereto than those under the agreement so amended, refinanced or replaced)
prohibiting
(a) the (i) creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or (ii) ability of WWI or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrowers by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrowers.
SECTION 7.2.13. STOCK OF SUBSIDIARIES. Each of the Borrowers will not (other than WWI in connection with a Permitted Acquisition or an Investment), and will not permit any of its respective Subsidiaries to issue any Capital Securities (whether for value or otherwise) to any Person other than WWI or another Wholly-owned Subsidiary of WWI except in connection with a Local Management Plan; PROVIDED, that, WW Australia shall at all times be the record and beneficial direct owner of all of the issued and outstanding Capital Securities of the SP1 Borrower.
SECTION 7.2.14. SALE AND LEASEBACK. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into any agreement or arrangement with any other Person providing for the leasing by WWI or any of its Subsidiaries of real or personal property which has been or is to be sold or transferred by WWI or any of its Subsidiaries to such other Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of WWI or any of its Subsidiaries.
SECTION 7.2.15. FISCAL YEAR. Each of the Borrowers will not and will not permit any of its respective Subsidiaries to change its Fiscal Year.
SECTION 7.2.16. DESIGNATION OF SENIOR INDEBTEDNESS. WWI will not designate any Indebtedness as "Designated Senior Indebtedness" pursuant to clause (1) of the definition of such term in the Senior Subordinated Note Indenture, without the consent of the Required Lenders.
SECTION 7.3. MAINTENANCE OF SEPARATE EXISTENCE. The SP1 Borrower covenants and agrees with the Administrative Agent, the Issuer and each Lender as follows:
(a) OTHER BUSINESS. It will not engage in any business or enterprise or enter into any transaction other than the borrowing of Loans under the Agreement, and the incurrence and payment of ordinary course operating expenses, and as otherwise contemplated by the Loan Documents.
(b) MAINTENANCE OF SEPARATE EXISTENCE. In order to maintain its corporate existence separate and apart from that of WWI, any Subsidiary of WWI and any Affiliates thereof and any other Person, it will perform all necessary acts to maintain such separation, including without limitation,
(i) practicing and adhering to corporate formalities, such as maintaining appropriate corporate books and records;
(ii) complying with Article Sixth of its certificate of incorporation;
(iii) owning or leasing (including through shared arrangements with Affiliates) all office furniture and equipment necessary to operate its business;
(iv) refraining from (A) guaranteeing or otherwise becoming liable for any obligations of any of its Affiliates or any other Person, (B) having its Obligations guaranteed by its Affiliates or any other Person (except as otherwise contemplated by the Loan Documents), (C) holding itself out as responsible for debts of any of its Affiliates or any other Person or for decisions or actions with respect to the affairs of any of its Affiliates or any other Person, and (D) being directly or indirectly named as a direct or contingent beneficiary or loss payee on any insurance policy of any Affiliate;
(v) maintaining its deposit and other bank accounts and all of its assets separate from those of any other Person;
(vi) maintaining its financial records separate and apart from those of any other Person;
(vii) compensating all its employees, officers, consultants and agents for services provided to it by such Persons, or reimbursing any of its Affiliates in
respect of services provided to it by employees, officers, consultants and agents of such Affiliate, out of its own funds;
(viii) maintaining any owned or leased office space separate and apart from that of any of its Affiliates (even if such office space is subleased from or is on or near premises occupied by any of its Affiliates);
(ix) accounting for and managing all of its liabilities separately from those of any of its Affiliates and any other Person, including, without limitation, payment directly by the SP1 Borrower of all payroll, accounting and other administrative expenses and taxes;
(x) allocating, on an arm's-length basis, all shared corporate operating services, leases and expenses, including, without limitation, those associated with the services of shared consultants and agents and shared computer and other office equipment and software;
(xi) refraining from filing or otherwise initiating or supporting the filing of a motion in any bankruptcy or other insolvency proceeding involving it, WWI, any Subsidiary of WWI, any Affiliate thereof or any other Person to substantively consolidate it with WWI, any Subsidiary of WWI, any Affiliate thereof or any other Person;
(xii) remaining solvent;
(xiii) conducting all of its business (whether written or oral) solely in its own name;
(xiv) refraining from commingling its assets with those of any of its Affiliates or any other Person;
(xv) maintaining an arm's-length relationship with all of its Affiliates;
(xvi) refraining from acquiring obligations or securities of WWI, any Subsidiary of WWI or any Affiliate thereof;
(xvii) refraining from pledging its assets for the benefit of any of its Affiliates or any other Person or making any loans or advances to any of its Affiliates or any other Person (in each case, except as otherwise permitted pursuant to the Loan Documents); and
(xviii) correcting any known misunderstanding regarding its separate identity.
(c) INDEPENDENT DIRECTORS. It will not cause or allow its board of directors to take any action requiring the unanimous affirmative vote of 100% of the members of its board of directors unless the Independent Director(s) (as defined in the certificate of incorporation of the SP1 Borrower) shall have participated in such vote, and it shall comply in all respects with Article Seventh of its certificate of incorporation.
(d) UNANIMOUS CONSENT REQUIRED FOR CERTAIN ACTIONS. It shall not, without the unanimous consent of all of the members of its board of directors, including its independent director(s), (i) file, or authorize or consent to the filing of, a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest, (ii) dissolve, liquidate, consolidate, merge, or sell all or substantially all of its assets or any other entity in which it has a direct or indirect legal or beneficial ownership interest, (iii) engage in any other business activity or (iv) amend Articles Third, Sixth and Seventh of its Certificate of Incorporation.
(e) NO POWERS OF ATTORNEY. The SP1 Borrower shall not grant any powers of attorney to any Person for any purposes except (i) for the purpose of permitting any Person to perform any ministerial or administrative functions on behalf of the SP1 Borrower which are not inconsistent with the terms of the Loan Documents, (ii) to the Administrative Agent for the purposes of the Security Agreements, Pledge Agreements and Guaranties, or (iii) where otherwise provided or permitted by the Loan Documents.
ARTICLE VIII
GUARANTY
SECTION 8.1. THE GUARANTY. WWI hereby unconditionally and irrevocably guarantees the full and prompt payment when due, whether at stated maturity, by acceleration or otherwise (including all amounts which would have become due but for the operation of the automatic stay under Section 362(a) of the Federal Bankruptcy Code, 11 U.S.C. 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), of the following (collectively, the "GUARANTEED OBLIGATIONS"),
(a) all Obligations of the SP1 Borrower and each other Obligor to the Administrative Agent and each of the Lenders now or hereafter existing under this Agreement and each other Loan Document, whether for principal, interest, fees, expenses or otherwise; and
(b) all other Obligations to the Administrative Agent and each of the Lenders now or hereafter existing under any of the Loan Documents, whether for principal, interest, fees, expenses or otherwise.
The obligations of WWI under this ARTICLE VIII constitute a guaranty of payment when due and not of collection, and WWI specifically agrees that it shall not be necessary or required that the Administrative Agent, any Lender or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the SP1 Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of WWI under this ARTICLE VIII.
SECTION 8.2. GUARANTY UNCONDITIONAL. The obligations of WWI under this ARTICLE VIII shall be construed as a continuing, absolute, unconditional and irrevocable guaranty of payment and shall remain in full force and effect until the Final Termination Date. WWI guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the agreement, instrument or document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any of the Lenders with respect thereto. The liability of WWI hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity, legality or enforceability of this Agreement, the Notes, the TLCs, any Rate Protection Agreement with a Lender or any other Loan Document or any other agreement or instrument relating to any thereof;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any compromise, renewal, extension, acceleration or release with respect thereto, or any other amendment or waiver of or any consent to departure from this Agreement, the Notes, the TLCs, any Rate Protection Agreement with a Lender or any other Loan Document;
(c) any addition, exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;
(d) the failure of the Administrative Agent or any Lender
(i) to assert any claim or demand or to enforce any right or remedy against the SP1 Borrower, any other Obligor or any other Person (including any other guarantor) under the provisions of this Agreement, any Note, any TLC, any Rate Protection Agreement with a Lender or any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note, any TLC, any Rate Protection Agreement with a Lender or any other Loan Document;
(f) any defense, setoff or counterclaim which may at any time be available to or be asserted by any Obligor against the Administrative Agent or any Lender;
(g) any reduction, limitation, impairment or termination of the Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and WWI hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations or otherwise; or
(h) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, WWI, any other Obligor or any surety or guarantor.
SECTION 8.3. REINSTATEMENT IN CERTAIN CIRCUMSTANCES. If at any time any payment in whole or in part of any of the Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of WWI, any other Obligor or otherwise, WWI's obligations under this ARTICLE VIII with respect to such payment shall be reinstated as though such payment had been due but not made at such time.
SECTION 8.4. WAIVER. WWI irrevocably waives promptness, diligence, notice of acceptance hereof, presentment, demand, protest and any other notice with respect to any of the Guaranteed Obligations, as well as any requirement that at any time any action be taken by any Person against the SP1 Borrower or any other Person.
SECTION 8.5. POSTPONEMENT OF SUBROGATION, ETC. WWI will not exercise any rights which it may acquire by way of rights of subrogation by any payment made hereunder or otherwise, prior to the Final Termination Date. Any amount paid to WWI on account of any such subrogation rights prior to Final Termination Date shall be held in trust for the benefit of the Lenders and each holder of a Note and/or TLC and shall immediately be paid to the Administrative Agent and credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement; PROVIDED, HOWEVER, that if
(a) WWI has made payment to the Lenders and each holder of a Note of all or any part of the Guaranteed Obligations, and
(b) the Final Termination Date has occurred,
each Lender and each holder of a Note agrees that, at WWI's request, the Administrative Agent, on behalf of the Lenders and the holders of the Notes, will execute and deliver to WWI appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to WWI of an interest in the Guaranteed Obligations resulting from such payment by WWI. In furtherance of the foregoing, at all times prior to the Final Termination Date, WWI shall refrain from taking any action or commencing any proceeding against the SP1 Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments to any Lender or any holder of a Note and/or TLC; PROVIDED, HOWEVER, that WWI may make any necessary filings solely to preserve its claims against the SP1 Borrower.
SECTION 8.6. STAY OF ACCELERATION. If acceleration of the time for payment of any amount payable by the SP1 Borrower under this Agreement or any Note or TLC is stayed upon the occurrence of any event referred to in SECTION 9.1.9 with respect to the SP1 Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by WWI hereunder forthwith.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. LISTING OF EVENTS OF DEFAULT. Each of the following events or occurrences described in this SECTION 9.1 shall constitute an "EVENT OF DEFAULT".
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS. Any Borrower shall default in the payment or prepayment of any Reimbursement Obligation (including pursuant to SECTIONS 2.6 and 2.6.2) on the applicable Disbursement Due Date or any deposit of cash for collateral purposes on the date required pursuant to SECTION 2.6.4 or any principal of any Loan when due, or any Obligor (including WWI and the SP1 Borrower) shall default (and such default shall continue unremedied for a period of three Business Days) in the payment when due of any interest or commitment fee or of any other monetary Obligation.
SECTION 9.1.2. BREACH OF WARRANTY. Any representation or warranty of any Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrowers or any other Obligor to the Administrative Agent, the Issuer or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to ARTICLE V) is or shall be incorrect when made in any material respect.
SECTION 9.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. Any Borrower shall default in the due performance and observance of any of its obligations under SECTION 7.1.9 or SECTION 7.2.
SECTION 9.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to WWI by the Administrative Agent at the direction of the Required Lenders.
SECTION 9.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur (i) in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness, other than Indebtedness described in SECTION 9.1.1, of WWI or any of its Subsidiaries or any other Obligor having a principal amount, individually or in the aggregate, in excess of $1,000,000, or (ii) a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness having a principal amount, individually or in the aggregate, in excess of $5,000,000 if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity.
SECTION 9.1.6. JUDGMENTS. Any judgment or order for the payment of money in excess of $1,000,000 (not covered by insurance from a responsible insurance company that is not denying its liability with respect thereto) shall be rendered against WWI or any of its Subsidiaries or any other Obligor and remain unpaid and either
(a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or
(b) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.
SECTION 9.1.7. PENSION PLANS. Any of the following events shall occur with respect to any Pension Plan:
(a) the termination of any Pension Plan if, as a result of such termination, WWI or any Subsidiary would be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $5,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in an amount in excess of $5,000,000.
SECTION 9.1.8. CHANGE IN CONTROL. Any Change in Control shall occur.
SECTION 9.1.9. BANKRUPTCY, INSOLVENCY, ETC. WWI or any of its Subsidiaries (other than any Immaterial Subsidiary or the Designated Subsidiary) or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for WWI or any of its Subsidiaries or any other Obligor or any property of any thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for WWI or any of its Subsidiaries or any other Obligor or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that WWI or each Subsidiary and each other Obligor hereby expressly authorizes the Administrative Agent, the Issuer and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of WWI or any of its Subsidiaries or any other Obligor, and, if any such case or proceeding is not commenced by WWI or such Subsidiary or such other Obligor, such case or proceeding shall be consented to or acquiesced in by WWI or such Subsidiary or such other Obligor or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that WWI, each Subsidiary and each other Obligor hereby expressly authorizes the Administrative Agent, the Issuer and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or
(e) take any action (corporate or otherwise) authorizing, or in furtherance of, any of the foregoing.
SECTION 9.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be in full force and effect or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; any Borrower or any other Obligor shall, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability thereof; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document, except to the extent any event referred to above (a) results from the failure of the Administrative Agent to maintain possession of certificates representing securities pledged under the WWI
Pledge Agreement or to file continuation statements under the Uniform Commercial Code of any applicable jurisdiction or (b) is covered by a lender's title insurance policy and the relevant insurer promptly after the occurrence thereof shall have acknowledged in writing that the same is covered by such title insurance policy.
SECTION 9.1.11. SENIOR SUBORDINATED NOTES. The subordination provisions relating to the Senior Subordinated Note Indenture (the "SUBORDINATION PROVISIONS") shall fail to be enforceable by the Lenders (which have not effectively waived the benefits thereof) in accordance with the terms thereof, or the principal or interest on any Loan, Reimbursement Obligation or other monetary Obligations shall fail to constitute Senior Debt, or the same (or any other similar term) used to define the monetary Obligations.
SECTION 9.1.12. REDEMPTION. Any Senior Subordinated Noteholder of any Subordinated Debt shall file an action seeking the rescission thereof or damages or injunctive relief relating thereto; or any event shall occur which, under the terms of any agreement or indenture relating to Subordinated Debt, shall require WWI or any of its Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire all or any portion of the principal amount of the Subordinated Debt (other than as provided under SECTION 7.2.6); or WWI or any of its Subsidiaries shall for any other reason purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire, or make any other payments in respect of the principal amount of any such Subordinated Debt (other than as provided under SECTION 7.2.6).
SECTION 9.2. ACTION IF BANKRUPTCY, ETC. If any Event of Default described in CLAUSES (A) through (D) of SECTION 9.1.9 shall occur with respect to WWI, any Subsidiary or any other Obligor, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in CLAUSES (A) through (D) of SECTION 9.1.9 with respect to WWI or any Subsidiary or any other Obligor) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to WWI declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable, require the Borrowers to provide cash collateral to be deposited with the Administrative Agent in an amount equal to the Stated Amount of all issued Letters of Credit and/or declare the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, the Borrowers shall deposit with the Administrative Agent cash collateral in an amount equal to the Stated Amount of all issued Letters of Credit and/or, as the case may be, the Commitments shall terminate.
ARTICLE X
THE AGENTS
SECTION 10.1. ACTIONS. Each Lender hereby appoints Scotiabank as its Administrative Agent and as a Lead Agent and Book Manager under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes, the TLCs, and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby appoints CSFB as the Syndication Agent and as a Lead Agent and Book Manager. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent, ratably in accordance with their respective Term Loans and TLCs outstanding and Commitments (or, if no Term Loans, TLCs or Commitments are at the time outstanding and in effect, then ratably in accordance with the principal amount of Term Loans or, as the case may be, TLCs held by such Lender, and their respective Commitments as in effect in each case on the date of the termination of this Agreement), from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agents in any way relating to or arising out of this Agreement, the Notes, the TLCs and any other Loan Document, including reasonable attorneys' fees, and as to which any Agent is not reimbursed by the Borrowers or any other Obligor (and without limiting the obligation of the Borrowers or any other Obligor to do so); PROVIDED, HOWEVER, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from an Agent's gross negligence or willful misconduct. The Agents shall not be required to take any action hereunder, under the Notes, the TLCs or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes, the TLCs or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agents shall be or become, in any Agent's determination, inadequate, any Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. Notwithstanding the foregoing, the Lead Arrangers and Book Managers shall have no duties, obligations or liabilities under any Loan Document.
SECTION 10.2. FUNDING RELIANCE, ETC. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the applicable Borrower a
corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender severally agrees and the Borrowers jointly and severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the applicable Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of any Borrower) and (in the case of a Lender), at the Federal Funds Rate (for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing.
SECTION 10.3. EXCULPATION. Neither any Agent nor any of their respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrowers of their obligations hereunder or under any other Loan Document. Any such inquiry which may be made by any Agent shall not obligate it to make any further inquiry or to take any action. The Agents shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agents believe to be genuine and to have been presented by a proper Person.
SECTION 10.4. SUCCESSOR. The Syndication Agent may resign as such upon one Business Day's notice to WWI and the Administrative Agent. The Administrative Agent may resign as such at any time upon at least 30 days prior notice to WWI and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, with the prior consent of WWI (which consent shall not be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $250,000,000; PROVIDED, HOWEVER, that if, such retiring Administrative Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in above, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor as provided for above. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of
(a) this ARTICLE X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and
(b) SECTION 11.3 and SECTION 11.4 shall continue to inure to its benefit.
SECTION 10.5. CREDIT EXTENSIONS BY EACH AGENT. Each Agent shall have the same rights and powers with respect to (x) the Credit Extensions made by it or any of its Affiliates, and (y) the Notes or TLCs held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any Subsidiary or Affiliate of WWI, as if such Agent were not an Agent hereunder.
SECTION 10.6. CREDIT DECISIONS. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrowers, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.
SECTION 10.7. COPIES, ETC. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by any Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by such Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from any Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement.
SECTION 10.8. RELIANCE BY THE ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the
Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. For purposes of applying amounts in accordance with this Section, the Administrative Agent shall be entitled to rely upon any Secured Party that has entered into a Rate Protection Agreement with any Obligor for a determination (which such Secured Party agrees to provide or cause to be provided upon request of the Administrative Agent) of the outstanding Secured Obligations owed to such Secured Party under any Rate Protection Agreement. Unless it has actual knowledge evidenced by way of written notice from any such Secured Party and any Borrower to the contrary, the Administrative Agent, in acting hereunder and under each other Loan Document, shall be entitled to assume that no Rate Protection Agreements or Obligations in respect thereof are in existence or outstanding between any Secured Party and any Obligor.
SECTION 10.9. DEFAULTS. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or any Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to SECTION 11.1) take such action with respect to such Default as shall be directed by the Required Lenders; PROVIDED, THAT unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all Lenders.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrowers and the Required Lenders; PROVIDED, HOWEVER, that no such amendment, modification or waiver shall:
(a) modify this SECTION 11.1 without the consent of all Lenders;
(b) increase the aggregate amount of any Lender's Percentage of any Commitment Amount, increase the aggregate amount of any Loans or TLCs required to be made or purchased by a Lender pursuant to its Commitments, extend the final Commitment Termination Date of Credit Extensions made (or participated in) by a
Lender or reduce any fees described in ARTICLE III payable to any Lender without the consent of such Lender;
(c) extend the final Stated Maturity Date for any Lender's Loan or TLC, or reduce the principal amount of or rate of interest on any Lender's Loan or TLC or extend the date on which scheduled payments of principal, or payments of interest or fees are payable in respect of any Lender's Loans or TLCs, in each case, without the consent of such Lender (it being understood and agreed, however, that any vote to rescind any acceleration made pursuant to SECTION 9.2 and SECTION 9.3 of amounts owing with respect to the Loans, TLCs and other Obligations shall only require the vote of the Required Lenders);
(d) reduce the percentage set forth in the definition of "Required Lenders" or any requirement hereunder that any particular action be taken by all Lenders without the consent of all Lenders;
(e) increase the Stated Amount of any Letter of Credit or extend the Stated Expiry Date of any Letter of Credit to a date which is subsequent to the Revolving Loan Commitment Termination Date, in each case, unless consented to by the Issuer of such Letter of Credit;
(f) except as otherwise expressly provided in this Agreement or another Loan Document, release (i) any Guarantor from its obligations under a Guaranty other than in connection with a Disposition of all or substantially all of the Capital Securities of such Guarantor in a transaction permitted by SECTION 7.2.9 as in effect from time to time or (ii) all or substantially all of the collateral under the Loan Documents, in either case without the consent of all Lenders;
(g) change any of the terms of CLAUSE (C) of SECTION 2.1.4 or
SECTION 2.3.2 without the consent of the Swingline Lender; or
(h) affect adversely the interests, rights or obligations of the Administrative Agent (in its capacity as the Administrative Agent), the Syndication Agent (in its capacity as the Syndication Agent) or any Issuer (in its capacity as Issuer), unless consented to by the Administrative Agent, the Syndication Agent or such Issuer, as the case may be.
No failure or delay on the part of the Administrative Agent, the Syndication Agent, any Issuer or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Borrower or any other Obligor in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent, the Syndication Agent, any Issuer or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2. NOTICES. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on SCHEDULE III hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre- paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (telephonic confirmation in the case of facsimile).
SECTION 11.3. PAYMENT OF COSTS AND EXPENSES. The Borrowers jointly and severally agree to pay on demand all reasonable expenses of the Administrative Agent (including the reasonable fees and out-of-pocket expenses of Mayer, Brown & Platt, special New York counsel to the Administrative Agent and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with:
(a) the syndication by the Agents of the Loans, the TLCs, the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of each Mortgage, each Pledge Agreement and each Security Agreement and/or any Uniform Commercial Code financing statements or other instruments relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of such Mortgage, Pledge Agreement or Security Agreement; and
(c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document.
The Borrowers further jointly and severally agree to pay, and to save each Agent, the Issuer and the Lenders harmless from all liability for, any stamp or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the Credit Extensions made hereunder, or the issuance of the Notes, the TLCs and Letters of Credit or any other Loan Documents. The Borrowers also agree to reimburse the Administrative Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent, the Issuer or such Lender in
connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations.
SECTION 11.4. INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrowers hereby jointly and severally indemnify, exonerate and hold the Administrative Agent, the Syndication Agent, the Issuer and each Lender and each of their respective Affiliates, and each of their respective partners, officers, directors, employees and agents, and each other Person controlling any of the foregoing within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively, the "INDEMNIFIED PARTIES"), free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses actually incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension;
(b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of any Borrower as the result of any determination by the Required Lenders pursuant to ARTICLE V not to make any Credit Extension);
(c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by WWI or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not the Administrative Agent, the Syndication Agent, the Issuer or such Lender is party thereto;
(d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by WWI or any of its Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by WWI or any Subsidiary thereof of any Hazardous Material present on or under such property in a manner giving rise to liability at or prior to the time WWI or such Subsidiary owned or operated such property (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, WWI or such Subsidiary; or
(f) each Lender's Environmental Liability (the indemnification herein shall survive repayment of the Notes and the TLCs and any transfer of the property of WWI or
any of its Subsidiaries by foreclosure or by a deed in lieu of foreclosure for any Lender's Environmental Liability, regardless of whether caused by, or within the control of, WWI or such Subsidiary);
except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or willful misconduct. WWI, the Borrowers and their permitted successors and assigns hereby waive, release and agree not to make any claim, or bring any cost recovery action against, the Administrative Agent, the Syndication Agent, the Issuer or any Lender under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted, except to the extent arising out of the gross negligence or willful misconduct of any Indemnified Party. It is expressly understood and agreed that to the extent that any of such Persons is strictly liable under any Environmental Laws, any Borrower's obligation to such Person under this indemnity shall likewise be without regard to fault on the part of such Borrower with respect to the violation or condition which results in liability of such Person. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each of the Borrowers hereby jointly and severally agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
SECTION 11.5. SURVIVAL. The obligations of the Borrowers under SECTIONS 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders under SECTIONS 4.8 and 10.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations, the termination or expiration of all Letters of Credit and the termination of all Commitments. The representations and warranties made by the Borrowers and each other Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6. SEVERABILITY. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 11.7. HEADINGS. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.
SECTION 11.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the parties hereto in several counterparts each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.
SECTION 11.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, THE TLCS AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE
LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT), INCLUDING PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND COMMITMENT FEES, SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto.
SECTION 11.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED, HOWEVER, that:
(a) none of the Borrowers may assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are subject to SECTION 11.11.
SECTION 11.11. SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN LOANS, NOTES AND TLCS. Each Lender may assign, or sell participations in, its Loans, its TLCs, Letters of Credit and Commitments to one or more other Persons, on a non PRO RATA basis, in accordance with this SECTION 11.11.
SECTION 11.11.1. ASSIGNMENTS. Any Lender,
(a) with the written consents of WWI and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and which consent, in the case of WWI, shall be deemed to have been given in the absence of a written notice delivered by WWI to the Administrative Agent, on or before the fifth Business Day after receipt by WWI of such Lender's request for such consent), may at any time assign and delegate to one or more commercial banks or other financial institutions; and
(b) with notice to WWI and the Administrative Agent, but without the consent of any Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates, Related Fund or to any other Lender,
(each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "ASSIGNEE LENDER"), all or any fraction of such Lender's total Loans, TLCs, participations in Letters of Credit and Letter of Credit Outstandings with respect thereto and Commitments in a minimum aggregate amount of (x) $1,000,000 (if such assignment and delegation is to a then existing Lender or a Related Fund or group of Related Funds) or (y) $5,000,000 (if such assignment and delegation is to a Person not then a Lender; unless otherwise agreed to by the Administrative Agent and the Borrower) or the then remaining amount of a Lender's type of Loan or Commitment; PROVIDED, HOWEVER, that (i) with respect to assignments of Revolving Loans, the assigning Lender must assign a PRO RATA portion of each of its Revolving Loan Commitments, Revolving Loans and interest in Letters of Credit Outstandings and (ii) the Administrative Agent, in its own discretion, or by instruction from the Issuer, may refuse acceptance of an assignment of Revolving Loans and Revolving Loan Commitments to a Person not satisfying long-term certificate of deposit ratings published by S&P or Moody's, of at least BBB- or Baa3, respectively, or (unless otherwise agreed to by the Issuer), if such assignment would, pursuant to any applicable laws, rules or regulations, be binding on the Issuer, result in a reduced rate of return to the Issuer or require the Issuer to set aside capital in an amount that is greater than that which is required to be set aside for other Lenders participating in the Letters of Credit; PROVIDED, FURTHER, that any such Assignee Lender will comply, if applicable, with the provisions contained in SECTION 4.6 and the Borrowers, each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrowers and the Administrative Agent by such Lender and such Assignee Lender;
(ii) such Assignee Lender shall have executed and delivered to the Borrowers and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; and
(iii) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned
and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within ten Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the applicable Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes or TLCs, as the case may be, evidencing such Assignee Lender's assigned Loans, TLCs, TLC Commitments and Commitments and, if the assignor Lender has retained Loans, TLCs, TLC Commitments and Commitments hereunder, replacement Notes or TLCs, as the case may be, in the principal amount of the Loans or TLCs, as the case may be, and TLC Commitments or Commitments, as the case may be, retained by the assignor Lender hereunder (such Notes or TLCs, as the case may be, to be in exchange for, but not in payment of, those Notes or TLCs, as the case may be, then held by such assignor Lender). Each such Note or TLC, as the case may be, shall be dated the date of the predecessor Notes or TLCs, as the case may be. The assignor Lender shall mark the predecessor Notes or TLCs, as the case may be, "exchanged" and deliver them to the applicable Borrower. Accrued interest on that part of the predecessor Notes or TLCs, as the case may be, evidenced by the new Notes or TLCs, as the case may be, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes or TLCs, as the case may be, evidenced by the replacement Notes or TLCs, as the case may be, shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes or TLCs, as the case may be, and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement, in the amount of $3,500, unless such assignment and delegation is by a Lender to its Affiliate (which shall not include a Related Fund) or if such assignment and delegation is by a Lender to the Federal Reserve Bank, as provided below. Any attempted assignment and delegation not made in accordance with this SECTION 11.11.1 shall be null and void.
Notwithstanding any other term of this SECTION 11.11.1, the agreement of the Swing Line Lender to provide the Swing Line Loan Commitment shall not impair or otherwise restrict in any manner the ability of the Swing Line Lender to make any assignment of its Loans or Commitments, it being understood and agreed that the Swing Line Lender may terminate its Swing Line Loan Commitment, to the extent such Swing Line Commitment would exceed its Revolving Loan Commitment after giving effect to such assignment, in connection with the making of any assignment. Nothing contained in this SECTION 11.11.1 shall prevent or prohibit any Lender from pledging its rights (but not its obligations to make Loans) under this Agreement and/or its Loans and/or its Notes hereunder to a Federal Reserve Bank (or in the case of a Lender which is a fund, to the trustee of, or other Eligible Institution affiliated with, such fund for the benefit of its investors) in support of borrowings made by such Lender from such Federal Reserve Bank.
In the event that S&P or Moody's shall, after the date that any Lender with a Commitment to make Revolving Loans or participate in Letters of Credit or Swing Line Loans becomes a Lender, downgrade the long-term certificate of deposit rating or long-term senior unsecured debt rating of such Lender, and the resulting rating shall be below BBB- or Baa3, then each of the Issuer and (if different) the Swing Line Lender shall have the right, but not the obligation, upon notice to such
Lender and the Administrative Agent, to replace such Lender with an Assignee
Lender in accordance with and subject to the restrictions contained in this
Section, and such Lender hereby agrees to transfer and assign without recourse
(in accordance with and subject to the restrictions contained in this Section)
all its interests, rights and obligations in respect of its Revolving Loan
Commitment under this Agreement to such Assignee Lender; PROVIDED, HOWEVER, that
(i) no such assignment shall conflict with any law, rule and regulation or order
of any governmental authority and (ii) such Assignee Lender shall pay to such
Lender in immediately available funds on the date of such assignment the
principal of and interest and fees (if any) accrued to the date of payment on
the Loans made, and Letters of Credit participated in, by such Lender hereunder
and all other amounts accrued for such Lender's account or owed to it hereunder.
SECTION 11.11.2. PARTICIPATIONS.
(a) Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "PARTICIPANT") participating interests in any of the Loans, TLCs, Commitments, or other interests of such Lender hereunder; PROVIDED, HOWEVER, that
(i) no participation contemplated in this Section shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document;
(ii) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations;
(iii) each Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents;
(iv) no Participant, unless such Participant is an Affiliate of such Lender, or Related Fund or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any action of the type described in CLAUSE (A), (B), (F) or, to the extent requiring the consent of each Lender, CLAUSE (C) of SECTION 11.1; and
(v) the Borrowers shall not be required to pay any amount under this Agreement that is greater than the amount which it would have been required to pay had no participating interest been sold.
The Borrowers acknowledge and agree, subject to CLAUSE (V) above, that each Participant, for purposes of SECTIONS 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 11.3 and 11.4, shall be considered a Lender.
Each Participant shall only be indemnified for increased costs pursuant to
SECTION 4.3, 4.5 or 4.6 if and to the extent that the Lender which sold such
participating interest to such Participant concurrently is entitled to make, and
does make, a claim on any Borrower for such increased costs. Any Lender that
sells a participating interest in any Loan, TLC, Commitment or other interest to
a Participant under this Section shall indemnify and hold harmless each Borrower
and the Administrative Agent from and against any taxes, penalties, interest or
other costs or losses (including reasonable attorneys' fees and expenses)
incurred or payable by any Borrower or the Administrative Agent as a result of
the failure of such Borrower or the Administrative Agent to comply with its
obligations to deduct or withhold any taxes from any payments made pursuant to
this Agreement to such Lender or the Administrative Agent, as the case may be,
which taxes would not have been incurred or payable if such Participant had been
a Non-U.S. Lender that was entitled to deliver to such Borrower, the
Administrative Agent or such Lender, and did in fact so deliver, a duly
completed and valid Form 1001 or 4224 (or applicable successor form) entitling
such Participant to receive payments under this Agreement without deduction or
withholding of any United States federal taxes.
(b) Each Lender agrees and represents with and for the benefit of the SP1 Borrower and WW Australia that it:
(i) has not (directly or indirectly) offered by subscription or purchase or issued invitations to subscribe for or buy nor has it sold the TLCs;
(ii) will not (directly or indirectly) offer for subscription or purchase or issue invitations to subscribe for or buy nor will it sell the TLCs; and
(iii) has not distributed and will not distribute any draft, preliminary or definitive offering memorandum, advertisements or other offering material relating to the TLCs,
in the Commonwealth of Australia, its territories or possessions, unless (x) the consideration is payable by each offeree or invitee in a minimum amount of A$500,000 or the offer or invitation is otherwise an EXCLUDED OFFER OR EXCLUDED INVITATION for the purposes of the Australian Corporations Law and the Corporations Regulations made under the Australian Corporations Law, and (y) the offer, invitation or distribution complies with all applicable laws, regulations and directives and does not require any document to be lodged with, or registered by, the ASIC.
(c) Each Lender agrees and represents with and for the benefit of the SP1 Borrower and WW Australia that it has not sold and will not sell the TLCs to any person if, at the time of such sale, the employees of the Lender aware of, or involved in, the sale knew or had reasonable grounds to suspect that, as a result of such sale, any TLCs or an interest in any TLCs were being, or would later be, acquired (directly or indirectly) by an associate of the SP1 Borrower or WW Australia for the purposes of section 128F(5) of the Income Tax Assessment Act 1936 of Australia.
(d) The SP1 Borrower holds the benefit of the agreements and representations in paragraphs (b) and (c) in trust for WW Australia.
SECTION 11.11.3. REGISTER. The Borrowers hereby designate the Administrative Agent to serve as the Borrowers' agent, solely for the purpose of this Section, to maintain a register (the "REGISTER") on which the Administrative Agent will record each Lender's Commitment, the Loans made by each Lender and the Notes evidencing such Loans and the TLCs, and each repayment in respect of the principal amount of the Loans and the TLCs of each Lender and annexed to which the Administrative Agent shall retain a copy of each Lender Assignment Agreement delivered to the Administrative Agent pursuant to this Section. Failure to make any recordation, or any error in such recordation, shall not affect any Borrower's or any other Obligor's Obligations in respect of such Loans or Notes or TLCs. The entries in the Register shall be conclusive, in the absence of manifest error, and WWI, the Borrowers, the Administrative Agent and the Lenders shall treat each Person in whose name a Loan and related Note or TLC is registered as the owner thereof for all purposes of this Agreement, notwithstanding notice or any provision herein to the contrary. A Lender's Commitment and the Loans made pursuant thereto and the Notes evidencing such Loans or TLCs may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer in the Register. Any assignment or transfer of a Lender's Commitment or the Loans or the Notes evidencing such Loans or TLCs made pursuant thereto shall be registered in the Register only upon delivery to the Administrative Agent of a Lender Assignment Agreement duly executed by the assignor thereof. No assignment or transfer of a Lender's Commitment or the Loans made pursuant thereto or the Notes evidencing such Loans or TLCs shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section. No Assignment and Assumption Agreement shall be effective until recorded in the Register.
SECTION 11.12. OTHER TRANSACTIONS. Nothing contained herein shall preclude the Administrative Agent, the Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, the Borrowers or any of their Affiliates in which any Borrower or such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE LENDERS, ANY ISSUER OR THE BORROWERS IN CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWERS IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH OF THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY OF WWI OR THE BORROWERS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF WWI AND THE BORROWERS HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, EACH LENDER, EACH ISSUER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, SUCH LENDER, SUCH ISSUER OR ANY BORROWER IN CONNECTION HEREWITH OR THEREWITH. EACH OF THE BORROWERS ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 11.15. CONFIDENTIALITY. The Lenders shall hold all non-public information obtained pursuant to or in connection with this Agreement or obtained by such Lender based on a review of the books and records of WWI or any of its Subsidiaries in accordance with their customary procedures for handling confidential information of this nature, but may make disclosure to any of their examiners, Affiliates, outside auditors, counsel and other professional
advisors or to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section) in connection with this Agreement or as reasonably required by any potential BONA FIDE transferee, participant or assignee, or in connection with the exercise of remedies under a Loan Document, or as requested by any governmental agency or representative thereof or pursuant to legal process; PROVIDED, HOWEVER, that
(a) unless specifically prohibited by applicable law or court order, each Lender shall notify WWI of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this SECTION 11.15, each Lender shall require any such BONA FIDE transferee, participant and assignee receiving a disclosure of non-public information to agree in writing
(i) to be bound by this SECTION 11.15; and
(ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this SECTION 11.15; and
(c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Lender shall be obligated or required to return any materials furnished by WWI or any Subsidiary.
SECTION 11.16. JUDGMENT CURRENCY. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder, under any Note, TLC or under any other Loan Document in another currency into U.S. Dollars or into a Foreign Currency, as the case may be, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the applicable Secured Party could purchase such other currency with U.S. Dollars or with such Foreign Currency, as the case may be, in New York City, at the close of business on the Business Day immediately preceding the day on which final judgment is given, together with any premiums and costs of exchange payable in connection with such purchase.
SECTION 11.17. RELEASE OF SECURITY INTERESTS.
(a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by SECTION 11.1) to take any action requested by the Borrowers having the effect
of releasing any collateral or guarantee obligations (i) to the extent
necessary to permit consummation of any transaction expressly permitted
by any Loan Document or that has been consented to in accordance with
SECTION 11.1 or (ii) under the circumstances described in paragraph (b)
below.
(b) At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents shall have been paid in full, the Commitments have been terminated and no letters of Credit shall be outstanding, the collateral shall be released from the Liens created by the Security Agreements, and the Security Agreements and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Obligor under the Security Agreements shall terminate, all without delivery of any instrument or performance of any act by any Person.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
BORROWERS
WEIGHT WATCHERS INTERNATIONAL, INC.
By:________________________________
Name:
Title:
WW FUNDING CORP.
By:________________________________
Name:
Title:
AGENTS
CREDIT SUISSE FIRST BOSTON
as the Syndication Agent
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
as the Administrative Agent
By:________________________________
Name:
Title:
ISSUER
THE BANK OF NOVA SCOTIA
as the Issuer
By:________________________________
Name:
Title:
LENDERS
THE BANK OF NOVA SCOTIA
By:________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 5.1.9 LIEN SEARCH JURISDICTIONS
ITEM 6.1 GOOD STANDING.
ITEM 6.7 LITIGATION.
DESCRIPTION OF PROCEEDING ACTION OR CLAIM SOUGHT
------------------------- ----------------------
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ITEM 6.8 EXISTING SUBSIDIARIES.
ITEM 6.11 EMPLOYEE BENEFIT PLANS.
ITEM 6.12 ENVIRONMENTAL MATTERS.
ITEM 7.2.2(c) ONGOING INDEBTEDNESS.
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
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ITEM 7.2.5(a) ONGOING INVESTMENTS.
SCHEDULE II
COMMITMENTS AND PERCENTAGES
II-1
SCHEDULE III
III-1
Exhibit 10.9
STOCKHOLDERS' AGREEMENT
Dated as of
September 30, 1999
Among
WEIGHT WATCHERS INTERNATIONAL, INC.,
ARTAL LUXEMBOURG S.A.
and
THE OTHER STOCKHOLDERS NAMED HEREIN
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES........................1
1.1 DEFINITIONS......................................................1
1.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................4
1.3 REPRESENTATIONS AND WARRANTIES OF ARTAL..........................5
1.4 REPRESENTATIONS AND WARRANTIES OF NAMED INVESTORS................5
ARTICLE II COVENANTS..........................................................6
2.1 TRANSFERS OF COMMON STOCK........................................6
2.2 [Intentionally Omitted.].........................................8
2.3 TAG ALONG........................................................8
2.4 DRAG ALONG......................................................12
2.5 CERTAIN TRANSFERS BY ARTAL......................................13
ARTICLE III REGISTRATION RIGHTS..............................................14
1.1 REGISTRATION RIGHTS.............................................14
ARTICLE IV LEGENDS..........................................................14
4.1 LEGEND..........................................................14
ARTICLE V IRREVOCABLE PROXY................................................16
5.1 IRREVOCABLE PROXY...............................................16
ARTICLE VI POWER OF ATTORNEY................................................16
6.1 POWER OF ATTORNEY...............................................16
ARTICLE VII MISCELLANEOUS....................................................17
7.1 TERMINATION.....................................................17
7.2 REMEDIES........................................................17
7.3 CONSENT TO AMENDMENTS...........................................18
7.4 SUCCESSORS AND ASSIGNS..........................................18
7.5 SEVERABILITY....................................................18
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7.6 COUNTERPARTS....................................................19
7.7 NOTICES.........................................................19
7.8 GOVERNING LAW...................................................19
7.9 FURTHER ASSURANCES..............................................19
7.10 JURISDICTION; VENUE; PROCESS...................................19
7.11 MUTUAL WAIVER OF JURY TRIAL....................................20
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STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of September 30, 1999, among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "COMPANY"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("ARTAL"), MERCHANT CAPITAL, INC. ("MERCHANT"), LOGO INCORPORATED PTY. LTD. ("LOGO"), LONGISLAND INTERNATIONAL LIMITED ("LIL"), ENVOY PARTNERS, ("ENVOY"), and SCOTIABANC, INC. ("SCOTIA" and, together with Merchant, Logo, LIL and Envoy, the "NAMED INVESTORS").
WHEREAS, upon the completion of the transactions contemplated by the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999 (the "RECAPITALIZATION AGREEMENT"), among the Company, H.J. Heinz Company, Artal International S.A. and Artal, Artal will own 22,372,000 shares of common stock of the Company, no par value per share (the "COMMON STOCK").
WHEREAS, pursuant to a Stock Purchase Agreement, dated as of the date hereof (the "STOCK PURCHASE AGREEMENT"), each Named Investor will purchase from Artal the number of shares of Common Stock set forth opposite its name on Schedule I hereto.
NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:
DEFINITIONS;
REPRESENTATIONS AND WARRANTIES
DEFINITIONS. Capitalized terms used herein shall have the meanings set forth below:
" AFFILIATE" means any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another Person. The term "control" includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
" ARTICLES OF INCORPORATION" means the Articles of Incorporation of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
" BY-LAWS" means the By-Laws of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
" CLOSING DATE" means September 29, 1999.
" CORPORATE GROUP" means, with respect to any Person, (i) such Person together
with its direct and indirect wholly owned subsidiaries and any entity, directly
or indirectly through wholly owned subsidiaries, wholly owning such Person or
(ii) if permitted by each of the agreements governing material debt of such
Person, such Person together with its Affiliates.
" DRAG ALONG NUMBER" shall have the meaning specified in Section 2.4.
" FAMILY GROUP" means, with respect to any individual, such individual's spouse and descendants and such individual's parents, grandparents, aunts, uncles, brothers, sisters and their respective spouses and descendants (in each case, whether natural or adopted) and any trust or similar entity established and maintained solely for the benefit of such individual and/or his spouse, descendants and/or such above-listed relatives and all of the aforesaid of the grantor of a trust that is a stockholder of the Company.
" HEINZ" means H. J. Heinz Company, a Pennsylvania corporation.
" INVESTOR JOINDER" means a joinder agreement, substantially in the form of Exhibit 2.1(a) hereto, by which a Person becomes an Investor Stockholder after the date hereof.
" INVESTOR STOCKHOLDERS" means, collectively, Artal, each Named Investor and any Person who hereafter becomes an Investor Stockholder pursuant to an Investor Joinder under this Agreement.
PERMITTED TRANSFEREE" shall mean those Persons to whom Transfers are permitted pursuant to clauses (i), (ii) and (iv) of Section 2.1(b).
" PERSON" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
" PUBLIC OFFERING" means a public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act.
" REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of September 29, 1999, among the Company, Artal and Heinz.
" RULE 144 SALE" means a Transfer of Common Stock which occurs after the initial Public Offering under Rule 144 under the Securities Act.
" SALE NOTICE" shall have the meaning specified in Section 2.3. ??""
" SEC" means the Securities and Exchange Commission.
" SECURITIES ACT" means the Securities Act of 1933, as amended.
" SECURITIES HOLDING COMPANY" shall have the meaning specified in Section 2.3.
" SUBSIDIARY" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by a Person either directly or through one or more of its Subsidiaries.
" TRANSFER" shall be construed broadly and shall include any transfer by way of issuance, sale, assignment, hypothecation, disposition, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation.
" TRANSFEROR GROUP" shall have the meaning specified in Section 2.4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Investor Stockholders as follows:
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by Artal and each of the Named Investors, constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms; and
(b) The execution, delivery and performance by the Company of this Agreement will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the Articles of Incorporation or By-Laws of the Company (or the corresponding documents of any of its Subsidiaries), (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial condition, results of operations or business of the Company and its Subsidiaries, taken as a whole, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it.
REPRESENTATIONS AND WARRANTIES OF ARTAL. Artal hereby represents and warrants to the Company and the Named Investors as follows:
(c) Artal is a corporation duly organized, validly existing and in good standing under the laws of Luxembourg and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Artal of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Artal. This Agreement has been duly executed and delivered by Artal and, assuming the due authorization, execution and delivery thereof by the Company and each of the Named Investors, constitutes the valid and legally binding obligation of Artal, enforceable against Artal in accordance with its terms; and
(d) The execution, delivery and performance of this Agreement by Artal will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws or similar constitutive documents of Artal or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Artal is a party or by which Artal is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Artal or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to Artal.
REPRESENTATIONS AND WARRANTIES OF NAMED INVESTORS. Each Named Investor hereby represents and warrants to the Company, Artal and the other Named Investors as follows:
(e) Such Named Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by such Named Investor of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of such Named Investor. This Agreement has been duly executed and delivered by such Named Investor and, assuming the due authorization, execution and delivery thereof by Artal, the other Named Investors and the Company, constitutes the valid and legally binding obligation of such Named Investor, enforceable against such Named Investor in accordance with its terms; and
(f) The execution, delivery and performance of this Agreement by such Named Investor will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the articles of incorporation or by-laws or similar constitutive documents of such Named Investor or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which such Named Investor is a party or by which such Named Investor is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of such Named Investor, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it.
COVENANTS
TRANSFERS OF COMMON STOCK.
(g) Except as permitted pursuant to Section 2.1(b) or with the prior written consent of Artal, no Named Investor shall Transfer any shares of Common Stock until the third anniversary of the completion of the initial Public Offering. Prior to making any permitted (whether as result of the exceptions set forth in Section 2.1(b) or otherwise) Transfer of shares of Common Stock to any Person at any time prior to the termination of this
Agreement (other than a Transfer pursuant to a Public Offering, a Rule 144 Sale or a Transfer pursuant to Sections 2.1(b)(iii)), such Named Investor shall obtain an Investor Joinder from such transferee, and such transferee shall, by execution thereof, agree to become and automatically be deemed to be an Investor Stockholder subject to all of the rights and obligations contained in this Agreement applicable to Named Investors and to have made on the date thereof all representations and warranties made on the date hereof by such Named Investor (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person). Promptly thereafter, the Named Investor shall cause originally executed copies of such Investor Joinder to be delivered to the Company and the other Investor Stockholders and shall notify such Investor Stockholders of the number of shares of Common Stock Transferred.
(h) The restriction on Transfer contained in the first sentence of Section 2.1(a) above shall be inapplicable with respect to:
(i) any Transfers of Common Stock made by an individual Investor Stockholder to his or her Family Group and, thereafter, among members of such Family Group;
(ii) any Transfers of Common Stock by an Investor Stockholder to a member of its Corporate Group and, thereafter, among members of such Corporate Group; PROVIDED, HOWEVER, if such transferee ceases to be a member of such Corporate Group, such transferee shall immediately Transfer such Common Stock to a member of such Investor Stockholder's Corporate Group;
(iii) any Transfer of Common Stock pursuant to the terms of Sections 2.3 or 2.4 or the Registration Rights Agreement; and
(iv) any Transfers of Common Stock made by an individual Investor Stockholder upon his or her death to his or her estate, PROVIDED that the beneficiaries of the estate are Persons specified in clause (i) of this Section 2.1(b);
PROVIDED, that no such Transfer shall be permitted under this Section 2.1(b) if it would constitute a default or event of default under any agreement governing material debt of the Company or any of its Subsidiaries; PROVIDED, FURTHER, that in order to facilitate compliance with federal securities laws and the provisions of this Agreement, the aggregate number of Permitted Transferees under Section 2.1(b) shall not exceed 35 Persons at any time without the consent of Artal, which consent shall not be unreasonably withheld or delayed.
(i) Any Transfer made in violation of this Section 2.1 (including, without limitation, a Transfer made without obtaining a necessary Investor Joinder) shall be null and void. The Company shall not permit such Transfer to be recorded on the Company's books and records and shall not otherwise cooperate in consummating such Transfer.
(j) No Person shall be permitted to become a party to this Agreement except by executing an Investor Joinder pursuant to the terms set forth in this Section 2.1 or pursuant to the terms set forth in Section 2.5.
[Intentionally Omitted.]
TAG ALONG. (a) At least 30 days prior to making any Transfer of any shares of Common Stock held by Artal (other than pursuant to a Public Offering or a Rule 144 Sale), Artal shall deliver a written notice (the "SALE NOTICE") to the Named Investors, specifying in reasonable detail the number of shares of Common Stock proposed to be transferred, the identity of the prospective transferee(s), the terms and conditions of the Transfer (including without limitation, the price to be paid, terms of payment, form of consideration and other material terms, including Artal's reasonable estimate of the fair
market value of any non-cash consideration offered) and all information reasonably required to make the calculations set forth in this Section 2.3(a); PROVIDED, HOWEVER, that the provisions of this Section shall not apply to (i) any Transfer of any shares of Common Stock to any of the employees of the Company or any of its Subsidiaries (or to the Company for related issuance to such employees) in connection with management equity participation or similar contracts, plans or programs (PROVIDED, that such contracts, plans or programs are created in good faith and not for purposes of avoiding the transfer restrictions contained in this Section), (ii) any Transfer of shares of Common Stock made by an individual to his or her Family Group and, thereafter, among members of such Family Group, (iii) any Transfers by Artal to a member of its own Corporate Group and thereafter among members of such Corporate Group, (iv) any Transfers of shares of Common Stock pursuant to a pledge or similar agreement to secure debt of such Person (incurred in good faith and not for purposes of avoiding the rights granted to the Named Investors in this Section 2.3) owing to a bank or other BONA FIDE financial institution, including, without limitation, any such Transfer upon the exercise by such bank or other BONA FIDE financial institution of its rights under such pledge or similar agreement to acquire beneficial or other ownership of the shares of Common Stock pledged thereunder; (v) any Transfer of shares of Common Stock made by an individual upon his or her death to his or her estate; PROVIDED, that the beneficiaries of the estate are Persons specified in clause (ii) above or (vi) any Transfer of Common Stock by Artal in a transaction which does not constitute a Public Offering within 12 months of the Closing Date to the extent such Transfer under this clause (vi), together with all other Transfers made pursuant to this clause (vi) during such period, do not exceed 35% of the number of shares of Common Stock that Artal owned on the Closing Date after making the Transfers to the Named Investors pursuant to the Stock Purchase Agreement. Each Named Investor may elect to participate in the proposed Transfer by delivering written notice to Artal within 15 days after delivery of the Sale Notice. If any or all of the Named Investors have elected to participate in such
Transfer pursuant to the terms hereof, each such Named Investor shall be entitled to sell in the proposed Transfer, at the same price and on the same terms and conditions as Artal, up to a number of shares of Common Stock being Transferred by Artal equal to the product of (i) the number of such shares of Common Stock then beneficially owned by each such Named Investor(s) MULTIPLIED BY, (ii) a percentage calculated by dividing the aggregate number of shares of Common Stock which Artal proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by Artal in the aggregate; PROVIDED that the number of shares of Common Stock which such Named Investor(s) is permitted to sell pursuant to this Section 2.3(a) shall not include any shares of Common Stock acquired by such Named Investor(s) in connection with or after the consummation of a Public Offering. If any or all of the Named Investors elect to participate in such Transfer, each such Named Investors shall be obligated to pay its PRO RATA portion of the transaction costs associated therewith. If the aggregate number of shares of Common Stock the Named Investors elect and are permitted under the foregoing provisions to sell in the proposed Transfer is, together with the aggregate number of shares of Common Stock that Artal proposes to so sell and the aggregate number of shares of Common Stock that any other Person elects and is permitted to sell pursuant to any similar agreement, more than the total number of shares of Common Stock that the transferee wishes to purchase, then each of the Named Investors and Artal shall be entitled to sell to the transferee that number of shares of Common Stock equal to the number of shares of Common Stock to be so purchased by the transferee from all such selling parties (including any such other Person) multiplied by a fraction, the numerator of which is the number of such shares of Common Stock such selling party elects and is permitted under the foregoing provisions to sell and the denominator of which is the aggregate number of shares of Common Stock all such selling parties elect to sell and are permitted to sell under the foregoing provisions and pursuant to any similar agreement. If and to the extent that the transferee purchases any shares of Common Stock from Artal but does not purchase, upon the
same terms and conditions and for the same price, the shares of Common Stock the Named Investors elect and are permitted under the foregoing provisions to sell to the transferee, Artal shall, simultaneously with the sale of its shares of Common Stock, purchase from such Named Investor(s), at the same price and on the same terms and conditions as are applicable to the shares of Common Stock purchased from Artal, such shares of Common Stock of such Named Investor. If a Named Investor has not delivered written notice to Artal that such Named Investor elects to participate in a proposed Transfer within the 15-day period provided above for the delivering of such notice, then Artal shall have the right, for a period of 45 days after the expiration of such 15-day period, to consummate such proposed Transfer to the proposed transferee named in the related Sales Notice and at the same price and on the same terms and conditions stated in such Sales Notice. If, at the end of such 45-day period, Artal has not consummated such proposed Transfer, the terms of this Section 2.3 shall again be in effect with respect to such proposed Transfer.
(k) For purposes of Section 2.3(a), if Artal has Transferred
all or part of its shares of Common Stock to one or more of its Subsidiaries or
other similar entities controlled by it (a "SECURITIES HOLDING COMPANY"), a sale
or other disposition by Artal (by merger or otherwise) of an equity or
beneficial interest in a Securities Holding Company (other than a sale or
disposition of the nature set forth in the proviso to the first sentence of
Section 2.3(a)) shall be treated as follows: (i) if such sale or other
disposition is of 50% or more of the equity or beneficial interest in such
Securities Holding Company, then such sale or other disposition shall be deemed
to be a Transfer of all such shares of Common Stock directly or indirectly owned
or controlled by such Securities Holding Company, and (ii) if such sale or other
disposition is of less than 50% of the equity or beneficial interest in such
Securities Holding Company, then such sale or other disposition shall be deemed
to be Transfer of a percentage of the number of shares of Common Stock directly
or indirectly owned or controlled by such Securities Holding Company equal to
the
percentage of the equity or beneficial interest in such Securities Holding Company sold or disposed of in such transaction. In either such event, if the Securities Holding Company owns assets other than shares of Common Stock, the consideration paid to the transferring party for the Transfer and allocable to the shares of Common Stock, in the absence of agreement of the parties to this Agreement, shall be determined by an investment banking firm of national reputation selected by mutual agreement of the parties hereto, PROVIDED, that such investment banking firm shall not have a material direct or indirect financial interest in or other relationship with any of the parties hereto or their Affiliates.
(l) The exercise or nonexercise of the rights of any Named Investor in this Section 2.3 to participate in one or more Transfers by Artal shall not adversely affect any Named Investor's rights to participate in subsequent Transfers by Artal.
DRAG ALONG.
(m) In the case that Artal proposes to make a Transfer of
shares of Common Stock (or of a Securities Holding Company) owned by it or its
Affiliates (the "TRANSFEROR GROUP") that would trigger the Named Investors' tag
along rights pursuant to Section 2.3 (assuming solely for the purpose of this
Section 2.4(a) that the exception contained in Section 2.3(a)(vi) shall not
apply with respect to the provisions of Section 2.3(a)) , Artal may elect, by so
specifying in the Sale Notice, to require each Named Investor to, and each Named
Investor will, participate in such transaction on the same terms and conditions
as the Transferor Group with respect to a number of shares of Common Stock
determined as set forth below. Each Named Investor shall be required to sell in
the proposed Transfer, at the same price and on the same terms and conditions as
the Transferor Group, a number of shares of Common Stock equal to the lesser of
(i) the product of (A) the number of shares of Common Stock then beneficially
owned by such Named Investor MULTIPLIED BY, (B) a percentage calculated by
dividing the aggregate number of shares of Common Stock which the Transferor
Group
proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by the Transferor Group and (ii) the number of such shares of Common Stock specified by Artal in the relevant Sale Notice (such number being hereinafter referred to as the "DRAG ALONG NUMBER").
(n) In connection with any proposed transaction described in
Section 2.4(a) above, each Named Investor agrees (i) to consent to and raise no
objections (other than with respect to its rights under this Section 2.4) to,
and to take all other actions (including, without limitation, voting, or
entering into written consents with respect to, all of its shares of Common
Stock in favor of such transaction) necessary or desirable to cause, the
consummation of such transaction and (ii) to sell, Transfer and deliver its
shares of Common Stock as required by the terms of such transaction.
(o) If the Drag Along Number is less than the number of shares of Common Stock that any Named Investor may sell in the proposed Transfer pursuant to its rights under Section 2.3, then, notwithstanding the exercise by Artal of their rights under this Section 2.4, such Named Investor may elect to sell such additional shares of Common Stock pursuant to its rights under Section 2.3.
CERTAIN TRANSFERS BY ARTAL.
Artal agrees that it will not effect any Transfer of Common Stock held by it as described in clause (ii), (iii), (iv) or (v) of the proviso in the first sentence of Section 2.3(a), unless such transferee has delivered to the Company an Investor Joinder whereby such transferee shall, by execution thereof, agree to become and shall automatically be deemed to be an Investor Stockholder subject to all of the rights (to the extent of the terms of the assignment of such rights) and all of the obligations contained in this Agreement applicable to Artal and to have made on the date thereof all representations and warranties made on the date hereof by Artal (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person).
REGISTRATION RIGHTS
REGISTRATION RIGHTS. Currently herewith, the Named Investors will become parties to the Registration Rights Agreement by executing a joinder agreement.
LEGENDS
LEGEND. (a) Each certificate or instrument evidencing shares of Common Stock that is held by a Named Investor or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement on or after the date hereof shall bear the following legend on the face thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE
PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT.
(p) Each certificate or instrument evidencing shares of Common Stock, which is issued to a transferee of a Named Investor which is not required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement (other than transferees in a Public Offering) on or after the date hereof shall bear the following legend on the face thereof:
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.
(q) Upon the sale of any shares of Common Stock pursuant to an effective registration statement under the Securities Act or upon the termination or expiration of this Agreement, the certificates or instruments representing such shares of Common Stock shall be replaced, at the expense of the Company, with certificates or instruments not bearing the legends required by this Section 4.1.
(r) Until such time as the certificates or instruments
evidencing shares of Common Stock that are held by the Named Investors, or a
transferee thereof which is required to execute an Investor Joinder pursuant to
Section 2.1(a) hereof, are no longer required to bear either of the legends
contained in Sections 4.1(a) and 4.1(b), the Named Investors and each such
transferee agrees that it will not Transfer any shares of Common Stock except
(i) pursuant to a registration statement under the
Securities Act or (ii) pursuant to an exemption from registration thereunder.
IRREVOCABLE PROXY
IRREVOCABLE PROXY. Each Named Investor hereby irrevocably appoints Artal or any designee of Artal the lawful agent, attorney and proxy of such shareholder, for so long as such Named Investor owns any shares of Common Stock acquired pursuant to the Stock Purchase Agreement, to vote all such shares of Common Stock with respect to any and all matters such shares are entitled to vote. Each Named Investor intends this proxy to be irrevocable and coupled with an interest and will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by it with respect to the shares of Common Stock. Each Named Investor shall not hereafter, unless and until this Agreement terminates pursuant to Section 7.1 hereof or with the written consent of Artal, purport to vote (or execute a consent with respect to) such shares of Common Stock (other than through this irrevocable proxy) or grant any other proxy or power of attorney with respect to any shares of Common Stock, deposit any such shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of such shares of Common Stock.
POWER OF ATTORNEY
POWER OF ATTORNEY. (a) Each Named Investor hereby irrevocably constitutes and appoints Artal or any designee of Artal, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Named Investor and in the name of such Named Investor or in Artal's own name, from time to time in Artal's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including, without limitation, any financing statements, endorsements, assignments or other instruments of transfer.
(s) Each Named Investor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 6.1(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
MISCELLANEOUS
TERMINATION. As to any particular Investor Stockholder, this Agreement shall no longer be binding or of further force or effect as to such Investor Stockholder, except as noted below, as of the date such Investor Stockholder has Transferred all such Investor Stockholder's interest in the Common Stock; PROVIDED, HOWEVER, that no such termination shall be effective if such Investor Stockholder is in breach of this Agreement.
REMEDIES.
(t) Each Investor Stockholder shall have all rights and remedies reserved for such Investor Stockholder pursuant to this Agreement, the Company's Articles of Incorporation and By-Laws and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity.
(u) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any swch failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
CONSENT TO AMENDMENTS. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of each of the parties hereto.
SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted transferees of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries.
SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. To the extent there exists any inconsistency between the provisions of this Agreement and the By-Laws of the Company, the provisions of this Agreement shall govern in all instances.
COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
NOTICES. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Investor Stockholder at the address or addresses indicated on the signature pages hereto or on the Investor Joinder (as the case may be), or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 7.7 to the sending party.
GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby.
JURISDICTION; VENUE; PROCESS. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself
and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action.
(b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon.
MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
* * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Ray Debbane -------------------------------------- |
Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: Facsimile No.: 1-212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. |
22
ARTAL LUXEMBOURG S.A.
By: /s/ David Van Zandt
--------------------------------------
Address for Notices: With copies to:
Artal Luxembourg S.A. David Van Zandt
105, Grand-Rue Northwestern University School of Law
L-1661 Luxembourg 357 East Chicago Avenue
Luxembourg Chicago, Illinois 60611
Facsimile No.: 352-22-42-59-22 Facsimile No.: 1-773-388-0291
Attn: Managing Director
and
Simpson Thacher &
Bartlett 425
Lexington Avenue
New York, New York 10017
Facsimile No.: 1-212-455-2502
Attn: Robert E. Spatt, Esq.
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23
INCORPORATED PTY. LTD.
LOGO
By: /s/ Richard Penn
--------------------------------------
Address for Notices: With copies to:
Logo Incorporated Pty. Ltd. Andersen Legal
502/1 Kirribilli Avenue 141 Walker Street
Kirribilli North Sydney
N.S.W. 2061 NSW 2060
Australia Australia
Facsimile No.: 011-612-9959-5025 Facsimile No.: 011-612-9964-6650
Attn: Chief Executive Officer Attn: Costas Condoleon
Timothy Woodforde
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24
MERCHANT CAPITAL, INC.
By: /s/ Mark Patterson
--------------------------------------
Address for Notices: With copies to:
Facsimile No.: Facsimile No.:
Attn: Attn:
|
25
|
SCOTIABANC, INC.
By: /s/ W. T. Brown -------------------------------------- |
Address for Notices: With copies to: William Brown Eric Knight Scotiabanc, Inc. One Liberty Plaza 600 Peachtree Street, NE New York, New York 10006 Atlanta, GA 30308 Facsimile No.: 212-225-5172 Facsimile No.: 404-888-8998 |
ENVOY PARTNERS
By: /s/ Blair Effran -------------------------------------- |
Address for Notices: With copies to:
Facsimile No.: Facsimile No.:
Attn: Attn:
LONGISLAND INTERNATIONAL LIMITED By: /s/ Nicolas Karpuchess -------------------------------------- |
Address for Notices: With copies to: Facsimile No.: Facsimile No.: Attn: Attn: |
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SCHEDULE 1
Number of Shares Named Investor of Common Stock -------------- --------------- Merchant Capital, Inc. 200,000 Logo Incorporated Pty. Ltd. 230,000 Longisland International Limited 140,000 Envoy Partners 200,000 Scotiabanc, Inc. 200,000 |
EXHIBIT 2.1(a)
INVESTOR JOINDER
By execution of this Investor Joinder, the undersigned agrees to become a party to that certain Stockholders' Agreement, dated as of September 30, 1999 (the "Agreement"), among Weight Watchers International, Inc. (the "Company"), Artal Luxembourg S.A. and the other stockholders of the Company named therein. By execution of this Investor Joinder, the undersigned shall have all rights, and shall observe all the obligations, applicable to [fill in name of transferee] (except as otherwise set forth in the Agreement), and to have made on the date hereof all representations and warranties made by such Investor Stockholder, modified, if necessary, to reflect the nature of the undersigned as a corporation, partnership, other entity or natural person.
Name:_________________________ Address for Notices: With copies to: ------------------------------ ----------------------------------------- ------------------------------ ----------------------------------------- ------------------------------ ----------------------------------------- ------------------------------ ----------------------------------------- ------------------------------ ----------------------------------------- |
If an individual, are you presently married or separated?
yes _____ no _____
(If yes, you must also have your spouse execute a spousal consent in the form attached hereto.)
Signature:___________________
Date:___________________
I, _________________________________, am the spouse of ____________________, one of the stockholders of Weight Watchers International, Inc., a Virginia corporation (the "Company"). I acknowledge that my spouse is a party to that certain Stockholders' Agreement, dated as of September 30, 1999, among the Company Artal Luxembourg S.A. and the other stockholders of the Company named therein (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement.
Executed this ____ day of __________, 199_.
EXHIBIT 10.20
WARRANT AGREEMENT
Dated as of November 24, 1999
between
WEIGHTWATCHERS.COM, INC.
and
WEIGHT WATCHERS INTERNATIONAL, INC.
WARRANT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. Defined Terms...............................................................................1
1.1 Certain Definitions.............................................................................1
1.2 Rules of Construction...........................................................................4
SECTION 2. Issuance, Form, Execution, Delivery and Registration of
Warrant Certificates.................................................................4
2.1 Issuance of Warrants............................................................................4
2.2 Execution of Warrant Certificates...............................................................4
2.3 Registration, Registration of Transfers and Exchanges...........................................5
2.4 Form of Warrant Certificates....................................................................5
2.5 Restrictive Legends.............................................................................6
2.6 Offices for Exercise, etc.......................................................................6
2.7 Cancellation....................................................................................6
2.8 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates..............................6
SECTION 3. Terms of Warrants; Exercise of Warrants.....................................................7
3.1 Exercise Period.................................................................................7
3.2 Manner of Exercise..............................................................................7
3.3 Issuance of Warrant Shares......................................................................8
3.4 Fractional Warrant Shares.......................................................................8
3.5 Sufficient Authorized Share Capital.............................................................9
3.6 Payment of Taxes................................................................................9
SECTION 4. Adjustment of Exercise Price and Number of Warrant Shares Issuable..........................9
4.1 Adjustments.....................................................................................9
4.2 Superseding Adjustment.........................................................................13
4.3 Minimum Adjustment.............................................................................14
4.4 Notice of Adjustment...........................................................................14
4.5 Notice of Certain Transactions.................................................................14
4.6 Adjustment to Warrant Certificate..............................................................15
4.7 Challenge to Good Faith Determination..........................................................15
4.8 Treasury Stock.................................................................................15
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PAGE
SECTION 5. Holders' Rights and Obligations............................................................15
5.1 Registration Rights............................................................................15
5.2 Other Rights and Obligations...................................................................15
SECTION 6. Miscellaneous..............................................................................16
6.1 Notices to the Company and WWI.................................................................16
6.2 Amendments.....................................................................................17
6.3 Severability...................................................................................17
6.4 Successors.....................................................................................17
6.5 Termination....................................................................................17
6.6 Governing Law..................................................................................17
6.7 Jurisdiction; Venue............................................................................17
6.8 Benefits of This Agreement.....................................................................17
6.9 Counterparts...................................................................................18
6.10 Table of Contents..............................................................................18
6.11 MUTUAL WAIVER OF JURY TRIAL....................................................................18
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EXHIBITS
EXHIBIT A - Form of Note
EXHIBIT B - Form of Warrant Certificate
WARRANT AGREEMENT, dated as of November 24, 1999 (the "AGREEMENT"), between WeightWatchers.com, Inc., a Delaware corporation (the "COMPANY"), and Weight Watchers International, Inc., a Virginia corporation ("WWI").
WHEREAS, WWI has agreed to loan the Company up to an aggregate principal amount of $10.0 million (the "LOAN") pursuant to the terms of the Note attached hereto as Exhibit A; and
WHEREAS, in order to induce WWI to make the Loan, the Company has agreed to enter into this Agreement and issue 60,246 Warrants to WWI.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, and for the purpose of defining the respective rights and obligations of the Company and the Holders (as defined below), the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:
"AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, is defined to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
"BOARD" means the Board of Directors of the Company.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
"CASHLESS EXERCISE" has the meaning specified in Section 3.2 hereof.
"CASHLESS EXERCISE RATIO" means a fraction, the numerator of which is the excess of the Current Market Value (as defined below) per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of Common Stock on the Exercise Date.
"COMBINATION" has the meaning specified in Section 4.1(d) hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $0.01 per share, of the Company.
"CURRENT MARKET VALUE," per share of Common Stock or any other security at any date, means (i) if the security is not registered under the Exchange Act, the fair market value of the security (without any discount for lack of liquidity, the amount of such security offered to be purchased or the fact that such securities may represent a minority interest in a private company or a company under the control of another Person) as determined in good faith by the Board and certified in a board resolution that is delivered to the Holders, and, if requested by the Majority Holders, determined to be fair, from a financial point of view, to the holders of such security or another security exercisable for such security, by an Independent Financial Expert (as set forth in such Independent Financial Expert's written fairness opinion); or (ii) if the security is registered under the Exchange Act, the average of the last reported sale price of the security (or the equivalent in an over-the-counter market) for each Business Day during the period commencing 15 Business Days before such date and ending on the date one day prior to such date, or if the security has been registered under the Exchange Act for less than 15 consecutive Business Days before such date, the average of the daily closing bid prices (or such equivalent) for all of the Business Days before such date for which daily closing bid prices are available (PROVIDED, HOWEVER, that if the closing bid price is not determinable for at least 10 Business Days in such period, the "Current Market Value" of the security shall be determined as if the security were not registered under the Exchange Act). The Company shall pay the fees and expenses of any Independent Financial Expert in the determination of Current Market Value.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended (or any successor act), and the rules and regulations promulgated thereunder.
"EXERCISE DATE" means the date on which a Warrant is exercised by the Holder thereof.
"EXERCISE PRICE" means the purchase price per Warrant Share to be paid upon the exercise of each Warrant, which price shall be $500.00 per Warrant Share as adjusted in accordance with the terms hereof.
"EXPIRATION DATE" means November 24, 2009.
"HOLDER" means the holder of a Warrant, which shall initially be WWI.
"INDEPENDENT FINANCIAL EXPERT" means a nationally recognized investment bank that does not (and whose directors, executive officers and 5% stockholders do not) have a
direct or indirect financial interest in the Company, the Holders, or any of their respective subsidiaries or Affiliates, which has not been for at least five years, and at the time it is called upon to give independent financial advice to the Company is not (and none of its directors, executive officers or 5% stockholders is), a promoter, director, or officer of the Company, the Holders or any of their respective subsidiaries or Affiliates. The Independent Financial Expert may be compensated and indemnified by the Company for opinions or services it provides as an Independent Financial Expert.
"ISSUE DATE" means November 24, 1999, the date on which the Warrants are first issued.
"MAJORITY HOLDERS" means the Holders of a majority of the then outstanding Warrants.
"OFFICER" means the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company.
"PERSON" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"REPURCHASE PRICE" means, in respect of a Warrant, (i) the excess of the Current Market Value of a share of Common Stock of the Company over the Exercise Price per share of Common Stock, multiplied by (ii) the number of Warrant Shares that would be obtained if one Warrant was exercised on the date of repurchase.
"RIGHT" has the meaning specified in Section 4.1(g) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended (or any successor act), and the rules and regulations promulgated thereunder.
"SUCCESSOR COMPANY" has the meaning specified in Section 4.1(d) hereof.
"WARRANT CERTIFICATES" means the certificates evidencing the Warrants to be delivered pursuant to this Agreement, substantially in the form of Exhibit B hereto.
"WARRANT REGISTRAR" has the meaning specified in Section 2.3 hereof.
"WARRANT SHARES" has the meaning specified in Section 2.1 hereof.
"WARRANTS" shall mean the Warrants issued hereunder and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.
1.2 RULES OF CONSTRUCTION. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles ("U.S. GAAP") as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural include the singular.
SECTION 2. ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANT CERTIFICATES.
2.1 ISSUANCE OF WARRANTS. Each Warrant Certificate shall evidence the number of Warrants specified therein, and each Warrant evidenced thereby shall represent the right, subject to the provisions contained herein and therein, to purchase from the Company (and the Company shall issue and sell to such holder of the Warrant) one share of Common Stock of the Company (the shares purchasable upon exercise of a Warrant being hereinafter referred to as the "WARRANT SHARES," subject to adjustment as provided in Section 4 hereof).
2.2 EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be executed on behalf of the Company by one Officer of the Company. Such signatures may be the manual or facsimile signatures of the present or any future such Officers. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Warrant Certificate.
In case any Officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such Officer before the Warrant Certificate so signed shall be delivered by the Company, such Warrant Certificate nevertheless may be delivered or disposed of as though the Person who signed such Warrant Certificate had not ceased to be such Officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper Officers of the Company, although at the date of the execution and delivery of this Agreement any such Person was not such an Officer.
2.3 REGISTRATION, REGISTRATION OF TRANSFERS AND EXCHANGES. The Company will keep, at the office or agency maintained by the Company for such purpose, a register or registers in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of, and registration of transfer and exchange of, Warrants as provided herein. Each person designated by the Company from time to time as a Person authorized to register the
transfer and exchange of the Warrants is hereinafter called, individually and collectively, the "WARRANT REGISTRAR." The Company hereby initially appoints itself as Warrant Registrar. Upon written notice to the Holders and any acting Warrant Registrar, the Company may appoint a successor Warrant Registrar for such purposes.
The Company will at all times designate one Person (who may be the Company and who need not be a Warrant Registrar) to act as repository of a master list of names and addresses of the holders of Warrants (the "WARRANT REGISTER"). The Company will act as such repository unless and until some other Person is, by written notice from the Company to the Holders and the Warrant Registrar, designated by the Company to act as such. In the event the Warrant Registrar is not the repository, the Company shall cause the Warrant Registrar to furnish to such repository, on a current basis, such information as to all registrations of transfer and exchanges effected by the Warrant Registrar, as may be necessary to enable such repository to maintain the Warrant Register on as current a basis as is practicable.
When Warrants are presented to the Company with a request to register the transfer of the Warrants or exchange Warrants for an equal number of Warrants of other authorized denominations, the Company shall register the transfer or make the exchange as requested if the requirements under this Warrant Agreement as set forth herein for such transactions are met; PROVIDED, HOWEVER, that the Warrants presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Company, duly executed by the holder thereof or by his attorney, duly authorized in writing.
All Warrants issued upon any registration of transfer or exchange of Warrants shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrants surrendered upon such registration of transfer or exchange.
2.4 FORM OF WARRANT CERTIFICATES. The Warrant Certificates to be delivered pursuant to this Agreement shall be substantially in the form set forth in Exhibit B attached hereto. Such Warrant Certificates shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Warrants from time to time endorsed thereon and that the aggregate amount of outstanding Warrants represented thereby may from time to time be decreased or increased, as appropriate. Any endorsement of a Warrant Certificate to reflect the amount of any increase or decrease in the amount of outstanding Warrants represented thereby shall be made by the Company in accordance with instructions given by the holder thereof.
2.5 RESTRICTIVE LEGENDS.
The Warrant Certificates shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
2.6 OFFICES FOR EXERCISE, ETC. So long as any of the Warrants remain outstanding, the Company will designate: (a) an office or agency where the Warrant Certificates may be presented for exercise, (b) an office or agency where the Warrant Certificates may be presented for registration of transfer and for exchange, and (c) an office or agency where notices and demands to or upon the Company in respect of the Warrants or of this Agreement may be served. The Company may from time to time change such designation, as it may deem desirable or expedient. The Company will give to the Holders and the Warrant Registrar written notice of the location of any such office or agency and of any change of location thereof. The Company hereby designates its office at the address set forth in Section 6.1, as the initial agency maintained for such purpose.
2.7 CANCELLATION. All Warrant Certificates surrendered for the purpose of exercise (in whole or in part), exchange, substitution or transfer shall, if surrendered to the Company or to any of its agents, be delivered to the Company for cancellation or in cancelled form, or if surrendered to the Company shall be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. If the Company purchases or acquires Warrants and if the Company so chooses, the Company may cancel and retire the Warrant Certificates evidencing said Warrants.
2.8 LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT CERTIFICATES. Upon receipt by the Company (or any agent of the Company if requested by the Company) of evidence satisfactory to it of the loss, theft, destruction, defacement or mutilation of any Warrant Certificate and of indemnity satisfactory to it (which may include posting a bond) and, in the case of mutilation or defacement, upon surrender thereof to the Company for cancellation, then, in the absence of notice to the Company that such Warrant Certificate has been acquired by a BONA FIDE purchaser or holder in due course, the Company shall execute in exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate representing a like number of Warrants, bearing a number or other distinguishing symbol not contemporaneously outstanding. Upon the issuance of any new Warrant Certificate under this Section, the Company may require the payment from the holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Warrant Registrar) in connection therewith. Every substitute Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute an additional contractual obligation of the Company, whether or not the lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the
benefits of (but shall be subject to all the limitations of rights set forth in)
this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.8 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
SECTION 3. TERMS OF WARRANTS; EXERCISE OF WARRANTS.
3.1 EXERCISE PERIOD. Subject to the terms of this Agreement, each Holder shall have the right until 5:00 p.m., New York City time, on the Expiration Date to receive from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.
The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the Holders of the outstanding Warrants to the effect that the Warrants will terminate and become void as of 5:00 p.m., New York City time, on the Expiration Date; PROVIDED, HOWEVER, that the failure by the Company to give such notice as provided in this Section shall not affect such termination and becoming void of the Warrants as of 5:00 p.m., New York City time, on the Expiration Date.
3.2 MANNER OF EXERCISE. A Warrant may be exercised at any time prior to the Expiration Date upon (i) surrender to the Company of the Warrant Certificates, together with the form of election to purchase properly completed and executed by the Holder thereof and (ii) payment to the Company of the Exercise Price for each share of Common Stock or other securities issuable upon exercise of such Warrants. The Exercise Price may be paid (i) in cash or by certified or official bank check or by wire transfer to an account designated by the Company for such purpose (a "CASH EXERCISE") or (ii) without the payment of cash, by reducing the number of shares of Common Stock that would be obtainable upon the exercise of a Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (a) the number of shares of Common Stock for which such Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in accordance with clause (ii) of the immediately preceding sentence is herein called a "CASHLESS EXERCISE." In the event of a Cashless Exercise of Warrants, the Company will purchase from the Holder thereof such number of Warrants as would have entitled the Holder thereof to receive the excess of the number of shares of Common Stock deliverable upon a Cash Exercise over the number of shares of Common Stock deliverable upon a Cashless Exercise, for a purchase price equal to the Exercise Price multiplied by the excess of the number of shares of Common Stock purchasable upon a Cash Exercise over the number of shares of Common Stock purchasable upon a Cashless Exercise. The Company agrees to offset the purchase price referred to in the immediately
preceding sentence with the obligation to pay the Exercise Price in respect of the shares of Common Stock deliverable upon a Cashless Exercise. Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the holder's option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Warrants that the Holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions of this Agreement shall be applicable with respect to a surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. Upon surrender of the Warrant Certificate and payment of the Exercise Price in accordance with this Agreement, the Company will issue shares of Common Stock of the Company for each Warrant evidenced by such Warrant Certificate, subject to adjustment as described herein. Whenever there occurs a Cashless Exercise, the Company shall deliver to the Holder a certificate setting forth the Cashless Exercise Ratio.
3.3 ISSUANCE OF WARRANT SHARES. Subject to Section 2.8, upon the surrender of Warrant Certificates and payment of the Exercise Price, as set forth above, the Company shall issue shares of Common Stock in such name or names as the Holder may designate, for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise to the Person or Persons entitled to receive the same, together with cash as provided in Section 3.4 in respect of any fractional Warrant Shares otherwise issuable upon such exercise. Such shares of Common Stock shall be deemed to have been issued and any Person so designated shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the per share Exercise Price or upon a Cashless Exercise.
The Company hereby agrees that no service charge will be made for registration of transfer or exchange upon surrender of any Warrant Certificate at the office maintained for that purpose. Holders may be required to make payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Warrant Certificates.
3.4 FRACTIONAL WARRANT SHARES. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.4, be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, at its option, pay an amount in cash equal to the Current Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction.
3.5 SUFFICIENT AUTHORIZED SHARE CAPITAL.
The Company has and will maintain an authorized share capital sufficient for the issuance of such number of shares of Common Stock as will be issuable upon the exercise of all
outstanding Warrants. Such shares of Common Stock, when issued and paid for in accordance with the Warrant Agreement, will be duly and validly issued, fully paid and nonassessable, free of preemptive rights and free from all liens, charges and security interests with respect to the issue thereof.
3.6 PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrants and the Warrant Shares issuable upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or Warrant Shares in a name other than that of the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.
4.1 ADJUSTMENTS. The Exercise Price and the number of Warrant Shares purchasable upon the exercise of Warrants shall be subject to adjustment from time to time as follows:
(a) CHANGES IN SHARES OF COMMON STOCK. In the event that at any time or from time to time after the date hereof the Company shall (i) pay a dividend or make a distribution on its shares of Common Stock in shares of Common Stock or other shares of capital stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) increase or decrease the number of shares of Common Stock outstanding by reclassification of its shares of Common Stock, then the number of shares of Common Stock purchasable upon exercise of each Warrant immediately after the happening of such event shall be adjusted (including by adjusting the definition of "Warrant Shares") so that, after giving effect to such adjustment, the Holder of each Warrant shall be entitled to receive the number of shares of Common Stock upon exercise that such Holder would have owned or have been entitled to receive had such Warrants been exercised immediately prior to the happening of the events described above (or, in the case of a dividend or distribution of shares of Common Stock, immediately prior to the record date therefor). An adjustment made pursuant to this Section 4.1(a) shall become effective immediately after the effective date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
(b) CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In case at any time or from time to time after the date hereof the Company shall distribute to holders of shares of Common Stock (i) any dividend or other distribution of cash, evidences of its indebtedness, shares of its capital stock or any other properties or securities or (ii) any options, warrants or other rights to subscribe
for or purchase any of the foregoing (other than, in each case set forth in (i) and (ii), (x) any dividend or distribution described in Section 4.1(a) or (y) any rights, options, warrants or securities described in Section 4.1(c)) then the number of Warrant Shares purchasable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock issuable immediately prior to the record date upon exercise of each Warrant by a fraction, the numerator of which shall be the sum of (x) any cash distributed per Warrant Share and (y) the Current Market Value of the portion, if any, of the distribution applicable to one Warrant Share consisting of evidences of indebtedness, shares of stock, securities, other property, warrants, options or subscription of purchase rights and the denominator of which shall be the Current Market Value of the shares of Common Stock comprising one Warrant Share immediately after such dividend or other distribution. Such adjustment shall be made whenever any distribution is made and shall become effective as of the date of distribution, retroactive to the record date for any such distribution; PROVIDED, HOWEVER, that the Company is not required to make an adjustment pursuant to this Section 4.1(b) if at the time of such distribution the Company makes the same distribution to Holders of Warrants as it makes to holders of shares of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are exercisable (whether or not currently exercisable). No adjustment shall be made pursuant to this Section 4.1(b) which shall have the effect of decreasing the number of Warrant Shares purchasable upon exercise of each Warrant.
(c) RIGHTS ISSUE. In the event that at any time or from time to time after the date hereof the Company shall issue, sell, distribute or otherwise grant any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any securities convertible or exchangeable into, shares of Common Stock to all holders of shares of Common Stock, entitling such holders to subscribe for or purchase shares of Common Stock or stock or securities convertible into shares of Common Stock within 60 days after the record date for such issuance, sale, distribution or other grant, as the case may be, and the sum of (a) the offering price of such right, option, warrant or other security (on a per share basis) and (b) any subscription, purchase, conversion or exchange price per share of Common Stock (the "CONSIDERATION") is lower at the record date for such issuance than the then Current Market Value per share of such Common Stock, the number of shares of Common Stock thereafter purchasable shall be increased to a number determined by multiplying the number of shares of Common Stock issuable immediately prior to the record date upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the number of additional shares of Common Stock offered for subscription or purchase or into or for which such securities are convertible or exchangeable, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the total number of shares of Common Stock which could be purchased at the Current Market Value with the aggregate of the Consideration with respect to such issuance, sale, distribution or other grant. Such adjustment shall be made whenever such rights, options or warrants are issued and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or securities; provided however, that the Company is not required to make an adjustment pursuant to this Section 4.1(c) if the Company shall make the same distribution to Holders of Warrants. No adjustment shall be made pursuant to this Section
4.1(c) which shall have the effect of decreasing the number of Warrant Shares purchasable upon exercise of each Warrant.
If the Company at any time shall issue two or more securities as a unit and one or more of such securities shall be rights, options or warrants for or securities convertible or exchangeable into, shares of Common Stock subject to this Section 4.1(c), the consideration allocated to each such security shall be determined in good faith by the Board.
(d) COMBINATION; LIQUIDATION. (i) Except as provided in clause
(ii) below, in the event of certain consolidations, mergers or demergers of the
Company, or the sale of all or substantially all of the assets of the Company to
another Person (a "COMBINATION"), each Warrant will thereafter be exercisable
for the right to receive the kind and amount of shares of stock or other
securities or property to which such holder would have been entitled as a result
of such Combination had the Warrants been exercised immediately prior thereto.
Unless clause (ii) is applicable to a Combination, if any Warrants shall be
outstanding after a Combination, the Company shall provide that the surviving or
acquiring Person (the "SUCCESSOR COMPANY") in such Combination will enter into
an agreement with the Holders confirming the Holders' rights pursuant to this
Section 4.1(d) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.1(d) shall similarly apply to successive
Combinations involving any Successor Company.
(ii) In the event of (A) a Combination, and, in connection therewith, the consideration payable to the holders of shares of Common Stock in exchange for their shares is payable solely in cash or (B) a dissolution, liquidation or winding-up of the Company, then the holders of the Warrants will be entitled to receive distributions on an equal basis with the holders of shares of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such event, less the Exercise Price. Upon receipt of such payment, if any, the Warrants will expire and the rights of holders thereof will cease.
(iii) In the case of any such Combination, the surviving or acquiring Person as described in this Section 4.1(d) and, in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall promptly pay to the Holders of the Warrants the amounts to which they are entitled as described above upon surrender of the Warrant Certificates. The Company shall make payment to the Holders by delivering a check, or by wire transfer of same- day funds, in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrants.
(e) TENDER OFFERS; EXCHANGE OFFERS. In the event that the Company or any subsidiary of the Company shall purchase shares of Common Stock pursuant to a tender offer or an exchange offer for a price per share of Common Stock that is greater than the then Current Market Value per share of Common Stock in effect at the end of the trading day immediately following the day on which such tender offer or exchange offer expires, then the Company, or
such subsidiary of the Company, shall, within 10 Business Days of the expiry of such tender offer or exchange offer, offer to purchase Warrants for comparable consideration per share of Common Stock based on the number of shares of Common Stock which the Holders of such Warrants would receive upon exercise of such Warrants (the "OFFER") (such amount less the Exercise Price in respect of such share, the "PER SHARE CONSIDERATION"); PROVIDED, HOWEVER, if a tender offer is made for only a portion of the outstanding shares of Common Stock, then such offer shall be made for such shares of Common Stock issuable upon exercise of the Warrants in the same pro rata proportion.
The Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase such Warrants for the applicable Per Share Consideration.
(f) OTHER EVENTS. If any event occurs as to which the foregoing provisions of this Section 4 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid.
(g) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other exception contained in this Section 4.1, and in addition thereto, no adjustment need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of equity securities to employees, directors, consultants or advisors of the Company or any of its subsidiaries and (B) exercises of Rights by, or issuances of equity securities in connection with Rights previously issued to former employees, former directors, former consultants (to the extent that all such securities, other than those permitted by clause (ii) below, do not have an aggregate value in excess of 15% of the equity value of the Company on a fully diluted basis, as determined in good faith by the Board). As used herein, "RIGHT" shall mean any right, option, warrant or convertible or exchangeable security containing the right to subscribe for or acquire one or more shares of Common Stock, excluding the Warrants;
(ii) options, warrants or other agreements or rights to purchase capital stock of the Company entered into or granted prior to the date of the issuance of the Warrants or any issuance of capital stock pursuant thereto or in connection therewith;
(iii) bona fide public offerings or private placements;
(iv) rights to purchase shares of Common Stock pursuant to a Company plan for reinvestment of dividends or interest;
and
(v) a change in the par value of shares of Common Stock (including a change from par value to no par value or VICE VERSA).
(h) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted, as provided under this Section 4, the Exercise Price per share of Common Stock payable upon exercise of such Warrant shall be adjusted (calculated to the nearest $0.01) so that it shall equal the price determined by multiplying such Exercise Price immediately prior to such adjustment by a fraction the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of each Warrant immediately prior to such adjustment and the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. Following any adjustment to the Exercise Price pursuant to this Section 4, the amount payable, when adjusted, shall never be less than the par value per share of Common Stock at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between such classes of shares in a manner that the Board deems fair and
equitable to the Holders. After such allocation, the exercise privilege and the
Exercise Price of each class of shares shall thereafter be subject to adjustment
on terms comparable to those applicable to shares of Common Stock under this
Section 4.
Such adjustment shall be made successively whenever any event listed above shall occur.
4.2 SUPERSEDING ADJUSTMENT. Upon the expiration of any rights, options, warrants or conversion or exchange privileges which resulted in the adjustments pursuant to this Section 4, if any thereof shall not have been exercised, the number of Warrant Shares purchasable upon the exercise of each Warrant shall be readjusted as if (A) the only shares of Common Stock issuable upon exercise of such rights, options, warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and (B) shares of Common Stock actually issued, if any, were issuable for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges whether or not exercised; PROVIDED, HOWEVER, that no such readjustment shall (except by reason of an intervening adjustment under Section 4.1(a)) have the effect of decreasing the number of Warrant Shares purchasable upon the exercise of each Warrant by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion or exchange privileges.
4.3 MINIMUM ADJUSTMENT. The adjustments required by the preceding Sections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment of the number of shares of Common Stock purchasable upon exercise of Warrants that would otherwise be required shall be made (except in the case of a subdivision or combination of shares of Common Stock, as provided for in Section
4.1(a)) unless and until such adjustment either by itself or with other
adjustments not previously made increases or decreases by at least 1% of the
number of shares of Common Stock purchasable upon exercise of Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence. In computing adjustments
under this Section 4, fractional interests in shares of Common Stock shall be
taken into account to the nearest one-hundredth of a share.
4.4 NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock and other property, if any, purchasable upon exercise of Warrants is adjusted, as herein provided, the Company shall deliver to the Holders a certificate setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which the Board determined the fair market value of any evidences of indebtedness, other securities or property or warrants or other subscription or purchase rights), and specifying the number of shares of Common Stock purchasable upon exercise of Warrants after giving effect to such adjustment. The Company shall promptly deliver a copy of such certificate to each Holder.
4.5 NOTICE OF CERTAIN TRANSACTIONS. In the event that the Company shall propose (a) to pay any dividend payable in securities of any class to the holders of its shares of Common Stock or to make any other distribution to the holders of its shares of Common Stock, (b) to offer the holders of its shares of Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of Common Stock or shares of stock of any class or any other securities, rights or options, (c) to effect any reclassification of its shares of Common Stock, capital reorganization or Combination or (d) to effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company, or in the event of a tender offer or exchange offer described in Section 4.1(e), the Company shall within 5 Business Days of making such proposal, tender offer or exchange offer send to the Holders a notice of such proposed action or offer, such notice to be mailed by the Company to the Holders at their addresses as they appear in the Warrant Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of shares of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect of such action on the shares of Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, purchasable upon exercise of each Warrant after giving effect to any adjustment which will be required as a result of such action. Such notice shall be given by the Company as promptly as possible and, in the case of any action covered by clause (a) or (b) above, at least 10 Business Days prior to the record date for determining holders of the shares of Common Stock for purposes of such action and, in the case of any other such action, at least 20 Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of shares of Common Stock, whichever shall be the earlier.
4.6 ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Section 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock as are stated
in any Warrant Certificates issued prior to the adjustment. The Company,
however, may at any time in its sole discretion make any change in the form of
Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
4.7 CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board shall be required to make a determination in good faith of the Current Market Value of any item under Section 4, such determination may be challenged in good faith by the Majority Holders.
4.8 TREASURY STOCK. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Company shall be deemed an issuance thereof and a repurchase thereof and designation of such shares as treasury stock shall be deemed to be a redemption thereof for the purposes of this Agreement.
SECTION 5. HOLDERS' RIGHTS AND OBLIGATIONS.
5.1 REGISTRATION RIGHTS. The parties hereby agree and acknowledge that the Holders will have registration rights with respect to Warrant Shares in accordance with the provisions of the Registration Rights Agreement, dated as of September 29, 1999, among the Company, WWI, H.J. Heinz Company ("Heinz") and Artal Luxembourg S.A. ("Artal").
5.2 OTHER RIGHTS AND OBLIGATIONS. The parties hereby agree that the Warrants shall have the rights and be subject to the obligations set forth in the Stockholders' Agreement, dated as of September 29, 1999 (the "Stockholders' Agreement"), among the Company, WWI, Heinz and Artal with respect to shares of Common Stock held by WWI. The parties hereby agree and acknowledge that the Warrant Shares shall accordingly be subject to the provisions of the Stockholders' Agreement.
SECTION 6. MISCELLANEOUS.
6.1 NOTICES TO THE COMPANY AND WWI. Any notice or demand authorized by this Agreement to be given or made by the Holder of any Warrant Certificate to or on the Company shall be sufficiently given or made (i) five business days after deposited in the mail, first class or registered, postage prepaid, (ii) one business day after being timely delivered to a next-day air courier or (ii) when receipt is acknowledged by the addressee, if telecopied, addressed (until another addresses is filed in writing by the Company with the Holders), as follows:
WeightWatchers.com, Inc.
c/o The Invus Group, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Chris Sobecki and Phillipe Amouyal
Telecopy: (212) 371-1829
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert E. Spatt, Esq.
Telecopy: (212) 455-2502
Any notice pursuant to this Agreement to be given by the Company to any Holder shall be sufficiently given or made (i) five business days after deposited in the mail, first-class or registered, postage prepaid, (ii) one business day after being timely delivered to a next-day air courier or (ii) when receipt is acknowledged by the addressee, if telecopied, addressed (until another or additional address is filed in writing by a Holder with the Company) to the Holder as follows:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York 11797 Attention: General Counsel Telecopy: (516) 390-1719
with a copy to:
Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Robert E. Spatt, Esq.
Telecopy: (212) 455-2502
6.2 AMENDMENTS. Except as set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Company and each Holder; provided that the Company and the Majority Holders may amend or waive this Agreement except to the extent such waiver or amendment would constitute an adverse amendment or waiver to a non-consenting Holder's rights hereunder in a material respect.
6.3 SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction.
6.4 SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Holders shall bind and inure to the benefit of their respective permitted successors and assigns hereunder.
6.5 TERMINATION. This Agreement (other than the Company's obligations with respect to Warrants previously exercised and the Company's and the Holders' rights and obligations set forth in Sections 5.1 and 5.2) shall terminate at 5:00 p.m., New York City time on the Expiration Date.
6.6 GOVERNING LAW. THIS WARRANT AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
6.7 JURISDICTION; VENUE. The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action.
6.8 BENEFITS OF THIS AGREEMENT. (a) Nothing in this Agreement shall be construed to give to any Person other than the Company and the Holders of any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the Holders.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company, to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein.
6.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
6.10 TABLE OF CONTENTS. The table of contents and headings of the Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
6.11 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.
WEIGHTWATCHERS.COM, INC.
By: /s/ Philippe Amouyal
---------------------------------------
Name: Philippe Amouyal
Title: President
|
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg
---------------------------------------
Name: Robert W. Hollweg
Title: Vice President & Secretary
|
EXHIBIT A
[Form of Note]
EXHIBIT B
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. ___ _____ Warrants
WARRANT CERTIFICATE
WEIGHTWATCHERS.COM, INC.
THIS CERTIFIES THAT, Weight Watchers International, Inc., a Virginia corporation ("WWI"), is the owner of _____ Warrants (the "WARRANTS") as described above, transferable only on the books of WeightWatchers.com, Inc., a Delaware corporation (the "COMPANY"), by the holder thereof in person or by his or her duly authorized attorney, on surrender of the Certificate properly endorsed. Each Warrant entitles the holder thereof (the "HOLDER"), at its option and subject to the provisions contained herein and in the Warrant Agreement, dated as of November __, 1999 (the "WARRANT AGREEMENT"), between the Company and WWI, to purchase from the Company, one Warrant Share per Warrant at the exercise price per share of $500.00 (the "EXERCISE PRICE"), or by Cashless Exercise. This Warrant is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company and the Holders of the Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement. This Warrant Certificate shall terminate and become void as of 5:00 p.m. on November __, 2009 (the "EXPIRATION DATE") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The Exercise Price and the number of Warrant Shares purchasable upon exercise of the Warrants shall be subject to adjustment from time to time as set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed on behalf of the Company on the date set forth below.
Dated: November __, 1999
WEIGHTWATCHERS.COM, INC.
Title:
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company c/o The Invus Group, Ltd., 135 East 57th Street, New York, New York 10022.
Warrants may be exercised at any time until 5:00 p.m., New York City time on the Expiration Date. Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part by surrender of this Warrant Certificate with the form of election to purchase Warrant Shares attached hereto duly executed and with the simultaneous payment of the Exercise Price (i) in cash to the Company at the office of the Company or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made in cash or by certified or official bank check payable to the order of the Company or by wire transfer of same-day funds to an account designated by the Company for such purpose. Payment by Cashless Exercise shall be made by the surrender of a Warrant or Warrants represented by one or more Warrant Certificates and without payment of the Exercise Price in cash, in exchange for the issuance of such number of shares of Common Stock equal to the product of (1) the number of shares of Common Stock for which such Warrants would otherwise then be nominally exercised if payment of the Exercise Price were being made in cash and (2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock issuable upon the exercise of each Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which this Warrant remains outstanding, the Holder hereof will be entitled to receive upon exercise of the Warrants the shares of capital stock or other securities or other property of such surviving entity as such Holder would have been entitled to receive upon or as the result of such Combination had the Holder exercised its Warrants immediately prior to such Combination; PROVIDED, HOWEVER, that in the event that, in connection with such Combination, consideration to holders of shares of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will be entitled to receive distributions on an equal basis with the holders of shares of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant Agreement but not for any exchange or original issuance (not involving a transfer) with respect to the exercise of the Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the Holder hereof a new Warrant Certificate in respect of the Warrant Shares as to which the Warrants shall
not have been exercised. This Warrant Certificate may be exchanged at the office of the Company by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. In the event any fractional Warrant Shares would have to be issued upon the exercise of the Warrants, the Company may, at its option, pay an amount in cash equal to the Current Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction, in lieu of issuing such fractional share.
The Warrants do not entitle any holder hereof to any of the rights of a stockholder of the Company. All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and treated by the Company as the absolute owner of the Warrant Certificate for all purposes whatsoever and the Company shall not be affected by notice to the contrary.
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise ____________ Warrants at an exercise price per Warrant Share of $________ to acquire an equal number of Warrant Shares on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to WeightWatchers.com, Inc., and directs that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto.
Date: ________________, ____
_______________________________1/
(Signature of Owner)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
EXHIBIT 10.21
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. 01 60,246 Warrants
WARRANT CERTIFICATE
WEIGHTWATCHERS.COM, INC.
THIS CERTIFIES THAT, Weight Watchers International, Inc., a Virginia corporation ("WWI"), is the owner of 60,246 Warrants (the "WARRANTS") as described above, transferable only on the books of WeightWatchers.com, Inc., a Delaware corporation (the "COMPANY"), by the holder thereof in person or by his or her duly authorized attorney, on surrender of the Certificate properly endorsed. Each Warrant entitles the holder thereof (the "HOLDER"), at its option and subject to the provisions contained herein and in the Warrant Agreement, dated as of November 24, 1999 (the "WARRANT AGREEMENT"), between the Company and WWI, to purchase from the Company, one Warrant Share per Warrant at the exercise price per share of $500.00 (the "EXERCISE PRICE"), or by Cashless Exercise. This Warrant is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company and the Holders of the Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement. This Warrant Certificate shall terminate and become void as of 5:00 p.m. on November 24, 2009 (the "EXPIRATION DATE") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The Exercise Price and the number of Warrant Shares purchasable upon exercise of the Warrants shall be subject to adjustment from time to time as set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed on behalf of the Company on the date set forth below.
Dated: November 24, 1999
WEIGHTWATCHERS.COM, INC.
By: /s/ Philippe Amouyal
----------------------------------
Name:
Title:
|
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company c/o The Invus Group, Ltd., 135 East 57th Street, New York, New York 10022.
Warrants may be exercised at any time until 5:00 p.m., New York City time on the Expiration Date. Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part by surrender of this Warrant Certificate with the form of election to purchase Warrant Shares attached hereto duly executed and with the simultaneous payment of the Exercise Price (i) in cash to the Company at the office of the Company or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made in cash or by certified or official bank check payable to the order of the Company or by wire transfer of same-day funds to an account designated by the Company for such purpose. Payment by Cashless Exercise shall be made by the surrender of a Warrant or Warrants represented by one or more Warrant Certificates and without payment of the Exercise Price in cash, in exchange for the issuance of such number of shares of Common Stock equal to the product of (1) the number of shares of Common Stock for which such Warrants would otherwise then be nominally exercised if payment of the Exercise Price were being made in cash and (2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock issuable upon the exercise of each Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which this Warrant remains outstanding, the Holder hereof will be entitled to receive upon exercise of the Warrants the shares of capital stock or other securities or other property of such surviving entity as such Holder would have been entitled to receive upon or as the result of such Combination had the Holder exercised its Warrants immediately prior to such Combination; PROVIDED, HOWEVER, that in the event that, in connection with such Combination, consideration to holders of shares of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will be entitled to receive distributions on an equal basis with the holders of shares of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant Agreement but not for any exchange or original issuance (not involving a transfer) with respect to the exercise of the Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the Holder hereof a new Warrant Certificate in respect of the Warrant Shares as to which the Warrants shall not have been exercised. This Warrant Certificate may be exchanged at the office of the Company by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. In the event any fractional Warrant Shares would have to be issued upon the exercise of the Warrants, the Company may, at its option, pay an amount in cash equal to the Current Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction, in lieu of issuing such fractional share.
The Warrants do not entitle any holder hereof to any of the rights of a stockholder of the Company. All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and treated by the Company as the absolute owner of the Warrant Certificate for all purposes whatsoever and the Company shall not be affected by notice to the contrary.
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise ____________ Warrants at an exercise price per Warrant Share of $________ to acquire an equal number of Warrant Shares on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to WeightWatchers.com, Inc., and directs that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto.
Date: ________________, ____
_______________________________1/
(Signature of Owner)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
EXHIBIT 10.24
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND LAWS IS AVAILABLE.
WEIGHTWATCHERS.COM, INC.
SECOND AMENDED AND RESTATED NOTE
$34,500,000 OCTOBER 1, 2000
FOR VALUE RECEIVED, the undersigned, WEIGHTWATCHERS.COM, INC., a Delaware corporation (the "Company"), promises to pay to the order of WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "Holder"), in six (6) equal semi-annual installments on March 31 and September 30 of each year, commencing on March 31, 2004 and ending September 30, 2006 (the "Maturity Date"), the principal amount of (a) THIRTY FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS ($34,500,000), or, if less, (b) the aggregate unpaid principal amount as of March 30, 2004 of all loans made by the Holder to the Company pursuant to this second amended and restated promissory note (this "Note").
Until July 31, 2003, the Holder agrees, at any time or from time to time, to loan the Company up to an aggregate principal amount of $ 34,500,000 (the "Commitment") within five business days of its receipt of a written request therefor. This Note amends and restates as of the date hereof an existing amended and restated promissory note dated October 1, 2000 between the Company and the Holder (the "Old Note") in the aggregate principal amount of $28,500,000, which included the outstanding principal amount plus accrued interest on a pre-existing promissory note dated November 24, 1999 for $10,000,000 between the Company and the Holder (the "Prior Note"). As of October 1, 2000, the principal amount plus accrued interest of the Prior Note was rolled over and subsumed into the Old Note and the Prior Note was thereby cancelled. All loans made under this Note shall be in an amount equal to $100,000 or an integral multiple thereof. The unpaid principal amount of this Note from borrowings made under this Note from and including the Issuance Date through September 10, 2001 shall bear interest beginning January 1, 2002 at a rate of 13% per annum, and such interest shall be due and payable semi-annually in arrears on March 31 and September 30 of each year, commencing on March 31, 2002. The unpaid principal amount of this Note from borrowings made under this Note after September 10, 2001 shall bear interest at a rate of 13% per annum, and such interest shall be due and payable semi-annually in arrears on March 31 and September 30 of each year, commencing on March 31, 2002. Interest will be computed on the basis of a 365-day year and the actual number of days elapsed including the first day but excluding the payment date. All payments of principal of and interest on this Note shall be payable in lawful currency of the United States of America. All such payments shall be made by the Company to an account established by the Holder and notified to the Company and shall be recorded on the books and records of the Company and the Holder.
The Company agrees to pay to the Holder a commitment fee for the period from and including January 1, 2002 to July 31, 2003, computed at a rate of 0.50% per annum on the average daily unused portion of the Commitment payable semi-annually in arrears on March 31 and September 30 of each year, commencing March 31, 2002.
If any payment on this Note becomes due and payable on a day other than a day on which commercial banks in New York City are open for the transaction of normal business (a "Business Day"), the maturity thereof shall be extended to the next succeeding Business Day and, with respect to any payment of principal, interest or commitment fees thereon, shall be payable at the then applicable rate during such extension.
The Holder is authorized to endorse on Schedule A attached hereto and made a part hereof, the amount of each loan made pursuant to this Note (including the outstanding principal and interest on the Prior Note) and the date and amount of each payment or prepayment of principal thereof. Each such endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed.
In addition to, but not in limitation of, the foregoing, the Company further agrees to pay all expenses, including (i) the making of any loans under this Note and (ii) reasonable attorneys' fees and legal expenses, incurred by the Holder in connection with endeavoring to collect any amounts payable hereunder which are not paid when due.
1. PAYMENT PROVISIONS.
1.1 PAYMENTS ON THIS NOTE. The Company shall make payments of principal of, interest on and the commitment fees with respect to this Note when due.
1.2 OPTIONAL REDEMPTION. This Note may be redeemed at the option of the Company, at any time or from time to time, in whole or in part, without premium or penalty, at par plus accrued and unpaid interest, plus any accrued and unpaid commitment fees.
1.3 CHANGE OF CONTROL. Upon a Change of Control, the Holder shall have the right to require the Company to repurchase this Note at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest plus any accrued and unpaid commitment fee to the date of purchase.
2. DEFAULT. The entire unpaid principal of this Note, together with all accrued and unpaid interest and any accrued and unpaid commitment fees shall become and be immediately due and payable upon written demand of the Holder (or in the case of an event specified in Sections 2(g) or (h), automatically without notice), without any other notice or demand of any kind or any presentment or protest, if any one of the following events (an "Event of Default") shall occur and be continuing at the time of such demand, whether voluntarily or involuntarily, or, without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any governmental body:
a. The Company defaults in any payment of interest or any commitment fee on this Note when the same becomes due and payable, and such default continues for a period of 30 days;
b. The Company (i) defaults in the payment of the principal
of this Note when the same becomes due and payable at
its Stated Maturity or pursuant to the provision of
Section 1.3, (ii) defaults in the payment of the
principal of this Note when the same becomes due and
payable upon redemption, upon declaration or otherwise,
or (iii) fails to redeem or purchase the Note when
required pursuant to this Note;
c. The Company fails to comply with Section 3.8;
d. The Company or any of its Subsidiaries fail to comply with any other provision of Section 3, and such failure continues for 30 days after the notice specified below;
e. The Company or any of its Subsidiaries fail to comply with any of its agreements in this Note (other than those referred to in (a), (b), (c) or (d) above) and such failure continues for 60 days after the notice specified below;
f. Indebtedness of the Company or any of its Subsidiaries is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated at any time exceeds $1,000,000;
g. The Company or any of its Subsidiaries pursuant to or within the meaning of any Bankruptcy Law:
1. commences a voluntary case;
2. consents to the entry of an order for relief against it in an involuntary case;
3. consents to the appointment of a custodian of it or for any substantial part of its property; or
4. makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to insolvency;
h. A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
1. is for relief against the Company or any of its Subsidiaries in an involuntary case;
2. appoints a custodian of the Company or any of its Subsidiaries or for any substantial part of its property; or
3. orders the winding up or liquidation of the Company or any of its Subsidiaries;
or any similar relief is granted under any foreign laws and the order, decree or relief remains unstayed and in effect for 60 consecutive days;
i. Any judgment or decree for the payment of money in excess of $1,000,000 is rendered against the Company or any of its Subsidiaries (other than a judgment or decree in a claim brought by any Person arising out of, or relating to, the Company's or any of its Subsidiaries' (A) use of the Weight Watchers trademarks, service marks, trade names, brand names, copyrights, program information, terminology or materials, and/or other intellectual property as provided in any license agreement between the Company (or any of its Subsidiaries) and the Holder, or (B) provision of services pursuant to any service agreement between the Company (or any of its Subsidiaries) and the Holder) and is not discharged and either (1) an enforcement proceeding has been commenced by any creditor upon such judgment or decree or (2) there is a period of 60 days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed; or
A Default under Sections 2(d) or (e) is not an Event of Default until the Holder notifies the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice.
3. COVENANTS.
3.1 LIMITATION ON INDEBTEDNESS.
a. The Company and its Subsidiaries shall not Incur any Indebtedness which will result in the total Indebtedness of the Company and its Subsidiaries exceeding $44,000,000 (including the amount of any principal and interest outstanding on this Note) at any time that there is any principal or interest outstanding on this Note. Notwithstanding the foregoing, for purposes of determining the total Indebtedness Incurred by the Company and its Subsidiaries at any time, any Indebtedness between the Company and any of its Subsidiaries, or between any of the Company's Subsidiaries, shall be excluded.
b. This Note shall be senior and have a first priority over all other Indebtedness of the Company.
3.2 LIMITATION ON LIENS. The Company shall not, directly or indirectly create, incur, assume or suffer to exist any Lien that secures obligations on any asset or property of the Company and any of its Subsidiaries or any income or profits therefrom, or assign or convey any right to receive income therefrom except for (A) (i) Liens incurred in the ordinary course of business for sums not overdue for a period of more than thirty (30) days (other than Liens consented in writing by Holder), (ii) Liens incurred in the ordinary course of business to finance the purchase, lease or improvement of property (real or personal) or equipment, or (iii) Liens incurred with respect to this Note or any Guarantee issued by the Holder or any Subsidiary of the Holder, or (B) the amount of such Lien or Liens do not result in the total Indebtedness of the Company exceeding $44,000,000 as hereinbefore provided.
3.3 LIMITATION ON DISTRIBUTIONS AND REDEMPTIONS.
a. The Company or any Subsidiary shall not, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or similar payment to the direct or indirect holders of its Capital Stock except (1) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock and (2) dividends or distributions payable solely to the Company or a Wholly Owned Subsidiary, (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Wholly Owned Subsidiary held by Persons other than the Company, (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payments any Indebtedness (other than Indebtedness represented by this Note and Indebtedness
between the Company and any of its Subsidiaries, or between Subsidiaries of the Company) or (iv) make any Investment in any Person other than a Permitted Investment.
b. The provisions of Section 3.3(a) shall not prohibit:
The repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company held by any director, officer or employee of the Company or any Subsidiary of the Company upon such director ceasing to be a director or upon the termination of such officer's or employee's employment with the Company or any Subsidiary of the Company; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1,000,000 in any twelve-month period.
3.4 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Company shall not, and shall not permit any Subsidiary to, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligation owed to the Company or any of its Subsidiaries, (ii) make any loans or advances to the Company or any of its Subsidiaries, or (iii) transfer any of its property or assets to the Company or any of its Subsidiaries.
3.5 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. The Company shall not, and shall not permit any Subsidiary to, make any Asset Disposition in excess of $10,000 unless (a) the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the Board of Directors (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition, (b) at least 85% of the consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents, and (c) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be) to invest in Additional Assets within 120 days of receipt thereof. On the 121st day after an Asset Disposition or on such earlier date as the Board of Directors shall determine not to apply 100% of the Net Available Cash as set forth in the preceding sentence, the Company shall redeem this Note, in whole or in part, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest with the aggregate amount of Net Available Cash which has not been applied in accordance with the preceding sentence.
3.6 LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
a. The Company shall not, and shall not permit any Subsidiary of the Company to, directly or indirectly, enter into or conduct any transaction or related series of transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms of such transaction are no less
favorable to the Company or such Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate.
b. The foregoing shall not prohibit (1) any transaction
between the Company or any of its Subsidiaries, on the
one hand, and any Permitted Holder, on the other hand,
(2) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the
Board of Directors, (3) loans or advances to employees
in the ordinary course of business, or (4) any
transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
3.7 SALE OF SUBSIDIARY CAPITAL STOCK. The Company (a) will not, and will not permit any Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Subsidiary to any Person (other than the Company or a Wholly Owned Subsidiary) and (b) will not permit any Subsidiary to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Subsidiary.
3.8 MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company shall not consolidate with or merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all its assets to, any Person (in one transaction or a series of related transactions), or permit any Person to merge with or into the Company and the Company will not permit any of its Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or the Company and its Subsidiaries, taken as a whole, to any other Person or Persons without the express written permission of the Holder, unless the principal amount of the Note and any outstanding interest or commitment fee is paid in full prior to the completion of any such transaction. In granting any such written permission the Holder at a minimum will require the following:
1. the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation organized and existing under the laws of the United States of America or any state thereof and the Successor Company (if not the Company) shall expressly assume all the obligations of the Company under this Note;
2. immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been incurred by the Successor Company or
such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing;
3. immediately after giving effect to such transaction on a pro forma basis, the Successor Company shall have a Consolidated Net Worth equal to or greater than an amount which is not less than the Consolidated Net Worth of the Company prior to such transaction; and
4. the Company shall have delivered to the Holder an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer complies with the terms of this Note and the Successor Company shall have delivered to the Holder an Officer's Certificate and an Opinion of Counsel, each stating that the assumption of the Note has been duly approved and authorized by the Board of Directors or Shareholders of such Successor Company as may be required by the Holder.
3.9 PERIODIC REPORTS. The Company shall provide the Holder with three quarterly unaudited financial statements (within forty-five (45) days of each quarter end) and audited annual reports containing all financial information reasonably requested by Holder (within ninety (90) days of each year end) including, without limitation, income statement, balance sheet, and cash flows prepared in accordance with GAAP. Notwithstanding the foregoing, audited annual reports with respect to calendar years 1999 and 2000 shall be provided by the Company no later than May 31, 2001.
3.10 CORPORATE EXISTENCE. The Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership, limited liability or other existence of each of its Subsidiaries in accordance with the respective organizational documents (as the same may be amended from time to time) of each Subsidiary and the rights (charter and statutory) of the Company and each of its Subsidiaries; provided, however, that the Company shall not be required to preserve any such existence or right if such existence or right involves a Wholly Owned Subsidiary.
3.11 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of its Subsidiaries or upon the income, profits or property of it or any of its Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material Lien upon or a material liability affecting the property of it or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made.
3.12 MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all material properties owned by or leased by it or any of its Subsidiaries useful and necessary to the conduct of its business or the business of any of its Subsidiaries to be improved or maintained and kept in normal condition, repair and working order and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 3.12 shall prevent the Company or any of its Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors or of the board of directors of any Subsidiary of the Company concerned, or of an officer (or other agent employed by the Company or of any of its Subsidiaries) of the Company or any of its Subsidiaries having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Subsidiary of the Company, and if such discontinuance or disposal is not adverse in any material respect to the Holder.
(b) To the extent available at commercially reasonable rates, the Company shall maintain, and shall cause its Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses, of similar size.
3.13 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT. The Company shall deliver to the Holder, within 90 days after the close of each quarter, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill its obligations under this Note and further stating, as to each such officer signing such certificate, that, to the best of his knowledge, the Company during such preceding fiscal year has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill each and every such covenant contained in this Note and no Default occurred during such year and at the date of such certificate there is no Default which has occurred and is continuing or, if such signers do know of such Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest on or commitment fee with respect to this Note is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Holder should the Company elect to change the manner in which it fixes its fiscal year end. The Company shall notify the Holder of any default or defaults in the performance of any covenants or agreements under this Note within five Business Days of becoming aware of any such default.
3.14 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders of the relevant jurisdiction in which they are incorporated and/or in which they carry on business, all political subdivisions thereof, and of any relevant governmental regulatory authority, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for
such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole.
3.15 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of and/or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law had been enacted.
3.16 CONDUCT OF BUSINESS. The Company shall not, and shall not permit any Subsidiary to, engage in any business, other than a Related Business.
3.17 FUTURE SUBSIDIARIES. Unless otherwise agreed to in writing by Holder, after the Issuance Date, the Company will cause each Subsidiary created or acquired by the Company and each of its Subsidiaries to execute and deliver to the Holder a supplement to this Note (which shall also be executed and delivered by the Company) pursuant to which such Subsidiary will become a party to this Note and thereby be obligated, on a joint and several basis, to make full and prompt payment of the principal of, premium, if any, and interest on this Note.
3.18 JURISDICTION OF INCORPORATION. The Company shall not change its jurisdiction of incorporation or the jurisdiction of its tax residency to a jurisdiction other than the United States of America or any state thereof.
4. CERTAIN DEFINITIONS. For purposes of this Note, unless otherwise specifically indicated herein, the term "consolidated" with respect to any Person refers to such Person consolidated with its Subsidiaries. In addition, for purposes of the following definitions and this Note generally, all calculations and determinations shall be made in accordance with GAAP and shall be based upon the consolidated financial statements of the Company and its Subsidiaries prepared in accordance with GAAP. As used in this Note, the following terms shall have the following meanings:
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Subsidiary of the Company; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Subsidiary of the Company; PROVIDED, HOWEVER, that, in the case of clauses
(ii) and (iii), such Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) of shares of Capital Stock of a Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) other than (i) a disposition by a Subsidiary to the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in the ordinary course of business, (iii) the sale of Temporary Cash Investments in the ordinary course of business, and (iv) a disposition of obsolete equipment or property, or equipment or property that is no longer useful in the business of the Company and its Subsidiaries and that is disposed of in the ordinary course of business.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by this Note, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended).
"Bankruptcy Law" means Title 11, United States Code, or any similar U.S. Federal and state laws relating to bankruptcy, insolvency, winding up, administration, receivership and other similar matters.
"Board of Directors" means the Board of Directors of the Company.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including, without limitation, any Preferred Stock and if such Person is a partnership, partnership interests, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease.
"Change of Control" means the occurrence of any of the following events:
(i) any Person (other than a Permitted Holder) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), except that such Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of more than 35% of the total voting power of the Voting Stock of the Company;
(ii) the first day within any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors or the board of directors of the Company (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of the Company or the Company was approved by a majority of the directors of the Company, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than by voluntary resignation, death or disability) to constitute a majority of such board of directors then in office;
(iii) upon any merger or consolidation of the Company with or into any Person or any sale, transfer or other conveyance of all or substantially all of the assets of the Company, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction or series of related transactions, any Person (other than a Permitted Holder) is or becomes the owner, directly or indirectly, of more than 35% of the total voting power in the aggregate normally entitled to vote in the election of directors, managers, or trustees, as applicable, of the transferee or surviving entity;
(iv) a sale or disposition (other than a transfer to one or more Wholly Owned Subsidiaries of the Company), whether directly or indirectly, by the Company of all or substantially all of its assets; or
(v) the pro rata distribution by the Company to its stockholders of substantially all of its assets.
"Company" means WeightWatchers.com, Inc. (the maker of this Note).
"Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of the Company ending prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in
whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Notes.
"GAAP" means generally accepted accounting principles in the United States in effect as of the Issuance Date.
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of determination (without duplication):
(i) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except trade payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Indebtedness of such Person;
(vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends);
(vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; PROVIDED, HOWEVER, that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and
(ix) to the extent not otherwise included in this definition, net obligations of such Person under Currency Agreements and Interest Rate Agreements.
For the avoidance of doubt, the term "Indebtedness" shall not be deemed to include the trade liabilities of any Person.
"Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person.
"Issuance Date" means October 1, 2000.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof) whether or not recorded, filed or otherwise perfected under applicable law.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) therefrom,
in each case net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability under
GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition, and (iv) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Subsidiary of the Company after such Asset Disposition.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements of
Section 8.5.
"Opinion of Counsel" means a written opinion from legal counsel which and who are reasonably acceptable to, and addressed to, the Holder complying with the requirements of Section 8.5.
"Permitted Holder" means Artal Luxembourg S.A., the Holder or any of their respective Affiliates.
"Permitted Investment" means an Investment by the Company or any of its Subsidiaries in:
(1) any Subsidiary or Person that will, upon the making of the Investment, become or remain a Wholly Owned Subsidiary of the Company (provided the primary business of such Subsidiary is a Related Business);
(2) any Subsidiary or Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to the Company or a Wholly Owned Subsidiary of the Company (provided such merger, consolidation, transfer or conveyance complies with Section 3.8 above);
(3) cash and Temporary Cash Investments;
(4) receivables owing to the Company or any Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (provided that such trade terms may include concessionary trade terms as the Company or any Subsidiary deems reasonable under the circumstances);
(5) payroll, travel and similar advances to cover matters that are expected at the time of such advances to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(6) stock, obligations or securities received in the settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary or in the satisfaction of judgments;
(7) any Person to the extent such Investment represents the non-cash portion of the consideration received for in an Asset Disposition as permitted pursuant to Section 3.5;
(8) Investments the payment for which consists of Capital Stock of the Company (other than Disqualified Stock); and
(9) any Investment acquired by the Company or any of its Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable, or (b) as a result of a foreclosure by the Company or any such Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default.
"Person" means any individual, corporation (including the Company), partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Business" means any business related, ancillary or complementary to the businesses of the Company's and its Subsidiaries' (i) use of the Weight Watchers trademarks, service marks, trade names, brand names, copyrights, program information, terminology or materials, and/or other intellectual property as provided in any license agreement between the Company (or any Subsidiary) and the Holder, or (ii) provision of services pursuant to any service agreement between the Company (or any Subsidiary) and the Holder.
"Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Subsidiary transfers such property to a Person and the Company or a Subsidiary leases it from such Person.
"Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).
"Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America or any state thereof having capital, surplus and
undivided profits aggregating in excess of $250 million and whose long-term
debt, or whose parent holding company's long-term debt, is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act), (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, (v) Investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc., and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors.
"Wholly Owned Subsidiary" means a Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary.
6. LOSS, THEFT, DESTRUCTION OR MUTILATION.
Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of such loss, theft or destruction, upon delivery to the Company of an indemnity undertaking reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender of this Note to the Company, the Company will issue a new note, of like tenor and principal amount, in lieu of or in exchange for such lost, stolen, destroyed or mutilated Note. Upon the issuance of any substitute Note, the Company may require the payment to it of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses in connection therewith.
5. NOTICES AND DEMANDS.
All notices, demands and other communications provided for in this Note or made under this Note shall be in writing and shall be deemed to have been duly given if delivered by
hand (whether by overnight courier or otherwise) or sent by registered or certified mail, return receipt requested, postage prepaid, to the Person to whom it is directed:
(a) If to Holder, to it at the following address:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797-2055 Attn: General Counsel
(b) If to the Company, to it at the following address:
WeightWatchers.com, Inc. 888 Seventh Ave., 8th Floor New York, New York 10106 Attn: General Counsel
If a party desires to change its address for the purpose of receipt of notice, or to change the person to receive a copy of notice, such notice or change of address or recipient shall be given in the manner specified herein.
6. PRESENT INTENT. By acceptance of this Note, the Holder acknowledges that this Note is being acquired without a present intention of resale or distribution, and that this Note will not be transferred, pledged or otherwise disposed of by the Holder in the absence of an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or an opinion of counsel (including in-house counsel) reasonably satisfactory to the Company that such registration is, under the circumstances, not required.
7. MISCELLANEOUS PROVISIONS.
7.1 NO ORAL MODIFICATIONS. Neither this Note nor any term of this Note may be changed, waived, discharged or terminated orally, but may only be amended or modified by an instrument in writing signed by the Holder and the Company.
7.2 BINDING EFFECT. This Note shall be binding upon and inure to the benefit of the Company, the Holder of this Note and their respective heirs, successors and assigns.
7.3 GOVERNING LAW, JURISDICTION; JURY TRIAL WAIVER. This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York located in the borough of Manhattan in the City of New York, or, if such court does not have jurisdiction, the Supreme Court of the State of New York, New York County, for the purposes of any suit, action or other proceeding arising out of this Note. The Company hereby further agrees that service of any process, summons, notice or document by U.S. registered mail to its address set forth in Section 6 shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties hereto irrevocably and unconditionally waives, to the extent permitted by applicable
law, any objection to the laying of venue of any action, suit or proceeding arising out of this Note in (a) the United States District Court for the Southern District of New York or (b) the Supreme Court of the State of New York, New York County, and hereby further irrevocably and unconditionally waives, to the extent permitted by applicable law, and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. To the extent permitted by applicable law, the Company waives the right to trial by jury in any such action or proceeding.
7.4 RECOURSE. Recourse under this Note shall be to the assets of the Company only and in no event to the officers, directors or stockholders of the Company.
7.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Note shall include:
(1) statement that the Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; PROVIDED, HOWEVER, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials.
7.6 ASSIGNABILITY. The Holder may sell, assign, transfer or otherwise hypothecate ("Transfer") this Note to any other Person. If any interest in this Note is Transferred in compliance with this Section 8.6, this Note shall be cancelled and the Company shall execute and deliver a new note (in substantially the form of this Note) to each Person to whom an interest in this Note has been Transferred in an aggregate principal amount equal to such Person's interest in this Note.
7.7 COSTS. The Company will pay all reasonable costs and expenses of collection, including attorneys' fees and disbursements, appraiser's fees and court costs, incurred or paid by the Holder in enforcing this Note, to the extent permitted by law, including all costs and reasonable attorneys' fees incurred in any appeal, bankruptcy proceeding, or other proceeding.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in its corporate name by its duly authorized officer as of this 10th day of September, 2001.
WEIGHTWATCHERS.COM, INC.
By: /s/ Sharon A. Fordham ----------------------------------- |
Agreed and Accepted:
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg --------------------------------- |
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Note as of the Issuance Date was $10,355,503. The following decreases/increases in the principal amount of this Note have been made:
-------------------------------------------------------------------------------
Decrease Increase Total Principal Notation
Date of in in Amount at Made by
Decrease Principal Principal Maturity or on
Increase Amount at Amount at Following such behalf
Maturity Maturity Decrease/Increase of Holder
-------------------------------------------------------------------------------
10/16/00 $200,000 $10,555,503
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10/25/00 $300,000 $10,855,503
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11/1/00 $2,700,000 $13,555,503
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11/29/00 $2,500,000 $16,055,503
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12/18/00 $1,100,000 $17,155,503
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1/5/01 $900,000 $18,055,503
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1/22/01 $2,000,000 $20,055,503
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2/15/01 $1,300,000 $21,355,503
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3/16/01 $1,000,000 $22,355,503
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4/6/01 $600,000 $22,955,503
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4/23/01 $544,497 $23,500,000
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5/9/01 $700,000 $24,200,000
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6/6/01 $800,000 $25,000,000
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7/9/01 $700,000 $25,700,000
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8/24/01 $500,000 $26,200,000
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Decrease Increase Total Principal Notation
Date of in in Amount at Made by
Decrease Principal Principal Maturity or on
Increase Amount at Amount at Following such behalf
Maturity Maturity Decrease/Increase of Holder
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EXHIBIT 10.28
EXECUTION COPY
AMENDMENT NO. 1
This AMENDMENT NO. 1, dated as of April 26, 2001 (this "AMENDMENT") to the Existing Credit Agreement referred to below, is among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), WW FUNDING CORP., a Delaware corporation (the "SP1 BORROWER", and together with WWI, the "BORROWERS") and the various financial institutions parties thereto (the "LENDERS").
WHEREAS, the Borrowers, the Lenders, The Bank of Nova Scotia, as the administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders and as a lead arranger and a book manager, Credit Suisse First Boston, as the syndication agent for the Lenders (in such capacity, the "SYNDICATION AGENT") and as a lead arranger and a book manager and BHF (USA) Capital Corporation, as the documentation agent for the Lenders (in such capacity, the "DOCUMENTATION AGENT") are party to the Amended and Restated Credit Agreement, dated as of January 16, 2001 (as further amended, supplemented or otherwise modified prior to the First Amendment Effective Date (as defined below), the "EXISTING CREDIT AGREEMENT");
WHEREAS, the Borrower has requested that the Lenders amend certain provisions of the Existing Credit Agreement as herein provided, and the Lenders are willing to effect such amendments, but only on and subject to the terms and conditions of this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto hereby agree as follows.
PART I
DEFINITIONS
SUBPART 0.1 CERTAIN DEFINITIONS. Terms used in this Amendment which are defined in the Existing Credit Agreement shall have the meanings set forth in the Existing Credit Agreement. The following additional terms, as used herein, shall have the following respective meanings (such meanings to be equally applicable to the singular and plural forms thereof):
"AMENDMENT" is defined in the PREAMBLE.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"FIRST AMENDMENT EFFECTIVE DATE" is defined in SUBPART 3.1.
PART II
AMENDMENTS TO EXISTING
CREDIT AGREEMENT
SUBPART 2.1 AMENDMENT TO THE ARTICLE I. Article I of the Existing Credit Agreement is hereby amended as set forth in SUBPART 2.1.1.
SUBPART 2.1.1. Section 1.1 of the Existing Credit Agreement is hereby amended by inserting the following definitions in the appropriate alphabetical order:
"FIRST AMENDMENT EFFECTIVE DATE" is defined in Subpart 3.1 of Amendment No. 1, dated as of April 26, 2001, to this Agreement, among the Borrowers and the Lenders parties thereto.
"HEINZ COMMON SHARES" means the 1,428,000 WWI Common Shares owned by HJH (and/or its Affiliates) as of the First Amendment Effective Date, as such number of WWI Common Shares may be adjusted from time to time in accordance with Section 1.3 of the Heinz Put/Call Agreement.
"HEINZ PUT/CALL AGREEMENT" means the Put/Call Agreement, dated as of April 18, 2001, between WWI and HJH, as the same may be amended, supplemented or modified from time to time.
"MAXIMUM SUBORDINATED RESTRICTED PAYMENT AMOUNT" means, on any
date, the difference between (a) the maximum Dollar amount that could
then be used to redeem, purchase or defease Senior Subordinated Notes
pursuant to, and without causing a Default under, CLAUSE (b)(ii) of
SECTION 7.2.6 less (b) the Retained ECF Amount as of such date.
"RETAINED ECF AMOUNT" means, on any date, 50% of the amount of all Restricted Payments made (or to be made) during the then current fiscal year of WWI on or prior to such date of determination pursuant to CLAUSE (a)(w) of SECTION 7.2.6.
SUBPART 2.2. AMENDMENTS TO ARTICLE VII. Article VII of the Existing Credit Agreement is hereby amended in accordance with SUBPARTS 2.2.1 through 2.2.3.
SUBPART 2.2.1. Clause (b) of Section 7.1.9 of the Existing Credit Agreement is hereby amended by inserting the following language immediately after the phrase "general corporate purposes":
(including to fund Restricted Payments permitted pursuant to CLAUSE
(a)(w) of SECTION 7.2.6)
SUBPART 2.2.2. Clause (a) of Section 7.2.6 of the Existing Credit Agreement is hereby amended by inserting the following new clause (a)(w) immediately before existing clause (a)(x):
(w) from time to time on or prior to September 12, 2002, WWI may
purchase or redeem for cash all or any portion of the Heinz Common
Shares; PROVIDED, that (i) the aggregate consideration paid for all
Heinz Common Shares shall not exceed $28,000,000, (ii) both before and
after giving effect to any such purchase or redemption, no Default
shall have occurred and be continuing, or would result therefrom and
(iii) at the time of any such purchase or redemption (both before and
after giving effect to any such purchase or redemption), the Borrower
shall have at least $30,000,000 of availability under the Revolving
Loan Commitments (after giving effect to the outstanding principal
amount of Swing Line Loans and the aggregate amount of Letter of Credit
Outstandings);
SUBPART 2.2.3. Clause (b)(ii) of Section 7.2.6 of the Existing Credit Agreement is hereby amended by inserting the following new clause (b)(ii)(w) immediately before the existing clause (b)(ii)(x):
(w) the aggregate amount of such redemption, purchase or defeasance does not exceed the then current Maximum Subordinated Restricted Payment Amount,
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. FIRST AMENDMENT EFFECTIVE DATE. This Amendment, and the amendments and modifications set forth herein, shall be and become effective on the date (the "FIRST AMENDMENT EFFECTIVE DATE") when each of the conditions set forth in this Part shall have been fulfilled to the satisfaction of the Administrative Agent.
SUBPART 3.1.1. EXECUTION OF COUNTERPARTS. The Administrative Agent shall have received counterparts of this Amendment, duly executed and delivered on behalf of the Borrowers and the Required Lenders.
SUBPART 3.1.2. AMENDMENT FEE, ETC. The Administrative Agent shall have received (i) an amendment fee (but only for the account of each Lender that has executed and delivered (including
delivery by way of facsimile) a copy of this Amendment to the attention of Sherri Snelson at Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 (19th floor), telecopy number 212-262-1910, at or prior to 5:00 p.m. New York time on April 26, 2001) in the amount of 1/8 of 1% of such Lender's portion of the Total Exposure Amount, and (ii) any other amounts then owing to the Administrative Agent.
SUBPART 3.1.3. SATISFACTORY LEGAL FORM. All documents executed or submitted pursuant hereto by or on behalf of the Borrowers shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel, and the Administrative Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Administrative Agent or such counsel may reasonably request.
PART IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Amendment and to amend the Existing Credit Agreement as provided herein, the Borrowers represent and warrant to each Lender as set forth in this Part.
SUBPART 4.1. COMPLIANCE WITH REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth herein, in Article VI of the Credit Agreement and in each other Loan Document are true and correct in all material respects with the same effect as if made on and as of the First Amendment Effective Date (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date), and both before and after giving effect to the terms of this Amendment, no Default has occurred and is continuing.
SUBPART 4.2. VALIDITY, ETC. This Amendment has been duly authorized, executed and delivered by each of the Borrowers, and each of this Amendment, the Credit Agreement and each other Loan Document constitutes the legal, valid and binding obligations of the Borrowers and each other Obligor party thereto, in each case enforceable against the Borrowers or such other Obligor(s) in accordance with their respective terms, except as such enforceability may be affected by the applicability of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
PART V
MISCELLANEOUS PROVISIONS
SUBPART 5.1. NO OTHER AMENDMENTS; REFERENCES TO THE CREDIT AGREEMENT, ETC. Other than as specifically provided herein, this Amendment shall not operate as a waiver or amendment of any right, power or privilege of any Lender or Agent under the Credit Agreement or any other Loan Document or of any other term or condition of the Credit Agreement or any other Loan Document, nor shall the entering into of this Amendment preclude the Lenders or any Agent from refusing to enter into any further waivers or amendments with respect to the Credit Agreement or any other Loan Document. All references to the Credit Agreement in any document, instrument, agreement, or writing shall from and after the First Amendment Effective Date be deemed to refer to the Existing Credit Agreement, as amended hereby. The Borrowers agree to pay all reasonable expenses of the Administrative Agent in connection with the negotiation, preparation, execution, delivery and administration of this Amendment and all related documents, including all reasonable legal fees and expenses and all expenses associated with the solicitation of and communication with the Lenders in connection herewith, whether or not the transactions contemplated hereby or thereby are consummated or effectuated.
SUBPART 5.2. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this or any other provision hereof.
SUBPART 5.3. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
SUBPART 5.4. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.
SUBPART 5.5. CROSS-REFERENCES. References in this Amendment to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendment.
SUBPART 5.6. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SUBPART 5.7. LOAN DOCUMENT PURSUANT TO CREDIT AGREEMENT. This Amendment is a Loan Document executed pursuant to the Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized officers as of the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
Title:
WW FUNDING CORP.
Title:
LENDERS:
THE BANK OF NOVA SCOTIA
Title:
Title:
Title:
Title:
EXHIBIT 10.29
WARRANT AGREEMENT
Dated as of September 10, 2001
between
WEIGHTWATCHERS.COM, INC.
and
WEIGHT WATCHERS INTERNATIONAL, INC.
WARRANT AGREEMENT
TABLE OF CONTENTS
Page
Section 1. Defined Terms.....................................................1
1.1 Certain Definitions..............................................1
1.2 Rules of Construction............................................3
Section 2. Issuance, Form, Execution, Delivery and Registration of Warrant
Certificates...........................................................4
2.1 Issuance of Warrants.............................................4
2.2 Execution of Warrant Certificates................................4
2.3 Registration, Registration of Transfers and Exchanges............4
2.4 Form of Warrant Certificates.....................................5
2.5 Restrictive Legends..............................................5
2.6 Offices for Exercise, etc........................................5
2.7 Cancellation.....................................................6
2.8 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates.....................................................6
Section 3. Terms of Warrants; Exercise of Warrants...........................6
3.1 Exercise Period..................................................6
3.2 Manner of Exercise...............................................7
3.3 Issuance of Warrant Shares.......................................7
3.4 Fractional Warrant Shares........................................8
3.5 Sufficient Authorized Share Capital..............................8
3.6 Payment of Taxes.................................................8
Section 4. Adjustment of Exercise Price and Number of Warrant Shares
Issuable..........................................................8
4.1 Adjustments......................................................8
4.2 Superseding Adjustment..........................................12
4.3 Minimum Adjustment..............................................13
4.4 Notice of Adjustment............................................13
4.5 Notice of Certain Transactions..................................13
4.6 Adjustment to Warrant Certificate...............................14
4.7 Challenge to Good Faith Determination...........................14
4.8 Treasury Stock..................................................14
Section 5. Holders' Rights and Obligations..................................14
5.1 Registration Rights.............................................14
5.2 Other Rights and Obligations....................................14
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Section 6. Miscellaneous....................................................14
6.1 Notices to the Company and WWI..................................14
6.2 Amendments......................................................15
6.3 Severability....................................................15
6.4 Successors......................................................15
6.5 Termination.....................................................15
6.6 Governing Law...................................................16
6.7 Jurisdiction; Venue.............................................16
6.8 Benefits of This Agreement......................................16
6.9 Counterparts....................................................16
6.10 Table of Contents...............................................16
6.11 MUTUAL WAIVER OF JURY TRIAL.....................................16
Exhibits
EXHIBIT A - Form of Note
EXHIBIT B - Form of Warrant Certificate
-ii-
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WARRANT AGREEMENT, dated as of September 10, 2001 (the "AGREEMENT"), between WeightWatchers.com, Inc., a Delaware corporation (the "COMPANY"), and Weight Watchers International, Inc., a Virginia corporation ("WWI").
WHEREAS, WWI has agreed to amend and restate the amended and restated loan (the "AMENDED LOAN") between the Company and WWI to, among other things, permit the Company to borrow up to an aggregate principal amount of $34.5 million pursuant to the terms of the Note attached hereto as Exhibit A; and
WHEREAS, in order to induce WWI to enter into the Amended Loan, the Company has agreed to enter into this Agreement and issue an additional 533,333 Warrants to WWI.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, and for the purpose of defining the respective rights and obligations of the Company and the Holders (as defined below), the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:
"AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, is defined to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
"BOARD" means the Board of Directors of the Company.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
"CASHLESS EXERCISE" has the meaning specified in Section 3.2 hereof.
"CASHLESS EXERCISE RATIO" means a fraction, the numerator of which is the excess of the Current Market Value (as defined below) per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of Common Stock on the Exercise Date.
"COMBINATION" has the meaning specified in Section 4.1(d) hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $0.01 per share, of the Company.
"CURRENT MARKET VALUE," per share of Common Stock or any other security at any date, means (i) if the security is not registered under the Exchange Act, the fair market value of the security (without any discount for lack of liquidity, the amount of such security offered to be purchased or the fact that such securities may represent a minority interest in a private company or a company under the control of another Person) as determined in good faith by the Board and certified in a board resolution that is delivered to the Holders, and, if requested by the Majority Holders, determined to be fair, from a financial point of view, to the holders of such security or another security exercisable for such security, by an Independent Financial Expert (as set forth in such Independent Financial Expert's written fairness opinion); or (ii) if the security is registered under the Exchange Act, the average of the last reported sale price of the security (or the equivalent in an over-the-counter market) for each Business Day during the period commencing 15 Business Days before such date and ending on the date one day prior to such date, or if the security has been registered under the Exchange Act for less than 15 consecutive Business Days before such date, the average of the daily closing bid prices (or such equivalent) for all of the Business Days before such date for which daily closing bid prices are available (PROVIDED, HOWEVER, that if the closing bid price is not determinable for at least 10 Business Days in such period, the "Current Market Value" of the security shall be determined as if the security were not registered under the Exchange Act). The Company shall pay the fees and expenses of any Independent Financial Expert in the determination of Current Market Value.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended (or any successor act), and the rules and regulations promulgated thereunder.
"EXERCISE DATE" means the date on which a Warrant is exercised by the Holder thereof.
"EXERCISE PRICE" means the purchase price per Warrant Share to be paid upon the exercise of each Warrant, which price shall be $7.14 per Warrant Share as adjusted in accordance with the terms hereof.
"EXPIRATION DATE" means September 10, 2011.
"HOLDER" means the holder of a Warrant, which shall initially be
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"INDEPENDENT FINANCIAL EXPERT" means a nationally recognized investment bank that does not (and whose directors, executive officers and 5% stockholders do not) have a direct or indirect financial interest in the Company, the Holders, or any of their respective subsidiaries or Affiliates, which has not been for at least five years, and at the time it is called upon to give independent financial advice to the Company is not (and none of its directors, executive officers or 5% stockholders is), a promoter, director, or officer of the Company, the Holders or any of their respective subsidiaries or Affiliates. The
Independent Financial Expert may be compensated and indemnified by the Company for opinions or services it provides as an Independent Financial Expert.
"ISSUE DATE" means September 10, 2001, the date on which the Warrants are first issued.
"MAJORITY HOLDERS" means the Holders of a majority of the then outstanding Warrants.
"OFFICER" means the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company.
"PERSON" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"REPURCHASE PRICE" means, in respect of a Warrant, (i) the excess of the Current Market Value of a share of Common Stock of the Company over the Exercise Price per share of Common Stock, multiplied by (ii) the number of Warrant Shares that would be obtained if one Warrant was exercised on the date of repurchase.
"RIGHT" has the meaning specified in Section 4.1(g) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended (or any successor act), and the rules and regulations promulgated thereunder.
"SUCCESSOR COMPANY" has the meaning specified in Section 4.1(d) hereof.
"WARRANT CERTIFICATES" means the certificates evidencing the Warrants to be delivered pursuant to this Agreement, substantially in the form of Exhibit B hereto.
"WARRANT REGISTRAR" has the meaning specified in Section 2.3 hereof.
"WARRANT SHARES" has the meaning specified in Section 2.1 hereof.
"WARRANTS" shall mean the Warrants issued hereunder and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.
1.2 RULES OF CONSTRUCTION. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles ("U.S. GAAP") as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural include the singular.
SECTION 2. ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANT CERTIFICATES.
2.1 ISSUANCE OF WARRANTS. Each Warrant Certificate shall evidence the number of Warrants specified therein, and each Warrant evidenced thereby shall represent the right, subject to the provisions contained herein and therein, to purchase from the Company (and the Company shall issue and sell to such holder of the Warrant) one share of Common Stock of the Company (the shares purchasable upon exercise of a Warrant being hereinafter referred to as the "WARRANT SHARES," subject to adjustment as provided in Section 4 hereof).
2.2 EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be executed on behalf of the Company by one Officer of the Company. Such signatures may be the manual or facsimile signatures of the present or any future such Officers. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Warrant Certificate.
In case any Officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such Officer before the Warrant Certificate so signed shall be delivered by the Company, such Warrant Certificate nevertheless may be delivered or disposed of as though the Person who signed such Warrant Certificate had not ceased to be such Officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper Officers of the Company, although at the date of the execution and delivery of this Agreement any such Person was not such an Officer.
2.3 REGISTRATION, REGISTRATION OF TRANSFERS AND EXCHANGES. The Company will keep, at the office or agency maintained by the Company for such purpose, a register or registers in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of, and registration of transfer and exchange of, Warrants as provided herein. Each person designated by the Company from time to time as a Person authorized to register the transfer and exchange of the Warrants is hereinafter called, individually and collectively, the "WARRANT REGISTRAR." The Company hereby initially appoints itself as Warrant Registrar. Upon written notice to the Holders and any acting Warrant Registrar, the Company may appoint a successor Warrant Registrar for such purposes.
The Company will at all times designate one Person (who may be the Company and who need not be a Warrant Registrar) to act as repository of a master list of names and addresses of the holders of Warrants (the "WARRANT REGISTER"). The Company will act as such repository unless and until some other Person is, by written notice from the Company to the Holders and the Warrant Registrar, designated by the Company to act as such. In the event the Warrant Registrar is not the repository, the Company shall cause the Warrant Registrar to furnish to such repository, on a current basis, such information as to all registrations of transfer and
exchanges effected by the Warrant Registrar, as may be necessary to enable such repository to maintain the Warrant Register on as current a basis as is practicable.
When Warrants are presented to the Company with a request to register the transfer of the Warrants or exchange Warrants for an equal number of Warrants of other authorized denominations, the Company shall register the transfer or make the exchange as requested if the requirements under this Warrant Agreement as set forth herein for such transactions are met; PROVIDED, HOWEVER, that the Warrants presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Company, duly executed by the holder thereof or by his attorney, duly authorized in writing.
All Warrants issued upon any registration of transfer or exchange of Warrants shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrants surrendered upon such registration of transfer or exchange.
2.4 FORM OF WARRANT CERTIFICATES. The Warrant Certificates to be delivered pursuant to this Agreement shall be substantially in the form set forth in Exhibit B attached hereto. Such Warrant Certificates shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Warrants from time to time endorsed thereon and that the aggregate amount of outstanding Warrants represented thereby may from time to time be decreased or increased, as appropriate. Any endorsement of a Warrant Certificate to reflect the amount of any increase or decrease in the amount of outstanding Warrants represented thereby shall be made by the Company in accordance with instructions given by the holder thereof.
2.5 RESTRICTIVE LEGENDS. The Warrant Certificates shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
2.6 OFFICES FOR EXERCISE, ETC. So long as any of the Warrants remain outstanding, the Company will designate: (a) an office or agency where the Warrant Certificates may be presented for exercise, (b) an office or agency where the Warrant Certificates may be presented for registration of transfer and for exchange, and (c) an office or agency where notices and demands to or upon the Company in respect of the Warrants or of this Agreement may be served. The Company may from time to time change such designation, as it may deem desirable or expedient. The Company will give to the Holders and the Warrant Registrar written notice of the location of any such office or agency and of any change of location thereof. The Company
hereby designates its office at the address set forth in Section 6.1, as the initial agency maintained for such purpose.
2.7 CANCELLATION. All Warrant Certificates surrendered for the purpose of exercise (in whole or in part), exchange, substitution or transfer shall, if surrendered to the Company or to any of its agents, be delivered to the Company for cancellation or in cancelled form, or if surrendered to the Company shall be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. If the Company purchases or acquires Warrants and if the Company so chooses, the Company may cancel and retire the Warrant Certificates evidencing said Warrants.
2.8 LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT
CERTIFICATES. Upon receipt by the Company (or any agent of the Company if
requested by the Company) of evidence satisfactory to it of the loss, theft,
destruction, defacement or mutilation of any Warrant Certificate and of
indemnity satisfactory to it (which may include posting a bond) and, in the case
of mutilation or defacement, upon surrender thereof to the Company for
cancellation, then, in the absence of notice to the Company that such Warrant
Certificate has been acquired by a BONA FIDE purchaser or holder in due course,
the Company shall execute in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section, the Company may require the payment from the
holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Warrant Registrar) in
connection therewith. Every substitute Warrant Certificate executed and
delivered pursuant to this Section in lieu of any lost, stolen or destroyed
Warrant Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
(but shall be subject to all the limitations of rights set forth in) this
Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.8 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
SECTION 3. TERMS OF WARRANTS; EXERCISE OF WARRANTS.
3.1 EXERCISE PERIOD. Subject to the terms of this Agreement, each Holder shall have the right until 5:00 p.m., New York City time, on the Expiration Date to receive from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.
The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the Holders of the outstanding Warrants to the effect that the Warrants will terminate and become void as of 5:00 p.m., New York City time, on the Expiration Date; PROVIDED, HOWEVER, that the failure by the Company to give such notice as provided in this Section shall not affect such termination and becoming void of the Warrants as of 5:00 p.m., New York City time, on the Expiration Date.
3.2 MANNER OF EXERCISE. A Warrant may be exercised at any time prior to the Expiration Date upon (i) surrender to the Company of the Warrant Certificates, together with the form of election to purchase properly completed and executed by the Holder thereof and (ii) payment to the Company of the Exercise Price for each share of Common Stock or other securities issuable upon exercise of such Warrants. The Exercise Price may be paid (i) in cash or by certified or official bank check or by wire transfer to an account designated by the Company for such purpose (a "CASH EXERCISE") or (ii) without the payment of cash, by reducing the number of shares of Common Stock that would be obtainable upon the exercise of a Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (a) the number of shares of Common Stock for which such Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in accordance with clause (ii) of the immediately preceding sentence is herein called a "CASHLESS EXERCISE." In the event of a Cashless Exercise of Warrants, the Company will purchase from the Holder thereof such number of Warrants as would have entitled the Holder thereof to receive the excess of the number of shares of Common Stock deliverable upon a Cash Exercise over the number of shares of Common Stock deliverable upon a Cashless Exercise, for a purchase price equal to the Exercise Price multiplied by the excess of the number of shares of Common Stock purchasable upon a Cash Exercise over the number of shares of Common Stock purchasable upon a Cashless Exercise. The Company agrees to offset the purchase price referred to in the immediately preceding sentence with the obligation to pay the Exercise Price in respect of the shares of Common Stock deliverable upon a Cashless Exercise. Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the holder's option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Warrants that the Holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions of this Agreement shall be applicable with respect to a surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. Upon surrender of the Warrant Certificate and payment of the Exercise Price in accordance with this Agreement, the Company will issue shares of Common Stock of the Company for each Warrant evidenced by such Warrant Certificate, subject to adjustment as described herein. Whenever there occurs a Cashless Exercise, the Company shall deliver to the Holder a certificate setting forth the Cashless Exercise Ratio.
3.3 ISSUANCE OF WARRANT SHARES. Subject to Section 2.8, upon the surrender of Warrant Certificates and payment of the Exercise Price, as set forth above, the Company shall issue shares of Common Stock in such name or names as the Holder may designate, for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise to the Person or Persons entitled to receive the same, together with cash as provided in Section 3.4 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such shares of Common Stock shall be deemed to have been issued and any Person so designated shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the per share Exercise Price or upon a Cashless Exercise.
The Company hereby agrees that no service charge will be made for registration of transfer or exchange upon surrender of any Warrant Certificate at the office maintained for that purpose. Holders may be required to make payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Warrant Certificates.
3.4 FRACTIONAL WARRANT SHARES. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.4, be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, at its option, pay an amount in cash equal to the Current Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction.
3.5 SUFFICIENT AUTHORIZED SHARE CAPITAL. The Company has and will maintain an authorized share capital sufficient for the issuance of such number of shares of Common Stock as will be issuable upon the exercise of all outstanding Warrants. Such shares of Common Stock, when issued and paid for in accordance with the Warrant Agreement, will be duly and validly issued, fully paid and nonassessable, free of preemptive rights and free from all liens, charges and security interests with respect to the issue thereof.
3.6 PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrants and the Warrant Shares issuable upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or Warrant Shares in a name other than that of the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.
4.1 ADJUSTMENTS. The Exercise Price and the number of Warrant Shares purchasable upon the exercise of Warrants shall be subject to adjustment from time to time as follows:
(a) CHANGES IN SHARES OF COMMON STOCK. In the event that at any time or from time to time after the date hereof the Company shall (i) pay a dividend or make a distribution on
its shares of Common Stock in shares of Common Stock or other shares of capital stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) increase or decrease the number of shares of Common Stock outstanding by reclassification of its shares of Common Stock, then the number of shares of Common Stock purchasable upon exercise of each Warrant immediately after the happening of such event shall be adjusted (including by adjusting the definition of "Warrant Shares") so that, after giving effect to such adjustment, the Holder of each Warrant shall be entitled to receive the number of shares of Common Stock upon exercise that such Holder would have owned or have been entitled to receive had such Warrants been exercised immediately prior to the happening of the events described above (or, in the case of a dividend or distribution of shares of Common Stock, immediately prior to the record date therefor). An adjustment made pursuant to this Section 4.1(a) shall become effective immediately after the effective date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
(b) CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In case at any time or from time to time after the date hereof the Company shall distribute to holders of shares of Common Stock (i) any dividend or other distribution of cash, evidences of its indebtedness, shares of its capital stock or any other properties or securities or (ii) any options, warrants or other rights to subscribe for or purchase any of the foregoing (other than, in each case set forth in (i) and (ii), (x) any dividend or distribution described in Section 4.1(a) or (y) any rights, options, warrants or securities described in Section 4.1(c)) then the number of Warrant Shares purchasable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock issuable immediately prior to the record date upon exercise of each Warrant by a fraction, the numerator of which shall be the sum of (x) any cash distributed per Warrant Share and (y) the Current Market Value of the portion, if any, of the distribution applicable to one Warrant Share consisting of evidences of indebtedness, shares of stock, securities, other property, warrants, options or subscription of purchase rights and the denominator of which shall be the Current Market Value of the shares of Common Stock comprising one Warrant Share immediately after such dividend or other distribution. Such adjustment shall be made whenever any distribution is made and shall become effective as of the date of distribution, retroactive to the record date for any such distribution; PROVIDED, HOWEVER, that the Company is not required to make an adjustment pursuant to this Section 4.1(b) if at the time of such distribution the Company makes the same distribution to Holders of Warrants as it makes to holders of shares of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are exercisable (whether or not currently exercisable). No adjustment shall be made pursuant to this Section 4.1(b) which shall have the effect of decreasing the number of Warrant Shares purchasable upon exercise of each Warrant.
(c) RIGHTS ISSUE. In the event that at any time or from time to time after the date hereof the Company shall issue, sell, distribute or otherwise grant any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any securities convertible or exchangeable into, shares of Common Stock to all holders of shares of Common Stock, entitling such holders to subscribe for or purchase shares of Common Stock or stock or securities convertible into shares of Common Stock within 60 days after the record date for such issuance,
sale, distribution or other grant, as the case may be, and the sum of (a) the offering price of such right, option, warrant or other security (on a per share basis) and (b) any subscription, purchase, conversion or exchange price per share of Common Stock (the "CONSIDERATION") is lower at the record date for such issuance than the then Current Market Value per share of such Common Stock, the number of shares of Common Stock thereafter purchasable shall be increased to a number determined by multiplying the number of shares of Common Stock issuable immediately prior to the record date upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the number of additional shares of Common Stock offered for subscription or purchase or into or for which such securities are convertible or exchangeable, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the total number of shares of Common Stock which could be purchased at the Current Market Value with the aggregate of the Consideration with respect to such issuance, sale, distribution or other grant. Such adjustment shall be made whenever such rights, options or warrants are issued and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or securities; provided however, that the Company is not required to make an adjustment pursuant to this Section 4.1(c) if the Company shall make the same distribution to Holders of Warrants. No adjustment shall be made pursuant to this Section 4.1(c) which shall have the effect of decreasing the number of Warrant Shares purchasable upon exercise of each Warrant.
If the Company at any time shall issue two or more securities as a unit and one or more of such securities shall be rights, options or warrants for or securities convertible or exchangeable into, shares of Common Stock subject to this Section 4.1(c), the consideration allocated to each such security shall be determined in good faith by the Board.
(d) COMBINATION; LIQUIDATION. (i) Except as provided in clause (ii)
below, in the event of certain consolidations, mergers or demergers of the
Company, or the sale of all or substantially all of the assets of the Company to
another Person (a "COMBINATION"), each Warrant will thereafter be exercisable
for the right to receive the kind and amount of shares of stock or other
securities or property to which such holder would have been entitled as a result
of such Combination had the Warrants been exercised immediately prior thereto.
Unless clause (ii) is applicable to a Combination, if any Warrants shall be
outstanding after a Combination, the Company shall provide that the surviving or
acquiring Person (the "SUCCESSOR COMPANY") in such Combination will enter into
an agreement with the Holders confirming the Holders' rights pursuant to this
Section 4.1(d) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.1(d) shall similarly apply to successive
Combinations involving any Successor Company.
(ii) In the event of (A) a Combination, and, in connection therewith, the consideration payable to the holders of shares of Common Stock in exchange for their shares is payable solely in cash or (B) a dissolution, liquidation or winding-up of the Company, then the holders of the Warrants will be entitled to receive distributions on an equal basis with the holders of shares of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such event, less the Exercise Price. Upon
receipt of such payment, if any, the Warrants will expire and the rights of holders thereof will cease.
(iii) In the case of any such Combination, the surviving or acquiring Person as described in this Section 4.1(d) and, in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall promptly pay to the Holders of the Warrants the amounts to which they are entitled as described above upon surrender of the Warrant Certificates. The Company shall make payment to the Holders by delivering a check, or by wire transfer of same-day funds, in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrants.
(e) TENDER OFFERS; EXCHANGE OFFERS. In the event that the Company or any subsidiary of the Company shall purchase shares of Common Stock pursuant to a tender offer or an exchange offer for a price per share of Common Stock that is greater than the then Current Market Value per share of Common Stock in effect at the end of the trading day immediately following the day on which such tender offer or exchange offer expires, then the Company, or such subsidiary of the Company, shall, within 10 Business Days of the expiry of such tender offer or exchange offer, offer to purchase Warrants for comparable consideration per share of Common Stock based on the number of shares of Common Stock which the Holders of such Warrants would receive upon exercise of such Warrants (the "OFFER") (such amount less the Exercise Price in respect of such share, the "PER SHARE CONSIDERATION"); PROVIDED, HOWEVER, if a tender offer is made for only a portion of the outstanding shares of Common Stock, then such offer shall be made for such shares of Common Stock issuable upon exercise of the Warrants in the same pro rata proportion.
The Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase such Warrants for the applicable Per Share Consideration.
(f) OTHER EVENTS. If any event occurs as to which the foregoing provisions of this Section 4 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid.
(g) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other exception contained in this Section 4.1, and in addition thereto, no adjustment need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of equity securities to employees, directors, consultants or advisors of the Company or any of its subsidiaries and (B) exercises of Rights by, or issuances of equity securities in connection with Rights previously issued to former employees, former directors, former consultants (to the extent
that all such securities, other than those permitted by clause (ii) below, do not have an aggregate value in excess of 15% of the equity value of the Company on a fully diluted basis, as determined in good faith by the Board). As used herein, "RIGHT" shall mean any right, option, warrant or convertible or exchangeable security containing the right to subscribe for or acquire one or more shares of Common Stock, excluding the Warrants;
(ii) options, warrants or other agreements or rights to purchase capital stock of the Company entered into or granted prior to the date of the issuance of the Warrants or any issuance of capital stock pursuant thereto or in connection therewith;
(iii) bona fide public offerings or private placements;
(iv) rights to purchase shares of Common Stock pursuant to a Company plan for reinvestment of dividends or interest; and
(v) a change in the par value of shares of Common Stock (including a change from par value to no par value or VICE VERSA).
(h) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted, as provided under this Section 4, the Exercise Price per share of Common Stock payable upon exercise of such Warrant shall be adjusted (calculated to the nearest $0.01) so that it shall equal the price determined by multiplying such Exercise Price immediately prior to such adjustment by a fraction the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of each Warrant immediately prior to such adjustment and the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. Following any adjustment to the Exercise Price pursuant to this Section 4, the amount payable, when adjusted, shall never be less than the par value per share of Common Stock at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall determine the allocation of the adjusted Exercise Price between such classes of shares in a manner that the Board deems fair and equitable to the Holders. After such allocation, the exercise privilege and the Exercise Price of each class of shares shall thereafter be subject to adjustment on terms comparable to those applicable to shares of Common Stock under this Section 4.
Such adjustment shall be made successively whenever any event listed above shall occur.
4.2 SUPERSEDING ADJUSTMENT. Upon the expiration of any rights, options, warrants or conversion or exchange privileges which resulted in the adjustments pursuant to this Section 4, if any thereof shall not have been exercised, the number of Warrant Shares purchasable upon the exercise of each Warrant shall be readjusted as if (A) the only shares of Common Stock issuable upon exercise of such rights, options, warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and (B) shares of Common Stock actually issued, if any, were issuable for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges whether or not exercised; PROVIDED, HOWEVER, that no such readjustment shall (except by reason of an intervening adjustment under Section 4.1(a)) have the effect of decreasing the number of Warrant Shares purchasable upon the exercise of each Warrant by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion or exchange privileges.
4.3 MINIMUM ADJUSTMENT. The adjustments required by the preceding
Sections of this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that no adjustment of the
number of shares of Common Stock purchasable upon exercise of Warrants that
would otherwise be required shall be made (except in the case of a subdivision
or combination of shares of Common Stock, as provided for in Section 4.1(a))
unless and until such adjustment either by itself or with other adjustments not
previously made increases or decreases by at least 1% of the number of shares of
Common Stock purchasable upon exercise of Warrants immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Section 4, fractional interests in shares of Common Stock shall be taken into
account to the nearest one-hundredth of a share.
4.4 NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock and other property, if any, purchasable upon exercise of Warrants is adjusted, as herein provided, the Company shall deliver to the Holders a certificate setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which the Board determined the fair market value of any evidences of indebtedness, other securities or property or warrants or other subscription or purchase rights), and specifying the number of shares of Common Stock purchasable upon exercise of Warrants after giving effect to such adjustment. The Company shall promptly deliver a copy of such certificate to each Holder.
4.5 NOTICE OF CERTAIN TRANSACTIONS. In the event that the Company shall propose (a) to pay any dividend payable in securities of any class to the holders of its shares of Common Stock or to make any other distribution to the holders of its shares of Common Stock, (b) to offer the holders of its shares of Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of Common Stock or shares of stock of any class or any other securities, rights or options, (c) to effect any reclassification of its shares of Common Stock, capital reorganization or Combination or (d) to effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company, or in the event of a tender offer or exchange offer described in Section 4.1(e), the Company shall within 5 Business Days of making such proposal, tender offer or exchange offer send to the Holders a notice of such proposed action or offer, such notice to be mailed by the Company to the Holders at their addresses as they appear in the Warrant Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of shares of Common Stock, if any such
date is to be fixed, and shall briefly indicate the effect of such action on the shares of Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, purchasable upon exercise of each Warrant after giving effect to any adjustment which will be required as a result of such action. Such notice shall be given by the Company as promptly as possible and, in the case of any action covered by clause (a) or (b) above, at least 10 Business Days prior to the record date for determining holders of the shares of Common Stock for purposes of such action and, in the case of any other such action, at least 20 Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of shares of Common Stock, whichever shall be the earlier.
4.6 ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Section 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock as are stated
in any Warrant Certificates issued prior to the adjustment. The Company,
however, may at any time in its sole discretion make any change in the form of
Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
4.7 CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board shall be required to make a determination in good faith of the Current Market Value of any item under Section 4, such determination may be challenged in good faith by the Majority Holders.
4.8 TREASURY STOCK. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Company shall be deemed an issuance thereof and a repurchase thereof and designation of such shares as treasury stock shall be deemed to be a redemption thereof for the purposes of this Agreement.
SECTION 5. HOLDERS' RIGHTS AND OBLIGATIONS.
5.1 REGISTRATION RIGHTS. The parties hereby agree and acknowledge that the Holders will have registration rights with respect to Warrant Shares in accordance with the provisions of the Registration Rights Agreement, dated as of September 29, 1999, among the Company, WWI, H.J. Heinz Company ("Heinz") and Artal Luxembourg S.A. ("Artal").
5.2 OTHER RIGHTS AND OBLIGATIONS. The parties hereby agree that the Warrants shall have the rights and be subject to the obligations set forth in the Stockholders' Agreement, dated as of September 29, 1999 (the "Stockholders' Agreement"), among the Company, WWI, Heinz and Artal with respect to shares of Common Stock held by WWI. The parties hereby agree and acknowledge that the Warrant Shares shall accordingly be subject to the provisions of the Stockholders' Agreement.
SECTION 6. MISCELLANEOUS.
6.1 NOTICES TO THE COMPANY AND WWI. Any notice or demand authorized by this Agreement to be given or made by the Holder of any Warrant Certificate to or on the
Company shall be sufficiently given or made (i) five business days after deposited in the mail, first class or registered, postage prepaid, (ii) one business day after being timely delivered to a next-day air courier or (ii) when receipt is acknowledged by the addressee, if telecopied, addressed (until another addresses is filed in writing by the Company with the Holders), as follows:
WeightWatchers.com, Inc. 888 Seventh Ave., 8th Floor New York, New York 10106 Attention: General Counsel Telecopy: (212) 315-0709
Any notice pursuant to this Agreement to be given by the Company to any Holder shall be sufficiently given or made (i) five business days after deposited in the mail, first-class or registered, postage prepaid, (ii) one business day after being timely delivered to a next-day air courier or (ii) when receipt is acknowledged by the addressee, if telecopied, addressed (until another or additional address is filed in writing by a Holder with the Company) to the Holder as follows:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York 11797 Attention: General Counsel Telecopy: (516) 390-1719
6.2 AMENDMENTS. Except as set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Company and each Holder; provided that the Company and the Majority Holders may amend or waive this Agreement except to the extent such waiver or amendment would constitute an adverse amendment or waiver to a non-consenting Holder's rights hereunder in a material respect.
6.3 SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction.
6.4 SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Holders shall bind and inure to the benefit of their respective permitted successors and assigns hereunder.
6.5 TERMINATION. This Agreement (other than the Company's obligations with respect to Warrants previously exercised and the Company's and the Holders' rights and obligations set forth in Sections 5.1 and 5.2) shall terminate at 5:00 p.m., New York City time on the Expiration Date.
6.6 GOVERNING LAW. This Warrant Agreement and the Warrants shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
6.7 JURISDICTION; VENUE. The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action.
6.8 BENEFITS OF THIS AGREEMENT. (a) Nothing in this Agreement shall be construed to give to any Person other than the Company and the Holders of any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the Holders.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company, to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein.
6.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
6.10 TABLE OF CONTENTS. The table of contents and headings of the Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
6.11 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.
WEIGHTWATCHERS.COM, INC.
By: /s/ Sharon A. Fordham --------------------------------- |
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg --------------------------------- |
EXHIBIT A
[Form of Amended and Restated Note]
EXHIBIT B
[Form of Warrant Certificate]
[FORM OF REVERSE OF WARRANT CERTIFICATE]
FORM OF ELECTION TO PURCHASE WARRANT SHARES
Securities and/or check to be issued to:
Please insert social security or identifying number:
Any unexercised Warrants evidenced by the within Warrant Certificate to be issued to:
Please insert social security or identifying number:
EXHIBIT 10.30
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. 04 533,333 Warrants
WARRANT CERTIFICATE
WEIGHTWATCHERS.COM, INC.
THIS CERTIFIES THAT, Weight Watchers International, Inc., a Virginia corporation ("WWI"), is the owner of 533,333 Warrants (the "WARRANTS") as described above, transferable only on the books of WeightWatchers.com, Inc., a Delaware corporation (the "COMPANY"), by the holder thereof in person or by his or her duly authorized attorney, on surrender of the Certificate properly endorsed. Each Warrant entitles the holder thereof (the "HOLDER"), at its option and subject to the provisions contained herein and in the Warrant Agreement, dated as of September 10, 2001 (the "WARRANT AGREEMENT"), between the Company and WWI, to purchase from the Company, one Warrant Share per Warrant at the exercise price per share of $ 7.14 (the "EXERCISE PRICE"), or by Cashless Exercise. This Warrant is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company and the Holders of the Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement. This Warrant Certificate shall terminate and become void as of 5:00 p.m. on September 10, 2011 (the "EXPIRATION DATE") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The Exercise Price and the number of Warrant Shares purchasable upon exercise of the Warrants shall be subject to adjustment from time to time as set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed on behalf of the Company on the date set forth below.
Dated: September 10, 2001
WEIGHTWATCHERS.COM, INC.
By: /s/ Sharon A. Fordham --------------------------------- Name: Sharon A. Fordham Title: Chief Executive Officer |
This Warrant Certificate is issued under and in accordance with the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company, 888 Seventh Ave., 8th Floor, New York, New York 10106.
Warrants may be exercised at any time until 5:00 p.m., New York City time on the Expiration Date. Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part by surrender of this Warrant Certificate with the form of election to purchase Warrant Shares attached hereto duly executed and with the simultaneous payment of the Exercise Price (i) in cash to the Company at the office of the Company or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made in cash or by certified or official bank check payable to the order of the Company or by wire transfer of same-day funds to an account designated by the Company for such purpose. Payment by Cashless Exercise shall be made by the surrender of a Warrant or Warrants represented by one or more Warrant Certificates and without payment of the Exercise Price in cash, in exchange for the issuance of such number of shares of Common Stock equal to the product of (1) the number of shares of Common Stock for which such Warrants would otherwise then be nominally exercised if payment of the Exercise Price were being made in cash and (2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock issuable upon the exercise of each Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which this Warrant remains outstanding, the Holder hereof will be entitled to receive upon exercise of the Warrants the shares of capital stock or other securities or other property of such surviving entity as such Holder would have been entitled to receive upon or as the result of such Combination had the Holder exercised its Warrants immediately prior to such Combination; PROVIDED, HOWEVER, that in the event that, in connection with such Combination, consideration to holders of shares of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will be entitled to receive distributions on an equal basis with the holders of shares of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant Agreement but not for any exchange or original issuance (not involving a transfer) with respect to the exercise of the Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the Holder hereof a new Warrant Certificate in respect of the Warrant Shares as to which the Warrants shall not have been exercised. This Warrant Certificate may be exchanged at the office of the Company by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. In the event any fractional Warrant Shares would have to be issued upon the exercise of the Warrants, the Company may, at its option, pay an amount in cash equal to the Current Market Value for one Warrant Share on the Business Day immediately preceding the date the Warrant is exercised, multiplied by such fraction, in lieu of issuing such fractional share.
The Warrants do not entitle any holder hereof to any of the rights of a stockholder of the Company. All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and treated by the Company as the absolute owner of the Warrant Certificate for all purposes whatsoever and the Company shall not be affected by notice to the contrary.
EXHIBIT 10.31
SECOND AMENDED AND RESTATED
COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (this "Collateral Assignment and Security Agreement"), dated as of September 10, 2001, made by WEIGHTWATCHERS.COM, INC., a Delaware corporation (the "COMPANY"), in favor of WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "HOLDER").
WHEREAS, the Company and the Holder are parties to that certain Second Amended and Restated Note, dated as of October 1, 2000 (the "NOTE"), in a principal amount of $34,500,000;
WHEREAS, pursuant to the Note, the Holder has agreed to make loans to the Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition to the obligation of the Holder to make the loans to the Company under the Note that the Company shall have executed and delivered this Agreement to the Holder.
NOW, THEREFORE, in consideration of the premises and to induce the Holder to enter into the Note and to induce the Holder to make the loans to the Company, the Company hereby agrees with the Holder as follows:
1. DEFINED TERMS.
1.1 DEFINITIONS.
(a) Unless otherwise defined herein, terms defined in the Note and used herein shall have the meanings given to them in the Note, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Certificated Security, Chattel Paper, Documents, Equipment, General Intangibles, Instruments, Inventory, Investment Property and Proceeds.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Collateral Assignment and Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.
"CODE": the Uniform Commercial Code as from time to time in effect in the State of New York.
"COLLATERAL": as defined in Section 1.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, and
(ii) the right to obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming the Company as licensor or licensee, granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.
"DEPOSIT ACCOUNTS": as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including, without limitation, any demand, time, savings, passbook or like account maintained with a depositary institution.
"INTELLECTUAL PROPERTY": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"OBLIGATIONS": the collective reference to the unpaid principal of and interest on the loans made under the Note and all other obligations and liabilities of the Company to the Holder, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Note or this Agreement.
"PATENTS": (i) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, (ii) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof and (iii) all rights to obtain any reissues or extensions of the foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing for the grant by or to the Company of any right to manufacture, use or sell any invention covered in whole or in part by a Patent.
"RECEIVABLE": any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account).
"TRADEMARKS": (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, and (ii) the right to obtain all renewals thereof.
"TRADEMARK LICENSE" means any agreement, written or oral, providing for the grant by or to the Company of any right to use any Trademark.
"VEHICLES" means all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection and Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, the Company hereby grants to the Holder a security interest in all of the following property now owned or at any time hereafter acquired by the Company or in which the Company now has or at any time in the future may acquire any right, title or interest (collectively, the "COLLATERAL"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Deposit Accounts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Investment Property;
(k) all Vehicles;
(l) all other property not otherwise described above;
(m) all books and records pertaining to the Collateral; and
(n) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.
Notwithstanding anything to the contrary above or contained herein, this Agreement shall not constitute an assignment or pledge of, or grant of security interest in or lien on, any Collateral to the
extent that such assignment, pledge or grant of security interest or lien with respect to such Collateral is prohibited by, constitutes a breach of, or results in the termination of the terms of any contract, agreement, instrument or indenture relating to such Collateral; provided that the foregoing limitation shall not affect, limit, restrict or impair the grant by the Company of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due or other right of payment under any such contract, agreement, instrument or indenture.
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants that:
3.1 TITLE; NO OTHER LIENS. Except for the security interest granted to the Holder pursuant to this Agreement, the Company owns each item of the Collateral free and clear of any and all liens or claims of others, other than liens expressly permitted by the Note. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Holder pursuant to this Agreement.
3.2 PERFECTED FIRST PRIORITY LIENS. The security interests granted pursuant to this Agreement upon completion of the filings and other actions specified on SCHEDULE 1 will constitute perfected security interests in the Collateral (other than security interest in vehicles granted hereunder which shall not be required to be perfected) in favor of the Holder, as collateral security for the Obligations and are prior to all other liens on the Collateral in existence on the date hereof.
3.3 INVENTORY AND EQUIPMENT. The Inventory and the Equipment are kept at the locations listed on SCHEDULE 2.
3.4 JURISDICTION OF ORGANIZATION; CHIEF EXECUTIVE OFFICE. The Company's jurisdiction of organization is Delaware and its chief executive office or sole place of business is 888 Seventh Avenue, 8th Floor, New York, NY 10106.
4. COVENANTS. The Company covenants and agrees with the Holder that, from and after the date of this Agreement until the Obligations shall have been paid in full:
4.1 DELIVERY OF INSTRUMENTS, CERTIFICATED SECURITIES AND CHATTEL PAPER. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Holder, duly indorsed in a manner satisfactory to the Holder, to be held as Collateral pursuant to this Agreement.
4.2 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION.
(a) The Company shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in subsection 3.2 and shall defend such security interest against the claims and demands of all persons whomsoever.
(b) The Company will furnish to the Holder from time to time statements and schedules further identifying and describing the assets and property of the Company and such other reports in connection therewith as the Holder may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the Holder, and at the sole expense of the Company, the Company will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Holder may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the
Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts and any other relevant Collateral, taking any actions necessary to enable the Holder to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto.
4.3 CHANGES IN LOCATIONS, NAME, ETC. The Company will not, except
upon 15 days' prior written notice to the Holder and delivery to the Holder of
(a) all additional executed financing statements and other documents reasonably
requested by the Holder to maintain the validity, perfection and priority of the
security interests provided for herein and (b) if applicable, a written
supplement to SCHEDULE 2 showing any additional location at which Inventory or
Equipment shall be kept:
(a) permit any of the Inventory or Equipment to be kept at a location other than those listed on SCHEDULE 2;
(b) change its jurisdiction of organization or the location of its chief executive office or sole place of business from that specified in subsection ; or
(c) change its name, identity or corporate structure to such an extent that any financing statement filed by the Holder in connection with this Agreement would become misleading.
4.4 NOTICES. The Company will advise the Holder promptly, in reasonable detail, of:
(a) any lien (other than security interests created hereby) on any of the Collateral which would adversely affect the ability of the Holder to exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby.
5. REMEDIES. If an Event of Default shall occur and be continuing, the Holder may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code.
6. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
7. AMENDMENTS IN WRITING. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Company and the Holder.
8. NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. The Holder shall not by any act (except by a written instrument pursuant to Section 7), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Holder, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Holder would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
9. ENFORCEMENT EXPENSES; INDEMNIFICATION.
(a) The Company agrees to pay or reimburse the Holder for all its costs and expenses incurred in enforcing or preserving any rights under this Agreement, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to the Holder.
(b) The Company agrees to pay, and to save the Holder harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(c) The Company agrees to pay, and to save the Holder harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (other than those resulting from the gross negligence or willful misconduct of the Holder) with respect to the execution, delivery, enforcement, performance and administration of this Agreement.
(d) The agreements in this Section 9 shall survive repayment of the Obligations and all other amounts payable under the Note.
10. RELEASES.
(a) At such time as the Obligations shall have been in full, the Collateral shall be released from the liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Holder and the Company hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Company. At the request and sole expense of the Company following any such termination, the Holder shall deliver to the Company any Collateral held by the Holder hereunder, and execute and deliver to the Company such documents as the Company shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise disposed of by the Company in a transaction permitted by the Note, then the Holder, at the request and sole expense of the Company, shall execute and deliver to the Company all releases or other documents reasonably necessary or desirable for the release of the liens created hereby on such Collateral.
11. NOTICES. All notices, requests and demands to or upon the Holder hereunder shall be effected in the manner provided for in the Note.
12. SECTION HEADINGS. The Section and subsection headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of the Company and shall inure to the benefit of the Holder and its successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
15. WAIVER OF JURY TRIAL. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the undersigned has caused this Second Amended and Restated Collateral Assignment and Security Agreement to be duly executed and delivered as of the date first above written.
WEIGHTWATCHERS.COM, INC.
By: /s/ Sharon A. Fordham --------------------------- Name: Sharon A. Fordham Title: Chief Executive Officer |
SCHEDULE 1
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
UNIFORM COMMERCIAL CODE FILINGS
UCC-1 Financing Statements
SCHEDULE 2
INVENTORY AND EQUIPMENT
Exhibit 10.33
AMENDED AND RESTATED CO-PACK AGREEMENT
THIS AMENDED AND RESTATED CO-PACK AGREEMENT, made and entered into this 13th day of September, 2001, by and between Weight Watchers International, Inc., a Virginia corporation with its principal offices at 175 Crossways Park West, Woodbury, New York 11797-2055 ("WWI") and Nellson Nutraceutical, Inc., a Delaware corporation with its principal offices at 5801 Ayala Avenue, Irwindale, California 91706-1146 ("Co-Packer").
WITNESSETH:
WHEREAS, WWI and Co-Packer entered into a Co-Pack Agreement, dated November 30, 1999 (the "Existing Agreement"), and the parties desire to modify certain of the terms of their business agreement and wish to do so by canceling the Existing Agreement and substituting in its place this Agreement upon the terms and conditions set forth herein; and
WHEREAS, WWI desires to obtain a supply of bar and drink mix products as more fully described in Exhibit A, which is attached to and made a part of this Agreement, (the "Products") for distribution and sale by WWI under the terms of this Agreement and Co-Packer desires to supply the Products to WWI under the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises that this Agreement contains, and other good and valuable consideration, receipt of which the parties acknowledge, the parties, intending to be bound legally, agree as follows:
1. MANUFACTURE OF THE PRODUCT. WWI shall place purchase orders with Co-Packer, and Co-Packer shall sell and deliver to WWI, quantities of the Products under the terms of this Agreement. Co-Packer shall manufacture and package the Products in strict compliance with the standards and specifications attached as Exhibit B and made a part of
this Agreement (the "Specifications"). All purchases of the Products by WWI under this Agreement shall be pursuant to, and under the terms and conditions of, a duly authorized and issued WWI purchase order, the form of which is attached as Exhibit C and made a part of this Agreement. In addition, Co-Packer shall comply with the provisions of the WWI Co-Pack Manual for the Products attached as Exhibit D and made a part of this Agreement, as WWI may reissue or amend from time to time (the "Co-Pack Manual"). The terms and conditions of the WWI purchase order form and the Co-Pack Manual shall be in addition to and not in limitation of the terms and conditions of this Agreement. Any inconsistencies between the terms and conditions of the WWI purchase order form or the Co-Pack Manual and this Agreement shall be resolved in favor of the terms and conditions of this Agreement. Any inconsistencies between the terms and conditions of the WWI purchase order form and the provisions of the Co-Pack Manual shall be resolved in favor of the provisions of the Co-Pack Manual. Any terms or conditions appearing on or incorporated into any invoice forms or other documents sent by Co-Packer which are inconsistent with or in addition to the terms and conditions of this Agreement shall not apply.
2. TERM. The term of this Agreement shall commence as of the date of this Agreement and shall continue in full force and effect until December 31, 2004 (the "Term"). This Agreement may, at the option of WWI, be renewed for an additional one (1) year period, and successive one (1) year periods thereafter, by providing written notice to Co-Packer of such election to renew at least one hundred eighty (180) days prior to expiration of the Term or any renewal term thereof.
3. PRODUCTION SCHEDULE. Both parties understand and acknowledge that the quantity and variety of the Products ordered by WWI will be derived from marketing projections that may not necessarily depict actual sales volume since the Products represent a new entry by WWI into the bar market; therefore, the total quantity of Product to be purchased hereunder is subject to wide fluctuation. On or before the beginning of each month during the Term or any renewal term, WWI shall also furnish Co-Packer with an estimate of the quantities of the Products it will require in the succeeding three-month period. These estimates shall not be binding or otherwise limit or obligate WWI in its order
of Products under this Agreement. Notwithstanding anything contained herein to the contrary, WWI shall not be required to purchase any minimum quantity of the Products.
4. LEAD TIME. Co-Packer understands and acknowledges that, because of the competitive nature of the market for the Products, TIME IS OF THE ESSENCE of this Agreement. Co-Packer shall manufacture and shall ship all quantities of the Products for delivery as specified in a duly authorized purchase order that WWI has issued pursuant to Section 1 of this Agreement. Co-Packer shall manufacture and have ready for shipment sufficient Products to fill WWI's purchase orders with thirty (30) days from the date each purchase order is received by Co-Packer.
5. MANUFACTURING FACILITIES. Co-Packer shall manufacture the Products at its processing facilities at Irwindale and Los Angeles, California or at such other facility as WWI and Co-Packer shall mutually agree (the "Factory"). Co-Packer warrants that the Factory is capable of manufacturing and processing the Products in accordance with the requirements of this Agreement and that Co-Packer now solely leases and operates, and for the term of this Agreement solely shall lease and operate, the Factory and all processing equipment located in the Factory. Co-packer shall be the exclusive supplier of the Products within the continental United States of America during the term of this Agreement.
6. RAW MATERIALS; INGREDIENTS; PACKAGING. Co-Packer shall furnish all raw materials and ingredients required for the manufacture, production, and processing of the Products and shall supply all nutrition bar wraps, four pack cartons, and cases necessary for packaging of the Products under this Agreement. Co-Packer shall label all Products using artwork, graphics, and label copy that WWI shall furnish.
7. OWNERSHIP RIGHTS OF WWI; CHANGES IN SPECIFICATIONS. Co-Packer acknowledges that WWI is and shall remain the owner of all recipes, formulations, specifications, artwork, graphics, and label copy furnished by, or developed for, WWI and other confidential and proprietary information relating to the Products. Co-Packer shall be the owner of the specific manufacturing processing techniques which it develops in the
production of the Products. WWI shall have the right from time to time at its sole option to modify the formulations for the Products included as part of the Specifications. The prices for Products with modified formulations shall be adjusted by mutual agreement of the parties hereto to reflect any increased or decreased cost of manufacture by Co-Packer. WWI shall also have the right from time to time upon the mutual agreement of the parties hereto to require modifications or alterations in the processing techniques utilized to manufacture the Products. The prices shall be adjusted by mutual agreement of the parties hereto to reflect any increased or decreased costs as a result of such modifications or alterations, including but not limited to any increased or decreased fixed costs from changes in or additions to equipment required thereby.
8. COMPENSATION. WWI shall pay to Co-Packer in full and complete consideration for the manufacture of the Products, including but not limited to all ingredients, processing, production ,wrapping, packaging and packing of the Products in display boxes and master shippers, and the industry standard stretch wrapping of pallets and delivery of the Products to WWI, the prices specified on Exhibit E, attached hereto and made part hereof, for all Products manufactured, processed, and delivered in strict compliance with the Specifications and delivered as herein set forth. One Hundred Eighty (180) days prior to the expiration of the initial term of this Agreement and any renewal terms thereafter, the parties will review the economics of the supply relationship set forth herein. For the purpose of such review, the aggregate baseline cost of the Products will directly relate to the price per bar as set forth on Exhibit E. If the aggregate baseline cost of raw materials, packaging materials, direct labor, or variable overhead increases or decreases more than five (5) percent during the period under review, the parties agree to negotiate an appropriate price adjustment in good faith.
9. MATERIALS.
(a) All ingredients and raw materials that Co-Packer uses for the manufacture of the Products shall strictly conform to the Specifications. Suppliers of all other raw materials and ingredients for use in the manufacture of the Products shall be
subject, at WWI's option, to the review and approval of WWI before receipt and use of raw materials and ingredients from such supplier. Such approval of Co-Packer's suppliers shall not be unreasonably withheld. Any such review and approval of suppliers by WWI shall be gratuitous and shall not (i) relieve Co-Packer of its obligations under this Agreement, including the duty to inspect all incoming raw materials and insure that they meet the Specifications, or (ii) constitute acceptance by WWI of any raw materials, ingredients, Products, or portion thereof.
10. DELIVERY. Co-Packer shall deliver all the Products that WWI purchases under this Agreement to WWI F.O.B. the Factory and shall place the Products into the custody of carriers that WWI has approved pursuant to WWI's written directions. Co-Packer shall furnish to WWI sufficient information to verify shipment of the Products. Co-Packer shall invoice WWI for the Products on the earlier of the date: (i) that such Products are shipped from the Factory on instructions from WWI; or (ii) four (4) days after production of Product pursuant to a duly authorized and issued WWI purchase order. Terms of payment shall be 1% fifteen (15) days, net thirty (30) days from the date that WWI receives such invoice.
11. RISK OF LOSS. WWI shall bear the risk of loss or damage to any of the Products after Co-Packer has delivered the same to the possession of WWI or to a carrier that WWI has approved pursuant to WWI's instructions, except for loss or damage caused by the manufacturing, processing, packaging, or quality of the Products, in which case Co-Packer solely shall bear the risk of such loss or damage. Co-Packer shall bear the risk of loss or damage to any of the Products that occurs before the delivery of such Products to WWI or to the carrier that WWI has designated for transportation of the Products.
12. INSPECTIONS. Representatives of WWI may enter and inspect, as they pertain to the production of the Products, the Factory and any warehouse at which Co-Packer has stored the Products, during the time of production, storage, or clean-up periods. The inspection may include all aspects of Co-Packer's manufacturing techniques, quality control, sanitation procedures, and records. Co-Packer may restrict access by WWI's representatives
to only those areas where the Products and ingredients and materials for the Products are processed, tested, or stored. Co-Packer shall maintain and make available to WWI upon request all records of chemical, physical, microbiological, and process tests of the basic ingredients and packaging materials, intermediate products, and finished Products that Co-Packer conducts or that it requires from its suppliers. Any such inspection or testing by WWI shall be gratuitous and shall not (i) relieve Co-Packer of its obligations under this Agreement or (ii) constitute acceptance by WWI of any portion of the Products. WWI shall receive the Products subject, at WWI's discretion, to inspection and approval of the lot or lots, or submitted samples from the lots, by WWI's quality control personnel within a reasonable time after receipt. Payments by WWI for any quantity of the Products shall not constitute approval or acceptance of such Products. If any quantity of the Products is defective or does not conform to samples, descriptions, or the Specifications, WWI may, at its option, reject all of such quantity, accept all of such quantity, or accept any commercial unit or units of such quantity and reject the rest. Co-Packer shall reimburse WWI in full for the quantity of the Products rejected and returned. Co-Packer shall assume all costs of transportation and handling both ways for such rejected Products. Co-Packer shall remove WWI's trademarks, trade name, and any other marks identifying WWI or WWI's parent or affiliate companies from any rejected Products and the case artwork before Co-Packer disposes of such Products. Upon request of WWI, Co-Packer shall certify in writing to WWI that all such trademarks, trade names, and identifying marks have been removed from any rejected Products. Co-Packer shall furnish to WWI without charge samples of the Products that WWI reasonably requests for quality control testing and evaluation. Co-Packer shall separately code each case of the Products to be readily identifiable by specific lot number designation by five hour (half-shift) production intervals.
13. CONFIDENTIALITY AND NON-COMPETITION.
(a) WWI and Co-Packer have executed a Mutual Non-Disclosure Agreement, dated October 28, 1998 (the "Mutual Non-Disclosure Agreement"). The provisions of the Mutual Non-Disclosure Agreement shall apply to the information that the parties exchange in the course of performance of this Agreement.
(b) Co-Packer acknowledges that it is reasonable and necessary for the protection of the business and goodwill of WWI for Co-Packer to enter into the following agreement respecting competition with WWI and that WWI would suffer irreparable injury if Co-Packer breaches any such agreement. As a further safeguard and necessary protection for trade secret and proprietary information that WWI discloses to Co-Packer, Co-Packer shall not, directly or indirectly, engage in the business of producing, distributing, purchasing, or selling, or otherwise dealing in, any products, goods, or merchandise that cannot be differentiated from the Product by a large (i.e. greater than 200) sample of consumers in a blind taste evaluation, in any part of the United States, except pursuant to this Agreement. Without limiting the generality of the foregoing, Co-Packer shall be considered to engage in such business if any company of which it owns beneficially or of record more than five percent of the outstanding shares of any class of stock, or of which it is a partner, joint venturer, or proprietor engages in such business. The covenants set forth in this Section 13(b) shall remain in full force and effect during the initial term and any renewal term of this Agreement and for five years after any termination of this Agreement.
14. WARRANTIES AND REPRESENTATIONS. Co-Packer warrants and represents that:
(a) All of the Products that Co-Packer manufactures, processes, and packages under this Agreement (i) shall be manufactured, processed, and packaged strictly in conformity with applicable sanitation standards set forth in United States Food and Drug Administration, the United States Department of Agriculture, and the State and Local Governmental Agency having jurisdiction over the manufacturing, processing, and packaging of the Products, and all applicable rules and regulations, as amended, (ii) shall conform strictly to Specifications, and (iii) shall be fit and wholesome for human consumption and shall meet all requirements of applicable statutes, rules, and regulations of the United States and any state or local government.
(b) The normal shelf life of the Products that Co-Packer delivers to WWI shall not be less than six (6) months from the date of production if WWI transports and stores the Products at between 50 Degrees Farenheit and 80 Degrees Farenheit.
(c) Each delivery under this Agreement shall be, as of the date of such delivery, not short in weight, or adulterated or misbranded within the meaning of the Federal Food Drug and Cosmetic Act, as amended, the Federal Fair Packaging and Labeling Act of 1966, as amended, or any other food or drug law or regulation of any state or local government and shall comply with all other applicable laws and regulations of which Co-Packer has knowledge, whether independently or by specific directive from WWI. Each delivery under this Agreement shall be a product that, under the provisions of such federal, state, and local laws, may be lawfully shipped and sold in interstate commerce and conforms in all respects to the requirements of such laws and the rules and regulations issued pursuant to such laws. If WWI claims a breach of this provision, WWI may return the subject Products to Co-Packer and Co-Packer shall assume all cost of transportation and handling both ways and reimburse WWI for any such costs paid by WWI.
(d) All equipment and procedures that Co-Packer uses in the manufacture of the Products do not and will not infringe any valid United States, foreign, or other letters patent, trademark, copyright, or other proprietary right of any person not a party to this Agreement.
(e) All materials, ingredients, supplies, and packaging materials that Co-Packer uses in the manufacture of the Products shall be merchantable, of good quality, free from defects, and fit for the purpose intended. This warranty shall not apply to any such materials or ingredients that WWI furnishes; however, Co-Packer shall evaluate any such materials or ingredients that WWI furnishes and reject the same if not merchantable, of good quality, and fit for the purpose intended.
(f) No delivery shall bear or contain any food additive, pesticide, or other substance as of the date of such delivery that is unsafe for human consumption within
the meaning of the Federal Food Drug and Cosmetic Act, with all revisions and amendments pertaining to such statute.
(g) The execution of this Agreement and performance of its obligations under this Agreement does not, and will not, abrogate, breach, or conflict with any agreement, mortgage, pledge, or contract to which Co-Packer is a party or to which the Factory or any of the equipment, fixtures, or personal property that the Factory contains is subject.
15. INDEMNITY BY CO-PACKER.
(a) Co-Packer shall indemnify and shall hold harmless WWI (including its parent, affiliate, and subsidiary companies) and its customers from and against any and all claims, demands, actions, suits, causes of action, damages, and expenses (including, but not limited to, expenses of investigation, settlement, litigation, and attorneys' fees incurred in connection therewith) that any person or entity makes, sustains, or brings against WWI (including its parent, affiliate, and subsidiary companies) or any of its customers for the recovery of damages for the injury, illness, or death of any person caused or alleged to be caused by the consumption or use by such person of any of the Products that Co-Packer ships or delivers to WWI in breach of Co-Packer's warranties under this Agreement.
(b) Co-Packer shall indemnify and shall hold harmless WWI (including its parent, affiliate, and subsidiary companies) and its customers from and against all losses, claims, damages, and expenses (including, but not limited to, expenses of investigation, settlement, litigation, and attorneys' fees incurred in connection therewith) from recalls by governmental authorities, or by WWI in reasonable anticipation of a governmental recall, of any of the Products that Co-Packer ships or delivers pursuant to this Agreement, or other losses, claims, damages, actions, and expenses (including, but not limited to, expenses of investigation, settlement, litigation, or attorneys' fees incurred in connection therewith) to which WWI (including its parent, affiliate, and subsidiary companies) may become subject
by reason of any breach by Co-Packer of the warranties or representations provided in Section 14 of this Agreement.
(c) Co-Packer shall indemnify and shall hold WWI (including its parent, affiliate, and subsidiary companies) harmless from all consumer claims, including reasonable attorneys' fees, arising from or connected with consumer claims or actions that result from any breach of Co-Packer's warranties under this Agreement. Co-Packer understands and acknowledges that WWI, at WWI's option, processes consumer claims involving the Products through the claims investigation and settlement services of the National Food Processors Association (NFPA). Co-Packer shall pay to WWI reasonable costs or charges for the investigation and settlement of consumer claims by NFPA that allege a defect in the Products, or other condition that, if proven, would constitute a breach of Co-Packer's warranties to WWI under this Agreement. WWI shall confer with Co-Packer and its insurance carrier before settlement of consumer claims for which Co-Packer is responsible under this Agreement.
(d) If any person or entity asserts any claim or brings any
suit or action for which Co-Packer may be required to indemnify WWI (including
its parent, affiliate, and subsidiary companies) or its customers under this
Section 15, WWI promptly shall notify Co-Packer of such claim or suit.
Co-Packer, upon receipt of such notice, shall undertake in conjunction with WWI
(if WWI desires) the defense of such suit for the settlement of any such claim
at Co-Packer's own cost and expense.
16. INDEMNITY BY WWI. WWI shall indemnify and hold harmless Co-Packer from and against any and all claims, demands, actions, suits, causes of action, damages, and expenses (including, but not limited to, expenses of investigation, settlement, litigation, and attorneys' fees incurred in connection therewith) that any person or entity makes, sustains, or brings against Co-Packer for the recovery of damages for the injury, illness, or death of any person caused or alleged to be caused by the consumption or use by such person of any of the Products that Co-Packer ships or delivers to or at the direction of WWI pursuant to this Agreement if such injury, illness, or death results solely from the negligence of WWI or its
agents or employees. If any person or entity asserts any claim or brings any suit or action against Co-Packer for which WWI may be required to indemnify Co-Packer under this Section 16, Co-Packer promptly shall notify WWI of such claim or suit. WWI, upon receipt of such notice, shall undertake in connection with Co-Packer (if Co-Packer desires) the defense of such suit for the settlement of any such claim at WWI's own cost and expense.
17. INSURANCE. Co-Packer shall maintain in full force and effect during the term of this Agreement comprehensive general liability insurance coverage, including contractual liability and products/completed operations liability coverage, with WWI, and any other affiliates designated by WWI, named as an additional insured, with minimum limits of $5,000,000.00 combined single limit for bodily injury and property damage per occurrence, with a responsible insurance carrier acceptable to WWI. Such insurance shall be on an occurrence basis; that is, it shall cover any claim made for injuries or damages arising out of an event occurring during the term of the policy regardless of whether the claim is made after the expiration of the term of the policy. Before commencement of any production under this Agreement and from time to time thereafter upon the expiration of any such certificate of insurance, Co-Packer shall furnish WWI with a certificate of insurance evidencing the above coverages. Such certificate shall contain a clause for notification of WWI thirty days in advance of any cancellation, reduction, or change in coverage.
18. RESALES OF THE PRODUCT. WWI shall have complete and sole discretion as to the resale of the Products, including the pricing of the Products, the advertising, marketing, sales, and distribution of the Products, and the expenses it incurs in connection therewith.
19. TRADEMARKS AND TRADE NAMES. Nothing contained in this Agreement shall be deemed to give Co-Packer any right, title, or interest in or to WWI's trademarks and trade names, or the trademarks and trade names of any parent, affiliate, or subsidiary company of WWI, including, but not limited to, the WEIGHT WATCHERS trademark. Co-Packer may not use any of such trademarks or trade names, except as WWI authorizes in writing.
20. INTENTIONALLY OMITTED.
21. TERMINATION BY WWI. WWI may terminate this Agreement:
(a) If Co-Packer breaches or violates any of the warranties, representations, agreements, covenants, or conditions that this Agreement contains or requires and Co-Packer fails to remedy the breach or violation within fifteen (15) days after receipt from WWI of written notice of the breach or violation; or
(b) If Co-Packer makes an assignment for the benefit of its creditors, commits any act of bankruptcy, has a receiver appointed, or otherwise admits of its inability to pay its debts as they mature, or if a private party garnishes its assets or a governmental authority sequesters its assets; or
(c) If Co-Packer attempts to assign or transfer any interest under this Agreement without the prior written consent of WWI, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Co-Packer shall have the right, without WWI's consent, to assign or transfer its interest under this Agreement to (a) an affiliate, subsidiary or parent of Co-Packer; (b) an entity with which Co-Packer is merged or consolidated; or (c) an entity which purchases or otherwise acquires all of the assets and/or stock of Co-Packer, provided such entity shall be bound by all of the terms and conditions contained in this Agreement.
22. TERMINATION BY CO-PACKER. Co-Packer may terminate this Agreement:
(a) If WWI breaches or violates any of the agreements, covenants, or conditions that this Agreement requires or contains and WWI fails to remedy the breach or violation within fifteen (15) days after receipt from Co-Packer of written notice of the breach or violation; or
(b) If WWI makes an assignment for the benefit of its creditors, commits an act of bankruptcy, has a receiver appointed, or otherwise admits of its inability to pay its debts as they mature.
23. EFFECT OF TERMINATION. In the event of termination of this Agreement, such termination shall be without prejudice to any rights that may have accrued to Co-Packer or WWI at the date of termination.
24. RETURN OF MATERIALS. In the event of termination or expiration of this Agreement, Co-Packer immediately shall account for and return to WWI all packaging materials and ingredients that WWI has supplied pursuant to this Agreement.
25. INTENTIONALLY OMITTED.
26. FORCE MAJEURE. If either party is prevented from performing any of
its obligations under this Agreement or is substantially delayed in such
performance by reason of any cause beyond its control, including any
governmental restrictions, acts of God, crop shortages, riots, war, fire, labor
disputes, or other causes of FORCE MAJEURE, it shall be excused from the
performance of its obligations affected by the reasons referred to, or from the
delay in such performance. If such condition continues for a period of sixty
days and substantially interferes with the further performance by either party
of this Agreement, either party may terminate this Agreement on thirty days'
written notice to the other party. If this Agreement is terminated under this
Section 26, each party shall bear the costs it has incurred before the date of
termination specifically related to the Products not delivered to WWI by the
date of termination.
27. INDEPENDENT CONTRACTORS. The parties are independent contractors and engage in the operation of their own respective businesses. Neither Co-Packer nor WWI shall be considered the agent of the other for any purpose whatsoever. Neither Co-Packer nor WWI has any authority to enter into any contracts or assume any obligations for the other or to make any warranties or representations on behalf of the other. Nothing in this
Agreement shall be considered to establish a relationship of co-partners or joint venturers between Co-Packer and WWI. Under no circumstances shall WWI be liable for the debts or obligations of Co-Packer or for the wages, salaries, or benefits of Co-Packer's employees.
28. SEVERABILITY. If any section or portion of this Agreement violates any applicable law, such section or portion shall be inoperative. If a court of competent jurisdiction rules that any provision set forth in this Agreement is unenforceable, then such provision shall be deemed modified to the extent that, in the court's opinion, is necessary to make it enforceable. The remainder of the Agreement shall remain valid and shall continue to bind the parties.
29. BROKER'S FEES. Each party warrants to the other that it has not incurred nor will it incur any liability for brokerage fees, finder's fees, agents' commissions, or other similar forms of compensation in connection with this Agreement or any transaction that this Agreement contemplates.
30. SUCCESSORS AND ASSIGNS. This Agreement shall be binding and inure to the benefit of each of the parties and its permitted successors and assigns.
31. NOTICES. Each party shall give in writing by personal delivery or by U.S. mail any notice or communication that such party may or must give under this Agreement or with respect to it. Such notice shall be deemed to have been given or made when personally delivered or deposited in the U.S. mail, first class, certified or registered, postage prepaid, return receipt requested, directed to the respective parties as follows:
(a) Notices to WWI shall be addressed to:
Weight Watchers International Inc. 175 Crossways Park West Woodbury, New York 11797 Attn: Product Development Department
with a copy to:
Weight Watchers International Inc.
175 Crossways Park West Woodbury, New York 11797 Attn: Legal Department
(b) Notices to Co-Packer shall be addressed to:
Nellson Nutraceutical, Inc. 5801 Ayala Avenue P.O. Box 2263 Irwindale, California 91706-1146 Attn: ________________
Either party may, from time to time by notice given in accordance with this
Section 31, advise the other of changes of address or additional addresses for
the giving of notices.
32. WAIVER. No waiver by either party of any breach, default, or violation of any term, warranty, representation, agreement, covenant, condition, or provision of this Agreement shall constitute a waiver of any subsequent breach, default, or violation of the same or other term, warranty, representation, agreement, covenant, condition, or provision.
33. ENTIRE AGREEMENT. This Agreement, together with any Exhibits attached to this Agreement, contains all of the terms, warranties, representations, agreements, covenants, conditions, and provisions the parties have agreed upon with respect to the subject matter of this Agreement and merges and supersedes all prior agreements, understandings, and representations relating to such subject matter. This Agreement shall not be altered or changed except by a writing that an authorized officer or representative of each party signs.
34. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law rules. The courts of the State of New York, to the personal jurisdiction of which each party voluntarily submits, shall have exclusive jurisdiction over any dispute arising out of the construction, interpretation, or enforcement of this Agreement.
35. INTERPRETATION. This Agreement shall be construed as a whole in accordance with the fair meaning of its language and, regardless of who is responsible for its original drafting, shall not be construed for or against either party. The captions of the various sections of this Agreement are included for convenience of reference only and shall in no way affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, each party has executed this Agreement on the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg
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NELLSON NUTRACEUTICAL, INC.
By: /s/ Ben J. Muhlenkamp
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EXHIBIT A
DESCRIPTION OF PRODUCTS
EXHIBIT B
SPECIFICATIONS
EXHIBIT C
WEIGHT WATCHERS INTERNATIONAL, INC. - FORM PURCHASE ORDER
EXHIBIT D
CO-PACK MANUAL
EXHIBIT E
PRICING SCHEDULE
EXHIBIT 10.37
GUARANTY OF SUBLEASE
GUARANTY by the undersigned, WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("Guarantor"), annexed to that certain Agreement of Sublease dated September ___, 2000 (the "Lease") between RDR ASSOCIATES, INC. ("Landlord"), as sublandlord, and WEIGHTWATCHERS.COM, INC. ("Tenant"), as subtenant.
In consideration of the simultaneous subletting of space on the 8th floor of the building at 888 Seventh Avenue, New York, New York by Landlord to Tenant (such premises being more particularly described in the Lease), Guarantor, for itself and on behalf of its successor and permitted assigns, hereby jointly and severally:
1 Unconditionally guarantees to Landlord, its successors and assigns, the full payment, performance and observance of all the terms, covenants and conditions of the Lease therein expressed on Tenant's part to be paid, performed and observed. If, at any time, Tenant shall default beyond any applicable notice and cure period in the performance or observance of any of such terms, covenants and conditions, Guarantor shall keep, perform and observe the same, as the case may be, in the place and stead of Tenant. The foregoing shall include any liability of Tenant which shall accrue under the Lease for any period preceding, as well as any period following, the respective commencement and expiration (or termination) dates of the Lease.
2 Agrees that Guarantor's obligations hereunder shall exist without requiring any notice (except as expressly provided for in the Lease) of breach or default of or by Tenant to be delivered by Landlord to Guarantor, all of which Guarantor hereby expressly waives.
3 Agrees to and with Landlord, its successors and assigns, that Guarantor, at Landlord's option, may be joined in any action against Tenant in connection with the Lease, and that recovery may be had against Guarantor in such action or in any independent action against Guarantor without Landlord first pursuing or exhausting any remedy or claim against Tenant, its successors or assigns. Guarantor also agrees that it will be conclusively bound by the judgment in any such action to Landlord against Tenant (wherever brought) whether or not it was a party to such action. Guarantor waives all right to trial by jury in any action or proceeding hereinafter instituted by Landlord concerning this Guaranty or the Lease to which Guarantor may be a party.
4 Agrees that this Guaranty shall remain and continue in full force and effect as to any renewal, extension or modification of the Lease (including any holdover), and as to any assignment or subletting of the premises demised under the Lease, but in case of any Lease modification, the liability of Guarantor shall be deemed modified in accordance with the terms of any such modification. In addition, any act of Landlord, its successor or assigns, consisting of a waiver of any of the terms or conditions of the Lease, the giving of any consent to any matter or thing relating to the Lease or the granting of any indulgences or extensions of time to Tenant, may be done without notice to Guarantor and without releasing any of its obligations hereunder.
5 Agrees that the liability of Guarantor hereunder shall not be affected by (a) the release or discharge of Tenant in any creditors', receivership, bankruptcy or other proceedings, (b) the impairment, limitation or modification of the liability of Tenant in
bankruptcy, or of any remedy for the enforcement of Tenant's liability under the Lease, resulting from the operation of any present or future provision of any Bankruptcy Act or other statute or from the decision in any court, (c) the rejection or disaffirmance of the Lease in any such proceedings, (d) the assignment or transfer of the Lease by Tenant, (e) any disability or other defense of Tenant (other than the defense that Tenant has complied with the relevant obligation set forth in the Lease) or (f) the cessation from any cause whatsoever of the liability of the Tenant.
6 Warrants and represents that it has the legal right and capacity to execute this Guaranty. In the event that this Guaranty shall be held ineffective or unenforceable by any court of competent jurisdiction, then Guarantor shall be deemed to be a tenant under the Lease with the same force and effect as if it was expressly named as a joint tenant therein. This Guaranty shall be governed by and construed under the laws of the State of New York.
7. Guarantor irrevocably consents and agrees that any legal
action or proceeding with respect to this Guaranty may be brought in any of the
Federal or state courts having subject matter jurisdiction located in the
Borough of Manhattan, The City of New York, and, by its execution and delivery
of this Guaranty hereby (a) accepts the non-exclusive jurisdiction of the
aforesaid courts, (b) irrevocably agrees that service of process to it out of
any of the aforesaid courts may be made by mailing same to its address for
notices set forth below, (c) irrevocably agrees to be bound by any final
judgment (after any appeal) of any such court with respect to this Guaranty, and
(d) irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding with respect to this Guaranty brought in any such court, and further
irrevocably waives, to the fullest extent permitted by law, any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this 12th day of September, 2000.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Thomas S. Kiritsis
--------------------------------
Address For Notice:
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Weight Watchers International, Inc. 175 Crossways Park West Woodbury, N.Y. 11797 Attention: General Counsel Fax: 516-390-1795
STATE OF NEW YORK )
) ss.:
COUNTY OF )
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On the ____ day of September, 2000, before me, the undersigned, personally appeared _____________________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
EXHIBIT 10.38
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September 29, 1999, by and among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "COMPANY"), H.J. HEINZ COMPANY, a Pennsylvania corporation ("HEINZ") and ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("ARTAL").
RECITALS
WHEREAS, upon the completion of the transactions contemplated by the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999 (the "RECAPITALIZATION AGREEMENT"), among the Company, Heinz, and Artal, Heinz will own 1,428,000 shares of common stock of the Company, no par value per share (the "COMMON STOCK"), and Artal will own 22,372,000 shares of Common Stock.
WHEREAS, the Company, Heinz and Artal will enter into a Stockholders' Agreement (the "STOCKHOLDERS' AGREEMENT") concurrently with the execution hereof.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, in the Recapitalization Agreement and in the Stockholders' Agreement, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have the meanings set forth below:
"ADVICE" shall have the meaning specified in Section 2.4.
"ARTAL ASSIGNEE" means a Person to whom Artal has transferred Artal Registrable Securities and to whom Artal has assigned its rights hereunder with respect to such Artal Registrable Securities, but only to the extent of the terms of the assignment of such rights.
"ARTAL REGISTRABLE SECURITIES" means, collectively, (a) the Common Stock acquired by Artal on the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Except for the Artal Registrable Securities transferred to the Future Investors within 60 days of the date hereof, Artal Registrable Securities shall remain Artal Registrable Securities in the hands of any transferee. Any particular Artal Registrable Securities shall cease to be Artal Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding.
"CONVERSION SECURITIES" shall have the meaning specified in Section
3.11.
"DEMANDING PARTY" shall have the meaning specified in Section 2.1(a).
"DEMAND NOTICE" shall have the meaning specified in Section 2.1(a).
"DEMAND REGISTRATION" shall have the meaning specified in Section 2.1(a).
"DEMAND REGISTRATION STATEMENT" shall have the meaning specified in
Section 2.1(b).
"EFFECTIVENESS DATE" shall have the meaning specified in Section 2.1(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
"EXECUTIVE AGREEMENTS" shall have the meaning specified in Section 2.9.
"FILING DATE" shall have the meaning specified in Section 2.1(b).
"FUTURE INVESTOR" means any Person who purchases Common Stock from Artal pursuant to a stock purchase agreement which designates such Person to be a Future Investor for purposes of this Agreement and who agrees to become a party to, and agrees to be bound by, the provisions of this Agreement with respect to Future Investors by delivering a joinder agreement, substantially in the form of Exhibit A hereto, to the Company.
"FUTURE INVESTORS' REGISTRABLE SECURITIES" means, collectively, (a) the Common Stock acquired from Artal by each Future Investor within 60 days of the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Future Investors' Registrable Securities that are transferred in accordance with the provisions of the applicable stockholders' agreement to which such Future Investor and Artal are parties, shall remain Future Investors' Registrable Securities in the hands of any such transferee. Any particular Future Investors' Registrable Securities shall cease to be Future Investors' Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding.
"HEINZ REGISTRABLE SECURITIES" means, collectively, (a) the Common Stock acquired by Heinz on the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Heinz Registrable Securities that are transferred in accordance with the provisions of the Stockholders' Agreement shall remain Heinz Registrable Securities in the hands of any such transferee. Any particular Heinz Registrable Securities shall cease to be Heinz Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding.
"HOLDER" means any holder of Registrable Securities.
"INCIDENTAL REGISTRATION" shall have the meaning specified in
Section 2.2(a).
"INDEMNIFIED PARTY" shall have the meaning specified in Section 2.6(a).
"INSPECTORS" shall have the meaning specified in Section 2.4(n).
"LOSSES" shall have the meaning specified in Section 2.6(a).
"NASDAQ" means the National Association of Securities Dealers Automated Quotation System.
"OTHER HOLDER" shall have the meaning specified in Section 2.2(b).
"OTHER INVESTORS' REGISTRABLE SECURITIES" means, collectively, the Heinz Registrable Securities and the Future Investors' Registrable Securities.
"OTHER REGISTRABLE SECURITIES" shall have the meaning specified in
Section 2.2(b).
"PERSON" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"PROCEEDING" shall have the meaning specified in Section 2.6(c).
"PROSPECTUS" means the prospectus included in the Registration Statement, including any form of prospectus or any preliminary prospectus, as amended or supplemented by any prospectus supplement and by all other amendments or supplements to such prospectus, including all post-effective amendments and all material, if any, incorporated by reference or deemed to be incorporated by reference into such prospectus.
"RECAPITALIZATION" means any stock split, reverse stock split, dividend or combination, or any recapitalization, reclassification, merger, consolidation, exchange or other similar reorganization.
"REGISTRABLE SECURITIES" means the Artal Registrable Securities, the Heinz Registrable Securities, the Future Investors' Registrable Securities and any securities deemed to be Registrable Securities pursuant to Section 2.9 hereof.
"REGISTRATION NOTICE" shall have the meaning specified in Section 2.1(b).
"REGISTRATION STATEMENT" means any registration statement of the Company under which any of the Registrable Securities are included therein pursuant to the provisions of this Agreement, including the prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.
"RULE 144" means Rule 144 promulgated by the SEC under the Securities Act as such rule may be amended from time to time, or any similar rule then in force.
"RULE 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
"SPECIAL COUNSEL" means a single law firm selected by a majority of the Holders of the Registrable Securities being registered pursuant to any Registration Statement.
"UNDERWRITER" has the meaning set forth in Section 2(11) of the Securities Act.
Section 2.1 DEMAND REGISTRATIONS.
(a) DEMAND REGISTRATIONS. At any time and from time to time, the Company shall, upon receipt of a written request (the "DEMAND NOTICE") given by Artal or an Artal Assignee (each a "DEMANDING PARTY") to register the Artal Registrable Securities, file a Registration Statement and shall, subject to the provisions of Section 2.1(c), include in the Registration Statement for registration the Registrable Securities requested to be registered by such Demanding Party. A registration effected pursuant to this Section 2.1(a) is referred to herein as a "DEMAND REGISTRATION".
(b) FILING AND EFFECTIVENESS. Each Registration Statement filed in connection with a Demand Registration (the "DEMAND REGISTRATION STATEMENT") shall be on Form S-1 or another available form acceptable to the Demanding Party permitting registration of such securities for resale by the Demanding Party in the manner or manners designated by it (including, without limitation, one or more underwritten offerings). The Company shall file the Demand Registration Statement as promptly as practicable but in any event within 60 days after
receiving a Demand Notice (the "FILING DATE") and shall use its best efforts to cause the same to be declared effective by the SEC within 120 days (in each case, the "EFFECTIVENESS DATE") of the date on which the Demanding Party gives the Demand Notice required by Section 2.1(a) hereof with respect to such Demand Registration.
Within ten days after receipt of such Demand Notice, the Company shall serve written notice (the "REGISTRATION NOTICE") of such registration request and the intended method of distribution to all other Holders of Registrable Securities and shall, subject to the provisions of Section 2.1(c) hereof, include in such registration all Registrable Securities of the class then being registered with respect to which the Company receives written requests for inclusion therein within fifteen (15) business days after the receipt of the Registration Notice by the applicable Holder. All requests made pursuant to this Section 2.1 will specify the number of Registrable Securities to be registered.
The Company hereby agrees to use its best efforts to comply with all necessary provisions of the federal securities laws in order to keep such Registration Statement effective for a period of 180 days from its Effectiveness Date.
(c) PRIORITY ON DEMAND REGISTRATIONS. If the Registrable Securities
registered pursuant to a Demand Registration are to be sold in one or more firm
commitment underwritten offerings, and the managing Underwriter of such
underwritten offering advises the Holders of such securities that, in its
opinion, the amount of securities requested to be included in such registration
exceeds the number which can be sold in such offering without a reasonable
likelihood of adversely affecting the price, timing or distribution of the
securities being offered, then the Company shall register (i) FIRST, the maximum
number of Registrable Securities requested to be included in such registration
by the Holders which in the Underwriter's opinion can be sold, PRO RATA based on
the number of Registrable Securities requested to be included by such Holders,
until all of such Registrable Securities have been registered, (ii) SECOND, the
number of securities requested to be included in such registration by the
holders of the Company's securities pursuant to any incidental or piggyback
registration rights which in the Underwriter's opinion can be sold, PRO RATA
based on the number of securities requested to be included by such holders and
(iii) THIRD, the maximum number of securities requested to be included in such
registration by the Company which in the Underwriter's opinion can be sold
without having such an adverse effect.
(d) SHELF REGISTRATIONS. Upon receipt of a written request by a Demanding Party, the Company shall use its best efforts to file and maintain an effective Registration Statement on Form S-3 at any time the Company is eligible to register securities on such form; PROVIDED, HOWEVER, that the Company shall not be obligated to comply with this Section 2.1(d) at any time that the Board of Directors of the Company determines, in its good faith judgment, that complying with this Section would interfere with a valid need not to disclose confidential information or because it would materially interfere with any financing, acquisition, corporate reorganization or merger or other transaction involving the Company.
(e) OTHER REGISTRATIONS. The Company shall not effect any registration of its securities (except on Form S-8, S-4 or any successor or similar forms), or effect any public or
private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any Holder or Holders of such securities (other than pursuant to and in accordance with this Section 2.1), from the date of a request to register Registrable Securities pursuant to and in accordance with this Section 2.1 until the earlier of (i) 90 days after the date on which all securities covered by such Demand Registration have been sold or (ii) 180 days after the date such Demand Registration has been declared effective by the SEC unless the Company shall have first notified in writing the Holders of the Registrable Securities covered by such Registration Statement of its intention to do so, and the Holders of a majority of the Registrable Securities, Artal or the managing Underwriter, if any, shall have consented thereto in writing; PROVIDED, that the restriction contained in this clause shall only be applicable to securities of the Company of the same class as the Registrable Securities which are the subject of any such request.
(f) POSTPONEMENT OF REGISTRATION. Notwithstanding anything to the contrary contained herein, the Company may postpone for up to ninety (90) days the filing or the effectiveness of a Registration Statement for a registration requested if its Board of Directors reasonably believes the requested registration would have a material adverse effect on, or interfere in any material respect with, any proposal or plan by the Company to engage in any public financing or any material pending corporate development or transaction, including, without limitation, a material acquisition of assets (other than in the ordinary course of business), any tender offer or any merger, consolidation or other similar transaction material to the Company and its subsidiaries taken as a whole.
Section 2.2 INCIDENTAL REGISTRATIONS.
(a) "PIGGY-BACK' REGISTRATIONS". If the Company at any time proposes to register any Common Stock (or any class of securities which were also issued with respect to Common Stock by way of a Recapitalization) under the Securities Act (other than a registration on Form S-8, S-4 or any successor or similar forms) for public offerings for cash, whether or not for its own account, it will each such time give prompt written notice to all Holders of its intention to do so and of such Holders' rights under this Section 2.2 (it being understood that only those Holders of Registrable Securities of the class then being registered shall have any rights under this Section 2.2 with respect to such registration), at least 30 days prior to the anticipated date of the initial filing of the registration statement relating to such registration. Such notice shall offer all such Holders the opportunity to include in such registration statement such number of Registrable Securities of the class then being registered as each such Holder may request. Upon the written request of any such Holder made within 20 days after the receipt of the Company's notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder), the Company shall use its best efforts to effect the registration under the Securities Act of all Registrable Securities of the class then being registered which the Company has been so requested to register by the Holders thereof, to permit the disposition of the Registrable Securities to be so registered, PROVIDED that (i) if such registration involves an underwritten offering, all Holders of Registrable Securities requesting to be included in the Company's registration must sell their Registrable Securities to the Underwriters selected by the Company on the same terms and conditions as apply to the Company (except that indemnification obligations of the Holders shall be limited to those obligations set forth in
Section 2.6(b)) and (ii) if, at any time after giving written notice of its intention to register any securities pursuant to this Section 2.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give written notice to all Holders of Registrable Securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. A registration effected pursuant to this Section 2.2(a) is referred to herein as an "INCIDENTAL REGISTRATION".
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant to this Section 2.2 involves an underwritten offering and the managing Underwriter advises the Company that, in its opinion, the number of securities (including all Registrable Securities) which the Company, the Holders and any other Persons propose to include in such registration exceeds the number which can be sold in such offering without a reasonable likelihood of adversely affecting the price, timing or distribution of the securities being offered, the Company will include in such registration (i) FIRST, all the securities the Company initially proposes to sell for its own account if the Company initiates such Incidental Registration or for the account of any security holder pursuant to any contractual requirement to register securities (unless such holder is exercising incidental registration rights subject to a proration provision similar to the provisions set forth in this Section 2.2(b) or demand registration rights subject to a proration provision similar to the provisions applicable to a Demanding Party as set forth in Section 2.1(c) hereof, in which case the provisions of the following clause (ii) shall apply to the securities of such holder), (ii) SECOND, to the extent that the number of securities referred to in clause (i) is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, all Registrable Securities requested to be included in such registration by the Holders pursuant to Section 2.2(a) and all securities of the class then being registered ("OTHER REGISTRABLE SECURITIES") requested to be included by any holder (each, an "OTHER HOLDER") of Other Registrable Securities pursuant to any similar registration rights agreement, PROVIDED, that if the number of Registrable Securities and Other Registrable Securities so requested to be included in such registration, together with the number of securities to be included in such registration pursuant to clause (i) of this Section, exceeds the number which the Company has been advised can be sold in such offering without having the adverse effect referred to above, the number of such Registrable Securities and Other Registrable Securities requested to be included in such registration by the Holders pursuant to Section 2.2(a) and the Other Holders pursuant to any similar registration rights agreement shall be limited to such extent and shall be allocated PRO RATA among (A) all Holders requesting such registration pursuant to Section 2.2(a) and (B) all Other Holders requesting such registration pursuant to any similar registration rights agreement on the basis of the relative number of securities requested to be included in such registration, and (iii) THIRD, if the Company does not initiate the Incidental Registration, to the extent the number of securities referred to in clauses (i) and (ii) is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, securities of the class then being registered the Company proposes to sell for its own account up to the number of such securities that, in the opinion of the managing Underwriter, can be sold without having such adverse effect.
Section 2.3 HOLD-BACK AGREEMENTS. Each Holder of Registrable Securities agrees, if requested (pursuant to a timely written notice) by the managing Underwriter in an
underwritten offering, not to effect any public sale or distribution of any of the issue being registered or a similar security of the Company or any securities convertible or exchangeable or exercisable for such securities including a sale pursuant to Rule 144 or Rule 144A (except as part of such underwritten offering), during the period beginning 10 days prior to, and ending 180 days after, the closing date of each underwritten offering made pursuant to such Registration Statement (or such shorter period as the managing Underwriter may agree), to the extent timely notified in writing by the Company or by the managing Underwriter.
Section 2.4 REGISTRATION PROCEDURES. In connection with the registration of any Registrable Securities, the Company shall effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or Registration Statements on Form S-1 or such other form available for the sale of the Registrable Securities by the Holders thereof in accordance with the intended method of distribution thereof, and use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; PROVIDED, HOWEVER, that before filing any Registration Statement or Prospectus or any amendments or supplements thereto (not including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall afford the Holders of the Registrable Securities covered by such Registration Statement, their Special Counsel and the managing Underwriter, if any, an opportunity to review copies of all such documents proposed to be filed. The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders have a right to review prior to the filing of such document, if the Holders of a majority of the Registrable Securities covered by such Registration Statement, their Special Counsel, or the managing Underwriter, if any, shall reasonably object, in writing, on a timely basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the effectiveness
period; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 (or any similar provisions then in force) under the Securities Act;
and comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to
it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the selling Holders of Registrable Securities, their Special Counsel and the managing Underwriter, if any, promptly (but in any event within 10 business days), and confirm such notice in writing, (i) when a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including
financial statements and schedules, all documents incorporated or deemed
to be incorporated by reference and all exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by
Section 2.4(k) below cease to be true and correct in all material
respects, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of
any event that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of such Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement
would be appropriate.
(d) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.
(e) If requested by the managing Underwriter, if any, or the Holders of a majority of the Registrable Securities being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing Underwriter, if any, or such Holders reasonably request to be included therein to comply with applicable law, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to take any actions under this Section 2.4(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to each selling Holder of Registrable Securities who so requests and to Special Counsel and each managing Underwriter, if any, without charge, one conformed copy of the Registration Statement or Statements and each post-effective
amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) Deliver to each selling Holder of Registrable Securities, their Special Counsel, and the Underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the Underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and an amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to use its best efforts to register or qualify, and cooperate with the selling Holders of Registrable Securities, the Underwriters, if any, the sales agent and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions within the United States as any selling Holder or the managing Underwriter, if any, reasonably request in writing, PROVIDED, that where Registrable Securities are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform "blue sky" investigations and file registrations and qualifications required to be filed pursuant to this Section 2.4(h); use its best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period during which the related Registration Statement is required to be kept effective and use its best efforts to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) take any action that would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject.
(i) Cooperate with the selling Holders of Registrable Securities and the managing Underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the managing Underwriter, if any, or Holders may reasonably request at least two business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering, or at least 10 business days prior to any other such sale.
(j) Upon the occurrence of any event contemplated by clause (v) or
(vi) of Section 2.4(c) above, as promptly as practicable prepare a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(k) If the offering is to be underwritten, enter into an underwriting agreement in form, scope and substance as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing Underwriter in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, (i) make such representations and warranties to the Underwriters, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to Underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions shall be reasonably satisfactory (in form, scope and substance) to the managing Underwriter), addressed to the Underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the Underwriters; (iii) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the Underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 2.6 hereof (or such other provisions and procedures acceptable to Holders of a majority of the Registrable Securities covered by such Registration Statement and the managing Underwriter or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder.
(l) Use its best efforts to cause the Registrable Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if applicable, if so requested by the Holders of a majority of the Registrable Securities covered by such Registration Statement or the managing Underwriter, if any.
(m) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement to be (i) listed on each securities
exchange on which securities issued by the Company are then listed, or
(ii) authorized to be quoted on the NASDAQ or the National Market System
of the NASDAQ if the securities so qualify, in each case, if requested by
the Holders of a majority of the Registrable Securities covered by such
Registration Statement or the managing Underwriter, if any.
(n) Make available for inspection by a representative of the Holders of Registrable Securities being sold, any Underwriter participating in any such disposition of Registrable Securities, if any, and any accountant retained by such representative of the Holders or Underwriter or Special Counsel (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement; PROVIDED, HOWEVER, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information, shall be kept confidential by such Inspector unless (i) disclosure of such information is required by court or administrative order, (ii) disclosure of such information, in the opinion of counsel to such Inspector, is necessary to avoid or correct a misstatement or omission of a material fact in the Registration Statement, Prospectus or any supplement or post-effective amendment thereto or disclosure is otherwise required by law, or (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector; without limiting the foregoing, no such information shall be used by such Inspector as the basis for any market transactions in securities of the Company or its subsidiaries in violation of law.
(o) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements satisfying the provisions of Section ll(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to Underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to Underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the Effectiveness Date of a Registration Statement, which statements shall cover said 12-month periods.
The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing, PROVIDED, that such information shall be used only in connection with such registration. The Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information promptly after receiving such request.
Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (ii), (iv), (v) or (vi) of Section 2.4(c), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 2.4(j), or until it is advised in writing (the "ADVICE") by the Company
that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Company shall give any such notice at any time during the effectiveness period of a Registration Statement for registration of an offering on a continuous basis under Rule 415, the effectiveness period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 2.4(j) or (y) the Advice.
Section 2.5 REGISTRATION EXPENSES.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registration Statement is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the National Association of Securities Dealers, Inc. in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or "blue sky" laws (including, without limitation, fees and
disbursements of counsel for the Underwriters or counsel for the Company, in
connection with "blue sky" qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as provided in Section 2.4(h), in the case
of Registrable Securities)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities in a
form eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
Underwriter, if any, or by the Holders of a majority of the Registrable
Securities included in any Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) fees and disbursements of all independent certified public accountants
referred to in Section 2.4(k) (including, without limitation, the expenses of
any special audit and "cold comfort" letters required by or incident to such
performance), (vi) Underwriters' fees and expenses (excluding discounts,
commissions, or fees of Underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of the
Registrable Securities, but including the fees and expenses of any "qualified
independent Underwriter" or other independent appraiser participating in an
offering pursuant to Schedule E to the By-laws of the National Association of
Securities Dealers, Inc.), (vii) rating agency fees, (viii) Securities Act
liability insurance, if the Company so desires such insurance, (ix) internal
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees of the Company performing legal or accounting
duties), (x) the expense of any annual audit, (xi) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange, and (xii) the fees and expenses of any Person,
including special experts, retained by the Company.
(b) In connection with any Registration Statement hereunder, the Holders of the Registrable Securities being registered shall bear the discounts, commissions, or fees of Underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities and the fees and disbursements of Special Counsel or such other counsel chosen by the Holders.
Section 2.6 INDEMNIFICATION, CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless, to the full extent permitted by law, each Holder of Registrable
Securities, the officers, directors and agents and employees of each of them,
each Person who controls each such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act), the officers, directors,
agents and employees of each such controlling person and any financial or
investment adviser (each, an "INDEMNIFIED PARTY"), from and against any and all
losses, claims, damages, liabilities, actions or proceedings (whether commenced
or threatened), reasonable costs (including, without limitation, reasonable
costs of preparation and reasonable attorneys' fees) and reasonable expenses
(including reasonable expenses of investigation) (collectively, "LOSSES"), as
incurred, arising out of or based upon (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or form of prospectus or in any amendment or supplements thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein (in the case of any
Prospectus or form of prospectus or any amendment or supplement thereto or any
preliminary prospectus, in light of the circumstances under which they were
made) or necessary to make the statements therein not misleading, except to the
extent that the same arise out of or are based upon information furnished in
writing to the Company by such Indemnified Party or the related Holder of
Registrable Securities expressly for use therein or (ii) any violation by the
Company of any federal, state or common law rule or regulation applicable to the
Company and relating to action required of or inaction by the Company in
connection with any such registration; PROVIDED, HOWEVER, that the Company shall
not be liable to any Indemnified Party to the extent that any such Losses arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus if (x) such
Indemnified Party or the related Holder of Registrable Securities failed to send
or deliver (if it had a duty to do so) a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale by such Indemnified Party or
the related Holder of Registrable Securities to the Person asserting the claim
from which such Losses arise, (y) the Prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, and (z) the Company has complied with its obligations under Section
2.4(c). For purposes of the last proviso to the immediately preceding sentence,
the term "Prospectus" shall not be deemed to include the documents incorporated
by reference therein. Such indemnity and reimbursement of costs and expenses
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder of Registrable Securities or an authorized officer of such Holder of Registrable Securities shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any Registration Statement or Prospectus and agrees, severally and not jointly, to indemnify, to the full extent permitted by law, the Company and its respective directors, officers, agents and employees each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling persons, from and against all Losses
arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, or form of prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein (in the case of any Prospectus or form of prospectus or any amendment or supplement thereto or any preliminary prospectus, in light of the circumstances under which they were made) or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement is contained in, or such omission or alleged omission is required to be contained in, any information so furnished in writing by such Holder to the Company expressly for use in such Registration Statement or Prospectus and that such statement or omission was relied upon by the Company in preparation of such Registration Statement, Prospectus or form of prospectus; PROVIDED, HOWEVER, that such Holder of Registrable Securities shall not be liable in any such case to the extent that the Holder has furnished in writing to the Company within a reasonable period of time prior to the filing of any such Registration Statement or Prospectus or amendment or supplement thereto information expressly for use in such Registration Statement or Prospectus or any amendment or supplement thereto which corrected or made not misleading, information previously furnished to the Company, and the Company failed to include such information therein. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Person shall be entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such indemnified party shall give prompt notice to the party or parties from which such indemnity is sought (the "INDEMNIFYING PARTIES") of the commencement of any action, suit, proceeding or investigation or written threat thereof (a "PROCEEDING") with respect to which such indemnified party seeks indemnification or contribution pursuant hereto; PROVIDED, HOWEVER, that the failure to so notify the indemnifying parties shall not relieve the indemnifying parties from any obligation or liability except to the extent that the indemnifying parties have been materially prejudiced by such failure. The indemnifying parties shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such Proceeding, to assume, at the indemnifying parties' expense, the defense of any such Proceeding with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that an indemnified party or parties (if more than one such indemnified party is named in any Proceeding) shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless: (1) the indemnifying parties agree to pay such fees and expenses; (2) the indemnifying parties fail promptly to assume the defense of such Proceeding or fail to employ counsel reasonably satisfactory to such indemnified party or parties; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such indemnified party or parties and the indemnifying parties or an affiliate of the indemnifying parties or such indemnified parties, and there may be one or more defenses available to such indemnified party or parties that are different from or additional to those available to the indemnifying parties, in which case, if such indemnified party or parties notifies the
indemnifying parties in writing that it elects to employ separate counsel at the expense of the indemnifying parties, the indemnifying parties shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying parties, it being understood, however, that, unless there exists a conflict among indemnified parties, the indemnifying parties shall not, in connection with any such Proceeding and any substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such indemnified party or parties. Whether or not such defense is assumed by the indemnifying parties, such indemnifying parties or indemnified party or parties will not be subject to any liability for any settlement made without its or their consent (which consent shall not be unreasonably withheld or delayed). The indemnifying parties shall not consent to entry of any judgment or enter into any settlement which (i) provides for other than monetary damages without the consent of the indemnified party or parties (which consent shall not be unreasonably withheld or delayed) or (ii) that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party or parties of a release, in form and substance satisfactory to the indemnified party or parties, from all liability in respect of such Proceeding for which such indemnified party would be entitled to indemnification hereunder.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 2.6 is unavailable to an indemnified party or is insufficient to hold
such indemnified party harmless for any Losses in respect of which this Section
2.6 would otherwise apply by its terms, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the amount paid or payable by such indemnified party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses if the indemnification
provided for in Section 2.6(a) or 2.6(b) was available to such party.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.6(d) were determined by PRO RATA allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provision of this Section 2.6(d), an indemnifying party that is a selling Holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such indemnifying party exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
Section 2.7 RULES 144 AND 144A. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Securities make publicly available other information so long as such information is necessary to permit sales under Rules 144 and 144A), and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A. Upon the request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.
Section 2.8 UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities covered by any Demand Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Company with the consent of a majority of the Registrable Securities included in such registration. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Person initiating such registration and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
Section 2.9 OTHER INVESTORS. The Company may enter into employment and related agreements ("EXECUTIVE AGREEMENTS") with other purchasers of Common Stock who are directors and/or employees of the Company or one of its subsidiaries or affiliates, which agreements will incorporate the provisions of this Agreement and give such purchasers all of the rights, preferences and privileges of an original party to this Agreement (other than the Company) pursuant to this Agreement; PROVIDED that, pursuant to any such agreement, such purchaser shall expressly agree to be bound by all of the terms, conditions and obligations of this Agreement as if such purchaser were an original party (other than the Company) hereto; and PROVIDED FURTHER that such purchaser shall not obtain any right to request a Demand Registration pursuant to Section 2.1. All Common Stock (including all securities issued with respect to such Common Stock by way of a Recapitalization) issued or issuable pursuant to Executive Agreements shall be deemed to be Registrable Securities for purposes of this Agreement.
TERMINATION. This Agreement will no longer be binding or of further force or effect as to any Holder as of the date such Holder no longer holds any Registrable Securities.
REMEDIES.
(a) Each Holder shall have all rights and remedies reserved for such Holder pursuant to this Agreement and all rights and remedies which such Holders have been granted at any time under any other agreement or contract and all of the rights which such Holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity.
(b) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
CONSENT TO AMENDMENTS. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Company and Artal. Notwithstanding the foregoing, no waiver or amendment which materially adversely affects a party hereto shall be effective with respect to such Person without the prior written consent of such Person.
SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted transferees (as specified in the applicable stockholders' agreement) of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries.
SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law. The parties agree that (i) the provisions of this Agreement
shall be severable in the event that any of the provisions hereof are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(ii) such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are as similar as possible in
terms to such invalid, void or otherwise unenforceable provisions but are valid
and enforceable and (iii) the remaining provisions shall remain enforceable to
the extent permitted by law.
COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
NOTICES. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days
after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Holder at the address or addresses indicated on the signature pages hereto, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 3.7 to the sending party.
GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby.
JURISDICTION; VENUE; PROCESS. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action.
(b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon.
MERGER, AMALGAMATION OR CONSOLIDATION OF THE COMPANY. If the Company is a party to any merger, amalgamation, or consolidation pursuant to which the Registrable Securities are converted into or exchanged for securities or the right to receive securities of any other person ("CONVERSION SECURITIES"), the issuer of such Conversion Securities shall assume (in a writing delivered to all Holders) all obligations of the Company hereunder. The Company will not effect any merger, amalgamation, or consolidation described in the immediately preceding sentence unless the issuer of the Conversion Securities complies with this Section 3.11.
MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
* * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Mark Matera _______________________________________ |
Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. |
H.J. HEINZ COMPANY
By: /s/ Mitchell Ring _______________________________________ |
Address for Notices: With copies to:
H.J. Heinz Company H.J. Heinz Company
600 Grant Street 600 Grant Street
Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219
Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102
Attn: Treasurer Attn: Senior Vice President and
General Counsel
|
ARTAL LUXEMBOURG S.A.
By: /s/ David Van Zandt _______________________________________ |
Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School L-1661 Luxembourg of Law Luxembourg 357 East Chicago Avenue Facsimile No.: 352-22-42-59-22 Chicago, Illinois 60611 Attn: Managing Director Facsimile No.: 1-773-388-0291 |
and
Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq.
EXHIBIT A
JOINDER AGREEMENT
By execution of this Joinder Agreement, the undersigned agrees to become a party to that certain Registration Rights Agreement, dated as of September 29, 1999 (the "Agreement"), among Weight Watchers International, Inc. (the "Company"), Artal Luxembourg S.A. and H.J. Heinz Company. By execution of this Joinder Agreement, the undersigned shall have all rights, and shall observe all the obligations, applicable to Future Investors (as defined in the Agreement) under the Agreement.
Name:_________________________ Address for Notices: With copies to: ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ ------------------------------ |
If an individual, are you presently married or separated?
yes _____ no _____
(If yes, you must also have your spouse execute a spousal consent in the form attached hereto.)
Signature:___________________
Date:___________________
CONSENT AND AGREEMENT OF SPOUSE
I, _________________________________, am the spouse of ____________________, one of the stockholders of Weight Watchers International, Inc., a Virginia corporation (the "Company"). I acknowledge that my spouse is a party to that certain Registration Rights Agreement, dated as of September 29, 1999, among the Company, Artal Luxembourg S.A. and the H.J. Heinz Company (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement.
Executed this ____ day of __________, 199_.
EXHIBIT 21
LIST OF SUBSIDIARIES OF WEIGHT WATCHERS INTERNATIONAL INC.
W.W. INVENTORY SERVICE CORP.
W.W. WEIGHT REDUCTION SERVICES, INC.
W/W TWENTYFIRST CORPORATION
WEIGHT WATCHERS DIRECT, INC.
W.W.I. EUROPEAN SERVICES, LTD.
WEIGHT WATCHERS NORTH AMERICA, INC.
WEIGHT WATCHERS (U.K.) LIMITED
WEIGHT WATCHERS FRANCE SARL
WEIGHT WATCHERS OPERATIONS FRANCE SARL
WEIGHT WATCHERS SWEDEN VIKT-VAKTARNA AKIEBOLAG
IL SALVALINEA, S.R.L.
WEIGHT WATCHERS BELGIUM, N.V.
WEIGHT WATCHERS DEUTSCHLAND GMBH
WEIGHT WATCHERS EESTI AKTSIASELTS
WEIGHT WATCHERS SUOMI OY
GUTBUSTERS PTY LTD
FORTUITY PTY LTD
WEIGHT WATCHERS (SWITZERLAND) S.A.
WEIGHT WATCHERS POLSKA SP. Z.O.O.
WEIGHT WATCHERS LATVIA
WEIGHT WATCHERS NEDERLANDS, B.V.
WEIGHT WATCHERS INTERNATIONAL PTY LIMITED
WEIGHT WATCHERS (ACCESSORIES & PUBLICATIONS) LTD
WEIGHT WATCHERS (EXERCISE) LTD
WEIGHT WATCHERS (FOOD PRODUCTS) LIMITED
WAIST WATCHERS, INC.
WEIGHT WATCHERS UK HOLDINGS LTD
WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD
WEIGHT WATCHERS NEW ZEALAND LIMITED
WEIGHT WATCHERS FUNDING, INC.
58 WW FOOD CORP
WEIGHT WATCHERS CAMPS, INC.
W.W. CAMPS AND SPAS, INC.
WW FOODS, INC.
WEIGHT WATCHERS EUROPEAN HOLDING, AB
WEIGHT WATCHERS DENMARK APS
WEIGHT WATCHERS OPERATIONS DENMARK APS
WEIGHT WATCHERS SPAIN S.L.
WEIGHT WATCHERS OPERATIONS SPAIN S.L.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our reports dated March 2, 2001, relating to the financial statements and financial statement schedule of Weight Watchers International, Inc., which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
October 29, 2001
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our report dated March 3, 2001, relating to the financial statements of Weighco Enterprises, Inc. and subsidiaries, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
October 29, 2001