AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 2001.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEIGHT WATCHERS INTERNATIONAL, INC.
(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
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT HOLLWEG, ESQ.
WEIGHT WATCHERS INTERNATIONAL, INC.
175 CROSSWAYS PARK WEST
WOODBURY, NEW YORK 11797-2055
(516) 390-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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 NOVEMBER 9, 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 certain of 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.............................. 37
BUSINESS.............................. 39
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PAGE
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MANAGEMENT............................ 50
RELATED PARTY TRANSACTIONS............ 58
PRINCIPAL AND SELLING SHAREHOLDERS.... 65
DESCRIPTION OF INDEBTEDNESS........... 66
DESCRIPTION OF CAPITAL STOCK.......... 68
SHARES ELIGIBLE FOR FUTURE SALE....... 75
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES........................ 77
UNDERWRITING.......................... 79
NOTICE TO CANADIAN RESIDENTS.......... 83
LEGAL MATTERS......................... 84
EXPERTS............................... 84
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 84
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 nine months of 2001, our pro forma revenues grew more than 25% 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 or 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 65% in the twelve months ended September 29, 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 $144.0 million and $478.3 million, respectively. Our net revenues for the three months and nine months ended September 29, 2001 increased 19.4% 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 $50.9 million and $160.0 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 quarter ended September 29, 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 quarter ended September 29, 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 nine months ended September 29, 2001 to the nine months ended October 28, 2000, which, in the opinion of our management, is the available period most comparable to the nine months ended September 29, 2001.
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
NINE MONTHS ENDED
FISCAL YEAR TWELVE MONTHS -----------------------------
ENDED APRIL 29, ENDED DECEMBER 30, OCTOBER 28, SEPTEMBER 29,
2000 2000 2000 2001
---------------- ------------------- ------------- -------------
(53 weeks) (54 weeks) (40 weeks) (39 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS INFORMATION:
Revenues, net......................... $436.4 $488.2 $382.1 $480.1
Cost of revenues...................... 216.8 237.5 183.3 215.6
------ ------ ------ ------
Gross profit........................ 219.6 250.7 198.8 264.5
Marketing expenses.................... 55.0 58.9 40.3 51.8
Selling, general and administrative
expenses............................ 60.3 62.7 49.3 51.9
Transaction costs..................... 8.3 -- -- --
------ ------ ------ ------
Operating income.................... 96.0 129.1 109.2 160.8
Interest expense, net................. 40.1 66.8 49.9 42.3
Other (income) expense, net........... (10.5) 7.6 (6.7) 13.9
------ ------ ------ ------
Income before income taxes and
minority interest................. 66.4 54.7 66.0 104.6
Provision for income taxes............ 28.1 20.1 21.3 38.8
------ ------ ------ ------
Income before minority interest..... 38.3 34.6 44.7 65.8
Minority interest..................... 0.8 0.3 0.2 0.1
------ ------ ------ ------
Net income.......................... $ 37.5 $ 34.3 $ 44.5 $ 65.7
====== ====== ====== ======
Preferred stock dividends............. $ 0.9 $ 1.5 $ 1.1 $ 1.1
------ ------ ------ ------
Net income available to common
shareholders...................... $ 36.6 $ 32.8 $ 43.4 $ 64.6
====== ====== ====== ======
PER SHARE INFORMATION:
Basic earnings per share.............. $ 0.20 $ 0.29 $ 0.39 $ 0.59
====== ====== ====== ======
Diluted earnings per share............ $ 0.20 $ 0.29 $ 0.39 $ 0.58
====== ====== ====== ======
Basic weighted average number of
shares*............................. 182.1 112.0 112.0 109.8
====== ====== ====== ======
Diluted weighted average number of
shares*............................. 182.1 112.0 112.0 111.4
====== ====== ====== ======
OTHER FINANCIAL INFORMATION:
Depreciation and amortization......... $ 18.1 $ 14.0 $ 11.5 $ 10.0
Capital expenditures.................. 2.7 4.3 2.7 1.9
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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 nine months ended October 28, 2000 and September 29, 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 nine months ended September 29, 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 NINE MONTHS ENDED
------------------------------------ ENDED ---------------------------
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, OCTOBER 28, SEPTEMBER 29,
1998 1999 2000 2000 2000 2001
---------- ---------- ---------- ------------ ----------- -------------
(52 weeks) (52 weeks) (53 weeks) (35 weeks) (40 weeks) (39 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS INFORMATION:
Revenues, net............................... $297.2 $364.6 $399.5 $273.2 $343.5 $478.3
Cost of revenues............................ 160.0 178.9 201.4 139.3 167.2 215.1
------ ------ ------ ------ ------ ------
Gross profit.............................. 137.2 185.7 198.1 133.9 176.3 263.2
Marketing expenses.......................... 49.2 52.9 51.5 27.0 37.1 51.5
Selling, general and administrative
expenses.................................. 44.1 48.9 50.7 32.2 40.8 51.7
Transaction costs........................... -- -- 8.3 -- -- --
------ ------ ------ ------ ------ ------
Operating income.......................... 43.9 83.9 87.6 74.7 98.4 160.0
Interest (income) expense, net.............. (4.9) (7.1) 31.1 37.1 42.9 42.0
Other expense (income), net................. 4.3 5.2 (10.4) 16.5 (6.7) 13.9
------ ------ ------ ------ ------ ------
Income before income taxes and minority
interest................................ 44.5 85.8 66.9 21.1 62.2 104.1
Provision for income taxes.................. 19.9 36.4 28.3 5.9 19.9 38.6
------ ------ ------ ------ ------ ------
Income before minority interest........... 24.6 49.4 38.6 15.2 42.3 65.5
Minority interest........................... 0.8 1.5 0.8 0.2 0.2 0.1
------ ------ ------ ------ ------ ------
Net income................................ $ 23.8 $ 47.9 $ 37.8 $ 15.0 $ 42.1 $ 65.4
====== ====== ====== ====== ====== ======
Preferred stock dividends................... -- -- $ 0.9 $ 1.0 $ 1.1 $ 1.1
------ ------ ------ ------ ------ ------
Net income available to common
shareholders............................ $ 23.8 $ 47.9 $ 36.9 $ 14.0 $ 41.0 $ 64.3
====== ====== ====== ====== ====== ======
PER SHARE INFORMATION:
Basic earnings per share.................... $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.37 $ 0.59
====== ====== ====== ====== ====== ======
Diluted earnings per share.................. $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.37 $ 0.58
====== ====== ====== ====== ====== ======
Basic weighted average number of shares*.... 276.2 276.2 182.1 112.0 112.0 109.8
====== ====== ====== ====== ====== ======
Diluted weighted average number of
shares*................................... 276.2 276.2 182.1 112.0 112.0 111.4
====== ====== ====== ====== ====== ======
OTHER FINANCIAL INFORMATION:
Net cash provided by (used in):
Operating activities...................... $ 36.4 $ 57.9 $ 49.9 $ 28.9 $ 50.1 $120.2
Investing activities...................... (4.9) (3.0) (19.6) (21.6) (15.7) (110.7)
Financing activities...................... (30.6) (47.7) 8.1 (8.0) (4.7) (15.5)
Depreciation and amortization............... 8.8 9.6 10.4 7.9 8.5 9.8
Capital expenditures........................ 3.4 2.5 1.9 3.6 2.2 1.9
BALANCE SHEET INFORMATION (AT END OF
PERIOD):
Working capital (deficit)................... $ 65.8 $ 91.2 $ (0.9) $ 10.2 $ 3.3 $(35.2)
Total assets................................ 370.8 371.4 334.2 346.2 346.9 423.4
Total debt.................................. 41.1 39.6 474.6 470.7 460.5 480.8
Redeemable securities:
Preferred stock........................... -- -- 25.9 26.0 25.7 25.6
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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 DEPEND ON THE EFFECTIVENESS OF OUR MARKETING AND ADVERTISING PROGRAMS.
Our business success depends on 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 classroom meetings 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 September 29, 2001, we had total debt and redeemable preferred stock of $506.4 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 nine months ended September 29, 2001 was $37.1 million and $42.0 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, 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, issue preferred stock, pay dividends on and redeem capital stock, 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 government 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 this offering, Artal Luxembourg will beneficially own 78.8% of our common stock or 76.4% 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 80,517,663 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 September 29, 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."
SEPTEMBER 29,
2001
--------------
(in millions)
Cash........................................................ $ 37.9
=======
Long-term debt (including current maturities):
Senior credit facilities(1)............................... $ 239.6
Senior subordinated notes due 2009(2)..................... 241.2
-------
Total long-term debt.................................... 480.8
-------
Redeemable preferred stock(3)............................... 25.6
-------
Shareholders' deficit:
Common stock, no par value (1,000,000,000 authorized,
111,987,568 issued and 105,407,142 outstanding)......... --
Treasury stock, at cost, 6,580,426 shares................. (26.6)
Accumulated (deficit)..................................... (152.2)
Accumulated other comprehensive (loss).................... (15.3)
-------
Total shareholders' (deficit)........................... (194.1)
-------
Total capitalization.................................. $ 312.3
=======
|
(1) The senior credit facilities consist of a $67.2 million term loan A facility, a $71.0 million term loan B facility, an $82.3 million transferable loan certificate facility, a $19.1 million term loan D facility and a $45.0 million revolving credit facility. As of September 29, 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.
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; and
- 1,294,348 shares of our common stock available for future issuance under our existing stock option plan.
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 nine months ended September 29, 2001 to the nine months ended October 28, 2000, which, in the opinion of our management, is the available period most comparable to the nine months ended September 29, 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
====== ======
|
* Our results of operations for the twelve months ended December 30, 2000 have been derived from our historical results of operations for the eight months ended December 30, 2000, plus our results of operations for the four months ended April 29, 2000, which are derived from our 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 NINE MONTHS ENDED SEPTEMBER 29, 2001
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. ADJUSTMENTS PRO FORMA
------------------- ----------- ---------
(39 weeks)
(in millions, except per share amounts)
Revenues, net.......................................... $478.3 $ 1.8 (G) $480.1
Cost of revenues....................................... 215.1 0.5 (G) 215.6
------ ----- ------
Gross profit......................................... 263.2 1.3 264.5
Marketing expenses..................................... 51.5 0.3 (G) 51.8
Selling, general and administrative expenses........... 51.7 0.2 (B) 51.9
(0.2)(C)
0.2 (G)
------ ----- ------
Operating income..................................... 160.0 0.8 160.8
Interest expense, net.................................. 42.0 0.3 (D,E) 42.3
Other expense, net..................................... 13.9 13.9
------ ----- ------
Income before income taxes and minority interest..... 104.1 0.5 104.6
Provision for income taxes............................. 38.6 0.2 (F) 38.8
------ ----- ------
Income before minority interest...................... 65.5 0.3 65.8
Minority interest...................................... 0.1 0.1
------ ----- ------
Net income........................................... $ 65.4 $ 0.3 $ 65.7
====== ===== ======
Preferred stock dividends.............................. $ 1.1 $ 1.1
------ ------
Net income available to common shareholders.......... $ 64.3 $ 64.6
====== ======
PER SHARE INFORMATION:
Basic earnings per share............................... $ 0.59 $ 0.59
====== ======
Diluted earnings per share............................. $ 0.58 $ 0.58
====== ======
Basic weighted average number of shares................ 109.8 109.8
====== ======
Diluted weighted average number of shares.............. 111.4 111.4
====== ======
|
See accompanying notes to this unaudited statement.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 28, 2000
(UNAUDITED)
HISTORICAL
WEIGHT WATCHERS PRO FORMA
INTERNATIONAL, INC. WEIGHCO ADJUSTMENTS PRO FORMA
------------------- ---------- ----------- ---------
(40 weeks) (39 weeks)
(in millions, except per share amounts)
Revenues, net..................................... $343.5 $46.1 $(7.5)(A) $382.1
Cost of revenues.................................. 167.2 23.6 (7.5)(A) 183.3
------ ----- ----- ------
Gross profit.................................... 176.3 22.5 198.8
Marketing expenses................................ 37.1 3.2 40.3
Selling, general and administrative expenses...... 40.8 10.9 3.0(B) 49.3
(5.4)(C)
------ ----- ----- ------
Operating income................................ 98.4 8.4 2.4 109.2
Interest expense, net............................. 42.9 1.7 5.3 (D,E) 49.9
Other (income) expense, net....................... (6.7) (6.7)
------ ----- ----- ------
Income before income taxes and minority 62.2 6.7 (2.9) 66.0
interest......................................
Provision for income taxes........................ 19.9 -- 1.4 (F) 21.3
------ ----- ----- ------
Income before minority interest................. 42.3 6.7 (4.3) 44.7
Minority interest................................. 0.2 -- 0.2
------ ----- ----- ------
Net income...................................... $ 42.1 $ 6.7 $(4.3) $ 44.5
====== ===== ===== ======
Preferred stock dividends......................... $ 1.1 $ 1.1
------ ------
Net income available to common shareholders..... $ 41.0 $ 43.4
====== ======
PER SHARE INFORMATION:
Basic and diluted earnings per share.............. $ 0.37 $ 0.39
====== ======
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.................. $ 0.9 $ 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
Interest expense, net................................... 37.1 1.6 4.7 (D,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 FISCAL EIGHT
MONTHS NINE MONTHS NINE MONTHS YEAR MONTHS
ENDED ENDED ENDED ENDED ENDED
DECEMBER 30, SEPTEMBER 29, OCTOBER 28, 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 $7.5 $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 $3.0 $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 $5.4 $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 $1.0 $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 $4.3 $5.7 $3.8
(F) Represents adjustment to recognize income
taxes at 37% for the twelve months ended
December 30, 2000 and the nine months
ended September 29, 2001 and October 28,
2000, 42% for the fiscal year ended April
29, 2000 and 28% for the eight months
ended December 30, 2000.................. $ 2.0 $0.2 $1.4 $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 $2.6 $2.4 $2.3
Management and incentive
compensation paid by Weighco
before acquisition....................... $ 3.8 -- $2.8 $3.2 $2.5
----- ---- ---- ---- ----
Total selling, general and
administrative expenses.................. $ 7.1 $0.2 $5.4 $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-competition 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 nine months ended October 28, 2000 and September 29, 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 nine months ended September 29, 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.
FISCAL YEAR ENDED
--------------------------------------------------------------
APRIL 27, APRIL 26, APRIL 25, APRIL 24, APRIL 29,
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS
INFORMATION:
Revenues, net........... $323.3 $292.8 $297.2 $364.6 $399.5
Cost of revenues........ 190.9 230.4(1) 160.0 178.9 201.4
------ ------ ------ ------ ------
Gross profit.......... 132.4 62.4 137.2 185.7 198.1
Marketing expenses...... 53.9 48.9 49.2 52.9 51.5
Selling, general and
administrative
expenses.............. 51.9 45.5(1) 44.1 48.9 50.7
Transaction costs....... -- -- -- -- 8.3
------ ------ ------ ------ ------
Operating income
(loss).............. 26.6 (32.0) 43.9 83.9 87.6
Interest expense
(income), net......... 3.3 1.0 (4.9) (7.1) 31.1
Other expense (income),
net................... 4.8 3.3 4.3 5.2 (10.4)
------ ------ ------ ------ ------
Income (loss) before
income taxes and
minority
interests........... 18.5 (36.3) 44.5 85.8 66.9
(Benefit from) provision
for income taxes...... (3.6) (12.9) 19.9 36.4 28.3
------ ------ ------ ------ ------
Income (loss) before
minority
interests........... 22.1 (23.4) 24.6 49.4 38.6
Minority interest....... 0.6 0.6 0.8 1.5 0.8
------ ------ ------ ------ ------
Net income (loss)..... $ 21.5 $(24.0) $ 23.8 $ 47.9 $ 37.8
====== ====== ====== ====== ======
Preferred stock
dividends............. -- -- -- -- $ 0.9
------ ------ ------ ------ ------
Net income (loss)
available to common
shareholders........ $ 21.5 $(24.0) $ 23.8 $ 47.9 $ 36.9
====== ====== ====== ====== ======
EIGHT
MONTHS NINE MONTHS ENDED
ENDED ---------------------------
DECEMBER 30, OCTOBER 28, SEPTEMBER 29,
2000 2000 2001
------------ ----------- -------------
(35 weeks) (40 weeks) (39 weeks)
(in millions, except per share amounts)
STATEMENT OF OPERATIONS
INFORMATION:
Revenues, net........... $273.2 $343.5 $478.3
Cost of revenues........ 139.3 167.2 215.1
------ ------ ------
Gross profit.......... 133.9 176.3 263.2
Marketing expenses...... 27.0 37.1 51.5
Selling, general and
administrative
expenses.............. 32.2 40.8 51.7
Transaction costs....... -- -- --
------ ------ ------
Operating income
(loss).............. 74.7 98.4 160.0
Interest expense
(income), net......... 37.1 42.9 42.0
Other expense (income),
net................... 16.5 (6.7) 13.9
------ ------ ------
Income (loss) before
income taxes and
minority
interests........... 21.1 62.2 104.1
(Benefit from) provision
for income taxes...... 5.9 19.9 38.6
------ ------ ------
Income (loss) before
minority
interests........... 15.2 42.3 65.5
Minority interest....... 0.2 0.2 0.1
------ ------ ------
Net income (loss)..... $ 15.0 $ 42.1 $ 65.4
====== ====== ======
Preferred stock
dividends............. $ 1.0 $ 1.1 $ 1.1
------ ------ ------
Net income (loss)
available to common
shareholders........ $ 14.0 $ 41.0 $ 64.3
====== ====== ======
|
EIGHT
FISCAL YEAR ENDED MONTHS NINE MONTHS ENDED
-------------------------------------------------------------- ENDED ------------------------
APRIL 27, APRIL 26, APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, OCTOBER SEPTEMBER
1996 1997 1998 1999 2000 2000 28, 2000 29, 2001
---------- ---------- ---------- ---------- ---------- ------------ ---------- -----------
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) (35 weeks) (40 weeks) (39 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 $ 0.37 $ 0.59
====== ====== ====== ====== ====== ====== ====== ======
Diluted earnings (loss)
per share.............. $ 0.08 $(0.09) $ 0.09 $ 0.17 $ 0.20 $ 0.13 $ 0.37 $ 0.58
====== ====== ====== ====== ====== ====== ====== ======
Basic weighted average
number of shares(2).... 276.2 276.2 276.2 276.2 182.1 112.0 112.0 109.8
====== ====== ====== ====== ====== ====== ====== ======
Diluted weighted average
number of shares(2).... 276.2 276.2 276.2 276.2 182.1 112.0 112.0 111.4
====== ====== ====== ====== ====== ====== ====== ======
OTHER FINANCIAL INFORMA-
TION:
Net cash provided by
(used in):
Operating activities... $ 9.7 $ 36.4 $ 57.9 $ 49.9 $ 28.9 $ 50.1 $120.2
Investing activities... (1.4) (4.9) (3.0) (19.6) (21.6) (15.7) (110.7)
Financing activities... (4.4) (30.6) (47.7) 8.1 (8.0) (4.7) (15.5)
Depreciation and
amortization........... $ 10.4 14.2 8.8 9.6 10.4 7.9 8.5 9.8
Capital expenditures..... 5.3 2.7 3.4 2.5 1.9 3.6 2.2 1.9
BALANCE SHEET INFORMATION
(AT END OF PERIOD):
Working capital
(deficit).............. $ 83.6 $ 64.9 $ 65.8 $ 91.2 $ (0.9) $ 10.2 $ 3.3 $(35.2)
Total assets............. 393.4 373.0 370.8 371.4 334.2 346.2 346.9 423.4
Total debt............... 97.2 97.0 41.1 39.6 474.6 470.7 460.5 480.8
Redeemable securities:
Preferred stock........ -- -- -- -- 25.9 26.0 25.7 25.6
|
(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 cost 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 65% of total worldwide attendance in the first nine months of 2001. For the first nine months of 2001, 63% of our revenues were derived from our U.S. operations, and the remaining 37% 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 that 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
(in millions)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
NACO MEETING FEES INTERNATIONAL COMPANY-OWNED MEETING FEES PRODUCT SALES FRANCHISE ROYALTIES OTHER
fiscal 1996 96.5 100.8 41.2 14.1 30.3
fiscal 1997 86.5 113.6 30.8 13.9 14.1
fiscal 1998 93.8 129 46.7 17.9 9
fiscal 1999 122.3 143.8 57.3 23.2 18
fiscal 2000 130.8 145.3 91.6 25.8 6
PRE-PACKAGED MEALS (DISCONTINUED) TOTAL
fiscal 1996 40.4 $323.30
fiscal 1997 34 $292.80
fiscal 1998 0.8 $297.20
fiscal 1999 0 $364.60
fiscal 2000 0 $399.50
|
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 our NACO operations' penetration in our target market to over 7%.
- OUR RETURN TO A VARIABLE COST STRUCTURE IN OUR 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, operating profit margin in our NACO operations 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. Attendance in our Continental Europe operations 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
===== ==== ==== ==== ==== =====
NINE MONTHS ENDED
-----------------------------
OCTOBER 28, SEPTEMBER 29,
2000 2001
------------ --------------
(40 weeks) (39 weeks)
United States*....... 11.4 18.0
United Kingdom....... 8.9 9.3
Continental Europe... 5.2 6.6
Other International.. 2.6 2.5
----- -----
Total................ 28.1 36.4
===== =====
|
* Attendance in the United States does not include Weighco attendance for any period prior to our completion of the Weighco acquisition on January 16, 2001. Weighco attendance was 4.4 million for 2000, 3.5 million for the nine months ended October 28, 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 nine months of 2001, our revenues grew more than 25% 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 nine months ended October 28, 2000 and September 29, 2001.
EIGHT
FISCAL YEAR ENDED MONTHS NINE MONTHS ENDED
--------------------------------- ENDED ---------------------------
APRIL 25, APRIL 24, APRIL 29, DECEMBER 30, OCTOBER 28, SEPTEMBER 29,
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 48.7 45.0
----- ----- ----- ----- ----- -----
Gross profit.................................... 46.2 50.9 49.6 49.0 51.3 55.0
Marketing expenses.............................. 16.6 14.5 12.9 9.9 10.8 10.8
Selling, general and administrative expenses.... 14.8 13.4 12.7 11.8 11.9 10.8
----- ----- ----- ----- ----- -----
Operating income................................ 14.8% 23.0% 24.0% 27.3% 28.6% 33.4%
===== ===== ===== ===== ===== =====
|
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 29, 2001 (39 WEEKS) TO THE NINE MONTHS ENDED OCTOBER 28, 2000 (40 WEEKS).
The nine months ended October 28, 2000, is, in the opinion of management, the available period most comparable to the nine months ended September 29, 2001.
Net revenues were $478.3 million for the nine months ended September 29, 2001, an increase of $134.8 million, or 39.2%, from $343.5 million for the nine months ended October 28, 2000. Of the $134.8 million increase, $79.2 million was attributable to NACO classroom meeting fees, $7.3 million from international company-owned classroom meeting fees, $0.3 million from franchise royalties, $45.6 million from product sales and $2.4 million from licensing, publications and other royalties. Pro forma for the acquisition of Weighco, net revenues for the nine months ended October 28, 2000 were $382.1 million.
NACO classroom meeting fees were $198.6 million for the nine months ended September 29, 2001, an increase of $79.2 million, or 66.3%, from $119.4 million for the nine months ended October 28, 2000. Our international company-owned classroom meeting fees were $119.9 million for the nine months ended September 29, 2001, an increase of $7.3 million, or 6.5%, from $112.6 million for the nine months ended October 28, 2000. NACO meeting fees benefited from the inclusion of Weighco in the current nine month period. Additionally, the increases in NACO and international company-owned meeting fees were the result of increased member attendance and the roll-out of new program innovations and price increases in select markets, offset by negative exchange rate variances.
Product sales were $130.0 million for the nine months ended September 29, 2001, an increase of $45.6 million, or 54.0%, from $84.4 million for the nine months ended October 28, 2000. NACO and international company-owned product sales were $74.7 million and $55.3 million, respectively. The increases in product sales were primarily the result of increased member attendance and our strategy to focus sales efforts on core classroom products, which has increased average product sales per attendance.
Franchise royalties were $22.4 million for the nine months ended September 29, 2001, an increase of $0.3 million, or 1.4%, from $22.1 million for the nine months ended October 28, 2000. For the nine months ended September 29, 2001, domestic and international franchise royalties were $18.5 million and $3.9 million, respectively. On a pro forma basis, franchise royalties increased 22.1% for the nine months ended September 29, 2001. This increase was primarily the result of increased member attendance, offset by negative exchange rate variances.
Royalties from licensing, publications and other were $7.4 million for the nine months ended September 29, 2001, an increase of $2.4 million, or 48.0%, from $5.0 million for the nine months ended October 28, 2000. This increase was driven by an increase in advertising revenue from WEIGHT WATCHERS MAGAZINE and an increase in licensing royalties.
Cost of revenues was $215.1 million for the nine months ended September 29, 2001, an increase of $47.9 million, or 28.6%, from $167.2 million for the nine months ended October 28, 2000. Gross profit margin was 55.0% for the nine months ended September 29, 2001, compared to 51.3% for the nine months ended October 28, 2000. The increase in gross profit margin was partly due to a $3.8 million non-recurring expense related to the elimination of a profit sharing agreement with certain franchisees in the nine months ended October 28, 2000. Excluding this charge, the gross profit margin in the nine months ended October 28, 2000 was 52.4%. The remaining increase in gross profit margin reflects increased attendance, price increases and cost control initiatives.
Marketing expenses were $51.5 million for the nine months ended September 29, 2001, an increase of $14.4 million, or 38.8%, from $37.1 million for the nine months ended October 28, 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. As a percentage of net revenues, marketing expenses remained constant at 10.8% for the nine months ended September 29, 2001 and the nine months ended October 28, 2000.
Selling, general and administrative expenses were $51.7 million for the nine months ended September 29, 2001, an increase of $10.9 million, or 26.7%, from $40.8 million for the nine months ended October 28, 2000. As a percentage of net revenues, these costs decreased from 11.9% for the nine months ended October 28, 2000 to 10.8% for the nine months ended September 29, 2001.
As a result of the above, our operating income was $160.0 million for the nine months ended September 29, 2001, an increase of $61.6 million, or 62.6%, from $98.4 million for the nine months ended October 28, 2000. On a pro forma basis, operating income for the nine months ended October 28, 2000 was $109.3 million. On a pro forma basis, operating income increased by 46.5% for the nine months ended September 29, 2001.
COMPARISON OF THE EIGHT MONTHS ENDED DECEMBER 30, 2000 (35 WEEKS) TO THE EIGHT MONTHS ENDED DECEMBER 18, 1999 (34 WEEKS).
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 the 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 revenues 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 attendance as a result of the roll-out 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 snack 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 royalties-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 nine months ended September 29, 2001, our primary source of funds to meet working capital needs was cash from operations. For the eight months ended December 30, 2000 cash flows provided by operating activities were $28.9 million. Cash and cash equivalents increased $0.5 million to $44.5 million during the eight months ended December 30, 2000. 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 to repay 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 nine months ended September 29, 2001, cash and cash equivalents decreased $6.6 million. Cash flows provided by operating activities of $120.2 million were used primarily for investing activities. Cash flows used for investing activities of $110.7 million were attributable to $84.4 million and $13.5 million paid in connection with the Weighco acquisition and the acquisition of our Oregon franchise, respectively, loans totaling $9.0 million made to WeightWatchers.com and capital expenditures of $1.9 million. Net cash flows provided by financing activities of $15.5 million consisted of proceeds from borrowings under our senior credit facility of $60.0 million, offset by the payment of dividends on our preferred stock of $1.5 million, repayments of principal on our outstanding senior credit facilities of $46.8 million and the repurchase of 6,719,254 shares of our common stock held by Heinz for $27.1 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 September 29, 2001, we had outstanding $470.7 million and $480.8 million, respectively, in aggregate indebtedness, with approximately $30.0 million and $45.0 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 September 29, 2001 were $239.6 million, consisting of a $67.2 million term loan A facility, a $71.0 million term loan B facility, an $82.3 million transferable loan certificate facility, a $19.1 million term loan D facility and a $45.0 million revolving credit facility. As of September 29, 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, 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, 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, SEPTEMBER 29,
2000 2000 2000 2000 2001 2001 2001
---------- ---------- ----------- ------------ ---------- ---------- -------------
(14 weeks) (13 weeks) (13 weeks) (9 weeks) (13 weeks) (13 weeks) (13 weeks)
(in millions)
Revenues, net........ $132.8 $103.1 $107.6 $62.5 $172.0 $162.3 $144.0
Gross profit....... 70.0 54.8 51.5 27.6 94.6 90.6 78.0
Marketing expenses... 18.6 6.7 11.8 8.5 27.1 13.5 10.9
Selling, general and
administrative
expenses........... 17.2 11.5 12.0 8.7 17.7 17.8 16.2
Operating income..... 34.2 36.6 27.7 10.4 49.8 59.3 50.9
Net income (loss).... 17.5 13.7 10.9 (9.6) 23.2 26.1 16.1
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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.
HISTORICAL
QUARTER
PRO FORMA QUARTER ENDED ENDED
----------------------------------------------------------------- --------------------------
TWO MONTHS
ENDED
APRIL 29, JULY 29, OCTOBER 28, DECEMBER 30, MARCH 31, JUNE 30, SEPTEMBER 29,
2000 2000 2000 2000 2001 2001 2001
---------- ---------- ----------- ------------ ---------- ---------- -------------
(14 weeks) (13 weeks) (13 weeks) (9 weeks) (13 weeks) (13 weeks) (13 weeks)
(in millions)
Revenues, net........ $145.4 $116.1 $120.6 $69.8 $173.8 $162.3 $144.0
Gross profit....... 77.9 62.1 58.8 31.9 95.9 90.6 78.0
Marketing expenses... 20.1 7.4 12.8 8.8 27.4 13.5 10.9
Selling, general and
administrative
expenses........... 20.1 14.3 14.9 10.6 17.9 17.8 16.2
Operating income..... 37.7 40.4 31.1 12.5 50.6 59.3 50.9
Net income (loss).... 18.4 14.5 11.6 (9.2) 23.5 26.1 16.1
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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, or SFAS, No. 141, "Business Combinations,"and SFAS No.142, "Goodwill and Other Intangible Assets." 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 September 29, 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 September 29, 2001, a 10% change in market interest rates would have less than a 5% impact on our net interest expense.
Other than intercompany transactions between our domestic and foreign entities and the portion of our senior subordinated notes that 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 September 29, 2001, we had long-term foreign currency forward contracts receivables with notional amounts of $44.0 million and Euro 76.0 million, offset by foreign currency forward contracts payables with notional amounts of British Pound 59.2 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
[LOGO]
SOURCE: 2000 GALLUP STUDY
* Includes group education-based 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 that 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 65% of total worldwide attendance in the first nine 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 TOTAL 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 |
* 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 our 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
Weight Watchers Percent
Penetration in 2000
-----------------------
Less Than
Spain 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-based 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 65% in the twelve months ended September 29, 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 weight-loss strategies, 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 attendance in our NACO operations 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 in 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. This exercise guide 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 pre-programmed 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 35% of our total worldwide attendance for the nine months ended September 29, 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 our 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 that 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 September 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, operates 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 through these efforts, 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 operating profit margin in our NACO operations 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 moved from a fixed cost structure back to a variable cost structure and have 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 the 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 September 29, 2001, we had approximately 34,000 employees and service providers, of which 13,100 were located in the United States, 13,000 were located in the United Kingdom, 3,300 were located in Continental Europe and 4,600 were located in Australia and New Zealand. One hundred fourteen employees work full-time as management and support personnel in our Woodbury, New York offices, 212 employees work full-time as management and support personnel at four regional offices in our NACO operations and 464 employees work full-time as management and support personnel in our international operations. Within our company-owned operations, approximately 9,400 service providers work part-time as leaders and approximately 24,000 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, New York 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. Our operations in each country also each have 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 September 29, 2001, there were approximately 2,500 NACO meeting locations, including approximately 2,000 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 and benefits committee 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
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AWARDS
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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, except as set forth below, 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. Any additional borrowings over the $26.2 million outstanding principal amount will begin bearing interest immediately.
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 snack bar and powder products manufactured by Nellson Nutraceutical for sale at our meetings. Under the agreement, Nellson Nutraceutical agreed to produce sufficient snack 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 snack 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 is the same as the address of Artal Luxembourg.
(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) Mr. Debbane is also a director of Artal Group. Artal Group is the parent entity 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, certain of 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 76.4% 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 September 29, 2001, of $239.6 million, consisting of a $67.2 million term loan A facility, a $71.0 million term loan B facility, an $82.3 million transferable loan certificate facility, a $19.1 million term loan D facility and a $45.0 million revolving credit facility. As of September 29, 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) 250,000,000 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 or certain of its transferees beneficially owns a majority of our then outstanding common 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 our president or by a resolution adopted by our board of directors. In addition, our articles of incorporation provide that Artal Luxembourg and certain of its transferees have the right to call special meetings of shareholders prior to the date it ceases to beneficially own 20% of our then outstanding common 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 and certain of its transferees when nominating its director designees. In addition, our bylaws provide that so long as Artal Luxembourg or certain of its transferees beneficially owns a majority of our then outstanding common 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 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 beneficially owns a majority of our then outstanding common stock, the anti-takeover provisions of our articles of incorporation 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 generally require the affirmative vote of a majority of our then outstanding voting stock. Our bylaws may be amended by the affirmative vote of our directors or by the affirmative vote of at least 80% 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 junior participating 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 junior participating 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 junior participating preferred stock payable in shares of Series B junior participating preferred stock, a subdivision or combination of the Series B junior participating preferred stock, a grant or distribution to holders of the Series B junior participating 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 junior participating 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 junior participating 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 junior participating 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 junior participating 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 junior participating 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 junior participating 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 junior participating preferred stock, the holders of any Series B junior participating 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 junior participating 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 junior participating 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 junior participating 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 8, 2003, of the Virginia anti-takeover law regulating "affiliated 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
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Artal Luxembourg, which will own 78.8% of our shares (or 76.4% 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.
Certain of 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, 764,534 shares if the underwriters exercise their over-allotment 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 September 29, 2001.................................. F-41
Unaudited Consolidated Statements of Operations for the
Nine Months Ended October 28, 2000 and September 29,
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 Nine Months Ended September 29, 2001................ F-43
Unaudited Consolidated Statements of Cash Flows For the
Nine Months Ended October 28, 2000 and September 29,
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 November 9, 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 164.44 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.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED) 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 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
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED) 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.
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.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. STOCK PLANS: (CONTINUED) 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 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.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED) 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 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
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) common stock available for purchase upon exercise of the warrants may be adjusted from time to time upon the occurrence of certain events.
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 snack bar products manufactured by Nellson for sale at the Company's meetings. Under the agreement, Nellson agrees to produce sufficient snack 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 snack 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 incurred during a calendar year. In addition, various other insurance coverages were also provided to
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. RELATED PARTY TRANSACTIONS: (CONTINUED) 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 29, 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
(This page has been left blank intentionally.)
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 30, 2000 AND SEPTEMBER 29, 2001
(IN THOUSANDS)
DECEMBER 30, SEPTEMBER 29,
2000 2001
------------ --------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 44,501 $ 37,904
Receivables, net.......................................... 14,678 17,103
Notes receivable, current................................. 2,106 2
Inventories............................................... 15,044 19,131
Prepaid expenses, other................................... 17,111 14,004
--------- ---------
TOTAL CURRENT ASSETS.................................... 93,440 88,144
Property and equipment, net................................. 8,145 9,650
Notes and other receivables, noncurrent..................... 5,601 325
Goodwill, net............................................... 150,901 237,102
Trademarks and other intangible assets, net................. 6,648 6,851
Deferred income taxes....................................... 67,207 67,207
Deferred financing costs, other............................. 14,275 14,170
--------- ---------
TOTAL ASSETS............................................ $ 346,217 $ 423,449
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Portion of long-term debt due within one year............. $ 14,120 $ 16,157
Accounts payable.......................................... 11,989 7,966
Accrued liabilities....................................... 47,636 67,066
Income taxes.............................................. 3,660 15,529
Deferred revenue.......................................... 5,836 16,645
--------- ---------
TOTAL CURRENT LIABILITIES............................... 83,241 123,363
Long-term debt.............................................. 456,530 464,629
Deferred income taxes....................................... 3,107 3,070
Other....................................................... 121 822
--------- ---------
TOTAL LONG-TERM DEBT AND OTHER LIABILITIES.............. 459,758 468,521
Redeemable preferred stock.................................. 25,996 25,621
Shareholders' deficit (Note 21):
Common stock, par value $0 per share, 1,000,000
authorized, issued 111,988 shares at December 30, 2000
and September 29, 2001; outstanding 111,988 shares at
December 30, 2000 and 105,407 shares at September 29,
2001.................................................... -- --
Treasury stock, at cost, 6,580 shares at September 29,
2001.................................................... -- (26,572)
Accumulated deficit....................................... (216,507) (152,232)
Accumulated other comprehensive loss...................... (6,271) (15,252)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT............................. (222,778) (194,056)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT................. $ 346,217 $ 423,449
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 28, 2000 AND SEPTEMBER 29, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED
---------------------------
OCTOBER 28, SEPTEMBER 29,
2000 2001
----------- -------------
(UNAUDITED)
Revenues, net............................................... $343,517 $478,340
Cost of revenues............................................ 167,215 215,093
-------- --------
Gross profit.............................................. 176,302 263,247
Marketing expenses.......................................... 37,119 51,483
Selling, general and administrative expenses................ 40,795 51,703
-------- --------
Operating income.......................................... 98,388 160,061
Interest expense, net....................................... 42,862 42,011
Other (income), expenses net................................ (6,762) 13,948
-------- --------
Income before income taxes and minority interest.......... 62,288 104,102
Provision for income taxes.................................. 19,922 38,590
-------- --------
Income before minority interest........................... 42,366 65,512
Minority interest........................................... 240 78
-------- --------
Net income................................................ $ 42,126 $ 65,434
======== ========
Preferred stock dividends................................... $ 1,125 $ 1,125
-------- --------
Net income available to common shareholders............... $ 41,001 $ 64,309
======== ========
Net income per share:
Basic..................................................... $ 0.37 $ 0.59
======== ========
Diluted................................................... $ 0.37 $ 0.58
======== ========
Weighted average common shares outstanding:
Basic..................................................... 111,988 109,762
======== ========
Diluted................................................... 112,035 111,416
======== ========
|
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 NINE MONTHS ENDED SEPTEMBER 29, 2001
(IN THOUSANDS)
(UNAUDITED)
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............................ 65,434
Foreign currency translation
adjustment.......................... (2,904)
Change in fair value of derivatives
accounted for as hedges............. (6,077)
Total Comprehensive Income............
Preferred stock dividend................ (1,125)
Purchase of treasury stock.............. 6,719 $(27,132) -- --
Sale of treasury stock.................. (139) 560 -- (34)
--------- ------ ----- -------- -------- -------- ---------
Balance at September 29, 2001......... 111,988 $ -- 6,580 $(26,572) $ -- $(15,252) $(152,232)
========= ====== ===== ======== ======== ======== =========
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............................ 65,434
Foreign currency translation
adjustment.......................... (2,904)
Change in fair value of derivatives
accounted for as hedges............. (6,077)
---------
Total Comprehensive Income............ 56,453
---------
Preferred stock dividend................ (1,125)
Purchase of treasury stock.............. (27,132)
Sale of treasury stock.................. 526
--------- ---------
Balance at September 29, 2001......... $ -- $(194,056)
========= =========
|
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 NINE MONTHS ENDED OCTOBER 28, 2000 AND SEPTEMBER 29, 2001
(IN THOUSANDS)
NINE MONTHS ENDED
---------------------------
OCTOBER 28, SEPTEMBER 29,
2000 2001
----------- -------------
(UNAUDITED)
Cash provided by operating activities....................... $50,093 $120,234
------- --------
Investing activities:
Capital expenditures...................................... (2,223) (1,865)
Advances to equity investment............................. (8,500) (9,044)
Acquisitions.............................................. (2,400) (97,853)
Other items, net.......................................... (2,595) (1,896)
------- --------
Cash used for investing activities...................... (15,718) (110,658)
------- --------
Financing activities:
Net increase (decrease) in short-term borrowings.......... 4,893 (622)
Proceeds from borrowings.................................. -- 60,000
Payments of dividends..................................... (879) (1,500)
Payments of long-term debt................................ (10,590) (46,774)
Deferred financing costs.................................. (165) --
Net Parent advances....................................... 2,078 --
Purchase of treasury stock................................ -- (27,132)
Proceeds from issuance of treasury stock.................. -- 525
------- --------
Cash used for financing activities...................... (4,663) (15,503)
------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... (4,703) (670)
Net increase (decrease) in cash and cash equivalents........ 25,009 (6,597)
Cash and cash equivalents, beginning of period.............. 34,446 44,501
------- --------
Cash and cash equivalents, end of period.................... $59,455 $ 37,904
======= ========
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(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. ACQUISITIONS
On September 4, 2001, the Company completed the acquisition of Weight Watchers of Oregon, Inc., for an aggregate purchase price of $13,500. Substantially all of the purchase price in excess of the net assets acquired was recorded as goodwill. The results of operations are included in the financial statements from the date of acquisition. The acquisition has been accounted for based on Statements 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 supercedes APB Opinion 17, "Intangible Assets", and requires goodwill and other intangible assets that have an indefinite useful life to no longer be amortized; however, these assets must be reviewed at least annually for impairment. The Company will adopt SFAS 142 on December 30, 2001 for all business combinations completed prior to July 1, 2001. Management has not yet determined the impact of adoption on the financial position and results of operations of the Company.
On January 16, 2001, the Company completed the acquisition of Weight Watchers' franchised territories and certain business assets of Weighco Enterprises, Inc., Weighco of Northwest, Inc., and Weighco of Southwest, Inc. ("Weighco"), for an aggregate purchase price of approximately $83,800 plus acquisition costs of approximately $600. The acquisition was financed through additional borrowings of $60,000 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 ($1,158) and property and equipment ($1,801). The excess of investment over the net book value of assets acquired at the date of acquisition resulted in goodwill of $81,394.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS (CONTINUED)
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 actual results that would have occurred, nor is it necessarily indicative of future results of operations of the consolidated companies.
PRO FORMA
NINE MONTHS ENDED
OCTOBER 28, 2000
-----------------
Revenues................................................... $382,059
Net income................................................. $ 44,472
Per share information:
Basic and diluted earnings per share..................... $ 0.39
|
4. 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 164,442 shares of common stock from Heinz for $349,500. 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 $349,500 consisted of $324,500 of cash and $25,000 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 $223,700. The recapitalization and stock purchase was financed through borrowings under credit facilities amounting to approximately $237,000 and by issuing Senior Subordinated Notes amounting to $255,000, 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 $15,900 of goodwill. In connection with the Transaction, the Company incurred approximately $8,300 in transaction costs and $15,900 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 $72,100 was established against the corresponding deferred tax asset of $144,200. 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 valuation allowance in the future periods.
5. 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)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. 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:
NINE MONTHS ENDED
-----------------------------
OCTOBER 28, SEPTEMBER 29,
2000 2001
------------ --------------
Numerator:
Net income....................................... $ 42,126 $ 65,434
Preferred stock dividends........................ 1,125 1,125
-------- --------
Numerator for basic EPS-income available to
common shareholders.......................... $ 41,001 $ 64,309
-------- --------
Numerator for diluted EPS-income available to
common shareholders.......................... $ 41,001 $ 64,309
-------- --------
Denominator:
Denominator for basic EPS-weighted-average
shares....................................... 111,987 109,761
Effect of dilutive securities:
Stock options................................ 48 1,655
-------- --------
Denominator for diluted EPS-adjusted weighted-
average shares............................... 112,035 111,416
======== ========
EPS:
Basic EPS........................................ $ 0.37 $ 0.59
======== ========
Diluted EPS...................................... $ 0.37 $ 0.58
======== ========
|
6. TREASURY STOCK
On April 18, 2001, the Company entered into a Put/Call Agreement with Heinz, pursuant to which Heinz acquired the right and option to sell during the period ending on or before May 15, 2002, and the Company acquired the right and option to purchase after that date and on or before August 15, 2002, 6,719 shares of the common stock of the Company owned by Heinz. During the nine months ended September 29, 2001, Heinz has sold all of its shares to the Company at fair value for an aggregate purchase price of $27,312, which was funded with cash from operations.
7. 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)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. COMPREHENSIVE INCOME (CONTINUED)
Comprehensive income is as follows:
NINE MONTHS ENDED
---------------------------
OCTOBER 28, SEPTEMBER 29,
2000 2001
----------- -------------
Net income.................................................. $42,126 $65,434
Foreign currency translation adjustment..................... (8,035) (2,904)
Change in fair value of derivatives
Cumulative effect of the adoption of SFAS 133............. -- (5,086)
Current period changes in fair value of derivatives....... -- (991)
------- -------
Comprehensive income........................................ $34,091 $56,453
======= =======
|
8. 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 $75,000 term loan A facility
("Term Loan A"), (ii) a $75,000 term loan B facility ("Term Loan B"), (iii) an
$87,000 transferable loan certificate ("TLC") and (iv) a revolving credit
facility with borrowings up to $30,000 ("Revolving Credit Facility"). The Credit
Facility was amended and restated on January 16, 2001 to provide for an
additional $50,000 in borrowings in connection with the acquisition of Weighco
(see Note 4) as follows: (i) Term Loan A was increased by $15,000, (ii) the
Revolving Credit Facility was increased by $15,000 to $45,000 and (iii) a new
$20,000 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 September 29,
2001, the interest rates were 5.46% for Term Loan A, 7.58% for Term Loan B,
7.58% for the TLC and 6.98% for Term Loan D. All assets of the Company
collateralize the Credit Facility.
In addition, as part of the Transaction, the Company issued $150,000 USD denominated and 100,000 EUR denominated principal amount of 13% Senior Subordinated Notes due 2009 (the "Notes") to qualified institutional buyers. At September 29, 2001, the 100,000 EUR notes translated into $91,150 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)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. 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.
9. 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 $5,086 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 September 29, 2001, losses of $991 for qualifying hedges, were reported as a component of accumulated other comprehensive loss. For the nine months ended September 29, 2001, the ineffective portion of changes in fair values of cash flow hedges was not material. In addition, fair value adjustments for non-qualifying hedges resulted in a reduction of net income of $1,200, for the nine months ended September 29, 2001. The Company does not anticipate any reclassification to earnings from accumulated other comprehensive loss within the next twelve months.
10. WEIGHTWATCHERS.COM NOTE AND WARRANT AGREEMENTS
On October 1, 2000, the Company amended its loan agreement with WeightWatchers.com, increasing the aggregate principal amount from $10,000 to $23,500. On that date, the unpaid principal and accumulated interest was rolled over into the new loan. The Company further amended the agreement on May 3, 2001 and on September 10, 2001, increasing the aggregate amount to $28,500 and $34,500, respectively. 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. During the nine month period ended September 29, 2001 the Company advanced WeightWatchers.com $9,044, pursuant to the note, which were classified in other expenses, net. As of September 29, 2001, $26,200 of principal was outstanding under this note.
Under warrant agreements dated November 24, 1999, October 1, 2000, May 3, 2001, and September 10, 2001, the Company has received warrants to purchase an additional 6,395 shares of
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. WEIGHTWATCHERS.COM NOTE AND WARRANT AGREEMENTS (CONTINUED)
WeightWatchers.com's common stock in connection with the loans that the Company has 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. 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.
11. 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.
12. 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 nine month period ended September 29, 2001 was 37.1%.
13. STOCK SPLIT
On October 29, 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 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.
14. 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.;
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. GUARANTOR SUBSIDIARIES (CONTINUED)
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 & 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.
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 SEPTEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 15,457 $ 11,522 $10,925 $ -- $ 37,904
Receivables, net.............................. 5,108 9,456 2,539 -- 17,103
Notes receivable, current..................... -- -- 2 -- 2
Inventories................................... -- 15,179 3,952 -- 19,131
Prepaid expenses, other....................... 553 11,902 1,549 -- 14,004
Intercompany (payables) receivables........... (1,272) (8,088) 9,360 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS........................ 19,846 39,971 28,327 -- 88,144
Investment in consolidated subsidiaries......... 230,672 -- -- (230,672) --
Property and equipment, net..................... 1,116 7,408 1,126 -- 9,650
Notes and other receivables, noncurrent......... 325 -- -- -- 325
Goodwill, net................................... 27,168 209,256 678 -- 237,102
Trademarks and other intangible assets, net..... 909 5,929 13 -- 6,851
Deferred income taxes........................... (44,713) 111,920 -- -- 67,207
Deferred financing costs, other................. 13,348 (560) 1,382 -- 14,170
--------- -------- ------- --------- ---------
TOTAL ASSETS................................ $ 248,671 $373,924 $31,526 $(230,672) $ 423,449
========= ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES
Portion of long-term debt due within one
year........................................ $ 15,321 $ 836 $ -- $ -- $ 16,157
Accounts payable.............................. 214 5,014 2,738 -- 7,966
Accrued liabilities........................... 30,973 28,708 7,385 -- 67,066
Income taxes.................................. (15,031) 27,874 2,686 -- 15,529
Deferred revenue.............................. -- 15,660 985 -- 16,645
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES................... 31,477 78,092 13,794 -- 123,363
Long-term debt................................ 383,148 81,481 -- -- 464,629
Deferred income taxes......................... 2,481 -- 589 -- 3,070
Other......................................... -- 700 122 -- 822
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES............................... 385,629 82,181 711 -- 468,521
Redeemable preferred stock.................... 25,621 -- -- -- 25,621
Shareholders' (deficit) equity................ (194,056) 213,651 17,021 (230,672) (194,056)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS' (DEFICIT)
EQUITY.................................... $ 248,671 $373,924 $31,526 $(230,672) $ 423,449
========= ======== ======= ========= =========
|
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 NINE MONTHS ENDED OCTOBER 28, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $25,836 $261,398 $56,283 $ -- $343,517
Cost of revenues...................... 6,549 127,449 33,217 -- 167,215
------- -------- ------- -------- --------
Gross profit........................ 19,287 133,949 23,066 -- 176,302
Marketing expenses.................... 3,231 27,700 6,188 -- 37,119
Selling, general and administrative
expenses............................ 20,097 14,907 5,791 -- 40,795
------- -------- ------- -------- --------
Operating (loss) income............. (4,041) 91,342 11,087 -- 98,388
Interest expense (income), net........ 30,328 12,659 (125) -- 42,862
Other (income) expenses, net.......... (6,757) (33) 28 -- (6,762)
Equity in income of consolidated
subsidiaries........................ 47,535 -- -- (47,535) --
Franchise commission income (loss).... 20,201 (17,411) (2,790) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 40,124 61,305 8,394 (47,535) 62,288
(Benefit from) provision for income
taxes............................... (2,002) 18,468 3,456 -- 19,922
------- -------- ------- -------- --------
Income before minority interest..... 42,126 42,837 4,938 (47,535) 42,366
Minority interest..................... -- -- 240 -- 240
------- -------- ------- -------- --------
Net income.......................... $42,126 $ 42,837 $ 4,698 $(47,535) $ 42,126
======= ======== ======= ======== ========
|
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 NINE MONTHS ENDED SEPTEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $ 3,505 $400,426 $74,409 $ -- $478,340
Cost of revenues...................... 675 174,329 40,089 -- 215,093
------- -------- ------- -------- --------
Gross profit........................ 2,830 226,097 34,320 -- 263,247
Marketing expenses.................... -- 42,833 8,650 -- 51,483
Selling, general and administrative
expenses............................ 14,507 29,878 7,318 -- 51,703
------- -------- ------- -------- --------
Operating (loss) income............. (11,677) 153,386 18,352 -- 160,061
Interest expense (income), net........ 29,844 12,720 (553) -- 42,011
Other expenses, net................... 9,753 4,174 21 -- 13,948
Equity in income of consolidated
subsidiaries........................ 79,405 -- -- (79,405) --
Franchise commission income (loss).... 37,828 (33,352) (4,476) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 65,959 103,140 14,408 (79,405) 104,102
Provision for income taxes............ 525 33,643 4,422 -- 38,590
------- -------- ------- -------- --------
Income before minority interest..... 65,434 69,497 9,986 (79,405) 65,512
Minority interest..................... -- -- 78 -- 78
------- -------- ------- -------- --------
Net income.......................... $65,434 $ 69,497 $ 9,908 $(79,405) $ 65,434
======= ======== ======= ======== ========
|
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 NINE MONTHS OCTOBER 28, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Cash provided by (used for) operating
activities............................ $ 77,713 $12,478 $ 8,574 $(48,672) $50,093
-------- ------- ------- -------- -------
Investing activities:
Capital expenditures.................. (430) (1,259) (534) -- (2,223)
Advances to equity investment......... (8,500) -- -- -- (8,500)
Acquisition of miniority interest..... (2,400) -- -- -- (2,400)
Other items, net...................... (2,003) (681) 89 -- (2,595)
-------- ------- ------- -------- -------
Cash used for investing
activities........................ (13,333) (1,940) (445) -- (15,718)
-------- ------- ------- -------- -------
Financing activities:
Net increase in short-term
borrowings.......................... 394 4,499 -- -- 4,893
Parent company investment in
subsidiaries........................ (36,099) -- -- 36,099 --
Payment of dividends.................. (879) (4,355) (1,603) 5,958 (879)
Payments on long-term debt............ (9,937) (653) -- -- (10,590)
Deferred financing costs.............. (165) -- -- -- (165)
Net Parent advances................... 2,084 -- 1,378 (1,384) 2,078
-------- ------- ------- -------- -------
Cash used for financing
activities........................ (44,602) (509) (225) 40,673 (4,663)
-------- ------- ------- -------- -------
Effect of exchange rate changes on cash
and cash equivalents.................. (7,962) (3,267) (1,473) 7,999 (4,703)
Net increase in cash and cash
equivalents........................... 11,816 6,762 6,431 -- 25,009
Cash and cash equivalents, beginning of
year.................................. 3,880 21,847 8,719 -- 34,446
-------- ------- ------- -------- -------
Cash and cash equivalents, end of
year.................................. $ 15,696 $28,609 $15,150 $ -- $59,455
======== ======= ======= ======== =======
|
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 NINE MONTHS ENDED SEPTEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Cash provided by operating activities... $ 67,521 $124,702 $ 7,416 $(79,405) $120,234
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures.................. (80) (1,359) (426) -- (1,865)
Advances to equity investment......... (9,044) -- -- -- (9,044)
Acquisition........................... -- (97,853) -- -- (97,853)
Other items, net...................... (576) (1,240) (80) -- (1,896)
-------- -------- ------- -------- --------
Cash used for investing activities.... (9,700) (100,452) (506) -- (110,658)
-------- -------- ------- -------- --------
Financing activities:
Net decrease in short-term
borrowings.......................... (566) (56) -- -- (622)
Parent company investment in
subsidiaries........................ (54,796) -- -- 54,796 --
Proceeds from borrowings.............. 60,000 -- -- -- 60,000
Payment of dividends.................. (1,500) (19,396) (3,258) 22,654 (1,500)
Payments on long-term debt............ (42,744) (4,030) -- -- (46,774)
Net parent settlements................ -- -- 986 (986) --
Purchase of treasury stock............ (27,132) -- -- -- (27,132)
Proceeds from issuance of treasury
stock............................... 525 -- -- -- 525
-------- -------- ------- -------- --------
Cash used for financing activities.... (66,213) (23,482) (2,272) 76,464 (15,503)
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents.................. (2,850) (437) (324) 2,941 (670)
Net (decrease) increase in cash and cash
equivalents........................... (11,242) 331 4,314 -- (6,597)
Cash and cash equivalents, beginning of
period................................ 26,699 11,191 6,611 -- 44,501
-------- -------- ------- -------- --------
Cash and cash equivalents, end of
period................................ $ 15,457 $ 11,522 $10,925 $ -- $ 37,904
======== ======== ======= ======== ========
|
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
===========
|
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 Amended and Restated Articles of Incorporation of
Weight Watchers International, Inc.
3.2* Form of 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 Rights Agreement between Weight Watchers
International, Inc. and EquiServe Trust Company, N.A.
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 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, dated as of November 5, 2001, between
Weight Watchers International, Inc. and Artal Luxembourg
S.A.
10.33** Amended and Restated Co-Pack Agreement, dated as of
September 13, 2001, between Weight Watchers
International, Inc. and Nellson Nutraceutical, Inc.
10.34* Amended and Restated Intellectual Property License
Agreement, dated as of September 10, 2001, between Weight
Watchers International, Inc. and WeightWatchers.com, Inc.
10.35* Service Agreement, dated as of September 10, 2001, between
Weight Watchers International, Inc. and WeightWatchers.com,
Inc.
10.36* Corporate Agreement, dated as of November 5, 2001, 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.
|
* Filed herewith.
** Previously filed.
(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. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on November 9, 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. 2 to the Registration Statement has been signed below by the following persons in the capacities indicated on the 9th day of November, 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
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*By: /s/ SACHA LAINOVIC
--------------------------------------
ATTORNEY-IN-FACT
|
II-9
Exhibit 1.1
Shares
WEIGHT WATCHERS INTERNATIONAL, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 2001
Credit Suisse First Boston Corporation
GOLDMAN, SACHS & CO.,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue,
New York, N.Y.10010-3629
Dear Sirs:
1. INTRODUCTORY. Artal Luxembourg S.A. ("ARTAL") and each of the additional selling stockholders listed on Schedule A hereto (the "NON-CONTROLLING SELLING STOCKHOLDERS", and together with Artal, the "SELLING STOCKHOLDERS"), propose to sell (the "Offering") to the several underwriters named in Schedule B hereto (the "UNDERWRITERS") an aggregate of 17,400,000 outstanding shares (the "FIRM SECURITIES") of the Common Stock, no par value (the "SECURITIES") of Weight Watchers International, Inc., a Virginia corporation (the "COMPANY"), and certain of the Selling Stockholders (the "Optional Selling Stockholders") also propose to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than 2,610,000 additional outstanding shares (the "OPTIONAL SECURITIES") of the Company's Securities as set forth below. The Firm Securities and the Optional Securities are herein collectively called the "OFFERED SECURITIES". The Company and each Selling Stockholder hereby agree with the several Underwriters as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDERS. (a) The Company represents and warrants to, and agrees with, the several Underwriters that:
(i) A registration statement (No. 333-69362) relating to the Offered Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission ("COMMISSION") and either (A) has been declared effective under the Securities Act of 1933, as amended (the "ACT") and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (the "INITIAL REGISTRATION STATEMENT") has been declared effective, either (A) an additional registration statement (the "ADDITIONAL REGISTRATION STATEMENT") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) ("RULE 462(B)") under the Act and, if so filed, has become effective upon filing pursuant to such Rule and the Offered Securities all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (B) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and will become effective upon filing pursuant to such Rule and upon such filing the Offered Securities will all have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has
been filed with the Commission prior to the execution and delivery
of this Agreement, the most recent amendment (if any) to each such
registration statement has been declared effective by the Commission
or has become effective upon filing pursuant to Rule 462(c) ("RULE
462(C)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement
or, if filed prior to the execution and delivery of this Agreement,
the additional registration statement means (A) if the Company has
advised Credit Suisse First Boston Corporation ("CSFBC") and
Goldman, Sachs & Co., as representatives of the several Underwriters
(the "REPRESENTATIVES"), that it does not propose to amend such
registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company
has advised the Representatives that it proposes to file an
amendment or post-effective amendment to such registration
statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment,
as the case may be, is declared effective by the Commission. If an
additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised
the Representatives that it proposes to file one, "EFFECTIVE TIME"
with respect to such additional registration statement means the
date and time as of which such registration statement is filed and
becomes effective pursuant to Rule 462(b). "EFFECTIVE DATE" with
respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its
Effective Time, including all information contained in the
additional registration statement (if any) and deemed to be a part
of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(B)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and
including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant
to Rule 430A(b), is hereinafter referred to as the "ADDITIONAL
REGISTRATION STATEMENT". The Initial Registration Statement and the
Additional Registration Statement are hereinafter referred to
collectively as the "REGISTRATION STATEMENTS" and individually as a
"REGISTRATION STATEMENT". The form of prospectus relating to the
Offered Securities, as first filed with the Commission pursuant to
and in accordance with Rule 424(b) ("RULE 424(B)") under the Act or
(if no such filing is required) as included in a Registration
Statement, is hereinafter referred to as the "PROSPECTUS". No
document has been or will be prepared or distributed in reliance on
Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission (the "RULES AND REGULATIONS") and did 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, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed or will conform, in all material respects to the requirements of the Act and the Rules and Regulations and did not contain, or will not contain, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement, if any, is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and neither of such documents contains, or
will contain, any untrue statement of a material fact or omits, or will
omit, to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus
or any preliminary prospectus or any amendment or supplement thereto,
in light of the circumstances under which they were made) not
misleading. If the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this Agreement: on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the Rules and
Regulations, neither of such documents will contain any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus or any preliminary prospectus or
any amendment or supplement thereto, in light of the circumstances
under which they were made) not misleading, and no Additional
Registration Statement has been or will be filed. The two preceding
sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written information
furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and
agreed that the only such information is that described as such in
Section 7(c) hereof.
(iii) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Virginia, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus and is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where such failure to be so qualified, be in good standing or have such power or authority would not individually or in the aggregate have a material adverse affect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole ("Material Adverse Effect").
(iv) Each subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Act (the "Significant Subsidiaries") has been duly incorporated or organized and is an existing corporation or other entity, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or organization, if applicable, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus and is duly qualified to do business as a foreign corporation, or other entity, as the case may be, in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified, be in good standing or have such power or authority would not individually or in the aggregate have a Material Adverse Effect; all of the issued and outstanding capital stock or other ownership interests of each Significant Subsidiary has been duly authorized and validly issued and is fully paid and nonassessable; and, except for pledges in favor of Credit Suisse First Boston, New York branch under Amendment Number 1 to the Credit Agreement, dated April 26, 2001, among the Company, WW Funding Corp., Credit Suisse First Boston, as syndicated agent, lead arranger and book manager, BHF (USA) Capital Corporation, as the documentation agent, and the various financial institutions named therein, the capital stock or other ownership interests of each Significant Subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. Annex I attached hereto sets forth a true and complete list of all of the Significant Subsidiaries.
(v) The Offered Securities and all other outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable and conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering.
(vii) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act.
(viii) The Offered Securities have been approved for listing subject to notice of issuance on the New York Stock Exchange.
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement in connection with the sale
of the Offered Securities, except such as (A) have been obtained and
made under the Act, (B) may be required under state securities laws and
(C) may be required by the securities laws of any jurisdiction outside
of the United States of America.
(x) The execution, delivery and performance of this Agreement, and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (A) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their respective properties, or (B) any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or (C) the charter or by-laws of the Company or any such subsidiary, except in the case of (A) or (B), where such breach, violation or default would not individually or in the aggregate have a Material Adverse Effect.
(xi) This Agreement has been duly authorized, executed and delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them, except where such failure would not individually or in the aggregate have a Material Adverse Effect; and except as disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them, except where such failure would not individually or in the aggregate have a Material Adverse Effect.
(xiii) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them, in each case except to the extent where such failure to do so would not individually or in the aggregate have a Material Adverse Effect, and neither the Company nor any subsidiary of the Company has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect.
(xiv) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is threatened that would have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can acquire on reasonable terms, all material trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated.
(xviii) The financial statements included in each Registration Statement and the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Prospectus, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; the schedules included in each Registration Statement present fairly the information required to be stated therein; and the assumptions used in preparing the pro forma financial statements included in each Registration Statement and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date of the latest audited financial statements included in the Prospectus there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.
(xx) The Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended.
(b) Artal represents and warrants to, and agrees with, the several Underwriters that:
(i) Artal is a SOCIETE ANONYME and validly existing and, to the extent such concept exists in the relevant jurisdiction, in good standing under the laws of the jurisdiction of its organization.
(ii) This Agreement has been duly authorized, executed and delivered by Artal.
(iii) The execution and delivery by Artal of, and the performance by Artal of its obligations under, this Agreement will not contravene any provision of applicable law or the
organizational documents of Artal or any agreement or other instrument binding upon Artal or any of its assets or any judgment, order or decree of any governmental body, agency or court having jurisdiction over Artal or any of its assets, except where such contravention would not individually or in the aggregate materially adversely affect the ability of Artal to consummate the transactions contemplated hereby, and no consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by Artal for the performance by Artal for the performance of its obligations under this Agreement, except (A) such as have been obtained or made, (B) such as may be required under state securities laws and (C) such as may be required by the securities laws of any jurisdiction outside the United States of America.
(iv) Artal has, and on each Closing Date hereinafter mentioned will have, full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by Artal on such Closing Date hereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder the several Underwriters will acquire a security entitlement with respect to the Offered Securities to be delivered by Artal on such Closing Date and no action based on an adverse claim may be asserted against the Underwriters with respect to such Offered Securities.
(v) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission and did 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, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed or will conform, in all material respects to the requirements of the Act and the Rules and Regulations and did not contain, or will not contain, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement, if any, is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and neither of such documents contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus or any preliminary prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations, neither of such documents will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus or any preliminary prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences apply only to the extent statements in or omissions from a Registration Statement or the Prospectus are based on written information furnished to the Company by Artal specifically for use therein.
(vi) There are no material agreements or arrangements relating to the Company or its subsidiaries to which Artal, or to Artal's knowledge, to which any direct or indirect stockholder of Artal is a party, which are required to be described in the Registration Statements or the Prospectus or to be filed as exhibits thereto that are not so described or filed.
(vii) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between Artal and any person that would give rise to a valid claim against Artal or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering.
(c) Each Non-Controlling Selling Stockholder severally and not jointly represents and warrants to, and agrees with, the several Underwriters that:
(i) Such Non-Controlling Selling Stockholder is validly existing and, to the extent such concept exists in the relevant jurisdiction, in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable.
(ii) Upon execution and delivery of the this Agreement by one of the Attorneys (as defined in the Power of Attorney) on behalf of such Non-Controlling Selling Stockholder, this Agreement will have been duly authorized, executed and, to the extent such concept exists in the relevant jurisdiction, delivered by such Non-Controlling Selling Stockholder.
(iii) The execution and delivery by such Non-Controlling Selling Stockholder of, and the performance by such Non-Controlling Selling Stockholder of its obligations under, this Agreement will not contravene any provision of applicable law, or the organization documents of such Non Controlling Selling Stockholder or any agreement or other instrument binding upon such Non Controlling Selling Stockholder or any of its assets or any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Non-Controlling Selling Stockholder or any of its assets, except where such contravention would not individually or in the aggregate materially adversely affect the ability of such Non-Controlling Selling Stockholder to consummate the transactions contemplated hereby, and no consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by such Non-Controlling Selling Stockholder for the performance by such Non-Controlling Selling Stockholder of its obligations under this Agreement, except (A) such as have been obtained or made and (B) such as may be required under state securities laws and (C) such as may be required by the securities laws of any jurisdiction outside the United States of America.
(iv) Such Non-Controlling Selling Stockholder has, and on each Closing Date hereinafter mentioned will have, full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by such Non-Controlling Selling Stockholder on such Closing Date hereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder the several Underwriters will acquire a security entitlement with respect to the Offered Securities to be delivered by such Non-Controlling Selling Stockholder on such Closing Date and no action based on an adverse claim may be asserted against the Underwriters with respect to such Offered Securities.
(v) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all material respects to
the requirements of the Act and the Rules and Regulations and did 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, (B) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed or will conform, in all material respects to the requirements
of the Act and the Rules and Regulations and did not contain, or will
not contain, any untrue statement of a material fact and did not omit,
or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(C) on the date of this Agreement, the Initial Registration Statement
and, if the Effective Time of the Additional Registration Statement, if
any, is prior to the execution and delivery of this Agreement, the
Additional Registration Statement each conforms, and at the time of
filing of the Prospectus pursuant to Rule 424(b) or (if no such filing
is required) at the Effective Date of the Additional Registration
Statement in which the Prospectus is included, each Registration
Statement and the
Prospectus will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and neither of such documents contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus or any preliminary prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations, neither of such documents will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus or any preliminary prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences apply only to the extent that any statements in or omissions from a Registration Statement or the Prospectus are based on written information furnished to the Company by such Non-Controlling Selling Stockholder specifically for use therein.
(vi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between such Non-Controlling Selling Stockholder and any person that would give rise to a valid claim against such Non-Controlling Selling Stockholder or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, each Selling Stockholder agrees, severally and not jointly, to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from each Selling Stockholder, at a purchase price of $o per share, that number of Firm Securities (rounded up or down, as determined by CSFBC in its discretion, in order to avoid fractions) obtained by multiplying the number of Firm Securities set forth opposite the name of such Selling Stockholder in Schedule A hereto, in each case by a fraction the numerator of which is the number of Firm Securities set forth opposite the name of such Underwriter in Schedule B hereto and the denominator of which is the total number of Firm Securities.
The Selling Stockholders will deliver or shall cause to be delivered the Firm Securities to the Representatives for the accounts of the Underwriters, against payment of the purchase price in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFBC drawn to the order of each of the Selling Stockholders at the office of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, NY 10019, at 10 a.m., New York time, on [ ], or at such other time not later than seven full business days thereafter as CSFBC and the Selling Stockholders determine, such time being herein referred to as the "FIRST CLOSING DATE". For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Firm Securities sold pursuant to the offering. The certificates for the Firm Securities so to be delivered will be in the form of one or more global securities, in such denominations and registered in such names as CSFBC requests and will be made available for checking at the office of Cravath, Swaine & Moore at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Selling Stockholders from time to time not more than 30 days subsequent to the date of the Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Security to be paid for the Firm Securities. Each Optional Selling Stockholder agrees, severally and not jointly, to sell to the Underwriters the respective numbers of Optional Securities obtained by multiplying the number of Optional Securities specified in such notice by a fraction the numerator of which is the number of shares set forth opposite the name of such Optional Selling Stockholder in Schedule A hereto under the caption "Number of Optional Securities to be Sold" and the denominator of which is the total number of Optional Securities (subject to adjustment by CSFBC to eliminate fractions). Such Optional Securities shall be purchased from each Optional Selling Stockholder for the account of each Underwriter in the same
proportion as the number of Firm Securities set forth opposite such Underwriter's name bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised not more than twice and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Optional Selling Stockholders.
Each time for the delivery of and payment for the Optional Securities, being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC but shall be not earlier than two full business days and not later than five full business days after written notice of election to purchase Optional Securities is given. The Optional Selling Stockholders will deliver or shall cause to be delivered the Optional Securities being purchased on each Optional Closing Date to the Representatives for the accounts of the several Underwriters, against payment of the purchase price therefor in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of each of the Selling Stockholders at the office of Cravath, Swaine & Moore. The certificates for the Optional Securities being purchased on each Optional Closing Date will be in the form of one or more global securities, in such denominations and registered in such names as CSFBC requests upon reasonable notice prior to such Optional Closing Date and will be made available for checking at the office of Cravath, Swaine & Moore at a reasonable time in advance of such Optional Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY AND THE SELLING STOCKHOLDERS. (a) The Company agrees with the several Underwriters and the Selling Stockholders that:
(i) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CSFBC, which consent shall not be unreasonably withheld, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a posteffective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 p.m., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by CSFBC.
(ii) The Company will advise CSFBC promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or the Prospectus and will not effect such amendment or supplement without CSFBC's consent, which consent shall not be unreasonably withheld; and the Company will also advise CSFBC promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplement of a Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of a
Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.
(iii) If, at any time when a prospectus relating to the offered securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will promptly notify CSFBC of such event and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6.
(iv) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"AVAILABILITY, DATE" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "AVAILABILITY DATE" means the
90th day after the end of such fourth fiscal quarter.
(v) The Company will furnish to the Representatives copies of
each Registration Statement (three of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC reasonably
requests. The Prospectus shall be so furnished on or prior to 3:00
p.m., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company and the Selling
Stockholders will pay the expenses of printing and distributing to the
Underwriters all such documents.
(vi) The Company will use its reasonable efforts to arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and will continue such qualifications in effect so long as required for the distribution, provided that the Company will not be required to qualify to do business in any jurisdiction where it is not now qualified or take any action which would subject it or to a general or unlimited service of process in any jurisdiction where it is not now subject.
(vii) During the period of 3 years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request; except, in the case of (ii), insofar as providing such information to CSFBC would violate Regulation FD under the Exchange Act.
(viii) For a period of 180 days after the date of the initial public offering of the Offered Securities (THE "LOCK-UP PERIOD"), the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, except (A) issuances of Securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof, (B) grants of employee stock options pursuant to the terms of a plan in effect on the date hereof , (C) issuances of Securities pursuant to the exercise of such options or issuances of Securities pursuant to the Company's dividend reinvestment plan, (D) issuances of Securities pursuant to the Company's employee benefit plans which are described in the Prospectus or the Company's dividend reinvestment plan, if any; (E) the filing of a registration statement on Form S-8 or a resale shelf registration statement relating to such grants, issuances, exercises or conversions; or (F) issuances in connection with the merger with or acquisition of another corporation or entity or the acquisition of the assets or properties of any such corporation or entity and the related entry into a merger or acquisition agreement with respect to such merger or acquisition; provided that any party acquiring Securities from the Company under the provisions of subsection (F) herein agrees in writing not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any such Securities of the Company or securities convertible into or exchangeable or exercisable for any shares of Securities, enter into a transaction which 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 the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of CSFBC. Notwithstanding the foregoing, each such party may transfer Securities to an affiliate or family member, heir or trust, provided that the transferee agrees to be bound in writing by the provisions of this Section.
(ix) The Company agrees with the several Underwriters that the Company will pay all expenses incident to the performance of the obligations of the Company and the Selling Stockholders, as the case may be, under this Agreement, for any filing fees and other expenses (including reasonable fees and disbursements of counsel to the Underwriters) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates pursuant to Section 5(a)(vi) and the printing of memoranda relating thereto, for any fees incident to listing the Offered Securities on the New York Stock Exchange, for the filing fee incident to the review by the National Association of Securities Dealers, Inc. of the Offered Securities, for any travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities, for any transfer taxes on the sale by the Selling Stockholders of the Offered Securities to the Underwriters and for expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters. Except as otherwise provided in this Section 5(a)(ix) and Section 9, the Underwriters shall pay their own costs and expenses in connection with the transactions contemplated hereby, including, without limitation, the fees and expenses of their counsel and the expenses of advertising the offering of the Offered Securities made by the Underwriters.
(b)(i) Each Selling Stockholder agrees with the several Underwriters that, during the Lock-up Period, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any additional shares of the Securities of the Company or securities convertible into or exchangeable or exercisable for any shares of Securities, enter into a transaction which 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 the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of CSFBC. Notwithstanding the foregoing, each Selling Stockholder may transfer Securities to an affiliate or family member, heir or trust, provided that the transferee agrees to be bound in writing by the provisions of this Section 5(b).
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and each Selling Stockholder herein, to the accuracy of the statements of Company officers made in any certificates pursuant to the provisions hereof, to the performance by the Company and each Selling Stockholder of their obligations hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of PricewaterhouseCoopers LLP, confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and substantially in the form of Exhibit A hereto.
(b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 p.m., New York time, on the date of this Agreement or such later date as shall have been consented to by CSFBC. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 p.m., New York time, on the date of this Agreement or, if earlier, the time the Prospectus is printed and distributed to any Underwriter, or shall have occurred at such later date as shall have been consented to by CSFBC. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of each Selling Stockholder, the Company or the Representatives, shall be threatened by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole which, in the judgment of a majority in interest of the Underwriters including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. Federal or New York authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters including the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated the Closing Date, of Hunton & Williams, special Virginia counsel for the Company, in the form attached hereto as Exhibit B.
(e) The Representatives shall have received an opinion, dated the Closing Date, of Simpson
Thacher & Bartlett, counsel for the Company and special New York counsel to Artal, in the form attached hereto as Exhibit C.
(f) The Representatives shall have received an opinion, dated the Closing Date, of Robert W. Hollweg, counsel to the Company, in the form attached hereto as Exhibit D:
(g) The Representatives shall have received an opinion, dated such Closing Date, of Arendt & Medernach, Luxembourg counsel for Artal, in the form attached hereto as Exhibit E.
(h) The Representatives shall have received an opinion, dated such Closing Date, of [ ], Monaco counsel for Longisland International Limited, in the form attached hereto as Exhibit F.
(i) The Representatives shall have received an opinion, dated such Closing Date, of [Dickstein Shapiro] , New York counsel for Longisland International Limited, in the form attached hereto as Exhibit G.
(j) The Representatives shall have received an opinion, dated such Closing Date, of [ ] , Georgia counsel for Scotiabanc, Inc., in the form attached hereto as Exhibit H.
(k) The Representatives shall have received an opinion, dated such Closing Date, of [Dickstein Shapiro], New York counsel for Scotiabanc, Inc., in the form attached hereto as Exhibit I.
(l) The Representatives shall have received an opinion, dated such Closing Date, of [Dickstein Shapiro], counsel for Merchant Capital, Inc., in the form attached hereto as Exhibit J.
(m) The Representatives shall have received an opinion, dated such Closing Date, of [Dickstein, Shapiro], New York counsel for Richard and Heather Penn, in the form attached hereto as Exhibit K.
(n) The Representatives shall have received from Cravath, Swaine & Moore, counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities delivered on such Closing Date, the Registration Statements, the Prospectus and other related matters as the Representatives may require, and each of the Selling Stockholders and the Company shall have furnished to such counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters. In rendering such opinion, Cravath, Swaine & Moore may rely as to the incorporation of the Company and all other matters governed by Virginia law upon the opinion of Hunton & Williams referred to above.
(o) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to their knowledge after reasonable investigation, shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111 (a) or (b) under the Act, prior to the time the Prospectus was printed and distributed to any Underwriter; and, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Prospectus or as described in such certificate.
(p) The Representatives shall have received a letter, dated such Closing Date, of PricewaterhouseCoopers LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to such
Closing Date for the purposes of this subsection.
(q) On or prior to the date of this Agreement, the Representatives shall have received a letter, substantially in the form of Exhibit L hereto and addressed to the Representatives, from each of the executive officers and directors of the Company.
(r) Each Selling Shareholder shall deliver to the Representatives a properly completed and executed United States Treasury Form W-8 or W-9 (or other applicable form of statement specified by Treasury Department regulations in lieu thereof).
Each Selling Stockholder and the Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. CSFBC may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify
and hold harmless each Underwriter, its partners, directors and officers and
each person, if any, who controls such Underwriter within the meaning of
Section 15 of the Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement or any amendment or supplement thereto, the
Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus or any preliminary prospectus or any amendment or supplement
thereto, in light of the circumstances under which they were made), not
misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only
such information furnished by any Underwriter consists of the information
described as such in subsection (c) below; and provided, further, that WITH
RESPECT TO ANY UNTRUE STATEMENT OR OMISSION OF MATERIAL FACT MADE IN ANY
PRELIMINARY PROSPECTUS, THE INDEMNITY AGREEMENT CONTAINED IN THIS SECTION
7(a) SHALL NOT INURE TO THE BENEFIT OF ANY UNDERWRITER FROM WHOM THE PERSON
ASSERTING ANY SUCH LOSS, CLAIM, DAMAGE OR LIABILITY PURCHASED THE OFFERED
SECURITIES CONCERNED, TO THE EXTENT THAT ANY SUCH LOSS, CLAIM, DAMAGE OR
LIABILITY OF SUCH UNDERWRITER OCCURS UNDER THE CIRCUMSTANCE WHERE IT SHALL
HAVE BEEN DETERMINED BY A COURT OF COMPETENT JURISDICTION THAT (W) THE
COMPANY HAD PREVIOUSLY FURNISHED COPIES OF THE PROSPECTUS TO THE
REPRESENTATIVES, (X) DELIVERY OF THE PROSPECTUS WAS REQUIRED BY THE ACT TO BE
MADE TO SUCH PERSON, (Y) THE UNTRUE STATEMENT OR OMISSION OF A MATERIAL FACT
CONTAINED IN THE PRELIMINARY PROSPECTUS WAS CORRECTED IN THE PROSPECTUS AND
(Z) THERE WAS NOT SENT OR GIVEN TO SUCH PERSON, AT OR PRIOR TO THE WRITTEN
CONFIRMATION OF THE SALE OF SUCH SECURITIES TO SUCH PERSON, A COPY OF THE
PROSPECTUS.
(b) Each Selling Stockholder will severally and not jointly indemnify
and hold harmless each Underwriter, its partners, directors and officers
and each person, if any, who controls such Underwriter within the meaning of
Section 15 of the Act, against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement or
any amendment or supplement thereto, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary prospectus or any amendment or
supplement thereto, in light of the circumstances under which they were made)
not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information about such Selling Stockholder (or any direct or indirect stockholders of such Selling Stockholder) furnished to the Company by such Selling Stockholder specifically for use therein, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Selling Stockholders will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by an Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below; provided, further, that WITH RESPECT TO ANY UNTRUE STATEMENT OR OMISSION OF MATERIAL FACT MADE IN ANY PRELIMINARY PROSPECTUS, THE INDEMNITY AGREEMENT CONTAINED IN THIS SECTION 7(b) SHALL NOT INURE TO THE BENEFIT OF ANY UNDERWRITER FROM WHOM THE PERSON ASSERTING ANY SUCH LOSS, CLAIM, DAMAGE OR LIABILITY PURCHASED THE OFFERED SECURITIES CONCERNED, TO THE EXTENT THAT ANY SUCH LOSS, CLAIM, DAMAGE OR LIABILITY OF SUCH UNDERWRITER OCCURS UNDER THE CIRCUMSTANCE WHERE IT SHALL HAVE BEEN DETERMINED BY A COURT OF COMPETENT JURISDICTION THAT (W) THE COMPANY HAD PREVIOUSLY FURNISHED COPIES OF THE PROSPECTUS TO THE REPRESENTATIVES, (X) DELIVERY OF THE PROSPECTUS WAS REQUIRED BY THE ACT TO BE MADE TO SUCH PERSON, (Y) THE UNTRUE STATEMENT OR OMISSION OF A MATERIAL FACT CONTAINED IN THE PRELIMINARY PROSPECTUS WAS CORRECTED IN THE PROSPECTUS AND (Z) THERE WAS NOT SENT OR GIVEN TO SUCH PERSON, AT OR PRIOR TO THE WRITTEN CONFIRMATION OF THE SALE OF SUCH SECURITIES TO SUCH PERSON, A COPY OF THE PROSPECTUS; AND PROVIDED, FURTHER, THAT THE LIABILITY UNDER THIS SUBSECTION OF EACH SELLING STOCKHOLDER SHALL BE LIMITED TO AN AMOUNT EQUAL TO THE AGGREGATE GROSS PROCEEDS NET OF UNDERWRITING DISCOUNTS AND COMMISSIONS BUT BEFORE DEDUCTING EXPENSES TO SUCH SELLING STOCKHOLDER FROM THE SALE OF SECURITIES SOLD BY SUCH SELLING STOCKHOLDER HEREUNDER.
(c) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the Act,
and each of the Selling Stockholders, its directors and officers and each
person, if any, who controls such Selling Stockholder within the meaning of
Section 15 of the Act, against any losses, claims, damages or liabilities to
which the Company or each of the Selling Stockholders may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement or any amendment or supplement
thereto, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus or any preliminary prospectus or any amendment or supplement
thereto, in light of the circumstances under which they were made), not
misleading,, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company and each Selling Stockholder in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: [(i)
the concession and reallowance figures appearing in the fourth paragraph
under the caption "Underwriting"; (ii) the information regarding sales to
discretionary accounts contained in paragraph six under the caption
"Underwriting"; (ii) the information regarding stabilizing transactions in
the thirteenth paragraph under the caption "Underwriting"; (iii) the
information regarding material relationships furnished on behalf of CSFBC
[and insert names of other underwriters with material relationships] in the
sixteenth, seventeenth and eighteenth paragraphs under the caption
"Underwriting"; and (iv) the information contained in the fourteenth,
fifteenth and nineteenth paragraphs under the caption "Underwriting".](01)
(1) To be updated when "Underwriting" section is finalized.
(d) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a), (b) or (c) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, (i) without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (A) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party or (ii) be liable for any settlement of any such action effected without its written consent (which shall not be unreasonably withheld).
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Selling Stockholders on
the one hand or the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter 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 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under this Section shall be in addition to any liability which the Company and the Selling Stockholders may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement, to each person, if any, who controls the Company within the meaning of the Act, to each Selling Stockholder and to each person, if any, who controls any Selling Stockholder within the meaning of the Act.
(g) Notwithstanding any other provision of this Section 7, the aggregate liability of each of the Selling Stockholders under this Section 7 shall be limited to the aggregate gross proceeds net of underwriting discounts and commissions but before deducting expenses received by each such Selling Stockholder from the offering of Offered Securities under this Agreement.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Selling Stockholders for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC and the Selling Stockholders for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholders, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholders, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company, the Selling Stockholders, and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv) or (v) of Section
6(c), the Company will reimburse the Underwriters for all substantiated
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory
Group, or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 175 Crossways Park West, Woodbury, NY 11797-2055, Attention:
General Counsel, or, if sent to Artal,
will be mailed, delivered or telegraphed and confirmed to Artal Luxembourg S.A., at 105, Grand-Rue, L-1661 Luxembourg, Grand-Duchy of Luxembourg with a copy to The Invus Group Ltd., 135 East 57th Street, 30th Floor, New York, N.Y. 10022, Attention: Raymond Debbane, or if sent to the Non-Controlling Selling Stockholders, will be mailed, delivered or telegraphed and confirmed to it at the address listed underneath such Non-Controlling Selling Stockholder's name on Schedule A hereto; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder.
12. REPRESENTATION. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives jointly or by CSFBC will be binding upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company and the Selling Stockholders hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Artal irrevocably appoints David Van Zant, Northwestern School of Law, East Chicago Avenue, Chicago, Illinois 60611, as its authorized agent upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to Artal by the person serving the same to the address provided in Section 10, shall be deemed in every respect effective service of process upon Artal in any such suit or proceeding. Artal further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of seven years from the date of this Agreement.
The obligation of Artal in respect of any sum due to any Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day, following receipt by such Underwriter of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Underwriter may in accordance with normal banking procedures purchase United States dollars with such other currency; if the United States dollars so purchased are less than the sum originally due to such Underwriter hereunder, Artal agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter against such loss. If the United States dollars so purchased are greater than the sum originally due to such Underwriter hereunder, such Underwriter agrees to pay to Artal an amount equal to the excess of the dollars so purchased over the sum originally due to such Underwriter hereunder.
If the foregoing is in accordance with the Representatives' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Selling Stockholders, the Company and the several Underwriters in accordance with its terms.
Very truly yours,
Artal Luxembourg S.A.
Weight Watchers International, Inc.
By
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
Credit Suisse First Boston Corporation Goldman Sachs & Co.
Acting on behalf of themselves and as the Representatives of the several Underwriters.
By Credit Suisse First Boston Corporation
By
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
ARTICLE I
The name of the Corporation shall be Weight Watchers International, Inc.
ARTICLE II
The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act, as amended from time to time, and any legislation succeeding thereto (the "VSCA").
All references herein to "Articles of Incorporation" shall mean these Amended and Restated Articles of Incorporation, as subsequently amended or restated in accordance herewith and with the VSCA.
ARTICLE III
The aggregate number of shares that the Corporation shall have authority to issue shall be 250,000,000 shares of Preferred Stock, no par value per share (hereinafter called "Preferred Stock"), and 1,000,000,000 shares of Common Stock, no par value per share (hereinafter called "Common Stock").
The following is a description of each of such classes of stock, and a statement of the preferences, limitations, voting rights and relative rights in respect of the shares of each such class:
A. PREFERRED STOCK
1. AUTHORITY TO FIX RIGHTS OF PREFERRED STOCK. The Board of Directors shall have authority, by resolution or resolutions, at any time and from time to time to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series, and, without limiting the generality of the foregoing, to fix and determine the designation of each such series, the number of shares that shall constitute such series and the following relative rights and preferences of the shares of each series so established:
(a) the annual or other periodic dividend, if any, payable on shares of such series, the time of payment thereof, whether any such dividends shall be cumulative or non-cumulative, the relative rights of priority, if any, of payment of dividends on the shares of that series and the date or dates from which any cumulative dividends shall commence to accrue;
(b) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(c) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption prices;
(d) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and if so, the amount of such sinking fund;
(e) whether that series shall have voting rights (including multiple or fractional votes per share) in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(f) the terms and conditions, if any, on which shares of such series may be converted into shares of stock of the Corporation of any other class or classes or into shares of any other series of the same or any other class or classes, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(g) whether, and if so the extent to which, shares of such series may participate with the Common Stock in any dividends in excess of the preferential dividend fixed for shares of such series or in any distribution of the assets of the Corporation, upon a liquidation, dissolution or winding-up thereof, in excess of the preferential amount fixed for shares of such series; and
(h) any other preferences and relative, optional or other special rights, and qualifications, limitations or restrictions of such preferences or rights, of shares of such series not fixed and determined by law or in this Article III.
2. DISTINCTIVE DESIGNATIONS OF SERIES. Each series of Preferred Stock shall be so designated as to distinguish the shares thereof from the shares of all other series. Different series of Preferred Stock shall not be considered to constitute different voting groups of shares for the purpose of voting by voting groups except as required by the VSCA or as otherwise specified by the Board of Directors, as reflected in articles of
amendment to the Articles of Incorporation, with respect to any series at the time of the creation thereof.
3. RESTRICTIONS ON CERTAIN DISTRIBUTIONS. So long as any shares of Preferred Stock are outstanding, the Corporation shall not declare and pay or set apart for payment any dividends (other than dividends payable in Common Stock or other stock of the Corporation ranking junior to the Preferred Stock as to dividends) or make any other distribution on such junior stock if, at the time of making such declaration, payment or distribution, the Corporation shall be in default with respect to any dividend payable on, or any obligation to redeem, any shares of Preferred Stock.
B. COMMON STOCK
1. VOTING RIGHTS. Subject to the provisions of the VSCA or of the Bylaws of the Corporation as from time to time in effect with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, and except as otherwise provided by the VSCA or in articles of amendment to the Articles of Incorporation establishing any series of Preferred Stock pursuant to the provisions of Section 1 of Part A of this Article III, the holders of outstanding shares of Common Stock of the Corporation shall possess exclusive voting power for the election of directors and for all other purposes, with each holder of record of shares of Common Stock of the Corporation being entitled to one vote for each share of such stock standing in his name on the books of the Corporation.
2. DIVIDENDS. Subject to the rights of the holders of Preferred Stock, holders of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock of any corporation or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in all such dividends and other distributions.
3. RIGHTS UPON DISSOLUTION. Except as required by the VSCA or the Articles of Incorporation with respect to any rights upon dissolution of the Preferred Stock or any one or more series thereof, the holders of the Common Stock shall have the exclusive right to receive, pro rata according to the number of shares of Common Stock owned of record by each of them, the net assets of the Corporation upon dissolution and the full amount of any dividends or other distributions paid by the Corporation.
C. GENERAL PROVISIONS
1. REDEEMED OR REACQUIRED SHARES. Shares of any series of Preferred Stock that have been redeemed or otherwise reacquired by the Corporation (whether through the operation of a sinking fund, upon conversion or otherwise) shall have the status of authorized and unissued shares of Preferred Stock and may be redesignated and reissued as a part of such series (except as otherwise provided in Part D of this Article III with respect to the Series A Preferred Stock or unless prohibited by the articles of amendment
creating any other series) or of any other series of Preferred Stock. Shares of Common Stock that have been reacquired by the Corporation shall have the status of authorized and unissued shares of Common Stock and may be reissued.
2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of any class of the Corporation shall, as such holder, have any right to subscribe for or purchase (a) any shares of stock of any class of the Corporation, or any warrants, options or other instruments that shall confer upon the holder thereof the right to subscribe for or purchase or receive from the Corporation any shares of stock of any class, whether or not such shares of stock, warrants, options or other instruments are issued for cash or services or property or by way of dividend or otherwise, or (b) any other security of the Corporation that shall be convertible into, or exchangeable for, any shares of stock of the Corporation of any class or classes, or to which shall be attached or appurtenant any warrant, option or other instrument that shall confer upon the holder of such security the right to subscribe for or purchase or receive from the Corporation any shares of its stock of any class or classes, whether or not such securities are issued for cash or services or property or by way of dividend or otherwise, other than such right, if any, as the Board of Directors, in its sole discretion, may from time to time determine. If the Board of Directors shall offer to the holders of shares of stock of any class of the Corporation, or any of them, any such shares of stock, options, warrants, instruments or other securities of the Corporation, such offer shall not, in any way, constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other securities of the Corporation without offering the same to such holders.
3. AFFILIATED TRANSACTIONS STATUTE. Effective May 8, 2003, the Corporation shall not be governed by Article 14 of the VSCA.
4. CONTROL SHARE ACQUISITION STATUTE. The provisions of Article 14.1 of the VSCA shall not apply to acquisitions of shares of any class of capital stock of the Corporation.
D. SERIES A PREFERRED STOCK. There is hereby established a series of the Corporation's authorized Preferred Stock, to be designated as the "Series A Preferred Stock, no par value per share." The designation and number, and relative rights, preferences and limitations of the Series A Preferred Stock, insofar as not already fixed by any other provision of these Articles of Incorporation, shall be as follows:
1. DESIGNATION AND AMOUNT. The number of shares constituting the Series A Preferred Stock shall be 1,000,000, and the liquidation preference of the Series A Preferred Stock shall be $25.00 per share (the "Liquidation Value").
2. RANK. The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (a) senior to the Corporation's Common Stock and to all other classes and series of stock of the Corporation now or hereafter authorized, issued or outstanding which by their terms expressly provide that
they are junior to the Series A Preferred Stock with respect to such
matters (collectively with the Common Stock, the "Junior Securities");
(b) on a parity with each other class of capital stock or series of
preferred stock issued by the Corporation after the date hereof, the
terms of which specifically provide that such class or series will rank
on a parity with the Series A Preferred Stock with respect to such
matters or which do not specify their rank (collectively referred to as
"Parity Securities"); and (c) junior to each other class of capital
stock or other series of Preferred Stock issued by the Corporation
after the date hereof, the terms of which specifically provide that
such class or series will rank senior to the Series A Preferred Stock
with respect to such matters (collectively referred to as "Senior
Securities").
3. DIVIDENDS.
(a) The holders of shares of the Series A Preferred Stock
shall be entitled to receive, as and when declared and out of funds
legally available therefor, dividends in cash on each share of
Series A Preferred Stock at an annual rate equal to 6% of the
Liquidation Value. Such dividends shall be cumulative and shall
accrue and be payable annually on July 31 of each year (each such
date being a "Dividend Payment Date"), to holders of record at the
close of business on the date specified by the Board of Directors of
the Corporation at the time such dividend is declared (the "Record
Date"), in preference to dividends on the Junior Securities,
commencing on the Dividend Payment Date next succeeding the Issue
Date. Any such Record Date shall be 15 days prior to the relevant
Dividend Payment Date. With respect to any dividend that has been
declared, if on the applicable Dividend Payment Date the Corporation
is in default under its Senior Credit Agreement or any of its other
Debt Agreements or if the payment of such dividend in cash would
result in such a default, the payment of such declared dividend with
respect to shares of Series A Preferred Stock on such date shall be
deferred to the next Dividend Payment Date or other payment date
provided pursuant to Section 3(d) below on which no default exists
or would occur. Such unpaid dividends shall accrue interest at a
rate of 6% per annum until paid in full. All dividends paid with
respect to shares of Series A Preferred Stock pursuant to this
Section 3 shall be paid pro rata to the holders entitled thereto.
(b) In the case of dividend payments made on the first Dividend Payment Date with respect to shares of Series A Preferred Stock issued on the Issue Date, dividends shall accrue and be cumulative from the Issue Date.
(c) Each fractional share of Series A Preferred Stock outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of Series A Preferred Stock pursuant to Section 3(a) of this Part D, and all such dividends with respect to such outstanding fractional shares shall be cumulative and shall accrue (whether or not declared), and shall be payable in the same manner and at such times as provided for in Section 3(a) of this Part D with respect to dividends on each outstanding share of Series A Preferred Stock. Each fractional share of Series A Preferred Stock outstanding shall also be entitled to a ratably proportionate
amount of any other distributions made with respect to each outstanding share of Series A Preferred Stock, and all such distributions shall be payable in the same manner and at the same time as distributions on each outstanding share of Series A Preferred Stock.
(d) Accrued but unpaid dividends for any past dividend periods may be declared by the Board of Directors and paid on any date fixed by the Board of Directors, whether or not a regular Dividend Payment Date, to holders of record on the books of the Corporation on such record date as may be fixed by the Board of Directors, which record date shall be not less than 10 days and not more than 30 days prior to the payment date thereof. Holders of Series A Preferred Stock will not be entitled to any dividends, whether payable in cash, property or stock, in excess of the full cumulative dividends provided for herein.
(e)(i) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or retirement of, any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities, whether directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than dividends or distributions payable in additional shares of Junior Securities to holders of Junior Securities), and shall not permit any Person directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities. Notwithstanding the foregoing, the Corporation may purchase, redeem or otherwise acquire, cancel or retire for value Junior Securities or options, warrants, equity appreciation rights or other rights to purchase or acquire Junior Securities (A) held by any existing or former employees or management of the Corporation or any Subsidiary of the Corporation or their assigns, estates or heirs, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees or (B) issued in connection with the incurrence of debt under a Debt Agreement or the issuance of Senior Securities (other than securities issued to any Permitted Holder).
(ii) No full dividends shall be declared by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative dividends have been or contemporaneously are declared and paid (in cash) or declared and a sum set apart sufficient for such payment (in cash) on the Series A Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full dividends on such Parity Securities. If any dividends are not paid in full, as aforesaid, upon the shares of Series A Preferred Stock and any other Parity Securities, all dividends declared upon shares of Series A Preferred Stock and any other Parity Securities shall be declared pro rata so that the amount of dividends declared per share of the Series A Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Series A Preferred Stock and such Parity Securities bear to each other.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders an amount in cash equal to 100% of the Liquidation Value for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series A Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Series A Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full.
(b) For the purposes of this Section 4, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with any one or more other Person shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the Corporation.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Corporation may redeem, in whole or in part, the Series A Preferred Stock, at any time or from time to time, in the manner provided in Section 6(a) of this Part D (an "Optional Redemption"). Any Optional Redemption shall be at a price per share equal to 100% of the Liquidation Value thereof plus 100% of the sum of accrued and unpaid dividends thereon (including an amount equal to a prorated dividend from the last Dividend Payment Date immediately prior to the redemption date).
(b) REDEMPTION UPON CHANGE IN CONTROL OR A PERMITTED HOLDER PUBLIC SALE. Upon the occurrence of a Change in Control or a Permitted Holder Public Sale (each a "Trigger Event"), the Series A Preferred Stock shall be redeemable at the option of the holders thereof, in whole or in part and in the manner provided in Section 6(b) of this Part D, at a redemption price per share payable in cash equal to 100% of the Liquidation Value plus accrued and unpaid dividends to the date of redemption (including an amount equal to a prorated dividend from the last Dividend Payment Date immediately prior to the redemption date). After the occurrence of the Trigger Event, the Corporation shall redeem the number of shares specified in the holders' notices of election to redeem pursuant to Section 6(b) of this Part D on the date fixed for
redemption. The Corporation's obligations pursuant to Section 5(b) of this Part D shall be suspended during any period when such redemption would be prohibited by the Corporation's Senior Credit Agreement or any of its other Debt Agreements.
6. PROCEDURE FOR REDEMPTION.
(a) If the Corporation elects to redeem Series A Preferred Stock pursuant to Section 5(a) of this Part D, the Corporation shall give written notice (an "Optional Redemption Notice") thereof by overnight courier or by facsimile transmission to each holder of Series A Preferred Stock at its address or facsimile number, as the case may be, as it appears in the records of the Corporation. Such notice shall set forth: (i) the redemption price; (ii) the redemption date (which date shall be no earlier than five days and no later than 60 days from the date the Optional Redemption Notice is sent); (iii) the procedures to be followed by such holder, including the place or places where certificates for such shares are to be surrendered for payment of the redemption price and (iv) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If less than all shares of Series A Preferred Stock are to be redeemed at any time, selection of such shares for redemption shall be made on a pro rata basis.
(b) At any time prior to and in any event no later than five days after the occurrence of a Change in Control and no later than 25 days prior to the occurrence of a Permitted Holder Public Sale, the Corporation shall give written notice of such Trigger Event by overnight courier or by facsimile transmission to each holder of Series A Preferred Stock at its address or facsimile number, as the case may be, as it appears in the records of the Corporation, which notice shall describe such Trigger Event. Such notice shall also set forth: (i) each holder's right to require the Corporation to redeem shares of Series A Preferred Stock held by such holder as a result of such Trigger Event; (ii) the redemption price; (iii) the redemption date (which date shall be no later than 45 days from the date of the occurrence of such Trigger Event); (iv) the procedures to be followed by such holder in exercising its right of redemption, including the place or places where certificates for such shares are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. In the event a holder of shares of Series A Preferred Stock shall elect to require the Corporation to redeem any or all of such shares of Series A Preferred Stock, such holder shall deliver, within 15 days of the sending to it of the Corporation's notice described in this Section 6(b), a written notice (the "Holder's Election Notice') stating such holder's election and specifying the number of shares to be redeemed pursuant to Section 5(b) of this Part D.
(c) If an Optional Redemption Notice has been sent by the Corporation as provided in Section 6(a) of this Part D, or notice of election has been delivered by the holders as provided in Section 6(b) of this Part D, and provided that on or before the applicable redemption date funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares entitled to redemption, so as to be and to
continue to be available therefor, then, from and after the redemption date (unless the Corporation defaults in the payment of the redemption price, in which case such rights shall continue until the redemption price is paid), dividends on the shares of Series A Preferred Stock so called for or entitled to redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding and shall not have the status of shares of Series A Preferred Stock, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive the applicable redemption price and any accrued and unpaid dividends from the Corporation to the date of redemption) shall cease. Upon surrender of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and a notice by the Corporation shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price as aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares without cost to the holder thereof.
7. REACQUIRED SHARES. Shares of Series A Preferred Stock that have been issued and reacquired in any manner shall (upon compliance with any applicable provisions of the laws of the Commonwealth of Virginia) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock other than the Series A Preferred Stock.
8. VOTING RIGHTS. Except as required by law or set forth below, the holders of the Series A Preferred Stock will have no voting rights with respect to their shares of Series A Preferred Stock. The approval of holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a class, shall be required to amend, repeal or change any of the provisions of the Articles of Incorporation of the Corporation in any manner that would alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely; provided that without the consent of each holder of Series A Preferred Stock, no amendment may reduce the dividend payable on or the Liquidation Value of the Series A Preferred Stock.
9. CERTAIN COVENANTS. Any holder of Series A Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Part D or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
10. DEFINITIONS. For the purposes of this Part D, the following terms shall have the meanings indicated:
"affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act or any successor provision. The terms "affiliated" and "non-affiliated" shall have meanings correlative to the foregoing.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Change in Control" shall mean
(a) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Corporation (unless the Permitted Holders shall hold a higher percentage thereof or have the ability to elect or designate for election a majority of the Board of Directors of the Corporation);
(b) the adoption by the shareholders of the Corporation of a plan or proposal for the liquidation or dissolution of the Corporation; or
(c) the merger or consolidation of the Corporation with another Person that is not an affiliate of the Corporation prior thereto or the sale or other disposition of all or substantially all the assets or property of the Corporation in one transaction or series of related transactions to a Person who is not an affiliate of the Corporation prior thereto.
"Debt Agreement" shall mean any instrument or agreement governing indebtedness (whether now outstanding or hereinafter incurred) of the Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Issue Date" shall mean the first date on which shares of Series A Preferred Stock are issued.
"Junior Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Parity Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Permitted Holder" shall mean Artal Luxembourg S.A. and any of its affiliates, but in the case of any affiliate, only for so long as it continues to be an affiliate of Artal Luxembourg S.A.
"Permitted Holder Public Sale" shall mean a sale for cash by a Permitted Holder of all or part of the Common Stock in a registered, secondary public offering.
"Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, limited liability company or other entity.
"Senior Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of January 16, 2001, among the Corporation, WW Funding Corp.,
various financial institutions, The Bank of Nova Scotia, as Administrative Agent, BHF (USA) Capital Corporation, as Documentation Agent, and Credit Suisse First Boston, as Syndication Agent, as amended by Amendment No. 1 to Credit Agreement, dated as of April 26, 2001, and the term "Senior Credit Agreement" shall also include any further amendments, extensions, renewals, restatements or refundings thereof and any credit facilities that replace, refund or refinance any part of the loans or commitments thereunder, including any such replacement, refunding or refinancing facility that increases the amount borrowable thereunder.
"Senior Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.
"Trigger Event" shall have the meaning set forth in Section 5(b) of this Part D.
"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.
ARTICLE IV
1. The number of directors shall be as specified in the Bylaws of the Corporation but such number may be increased or decreased from time to time in such manner as may be prescribed in the Bylaws, provided that in no event shall the number of directors exceed 15. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. Class I directors shall be elected initially for a one-year term, Class II directors initially for a two-year term and Class III directors initially for a three-year term. At each annual meeting of shareholders, beginning in 2002, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. The foregoing provisions of this Section 1 shall not apply to those directors who may be elected by the holders of any series of Preferred Stock.
2. Subject to the rights of the holders of any Preferred Stock then outstanding, at any time that Artal Luxembourg S.A. ("Artal") or a Majority Transferee owns a majority of the then outstanding shares of Common Stock, directors may be removed, with or without cause, by the affirmative vote of a majority of the votes entitled to be cast by the then outstanding shares of capital stock of the Corporation that are entitled to vote generally in the election of directors (the "Voting Shares"), voting together as a single voting group. At all other times, directors may be removed only for
cause and only by the affirmative vote of a majority of the votes entitled to be cast by the then outstanding Voting Shares, voting together as a single voting group. For purposes of the Articles of Incorporation, "Majority Transferee" shall mean a transferee from Artal or any other Majority Transferee of a majority of the then outstanding shares of Common Stock that pursuant to an instrument of transfer or related agreement has been granted rights under such provision of the Articles of Incorporation by Artal or such transferring Majority Transferee.
3. Subject to the rights of the holders of any Preferred Stock
then outstanding and to any limitations set forth in the VSCA,
newly-created directorships resulting from any increase in the
number of directors and any vacancies in the Board of Directors
resulting from death, resignation, disqualification, removal or
other cause shall be filled solely (a) by the Board of Directors or
(b) at a meeting of shareholders by the shareholders entitled to
vote on the election of directors. If the directors remaining in
office constitute fewer than a quorum of the Board, they may fill
the vacancy by the affirmative vote of a majority of the directors
remaining in office. Any director elected by the Board of Directors
to fill any vacancy shall hold office until the next annual meeting
of shareholders. In such event, the director elected by the
shareholders at the annual meeting shall hold office for a term that
shall coincide with the remaining term of the class of directors to
which such person has been elected.
4. No provision of any agreement, plan or related document contemplated by Section 13.1-646 of the VSCA and approved by the Board of Directors shall be considered to be a limitation on the authority or power of the Board of Directors but, if so considered, is hereby authorized by these Articles of Incorporation.
ARTICLE V
1. Except as expressly otherwise required in the Articles of Incorporation, to be approved, action on a matter involving (a) an amendment or restatement of the Articles of Incorporation for which the VSCA requires shareholder approval, (b) a plan of merger or share exchange for which the VSCA requires shareholder approval, (c) a sale of assets other than in regular course of business or (d) the dissolution of the Corporation shall be approved by the affirmative vote of a majority of the votes entitled to be cast by the then outstanding Voting Shares, voting together as a single group, unless in submitting any such matter to the shareholders the Board of Directors shall require a greater vote; provided that directors shall be elected by a plurality of the votes cast by shares entitled to vote in the election at a meeting at which a quorum is present.
2. At any time that Artal or a Majority Transferee owns a
majority of the then outstanding shares of Common Stock, the
affirmative vote of a majority of the votes entitled to be cast by
the then outstanding Voting Shares, voting together as a single
voting group, shall be required to amend, alter, change or repeal
any provision of Article IV, Section 2 or 3 of this Article V or
Section 1 of Article VII. At all other times, the affirmative vote
of at least 80 percent of the votes entitled to be cast by the then
outstanding Voting Shares, voting together as a single voting group,
shall be required to amend, alter, change or repeal any provision of
Article IV, Section 2 or 3 of this Article V or Section 1 of Article
VII.
3. In furtherance of, and not in limitation of, the powers conferred by the VSCA, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be altered, amended or repealed by the Board of Directors or by the shareholders having the requisite voting power with respect thereto, provided further that, in the case of any such action by shareholders, the affirmative vote of at least 80 percent of the votes entitled to be cast by the then outstanding Voting Shares, voting together as a single voting group, shall be required in order for the shareholders to amend, alter, change or repeal any provision of the Bylaws or to adopt any additional Bylaw.
ARTICLE VI
1. Every person who is or was a director, officer or employee of the Corporation, or who, at the request of the Corporation, serves or has served in any such capacity with another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise shall be indemnified by the Corporation against any and all liability and reasonable expense that may be incurred by him in connection with or resulting from any claim, action or proceeding (whether brought in the right of the Corporation or any such other corporation, entity, plan or otherwise), in which he may become involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Corporation, or such other corporation, entity or plan while serving at the request of the Corporation, whether or not he continues to be such at the time such liability or expense is incurred, unless such person engaged in willful misconduct or a knowing violation of the criminal law.
As used in this Article VI: (a) the terms "liability" and "expense" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by, a director, officer or employee; (b) the terms "director," "officer" and employee," unless the context otherwise requires, include the estate or personal representative of any such person; (c) a person is considered to be serving an employee benefit plan as a director, officer or employee of the plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or, in connection with the plan, to participants in or beneficiaries of the plan; (d) the term "occurrence" means any act or failure to act, actual or alleged, giving rise to a claim, action or proceeding; and (e) service as a trustee or as a member of a management or similar committee of a partnership, joint venture or limited liability company shall be considered service as a director, officer or employee of the trust, partnership, joint venture or limited liability company.
The termination of any claim, action or proceeding, civil or criminal, by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the standards of conduct set forth in this Section 1. The burden of proof shall be on the Corporation to establish, by a preponderance of the evidence, that the relevant standards of conduct set forth in this Section 1 have not been met.
2. Any indemnification under Section 1 of this Article VI shall be made unless (a) the Board of Directors, acting by a majority vote of those directors who were directors at the time of the occurrence giving rise to the claim, action or proceeding involved and who are not at the time parties to such claim, action or proceeding (provided there are at least two such directors), finds that the director, officer or employee has not met the relevant standards of conduct set forth in such Section 1, or (b) if there are not at least two such directors, the Corporation's principal Virginia legal counsel, as last designated by the Board of Directors as such prior to the time of the occurrence giving rise to the claim, action or proceeding involved, or in the event for any reason such Virginia counsel is unwilling to so serve, then Virginia legal counsel mutually acceptable to the Corporation and the person seeking indemnification, deliver to the Corporation their written advice that, in their opinion, such standards have not been met.
3. Expenses incurred with respect to any claim, action or proceeding of the character described in Section 1 of this Article VI shall, except as otherwise set forth in this Section 3, be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article VI. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's final ability to make repayment. Notwithstanding the foregoing, the Corporation may refrain from, or suspend, payment of expenses in advance if at any time before delivery of the final finding described in Section 2 of this Article VI, the Board of Directors or Virginia legal counsel, as the case may be, acting in accordance with the procedures set forth in Section 2 of this Article VI, finds by a preponderance of the evidence then available that the officer, director or employee has not met the relevant standards of conduct set forth in Section 1 of this Article VI.
4. No amendment or repeal of this Article VI shall adversely affect or deny to any director, officer or employee the rights of indemnification provided in this Article VI with respect to any liability or expense arising out of a claim, action or proceeding based in whole or substantial part on an occurrence the inception of which takes place before or while this Article VI, as set forth in these Articles of Incorporation, is in effect. The provisions of this Section 4 shall apply to any such claim, action or proceeding whenever commenced, including any such claim, action or proceeding commenced after any amendment or repeal of this Article VI.
5. The rights of indemnification provided in this Article VI shall be in addition to any rights to which any such director, officer or employee may otherwise be
entitled by contract or as a matter of law.
6. In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article VI, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law.
ARTICLE VII
1. A special meeting of the shareholders for any purpose or purposes, unless otherwise provided by law, may be called by order of the Chairman of the Board, the President, the Board of Directors or, at any time that Artal or any Artal Transferee owns at least 20 percent of the then outstanding shares of Common Stock, by Artal or any such Artal Transferee. For purposes of this Section 1, "Artal Transferee" shall mean a transferee from Artal or any other Artal Transferee of at least 20 percent of the then outstanding shares of Common Stock that pursuant to an instrument of transfer or related agreement has been granted rights under this Section 1 by Artal or any Artal Transferee.
2. For such periods as the Corporation shall have fewer than 300 shareholders of record, any action required or permitted by the VSCA to be taken at a shareholders' meeting may be taken without a meeting and without prior notice, if the action is taken by the written consent of shareholders who would be entitled to vote at a meeting of holders of outstanding shares and who have voting power to cast not less than the minimum number (or the applicable minimum numbers, in the case of voting by groups) of votes that would be necessary to authorize or take the action at a meeting at which all shareholders entitled to vote thereon were present and voted.
3. As used in the Articles of Incorporation, the word "own" shall mean "beneficially own" as determined pursuant to Rule 13d-3 (or any successor provision thereto) under the Securities Exchange Act of 1934, as amended.
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
AMENDED AND RESTATED
BYLAWS
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. PLACE OF MEETINGS.
Except as otherwise provided in the Articles of Incorporation (hereinafter called the "Articles") of Weight Watchers International, Inc. (hereinafter called the "Corporation"), all meetings of the shareholders of the Corporation shall be held at such place, either within or without the Commonwealth of Virginia, as may from time to time be fixed by the Board of Directors of the Corporation (hereinafter called the "Board").
Section 1.2. ANNUAL MEETINGS.
The annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held in each year on such day as may be fixed by the Board, at such hour as may be specified in the notice thereof.
Section 1.3. NOTICE OF MEETINGS.
Except as otherwise provided by law or the Articles, not less than 10 nor more than 60 days' notice in writing of the place, day, hour and purpose or purposes of each meeting of the shareholders, whether annual or special, shall be given to each shareholder of record of the Corporation entitled to vote at such meeting, either by the delivery thereof to such shareholder personally or by the mailing thereof to such shareholder in a postage prepaid envelope addressed to such shareholder at his address as it appears on the stock transfer books of the Corporation. Notice of a shareholders' meeting to act on an amendment of the Articles, a plan of merger or share exchange, a proposed sale of all, or substantially all of the Corporation's assets, otherwise than in the usual and regular course of business, or the dissolution of the Corporation shall be given not less than 25 nor more than 60 days before the date of the meeting and shall be accompanied, as appropriate, by a copy of the proposed amendment, plan of merger or share exchange or sale agreement. Notice of any meeting of shareholders shall not be required to be given to any shareholder who shall attend the meeting in person or by proxy, unless attendance is for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened, or who shall waive notice thereof in a writing signed by the shareholder before, at or after such meeting. Notice of any adjourned meeting need not be given, except when expressly required by law.
Section 1.4. QUORUM.
Shares representing a majority of the votes entitled to be cast on a matter by all classes or series that are entitled to vote thereon and be counted together collectively, represented in person or by proxy at any meeting of the shareholders, shall constitute a quorum for the transaction of business thereat with respect to such matter, unless otherwise provided by law or the Articles. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, the chairman of such meeting or the holder of shares representing a majority of the votes cast on the matter of adjournment, either in person or by proxy, may adjourn such meeting from time to time until a quorum is obtained. At any such adjourned meeting at which a quorum has been obtained, any business may be transacted that might have been transacted at the meeting as originally called.
Section 1.5. ORGANIZATION AND ORDER OF BUSINESS.
At all meetings of the shareholders, the Chairman of the Board of Directors or, in the chairman's absence, such director of the Corporation as designated in writing by the Chairman of the Board of Directors shall act as chairman. In the absence of all of the foregoing persons, or, if present, with their consent, a majority of the shares entitled to vote at such meeting, may appoint any person to act as chairman. The Secretary of the Corporation shall act as secretary at all meetings of the shareholders. In the absence of the Secretary, the chairman may appoint any person to act as secretary of the meeting.
The chairman shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the dismissal of business not properly presented, the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.
At each annual meeting of shareholders, only such business shall be
conducted as shall have been properly brought before the meeting (a) by or at
the direction of the Board or (b) by any shareholder of the Corporation who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in this Section 1.5. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States certified mail, postage
prepaid, and received at the principal executive offices of the Corporation (i)
with respect to the Corporation's first annual meeting following the initial
public offering of shares of its common stock, not later than the close of
business on the tenth business day following the date on which notice of such
meeting is first given to shareholders, (ii) not less than 120 days nor more
than 150 days before the first anniversary of the date of the Corporation's
proxy statement in connection with the last annual meeting of shareholders or
(iii) if no annual meeting was held in the previous year or the date of the
applicable annual meeting has been changed by more than 30 days from the date of
the previous year's annual meeting, not less than 60 days before the date of the
applicable annual meeting. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's stock transfer books, of such shareholder proposing such business, (c) a representation that such shareholder is a shareholder of record and intends to appear in person or by proxy at such meeting to bring the business before the meeting specified in the notice, (d) the class, series and number of shares of stock of the Corporation beneficially owned by the shareholder and (e) any material interest of the shareholder in such business. The Secretary of the Corporation shall deliver each such shareholder's notice that has been timely received to the Board or a committee designated by the Board for review. Notwithstanding the foregoing, at any time that Artal Luxembourg S.A. ("Artal") or a Majority Transferee owns a majority of the then outstanding shares of common stock, no par value (the "Common Stock"), of the Corporation, notice by Artal or a Majority Transferee shall be timely and complete if delivered in writing or orally at any time prior to the annual meeting. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1.5. The chairman of an annual meeting shall, if the facts warrant, determine that the business was not brought before the meeting in accordance with the procedures prescribed by this Section 1.5. If the chairman should so determine, he shall so declare to the meeting and the business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.5, a shareholder seeking to have a proposal included in the Corporation's proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, but not limited to, Rule 14a-8 or its successor provision. For purposes of these Bylaws, "Majority Transferee" shall mean a transferee from Artal or any other Majority Transferee of a majority of the then outstanding shares of Common Stock that pursuant to an instrument of transfer or related agreement has been granted rights under any provision of these Bylaws specified by Artal or such transferring Majority Transferee. For purposes of these Bylaws, the word "own" shall mean "beneficially own" as determined pursuant to Rule 13d-3 (or any successor provision thereto) under the Exchange Act.
Section 1.6. VOTING.
Unless otherwise provided by law or the Articles, at each meeting of the shareholders each shareholder entitled to vote at such meeting may vote either in person or by proxy in writing. Unless demanded by a shareholder present in person or represented by proxy at any meeting of the shareholders and entitled to vote thereon or so directed by the chairman of the meeting, the vote on any matter need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting or his proxy, and it shall show the number of shares voted.
Section 1.7. WRITTEN AUTHORIZATION.
A shareholder or a shareholder's duly authorized attorney-in-fact may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the shareholder or such shareholder's duly authorized attorney-in-fact or authorized officer, director, employee or agent signing such writing or causing such shareholder's signature to be
affixed to such writing by any reasonable means including, but not limited to, by facsimile signature.
Section 1.8. ELECTRONIC AUTHORIZATION.
The Secretary may approve procedures to enable a shareholder or a shareholder's duly authorized attorney-in-fact to authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, internet transmission, telephone transmission or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such transmission must either set forth or be submitted with information from which the judges or inspectors of election can determine that the transmission was authorized by the shareholder or the shareholder's duly authorized attorney-in-fact. If it is determined that such transmissions are valid, the judges or inspectors shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 1.8 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
Section 1.9. JUDGES.
One or more judges or inspectors of election for any meeting of shareholders may be appointed by the chairman of such meeting, for the purpose of receiving and taking charge of proxies and ballots and deciding all questions as to the qualification of voters, the validity of proxies and ballots and the number of votes properly cast.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. GENERAL POWERS AND NUMBER.
The property, business and affairs of the Corporation shall be managed under the direction of the Board as from time to time constituted. The Board shall consist of seven directors, but the number of directors may be increased to any number, not more than 15 directors as set forth in the Articles, or decreased to any number, not fewer than three directors, by amendment of these Bylaws, provided that no decrease in the number of directors shall shorten or terminate the term of any incumbent director. No director need be a shareholder.
Section 2.2. NOMINATION AND ELECTION OF DIRECTORS.
At each annual meeting of shareholders, the shareholders entitled to
vote shall elect the directors. No person shall be eligible for election as a
director unless nominated in accordance with the procedures set forth in this
Section 2.2. Nominations of persons for election to the Board may be made by the
Board or any committee designated by the Board or by any shareholder entitled to
vote for the election of directors at the applicable meeting of shareholders
who complies with the notice procedures set forth in this Section 2.2. Such
nominations, other than those made by the Board or any committee designated by
the Board, may be made only if written notice of a shareholder's intent to
nominate one or more persons for election as directors at the applicable meeting
of shareholders has been given, either by personal delivery or by United States
certified mail, postage prepaid, to the secretary of the Corporation and
received (i) with respect to the Corporation's first annual meeting following
the initial public offering of shares of its common stock, not later than the
close of business on the tenth business day following the date on which notice
of such meeting is first given to shareholders, (ii) not less than 120 days nor
more than 150 days before the first anniversary of the date of the Corporation's
proxy statement in connection with the last annual meeting of shareholders,
(iii) if no annual meeting was held in the previous year or the date of the
applicable annual meeting has been changed by more than 30 days from the date of
the previous year's annual meeting, not less than 60 days before the date of the
applicable annual meeting, or (iv) with respect to any special meeting of
shareholders called for the election of directors, not later than the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Each such shareholder's notice shall set forth
(a) as to the shareholder giving the notice, (i) the name and address, as they
appear on the Corporation's stock transfer books, of such shareholder, (ii) a
representation that such shareholder is a shareholder of record and intends to
appear in person or by proxy at such meeting to nominate the person or persons
specified in the notice, (iii) the class and number of shares of stock of the
Corporation beneficially owned by such shareholder and (iv) a description of all
arrangements or understandings between such shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such shareholder; and (b) as to each
person whom the shareholder proposes to nominate for election as a director, (i)
the name, age, business address and, if known, residence address of such person,
(ii) the principal occupation or employment of such person, (iii) the class and
number of shares of stock of the Corporation that are beneficially owned by such
person, (iv) any other information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors or is
otherwise required by the rules and regulations of the Securities and Exchange
Commission promulgated under the Exchange Act and (v) the written consent of
such person to be named in the proxy statement as a nominee and to serve as a
director if elected. The Secretary of the Corporation shall deliver each such
shareholder's notice that has been timely received to the Board or a committee
designated by the Board for review. Notwithstanding the foregoing, at any time
that Artal or any Artal Transferee owns a majority of the then outstanding
Common Stock, notice by Artal or any Artal Transferee shall be timely and
complete if delivered in writing or orally at least five business days prior to
the date the Corporation mails its proxy statement in connection with such
meeting of shareholders. Any person nominated for election as director by the
Board or any committee designated by the Board shall, upon the request of the
Board or such committee, furnish to the Secretary of the Corporation all such
information pertaining to such person that is required to be set forth in a
shareholder's notice of nomination. The chairman of the meeting of shareholders
shall, if the facts warrant, determine that a nomination was not made in
accordance with the procedures prescribed by this Section 2.2. If the chairman
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. For purposes of these Bylaws, "Artal
Transferee" shall mean a transferee from Artal or any other Artal Transferee
that pursuant to a negotiated instrument of transfer or related agreement has
been granted rights by Artal or such transferring Artal Transferee under the
provisions of Article
II of the Corporate Agreement, dated as of November 5, 2001, between the Corporation and Artal.
Section 2.3. COMPENSATION.
Each director, in consideration of such director's serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at Board and Committee meetings, or both, in cash or other property, including securities of the Corporation, as the Board shall from time to time determine, together with reimbursements for the reasonable expenses incurred by such director in connection with the performance of such director's duties. Nothing contained herein shall preclude any director from serving the Corporation, or any subsidiary or affiliated corporation, in any other capacity and receiving proper compensation therefor. If the Board adopts a resolution to that effect, any director may elect to defer all or any part of the annual and other fees hereinabove referred to for such period and on such terms and conditions as shall be permitted by such resolution.
Section 2.4. PLACE OF MEETINGS.
The Board may hold its meetings at such place or places within or without the Commonwealth of Virginia as it may from time to time by resolution determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.
Section 2.5. ORGANIZATIONAL MEETING.
As soon as practicable after each annual election of directors, the newly constituted Board shall meet for the purposes of organization. At such organizational meeting, the newly constituted Board shall elect officers of the Corporation and transact such other business as shall come before the meeting. Any organizational meeting may be held at any time or place designated by the Board from time to time.
Section 2.6. REGULAR MEETINGS.
Regular meetings of the Board may be held at such time and place as may from time to time be specified in a resolution adopted by the Board then in effect, and, unless otherwise required by such resolution, or by law, notice of any such regular meeting need not be given.
Section 2.7. SPECIAL MEETINGS.
Special meetings of the Board shall be held whenever called by the Chairman of the Board of Directors or by the Secretary at the request of any two or more of the directors then in office. Notice of a special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, not later than the third day before the day on which such meeting is to be held, or shall be sent addressed to him at such place by facsimile, telegraph, cable or wireless, or be delivered personally or by telephone, not later than the day before the day on which such meeting is to be held. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of such meeting, unless required by the Articles.
Section 2.8. QUORUM.
At each meeting of the Board the presence of a majority of the number of directors fixed by these Bylaws shall be necessary to constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum shall be present shall be the act of the Board, except as may be otherwise provided by law or by these Bylaws. Any meeting of the Board may be adjourned by a majority vote of the directors present at such meeting. Notice of any adjourned meeting need not be given.
Section 2.9. WAIVERS OF NOTICE OF MEETINGS.
Notwithstanding anything in these Bylaws or in any resolution adopted by the Board to the contrary, notice of any meeting of the Board need not be given to any director if such notice shall be waived in writing signed by such director before, at or after the meeting, or if such director shall be present at the meeting. Any meeting of the Board shall be a legal meeting without any notice having been given or regardless of the giving of any notice or the adoption of any resolution in reference thereto, if every member of the Board shall be present thereat. Except as otherwise provided by law or these Bylaws, waivers of notice of any meeting of the Board need not contain any statement of the purpose of the meeting.
Section 2.10. TELEPHONE MEETINGS.
Members of the Board or any committee may participate in a meeting of the Board or such committee by means of a conference telephone or other means of communication whereby all directors participating may simultaneously hear each other during the meeting, and participation by such means shall constitute presence in person at such meeting.
Section 2.11. ACTIONS WITHOUT MEETINGS.
Any action that may be taken at a meeting of the Board or of a committee may be taken without a meeting if a consent in writing, setting forth the action, shall be signed, either before or after such action, by all of the directors or all of the members of the committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote.
Section 2.12. CREATION OF COMMITTEES.
In addition to the executive committee authorized by Article III of these Bylaws, to the extent permitted by law, the Board may from time to time by resolution adopted by a majority of the number of directors then in office create such other committees of directors as the Board shall deem advisable and with such limited authority, functions and duties as the Board shall by resolution prescribe. The Board shall have the power to change the members of any such committee at any time, to fill vacancies, and to discharge any such committee, either with or without cause, at any time.
ARTICLE III
EXECUTIVE COMMITTEE
Section 3.1. HOW CONSTITUTED AND POWERS.
The Board, by resolution adopted pursuant to Article II, Section 2.12 hereof, may designate one or more directors to constitute an executive committee, who shall serve at the pleasure of the Board. The executive committee, to the extent provided in such resolution and permitted by law, shall have and may exercise all of the authority of the Board.
Section 3.2. ORGANIZATION, ETC.
The executive committee may choose a chairman and secretary. The executive committee shall keep a record of its acts and proceedings and report the same from time to time to the Board.
Section 3.3. MEETINGS.
Meetings of the executive committee may be called by any member of the committee. Notice of each such meeting, which need not specify the business to be transacted thereat, shall be mailed to each member of the committee, addressed to his or her residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such place by telegraph, telex or telecopy or be delivered personally or by telephone, not later than the day before the day on which the meeting is to be held.
Section 3.4. QUORUM AND MANNER OF ACTING.
A majority of the executive committee shall constitute a quorum for transaction of business, and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the executive committee. The members of the executive committee shall act only as a committee, and the individual members shall have no powers as such.
Section 3.5. REMOVAL.
Any member of the executive committee may be removed, with or without cause, at any time, by the Board.
Section 3.6. VACANCIES.
Any vacancy in the executive committee shall be filled by the Board.
ARTICLE IV
OFFICERS
Section 4.1. NUMBER, TERM, ELECTION.
The officers of the Corporation shall be a Chairman of the Board of Directors, a President, a Secretary and a Treasurer. The Board may appoint such other officers and such
assistant officers and agents with such powers and duties as the Board may find necessary or convenient to carry on the business of the Corporation. Such officers and assistant officers shall serve until their successors shall be elected and qualify, or as otherwise provided in these Bylaws. Any two or more offices may be held by the same person.
Section 4.2. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall, subject to the control of the Board, have full authority and responsibility for directing the conduct of the business, affairs and operations of the Corporation and shall preside at all meetings of the Board and of the shareholders. The Chairman of the Board of Directors shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board.
Section 4.3. PRESIDENT.
The President shall be the chief operating officer of the Corporation and shall have such powers and perform such duties as may from time to time be prescribed by the Board or by the Chairman of the Board of Directors. The President may sign and execute in the name of the Corporation deeds, contracts and other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board or by these Bylaws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed.
Section 4.4. VICE PRESIDENTS.
Each Vice President, if any, shall have such powers and perform such duties as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. Any Vice President of the Corporation may sign and execute in the name of the Corporation deeds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by these Bylaws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed.
Section 4.5. TREASURER.
The Treasurer shall have such powers and perform such duties as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. If the Board shall so determine, the Treasurer shall give a bond for the faithful performance of the duties of the office of the Treasurer, in such sum as the Board may determine to be proper, the expense of which shall be borne by the Corporation. To such extent as the Board shall deem proper, the duties of the Treasurer may be performed by one or more assistants, to be appointed by the Board.
Section 4.6. SECRETARY.
The Secretary shall keep the minutes of meetings of shareholders, of the Board, and, when requested, of committees of the Board, and shall attend to the giving and serving of notices of all meetings thereof. The Secretary shall keep or cause to be kept such stock transfer and other books, showing the names of the shareholders of the Corporation, and all other particulars regarding them, as may be required by law. The Secretary shall also perform such other duties and exercise such other powers as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. To such extent as the Board shall deem proper, the duties of the Secretary may be performed by one or more assistants, to be appointed by the Board.
ARTICLE V
REMOVALS AND RESIGNATIONS
Section 5.1. REMOVAL OF OFFICERS.
Any officer, assistant officer or agent of the Corporation may be removed at any time, either with or without cause, by the Board in its absolute discretion. Any officer or agent appointed otherwise than by the Board of Directors may be removed at any time, either with or without cause, by any officer having authority to appoint such an officer or agent, except as may be otherwise provided in these Bylaws. Any such removal shall be without prejudice to the recovery of damages for breach of the contract rights, if any, of the officer, assistant officer or agent removed. Election or appointment of an officer, assistant officer or agent shall not of itself create contract rights.
Section 5.2. RESIGNATION.
Any director, officer or assistant officer of the Corporation may resign as such at any time by giving written notice of his resignation to the Board, the Chairman of the Board of Directors or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if no time is specified therein, at the time of delivery thereof, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 5.3. VACANCIES.
Any vacancy in the office of any officer or assistant officer caused by death, resignation, removal or any other cause, may be filled by the Board for the unexpired portion of the term.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC.
Section 6.1. EXECUTION OF CONTRACTS.
Except as otherwise provided by law or by these Bylaws, the Board (i) may authorize any officer, employee or agent of the Corporation to execute and deliver any contract, agreement or
other instrument in writing in the name and on behalf of the Corporation, and
(ii) may authorize any officer, employee or agent of the Corporation so
authorized by the Board to delegate such authority by written instrument to
other officers, employees or agents of the Corporation. Any such authorization
by the Board may be general or specific and shall be subject to such limitations
and restrictions as may be imposed by the Board. Any such delegation of
authority by an officer, employee or agent may be general or specific, may
authorize re-delegation, and shall be subject to such limitations and
restrictions as may be imposed in the written instrument of delegation by the
person making such delegation.
Section 6.2. LOANS.
No loans shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name unless authorized by the Board. When authorized by the Board, any officer, employee or agent of the Corporation may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation and when so authorized may pledge, hypothecate or transfer any securities or other property of the Corporation as security for any such loans or advances. Such authority may be general or confined to specific instances.
Section 6.3. CHECKS, DRAFTS, ETC.
All checks, drafts and other orders for the payment of money out of the funds of the Corporation and all notes or other evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by the Board.
Section 6.4. DEPOSITS.
All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select or as may be selected by the Treasurer or any other officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board.
Section 6.5. VOTING OF SECURITIES.
Unless otherwise provided by the Board, the President may from time to time appoint an attorney or attorneys, or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes that the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as such officer may deem necessary or proper in the premises.
ARTICLE VII
CAPITAL STOCK
Section 7.1. SHARES.
Shares of the Corporation may but need not be represented by certificates.
When shares are represented by certificates, the Corporation shall issue such certificates in such form as shall be required by the Virginia Stock Corporation Act (the "VSCA") and as determined by the Board, to every shareholder for the fully paid shares owned by such shareholder. Each certificate shall be signed by, or shall bear the facsimile signature of, the Chairman of the Board of Directors or the President and the Secretary or an Assistant Secretary of the Corporation and may bear the corporate seal of the Corporation or its facsimile. All certificates for the Corporation's shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom shares (whether or not represented by a certificate) are issued, with the number of shares and date of issue, shall be entered on the share transfer books of the Corporation. Such information may be stored or retained on discs, tapes, cards or any other approved storage device relating to data processing equipment; provided that such device is capable of reproducing all information contained therein in legible and understandable form, for inspection by shareholders or for any other corporate purpose.
When shares are not represented by certificates, then within a reasonable time after the issuance or transfer of such shares, the Corporation shall send the shareholder to whom such shares have been issued or transferred a written statement of the information required by the VSCA to be included on certificates.
Section 7.2. STOCK TRANSFER BOOKS AND TRANSFER OF SHARES.
The Corporation, or its designated transfer agent or other agent, shall keep a book or set of books to be known as the stock transfer books of the Corporation, containing the name of each shareholder of record, together with such shareholder's address and the number and class or series of shares held by such shareholder. Shares of stock of the Corporation shall be transferable on the stock books of the Corporation by the holder in person or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or the transfer agent, but, except as hereinafter provided in the case of loss, destruction or mutilation of certificates, no transfer of stock shall be entered until the previous certificate, if any, given for the same shall have been surrendered and canceled. Transfer of shares of the Corporation represented by certificates shall be made on the stock transfer books of the Corporation only upon surrender of the certificates for the shares sought to be transferred by the holder of record thereof or by such holder's duly authorized agent, transferee or legal representative, who shall furnish proper evidence of authority to transfer with the Secretary of the Corporation or its designated transfer agent or other agent. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued. Except as otherwise provided by law, no transfer of shares shall be valid as against the Corporation, its shareholders or creditors, for any purpose, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
Section 7.3. HOLDER OF RECORD.
Except as otherwise required by the VSCA, the Corporation may treat the person in whose name shares of stock of the Corporation (whether or not represented by a certificate) stand of record on its books or the books of any transfer agent or other agent designated by the Board as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote, and to otherwise exercise the rights, powers and privileges of ownership of such shares.
Section 7.4. RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the Board fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
Section 7.5. LOST, DESTROYED OR MUTILATED CERTIFICATES.
In case of loss, destruction or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, destruction or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.
Section 7.6. TRANSFER AGENT AND REGISTRAR; REGULATIONS.
The Corporation may, if and whenever the Board so determines, maintain in the Commonwealth of Virginia or any other state of the United States, one or more transfer offices or agencies and also one or more registry offices which offices and agencies may establish rules and regulations for the issue, transfer and registration of certificates. No certificates for shares of stock of the Corporation in respect of which a transfer agent and registrar shall have been designated shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of shares represented by certificates and shares without certificates.
ARTICLE VIII
SEAL
The seal of the Corporation shall be a flat-face circular die, of which there may be any number of counterparts of facsimiles, in such form as the Board of Directors shall from time to time adopt as the corporate seal of the Corporation.
EMERGENCY BYLAWS
Section 1. DEFINITIONS.
As used in these Emergency Bylaws, (a) the term "period of emergency" shall mean any period during which a quorum of the Board cannot readily be assembled because of some catastrophic event.
(b) the term "incapacitated" shall mean that the individual to whom such term is applied shall not have been determined to be dead but shall be missing or unable to discharge the responsibilities of his office; and
(c) the term "senior officer" shall mean the Chairman of the Board of Directors, the President, any Vice President, the Treasurer and the Secretary, and any other person who may have been so designated by the Board before the emergency.
Section 2. APPLICABILITY.
These Emergency Bylaws, as from time to time amended, shall be operative only during any period of emergency. To the extent not inconsistent with these Emergency Bylaws, all provisions of the regular Bylaws of the Corporation shall remain in effect during any period of emergency.
No officer, director or employee shall be liable for actions taken in good faith in accordance with these Emergency Bylaws.
Section 3. BOARD OF DIRECTORS.
(a) A meeting of the Board may be called by any director or senior officer of the Corporation. Notice of any meeting of the Board need be given only to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio, and at a time less than twenty-four hours before the meeting if deemed necessary by the person giving notice.
(b) At any meeting of the Board, three directors in attendance shall constitute a quorum. Any act of a majority of the directors present at a meeting at which a quorum shall be present shall be the act of the Board. If less than three directors should be present at a meeting of the Board, any senior officer of the Corporation in attendance at such meeting shall serve as a director for such meeting, selected in order of rank and within the same rank in order of seniority.
(c) In addition to the Board's powers under the regular Bylaws of the Corporation to fill vacancies on the Board, the Board may elect any individual as a director to replace any director who may be incapacitated to serve until the latter ceases to be incapacitated or until the termination of the period of emergency, whichever first occurs. In considering officers of the Corporation for election to the Board, the rank and seniority of individual officers shall not be pertinent.
(d) The Board, during as well as before any such emergency, may change the principal office or designate several alternative offices or authorize the officers to do so.
Section 4. APPOINTMENT OF OFFICERS.
In addition to the Board's powers under the regular Bylaws of the Corporation with respect to the election of officers, the Board may elect any individual as an officer to replace any officer who may be incapacitated to serve until the latter ceases to be incapacitated.
Section 5. AMENDMENTS.
These Emergency Bylaws shall be subject to repeal or change by further action of the Board or by action of the shareholders, except that no such repeal or change shall modify the provisions of the second paragraph of Section 2 with regard to action or inaction prior to the time of such repeal or change. Any such amendment of these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.
EXHIBIT 4.5
WEIGHT WATCHERS INTERNATIONAL, INC.
and
EQUISERVE TRUST COMPANY, N.A.,
Rights Agent
Rights Agreement
Dated as of November __, 2001
TABLE OF CONTENTS
SECTION PAGE
------- ----
Section 1. Certain Definitions.........................................1
Section 2. Appointment of Rights Agent.................................6
Section 3. Issuance of Rights Certificates.............................6
Section 4. Form of Rights Certificates.................................8
Section 5. Countersignature and Registration...........................9
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.............................................10
Section 8. Cancellation of Rights Certificates........................12
Section 9. Reservation and Availability of Capital Stock..............12
Section 10. Preferred Stock Record Date................................14
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights.................................14
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares..................................................21
Section 13. Consolidation, Merger or Sale or Transfer of
Assets, Cash Flow or Earning Power.........................21
Section 14. Fractional Rights and Fractional Shares....................23
Section 15. Rights of Action...........................................25
Section 16. Agreement of Rights Holders................................25
Section 17. Rights Certificate Holder Not Deemed a Stockholder.........26
Section 18. Concerning the Rights Agent................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent..27
Section 20. Duties of Rights Agent.....................................27
Section 21. Change of Rights Agent.....................................30
Section 22. Issuance of New Rights Certificates........................31
Section 23. Redemption and Termination.................................32
i
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Section 24. Exchange...................................................32 Section 25. Notice of Certain Events...................................33 Section 26. Notices....................................................33 Section 27. Supplements and Amendments.................................34 Section 28. Successors.................................................35 Section 29. Determinations and Actions by the Board, etc...............35 Section 30. Benefits of this Agreement.................................35 Section 31. Severability...............................................35 Section 32. Governing Law..............................................36 Section 33. Counterparts...............................................36 Section 34. Descriptive Headings.......................................36 EXHIBITS Exhibit A -- Form of Certificate of Designation, Preferences and Rights Exhibit B -- Form of Rights Certificates Exhibit C -- Form of Summary of Rights |
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of November __, 2001 (the "Agreement"), between Weight Watchers International, Inc., a Virginia corporation (the "Company"), and EquiServe Trust Company, N.A., a federally chartered trust company (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on November __, 2001, the Board of Directors of the
Company (the "Board") authorized the issuance and distribution of one Right (as
hereinafter defined) for each share of Common Stock, no par value, of the
Company outstanding at the close of business on the date of this Agreement (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
earliest of the Close of Business on the Distribution Date, the Redemption Date
and the Close of Business on the Final Expiration Date (as such terms are
hereinafter defined) each Right initially representing the right to purchase one
one-hundredth of a share of Series B Junior Participating Preferred Stock of the
Company (the "Preferred Stock") having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights"); provided, however, that Rights may be issued with
respect to shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Close
of Business on the Final Expiration Date in accordance with the provisions of
Section 22 of the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with all Associates and Affiliates of such Person, shall be the Beneficial Owner of ten percent (10%), but shall not include (i) any Exempted Entity, (ii) the Company, (iii) any Subsidiary of the Company, (iv) any employee benefit plan of the Company, or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan or (v) any Person who becomes the Beneficial Owner of ten percent (10%) or more of the shares of Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of ten percent (10%) or more of the then outstanding shares of Common Stock, acquires beneficial ownership of additional shares of Common Stock representing one percent (1%) or more of the shares of Common Stock then outstanding or (vi) any such Person who has reported or is required to report such ownership (but less than 20%) on Schedule 13G under the Securities and Exchange Act of 1934, as amended and in effect on the date of the Agreement (the
"Exchange Act") (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such schedule (other than the disposition of the Common Stock) and, within 10 Business Days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person acquired shares of Common Stock in excess of 9.9% inadvertently or without knowledge of the terms of the Rights and who, together with all Associates and Affiliates, thereafter does not acquire additional shares of Common Stock while the Beneficial Owner of 10% or more of the shares of Common Stock then outstanding; provided, however, that if the Person requested to so certify fails to do so within 10 Business Days, then such Person shall become an Acquiring Person immediately after such 10-Business-Day period.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(d) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
(e) "Artal Entity" shall mean Artal Luxembourg S.A., a Luxembourg SOCIETE ANONYME, or any Affiliate thereof, except for the Company and its Subsidiaries.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event (as hereinafter defined) or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event, which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date (as hereinafter defined) or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act and (B) is not reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any voting securities of the Company; provided, however, that nothing in this paragraph (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty days. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of the securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.
(g) "Board" shall have the meaning set forth in the preamble of this Agreement.
(h) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.
(j) "Common Stock" shall mean the Common Stock, no par value, of the Company, except that "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person.
(k) "Common Stock Equivalents" shall have the meaning set forth in Section 11(a)(iii) hereof.
(l) "Company" shall have the meaning set forth in the preamble of this Agreement, as it may be modified by Section 13(a) hereof.
(m) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(n) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(o) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(p) "Equivalent Preferred Stock" shall have the meaning set forth in Section 11(b) hereof.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(r) "Exchange Ratio" shall have the meaning set forth in
Section 24(a) hereof.
(s) "Exempted Entity" shall mean: (1) any Artal Entity, (2) any transferee of any Artal Entity that acquires directly from any such Artal Entity ten percent (10%) or more of the then outstanding Common Stock (a "Non-Artal Exempted Entity"), (3) any transferee of any Non-Artal Exempted Entity that acquires directly from any Non-Artal Exempted Entity ten percent (10%) or more of the then outstanding Common Stock (a "Non-Artal Exempted Entity Transferee") and (4) any Person who or which is the Beneficial Owner of Common Stock beneficially owned by an Exempted Entity; provided, however, that any Artal Entity, any Non-Artal Exempted Entity and any Non-Artal Exempted Entity Transferee shall cease to be an Exempted Entity as of the date that such Artal Entity, Non-Artal Exempted Entity or Non-Artal Exempted Entity Transferee ceases to beneficially own ten percent (10%) or more of the shares of the then outstanding Common Stock.
(t) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(u) "Final Expiration Date" shall have the meaning set forth in Section 7(a) hereof.
(v) "NYSE" shall mean the New York Stock Exchange.
(w) "NASDAQ" shall mean the National Association of Securities Dealers Automated Quotation System.
(x) "Person" shall mean any individual, firm, corporation, partnership, limited liability company or other entity.
(y) "Preferred Stock" shall mean shares of Series B Junior Participating Preferred Stock, no par value, of the Company, and, to the extent that there are not a sufficient number of shares of Series B Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series B Junior Participating Preferred Stock.
(z) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(aa) "Purchase Price" shall have the meaning set forth in Sections 4(a) and 11(a)(ii) hereof.
(bb) "Record Date" shall have the meaning set forth in the preamble of this Agreement.
(cc) "Redemption Date" shall have the meaning set forth in
Section 23(b) hereof.
(dd) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(ee) "Rights" shall have the meaning set forth in the preamble of this Agreement.
(ff) "Rights Agent" shall have the meaning set forth in the preamble of this Agreement.
(gg) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof
(hh) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof.
(ii) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii) hereof.
(jj) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof.
(kk) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.
(ll) "Stock Acquisition Date" shall mean the earlier of the date of (i) the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed or amended pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or (ii) the public disclosure of facts by the Company or an Acquiring Person indicating that a Person has become such.
(mm) "Subsidiary" of any Person shall mean any corporation or other Person in which such Person beneficially owns, directly or indirectly, an amount of voting securities sufficient to elect at least a majority of the directors or control the management of such corporation or Person.
(nn) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(oo) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(pp) "Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof.
(qq) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable upon ten days written notice to the Rights Agent. The Rights Agent shall have no duty to supervise and shall in no event be liable for the acts or omissions of, any such co-rights agent.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the Close of Business on the
tenth (10th) Business Day after the Stock Acquisition Date or (ii) the Close of
Business on the tenth Business Day (or such later date as may be determined by
action of the Board prior to such time as any Person becomes an Acquiring
Person) after the date that a tender or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would become an Acquiring Person (the earlier of (i) and
(ii) being herein referred to as the "Distribution Date"), (x) the Rights will
be evidenced (subject to the provisions of paragraph (b) of this Section 3) by
the certificates for the Common Stock registered in the names of the holders of
the Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). The Company shall
promptly notify the Rights Agent of the occurrence of a Distribution Date and
request its transfer agent to provide to the Rights Agent a shareholder list
together with all other relevant information. As soon as practicable after the
Rights Agent is notified of the Distribution Date and receives such notice, list
and information from the Company, the Rights Agent will, at the Company's
expense, send by first-class, insured, postage-prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
right certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates. The failure to mail a Rights
Certificate shall not affect the legality or validity of the Rights.
(b) The Company will send, as promptly as practicable following the Record Date, a copy of a Summary of Rights, in the form attached hereto as Exhibit C (the "Summary of Rights") by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company and will make the Summary of Rights available to any holder of Rights who may so request from time to time prior to the Expiration Date. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Close of Business on the Distribution Date (or the earlier of the Redemption Date or the Close of Business on the Final Expiration Date), the surrender for transfer of any certificates representing shares of Common Stock outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company's treasury) on or after the Record Date but prior to the earliest of the Close of Business on the Distribution Date, the Redemption Date or the Close of Business on the Final Expiration Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Weight Watchers International, Inc. (the "Company") and the Rights Agent thereunder, as it may from time to time be amended or supplemented in accordance with its terms (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. The Rights Certificates shall be in machine printable format and in a form reasonably satisfactory to the Rights Agent. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date, show the date of countersignature, and on their face shall entitle the holders thereof to purchase such number of one one-hundredths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a),
Section 11(i) or Section 22 hereof that represents Rights beneficially owned by:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
continuing agreement, arrangement or understanding which has as a primary
purpose or effect avoidance of Section 7(e) hereof, and provided that the
Company shall have notified the Rights Agent that this Section 4(b) applies, any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.
The Company shall supply the Rights Agent with such legended Rights Certificates.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date and receipt by the Rights Agent of all reasonably necessary information, the Rights Agent will keep, or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that may have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have properly completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e), Section 14 hereof and Section 24 hereof, countersign and deliver
to the Person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The Company may require payment by the holders
of Rights of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates. The Rights Agent shall have no duty or obligation to take
any action under any Section of this Agreement which requires the payment by a
holder of Rights of applicable taxes and governmental charges unless and until
the Rights Agent is satisfied that all such taxes and/or charges have been paid.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's or the Rights Agent's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and, upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, at any time after the
Distribution Date the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(ii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M., New York City time, on
November__, 2011, or such later date as may be established by the Board prior to
the expiration of the Rights (such date, as it may be extended by the Board, the
("Final Expiration Date"); (ii) the time at which the right to exercise the
Rights terminates pursuant to Section 23 hereof; or (iii) the time at which the
right to exercise the Rights terminates pursuant to Section 24 hereof (the
earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $____, and shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable tax or charge, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-hundredths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or, upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement. The Company reserves the right to require, prior to the occurrence of a Triggering Event, that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, continuing agreement, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The
Company shall notify the Rights Agent when this Section 7(e) applies and should use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but neither the Company nor the Rights Agent shall have any liability to any holder of Rights Certificates or any other Person as a result of the Company's failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. The Rights Agent will endeavor to comply with the provisions hereof to the extent it has received instructions from the Company concerning such matters.
(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Associates or Affiliates thereof as the Company or the Rights Agent shall reasonably request.
SECTION 8. CANCELLATION OF RIGHTS CERTIFICATES. All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its reasonable best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its reasonable best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been
determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement and shall give simultaneous written notice to the Rights Agent stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may by issuing a public announcement temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. The Company shall promptly provide the Rights Agent with copies of such announcements. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law, or a registration statement shall not have been declared effective. The Rights Agent may assume that any Right exercised is permitted to be exercised under applicable law and shall have no liability for acting in reliance upon such assumption.
(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-hundredths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and payable any and all taxes and governmental charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax or charge shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax or charge is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event any Person shall become an Acquiring Person, then, promptly following the occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common Stock of the Company
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-hundredths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event and (y) dividing that product (which, following such
first occurrence, shall thereafter be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by 50% of the Current Market
Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on
the date of such first occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Articles of Incorporation, but which are
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights, are not sufficient to permit the exercise in full of the Rights
in accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall (A) determine the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common
Stock or other equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock, such as the Preferred Stock,
which the Board has deemed to have essentially the same value or economic rights
as shares of Common Stock (such shares of preferred stock being referred to as
"Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the Board;
provided, however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. For
purposes of the preceding sentence, the term "Spread" shall mean the excess of
(i) the Current Value over (ii) the Purchase Price. If the Board determines in
good faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the thirty
(30) day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization of such
additional shares (such thirty (30) day period, as it may be extended, is herein
called the "Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section 11(a)(iii), the
Company (1) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek such shareholder approval for such authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect, in each case with simultaneous written notice to the Rights Agent. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness, or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock, and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days immediately prior to and not including such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following and not including such date; provided, however, that in the event that the Current Market Price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights) or (B) any subdivision, combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use, or, if the shares of Common Stock are listed or admitted to trading on the New York Stock Exchange, the closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading, or, if on any such date the shares of Common Stock are not quoted by any such organizations, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the Current Market Price of a Unit shall be equal to the Current Market Price of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a share of Preferred Stock (calculated to the nearest one-
millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement (with prompt written notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made, and shall promptly give the Rights Agent a copy of such announcement. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredths of a share which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-hundredths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall give prompt written notice of such election to the Rights Agent) until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof) or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Record Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts and computations accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 27 hereof (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock). The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall have no duty with respect to and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS, CASH FLOW OR EARNING POWER.
(a) In the event that, at any time after a Person becomes an
Acquiring Person, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than (i) an Exempted
Entity or a (ii) Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than (i) an
Exempted Entity or (ii) a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into, or exchanged for, stock or other securities of any other
Person or cash or any other property or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than (i) an Exempted Entity or the Company or (ii) any Subsidiary
of the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case described in the foregoing clause (i) or (ii) of this Section 13(b) (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its reasonable best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and
(ii) take such all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).
(d) The Rights Agent may rely and be fully protected in
relying upon a certificate of the Company stating that the provisions of this
Section 13 have been fulfilled. Notwithstanding anything in this Agreement to
the contrary, the prior written consent of the Rights Agent must be obtained in
connection with any supplemental agreement which alters the rights or duties of
the Rights Agent, which consent shall not be unreasonably withheld.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use, or, if the Rights are listed or admitted to trading on the New York Stock Exchange, the closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or, if on any such date the Rights are not quoted by any such organizations, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board. If on any such date no market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.
(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices and/or formulas utilized in calculating such payments and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares
under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided,
however, the Company must use its reasonable best efforts to have any such order, decree, judgment or ruling (whether interlocutory or final) lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent such compensation as shall be agreed in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, delivery, execution, amendment and administration of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including, without limitation, the costs and expenses of defending against any claim (whether asserted by the Company or any holder of Rights) of liability in the premises. The costs and expenses incurred by the Rights Agent in enforcing this right of indemnification shall be paid by the Company unless it is determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction that the Rights Agent is not entitled to indemnification due to the Rights Agent's gross negligence, bad faith or willful misconduct, in which case the costs and expenses of the Company incurred in defending this claim for indemnification shall be paid by the Rights Agent. The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent.
(b) The Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its acceptance and administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be
signed and executed by the proper Person or Persons. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith unless and until it has received such notice.
(c) Notwithstanding anything in this Agreement to the contrary, in no event shall the Rights Agent be liable for special, indirect, incidental, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of the loss or damage and regardless of the form of the action.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only the duties and obligations expressly imposed by this Agreement, and no implied duties or obligations shall be read into this Agreement against the Rights Agent, upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no
liability for or in respect of, any action taken, suffered or omitted by it in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Any liability of the Rights Agent under this Rights Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility or
have any liability in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7(e)) or any adjustment required under the provisions of
Section 11, Section 13 or Section 24 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after the Rights Agent's
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable, nor shall the Rights Agent be
responsible for the legality of the terms hereof in its capacity as an
administrative agent.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such instruction shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in accordance with instructions of any such officer or for any delay in acting while waiting for these instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three (3) Business Days after the date any officer of the Company actually receives such application, unless such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted or unless the Rights Agent shall have acted with gross negligence or willful misconduct.
(h) The Rights Agent and any stockholder, director, Affiliate, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it reasonably believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company.
(l) In addition to the foregoing, the Rights Agent shall be
protected and shall incur no liability for, or in respect of, any action taken
or omitted by it in connection with its administration of this Agreement if such
acts or omissions are in reliance upon (i) the proper execution of the
certification concerning beneficial ownership appended to the form of assignment
and the form of election to purchase attached hereto unless the Rights Agent
shall have actual knowledge that, as executed, such certification is untrue or
(ii) the non-execution of such certification including, without limitation, any
refusal to honor any otherwise permissible assignment or election by reason of
such non-execution.
(m) The Company agrees to give the Rights Agent prompt written notice of any event or ownership which would prohibit the exercise or transfer or the Rights Certificates.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail. Any successor to the Rights Agent that so resigns will send notice to the registered holders of the Rights Certificates by first-class mail if such resignation occurs after the Distribution Date. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail. Any successor to the Rights Agent so removed will send notice to the holders of Rights Certificates by registered or certified mail if such removal occurs after the Distribution Date. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of sixty (60) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company, at the expense of the Company), then the Rights Agent or any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a Person organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust or stock transfer or shareholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a Person described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution
Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such forms as may be approved by its Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchaseable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Stock following the
Distribution Date and prior to the earlier of the Redemption Date and the Close
of Business on the Final Expiration Date, the Company may, with respect to
shares of Common Stock so issued or sold (i) pursuant to the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company
or (iv) a contractual obligation of the Company, in each case existing prior to
the Distribution Date, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale.
SECTION 23. REDEMPTION AND TERMINATION.
(a) The Board may, at its option, at any time prior to the earlier of (i) such time as any Person becomes an Acquiring Person or (ii) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the Current Market Price, as defined in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board.
(b) Immediately upon the time of the effectiveness of the redemption of the Rights pursuant to paragraph (a) of this Section 23 or such earlier time as may be determined by the Board ordering the redemption of the Rights, although not earlier than the time of such action (such time the "Redemption Date"), evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock; provided, however, that the failure to give or any defect in any such notice shall not affect the validity of such redemption. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.
SECTION 24. EXCHANGE.
(a) The Board may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Associates or Affiliates of such Person, becomes the Beneficial Owner of a majority of the Common Stock then outstanding.
(b) Immediately upon the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of the holders of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice (with prompt notice thereof to the Rights Agent) of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to the Rights Agent and all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such term is defined in paragraph (b) of Section 11 hereof) for Common Stock exchangeable for Rights, at the initial rate of one one-hundredth of a share of Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock, as appropriately adjusted to reflect stock splits, stock dividends and other similar transactions after the date hereof.
(d) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this subsection (e), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof) or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Rights Agent and to each holder of a Rights Certificate in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate and to the Rights Agent, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the Company with the Rights Agent) or by facsimile or other generally accepted means of electronic transmission as follows:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York 11797 Attention: General Counsel Telecopy No.: (516) 390-1795
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Rise Norman
Telecopy No.: (212) 455-2502
Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company) or by facsimile transmission as follows:
EquiServe Trust Company, N.A.
150 Royall Street
Canton, Massachusetts 02021
Attention:
Telecopy No.:
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Subject to the Corporate Agreement dated as of November 5, 2001 and except as provided in the other provisions of this Section 27, for so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of the Rights. At any time when the Rights are no longer redeemable, except as provided in the other provisions of this Section 27, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights; provided that no such supplement or amendment may (a) adversely affect the interests of the holders of the Rights as such (other than an Acquiring Person and its Affiliates and Associates), (b) cause the Rights again to be redeemable or (c) cause the Agreement again to become amendable other than in accordance with this sentence. Notwithstanding anything contained in
this Agreement to the contrary, (i) no supplement or amendment shall be made which changes the Redemption Price and (ii) no supplement or amendment that changes the rights of any Exempted Entity contained in Sections 1(a), 1(k) and 1(t) of this Agreement and related provisions thereto (other than the addition of other Persons as Exempted Entities) will be effective against such Exempted Entity without its prior written consent, which consent shall not be unreasonably withheld. Upon the delivery of a certificate from an appropriate officer of the Company which states that the supplement or amendment is in compliance with the terms of this Section 27, and provided that such supplement or amendment does not change or affect the rights, duties, liabilities or obligations of the Rights Agent, the Rights Agent shall execute such supplement or amendment, provided that any supplement or amendment that does not change or affect the rights, duties, liabilities or obligations of the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.
SECTION 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD, ETC. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties and (y) not subject the Board, or any of the directors on the Board to any liability to the holders of the Rights. The Rights Agent shall always be entitled to assume that the Company's Board acted in good faith and shall be fully protected and incur no liability in reliance thereon.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) 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, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated (with prompt notice to the Rights Agent) and shall not expire until the Close of Business on the tenth Business Day following the date of such determination by the Board. Without limiting the foregoing, if any provision requiring a specific group of Directors of the Company to act is held to by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then be made by the Board in accordance with applicable law and the Company's Articles of Incorporation and Bylaws.
SECTION 32. GOVERNING LAW. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the Commonwealth of Virginia and for all purposes shall be governed by, and construed in accordance with, the law of such Commonwealth; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by, and construed in accordance with, the law of the State of New York.
SECTION 33. 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.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By
Title:
EQUISERVE TRUST COMPANY, N.A.
By
Title:
EXHIBIT 4.6
Specimen of Stock Certificate
Weight Watchers Logo
WEIGHT WATCHERS INTERNATIONAL, INC.
Incorporated under the laws of the Commonwealth of Virginia
Number WTW ______ Shares Common Stock Common Stock No Par Value CUSIP 948626 10 6 |
THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY,
NJ OR NEW YORK CITY, NY
This certifies that _______**SPECIMEN**______________________ is the owner of ______________________________________________________FULLY PAID AND ON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE, OF Weight Watchers International, Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued under and shall be subject to the laws of the Commonwealth of Virginia and all the provisions of the Articles of Incorporation and the Bylaws and amendments thereto, and all Certificates setting forth the designations, descriptions and terms of each series of preferred or special class of stock (copies of which are on file with the transfer agent) to which the holder by acceptance hereof consents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
[SEAL] /s/ Robert W. Hollweg /s/ Linda Huett --------------------------------- ---------------------------------- Robert W. Hollweg Linda Huett Vice President and Secretary President and Chief Executive Officer |
WEIGHT WATCHERS INTERNATIONAL, INC.
A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO EACH CLASS OF SHARES AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH CLASS (AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS OF FUTURE CLASSES OF SHARES THAT THE CORPORATION IS AUTHORIZED TO ISSUE) WILL BE FURNISHED, WITHOUT CHARGE, TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
This certificate also evidences and entitles the holder hereof to certain rights (the "Rights") as set forth in a Rights Agreement (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Weight Watchers International, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Weight Watchers International, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request. As described in the Rights Agreement, Rights beneficially owned by an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the rights agreement), shall become null and void.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws and regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ..... Custodian
................. (Cust)
(Minor)
TEN ENT - as tenants by the entireties under Uniform Transfer to
Minors
.JT TEN - as joint tenants with right of
survivorship and not as tenants
Act...............................
in common (State)
|
Additional abbreviations may also be used though not in the above list.
----------------------------------------------------------------shares
Dated__________________ _____________________
NOTICE: THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
THE SIGNATURE(S) SHOULD
BE GUARANTEED BY AN
ELIGIBLE GUARANTOR
INSTITUTION, (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM),
PURSUANT TO SEC RULE 17Ad-15.
SIGNATURE(S) GUARANTEED.
|
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-
|
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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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
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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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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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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
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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
|
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
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.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg
-----------------------------------
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WW FUNDING CORP.
By: /s/ Linda Huett
-----------------------------------
|
CREDIT SUISSE FIRST BOSTON
By: /s/ William S. Lutkins
-----------------------------------
|
By: /s/ Robert Hetu
-----------------------------------
|
THE BANK OF NOVA SCOTIA
By: /s/ Philip N. Adsetts
-----------------------------------
|
BALANCED HIGH YIELD FUND I, LTD.,
as Lender
By: /s/ Thomas Dearth
-----------------------------------
|
By: /s/ John J. D'Angelo
-----------------------------------
|
BALANCED HIGH YIELD FUND II, LTD.,
as Lender
By: /s/ Thomas Dearth
-----------------------------------
|
By: /s/ John J. D'Angelo
-----------------------------------
|
BANK ONE, NA (Main Office: Chicago)
By: /s/ Jeffrey Lubatkin
-----------------------------------
|
BHF (USA) CAPITAL CORPORATION,
as Lender
By: /s/ Thomas Dearth
-----------------------------------
|
By: /s/ Thomas Scifo
-----------------------------------
|
CAPTIVA II FINANCE LTD.
By: /s/ David Dyer
-----------------------------------
|
CITADEL HILL 2000 LTD.
By: /s/ Stephen Lockhart
-----------------------------------
|
CARLYLE HIGH YIELD PARTNERS, L.P.
By: /s/ Linda M. Pace
-----------------------------------
|
CARLYLE HIGH YIELD PARTNERS II, L.P.
By: /s/ Linda M. Pace
-----------------------------------
|
THE CHASE MANHATTAN BANK
By: /s/ Richard G. Williams
-----------------------------------
|
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mischa Zabotin
-----------------------------------
|
PORTIS (USA) FINANCE LLC
By: /s/ E. Matthews Robert
-----------------------------------
|
By: /s/ Robert Fakhoury
-----------------------------------
|
JHW CASH FLOW I, L.P.
By: /s/ Steven Warshasky
-----------------------------------
|
KZH CRESCENT LLC
By: /s/ Susan Lee
-----------------------------------
|
KZH CRESCENT-2 LLC
By: /s/ Susan Lee
-----------------------------------
|
KZH CRESCENT-3 LLC
By: /s/ Susan Lee
-----------------------------------
|
LIBERTY-STEIN ROE ADVISOR FLOATING
RATE ADVANTAGE FUND
By: /s/ Brian W. Good
-----------------------------------
|
FLEET NATIONAL BANK, as Test Administrator for Long Lane Master Trust IV
By: /s/ Renee Nader
-----------------------------------
|
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James Dingler
-----------------------------------
|
NATIONAL CITY BANK
By: /s/ John Platek
-----------------------------------
|
PPM SPYGLASS FUNDING TRUST
By: /s/ Ann E. Morris
-----------------------------------
|
PRINCIPAL LIFE INSURANCE COMPANY
By: /s/ John C. Heiny
-------------------------------------
|
SEABOARD CLO 2000
By: /s/ Sheppard H.C. Davis, Jr.
-------------------------------------
|
SRF 2000 LLC
By: /s/ Ann E. Morris
-------------------------------------
|
SRF TRADING, INC.
By: /s/ Ann E. Morris
-----------------------------------
|
STEIN ROE & FAMHAM CLO I LTD., by Stein
Roe & Farnham Incorporated, as
portfolio manager
By: /s/ Brian W. Good
-----------------------------------
|
STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
By: /s/ Brian W. Good
-----------------------------------
|
VAN KAMPEN CLO I, LIMITED, BY VAN
KAMPEN MANAGEMENT INC., as
Collateral Manager
By: /s/ Darvin D. Pierce
-----------------------------------
|
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By: /s/ Darvin D. Pierce
-----------------------------------
|
VAN KAMPEN PRIME RATE INCOME TRUST,
By: Van Kampen Investment Advisory Corp.
By: /s/ Darvin D. Pierce
------------------------------------------
|
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 Agreement to be executed by their representative officers thereunto duly authorized as of the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg
-----------------------------------
|
WW FUNDING CORP.
By: /s/ Robert W. Hollweg
-----------------------------------
|
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
-----------------------------------
|
BANK ONE, NA (Main Office: Chicago)
By: /s/ Jeffrey Lubatkin
-----------------------------------
|
BHF (USA) CAPITAL CORPORATION
By: /s/ Thomas Dearth
-----------------------------------
|
By: /s/ Richard Cameron
-----------------------------------
|
CAPTIVA II FINANCE LTD.
By: /s/ David Egglishaw
-----------------------------------
|
CARLYLE HIGH YIELD PARTNERS II, LTD
By: /s/ Linda M. Pace
-----------------------------------
|
CARLYLE HIGH YIELD PARTNERS III, LTD
By: /s/ Linda M. Pace
-----------------------------------
|
THE CHASE MANHATTAN BANK
By: /s/ Richard G. Williams
-----------------------------------
|
CITADEL HILL 2000 LTD.
By: /s/ Stephen Lockhart
-----------------------------------
|
CONTINENTAL ASSURANCE COMPANY,
Separate Account (E), by: TCW Asset
Management Company as Attorney-in-Fact
By: /s/ Mark L. Gold
---------------------------------------
|
By: /s/ Richard F. Kurth
---------------------------------------
|
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Michael Lord
---------------------------------------
|
CREDIT SUISSE FIRST BOSTON
By: /s/ William S. Lutkins
-----------------------------------
|
By: /s/ Robert Hetu
-----------------------------------
|
FORTIS (USA) FINANCE LLC
By: /s/ Karen Louman
-----------------------------------
By: /s/ John T. Connard
-----------------------------------
|
JHW CASH FLOW I, L.P.
By: /s/ Steven G. Warshavsky
-----------------------------------
|
STEIN ROE & FAMHAM INCORPORATED,
as Agent for Keyport Life Insurance Company
By: /s/ James R. Fellows
--------------------------------------------
|
KZH CRESCENT LLC
By: /s/ Susan Lee
--------------------------------------------
|
KZH CRESCENT - 2 LLC
By: /s/ Susan Lee
--------------------------------------------
|
KZH CRESCENT-3 LLC
By: /s/ Susan Lee
-----------------------------------
|
LIBERTY-STEIN ROE ADVISOR FLOATING
RATE ADVANTAGE FUND, by Stein Roe
& Farnham Incorporated, as Advisor
By: /s/ James R. Fellows
-----------------------------------
|
MADISON AVENUE CDO I, LIMITED, by
Metropolitan Life Insurance Company as
Collateral Manager
By: /s/ James R. Dingler
---------------------------------------
|
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
-----------------------------------
|
NATIONAL CITY
By: /s/ John Platek
-----------------------------------
|
NUVEEN FLOATING RATE FUND
By: /s/ Lisa M. Mincheski
-----------------------------------
|
NUVEEN SENIOR INCOME FUND
By: /s/ Lisa M. Mincheski
-----------------------------------
|
PPM SPYGLASS FUNDING TRUST
By: /s/ Ann E. Morris
-----------------------------------
|
PRINCIPAL LIFE INSURANCE COMPANY
By: Principal Capital Management, LLC,
a Delaware Limited Liability Company,
its Authorized Signature
By: /s/ Jody L. Lambuth
-----------------------------------
|
SEABOARD CLO 2000 LTD.
By: /s/ Sheppard Davis
-----------------------------------
|
SEQUILS I, LTD
By: TCW Advisors, Inc.,
as its Collateral manager
By: /s/ Mark Gold
-----------------------------------
|
By: /s/ Richard R. Kurth
-----------------------------------
|
SEQUILS IV, LTD
By: TCW Advisors, Inc.,
as its Collateral manager
By: /s/ Mark Gold
-----------------------------------
|
By: /s/ Richard R. Kurth
-----------------------------------
|
SRF 2000 LLC
By: /s/ Ann E. Morris
-----------------------------------
|
SRF TRADING, INC.
By: /s/ Ann E. Morris
-----------------------------------
|
STEIN ROE & FAMHAM CLO I LTD.
By: Stein Roe & Famham Incorporated,
as Portfolio Manager
By: /s/ James R. Fellows
-----------------------------------
|
STEIN ROE FLOATING RATE LIMITED LIABILITY
COMPANY
By: Stein Roe & Famham Incorporated
as Advisor to the Stein Roe
Floating Rate Limited Liability
Company
By: /s/ James R. Fellows
-----------------------------------
|
TRYON CLD LTD 2000-I
By: /s/ Rashan White
-----------------------------------
|
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: TCW Asset Management Company,
as Investment Advisor
By: /s/ Mark L. Gold
-----------------------------------
By: /s/ Richard R. Kurth
-----------------------------------
|
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management Inc.
as Collateral Manager
BY: /s/ Darvin D. Pierce
-----------------------------------
|
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management Inc.
as Collateral Manager
By: /s/ Darvin D. Pierce
-----------------------------------
|
VAN KAMPEN PRIME RATE INCOME TRUST
By: /s/ Van Kampen Advisory Corp.
-----------------------------------
By: /s/ Darvin D. Pierce
-----------------------------------
|
WHITNEY CASH FLOW FUND II
By: /s/ Steven Warshavsky
-----------------------------------
|
Exhibit 10.32
TERMINATION AGREEMENT
This TERMINATION AGREEMENT is dated as of November 5, 2001 among Weight Watchers International, Inc., a Virginia corporation (the "Company") and Artal Luxembourg S.A., a Luxembourg corporation ("Artal").
WHEREAS, the Company, Artal and H.J. Heinz Company ("Heinz") entered into a Stockholders' Agreement, dated as of September 29, 1999 (the "Stockholders' Agreement");
WHEREAS, Heinz has sold back to the Company all of the shares of the Company's common stock, no par value, held by it;
WHEREAS, as a result of such sale, the Stockholders' Agreement terminated with respect to Heinz pursuant to Section 5.1 thereof; and
WHEREAS, subject to the terms and conditions of this Agreement, each of the Company and Artal desires to terminate the Stockholders' Agreement immediately upon effectiveness of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto hereby agree as follows:
1. TERMINATION. Each of the Company and Artal hereby terminate the Stockholders' Agreement and neither the Company nor Artal shall have any further rights or obligations under the Stockholders' Agreement;
2. CONDITION TO EFFECTIVENESS. This Agreement shall become effective as of the date first above written upon the receipt by each party hereto of counterparts of this Agreement, duly executed and delivered by the Company and Artal.
3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
4. COUNTERPARTS. This Agreement may be executed by the parties hereto in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg ----------------------------------- |
ARTAL LUXEMBOURG S.A.
By: /s/ Pol Kohler ----------------------------------- |
Exhibit 10.34
AMENDED AND RESTATED INTELLECTUAL PROPERTY LICENSE AGREEMENT
This Amended and Restated Intellectual Property License Agreement ("AGREEMENT"), originally dated as of September 29, 1999 ("EFFECTIVE DATE"), and thereafter amended as of October 1, 2000, by and between Weight Watchers International, Inc., a Virginia corporation ("LICENSOR"), and WeightWatchers.com, Inc., a Delaware corporation ("LICENSEE") (each of Licensor and Licensee, a "PARTY", and collectively, the "PARTIES"), hereby is amended and restated as of September 10, 2001, by and between Licensor and Licensee.
WHEREAS, Licensor, directly or through certain Affiliates (as defined herein), owns and operates a weight loss business;
WHEREAS, Licensor is developing a presence for its business in the Electronic Medium (as defined herein), pursuant to which products and services related to Licensor's business are offered for sale and information related to Licensor's business is distributed (collectively, the "LICENSOR OBJECTIVES");
WHEREAS, Licensee is creating, operating and maintaining an on-line business that can provide Licensor with a means of achieving the Licensor Objectives, as well as providing Licensee with a means of pursuing other online business ventures related to Licensor's business (together with Licensor Objectives, the "LICENSEE OBJECTIVES");
WHEREAS, Licensor desires to grant to Licensee, and Licensee desires to obtain from Licensor, a license to use certain trademarks, domain names and information related to Licensor's business for Licensee's use in connection with Licensee's pursuit of the Licensee Objectives, subject to the terms and conditions herein;
NOW, THEREFORE, for good and valuable consideration, including that stated in Article 4 herein, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
Article 1. DEFINITIONS.
Section 1.1. "AFFILIATE" shall mean any Person (other than Licensee) 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.
Section 1.2. "APPROVED E-COMMERCE ACTIVITIES" shall mean (i) E-Commerce Activities that have been approved by Licensor pursuant to the approval process set forth in
Section 4.4 hereof, and (ii) any other activities that are requested by Licensor and performed by Licensee pursuant to Licensor's instructions, in accordance with the Service Agreement dated as of the date hereof between Licensor and Licensee ("SERVICE AGREEMENT").
Section 1.3. "BUSINESS" shall mean the conduct of a business related to weight management and/or healthy lifestyles, which business shall utilize the Weight Watchers Program and the Licensed Materials.
Section 1.4. "DERIVATIVE WORKS" shall mean all updates, improvements, modifications, revisions or enhancements to or derivative works based upon the Licensed Materials.
Section 1.5. "E-COMMERCE ACTIVITIES" shall mean (i) those
activities performed by Licensee in accordance with the Service Agreement, and
(ii) those activities Licensee desires to conduct in the Electronic Medium in
connection with its conduct of the Business, including, without limitation,
those activities set forth on Schedule A to this Agreement (which is attached
hereto and made a part hereof).
Section 1.6. "ELECTRONIC MEDIUM" shall mean the Internet and any other related or similar forms of interactive and connected electronic delivery or digital transmission that now exist or may hereafter be developed, including but not limited to digital wireless or digital broadband. For the avoidance of doubt, products such as CD-ROM that can be procured and installed separately and have a user-interactive functionality will be part of the Electronic Medium solely if any of their functionality requires a connection (either permanent or occasional) to the Internet or any other interactive digital transmission facility.
Section 1.7. "FRANCHISEE" shall mean any and all franchisees of Licensor.
Section 1.8. "LICENSEE BUSINESS MATERIALS" shall mean any and all (i) content (whether text, graphic, video or any other materials) published or otherwise displayed in the Electronic Medium and (ii) advertising, public relations, promotional materials and packaging used either in or out of the Electronic Medium; in each case in connection with Licensee's conduct of the Business in the Electronic Medium and that incorporate or refer to the Licensed Property, in whole or in part.
Section 1.9. "LICENSED MATERIALS" shall mean any text, artwork, photographs, transfers, designs, graphic or pictorial or other similar material, including any and all advertising, public relations and promotional materials, owned by Licensor (or by third parties, subject to Section 2.2) and used by Licensor in connection with the Weight Watchers Program, including but not limited to those materials set forth on Schedule B to this Agreement (which is attached hereto and made a part hereof), and any other materials or information owned by Licensor (or by third parties, subject to Section 2.2) and furnished by Licensor, from time to time and in Licensor's sole discretion, to Licensee, and any Derivative Works created by either Licensee or Licensor.
Section 1.10. "LICENSED PROPERTY" shall mean, to the extent of Licensor's interest therein and subject to Third Party Agreements, the Licensed Materials (including Derivative Works created by either Licensee or Licensor) and the Licensed Trademarks.
Section 1.11. "LICENSED TRADEMARKS" shall mean any trademarks and service marks, trade names, brand names, corporate names, domain names, logos, trade dress, and other words, designations, labels, symbols, designs, colors, color combinations or product configurations, whether registered or unregistered, that are owned by Licensor and used in connection with Licensor's Business during the Term.
Section 1.12. "PERSON" shall mean any individual, general partnership, limited partnership, corporation, limited liability company, joint venture, trust, business trust, cooperative or association, and their respective heirs, executors, administrators, legal representatives, successors and assigns.
Section 1.13. "PROGRAM INFORMATION" shall mean certain terminology owned by Licensor and used by it in connection with the Weight Watchers Program and certain information owned and developed by Licensor for use in connection with the development, manufacture, marketing and distribution of products and services in accordance with such Weight Watchers Program and the calculation of Points(R) or other measurements relating thereto, as such terminology and information may exist from time to time.
Section 1.14. "SITES" shall mean those websites and pages developed, produced and maintained by, or at the direction of, Licensee on the Internet and any successors or extensions thereof.
Section 1.15. "TERM" shall have the meaning set forth in
Section 8.1.
Section 1.16. "THIRD PARTY AGREEMENTS" shall mean Licensor's pre-existing agreements with third parties, including without limitation (i) Licensor's agreements with Franchisees, and any similar agreements entered into by Licensor in the future to settle the Third Party Claims set forth on Schedule I to this Agreement (which is attached hereto and made a part hereof) or claims that are substantially similar thereto, and (ii) the Operating Agreement executed on September 29, 1999 between Licensor and H.J. Heinz Company ("HEINZ").
Section 1.17. "WEIGHT WATCHERS DOMAIN NAMES" shall mean those domain names set forth on Schedule C to this Agreement (which is attached hereto and made a part hereof), that Licensor previously registered, and any other domain names registered by Licensor after the date of this Agreement, which Licensor uses, has used or intends for Licensee to use in connection with its conduct of the Business in the Electronic Medium.
Section 1.18. "WEIGHT WATCHERS PROGRAM" shall mean current and future eating or lifestyle regimens to facilitate weight loss or weight control employed, designed, marketed or
adopted in any part of the world by or on behalf of Licensor, Licensor's Affiliates or Franchisees.
Article 2. GRANT OF LICENSE.
Section 2.1. LICENSE TO USE LICENSED TRADEMARKS. During the
Term, and subject to the terms and conditions herein (including the approval
process in Section 4.4 below) and to the provisions of any Third Party
Agreements, Licensor hereby grants to Licensee: (a) the exclusive right to use
the Licensed Trademarks as or part of a domain name for a Site; (b) the
exclusive right to use the Licensed Trademarks in the Electronic Medium in
connection with the Business (and any other business that uses any of the
Licensed Trademarks in which Licensor is engaged during the Term), except that
Licensor, its Affiliates and its licensees (other than Licensee) may use the
Licensed Trademarks in the Electronic Medium for the advertising and marketing
of products and services that are sold or offered outside the Electronic Medium;
(c) the exclusive right to use the Weight Watchers Domain Names; (d) the
non-exclusive right to use the Licensed Trademarks in the Electronic Medium or
outside the Electronic Medium in connection with advertising and marketing
activities relating to the Approved E-Commerce Activities within the scope of
the Business; and (e) the non-exclusive right to use the Licensed Trademark
WEIGHT WATCHERS as part of its company name.
Section 2.2. LICENSE TO USE LICENSED MATERIALS. During the Term, and subject to the terms and conditions herein (including the approval process in Section 4.4 below) and to the provisions of any Third Party Agreements, Licensor hereby grants to Licensee (a) the exclusive right to use and reproduce the Licensed Materials solely in connection with the public performance and display thereof in the Electronic Medium; and (b) a non-exclusive right to modify, revise, alter the Licensed Materials or otherwise create Derivative Works solely for purposes of Licensee's Business. In each instance, Licensee shall be limited to using the Licensed Materials solely in connection with Licensee's conduct of the Business in the Electronic Medium. Any materials or content owned by third parties that would constitute "Licensed Materials" if they were owned by Licensor shall be included within the definition of "Licensed Materials" for all purposes herein, PROVIDED that (i) Licensee shall pay all additional costs, if any, associated with obtaining Licensee's right to use such materials or content pursuant to this Agreement (except that Licensor shall pay any such costs if such materials or content constitute a core aspect of the Weight Watchers Program); (ii) Licensor shall use its reasonable efforts to assist Licensee in obtaining such rights from any such third parties; PROVIDED that if such materials or content constitute a core aspect of the Weight Watchers Program, Licensor shall obtain Licensee's right to use such materials or content from any such third parties; and (iii) the consent of any such third parties, if required, for Licensee's right to use such materials or content is obtained.
Section 2.3. EXCLUSIVITY OF RIGHTS. Subject to any Third Party Agreements, to the extent the rights granted to Licensee in Sections 2.1 and 2.2 are exclusive, such rights shall be exclusive even as against the Licensor and Licensor shall not license or grant any such rights to any other Person. Notwithstanding the foregoing, nothing in Sections 2.1 or 2.2 shall prevent
Licensor or its Affiliates from using, or permitting or licensing third parties to use, the Licensed Trademarks in the Electronic Medium for the advertising and marketing of products and services that are sold or offered outside the Electronic Medium.
Section 2.4. RIGHTS CONVEYED TO THIRD PARTIES. Licensee
acknowledges that its rights under this Agreement with respect to the Licensed
Property shall be subject to those rights granted by Licensor to Heinz and to
Franchisees pursuant to the applicable Third Party Agreements. Without limiting
the foregoing, Licensee covenants and agrees to perform the following
obligations pertaining to the Licensed Property agreed upon by Licensor pursuant
to the Third Party Agreements: (i) providing access by display of a hyperlink or
other means of transfer to certain Heinz websites, as set forth in Section
2.07(b)(iii)(B) of the Third Party Agreement with Heinz; (ii) paying the Online
Commission and eTools Commission to Franchisees (other than those Franchisees in
which Licensor or an Affiliate of Licensor now or hereafter, directly or
indirectly, owns a majority of the equity interests), as set forth in Sections
1.3 and 1.4 of the Franchisee Promotion Agreement dated as of August 23, 2001,
whether such commissions are paid directly to Franchisees by Licensee or, at
Licensor's option, paid to Licensor for payment by Licensor to Franchisees, and
(iii) providing access by display of a hyperlink or other means of transfer to
certain Franchisee websites, as set forth in Section 2.3 of the Amendment to
Franchise Agreement dated as of August 23, 2001.
Section 2.5. RIGHT TO SUBLICENSE. During the Term, and subject to the terms and conditions herein and the provisions of any Third Party Agreements, Licensor hereby grants to Licensee the right to sublicense its rights under Section 2.1 and 2.2 hereof to third parties, PROVIDED that Licensee receives prior written approval from Licensor in accordance with Section 4.4.
Section 2.6. OWNERSHIP OF DERIVATIVE WORKS. Licensor shall be the owner of all rights, title and interest (including intellectual property rights) in and to any Derivative Works created by Licensee in connection with Licensee's use of Licensed Materials pursuant to Licensee's conduct of the Business; PROVIDED, however, that "Derivative Works" shall not include, and Licensee shall retain all rights, title and interest (including intellectual property rights) in and to: (i) any software programs (including computer code) or processes created solely by Licensee in connection with its conduct of the Business, but not the Licensed Materials or Derivative Works incorporated in such programs or processes; and (ii) any hardware, equipment or other technology used by Licensee in connection with Licensee's conduct of the Business.
Section 2.7. RESERVATION OF RIGHTS. Licensor reserves all rights to use the Licensed Materials other than those rights expressly granted herein.
Article 3. PAYMENTS AND FEES.
Section 3.1. PAYMENTS. The Parties acknowledge that Licensee issued to Licensor 3,298,680 shares of its Common Stock, par value $0.01 (reflecting the April 28, 2000
stock split), in consideration for the licenses and rights granted herein.
Section 3.2. ROYALTY. In addition to the consideration described herein in Section 3.1, in consideration for the licenses and rights granted herein, Licensee shall also timely pay to Licensor all royalties as set forth on Schedule D to this Agreement (which is attached hereto and made a part hereof) in the manner set forth therein.
Section 3.3. METHOD OF PAYMENT. Unless otherwise agreed by the Parties in writing, all payments due under this Agreement shall be made by wire transfer of immediately available funds to an account specified by Licensor to Licensee.
Section 3.4. ACCOUNTING. During the Term, Licensee shall
prepare in accordance with U.S. generally accepted accounting principles a full
and accurate statement setting forth, with respect to each previous calendar
quarter, all Net Revenues (as defined in Schedule D) earned by Licensee in
connection with its conduct of the Business, collectively and as individually
attributable to each Approved E-Commerce Activity, and broken down by the
country from which such revenues originate and are received (such statement, a
"REPORT"). An appropriate officer of Licensee shall certify in writing that each
such Report is complete and correct (such certification, an "OFFICER'S
CERTIFICATION"). Licensee shall provide such Report and Officer's Certification
to Licensor, at the same time that it makes the quarterly payments due under
Section 3.2 hereof.
Section 3.5. BOOKS AND RECORDS. Licensee shall keep and maintain at its U.S. corporate headquarters or, to the extent it conducts any portion of the Business in or directed toward another jurisdiction, at the corporate headquarters for Licensee in such other jurisdiction, complete books and records of all Net Revenues earned in connection with its conduct of the Business, including the calculation of royalties. Such books and records shall, in all instances, be maintained in accordance with U.S. generally accepted accounting principles in addition to any other books and records Licensee may maintain for other purposes. During the Term, for a period of three (3) years and ninety (90) days after each calendar year ("REPORTING CYCLE"), Licensee shall keep all such books and records pertaining to such year in good order and available for inspection by Licensor pursuant to the procedures set forth in this Article 3. After each Reporting Cycle, no amounts within such period may be disputed by Licensor, and such records may be discarded at Licensee's sole discretion.
Section 3.6. AUDIT AND INSPECTION. Licensor or its duly
authorized representatives shall have the right, no more than one (1) time in
any given calendar quarter, to inspect or audit the books and records described
in Section 3.5 hereof at Licensee's U.S. corporate headquarters or Licensee's
corporate headquarters for any other jurisdiction in which Licensee conducts the
Business, at any time during normal business hours and upon reasonable advance
notice. If any such audit reveals that Licensee has underpaid the royalties owed
to Licensor during any given quarter, Licensee shall forthwith (i) pay to
Licensor all royalties not paid plus an amount equal to 50% of such amount, and,
(ii) if the amount of such royalties not paid in any given quarter is ten
percent (10%) or more than the amount of royalties that should have been paid
during such
quarter, Licensee also shall pay forthwith to Licensor any reasonable out-of-pocket expenses incurred by Licensor to conduct the audit, up to a maximum of $100,000 per audit.
Article 4. CONDUCT OF OPERATIONS.
Section 4.1. STANDARDS OF QUALITY. Licensee shall at all times and in all respects conduct its Business in a first-class manner so as to reflect credibly on Licensor and shall take no action so as to injure, damage, or render less valuable any of the Licensed Property or, where applicable, any goodwill associated therewith. Without limiting the generality of the foregoing or of any of Licensor's approval rights as set forth herein, Licensee shall not publicly perform or publicly display any material that Licensor considers, in its good faith discretion, to be offensive or indecent, nor shall Licensee permit any links (i) from any Site that can be accessed by a Weight Watchers Domain Name to any website that contains material that Licensor considers, in its good-faith discretion, to be offensive or indecent or (ii) (to the extent practicable) from any website that contains material Licensor considers, in its good faith discretion, to be offensive or indecent to any Site that can be accessed by a Weight Watchers Domain Name.
Section 4.2. USE OF LICENSED TRADEMARKS. In addition to the Standards of Quality set forth in Section 4.1 hereof and subject to the approval process set forth in Section 4.4 below, Licensee shall use the Licensed Trademarks in good faith, in a dignified manner, in a manner consistent with Licensor's high standards of, and reputation for quality, in a manner consistent with Licensee's own current standards for quality, in a manner consistent with Licensor's Trademark Usage Guidelines set forth on Schedule F (which is attached hereto and made a part hereof), which Licensor may in good faith amend from time to time, PROVIDED such amendments shall not be applicable or effective until Licensor provides Licensee with 30 days written notice of the same, and in accordance with good trademark practice wherever the Licensed Trademarks are used.
Section 4.3. LICENSEE BUSINESS CRITERIA. Without limiting the generality of the foregoing or of any of Licensor's approval rights as set forth herein, Licensee shall at all times and in all respects conduct its Business and use the Licensed Property in a manner that conforms and is consistent with the Licensee Business Criteria set forth in Schedule E (which is attached hereto and made a part hereof), which Licensor may in good faith amend from time to time, PROVIDED such amendments shall not be applicable or effective until Licensor provides Licensee with 30 days written notice of the same.
Section 4.4. APPROVAL PROCESS. (a) Licensee shall submit to Licensor in the manner set forth herein: (i) copies of any and all new Licensee Business Materials it intends to use (whether itself or by a third-party on its behalf), and (ii) a detailed written description of any and all new E-Commerce Activities, any proposed sublicense arrangements, any proposed use of the Data (as defined in Article 13) for purposes of soliciting or communicating with Persons accessing the Site, and (iii) any new marketing or operating strategy, policy or plan (collectively referred to herein as "PLANS") it develops in connection with its conduct of the Business. Licensor shall review such Licensee Business Materials and proposals to conduct E-Commerce
Activities and Plans for the purpose of determining whether or not they conform, or are consistent, with the Licensee Business Criteria and any other applicable provision of this Agreement. Subject to Section 4.4(b) below, Licensor shall in good faith approve or disapprove Licensee's proposed use of such materials as promptly as practicable after receipt of such materials or of Licensee's written request in connection therewith, but in the case of Licensee Business Materials, by not later than five (5) business days after receipt by Licensor of Licensee's request, and with respect to all E-Commerce Activities and Plans, by not later than thirty (30) days after receipt by Licensor of Licensee's request. In the event Licensor rejects any request, Licensor shall provide Licensee with a written explanation therefor, which explanation shall state with specificity how or why the materials, activities, strategies or plans presented or proposed fail to conform, or otherwise are inconsistent, with the Licensee Business Criteria or the provisions of this Agreement. Licensor shall have the right to rescind any approval given pursuant to this Section 4.4(a) on thirty (30) days prior written notice to Licensee, if in good faith it determines that the continued use of such Licensee Business Material, E-Commerce Activities and/or Plans conflicts with, no longer conforms with, is no longer applicable to, or may in any way harm the integrity or quality of, the then current Licensee Business Criteria, Licensed Property or Weight Watchers Program.
(b) Licensee Business Materials not approved or rejected within the approval period set forth above shall be deemed approved, PROVIDED that such materials conform to all of the requirements set forth in this Agreement. Notwithstanding the foregoing, Licensor shall have the right, subject to Section 4.5 below, at any time within sixty (60) days following the date such materials are deemed approved pursuant to this Section 4.4(b), to reject Licensee's proposed use of such Licensed Business Materials that it in good faith determines do not conform with, are not consistent with, is no longer applicable to, or may in any way harm the integrity or quality of, the then current Licensee Business Criteria, Licensed Property or Weight Watchers Program and any other applicable provision of this Agreement. In the event Licensor rejects the use of any materials during such 60-day period, Licensee's use of the applicable Licensed Business Materials prior to receipt of such rejection notice and for 30 days thereafter shall not be deemed to be a breach of this Agreement.
(c) Any materials or requests that previously have been approved by Licensor pursuant to Section 4.4(a) above do not need to be resubmitted for approval in connection with any subsequent use or request unless the original approval was limited to a specified use, instance or duration. Licensee shall not display, publish or otherwise use any Licensee Business Materials that have not been approved pursuant to the approval process set forth herein, and Licensee shall not conduct any activities in connection with its conduct of the Business other than the Approved E-Commerce Activities that follow approved Plans.
Section 4.5. THE INTERNET OPERATING COMMITTEE. During the Term of this Agreement, in the event of a dispute between Licensor and Licensee relating to the approval process set forth in Section 4.4 above, or any other dispute relating to the use of the Licensed Property set forth in Sections 4.1, 4.2 and 4.3 above, either Party may appeal ("APPEALING PARTY") to the Internet Operating Committee, which shall be created by Licensor and Licensee to
consider and resolve such disputes from time to time (and shall be described
more fully in Schedule G to this Agreement, which is attached hereto and made a
part hereof) in the manner set forth below. The Appealing Party shall send
written notice ("APPEAL NOTICE") to the other Party ("DEFENDING PARTY") of its
intent (and the basis therefor) to appeal to the Internet Operating Committee.
If the Parties have not reached an agreement within five (5) business days of
the Defending Party's receipt of the Appeal Notice, (i) the Appealing Party
shall promptly submit to the Internet Operating Committee copies of all
materials or other information originally submitted by Licensee to Licensor for
approval, and copies of all correspondence between the Parties concerning the
use of the applicable materials, activities and plans, including the approval or
rejection thereof, and (ii) each Party shall submit a written statement
explaining its basis for the appeal or its basis for opposing the appeal, as
applicable (such materials, collectively, "MATERIALS FOR APPEAL"). Any Materials
For Appeal sent to the Internet Operating Committee shall be sent simultaneously
to the other Party. Upon receipt of all of the Materials For Appeal described
herein, the Internet Operating Committee shall consider the position of each of
Appealing Party and the Defending Party and determine whether or not, in its
reasonable opinion, the materials or activities presented or proposed conform,
or otherwise are consistent, with the Licensee Business Criteria and the terms
of this Agreement. The Internet Operating Committee shall issue a written
summary of its findings and opinion to both Licensor and Licensee as promptly as
practicable after its receipt of all of the Materials For Appeal. In the event
that the Internet Operating Committee is deadlocked over any issue presented for
appeal pursuant to this section, such issue shall be presented either to the CEO
of Licensor or, if the CEO of Licensor is unavailable, a senior executive
delegate of such individual, for resolution. The findings and opinion of the
Internet Operating Committee or, in the event of a deadlock, the findings and
opinion of the CEO of Licensor or that person's appointed delegate shall be
final and binding upon both Licensor and Licensee. Disputes governed by this
Section 4.5 shall not be subject to arbitration pursuant to Section 8.3, EXCEPT
that a party may appeal, pursuant to Section 8.3, the findings and opinion of
the CEO (or that person's appointed delegate) hereunder solely on the ground
that such findings and opinion were rendered in bad faith.
Section 4.6. CORPORATE NOTICES. Licensee shall, at the option of Licensor, include on all Licensee Business Materials and/or display in connection with its publication of any Licensed Property in the Electronic Medium (i) an indication of the current or historical relationship between the Parties hereto, (ii) Licensee's status as a separate corporation or other separate business entity, and (iii) Licensor's ownership of the Licensed Property, in each case in the reasonable form to be supplied by Licensor from time to time.
Section 4.7. COMPLIANCE. Licensee shall at all times comply with all statutes, laws, rules, directives, regulations and sound industry practice pertaining to the Business and the use of the Licensed Property, including, without limitation, any of the foregoing with respect to export controls and data privacy.
Section 4.8. LIABILITY. Except as set forth herein, as between Licensor and Licensee, Licensee hereby assumes all liability that may arise from services rendered to customers and liability for injuries to and by servants, agents, employees or the general public in
connection with operation by Licensee of the Business. Licensor hereby assumes all liability which may arise from the following activities: (i) Licensee's sale of any products on Licensor's behalf, PROVIDED that Licensee's sale of such products is consistent with the terms of this Agreement and such liability is not the product of Licensee's bad faith, misconduct or negligence; and (ii) Licensee's publication or display of any Licensed Property provided by Licensor that was created by Licensor, its agents, Affiliates or Franchisees, PROVIDED that Licensor shall not assume any liability which may arise from (x) a revision, alteration or other change (other than as directed by Licensor or its agents or its Affiliates) to the Licensed Property by or on behalf of Licensee, or (y) Licensee's use of the Licensed Property in a manner that is inconsistent with the terms of this Agreement.
Article 5. LICENSOR OBLIGATIONS. During the Term, Licensor shall undertake the following obligations:
Section 5.1. PROVISION OF LICENSED PROPERTY. Following the execution of this Agreement, Licensor shall provide Licensee with copies of exemplars that were not already provided to Licensee of material uses of Licensed Materials and Licensed Trademarks or as otherwise agreed upon by the Parties or their respective representatives or agents. Thereafter, Licensor shall promptly provide Licensee with copies of any new Licensed Materials developed and any new Licensed Trademarks.
Section 5.2. COOPERATION WITH MARKETING EFFORTS AND WEIGHT WATCHERS PROGRAM INNOVATION. Licensor shall make reasonable and good faith efforts to consult and cooperate regularly (but not less than once per calendar quarter) with Licensee for the purpose of exchanging with reasonable lead time information about market trends and its advertising, marketing and promotional activities and plans and its Weight Watchers Program innovation plans.
Section 5.3. CONSULTATION. Licensor shall arrange for Licensor's staff to be available from time to time, as may reasonably be requested by Licensee, for consultation with Licensee's staff regarding Licensee's use of the Licensed Materials, including but not limited to the Program Information, in connection with Licensee's conduct of the Business in the Electronic Medium.
Article 6. LICENSEE OBLIGATIONS. During the term of this Agreement, Licensee shall undertake the following obligations:
Section 6.1. PROVISION OF DERIVATIVE WORKS. Following the execution of this Agreement and during the Term, Licensee shall provide Licensor with copies of any Derivative Works that were not already provided to Licensor and were created and used in connection with Licensee's conduct of the Business. Thereafter, Licensee shall provide Licensor with copies of any new Derivative Works it creates and uses within a reasonable period of time.
Section 6.2. CONSULTATION. Licensee shall arrange for Licensee's staff to be available from time to time, as may reasonably be requested by Licensor, to consult with Licensor's staff regarding issues that arise with respect to Licensee's conduct of the Business.
Article 7. OWNERSHIP OF LICENSED PROPERTY.
Section 7.1. OWNERSHIP OF LICENSED TRADEMARKS. (a) Licensor represents and Licensee acknowledges that as between the Parties, Licensor is the owner of all rights, title and interest in and to the Licensed Trademarks and is the owner of any and all goodwill attached to the Licensed Trademarks, including that which is developed pursuant to Licensee's use in connection with the conduct of the Business.
(b) Licensee shall be considered a "related company" to Licensor, as that term is defined by the U.S. Lanham Act, such that any and all goodwill arising from Licensee's use of the Licensed Trademarks shall inure solely to the benefit of Licensor. Licensee further acknowledges and agrees that its use of any of the Licensed Trademarks shall at all times be as licensee for the account and benefit of Licensor. To the extent that any rights in and to any of the Licensed Trademarks are deemed to accrue to Licensee anywhere in the world pursuant to this Agreement or otherwise, Licensee hereby assigns, at such time as they may be deemed to accrue, any and all such rights to Licensor, and will take all actions as may be necessary to effectuate such assignment.
(c) During the Term, Licensee shall have the right to propose new trademarks, service marks, corporate names and domain names for use in connection with Licensee's conduct of the Business in the Electronic Medium (such marks, together with any new marks developed by Licensor during the Term, "NEW MARKS"). Licensor shall have the right, in its sole discretion, to approve Licensee's use of such New Marks and to determine whether to file applications to register such New Marks with the U.S. Patent and Trademark Office or other similar governmental office in any other jurisdiction. Any such applications shall be prosecuted in Licensor's name. Licensee shall bear all costs incurred in connection with such prosecution. Any and all such New Marks shall be considered Licensed Trademarks, and any and all domain names within such New Marks shall be considered Weight Watchers Domain Names, for purposes of this Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement, Licensee shall not sell any products or fill any orders in any jurisdiction where the Licensed Trademarks or New Marks are not registered.
Section 7.2. OWNERSHIP OF LICENSED MATERIALS. Licensor represents and Licensee acknowledges that as between the Parties, Licensor is the owner of all rights, title and interest (including intellectual property rights) throughout the world in and to the Licensed Materials and any Derivative Works. In furtherance of Section 2.6, to the extent that any rights (including intellectual property rights) in and to any of the Licensed Materials or Derivative Works are deemed to accrue to Licensee anywhere in the world pursuant to this Agreement or otherwise,
Licensee hereby assigns any and all such rights, at such time as they may be deemed to accrue, to Licensor.
Article 8. TERM AND TERMINATION.
Section 8.1. TERM. The initial term of this Agreement ("INITIAL TERM") commences on the Effective Date and shall continue until the tenth (10th) anniversary thereof. Upon expiration of the Initial Term, this Agreement will automatically renew for additional, successive ten (10) year periods (each a "SUCCESSIVE TERM" and, together with the Initial Term, the "TERM"), unless terminated pursuant to the provisions of Section 8.2 hereof.
Section 8.2. TERMINATION. (a) If, at any time during the Term, Licensee (i) uses no Licensed Property for a continuous period of at least six months, or (ii) commits and fails to cure, within thirty (30) days following Licensor's written notice thereof, a material breach of the provisions of this Agreement, which material breach, if uncured, likely would cause the Licensed Property to be abandoned or render the Licensed Property invalid or unenforceable, Licensor shall have the right to terminate this Agreement upon written notice delivered to Licensee.
(b) Licensor shall have the right to terminate this Agreement immediately upon written notice to Licensee if (i) Licensee makes an assignment of all or substantially all of its assets for the benefit of creditors (other than Licensor); (ii) Licensee admits in writing its inability to pay debts as they mature; (iii) a trustee or receiver is appointed for a substantial part of Licensee's assets; or (iv) to the extent termination is enforceable under the U.S. Bankruptcy Code, a proceeding in bankruptcy is instituted against Licensee that is acquiesced in, is not dismissed within 120 days, or results in an adjudication of bankruptcy. The parties intend that this Agreement shall be construed as a contract for personal services, and that the reputation and identity of Licensee is a material condition to Licensor's grant of the license hereunder.
(c) Licensor shall have the right to terminate this Agreement immediately upon written notice to Licensee thereof if (i) Licensee has committed multiple, intentional material breaches of this Agreement and (ii) Licensor has, in each such instance, provided Licensee with written notice thereof pursuant to Section 8.3(a) hereof, PROVIDED, Licensor's written notice of termination contains a list and brief description of all such breaches.
(d) Except as otherwise set forth in this Section 8.2, the Agreement shall be terminable only upon the written consent of both Licensor and Licensee. Except as otherwise set forth in this Section 8.2, the breach by either Party of any provision of this Agreement, whether material or otherwise, shall not give either Party the right to terminate the Agreement; PROVIDED, however, that this provision shall not limit any other remedies available to the non-breaching Party, including the right to seek damages and injunctive relief.
(e) Upon termination, Licensee shall, within a reasonable period of time, but in no event longer than 30 days after the date of such termination, (i) return to Licensor (or, at Licensor's option and as per Licensor's instructions, shall destroy or otherwise dispose of) (A)
all original copies of Licensed Materials provided to Licensee by Licensor and (B) Derivative Works created by Licensee pursuant to the terms of this Agreement, and (ii) transfer title to any and all registrations for any domain names registered by Licensee that include or incorporate any Licensed Trademarks.
Section 8.3. ARBITRATION. (a) Subject to Section 4.5, in the event a controversy, claim or question of interpretation (each, a "CLAIM") arises with respect to either Party's obligations under this Agreement, or in the event that either Party believes the other Party has breached any provision hereof or defaulted any of its obligations hereunder (each, a "BREACH"), the Party making such Claim or alleging such Breach (the "FIRST PARTY") shall provide the other Party (the "SECOND PARTY") with written notice specifying the nature of such Claim or Breach in reasonable detail and specifying any corrective action the First Party desires the Second Party to undertake.
(b) Within five (5) days after receipt of such written notice, the Second Party shall provide written notice to the First Party of its intent to take the requested corrective action and promptly shall (i) initiate such corrective action at its sole cost and expense or (ii) provide written notice to the First Party explaining why it does not believe such requested corrective action is required under this Agreement.
(c) If (i) the Second Party has not complied with requested corrective action within thirty (30) days after receipt of written notice from the First Party; (ii) the Claim or Breach alleged is not capable of cure within thirty (30) days; (iii) the Second Party does not use its best efforts to cure such breach within such thirty (30) day period and make substantial progress toward cure; or (iv) the Second Party has indicated in writing its intent not to take such requested corrective action; then the First Party shall have the right to refer such Claim or dispute regarding a Breach to arbitration for final resolution.
(d) Any Claim or dispute regarding a Breach referred to arbitration for resolution shall be finally settled under the International Rules of the American Arbitration Association (the "RULES") by three arbitrators appointed in accordance with the Rules. Judgment on any award rendered by the arbitrators may be entered in any court having jurisdiction. Any award rendered by the arbitrators shall be final and binding on the parties and not subject to further appeal. The arbitrators shall have the authority to award any relief or remedy available under applicable law, including without limitation specific performance of any obligation created hereunder, the awarding of punitive damages, the issuance of injunctive or other provisional relief, or the imposition of sanctions. Unless otherwise agreed by the Parties, the place of such arbitration shall be the Borough of Manhattan in The City of New York.
Section 8.4. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The Parties acknowledge and agree that the obligations imposed on them in this Agreement are special, unique and of extraordinary character, and that in the event of breach by any party, damages may be an insufficient remedy. Consequently, each Party agrees that the other may seek specific performance (in addition to damages) as a remedy for the enforcement hereof without proof of
actual damages. In addition, the Parties acknowledge that the arbitration undertaking set forth in Section 8.3 above shall not preclude them from seeking an injunction or other restraining order from any court of competent jurisdiction without proof of actual damages pending the outcome of such arbitration proceeding.
Section 8.5. BANKRUPTCY. The licenses with respect to the
Licensed Property granted pursuant to Sections 2.1 and 2.2 hereof shall be
deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code (the
"BANKRUPTCY CODE"), licenses to rights in "intellectual property" as defined in
Section 101 of the Bankruptcy Code. The Parties agree that Licensee shall retain
and may fully exercise all of its rights and elections under the Bankruptcy
Code. In the event that a bankruptcy proceeding under the Bankruptcy Code is
commenced by or against Licensor, Licensee shall be entitled, at its option, to
retain all of its rights under this Agreement (including without limitation the
rights and licenses granted under Article 2 hereof) pursuant to Section 365(n)
of the Bankruptcy Code or receive a complete duplicate of, or complete access
to, all then existing Licensed Materials that are subject to the license
provisions hereunder, to the extent that such Licensed Materials constitute
"intellectual property" under Section 101 of the Bankruptcy Code. If such
Licensed Materials are not already in Licensee's possession, they shall be
promptly delivered to Licensee upon Licensee's written request (i) upon any such
commencement of a bankruptcy proceeding, unless Licensor elects to continue to
perform all of its obligations under this Agreement; or (ii) upon the rejection
of this Agreement by or on behalf of Licensor.
Article 9. INFRINGEMENT. Licensor and Licensee agree to notify each other immediately after either Party becomes aware of any actual or threatened infringement of the Licensed Property in or relating to the Electronic Medium. Licensor and Licensee may agree at a later date to pay jointly for an action alleging infringement of the Licensed Property or otherwise share such costs and any resulting damages, monetary judgment, settlement and/or compensation paid for such infringement. In the absence of such agreement, Licensor shall pay all costs and expenses associated with, and retain any and all such proceeds received in connection with any action relating to infringement of the Licensed Property.
Article 10. REPRESENTATIONS AND WARRANTIES.
Section 10.1. REPRESENTATIONS AND WARRANTIES OF LICENSOR AND LICENSEE. Licensor and Licensee each represents and warrants to the other Party that:
(a) This Agreement is a legal, valid and binding obligation of the warranting Party, enforceable against such Party in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity);
(b) The warranting Party is not subject to any judgment, order, injunction, decree
or award of any court, administrative agency or governmental body that would or might interfere with its performance of any of its material obligations hereunder; and
(c) The warranting Party has full power and authority to enter into and perform its obligations under this Agreement in accordance with its terms, and is not required to secure the consent, approval or waiver of any third party with respect to such performance.
Section 10.2. REPRESENTATIONS AND WARRANTIES OF LICENSOR. Licensor represents and warrants that it owns all right, title and interest in the Licensed Property or has the right to grant the licenses granted to Licensee hereunder with respect to the Licensed Property. Except as set forth on Schedule I to this Agreement, Licensor is not aware of any claims by any third parties challenging or otherwise pertaining to such ownership, and has no knowledge that any of the Licensed Property is being materially infringed upon by any third party.
Section 10.3. REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee represents and warrants that (i) in the operation of the Site (but excluding any warranty with respect to the Licensed Property), it will not infringe or otherwise violate the rights of any third party, and (ii) it will use materials, resources and personnel in the operation of the Site of a quality and reliability level that is at least industry standard and equal to those utilized in the operation of comparable third-party sites. Licensee further warrants and represents that it has no knowledge of any claims by or against any third parties challenging or otherwise pertaining to the operation of the Site (but excluding any claims covered by Section 10.2 above).
Article 11. ASSIGNMENTS. Except as otherwise expressly set forth herein, Licensee shall not voluntarily, involuntarily or by operation of law assign or otherwise transfer this Agreement or any of its rights or duties hereunder in whole or in part to any third party (including, without limitation, a Change of Control of Licensee) without the prior written consent of the Licensor (which consent may be withheld by Licensor in its sole and absolute discretion), PROVIDED, however, that approval shall not be required for a sale of equity to the public in an initial public offering or a secondary offering. A "Change of Control" shall mean the occurrence of any of the following (i) a sale or other transfer of all or substantially all of the assets used by Licensee in connection with the Business, (ii) any "person" (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than a Permitted Holder, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the voting stock (measured by voting power rather than number of shares) of the Licensee, and the Permitted Holders do not hold a higher percentage thereof or have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Licensee, or (iii) the Licensee consolidates or merges with or into any other Person, other than a consolidation or merger pursuant to a transaction in which the outstanding voting stock of the Licensee is changed into or exchanged for cash, securities or other property with the effect that no Person, other than a Permitted Holder, owns more than 35% of the voting stock (measured by voting power rather than number of shares) of the surviving corporation immediately following such transaction and the Permitted Holders do not hold a higher percentage thereof or have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the
board of directors of the surviving corporation. "Permitted Holder" shall mean Artal Luxembourg S.A., Licensor or any affiliate thereof. Any purported assignment made in contravention of this Article 11 shall be null and void. Upon the occurrence of a Change of Control that has not been approved in advance and in writing by Licensor, this Agreement shall terminate.
Article 12. INDEMNIFICATION.
Section 12.1. LICENSEE'S OBLIGATIONS. Licensee hereby agrees that it shall indemnify, defend and hold harmless Licensor and its Affiliates and their respective directors, officers, shareholders, partners, attorneys, accountants, agents and employees and their heirs and successors (the "LICENSOR INDEMNIFIED PARTIES") from, against and in respect of any damages, claims, losses, charges, actions, suits, proceedings, interest, penalties and reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) ("LOSSES") imposed on, sustained, incurred or suffered by any of the Licensor Indemnified Parties relating to or arising out of any action, suit, claim or arbitration ("ACTION") filed by any third Person that arises out of or stems from (i) Licensee's use of the Licensed Property in a manner that is inconsistent with the terms of this Agreement; (ii) Licensee's conduct of its business, unless such Losses are covered by the indemnity in Section 12.2 below; or (iii) any breach of this Agreement by Licensee, including, without limitation, Section 13.2 below.
Section 12.2. LICENSOR'S OBLIGATIONS. Licensor hereby agrees that is shall indemnify, defend and hold harmless Licensee and its Affiliates and their respective directors, officers, shareholders, partners, attorneys, accountants, agents and employees and their heirs and successors (the "LICENSEE INDEMNIFIED PARTIES") from, against and in respect of any Losses imposed on, sustained, incurred or suffered by any of the Licensee Indemnified Parties relating to or arising out of any Action brought by any third Person that arises out of or stems from (i) Licensee's use of the Licensed Property in connection with Licensee's conduct of the Business in a manner that is consistent with the terms of this Agreement; or (ii) any breach of this Agreement by Licensor, including, without limitation, Section 13.2 below.
Article 13. USER PROFILE DATA AND PRIVACY.
Section 13.1. DATA OWNERSHIP. Subject to the provisions set forth in Section 13.2 and Article 14 hereof, Licensor and Licensee shall jointly own any information collected by Licensee from users through the Site or the Electronic Medium ("DATA"). Consistent with such joint ownership, Licensee shall keep such Data in a database and shall provide Licensor at all times with reasonable access to such database and the Data contained therein during the Term of this Agreement.
Section 13.2. PRIVACY. Licensor and Licensee shall at all
times be bound (and shall require all employees and Affiliates to be bound) by
the rules, regulations and privacy policies promulgated by Licensee or any
applicable government entity or office with respect to use of Data and of
Confidential Information. All privacy policies created by Licensee shall be
subject to the approval process set forth in Section 4.4 above, and Licensee
shall at all times ensure that an approved privacy policy is (i) established,
(ii) followed and (iii) displayed to Persons accessing the Site.
Section 13.3. USE OF DATA. Without limiting the foregoing and subject to Article
14 below, Licensee shall not be permitted to use any Data for purposes of soliciting or communicating with Persons accessing the Site without the prior approval of Licensor in accordance with Section 4.4. Unless otherwise clearly disclosed to those accessing the Site, either on the Site or via the Electronic Medium, all Data collected through the Site or via the Electronic Medium that pertains to such users individually shall be considered to comprise Confidential Information (as defined in Section 14.1), shall be kept confidential pursuant to the provisions of Article 14 hereof, and shall not be disclosed to third parties. Nothing herein shall prevent either Party from disclosing any of the Data to each other and any Affiliate, to the extent permitted by law and all Licensee privacy policies approved pursuant to Section 13.2.
Article 14. CONFIDENTIALITY.
Section 14.1. CONFIDENTIAL INFORMATION. "Confidential
Information" shall mean written or oral information about the disclosing Party's
business or activities that is proprietary or confidential, which shall include
without limitation all business, financial and technical information of a Party,
marketing and advertising strategies, user lists, and any other information of a
Party marked or designated by such Party as confidential information; PROVIDED
THAT information shall not be considered Confidential Information of a Party if
it can be shown that such information; (i) is known to the recipient on the date
of disclosure directly or indirectly from a source other than the providing
Party and other than a source having an obligation of confidentiality to the
providing Party; (ii) thereafter becomes known (independently of disclosure by
the providing Party) to the recipient directly or indirectly from a source other
than one having an obligation of confidentiality to the providing Party; or
(iii) becomes publicly known or otherwise ceases to be secret or confidential,
except through a breach of this Agreement by the recipient.
Section 14.2. PROTECTION OF CONFIDENTIAL INFORMATION. The
Parties acknowledge and agree that, in connection with the performance of this
Agreement, each may have access to certain Confidential Information of
substantial value to the other party, which value would be impaired and which
value would be difficult to quantify if such information were disclosed to third
parties. Consequently, both Licensor and Licensee agree that, except as
expressly permitted in this Agreement (including, without limitation, Article
13), or agreed upon by the Parties pursuant to the approval process set forth in
Section 4.4 hereof, neither Party may use in any way for its own account or for
the account of any third party, nor disclose to any third party (other than an
Affiliate where permitted by law), any such Confidential Information revealed to
it by either Party, as the case may be. Licensor and Licensee further agree that
each will use reasonable best efforts to protect the confidentiality of such
Confidential Information. In the event of termination of this Agreement, there
shall be no use or disclosure by either Party of any such Confidential
Information in its possession, and all documents and materials incorporating,
embodying, containing or otherwise pertaining to Confidential Information shall
be returned to the rightful owner, or destroyed. The provisions of this Article
shall survive the termination of this Agreement for any reason. Upon any breach
or threatened breach of this Section 14.2, either Party shall be entitled to
injunctive relief without need for proving irreparable harm and without need to
post bond as security.
Section 14.3. PERMITTED DISCLOSURE. The Parties acknowledge and agree that each may disclose Confidential Information: (i) as required by law, regulation or court order; (ii) to their respective directors, officers, employees, attorneys, accountants, and other advisors, who are under an obligation of confidentiality, on a "need-to-know" basis; or (iii) in connection with disputes or litigation between the Parties involving such Confidential Information, in which case each Party shall endeavor to limit disclosure to such purpose. In the event a Party is required by law, regulation or court order to disclose any of the other Party's Confidential Information, such Party will promptly notify the other Party in writing prior to any such disclosure in order to facilitate seeking a protective order or other appropriate remedy from the proper authority. The disclosing Party agrees to cooperate with the other Party in seeking such order or other remedy. The disclosing Party further agrees that if such Party is not successful in precluding the requesting legal body from requiring the disclosure of the Confidential Information, it will furnish only that portion of the Confidential Information that is legally required and will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded to such Confidential Information as it is required to disclose.
Article 15. MISCELLANEOUS PROVISIONS.
Section 15.1. RELATIONSHIP OF PARTIES. This Agreement shall not be construed to create a joint venture, partnership or the relationship of principal and agent between the parties hereto, nor to impose upon either party any obligations for any losses, debts or other obligations incurred by the other party, except as expressly set forth herein.
Section 15.2. NOTICES. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or internationally recognized overnight courier service or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the Parties at the following addresses (or at such other addresses for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:
IF TO LICENSOR:
Weight Watchers International, Inc.
175 Crossways Park West
Woodbury, NY 11797
ATTENTION: Chief Executive Officer TELECOPY: (516) 390-1795
and to:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797
ATTENTION: General Counsel TELECOPY: (516) 390-1795
IF TO LICENSEE:
WeightWatchers.com, Inc.
888 Seventh Avenue, 8th Floor
New York, NY 10106
ATTENTION: Chief Executive Officer TELECOPY: (212) 315 - 0709
and to:
WeightWatchers.com, Inc.
888 Seventh Avenue, 8th Floor
New York, NY 10106
ATTENTION: General Counsel
TELECOPY: (212) 315 - 0709
Section 15.3. GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
Section 15.4. SURVIVAL. Articles 1, 12, 13, 14 and 15, Sections 2.6, 4.8, 7.1(a), 7.2, 8.2(e), 8.3, 8.4, and Sections 3.2-3.6 (to the extent relating to royalties accruing prior to such event), 6.1 (to the extent relating to Derivative Works created prior to such event) shall survive any suspension, expiration or termination of this Agreement.
Section 15.5. FURTHER ASSURANCES. Licensor and Licensee agree to execute such further documentation and perform such further actions, including the recordation of such documentation with appropriate authorities, as may be reasonably requested by the other Party hereto to evidence and effectuate the grant of rights and allocation of ownership of the Licensed Property as set forth in this Agreement.
Section 15.6. ENTIRE AGREEMENT. This Agreement, including the various Schedules attached hereto (and the applicable provisions of the Service Agreement), shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.
Section 15.7. AMENDMENTS. This Agreement (including this
Section 15.7) may not be modified or amended except by an agreement in writing
signed by each of the Parties hereto.
Section 15.8. HEADINGS. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.
Section 15.9. WAIVER. No failure of a Party to insist upon strict compliance by the other with any obligation or provision hereunder, and no custom or practice of the Parties at variance with the terms hereof, shall constitute a waiver of such Party's right to demand exact compliance with the terms of this Agreement.
Section 15.10. SEVERABILITY. If any provision of the Agreement or the application thereof to any Person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. If any court or government entity rules that any portion of this Agreement is invalid, illegal or unenforceable to any extent in a particular jurisdiction, such ruling shall not render such provision or this Agreement invalid, illegal or unenforceable in any other jurisdiction.
Section 15.11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, effective as of the date first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
("Licensor")
By: /S/ ROBERT W. HOLLWEG
------------------------------------------
|
WEIGHTWATCHERS.COM, INC.
("Licensee")
By: /S/ SHARON A. FORDHAM
------------------------------------------
|
Exhibit 10.35
SERVICE AGREEMENT
This Service Agreement ("Agreement") is made and entered into as of this 10th day of September, 2001 ("Effective Date"), by and between Weight Watchers International, Inc., a Virginia corporation ("WWI"), and WeightWatchers.com, Inc., a Delaware corporation ("WW.com").
WHEREAS, WWI and WW.com initially executed a certain Intellectual Property License Agreement on September 29, 1999, as amended ("INITIAL LICENSE AGREEMENT");
WHEREAS, WWI and WW.com have executed an Amended and Restated Intellectual Property License Agreement, dated as of the date hereof ("LICENSE AGREEMENT");
WHEREAS, pursuant both to the Initial License Agreement and the License Agreement, WWI agreed to license to WW.com the right to use certain Licensed Property (as defined in the License Agreement) in connection with WW.com's conduct of an on-line business;
WHEREAS, in partial consideration for these rights, and in exchange for the payment of certain additional fees, WW.com agreed to provide WWI with certain services, which are more fully described herein;
NOW, THEREFORE, for good and valuable consideration, including that stated in Article 6 herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Article 1. DEFINITIONS. Unless otherwise set forth herein, all defined terms used herein shall have the meanings ascribed to them in the License Agreement.
Section 1.1. "EXPENSES" shall mean:
(a) All fully-loaded personnel costs directly associated with services under this agreement (salary, benefits, space and utility allocation, computing and support allocations), contractor costs, and travel and living expenses at Licensee's cost. To the extent Licensee's personnel work on several projects, they shall maintain accurate records to reflect how their time is distributed across projects;
(b) All communications, printing and production costs, and all support and administrative costs incurred by Licensee that are specifically attributed to a project under this agreement; and
(c) All expenses other than personnel costs covered in Section 1.1(a) above incurred in the operations and maintenance of pages, subsites, and other infrastructure under this Agreement. Infrastructure and other fixed costs shall be allocated between Licensor and Licensee on the basis of number of pages, number of hits, bandwidth used and/or other metrics agreed by both parties.
Section 1.2. "LOOK AND FEEL" shall mean the look and feel, User interface and flow of User experience of an Internet site.
Section 1.3. "USER" shall mean any end-user of the Internet or any other Electronic Medium.
Article 2. SERVICE CATEGORIES. During the Term, and subject to the terms and conditions of this Agreement, WW.com shall provide all necessary and desirable services within Information Distribution, Marketing Services and Customer Communication Services, that WWI may, from time to time, request pursuant to the procedures set forth in this Agreement. Services to be provided are of the following types (collectively, "SERVICES"):
(a) services pertaining to the hosting, display and distribution via the Electronic Medium on the Site of corporate, investor and other business information provided by WWI both to its customers and to its Affiliates, Franchisees, employees, suppliers and service providers, including, but not limited to (x) the design, creation and publication on the Sites of web pages devoted specifically and exclusively (unless otherwise requested by Licensor) to the display and publication of corporate, investor and other business information that pertains to WWI, its Affiliates and its Franchisees, and (y) the development of functionality enabling controlled access to restricted portions of the Sites by Affiliates, Franchisees, employees, suppliers and service providers (all such services, "INFORMATION DISTRIBUTION SERVICES").
(b) services pertaining to the distribution via the Electronic Medium of marketing and promotional information provided by WWI in connection with the sale outside the Electronic Medium by WWI, its Affiliates, or Franchisees of products and services currently known as Weight Watchers Classes, At Home or By Mail, Men Products sold by mail delivery (such as GutBusters), and the Weight Watchers Magazine, and similar and successor products and services (such products and services "WW PRODUCTS"), including, but not limited to, publishing on the Sites information regarding WW Products (such services, "MARKETING SERVICES").
(c) services pertaining to the communication by WWI, its Affiliates and Franchisees via the Electronic Medium with their customers for the purpose of customer service in connection with WW Products, including, but not limited to, establishing a means by which customers can send questions to WWI, its Affiliates, or Franchisees regarding WW Products electronically and via the Site, and receive responses to such questions from WWI, its Affiliates
or Franchisees electronically and via the Site (such services, "CUSTOMER COMMUNICATION Services").
Article 3. REQUEST PROCEDURES.
Section 3.1. INITIAL REQUEST FOR SERVICES. WWI shall be
responsible for communicating all initial requests for Services in writing to
the appropriate officer or employee of WW.com, as designated by WW.com (each, an
"INITIAL REQUEST"). Each Initial Request shall contain (i) a general description
of the services requested (as described, a "SERVICE PROJECT"), (ii) the proposed
timing for WW.com's provision of such Service Project, (iii) the name of the
contact person at WWI for such Service Project to whom WW.com should direct any
future communications ("PROJECT CONTACT"), and (iv) the means by which WW.com
should contact the Project Contact to respond to the Initial Request. WW.com
shall acknowledge receipt of all Initial Requests submitted by WWI within five
(5) business days by contacting the Project Contact in the manner set forth in
the Initial Request.
Section 3.2. PROJECT WORK STATEMENT. Following the communication of an Initial Request for Services, the Parties shall negotiate and execute, in good faith, a document containing INTER ALIA (i) a schedule of milestones for completion and/or implementation of each requested Service Project, (ii) a schedule of any anticipated maintenance activities required following the initial provision or implementation of such Service Project ("MAINTENANCE PROJECTS") (the Service Projects and Maintenance Projects, collectively, "PROJECTS"), and (iii) an estimated budget for such Projects (such document, a "PROJECT WORK STATEMENT"). Absent contrary language in a Project Work Statement, any quotations or milestones therein are binding upon its execution. The parties shall update each Project Work Statement from time to time as set forth in Sections 3.3 and 3.4.
Section 3.3. QUARTERLY MEETINGS. During the Term, the parties shall meet quarterly, to the extent practicable within 30 days after the end of each calendar quarter, to discuss the status of any and all Projects being rendered by WW.com, the outcome of any Services that were rendered by WW.com during the previous calendar quarter, any Projects that WWI wishes to propose for provision by WW.com during the present calendar quarter, and any other issues that either Party wishes to discuss, to the extent such issues pertain to the provision of Services pursuant to this Agreement (each such meeting, a "QUARTERLY MEETING"). During each Quarterly Meeting, to the extent applicable and deemed necessary by the Parties, the Parties shall execute updates or revisions to any Project Work Statements covering ongoing Projects and initial Project Work Statements for any proposed Projects. In addition, with respect to EACH ongoing Project, WW.com shall provide to WWI, within five (5) business days before each Quarterly Meeting, a statement (i) describing the status of such Project, (ii) summarizing all expenditures made to date and any cost overruns anticipated in connection with its provision of such Project, and (iii) revising, to the extent necessary, the time frame for the achievement of any milestones previously established in the Project Work Statement for such Project.
Section 3.4. SERVICES PREVIOUSLY REQUESTED. The Parties acknowledge that, prior to the Effective Date, WWI requested, and WW.com has begun to provide, certain services consistent with the Services as defined herein. Annexed hereto are preliminary work statements describing the Service Projects performed and to be performed for the years 2000 and 2001. (See Annex A, attached hereto and made a part hereof.) Within a reasonable period following the execution of this Agreement, the Parties shall negotiate and execute Project Work Statements for each such Service Project in a manner that is consistent with the terms and provisions of Section 3.2 hereof.
Article 4. PARTIES' OBLIGATIONS.
Section 4.1. MUTUAL OBLIGATIONS. Subject to the approval process and the limitations set forth in the License Agreement, WWI and WW.com shall cooperate to promote the Site and traffic to the Site, including without limitation, through marketing, advertising, public relations and press activities, and facilitate an efficient and effective integration and delivery through the Site and the Electronic Medium of all Licensed Property.
Section 4.2. WW.COM OBLIGATIONS. In additional to its obligations under the License Agreement, WW.com:
(a) shall provide all day-to-day management and oversight of the Site, and display approved materials related to Services under this Agreement;
(b) shall not change, modify, supplement or remove from the Site any Licensed Property related to Services performed under this Agreement without the prior written approval of WWI , which such approved changes, modifications or supplements shall constitute "Derivative Works" for all purposes under the License Agreement; and
(c) shall comply at all times with all statutes, laws, rules, directives, regulations and sound industry practice pertaining to the operation of the Site, including without limitation any of the foregoing with respect to export controls and data privacy, and shall obtain all necessary third-party consents and approvals.
Article 5. DISPUTE RESOLUTION.
Section 5.1. INTERNET OPERATING COMMITTEE. In the event that a dispute arises regarding the Licensed Property to be used in connection with the provision of Services pursuant to this Agreement, either Party shall have the right to submit such a dispute for resolution to the Internet Operating Committee (as defined in the License Agreement) in accordance with the procedures set forth in Section 4.5 of the License Agreement. For the avoidance of doubt, such disputes shall not be subject to arbitration pursuant to Section 5.2, EXCEPT that a party may appeal, pursuant to Section 5.2, the findings and opinion of the CEO (or that person's appointed
delegate) under Section 4.5 of the License Agreement solely on the ground that such findings and opinion were rendered in bad faith.
Section 5.2. ARBITRATION.
(a) Subject to Section 5.1, in the event a controversy, claim or question of interpretation (each, a "Claim") arises with respect to either Party's obligations under this Agreement, or in the event that either Party believes the other Party has breached any provision hereof or defaulted any of its obligations hereunder (each, a "BREACH"), the Party making such Claim or alleging such Breach (the "FIRST PARTY") shall provide the other Party (the "SECOND PARTY") with written notice specifying the nature of such Claim or Breach in reasonable detail and specifying any corrective action the First Party desires the Second Party to undertake.
(b) Within five (5) days after receipt of such written notice, the Second Party shall provide written notice to the First Party of its intent to take the requested corrective action and promptly shall (i) initiate such corrective action at its sole cost and expense or (ii) provide written notice to the First Party explaining why it does not believe such requested corrective action is required under this Agreement.
(c) If (i) the Second Party has not complied with requested corrective action within thirty (30) days after receipt of written notice from the First Party; (ii) the Claim or Breach alleged is not capable of cure within thirty (30) days; (iii) the Second Party does not use its best efforts to cure such breach within such thirty (30) day period and make substantial progress toward cure; or (iv) the Second Party has indicated in writing its intent not to take such requested corrective action; then the First Party shall have the right to refer such Claim or dispute regarding a Breach to arbitration for final resolution.
(d) Any Claim or dispute regarding a Breach referred to arbitration for resolution shall be finally settled under the International Rules of the American Arbitration Association (the "RULES") by three arbitrators appointed in accordance with the Rules. Judgment on any award rendered by the arbitrators may be entered in any court having jurisdiction. Any award rendered by the arbitrators shall be final and binding on the parties and not subject to further appeal. The arbitrators shall have the authority to award any relief or remedy available under applicable law, including without limitation specific performance of any obligation created hereunder, the awarding of punitive damages, the issuance of injunctive or other provisional relief, or the imposition of sanctions. Unless otherwise agreed by the Parties, the place of such arbitration shall be the Borough of Manhattan in The City of New York.
Section 5.3. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The Parties acknowledge and agree that the obligations imposed on them in this Agreement are special, unique and of extraordinary character, and that in the event of breach by any party, damages may be an insufficient remedy. Consequently, each Party agrees that the other may seek specific performance (in addition to damages) as a remedy for the enforcement hereof without proof of
actual damages. In addition, the Parties acknowledge that the arbitration undertaking set forth in Section 5.2 above shall not preclude them from seeking an injunction or other restraining order from any court of competent jurisdiction without proof of actual damages pending the outcome of such arbitration proceeding.
Article 6. PAYMENTS AND FEES.
Section 6.1. AMOUNT. In exchange for the provision of Services as set forth herein, and beginning on January 1, 2001, WWI shall pay to WW.com quarterly in arrears, within thirty (30) days of WWI's receipt of the Report and Officer's Certification set forth in Section 6.3, all Expenses incurred during such calendar quarter by WW.com in connection with WW.com's provision thereof PLUS a fee of ten (10) percent of Expenses (except for travel and living expenses, which shall be paid strictly at cost) ("FEES"). WWI shall not be obligated to pay WW.com any Expenses or Fees for any Services performed prior to January 1, 2001.
Section 6.2. METHOD OF PAYMENT. Unless otherwise agreed by the Parties in writing, all payments due under this Agreement shall be made by wire transfer of immediately available funds to an account specified by WW.com to WWI.
Section 6.3. ACCOUNTING. During the Term, WW.com shall prepare in accordance with U.S. generally accepted accounting principles a full and accurate statement setting forth, with respect to each previous calendar quarter, all expenses incurred thereby in connection with its provision of Services (the statement, a "REPORT"). An appropriate officer of WW.com shall certify in writing that each such Report is complete and correct (such certification, an "OFFICER'S CERTIFICATION"). WW.com shall provide such Report and Officer's Certification to WWI within thirty (30) days after the end of each calendar quarter.
Section 6.4. RECORDS. WW.com shall keep and maintain at its U.S. corporate headquarters or, to the extent any Services are rendered in or directed toward another jurisdiction, the corporate headquarters for WW.com in any other jurisdiction complete books and records of expenses incurred thereby in connection with its provision of any Services requested by WWI pursuant to this Agreement, which records shall be maintained separately within WW.com's books from records relating to any other expenses incurred by WW.com in connection with the conduct of its business. Such books and records shall, in all instances, be maintained in accordance with U.S. generally accepted accounting principles in addition to any other books and records Licensee may maintain for other purposes. During the Term, for a period of three (3) years and ninety (90) days after each calendar year ("REPORTING CYCLE"), WW.com shall keep all such books and records pertaining to such year in good order and available for inspection by WWI pursuant to the procedures set forth in this Article 6. After each Reporting Cycle, no amounts within such period may be disputed by WWI, and such records may be discarded at WW.com's sole discretion.
Section 6.5. AUDIT AND INSPECTION. WWI or its duly authorized representatives shall have the right, no more than one (1) time in any given calendar quarter, to inspect or audit the above books and records at WW.com's U.S. corporate headquarters or WW.com's corporate headquarters for a particular foreign jurisdiction in which WW.com provides, or at which WW.com directs, any Services pursuant to this Agreement, at any time during normal business hours and upon reasonable advance notice. If any such audit reveals that WW.com has overcharged WWI during any applicable period for any Services performed by WW.com, WW.com shall forthwith (i) refund to WWI the amount of such overpayment plus an amount equal to 50% of such overpayment, and, (ii) if WW.com has overcharged WWI in an amount that is ten percent (10%) or greater of the actual amount of expenses incurred by WW.com for any relevant period, WW.com also shall pay forthwith to WWI its reasonable out-of-pocket expenses incurred to conduct the audit, up to a maximum of $100,000 per audit.
Article 7. TERM AND TERMINATION.
Section 7.1. TERM. The term of this Agreement shall begin on the Effective Date and continue until such time as (i) the License Agreement is terminated pursuant to the terms thereof, or (ii) both parties agree in writing to an earlier termination (the "TERM").
Section 7.2. TERMINATION. Upon termination of this Agreement, WW.com and WWI shall cooperate so as to best preserve the value of the Licensed Property (including Derivative Works), and to preserve, copy, transmit and/or transfer same as per WWI's reasonable instructions. Without limiting the generality of the foregoing, WW.com shall use all reasonable efforts to facilitate the copying, transmittal and/or transfer to WWI of all software and other technology relating to any functionality or features created or developed pursuant to this Agreement in which any Licensed Property (including Derivative Works) is incorporated or embodied, PROVIDED that (i) WWI shall pay all additional costs, if any, associated with obtaining WWI's right to use any such software and other technology owned by third parties in connection with such copying, transmittal and/or transfer and WW.com shall use its reasonable efforts to assist WWI in obtaining such rights; and (ii) effective upon and surviving the termination of this Agreement, WW.com hereby grants WWI a non-exclusive, non-transferable, sublicensable (to the extent necessary to accomplish such copying, transmittal and/or transfer) royalty-free license to use any such software and other technology owned by WW.com for such copying, transmittal and/or transfer.
Article 8. REPRESENTATIONS AND WARRANTIES.
Section 8.1. REPRESENTATIONS AND WARRANTIES OF WWI AND WW.COM. WWI and WW.com each represents and warrants to the other Party that:
(a) This Agreement is a legal, valid and binding obligation of the warranting Party, enforceable against such Party in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity);
(b) The warranting Party is not subject to any judgment, order, injunction, decree or award of any court, administrative agency or governmental body that would or might interfere with its performance of any of its material obligations hereunder; and
(c) The warranting Party has full power and authority to enter into and perform its obligations under this Agreement in accordance with its terms, and is not required to secure the consent, approval or waiver of any third party with respect to such performance.
Section 8.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF WW.COM. WW.com represents and warrants that all Services pursuant to this Agreement shall be of good quality, consistent with the services offered by each of WWI and WW.com, unless WWI expressly requests that such Services be provided at a different level or standard of quality. To the extent WW.com receives any warranties pertaining to the quality of any goods or services provided by any third parties in connection with its provision of the Services, WW.com shall take all reasonable steps to insure that such warranties cover or apply to WWI.
Article 9. INDEMNIFICATION.
Section 9.1. WW.COM'S OBLIGATIONS. WW.com hereby agrees that
it shall indemnify, defend and hold harmless WWI and its Affiliates and their
respective directors, officers, shareholders, partners, attorneys, accountants,
agents and employees and their heirs and successors (the "WWI INDEMNIFIED
PARTIES") from, against and in respect of any damages, claims, losses, charges,
actions, suits, proceedings, interest, penalties and reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees
(collectively, "LOSSES") imposed on, sustained, incurred or suffered by any of
the WWI Indemnified Parties relating to or arising out of (i) any Action filed
by any third Person that arises out of any Services provided by WW.com to WWI
pursuant to this Agreement, unless such Losses are covered by the indemnity in
Section 9.2 below, and (ii) any negligent, reckless or willful misconduct on the
part of WW.com or any of its employees or agents in connection with such
Services.
Section 9.2. WWI'S OBLIGATIONS. WWI hereby agrees that is shall indemnify, defend and hold harmless WW.com and its Affiliates and their respective directors, officers, shareholders, partners, attorneys, accountants, agents and employees and their heirs and successors (the "WW.COM INDEMNIFIED PARTIES") from, against and in respect of any Losses imposed on, sustained, incurred or suffered by any of the WW.com Indemnified Parties relating to or arising out of any Action brought by any third Person that arises out of (i) WW.com's use of any materials or information provided by WWI or used by WW.com at WWI's direction in connection with WW.com's provision of any requested Services, and (ii) any negligent, reckless or willful misconduct on the part of WWI, its Affiliates or Franchisees and any employees or
agents thereof, in connection with the provision of such materials or direction for their use by WW.com.
Article 10. ASSIGNMENT. Unless expressly permitted by WWI prior to the provision thereof, WW.com personally shall provide all Services requested by WWI pursuant to this Agreement, and WW.com shall not assign any of its rights or obligations hereunder to any other Person, provided, however, that WW.com can provide the Services by using, on a subcontracting basis, the same hosting and communication service providers that it may use for portions of the Site related to the conduct of its Business in the Electronic Medium. Any purported assignment made in contravention of this Article 10 shall be null and void.
Article 11. CONFIDENTIALITY.
Section 11.1. CONFIDENTIAL INFORMATION. "Confidential
Information" shall mean written or oral information about the disclosing Party's
business or activities that is proprietary or confidential, which shall include
without limitation all business, financial and technical information of a Party,
marketing and advertising strategies, User lists, and any other information of a
Party marked or designated by such Party as confidential information; PROVIDED
THAT information shall not be considered Confidential Information of a Party if
it can be shown that such information; (i) is known to the recipient on the date
of disclosure directly or indirectly from a source other than the providing
Party and other than a source having an obligation of confidentiality to the
providing Party; (ii) thereafter becomes known (independently of disclosure by
the providing Party) to the recipient directly or indirectly from a source other
than one having an obligation of confidentiality to the providing Party; or
(iii) becomes publicly known or otherwise ceases to be secret or confidential,
except through a breach of this Agreement by the recipient.
Section 11.2. PROTECTION OF CONFIDENTIAL INFORMATION. The Parties acknowledge and agree that, in connection with the performance of this Agreement, each may have access to certain Confidential Information of substantial value to the other party, which value would be impaired and which value would be difficult to quantify if such information were disclosed to third parties. Consequently, both Licensor and Licensee agree that, except as expressly permitted in this Agreement or in the License Agreement, or agreed upon by the Parties pursuant to the approval process set forth in the License Agreement, neither Party may use in any way for its own account or for the account of any third party, nor disclose to any third party (other than an Affiliate where permitted by law), any such Confidential Information revealed to it by either Party, as the case may be. Licensor and Licensee further agree that each will use reasonable best efforts to protect the confidentiality of such Confidential Information. In the event of termination of this Agreement, there shall be no use or disclosure by either Party of any such Confidential Information in its possession, and all documents and materials incorporating, embodying, containing or otherwise pertaining to Confidential Information shall be returned to the rightful owner, or destroyed. The provisions of this Article shall survive the termination of this Agreement for any reason. Upon any breach or threatened breach of this Section 11.2, either
Party shall be entitled to injunctive relief without need for proving irreparable harm and without need to post bond as security.
Section 11.3. PERMITTED DISCLOSURE. The Parties acknowledge and agree that each may disclose Confidential Information: (i) as required by law, regulation or court order; (ii) to their respective directors, officers, employees, attorneys, accountants, and other advisors, who are under an obligation of confidentiality, on a "need-to-know" basis; or (iii) in connection with disputes or litigation between the Parties involving such Confidential Information, in which case each Party shall endeavor to limit disclosure to such purpose. In the event a Party is required by law, regulation or court order to disclose any of the other Party's Confidential Information, such Party will promptly notify the other Party in writing prior to any such disclosure in order to facilitate seeking a protective order or other appropriate remedy from the proper authority. The disclosing Party agrees to cooperate with the other Party in seeking such order or other remedy. The disclosing Party further agrees that if such Party is not successful in precluding the requesting legal body from requiring the disclosure of the Confidential Information, it will furnish only that portion of the Confidential Information that is legally required and will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded to such Confidential Information as it is required to disclose.
Article 12. MISCELLANEOUS PROVISIONS.
Section 12.1. RELATIONSHIP OF PARTIES. This Agreement shall not be construed to create a joint venture, partnership or the relationship of principal and agent between any of the parties hereto, nor to impose upon any party any obligations for any losses, debts or other obligations incurred by another party, except as expressly set forth herein.
Section 12.2. NOTICES. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or internationally recognized overnight courier service or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:
If to WWI:
Weight Watchers International, Inc.
175 Crossways Park West
Woodbury, NY 11797
Attention: Chief Executive Officer Telecopy: (516) 390-1795
with copies to:
Weight Watchers International, Inc.
175 Crossways Park West
Woodbury, NY 11797
Attention: General Counsel Telecopy: (516) 390-1795
If to WW.com:
WeightWatchers.com, Inc.
888 Seventh Avenue, 8th Floor
New York, New York 10106
Attention: Chief Executive Officer Telecopy: (212) 315-0709
with a copy to:
WeightWatchers.com, Inc. 888 Seventh Avenue, 8th Floor New York, New York 10106 Attention: General Counsel Telecopy: (212) 315-0709
Section 12.3. GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
Section 12.4. SURVIVAL. Articles 6 (to the extent relating to Fees accruing prior to such event), 9, 11 and 12 and Sections 5.2, 5.3 and 7.2 shall survive the suspension, expiration or termination of this Agreement.
Section 12.5. FURTHER ASSURANCES. WWI and WW.com agree to execute such further documentation and perform such further actions, including the recordation of such documentation with appropriate authorities, as may be reasonably requested by the other Party hereto to evidence and effectuate the performance of the Services as set forth in this Agreement.
Section 12.6. ENTIRE AGREEMENT. This Agreement, including the Schedule, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.
Section 12.7. AMENDMENTS. This Agreement (including this
Section 12.7) may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
Section 12.8. HEADINGS. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.
Section 12.9. WAIVER. No failure of a Party to insist upon strict compliance by the other with any obligation or provision hereunder, and no custom or practice of the Parties at variance with the terms hereof, shall constitute a waiver of such Party's right to demand exact compliance with the terms of this Agreement.
Section 12.10. SEVERABILITY. If any provision of the Agreement or the application thereof to any person or entity or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. If any court or government entity rules that any portion of this Agreement is invalid, illegal or unenforceable to any extent in a particular jurisdiction, such ruling shall not render such provision or this Agreement invalid, illegal or unenforceable in any other jurisdiction.
Section 12.11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /S/ ROBERT W. HOLLWEG
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WEIGHTWATCHERS.COM, INC.
By: /S/ SHARON A. FORDHAM
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Exhibit 10.36
CORPORATE AGREEMENT
THIS CORPORATE AGREEMENT (the "Agreement") is entered into as of November 5, 2001 by and between Weight Watchers International, Inc., a Virginia corporation (the "Company"), and ARTAL LUXEMBOURG S.A., a Luxembourg SOCIETE ANONYME ("Artal").
RECITALS
WHEREAS, Artal owns approximately 94% of the outstanding Common Stock (as defined herein) of the Company.
WHEREAS, the Company has filed a registration statement to register a number of shares of its common stock in connection with an initial public offering (the "Initial Public Offering") by certain of its shareholders, including Artal, registered under the Securities Act (as defined herein).
WHEREAS, the parties desire to enter into this Agreement to set forth their agreement regarding certain corporate governance matters and certain other matters with respect to the on-going relationship between the Company and Artal.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Artal, for themselves and their successors and assigns, hereby agree as follows:
ARTICLE I
"ACTION" means any claim, suit, action, arbitration, inquiry, investigation or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) including, without limitation, by or before any court, arbitrator or Governmental Entity.
"AGREEMENT" has the meaning ascribed thereto in the preamble hereto, as such agreement may be amended and supplemented from time to time in accordance with its terms.
"ARTAL" has the meaning ascribed thereto in the preamble hereto.
"ARTAL DIRECTOR" shall mean (i) any director designated by Artal or any Authorized
Transferee in accordance with the provisions of Article II and (ii) any director of the Company who at such time as Artal ceases to beneficially own more than 50% of the Total Voting Power of the Company is a director or officer of Artal or The Invus Group, Ltd.
"AUTHORIZED TRANSFEREE" means any Transferee of at least 10% of the Total Voting Power of the Company that pursuant to a negotiated instrument of transfer or related agreement has been granted rights under such provision of this Agreement by Artal or such transferring Authorized Transferee.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"COMMON STOCK" means the common stock, no par value, of the Company, and any other class of the Company's capital stock representing the right to vote generally for the election of directors.
"COMPANY" has the meaning ascribed thereto in the preamble hereto.
"COMPANY LIABILITIES" means all Liabilities, whether arising before, at or after the Initial Public Offering Date, (i) of or in any way relating, in whole or in part, to the Company or any of its Subsidiaries or (ii) arising from the conduct of, in connection with or in any way relating to, in whole or in part, the businesses and operations of the Company or any of its Subsidiaries or the ownership or use of assets or property in connection therewith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any successor statute.
"FINALLY DETERMINED" means, with respect to any Action, threatened Action or other matter, that the outcome or resolution of that Action, threatened Action or matter has either (i) been decided by an arbitrator or Governmental Entity of competent jurisdiction by judgment, order, award or other ruling or (ii) has been settled or voluntarily dismissed and, in the case of each of clauses (i) and (ii), the claimants' rights to maintain that Action, threatened Action or other matter have been finally adjudicated, waived, discharged or extinguished, and that judgment, order, ruling, award, settlement or dismissal (whether mandatory or voluntary, but if voluntary that dismissal must be final, binding and with prejudice as to all claims specifically pleaded in that Action) is subject to no further appeal, vacatur proceeding or discretionary review.
"GOVERNMENTAL ENTITY" means any government or any state, department or other political subdivision thereof, or any governmental body, agency, authority (including, but not limited to, any central bank or taxing authority) or instrumentality (including, but not limited to, any court, tribunal or grand jury) exercising executive, prosecutorial, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFIED PARTY" has the meaning ascribed thereto in
Section 5.1.
"INDEMNIFYING PARTY" has the meaning ascribed thereto in
Section 5.2.
"INITIAL PUBLIC OFFERING" has the meaning ascribed thereto in the recitals hereto.
"INITIAL PUBLIC OFFERING DATE" means the date of completion of the initial sale of Common Stock in the Initial Public Offering.
"LIABILITIES" means any and all claims, debts, liabilities, assessments, fines, penalties, damages, losses, disgorgements and obligations, of any kind, character or description (whether absolute, contingent, matured, not matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect, derivative or otherwise) whenever arising, including, but not limited to, all costs and expenses relating thereto (including, but not limited to, all expenses of investigation, all attorneys' fees and all out-of-pocket expenses in connection with any Action or threatened Action).
"LOWER PERCENTAGE" has the meaning ascribed thereto in Section 2.4.
"LOWER THRESHOLD" has the meaning ascribed thereto in Section 2.1.
"NOMINEE THRESHOLD" has the meaning ascribed thereto in
Section 2.1.
"PERSON" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity.
"RATIO" has the meaning ascribed thereto in Section 2.2.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor statute.
"SUBSIDIARY" means, as to any Person, any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting power of capital stock or other voting ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is owned or controlled, directly or indirectly, by such Person or by one or more of the Subsidiaries of such Person or by a combination thereof. "Subsidiary," when used with respect to Artal, any Authorized Transferee or the Company, shall also include any other entity affiliated with Artal, such Authorized Transferee or the Company, as the case may be, that Artal, such Authorized Transferee and the Company may hereafter agree in writing shall be treated as a "Subsidiary" of such Person for the purposes of this Agreement.
"THIRD-PARTY CLAIM" has the meaning ascribed thereto in
Section 5.3.
"TOTAL VOTING POWER OF THE COMPANY" shall mean the total number of votes that may be cast in the election of members of the Board of Directors by all holders of Common
Stock.
"TRANSFEREE" shall mean any of (i) the transferee of all or any portion of the Common Stock held by Artal or (ii) the subsequent transferee of all or any portion of the Common Stock held by any Transferee; provided that no Transferee shall be entitled to any benefits of a Transferee hereunder unless such Transferee executes an instrument substantially in the form provided as Exhibit A attached hereto.
Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement and references to the parties shall mean the parties to this Agreement.
SEATS ON BOARD OF DIRECTORS
2.1 So long as Artal together with any Authorized Transferee
beneficially owns shares of the Company's stock having at least 10% (the
"Nominee Threshold") but less than a majority of the Total Voting Power of
the Company, in connection with any election of directors of the Company,
Artal and such Authorized Transferee shall have the right to designate and
the Company shall cause the nomination of such number of directors of the
Company such that after such election (assuming all such Artal and Authorized
Transferee designees are elected to the Board of Directors), the number of
Artal Directors will be equal to the number resulting from (1) the Total
Voting Power of the Company beneficially owned by Artal and any Authorized
Transferees divided by the Total Voting Power of the Company, multiplied by
(2) the total number of members on the Board of Directors, rounded to the
nearest whole number; provided, that in no event shall the number of Artal
Directors nominated pursuant to this provision constitute less than one
member of the Board of Directors. Notwithstanding the foregoing, if the
Company grants any other Person at any time or from time to time the right to
nominate a director or directors based on a lesser percentage of the Total
Voting Power of the Company (the "Lower Threshold") than the Nominee
Threshold, Artal and any Authorized Transferee shall have the right to
designate an equal number of members of the Board of Directors as such other
Person so long as it beneficially owns an amount of Common Stock greater than
or equal to the Lower Threshold. If a vacancy occurs or exists on the Board
of Directors at any time, including but not limited to a vacancy because of
the death, disability, retirement, resignation or removal of any director for
cause or otherwise, and the vacant position was held by an Artal Director,
then Artal (or if such Artal Director was nominated by an Authorized
Transferee, such Authorized Transferee) shall have the sole right to
designate an individual to fill such vacancy, and, subject to the fiduciary
duties of directors, the Board of Directors shall elect such nominee to fill
such vacancy. The Company shall use its reasonable best efforts to solicit
from the shareholders of the Company eligible to vote for the election of
directors proxies in favor of the nominees designated by the Board of
Directors in accordance with this Section 2.1.
2.2 If, at any time, the total number of directors of the Company is increased or decreased, the number of directors that Artal and any Authorized Transferees shall have the right to designate
pursuant to Section 2.1 above, shall as promptly as practicable be increased or
decreased so that the adjusted ratio of Artal Directors to total directors is
not less than the ratio of Artal Directors (determined immediately prior to such
increase or decrease, as the case may be, in accordance with the provisions of
Section 2.1) to the total number of directors of the Company immediately prior
to such increase or decrease, as the case may be (the "Ratio"). In such event,
Artal, each Authorized Transferee and the Company shall take such steps
consistent with the provisions of Section 2.1 to effectuate this increase or
decrease of Artal Directors in relation to the Ratio as rapidly as reasonably
possible.
2.3 At the request of Artal (or if such Artal Director was nominated by an Authorized Transferee, such Authorized Transferee) the Company shall (x) use its best efforts to cause a special meeting of shareholders to be held proposing the removal of any Artal Director provided, that if in the reasonable good faith determination by the Board of Directors it is materially detrimental to do so, then the Company may delay calling such special meeting; provided that the Company will cause such meeting in any event to be held within 90 days of such request by Artal or such Authorized Transferee and (y) use its best efforts to solicit from holders of Common Stock proxies to remove such specified Artal Directors.
2.4(a) For so long as Artal together with any Authorized Transferee beneficially owns shares of the Company's stock having at least 20% of the Total Voting Power of the Company, subject to the fiduciary duties of the directors, Artal Directors shall be nominated to serve on each committee of the Board of Directors (other than any committee required by law or stock exchange requirement to consist solely of independent directors but only to the extent a sufficient number of Artal Directors do not qualify as independent directors; provided that such lesser number of Artal Directors that do qualify as independent directors shall be appointed to such committee) so that after such appointment(s), the ratio of Artal Directors who are members of such committee to the total number of members of such committee is not less than the Ratio. Notwithstanding the foregoing, if the Company grants any other Person at any time or from time to time the right to nominate a director or directors to serve on any committee(s) of the Board of Directors at a percentage less than 20% of the Total Voting Power of the Company (the "Lower Percentage"), Artal and any Authorized Transferee shall have the right to appoint an equal number of Artal Directors to serve on such committee(s) as such other Person so long as Artal together with such Authorized Transferee beneficially owns an amount of the Common Stock having at least the same amount of the Total Voting Power of the Company as the Lower Percentage.
(b) For so long as (i) Artal together with any Authorized Transferee beneficially owns shares of the Common Stock having at least 10% but less than the lesser of 20% and the Lower Percentage of the Total Voting Power of the Company and (ii) there is at least one Artal Director, any such Artal Director shall be permitted to observe the proceedings of (but shall not be a member of) any committee of the Board of Directors. Notwithstanding the foregoing, if the Company grants any other Person at any time or from time to time the right to appoint a director or directors to observe the proceedings of any committee(s) of the Board of Directors at a percentage less than 10% of the Total Voting Power of the Company, Artal and such Authorized Transferee shall have the right to appoint an equal number of Artal Directors to observe such proceedings as such other Person so long as Artal together with such Authorized Transferee beneficially owns an amount of the Common Stock having at least the same amount of the Total Voting
Power of the Company as such lesser percentage.
Notwithstanding any other provision of this Article II, Artal and any Authorized Transferee shall not be prohibited from nominating a greater number of directors or committee members than specified in Sections 2.1 or 2.4, as the case may be.
ARTICLE III
(a) Each of Artal and any Authorized Transferee covenants and agrees that it will not take any action or enter into any commitment or agreement that may reasonably be anticipated to result, with or without notice and with or without lapse of time or otherwise, in a contravention or event of default by the Company of (i) any provisions of applicable law or regulation; (ii) any provision of the Company's articles of incorporation or bylaws; (iii) any credit agreement or other material instrument binding upon the Company in effect as of the date of this Agreement; or (iv) any judgment, order or decree of any Governmental Entity having jurisdiction over the Company or any of its assets.
(b) The Company covenants and agrees that it will not take
any action or enter into any commitment or agreement that may reasonably be
anticipated to result, with or without notice and with or without lapse of
time or otherwise, in a contravention or event of default by Artal or any
Authorized Transferee of (i) any provisions of applicable law or regulation;
(ii) any provision of the articles of incorporation or the bylaws (or similar
constitutive documents) of Artal or an Authorized Transferee; (iii) any
credit agreement or other material instrument binding upon Artal or an
Authorized Transferee in effect as of the date of this Agreement; or (iv) any
judgment, order or decree of any Governmental Entity having jurisdiction over
Artal or any Authorized Transferee or any of their respective assets.
(c) Artal or such Authorized Transferee, as the case may be, and the Company agree to provide to the other any information and documentation requested by the other for the purpose of evaluating and ensuring compliance with Sections 3.1(a) and 3.1(b) hereof.
Subject to the terms and conditions hereof, the Company agrees, and agrees to cause each of its Subsidiaries, and Artal and each Authorized Transferee agrees, and agrees to cause its officers, directors and advisors, to use their reasonable best efforts to promptly take, or cause to be promptly taken, or to refrain or cause to refrain from, as applicable, all action and to do, or cause to be done, all things necessary, on their respective parts, to assist each other in obtaining all governmental licenses, permits, consents, approvals, authorizations, qualifications and orders and to permit each other to be in compliance with all legal and regulatory requirements (of which such party has knowledge or has otherwise been made aware of by the other party hereto) as are reasonably necessary in connection with the operation of their respective businesses. The Company shall promptly furnish, and shall cause each of its
Subsidiaries to furnish, Artal or any Authorized Transferee with such information and assistance as Artal or such Authorized Transferee may reasonably request in connection with the preparation of any necessary filings or submissions by Artal or such Authorized Transferee or any of their respective Subsidiaries or affiliates to any governmental or regulatory agency or stock exchange or as otherwise necessary to comply with law or regulation, including, without limitation, any filings necessary under the provisions of the HSR Act, the Securities Act or the Exchange Act or pursuant to the requirements of any stock exchange. Artal and any Authorized Transferee shall furnish, and shall cause its officers, directors and advisors to furnish, the Company with such information and assistance as the Company may reasonably request in connection with the preparation of any necessary filings or submissions by the Company or any of its Subsidiaries or affiliates to any governmental or regulatory agency or stock exchange or as otherwise necessary to comply with law or regulation, including, without limitation, any filings necessary under the provisions of the HSR Act, the Securities Act, the Exchange Act or pursuant to the requirements of the New York Stock Exchange.
ARTICLE IV
The provisions of this Article IV are set forth to regulate and define the conduct of certain affairs of each party and their respective officers, directors and advisors, if applicable, and the powers, rights, duties and liabilities of each party and their respective directors and shareholders in connection therewith.
(a) Artal and any Authorized Transferee shall have no duty to
refrain from: (i) engaging in the same or similar activities or lines of
business as the Company; (ii) doing business with any customer of the
Company; and (iii) employing or engaging any officer or employee of the
Company, and no officer, director or advisor thereof (except as provided in
Section 4.3) shall be liable to the Company or its shareholders for breach of
any fiduciary duty by reason of any such activities of Artal or such
Authorized Transferee.
(b) The Company shall have no duty to refrain from: (i) engaging in the same or similar activities or lines of business as Artal or any Authorized Transferee; (ii) doing business with any customer of Artal or any Authorized Transferee; and (iii) employing or engaging any officer, director or advisor of Artal or any Authorized Transferee, and no officer or director of the Company (except as provided in Section 4.3) shall be liable to Artal or any Authorized Transferee or their respective shareholders for breach of any fiduciary duty by reason of any such activities of the Company.
In the event that a director or officer of the Company who is also a director, officer or advisor of Artal or any Authorized Transferee acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both the Company and Artal or such Authorized Transferee, such director or officer of the Company shall have fully satisfied and fulfilled the fiduciary duty of such director or officer to the Company and its shareholders with respect to such corporate opportunity, if such director or officer acts in a manner consistent with the following policy:
(i) If any officer or director of the Company who also serves as an officer, director or advisor of Artal or any Authorized Transferee becomes aware of a potential transaction related primarily to the group education-based weight-loss business that may represent a corporate opportunity for both the Company and Artal or such Authorized Transferee, such officer or director has no duty to present that opportunity to Artal or such Authorized Transferee; and the Company will have the sole right to pursue the transaction if the Board of Directors so determines.
(ii) If any officer or director of the Company who also serves as an officer, director or advisor of Artal or any Authorized Transferee becomes aware of any other potential transaction that may represent a corporate opportunity for both the Company and Artal or such Authorized Transferee, such officer or director will have a duty to present that opportunity to Artal or such Authorized Transferee; and Artal or such Authorized Transferee will have the sole right to pursue the transaction if Artal or such Authorized Transferee so determines.
(b) If any officer or director of the Company who does not serve as an officer, director or advisor of Artal or any Authorized Transferee becomes aware of a potential transaction that may represent a corporate opportunity for both the Company and Artal or any Authorized Transferee, neither the Company nor such officer or director has a duty to present that opportunity to Artal or any Authorized Transferee; and the Company may pursue the transaction if the Board of Directors so determines.
(c) If any officer, director or advisor of Artal or any Authorized Transferee who does not serve as an officer or director of the Company becomes aware of a potential transaction that may represent a corporate opportunity for both Artal or such Authorized Transferee and the Company, neither Artal, such Authorized Transferee nor any such officer, director or advisor has a duty to present that opportunity to the Company; and Artal or such Authorized Transferee may pursue the transaction if Artal or such Authorized Transferee so determines.
Any Person purchasing or otherwise acquiring any interest in shares of Common Stock shall be deemed to have notice of and to have consented to the provisions of this Article IV.
ARTICLE V
(a) On and after the Initial Public Offering Date, the Company shall indemnify and hold harmless Artal and any Authorized Transferee and their respective directors, officers, employees and
advisors (each, an "Indemnified Party") from and against any and all Liabilities incurred or suffered by any Indemnified Party arising out of (i) any and all Company Liabilities and (ii) the breach by the Company of any obligation under this Agreement.
(b) The Company shall indemnify and hold harmless each Indemnified Party from and against any and all Liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any document filed with the SEC by the Company pursuant to the Securities Act or the Exchange Act, or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of any prospectus, in the light of the circumstances under which they were made) not misleading, except, where in each case, those Liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information that is furnished in writing to the Company by such Indemnified Party.
If any Indemnified Party determines that it is or may be
entitled to indemnification by any party (the "Indemnifying Party") under
Article V of this Agreement (other than in connection with any Action subject to
Section 5.3), the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable, the basis for
its claim for indemnification and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. Within 30 days after
receipt of that notice, the Indemnifying Party shall pay the Indemnified Party
that amount in cash or other immediately available funds unless the Indemnifying
Party objects to the claim for indemnification or the amount of the claim. If
the Indemnifying Party does not give the Indemnified Party written notice
objecting to that indemnity claim and setting forth the grounds for the
objection(s) within that 30-day period, the Indemnifying Party shall be deemed
to have acknowledged its liability for that claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect that amount.
If there is a timely objection by the Indemnifying Party, the Indemnifying Party
shall pay to the Indemnified Party in cash the amount, if any, that is Finally
Determined to be required to be paid by the Indemnifying Party in respect of
that indemnity claim within 15 days after that indemnity claim has been so
Finally Determined.
Promptly after the earlier of receipt of (i) notice that a third party has commenced an Action against or otherwise involving any Indemnified Party or (ii) information from a third party alleging the existence of a claim against an Indemnified Party, in either case, with respect to which indemnification may be sought under Article V of this Agreement (a "Third-Party Claim"), the Indemnified Party shall give the Indemnifying Party written notice of the Third-Party Claim. The failure of the Indemnified Party to give notice as provided in this Section 5.3 shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent that the Indemnifying Party is materially prejudiced by the failure to give notice. Within 30 days after receipt of that notice, the Indemnifying Party may (i) at its option, elect to assume and control the defense of that Third-Party Claim at its sole cost and expense by giving written notice to that effect to the Indemnified Party, or (ii) object to the claim for
indemnification set forth in the notice delivered by the Indemnified Party pursuant to the first sentence of this Section 5.3; provided, that if the Indemnifying Party does not within that 30-day period give the Indemnified Party written notice objecting to that indemnification claim and setting forth the grounds for the objection(s), the Indemnifying Party shall be deemed to have acknowledged its liability for that indemnification claim. If the Indemnifying Party has acknowledged liability and elected to assume the defense of a Third-Party Claim, (x) the defense shall be conducted by counsel retained by the Indemnifying Party and reasonably satisfactory to the Indemnified Party, provided that the Indemnified Party shall have the right to participate in those proceedings and to be represented by counsel of its own choosing at the Indemnified Party's sole cost and expense unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii) such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party and in the reasonable judgement of such counsel it is advisable for such Indemnified Party to employ separate counsel or (iii) the Indemnifying Party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the Indemnified Party, in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party and (y) the Indemnifying Party may settle or compromise the Third-Party Claim without the prior written consent of the Indemnified Party so long as any settlement or compromise of the Third-Party Claim includes an unconditional release of the Indemnified Party from all claims that are the subject of that Third-Party Claim; provided, that the Indemnifying Party may not agree to any such settlement or compromise pursuant to which any remedy or relief, other than monetary damages for which the Indemnifying Party shall be responsible under this Agreement, shall be applied to or against the Indemnified Party, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. If the Indemnifying Party does not assume the defense of a Third-Party Claim for which it has acknowledged liability for indemnification hereunder, the Indemnified Party will act in good faith with respect to that Third-Party Claim and may require the Indemnifying Party to reimburse it on a current basis for its reasonable expenses of investigation, reasonable attorney's fees and reasonable out-of-pocket expenses incurred in investigating and defending against that Third-Party Claim and the Indemnifying Party shall be bound by the result obtained with respect to that claim by the Indemnified Party; provided, that the Indemnifying Party shall not be liable for any settlement or compromise of any Third-Party Claim effected without its consent, which consent shall not be unreasonably withheld. The Indemnifying Party shall pay to the Indemnified Party in cash the amount, if any, for which the Indemnified Party is entitled to be indemnified under this Agreement within 15 days after that Third-Party Claim has been Finally Determined.
If for any reason the indemnification provided for in
Section 5.1 is unavailable to any Indemnified Party, or insufficient to hold
it harmless, then the Indemnifying Party shall contribute to the amount paid
or payable by that Indemnified Party as a result of those Liabilities in that
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, in connection with those statements or omissions, which relative fault
shall be determined by reference to Artal or such Authorized
Transferee, as the case may be, on the one hand, or the Company, on the other hand, to which those actions, conduct, statements or omissions are primarily related, as well as any other relevant equitable considerations.
ARTICLE VI
INFORMATION RIGHTS
To the extent permitted by law, so long as Artal or any Authorized Transferee beneficially owns 10% or more of the Total Voting Power of the Company, the Company shall deliver to Artal or such Authorized Transferee such financial or other information as Artal or such Authorized Transferee may request.
To the extent required by law or stock exchange requirement or necessary to allow Artal's or any Authorized Transferee's audit committee to discharge their responsibilities, the Company shall allow, on reasonable notice, Artal or any Authorized Transferee or their respective representatives to audit the affairs of the Company, including (i) having access to (and take copies of) the records of the Company (and the working papers of its accountants); (ii) having access to the premises of the Company and its Subsidiaries and to have the ability to consult and discuss matters with the auditors, advisors and management of the Company (during normal office hours) and (iii) procuring that the Company shall, co-operate fully with Artal or any Authorized Transferee and their respective representatives in relation to this process. In addition, the Company shall use all reasonable efforts to allow the independent accountants of Artal or any Authorized Transferee to audit the working papers of and to assist in any review undertaken by the Company's independent accountants. Artal and any Authorized Transferees shall coordinate its efforts in good faith with, and work with and through, the Audit Committee of the Board of Directors and the Company's internal audit department to accomplish such objectives. The Company shall bear its internal fees and expenses and shall pay the fees and expenses of its accountants and other advisors incurred in connection with any audit undertaken pursuant to this Section 6.2.
ARTICLE VII
7.1 Artal represents and warrants as follows:
Artal is a SOCIETE ANONYME duly organized and validly existing under the laws of Luxemburg. The execution and delivery by Artal of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate action on the part of Artal, and this Agreement has been duly executed and delivered by the duly authorized officers of Artal and constitutes the valid, legal and binding obligation of Artal.
(i) The execution, delivery and performance of this Agreement by Artal will not result in (A) any conflict with the charter documents of Artal, (B) any material breach or violation of or default under any statute, law, rule, regulation, judgment, decree, order or any material mortgage, deed of trust, indenture, agreement or any other instrument to which Artal is a party or by which any of their respective material properties or assets are bound, or (C) the creation or imposition of any lien, charge, pledge or encumbrance thereon, except for such breaches, violations or defaults and such liens, charges, pledges or encumbrances as would not, individually or in the aggregate, have a material adverse effect on Artal's business or adversely affect the ability of Artal to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with any governmental authority is required with respect to Artal in connection with the execution and delivery of this Agreement, and the performance by Artal of its obligations hereunder.
There are no judicial or administrative actions, proceedings or investigations pending or, to the best knowledge of Artal, threatened, which question the validity of this Agreement or any action taken or to be taken by Artal in connection herewith.
7.2 The Company represents and warrants as follows:
The Company is a company duly organized, validly existing in good standing under the laws of the Commonwealth of Virginia. The execution and delivery by the Company of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement has been duly executed and delivered by the duly authorized officers of the Company and constitutes the valid, legal and binding obligation of the Company.
(i) The execution, delivery and performance of this Agreement by the Company will not result in (A) any conflict with the charter documents of the Company on any of its Subsidiaries (B) any material breach or violation of or default under any statute, law, rule, regulation, judgment, decree, order or any material mortgage, deed of trust, indenture, agreement or any other instrument to which the Company or any of its Subsidiaries is a party or by which any of their respective material properties or assets are bound, or (C) the creation or imposition of any lien, charge, pledge or encumbrance thereon, except for such breaches, violations or defaults and such liens, charges, pledges or encumbrances as would not, individually or in the aggregate, have a material adverse effect on the Company's business or adversely affect the ability of the Company to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with any governmental authority is required with respect to the Company in connection with the execution and delivery of this Agreement, and the performance by the Company of its obligations hereunder.
There are no judicial or administrative actions, proceedings or investigations pending or, to the best knowledge of the Company, threatened, which question the validity of this
Agreement or any action taken or to be taken by the Company in connection herewith.
7.3 Each Authorized Transferee represents and warrants as follows:
Such Authorized Transferee is duly organized and validly existing under the laws of the jurisdiction of its organization. The execution and delivery by such Authorized Transferee of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary action on the part of such Authorized Transferee, and this Agreement has been duly executed and delivered by the duly authorized officers of such Authorized Transferee and constitutes the valid, legal and binding obligation of such Authorized Transferee.
(i) The execution, delivery and performance of this Agreement by such Authorized Transferee will not result in (A) any conflict with the charter or similar documents of such Authorized Transferee, (B) any material breach or violation of or default under any statute, law, rule, regulation, judgment, decree, order or any material mortgage, deed of trust, indenture, agreement or any other instrument to which such Authorized Transferee is a party or by which any of its respective material properties or assets are bound, or (C) the creation or imposition of any lien, charge, pledge or encumbrance thereon, except for such breaches, violations or defaults and such liens, charges, pledges or encumbrances as would not, individually or in the aggregate, have a material adverse effect on such Authorized Transferee's business or adversely affect the ability of such Authorized Transferee to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with any governmental authority is required with respect to such Authorized Transferee in connection with the execution and delivery of this Agreement, and the performance by such Authorized Transferee of its obligations hereunder.
There are no judicial or administrative actions, proceedings or investigations pending or, to the best knowledge of such Authorized Transferee, threatened, which question the validity of this Agreement or any action taken or to be taken by such Authorized Transferee in connection herewith.
ARTICLE VIII
The Company agrees and acknowledges that the Company shall be responsible for the performance by each of its Subsidiaries of the obligations hereunder applicable to such Subsidiary.
This Agreement may be amended, supplemented or otherwise modified only by a writing duly executed by or on behalf each of the parties hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by
the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid, illegal or unenforceable to any extent, the remainder of this Agreement or such provision of the application of such provision to such party or circumstances, other than those to which it is so determined to be invalid, illegal or unenforceable, shall remain in full force and effect to the fullest extent permitted by law and shall not be affected thereby, unless such a construction would be unreasonable.
(a) if to the Company, to:
Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York 11797-2055 Attention: General Counsel Telecopy No.: 516-390-1795
with a copy to:
Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Rise Norman, Esq.
Telecopy No.: 212-455-2502
(b) If to Artal, to:
Artal Luxembourg S.A.
105 Grand-Rue
L-1661 Luxembourg, Luxembourg
Attention: Managing Director
Telecopy No.: 011-352-2242-5922
with a copy to:
The Invus Group, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Sacha Lainovic
Telecopy No: 212-371-1829
and to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Rise Norman, Esq.
Telecopy No.: 212-455-2502
or to such other addresses or telecopy numbers as may be specified by like notice to the other parties.
Artal and the Company shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments and take such other action as may be reasonably necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document or other instrument delivered pursuant hereto.
This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof.
The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Amendment shall properly lie and shall be brought in any federal or state court located in the Borough of Manhattan, City and 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 herself and in respect of its or her 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. The parties hereto acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same agreement.
(b) Any assignment pursuant to paragraph (a) of this Section 8.11 shall be effective upon receipt by the Company of (i) written notice from the transferring holder of the Common Stock stating the name and address of any Transferee and identifying the number of shares of Common Stock with respect to which the rights under this Agreement are being transferred and the nature of the rights so transferred, (ii) a copy of the provision of the instrument of transfer or related agreement granting the rights under this Agreement so transferred and (iii) a written agreement in substantially the form attached as Exhibit A hereto from such Transferee to be bound by the applicable terms of this Agreement.
Neither this Agreement nor any right or obligation hereunder shall be binding on the parties hereto and enforceable against them in accordance with the terms thereof unless and until the Initial Public Offering is complete.
This Agreement shall terminate with respect to any party hereto when such party no longer has any rights or obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /s/ Robert W. Hollweg
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ARTAL LUXEMBOURG S.A.
By: /s/ Pol Kohler -------------------------------- |
EXHIBIT A
JOINDER
By execution of this Joinder, the undersigned agrees to become a party to that certain Corporate Agreement, dated as of November 5, 2001 (the "Agreement"), between Weight Watchers International, Inc. and Artal Luxembourg S.A. By execution of this Joinder, the undersigned shall have all the rights, and shall observe all the obligations specified in Section 8.11 of the Agreement and to have made on the date hereof all representations and warranties set forth in Section 7.3 of the Agreement, modified, if necessary, to reflect the nature of the undersigned as a trust, estate or other entity.
Name:
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Address for Notices: With Copies to:
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Signature:
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Date:
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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
November 9, 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
November 9, 2001