UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2005

Commission File No. 000-03389

WEIGHT WATCHERS INTERNATIONAL, INC.

( Exact name of Registrant as specified in its charter)

Virginia		11-6040273
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

11 Madison Avenue, New York, NY 11010

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (212) 589-2700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes

The number of common shares outstanding as of July 29, 2005 was 103,129,573.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

Unaudited Consolidated Balance Sheets as of July 2, 2005 and January 1, 2005		2

Unaudited Consolidated Statements of Operations for the three months ended July 2, 2005 and July 3, 2004		3

Unaudited Consolidated Statements of Operations for the six months ended July 2, 2005 and July 3, 2004		4

Unaudited Consolidated Statement of Changes in Shareholders’ Equity for the six months ended July 2, 2005 and for the fiscal year ended January 1, 2005		5

Unaudited Consolidated Statements of Cash Flows for the six months ended July 2, 2005 and July 3, 2004		6

Notes to Unaudited Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 2.	Changes in Securities and Use of Proceeds and Issuer Purchases of Equity Securities	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Submission of Matters to a Vote of Security Holders	31

Item 5.	Other Information	32

Item 6.	Exhibits	32

Signatures		34

Exhibits		35

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALACE SHEETS

(IN THOUSANDS)

	July 2,			January 1,
	2005			2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	134,271		$	35,156
Receivables, net	25,776			21,778
Inventories, net	25,324			32,929
Deferred income taxes	16,763			4,317
Prepaid expenses and other current assets	23,274			31,636
TOTAL CURRENT ASSETS	225,408			125,816

Property and equipment, net	17,215			17,480
Franchise rights acquired	555,976			557,121
Goodwill	52,502			25,125
Trademarks and other intangible assets, net	6,438			5,721
Deferred income taxes	74,531			77,964
Deferred financing costs and other noncurrent assets	6,255			6,959
TOTAL ASSETS	$	938,325		$	816,186
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Portion of long-term debt due within one year	$	3,000		$	3,000
Accounts payable	34,516			20,760
Accrued liabilities	80,027			62,252
Dividend payable to Artal Luxembourg, S.A.	304,835			—
Income taxes payable	16,995			34,684
Deferred income taxes	12,545			4,844
Deferred revenue	39,954			27,082
TOTAL CURRENT LIABILITIES	491,872			152,622

Long-term debt	480,625			466,125
Deferred income taxes	27			715
Other	2,048			285
TOTAL LIABILITIES	974,572			619,747

SHAREHOLDERS’ EQUITY / (DEFICIT)
Common stock, $0 par; 1,000,000 shares authorized; 111,988 shares issued and outstanding	—			—
Treasury stock, at cost, 8,704 shares at July 2, 2005 and 9,575 shares at January 1, 2005	(249,804		)	(222,547		)
Deferred compensation	(9,474		)	(233		)
Dividend due to Artal Luxembourg, S.A.	(304,835		)	—
Retained earnings	522,457			413,425
Accumulated other comprehensive income	5,409			5,794
TOTAL SHAREHOLDERS’ EQUITY / (DEFICIT)	(36,247		)	196,439
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY / (DEFICIT)	$	938,325		$	816,186

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended
	July 2,		July 3,
	2005		2004
Meeting fees, net	$	185,401	$	161,944
Product sales and other, net	98,802		80,824
Online subscription fees	28,397		22,124
Revenues, net	312,600		264,892

Cost of meetings, products and other	129,394		116,731
Cost of online subscriptions	6,985		6,315
Cost of revenues	136,379		123,046
Gross profit	176,221		141,846

Marketing expenses	38,411		32,178
Selling, general and administrative expenses	77,322		22,694
Operating income	60,488		86,974

Interest expense, net	4,425		3,891
Other expense, net	1,162		229
Income before income taxes	54,901		82,854

Provision for income taxes	20,429		29,968
Net income	$	34,472	$	52,886

Earnings Per Share:
Basic	$	0.33	$	0.50
Diluted	$	0.33	$	0.49

Weighted average common shares outstanding:
Basic	103,238		105,371
Diluted	104,611		107,716

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Six Months Ended
	July 2,		July 3,
	2005		2004
Meeting fees, net	$	380,534	$	342,419
Product sales and other, net	207,415		181,716
Online subscription fees	54,649		22,124
Revenues, net	642,598		546,259

Cost of meetings, products and other	270,736		247,687
Cost of online subscriptions	13,721		6,315
Cost of revenues	284,457		254,002
Gross profit	358,141		292,257

Marketing expenses	99,514		78,716
Selling, general and administrative expenses	108,112		44,351
Operating income	150,515		169,190

Interest expense, net	9,161		8,291
Other (income)/expense, net	1,773		(3,504		)
Early extinguishment of debt	—		3,254
Income before income taxes and cumulative effect of accounting change	139,581		161,149

Provision for income taxes	53,481		59,565
Income before cumulative effect of account change	86,100		101,584

Cumulative effect of accounting change, net of tax	—		(11,941		)
Net income	$	86,100	$	89,643

Basic Earnings Per Share:
Income before cumulative effect of account change	$	0.84	$	0.96
Cumulative effect of accounting change, net of tax	—		(0.11		)
Net income	$	0.84	$	0.85

Diluted Earnings Per Share:
Income before cumulative effect of account change	$	0.82	$	0.94
Cumulative effect of accounting change, net of tax	—		(0.11		)
Net income	$	0.82	$	0.83

Weighted average common shares outstanding:
Basic	102,956		105,692
Diluted	104,718		108,161

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ EQUITY / (DEFICIT)

(IN THOUSANDS)

												Accumulated			Dividend
												Other			Due to Artal
	Common Stock			Treasury Stock					Deferred			Comprehensive			Luxembourg,			Retained
	Shares	Amount		Shares		Amount			Compensation			Income			S.A.			Earnings			Total

Balance at January 3, 2004	111,988	$	—	5,639		$	(48,421	)	$	(214	)	$	6,266		$	—		$	223,557		$	181,188
Comprehensive Income:
Net income																		183,084			183,084
Translation adjustment, net of taxes of ($650)												(673		)							(673		)
Change in fair value of derivatives accounted for as hedges, net of taxes of ($128)												201									201
Total Comprehensive Income																					182,612
Stock options exercised				(732	)	2,955												(1,076		)	1,879
Tax benifit of stock options exercised																		7,678			7,678
Purchase of treasury stock				4,668		(177,081		)													(177,081		)
Restricted stock issued to employees									(162		)							162			—
Compensation expense on restricted stock awards									143												143
Cumulative effect of accounting change																		20			20
Balance at January 1, 2005	111,988	$	—	9,575		$	(222,547	)	$	(233	)	$	5,794		$	—		$	413,425		$	196,439
Comprehensive Income:
Net income																		86,100			86,100
Translation adjustment, net of taxes of $616												(1,002		)							(1,002		)
Change in fair value of derivatives accounted for as hedges, net of taxes of ($394)												617									617
Total Comprehensive Income																					85,715
Stock options exercised				(1,588	)	6,414												(2,943		)	3,471
Tax benefit of stock options exercised																		20,646			20,646
Exercise of WW.com warrants																		(4,261		)	(4,261		)
Dividend due to Artal Luxembourg, S.A.															(304,835		)				(304,835		)
Purchase of treasury stock				717		(33,671		)													(33,671		)
Restricted stock issued to employees									(9,490		)							9,490			—
Compensation expense on restricted stock awards									249												249
Balance at July 2, 2005	111,988	$	—	8,704		$	(249,804	)	$	(9,474	)	$	5,409		$	(304,835	)	$	522,457		$	(36,247	)

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Six Months Ended
	July 2,			July 3,
	2005			2004

Cash provided by operating activities	$	181,427		$	146,187

Investing activities:
Capital expenditures	(4,808		)	(2,199		)
Website development expenditures	(1,213		)	(273		)
Repayments from equity investment	—			4,917
Cash paid for acquisitions	(58,160		)	(31,917		)
Other items, net	48			(519		)
Cash used for investing activities	(64,133		)	(29,991		)

Financing activities:
Net decrease in short-term borrowings	(21		)	(2,171		)
Net proceeds from revolver	16,000			268,000
Payments of long-term debt	(1,500		)	(454,930		)
Proceeds from new term loan	—			150,000
Premium paid on extinguishment of debt and other costs	—			(321		)
Proceeds from stock options exercised	3,471			1,049
Repurchase of treasury stock	(33,671		)	(65,457		)
Deferred financing costs	—			(2,657		)
Cash used for financing activities	(15,721		)	(106,487		)

Effect of exchange rate changes on cash/cash equivalents and other	(2,458		)	(907		)
Impact of consolidating WeightWatchers.com	—			5,693
Net increase in cash and cash equivalents	99,115			14,495
Cash and cash equivalents, beginning of period	35,156			23,442
Cash and cash equivalents, end of period	$	134,271		$	37,937

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. Basis of Presentation

The accompanying consolidated financial statements include the accounts of Weight Watchers International, Inc., its wholly-owned subsidiaries and WeightWatchers.com, Inc. (“WeightWatchers.com” or “WW.com”). For all periods presented prior to the second quarter 2005, WW.com was consolidated pursuant to Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). As a result of Weight Watchers International’s increased ownership interest in WW.com (see Note 2), beginning with the second quarter 2005, WW.com is consolidated pursuant to Accounting Research Bulletin No. 51, “Consolidated Financial Statements.”

The term “WWI” as used throughout this document is used to indicate Weight Watchers International and its wholly-owned subsidiaries. The term “the Company” as used throughout this document is used to indicate WWI as well as WeightWatchers.com. 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 and adjustments required upon adoption of FIN 46R) necessary for a fair statement.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, which follows these notes, contains additional information on the results of operations, the financial position and cash flows of the Company. Those comments should be read in conjunction with these notes. The Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005 includes additional information about the Company, its results of operations, its financial position and its cash flows, and should be read in conjunction with this Quarterly Report on Form 10-Q.

Recently Issued Accounting Standards:

In December 2004, the Financial Accounting Standards Board issued Statement No. 123R, “Share-Based Payment” (“FAS 123R”), which replaces FAS 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion 25, “Accounting for Stock Issued to Employees.” FAS 123R eliminates the option of using the intrinsic value method to record compensation expense related to stock-based awards to employees and instead requires companies to recognize the cost of such awards based on their grant-date fair value over the related service period of such awards. In April 2005, the Securities and Exchange Commission approved a new rule that amended the effective date of FAS 123R for public companies, whereby the Company will now be required to adopt this standard beginning in the first quarter of 2006.

In accordance with FAS 123R, the Company has elected to apply the modified prospective transition method to all past awards outstanding and unvested as of the date of adoption and will recognize the associated expense over the remaining vesting period based on the fair values previously determined and disclosed as part of its pro-forma disclosures. The Company will not restate the results of prior periods. Prior to the effective date of FAS 123R, the Company will continue to provide the pro forma disclosures for past award grants as required under FAS 123. The Company believes the pro forma disclosures in Note 2 to its consolidated financial statements for the year ended January 1, 2005 provide an appropriate short-term indicator of the level of expense that will be recognized in accordance with FAS 123R. However, the total expense recorded in future periods will depend on several variables, including the number of share-based payment awards that are granted in future periods and the fair value of those awards.

The American Jobs Creation Act of 2004 (the “AJCA”) was enacted on October 22, 2004 and includes a special one-time deduction of 85% of certain foreign earnings repatriated to the U.S. In December 2004, the FASB issued FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the AJCA, allowing companies additional time to evaluate the effect of the AJCA on plans for reinvestment or repatriation of foreign earnings. The Company does not believe this legislation will have a material impact to its results of operations or cash flows.

2. Acquisitions

Summary

The acquisitions of Weight Watchers of Fort Worth, Inc. and F-W Family Corporation have been accounted for under the purchase method of accounting and, accordingly, earnings have been included in the consolidated operating results of the Company since their dates of acquisition. Pursuant to a merger agreement effective July 2, 2005, the last day of the second quarter, WWI increased its ownership interest in WW.com from approximately 20% to 53% for a total cash outlay of $136,385. See further discussion below for the accounting treatment of this transaction. Details of these acquisitions are outlined below.

Franchise Acquisitions

On August 22, 2004, the Company completed the acquisition of certain assets of its Fort Worth franchisee, Weight Watchers of Fort Worth, Inc., for a purchase price of $30,000, which was financed through cash from operations. The purchase price has been allocated to franchise rights ($29,421), fixed assets ($226), inventory ($286), and other assets ($67). Pro forma results of operations, assuming this acquisition had been completed at the beginning of each period presented, would not differ materially from the reported results.

On May 9, 2004, the Company completed the acquisition of certain assets of its Washington, D.C. area franchisee, F-W Family Corporation (d/b/a Weight Watchers of Washington, D.C.) for a purchase price of $30,500, which was financed through cash from operations, plus assumed liabilities of $348. The total purchase price has been allocated to franchise rights ($30,286), fixed assets ($300), inventory ($228) and other assets ($52). Pro forma results of operations, assuming this acquisition had been completed at the beginning of each period presented, would not differ materially from the reported results.

Acquisition of WW.com

On June 13, 2005, Weight Watchers International entered into an agreement to acquire its affiliate, WeightWatchers.com. WWI increased its ownership interest in WW.com from 20% to 53% as follows: On July 1, 2005, WWI exercised its 6,395 warrants to purchase WW.com common stock for a total price of $45,660; and on July 2, 2005, WWI acquired through a merger of a subsidiary of WWI with WW.com (the “Merger”) 1,126 shares of WW.com common stock owned by the employees of WW.com and other parties not related to Artal Luxembourg, S.A., (“Artal”) for a total price of $28,383 and acquired an additional 2,759 shares of WW.com common stock, representing outstanding stock options then held by WW.com employees, for a total price of $62,342. On June 13, 2005, WW.com entered into a redemption agreement with Artal (the “Redemption”) to purchase the 12,092 shares of WW.com currently owned by Artal. Subject to satisfying certain conditions, as outlined in the redemption agreement, WW.com will complete this purchase on December 30, 2005 for a total price of $304,835, the same purchase price per share as that paid by WWI in the Merger. Upon consummation of the Redemption, WWI will own 100% of WW.com.

The acquisition of the 1,126 shares represented shares owned outright by the employees of WW.com and other parties not related to Artal. As such, this component of the transaction has been accounted for under the provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations,” (“FAS 141”). This resulted in an increase to goodwill of $27,346, which represents the excess of the purchase price of $28,383 over the net book value of the assets acquired of $4,262, plus transaction costs of $3,225. Management is in the process of finalizing the allocation of the purchase price and therefore the current balance for goodwill and other intangible assets is subject to change.

The acquisition of 2,759 shares represented vested and unvested options owned by employees of WW.com. Because Artal owns approximately 47% of WW.com and is the parent company to WWI, the acquisition of these shares is considered to be a transaction between entities under common control, and therefore, the provisions of FAS 141 are not applicable. Under the guidance of FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation,” (“FIN 44”), and Emerging Issues Task Force Issue No. 00-23, “Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FIN 44,” (“EITF 00-23”), the Company was required to record a compensation charge related to the 2,293 vested options of $39,647 in the second quarter 2005. This amount represents the difference between the purchase price per share and the exercise price per share of the vested options. The 466 unvested options were exchanged for 134 restricted stock units of WWI, resulting in deferred compensation of $7,214, which will be recorded as compensation expense in future periods as the restricted stock units vest.

In connection with the acquisition of the WW.com shares, WWI also purchased and canceled all 103 outstanding WW.com options held by WWI employees for a total settlement price of $2,415. Under the guidance of FIN 44 and EITF 00-23, the Company was required to record the full settlement price as a compensation charge in the second quarter 2005. This charge, coupled with the aforementioned $39,647 compensation charge recorded in connection with the vested options held by WW.com employees, result in a total compensation charge of $42,062, which was recorded as a component of selling, general and administrative expenses.

Because WW.com entered into the Redemption with Artal prior to the end of the second quarter, the Company was required to record the liability associated with this component of the transaction in the second quarter in accordance with the provisions of Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” Because Artal owns approximately 47% of WW.com, and is the parent company to WWI, the Redemption is considered to be a transaction between entities under common control. As such, the full redemption amount is recorded as a dividend payable to Artal.

3. Goodwill and Intangible Assets

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company no longer amortizes goodwill or other indefinite lived intangible assets. The Company performed its annual fair value impairment testing as of January 1, 2005 on its goodwill and other indefinite lived intangible assets and determined that no impairment existed. Unamortized goodwill is due mainly to the acquisition of the Company by the H.J. Heinz Company in 1978. For the six months ended July 2, 2005, goodwill increased primarily due to WWI’s increased ownership interest in WW.com (see Note 2). Management is in the process of finalizing the allocation of the purchase price and therefore the current balance for goodwill and other intangible assets is subject to change . Franchise rights acquired are due mainly to

acquisitions of the Company’s franchised territories. For the six months ended July 2, 2005, franchise rights acquired decreased due to foreign currency fluctuations.

In accordance with SFAS No. 142, aggregate amortization expense for finite lived intangible assets was recorded in the amounts of $909 and $1,664 for the three and six months ended July 2, 2005, respectively. Aggregate amortization expense for the three and six months ended July 3, 2004 was $531 and $818, respectively.

The carrying amount of the Company’s finite-lived intangible assets was as follows:

	July 2, 2005				January 1, 2005
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Deferred software costs	$	5,673	$	3,550	$	5,050	$	3,035
Trademarks	7,917		7,220		7,811		7,098
Non-compete agreement	1,200		1,200		1,200		1,175
Website development costs	8,327		5,454		6,815		4,624
Other	4,106		3,361		4,108		3,331
	$	27,223	$	20,785	$	24,984	$	19,263

Estimated amortization expense on the Company’s finite lived intangible assets for the next five fiscal years is as follows:

Remainder of 2005	$	1,886
2006	$	2,445
2007	$	865
2008	$	327
2009	$	115

4. Long-Term Debt

The Company’s long-term debt is entirely attributable to WWI. WeightWatchers.com does not have any credit facilities.

WWI’s Credit Agreement dated as of January 16, 2001 and amended and restated as of December 21, 2001, April 1, 2003, August 21, 2003, January 21, 2004 and supplemented on October 19, 2004 (the “Credit Facility”) consists of Term Loans and a revolving line of credit (“the Revolver”).

On January 21, 2004, WWI refinanced its Credit Facility as follows: the Term Loan A, Term Loan B, and the transferable loan certificate (“TLC”) in the aggregate amount of $454,180 were repaid and replaced with a new Term Loan B in the amount of $150,000 and borrowings under the Revolver of $310,000. In connection with this refinancing, available borrowings under the Revolver increased from $45,000 to $350,000.

Due to the early extinguishment of the Term Loans resulting from the January 21 refinancing, the Company recognized expenses of $3,254 for the three months ended April 3, 2004, which included the write-off of unamortized debt issuance costs of $2,933 and $321 of fees associated with the transaction.

On October 19, 2004, WWI supplemented its net borrowing capacity by adding an Additional Term Loan B to its existing Credit Facility in the amount of $150,000. Coterminous with the previously existing Credit Facility, these funds were initially used to reduce borrowings under WWI’s Revolver, resulting in no increase in WWI’s net borrowing.

On June 24, 2005, WWI amended its Credit Facility to amend certain provisions applicable to the Redemption scheduled for December 30, 2005 (see Note 2). WW.com anticipates financing the Redemption through credit borrowings.

The Term Loan B and the Revolver bear interest at a rate equal to LIBOR plus 1.75% or, at WWI’s option, the alternate base rate (as defined in the Credit Facility) plus 0.75%. The Additional Term Loan B bears interest at a rate equal to LIBOR plus 1.50%, or at WWI’s option, the alternative base rate (as defined in the Credit Facility), plus 0.50%. In addition to paying interest on outstanding principal under the Credit Facility, WWI is required to pay a commitment fee to the lenders under the Revolver with respect to the unused commitments at a rate equal to 0.375% per year.

The Credit Facility contains customary covenants including covenants that in certain circumstances restrict WWI’s ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other restricted payments, including investments, sell its assets and enter into consolidations, mergers and transfers of all or substantially all of its assets. The Credit Facility also requires WWI to maintain specified financial ratios and satisfy financial condition tests. The Credit Facility contains customary events of default. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans and declare amounts outstanding to be immediately due and payable.

5. Treasury Stock

On October 9, 2003, the Company, at the direction of WWI’s Board of Directors, authorized a program to repurchase up to $250,000 of the Company’s outstanding common stock. On June 13, 2005, the Company, at the direction of WWI’s Board of Directors, authorized adding $250,000 to this program.

The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal (as described in Note 1 of the Company’s Annual Report on Form 10-K for the year ended January 1, 2005) under the program. During the six months ended July 2, 2005 and July 3, 2004, respectively, the Company purchased 717 and 1,771 shares of common stock in the open market at a total cost of $33,671 and $65,457, respectively.

6. Earnings Per Share

Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of common shares outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of common shares outstanding adjusted for the effect of dilutive common stock equivalents.

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
	2005		2004		2005		2004
Numerator:
Income before cumulative effect of accounting change	$	34,472	$	52,886	$	86,100	$	101,584
Cumulative effect of accounting change, net of tax	—		—		—		(11,941		)
Net income	$	34,472	$	52,886	$	86,100	$	89,643

Denominator:
Weighted-average shares	103,238		105,371		102,956		105,692
Effect of dilutive stock options	1,373		2,345		1,762		2,469
Denominator for diluted EPS- Weighted-average shares	104,611		107,716		104,718		108,161

Basic EPS:
Income before cumulative effect of accounting change	$	0.33	$	0.50	$	0.84	$	0.96
Cumulative effect of accounting change, net of tax	—		—		—		(0.11		)
Net income	$	0.33	$	0.50	$	0.84	$	0.85

Diluted EPS:
Income before cumulative effect of accounting change	$	0.33	$	0.49	$	0.82	$	0.94
Cumulative effect of accounting change, net of tax	—		—		—		(0.11		)
Net income	$	0.33	$	0.49	$	0.82	$	0.83

The number of anti-dilutive stock options excluded from the calculation of weighted average shares for diluted EPS was 7 and 890 for the three months ended July 2, 2005 and July 3, 2004, respectively, and 36 and 383 for the six months ended July 2, 2005 and July 3, 2004, respectively.

7. Stock Plans

The Company has stock-based employee compensation plans and, as permitted by SFAS No. 123, continues to apply the recognition and measurement principles of APB No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for those plans. Except for costs incurred in connection with the acquisition of WW.com (See Note 2), no compensation expense for employee stock options is reflected in earnings, as all options granted under the plans had an exercise price equal to the market value of the common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123:

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2005			2004			2005			2004

Net income, as reported	$	34,472		$	52,886		$	86,100		$	89,643

Add:
Total stock-based employee compensation expense as recorded under FIN44 and APB25, net of related tax effect	24,485			—			24,485			—

Deduct:
Total stock-based employee compensation expense determined under the fair value method for all stock option awards, net of related tax effect	(25,016		)	(982		)	(25,710		)	(1,701		)

Pro forma net income	$	33,941		$	51,904		$	84,875		$	87,942

EPS:
Basic-as reported	$	0.33		$	0.50		$	0.84		$	0.85
Basic-pro forma	$	0.33		$	0.49		$	0.82		$	0.83

Diluted-as reported	$	0.33		$	0.49		$	0.82		$	0.83
Diluted-pro forma	$	0.32		$	0.48		$	0.81		$	0.81

8. Income Taxes

Although consolidated for financial reporting purposes, WWI and WeightWatchers.com are separate tax paying entities.

The effective tax rate for the three and six months ended July 2, 2005 was 37.2% and 38.3%, respectively, on the consolidated results of the Company. The effective tax rate for the three and six months ended July 3, 2004 was 36.2% and 37.0%, respectively. For the three and six months ended July 2, 2005, the primary differences between the U.S. federal statutory tax rate and the Company’s effective tax rate were state income taxes, offset by lower statutory rates in certain foreign jurisdictions and net operating loss carryforwards utilized by WeightWatchers.com. For the three and six months ended July 3, 2004, the primary differences between the U.S. federal statutory tax rate and the Company’s effective tax rate were state income taxes, offset by net operating loss carryforwards utilized by WeightWatchers.com.

Due to the consolidation of WeightWatchers.com, the Company has net operating loss carryforwards at July 2, 2005 of approximately $16,653 for federal income tax purposes. These losses are available to reduce WeightWatchers.com’s future taxable income and will begin to expire at varying amounts after 2019.

9. Transactions with WeightWatchers.com

WeightWatchers.com was formed on September 22, 1999 to develop and market monthly subscription weight loss plans on the Internet. WeightWatchers.com provides these weight management products to consumers through paid access to specified areas of its website. It also provides marketing services to WWI.

For the first quarter of 2004, WWI’s transactions with WeightWatchers.com were not considered intercompany activities and therefore, the income/(expense) resulting from transactions with WW.com has been included in the Company’s consolidated results of operations. Beginning in the second quarter of 2004 with the adoption of FIN 46R, all transactions with WeightWatchers.com are now considered intercompany activities and therefore, eliminated in consolidation.

Therefore, the Company’s consolidated results for the three and six months ended July 2, 2005 and the three months ended July 3, 2004 contain no income/(expense) related to WWI’s activities with WeightWatchers.com since all such activity was eliminated in consolidation. However, the Company’s consolidated results for the six months ended July 3, 2004 include the income/(expense) resulting from WWI’s activities with WeightWatchers.com that took place during the first quarter of fiscal 2004.

Loan Agreement:

Pursuant to the amended loan agreement, dated September 10, 2001, between WWI and WeightWatchers.com, WWI provided loans to WeightWatchers.com through fiscal 2001 aggregating $34,500. By the end of 2001, having reviewed the loan balances quarterly for impairment, WWI recorded a full valuation allowance against the balances. Beginning on January 1, 2002, the loan bears interest at 13% per year. This loan has been fully repaid as of July 2, 2004.

Interest income on the WW.com loan recorded by the Company was $949 for the six months ended July 3, 2004. Other income recorded by the Company resulting from loan repayments was $4,917 for the six months ended July 3, 2004.

Intellectual Property License:

WWI entered into an amended and restated intellectual property license agreement dated September 10, 2001 with WeightWatchers.com. In fiscal 2002, WWI began earning royalties pursuant to the agreement. Royalty income recorded by the Company was $1,954 for the six months ended July 3, 2004. This amount is included in product sales and other, net.

Service Agreement:

Simultaneous with the signing of the amended and restated intellectual property license agreement, WWI entered into a service agreement with WeightWatchers.com under which WeightWatchers.com provides certain types of services. WWI is 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. Service expense recorded by the Company was $558 for the six months ended July 3, 2004. This amount was included in marketing expenses.

Acquisition of WW.com

As described in Note 2, on June 13, 2005, WWI entered into an agreement to acquire its affiliate, WW.com. WW.com will continue to operate separately, and will continue to be subject to the license agreement and various ancillary agreements related to the sharing of space and resources.

10. Legal

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 is not expected to have a material effect on the Company’s results of operations, financial condition or cash flows.

11. Derivative Instruments and Hedging

The Company enters into interest rate swaps to hedge a substantial portion of its variable rate debt. In addition, in fiscal 2004, the Company entered into forward and swap contracts to hedge transactions denominated in foreign currencies in order to reduce currency risk associated with fluctuating exchange rates. These contracts were used primarily to hedge certain foreign currency cash flows and for payments arising from some of the Company’s foreign currency denominated debt obligations. The Company no longer utilizes derivative instruments to hedge against foreign currency fluctuations. As of July 2, 2005, the Company held contracts to purchase interest rate swaps with notional amounts totaling $150,000 and to sell interest rate swaps with notional amounts totaling $150,000. As of July 3, 2004, the Company held currency and interest rate swap contracts to purchase foreign currency and interest rate swaps with notional amounts totaling $209,156. The Company also held separate foreign currency and interest rate swap contracts to sell foreign currency and interest rate swaps with notional amounts totaling $210,335. The Company is hedging forecasted transactions for periods not exceeding the next 3 years. At July 2, 2005, given the current configuration of its debt, the Company estimates that no derivative gains or losses reported in accumulated other comprehensive income will be reclassified to the Statement of Operations within the next 12 months.

As of July 2, 2005 and July 3, 2004, cumulative gains/(losses) for qualifying hedges were reported as a component of accumulated other comprehensive income in the amounts of $546, or $896 before taxes, and $55, or $90 before taxes, respectively. For the three and six months ended July 2, 2005 there were no fair value adjustments recorded in operations since all hedges are considered qualifying. For the three and six months ended July 3, 2004, fair value adjustments for non-qualifying hedges resulted in an increase/(decrease) to net income of $35, or $58 before taxes, and ($166), or ($273) before taxes, respectively, included within other expense, net.

12. Comprehensive Income

Comprehensive income for the Company includes net income, the effects of foreign currency translation and changes in the fair value of derivative instruments. Comprehensive income is as follows:

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2005			2004			2005			2004
Net income	$	34,472		$	52,886		$	86,100		$	89,643
Foreign currency translation adjustments	(773		)	(858		)	(1,002		)	(1,980		)
Current period changes in fair value of derivatives	(669		)	227			617			325
Comprehensive income	$	33,030		$	52,255		$	85,715		$	87,988

13. Segment Data

The Company has two reportable operating segments: Weight Watchers International and WeightWatchers.com. Since these are two separate and distinct lines of business, the financial information for each company is maintained and managed separately and is captured in separate financial reporting systems. All intercompany activity is eliminated in consolidation.

Information about the Company’s reportable operating segments is as follows:

	Three Months Ended July 2, 2005
							Intercompany
	WWI			WW.com			Eliminations			Consolidated
REVENUES
Revenues from external customers	$	284,203		$	28,397		$	—		$	312,600
Intercompany revenue	2,729			836			(3,565		)	—
Total revenue	286,932			29,233			(3,565		)	312,600

Depreciation and amortization	1,930			2,043			—			3,973

OPERATING INCOME	94,824			(34,336		)	—			60,488
Interest expense, net	4,238			321			(134		)	4,425
Other (income)/expense, net	(8,904		)	233			9,833			1,162
Provision for taxes	38,702			(14,438		)	(3,835		)	20,429
Net income	$	60,788		$	(20,452	)	$	(5,864	)	$	34,472
Weighted average diluted shares outstanding										104,611

TOTAL ASSETS	$	926,788		$	123,693		$	(112,156	)	$	938,325

	Three Months Ended July 3, 2004
					Intercompany
	WWI		WW.com		Eliminations			Consolidated
REVENUES
Revenues from external customers	$	242,768	$	22,124				$	264,892
Intercompany revenue	2,096		632		(2,728		)	—
Total revenue	244,864		22,756		(2,728		)	264,892

Depreciation and amortization	2,074		624		—			2,698

OPERATING INCOME	82,498		4,519		(43		)	86,974
Interest expense, net	3,120		825		(54		)	3,891
Other (income)/expense, net	229		—		—			229
Provision for taxes	29,918		50		—			29,968
Net income	$	49,231	$	3,644	$	11		$	52,886
Weighted averaged diluted shares outstanding								107,716
TOTAL ASSETS	$	774,217	$	18,916	$	(13,313	)	$	779,820

Since FIN 46R was adopted as of the last day of the first quarter of 2004, WeightWatchers.com’s results of operations for the three months ended April 2004 were included in the first quarter 2004 charge for the cumulative effect of accounting change. This charge recorded all of the results of WW.com from inception to the end of first quarter 2004. As a result, the Company began consolidating 100% of the

results of WeightWatchers.com in the second quarter of 2004, thus the direct measure of profitablility for WeightWatchers.com for the six months ended July 3, 2004 is the same as that for the three months ended July 3, 2004.

	Six Months Ended July 2, 2005
							Intercompany
	WWI			WW.com			Eliminations			Consolidated
REVENUES
Revenues from external customers	$	587,949		$	54,649		$	—		$	642,598
Intercompany revenue	5,362			1,434			(6,796		)	—
Total revenue	593,311			56,083			(6,796		)	642,598

Depreciation and amortization	3,974			3,126			—			7,100

OPERATING INCOME	179,650			(29,135		)				150,515
Interest expense, net	8,450			888			(177		)	9,161
Other (income)/expense, net	(18,236		)	342			19,667			1,773
Provision for taxes	73,691			(12,540		)	(7,670		)	53,481
Net income	$	115,745		$	(17,825	)	$	(11,820	)	$	86,100
Weighted averaged diluted shares outstanding										104,718

TOTAL ASSETS	$	926,788		$	123,693		$	(112,156	)	$	938,325

	Six Months Ended July 3, 2004
						Intercompany
	WWI			WW.com		Eliminations			Consolidated
REVENUES
Revenues from external customers	$	524,135		$	22,124				$	546,259
Intercompany revenue	2,096			632		(2,728		)	—
Total revenue	526,231			22,756		(2,728		)	546,259

Depreciation and amortization	4,138			624		—			4,762

OPERATING INCOME	164,714			4,519		(43		)	169,190
Interest expense, net	7,520			825		(54		)	8,291
Other (income)/expense, net	(3,504		)	—		—			(3,504		)
Early extinguishment of debt	3,254			—		—			3,254
Provision for taxes	59,515			50		—			59,565
Income before cumulative effect of accounting change	$	97,929		$	3,644	$	11		$	101,584
Weighted averaged diluted shares outstanding									108,161

TOTAL ASSETS	$	774,217		$	18,916	$	(13,313	)	$	779,820

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 1, 2005 that includes additional information about us, our results of operations, our financial position and our cash flows. Except for historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 including, in particular, statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” and similar expressions in this Quarterly Report on Form 10-Q and the documents incorporated by reference in this Quarterly Report on Form 10-Q 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, pharmaceutical, surgical, dietary supplements and meal replacement products, and other weight-loss brands, diets, 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 general economic conditions; and

• more aggressive enforcement of existing legislation or regulation or a change in the interpretation of existing legislation or regulation.

You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein could cause our results to differ materially from those expressed or suggested in any forward-looking statements. Except as required by law, we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances that occur after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

CRITICAL ACCOUNTING POLICIES

For a discussion of the critical accounting policies affecting us, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Significant Accounting Policies” beginning on page 17 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2005. The critical accounting policies affecting us have not changed since January 1, 2005.

As discussed in Note 2, effective July 2, 2005, WWI increased its ownership in WeightWatchers.com from 20% to 53% by exercising its outstanding warrants to purchase WW.com stock and by acquiring all of the remaining equity interest in WW.com not owned by Artal Luxembourg, S.A. (“Artal”). Because WWI now owns a majority of WW.com and has operating control, the Company now consolidates 100% of the results of WW.com under the traditional rules of consolidation rather than under the provisions of FIN 46R. The Company had adopted FIN 46R at the beginning of the second

quarter 2004. Commencing in the second quarter 2005 and thereafter, quarterly consolidated results of the Company are comparable with respect to the inclusion of WW.com’s results.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 2, 2005

Consolidated

On a consolidated basis, revenues for the second quarter were $312.6 million, an increase of $47.7 million or 18.0% versus the second quarter of 2004. The North America (“NACO”) and Continental Europe meeting businesses, along with strong licensing revenues globally, were the primary drivers. WeightWatchers.com’s gross online revenues also increased, up 28.5%.

As a result of transaction-related expenses reported in the quarter in conjunction with our acquisition of the non-Artal shares of WW.com, consolidated operating income declined in the period from $87.0 million in 2004 to $60.5 million in 2005. Absent these expenses, 2005 second quarter operating income was $104.1 million, an increase of 19.7% over the 2004 comparable period.

The table below shows the consolidated second quarter income statements for the three months ended July 2, 2005 and July 3, 2004. As the table shows, transaction-related expenses, which are part of selling, general and administrative expenses, amount to $43.6 million. These are comprised primarily of $42.1 million of compensation expenses related to the redemption of WW.com stock options by employees pursuant to the transaction (see Note 2, page 8). Of this amount, $2.5 million is WWI expense and the remainder is WW.com expense. A corresponding tax benefit of $17.7 million has also been recorded.

	Three Months Ended July 2, 2005
			Less					Three Months
	Reported		Transaction			Adjusted		Ended		Increase /
	Results		Expenses			Results		July 3, 2004		(Decrease)
Consolidated Results
Revenues	$	312.6	$	—		$	312.6	$	264.9	$	47.7
Cost of revenues	136.4		—			136.4		123.0		13.4
Gross profit	176.2		—			176.2		141.9		34.3

Marketing expenses	38.4					38.4		32.2		6.2
Selling, general and administrative expenses	77.3		43.6			33.7		22.7		11.0
Operating income	60.5		(43.6		)	104.1		87.0		17.1

Interest expense, net	4.4					4.4		3.9		0.5
Other (income)/expense, net	1.2					1.2		0.2		1.0
Income before taxes	54.9		(43.6		)	98.5		82.9		15.6

Provision for income taxes	20.4		(17.7		)	38.1		30.0		8.1

Net income	$	34.5	$	(25.9	)	$	60.4	$	52.9	$	7.5

Weighted averge diluted common shares outstanding	104.6		104.6			104.6		107.7

Diluted EPS	$	0.33	$	(0.25	)	$	0.58	$	0.49	$	0.09

As a result of the transaction related expenses reported in the quarter, consolidated net income declined from $52.9 million in 2004 to $34.5 million in 2005 and diluted earnings per share declined from $0.49 in 2004 to $0.33 in 2005. Consolidated net income in the second quarter, excluding transaction expenses was $60.4 million, as compared to $52.9 million a year ago, and diluted earnings per share rose from $0.49 in second quarter 2004 to $0.58 this year.

Weight Watchers International on a Stand-Alone Basis

This section addresses Weight Watchers International on a stand-alone basis, excluding the consolidation of WeightWatchers.com. The chart below compares Weight Watchers International’s results for the three months ended July 2, 2005 to the comparable prior year period.

	WWI Three Month Results
	July 2,			July 3,		Increase/
	2005			2004		(Decrease)

Revenues	$	286.9		$	244.9	$	42.0
Cost of revenues	129.2			116.7		12.5
Gross profit	157.7			128.2		29.5

Marketing expenses	33.0			26.2		6.8
Selling, general and administrative expenses	29.9			19.5		10.4
Operating income	94.8			82.5		12.3

Interest expense, net	4.2			3.1		1.1
Other (income)/expense, net	(8.9		)	0.2		(9.1		)
Early extinguishment of debt						—
Income before income taxes	99.5			79.2		20.3

Provision for income taxes	38.7			29.9		8.8
Net income	$	60.8		$	49.3	$	11.5

Diluted EPS	$	0.58		$	0.46	$	0.12

Stand-alone WWI net revenues of $286.9 million for the three months ended July 2, 2005 rose 17.1%, an increase of $42.0 million from $244.9 million for the three months ended July 3, 2004. Worldwide company-owned attendances increased 6.4% from 15.5 million last year to 16.5 million this year. The benefit to revenues of the growth in attendances was compounded by higher per attendee meeting fees and product sales. Compared to the comparable period a year ago, classroom meeting fees increased by $23.5 million and product sales rose $11.6 million. NACO and Continental Europe were the largest contributors to these increases in the meeting business. Licensing revenues tripled globally, up $6.6 million.

Worldwide classroom meeting fees for the three months were $185.4 million, up 14.5% from $161.9 million in the second quarter 2004.

In NACO, second quarter 2005 classroom meeting fees were $111.4 million, up 16.1% from $95.9 million in last year’s second quarter. This growth was primarily driven by an 8.3% increase in attendance and raising prices in approximately 40% of the region. On an organic basis, excluding the impact of franchises acquired after the beginning of the second quarter 2004, attendance increased 5.3%. NACO’s organic attendance trends have rebounded into positive territory following a steadily improving trend in performance over the past four quarters. We believe that dieting consumers are moving back to healthier, more balanced approaches to weight loss, which should continue to benefit our business.

International classroom meeting fees were $74.0 million for the three months ended July 2, 2005, an increase of $8.0 million, or 12.1%, from $66.0 million for the three months ended July 3, 2004. The growth

in meeting fees was driven by a 4.3% increase in attendances, higher average meeting fees resulting from lower discounting, and the favorable impact of foreign currency exchange rates.

Worldwide product sales for the three months of 2005 were $78.9 million up 17.2% from $67.3 million in last year’s second quarter. In-meeting product sales per attendee posted strong growth domestically and in Continental Europe, up a total 11.5% globally. In NACO, the strength of new and refreshed consumable and other product lines has driven 14.6% growth in the quarter. NACO’s product sales increased to $39.3 million in the second quarter of 2005 from $34.3 million in the comparable prior year period. Internationally, product sales increased 20.0% to $39.6 million. New product introductions in Continental Europe and Australasia drove increases in product sales per attendee.

Franchise royalties were $3.3 million domestically and $1.8 million internationally for the three months ended July 2, 2005, up 8.5% in the aggregate versus the second quarter 2004. We have acquired two franchises during the last twelve months: the Washington D.C. area, during the second quarter of 2004, and Fort Worth, during the third quarter of 2004. Excluding the impact of these acquisitions, domestic franchise royalties rose 14%, while international franchise royalties rose 11%.

Revenue from licensing, advertising and other sources was $17.5 million for the three months ended July 2, 2005, an increase of $6.7 million, or 62.0%, from $10.8 million for the three months ended July 3, 2004. Licensing revenues increased $6.6 million to $9.9 million as we continued to broaden and deepen our range of high quality Weight Watchers branded licensed products worldwide. While this increase is partially the result of the reversion to us of licensing royalties that had been paid to HJ Heinz, the majority of the increase is from new licenses and growth.

Cost of revenues for the second quarter 2005 increased at lesser rate than our revenue growth, up 10.7% to $129.2 million from $116.7 million in the second quarter of last year. Accordingly, our gross profit margin in the quarter increased by 270 basis points to 55.0% of sales from 52.3% of sales a year ago. NACO’s gross margin rose with higher attendance per meeting, a price increase in 40% of its territories and better product cost. Outside the US, less discounting of our products and the price increase in meeting fees in the UK contributed to our gross margin growth. We also benefited at the gross margin line from the increase in licensing royalties.

Marketing expenses increased $6.8 million, or 26.0%, to $33.0 million in the three months ended July 2, 2005 from $26.2 million in the three months ended July 3, 2004. The increase in marketing is driven by initiatives to drive growth in some of our European countries and timing. As a percentage of revenue, marketing expenses were 11.5% in this year’s second quarter as compared to 10.7% in last year’s second quarter.

Selling, general and administrative expenses were $29.9 million for the three months ended July 2, 2005, an increase of $10.4 million, or 53.3 %, from $19.5 million for the three months ended July 3, 2004. The second quarter G&A includes a $2.5 million WW.com acquisition-related compensation charge. Further, unlike in 2005, salary expense in 2004 did not include expenses for management and staff bonuses in most of our geographies. One of the primary drivers of the increase in G&A was the strengthening of our management teams in North America and Continental Europe which began during last year and has been undertaken to drive the growth of our business. For example, we added a new team to manage our US Corporate Solutions business, which is focused on ways to grow revenue by bringing Weight Watchers to larger corporations to meet the needs of their diverse workforces. Selling, general and administrative expense was 10.4% of revenues in the second quarter of 2005 as compared to 8.0% in the second quarter of 2004.

Operating income was $94.8 million for the three months ended July 2, 2005, an increase of $12.3 million, or 14.9%, from $82.5 million for the three months ended July 3, 2004. The operating

income margin in the second quarter of 2005 was 33.0%, as compared to 33.7% in the second quarter of 2004. Excluding transaction-related expenses, the operating income margin was 33.9%.

Net interest charges increased to $4.2 million for the three months ended July 2, 2005 from $3.1 million in the three months ended July 3, 2004, primarily due to higher interest rates.

Other income in the second quarter 2005 was $8.9 million, and was comprised primarily of the final two loan repayments from WW.com. There were none in last year’s second quarter, which posted other expense of $0.2 million.

Our effective tax rate for the three months ended July 2, 2005 was 38.9% as compared to 37.8% for the three months ended July 3, 2004. The tax rate increased as a result of a slightly higher proportion of income derived domestically this year, which drives a higher combined rate.

WeightWatchers.com on a Stand-Alone Basis

The table below shows the results of WeightWatchers.com for the three months ended July 2, 2005 as compared to the comparable prior year quarter.

	Three Months Ended July 2, 2005
				Less				Three Months
($Millions	Reported			Transaction		Adjusted		Ended		Increase/
except EPS)	Results			Expenses		Results		July 3, 2004		(Decrease)

Revenues	$	29.2		$	—	$	29.2	$	22.8	$	6.4

Operating income	$	(34.3	)	$	41.1	$	6.8	$	4.5	$	2.3

Net income	$	(20.5	)	$	24.4	$	3.9	$	3.6	$	0.3

Diluted EPS	$	(0.20	)	$	0.24	$	0.04	$	0.03	$	0.01

Revenues were $29.2 million for the second quarter of 2005, an increase of $6.4 million, or 28.1% from the second quarter of 2004. This increase was driven principally by 20.8% growth in the active subscriber base (564 thousand on 6/30/2005 versus 467 thousand on 6/30/2004), and a price increase in the United States during Q3 2004.

In the second quarter 2005, WW.com was required to record a transaction related charge in the amount of $41.1 million which consists of a compensation charge of $39.6 million related the settlement of the vested options held by WW.com employees (See Note 2, page 8) plus other transaction-related expenses of $1.5 million.

Operating income, excluding transaction expenses was $6.8 million, which was up 51%, or $2.3 million in the second quarter versus 2004, outpaced revenue growth, and generated a 360 basis point improvement in operating margin. The margin improvement was driven by the price increase as well as by the operating leverage of the business model despite certain non-recurring expenses.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 2, 2005

As discussed above, effective July 2, 2005, WWI increased its ownership in WW.com from 20% to 53%. As a result of this transaction, the consolidated results of the Company include certain transaction-related expenses. The table below shows the consolidated income statements for the six months ended July 2, 2005 and July 3, 2004 on a comparable basis with respect to these transaction expenses.

	Six Months Ended July 2, 2005
			Less					Six Months
	Reported		Transaction			Adjusted		Ended			Increase /
	Results		Expenses			Results		July 3, 2004			(Decrease)
Consolidated Results

Revenues	$	642.6	$	—		$	642.6	$	546.3		$	96.3
Cost of revenues	284.5		—			284.5		254.0			30.5
Gross profit	358.1		—			358.1		292.3			65.8

Marketing expenses	99.5		—			99.5		78.7			20.8
Selling, general and administrative expenses	108.1		43.6			64.5		44.4			20.1
Operating income	150.5		(43.6		)	194.1		169.2			24.9

Interest expense, net	9.2		—			9.2		8.3			0.9
Other (income)/expense, net	1.7		—			1.7		(3.5		)	5.2
Early extinguishment of debt	—		—			—		3.3			(3.3		)
Income before taxes and cumulative effect of accounting change	139.6		(43.6		)	183.2		161.1			22.1

Provision for income taxes	53.5		(17.7		)	71.2		59.6			11.6

Income before cumulative effect	86.1		(25.9		)	112.0		101.5			10.5

Cumulative effect of accounting change	—		—			—		(11.9		)	11.9

Net income	$	86.1	$	(25.9	)	$	112.0	$	89.6		$	22.4

Weighted averge diluted common shares outstanding	104.7		104.7			104.7		108.2

Diluted EPS	$	0.82	$	(0.25	)	$	1.07	$	0.83		$	0.24

On a consolidated basis, revenues for the first half were $642.6 million, an increase of $96.3 million or 17.6% versus last year’s first half. The NACO and Continental Europe meeting businesses, along with strong licensing revenues globally, were the primary drivers. Due to the timing of the adoption of FIN 46R, consolidated 2004 first half includes only three months of WW.com results, as compared to the six months which are included in the 2005 consolidated results. This, along with the growth in the WW.com business, resulted in additional revenues of $29.3 million.

Gross margin as a percent of revenues increased to 55.7% from 53.5% in the first six months of 2004 on the strength of higher pricing, an increase in the licensing business and operating leverage resulting from the WW.com business. Operating income rose $24.9 million, to $194.1 million excluding transaction expenses, with $9.9 million of this increase resulting from the additional three months of WW.com in 2005.

Consolidated Company net income excluding transaction expenses was $112.0 million in the six months of 2005 up 10.3% as compared to $101.5 million in the same period last year (before the $11.9

million cumulative effect of accounting change recorded at the end of the first quarter 2004 that resulted from the adoption of FIN 46R with respect to Weight Watchers.com).

Weight Watchers International on a Stand-Alone Basi s

The section below addresses the results of Weight Watchers International on a stand-alone basis; excluding the consolidation of WeightWatchers.com. The chart below compares Weight Watchers International’s results for the six months ended July 2, 2005 to the comparable prior year period.

	WWI Six Month Results
	July 2,			July 3,			Increase/
	2005			2004			(Decrease)

Revenues	$	593.3		$	526.2		$	67.1
Cost of revenues	270.4			247.6			22.8
Gross profit	322.9			278.6			44.3

Marketing expenses	86.5			72.8			13.7
Selling, general and administrative expenses	56.8			41.1			15.7
Operating income	179.6			164.7			14.9

Interest expense, net	8.4			7.5			0.9
Other (income)/expense, net	(18.2		)	(3.5		)	(14.7		)
Early extinguishment of debt				3.3			(3.3		)
Income before income taxes	189.4			157.4			32.0

Provision for income taxes	73.7			59.5			14.2
Net income	$	115.7		$	97.9		$	17.8

Diluted EPS	$	1.11		$	0.91		$	0.20

Net revenues were $593.3 million for the six months ended July 2, 2005, an increase of $67.1 million, or 12.8%, from $526.2 million for the six months ended July 3, 2004. The $67.1 million increase was driven by a $38.1 million increase in classroom meeting fees, a $15.0 million increase in product sales, and a $13.9 million increase in licensing, advertising and other revenue.

For the six months ended July 2, 2005, total classroom meeting fees were $380.5 million, an increase of $38.1 million, or 11.1%, from $342.4 million in the six months ended July 3, 2004. Total attendances reached 34.5 million versus 33.5 million in the prior year period. In NACO, first half 2005 classroom meeting fees were $226.8 million, up 11.6% from $203.2 million in last year’s first half. NACO meeting fee growth was driven by a price increase in approximately 40% of the region and by a 2.9% increase in total NACO attendance in the first half over the prior year comparable period. NACO organic attendance was virtually flat, continuing its steadily improving trend. (Note that the organic attendance comparisons above exclude any franchises that were acquired during each comparable period.) With the decline in the low-carb diet phenomenon, we believe that dieting consumers are moving back to healthier, more balanced approaches to weight loss, which should continue to benefit our business.

International company-owned classroom meeting fees were $153.8 million for the six months ended July 2, 2005, an increase of $14.5 million, or 10.4%, from $139.3 million for the six months ended

July 3. 2004. The growth in meeting fees was primarily driven by attendance growth in Continental Europe, a price increase in the UK, and favorable foreign currency exchange rates.

Product sales were $168.8 million for the six months ended July 2, 2005, an increase of $15.1 million, or 9.8%, from $153.7 million for the six months ended July 3, 2004. Domestically, product sales rose 9.7% to $83.4 million, as in-meeting product sales per attendee grew, partially driven by sales of our new products lines and refreshed consumable offerings. Internationally, product sales increased 9.8% to $85.4 million, also on the strength of new product introductions.

Revenue from licensing, advertising and other sources was $33.0 million for the six months ended July 2, 2005, an increase of $13.9 million, or 72.8%, from $19.1 million for the six months ended July 3, 2004. Licensing revenues increased $13.1 million , more than three times that of last year, due to our continued focus on introducing a range of Weight Watchers branded licensed products worldwide. Increase in royalties is partially the result of the reversion to us of licensing royalties that had been paid to HJ Heinz.

Franchise royalties were $7.1 million domestically and $3.9 million internationally for the six months ended July 2, 2005. Total franchise royalties were $11.0 million, up slightly from $10.9 million in the first half of last year. Excluding the recently acquired franchises, domestic franchise royalties increased 7.9%, while international franchise royalties rose 10.7%.

Cost of revenues was $270.4 million for the six months ended July 2, 2005, an increase of $22.8 million, or 9.2%, from $247.6 million for the six months ended July 3, 2004. Gross profit margin of 54.4% of sales in the six months ended July 2, 2005 increased from 52.9% of sales in the comparable period a year ago, a result of increasing the meeting fee in part of NACO, less discounting of product sales and the strong growth we are beginning to experience in our licensing business.

Marketing expenses increased $13.7 million, or 18.8%, to $86.5 million in the six months ended July 2, 2005 from $72.8 million in the six months ended July 3, 2004. The increase in marketing spend is partially driven by timing. Last year we experienced more of a spread of marketing expenses between the fourth and first quarter (2003 into 2004). As a percentage of net revenues, marketing expenses were 14.6% in this year’s first half, as compared to 13.8% in the comparable period last year.

Selling, general and administrative expenses were $56.8 million for the six months ended July 2, 2005, an increase of $15.7 million, or 38.1%, from $41.2 million for the six months ended July 3, 2004. One of the primary drivers was the impact of strengthening our management teams in North America and Continental Europe which began during last year and has been undertaken to drive the growth of our business. This includes the addition of our new US Corporate Solutions management team who are focused on ways to bring Weight Watchers to larger corporations to meet the needs of their diverse workforces. 2005 G&A includes a $2.5 million transaction related compensation charge. Further, salary expense in 2004 did not include expenses for management and staff bonuses in most of our geographies. Selling, general and administrative expenses as a percentage of revenues were 9.6% in the first half of 2005 as compared to 7.8% in the first half of 2004.

Operating income was $179.6 million for the six months ended July 2, 2005, an increase of $14.9 million, or 9.0%, from $164.7 million for the six months ended July 3, 2004. The operating income margin in the first half of 2005 was 30.3%, as compared to 31.3% in the first half of 2004.

Net interest charges were up 12.0% or $0.9 million to $8.4 million for the six months ended July 2, 2005 as compared to $7.5 million in the six months ended July 3, 2004. The increase was primarily due to higher interest rates, partially offset by the reduction in interest expense due to the redemption of our remaining high yield debt in October 2004 and slightly lower average debt balances this year as compared to last year.

For the six months ended July 2, 2005, we reported other income of $18.2 million as compared to $3.5 million for the six months ended July 3, 2004. The increase in other income of $14.7 million is due to three additional loan payments received from WeightWatchers.com in the first half of 2005.

As a result of the refinancing of our Credit Facility, which we undertook in the first quarter of 2004 in order to move a large portion of our fixed Term Loans to Revolver, $3.3 million of expenses were recorded. These expenses associated with the early extinguishment of pre-existing Term Loans included the write-off of unamortized debt issuance costs from prior refinancings and the recognition of fees associated with this refinancing transaction.

LIQUIDITY AND CAPITAL RESOURCES

WEIGHT WATCHERS CONSOLIDATED

At July 2, 2005 and January 1, 2005, the balance sheets of WW.com are fully consolidated with WWI’s, and therefore the consolidated balance sheets for both periods are comparable with respect to WW.com.

For the six months ended July 2, 2005, the statement of cash flows for WW.com is fully consolidated with WWI’s. However, for the six months ended July 3, 2004, the statement of cash flows for WW.com was only fully consolidated for the three months ended July 3, 2004. For the three months ended April 3, 2004, the cash flows for WW.com were reflected on a single line entitled Impact of Consolidating WeightWatchers.com in the amount of $5.7 million.

Sources and Uses of Cash

For the six months ended July 2, 2005, cash and cash equivalents were $134.3 million, an increase of $99.1 million from January 1, 2005. Cash flows provided by operating activities in the six months of 2005 were $181.4 million, including $20.3 million of cash provided by WeightWatchers.com’s operating activities. Funds used for investing and financing activities combined totaled $79.8 million. Investing activities utilized $64.1 million of cash, primarily for expenditures of $58.2 million for the acquisition of our increased ownership of WW.com and $4.8 million of capital expenditures. Cash used for financing activities totaled $15.7 million. This included the repurchase of 0.7 million shares of our common stock for $33.7 million, pursuant to our stock repurchase program (See Part II, Item 2) offset by net proceeds from borrowings of $14.5 million. At July 2, 2005, WW.com’s balance sheet cash was $96.2 million.

At July 3, 2004, cash and cash equivalents were $37.9 million, an increase of $14.5 million from January 3, 2004. During the first half 2004, cash flows provided by operating activities were $146.2 million and the net use of funds for investing and financing activities totaled $136.5 million. Investing activities used cash of $30.0 million, primarily comprised of the $30.5 million cash paid for the acquisition of our Washington D.C area franchise. Cash used for financing activities totaled $106.5 million. We refinanced our debt in the first quarter, moving a large portion of our term loan credit facility to a revolving credit facility. During the first half, we paid down $42.0 million of our new revolving debt, made a small scheduled payment on our remaining term loan and repurchased 1.8 million shares of our stock pursuant to our stock repurchase program for $65.5 million.

Balance Sheet

Comparing the balance sheet at July 2, 2005 with that of January 1, 2005, our cash balance of $134.3 million has increased by $99.1 million. Our working capital deficit at July 2, 2005 was $266.5 million compared to $26.8 million at January 1, 2005.

Excluding cash, the working capital deficit increased by $338.8 million, primarily as a result of WW.com’s future redemption obligation pursuant to the agreement reached on June 13, 2005 to purchase the remaining WW.com shares from Artal in the amount of $304.8 million. Seasonality and timing drove decreases in inventory and prepaids (total $16.0 million), and higher accounts payable and accrued expenses (total $31.5 million). These combined to increase the working capital deficit by $47.5 million. In addition, seasonality and growth have resulted in higher deferred revenue for member prepayment purchases of $12.9 million. These amounts were offset by changes in income taxes and receivables totaling $26.4 million.

Long Term Debt

Our Credit Facility, as amended, consists of Term Loans and a revolving line of credit (the “Revolver”). At July 2, 2005, our total debt increased by $14.5 million to $483.6 million as compared to $469.1 million at January 1, 2005. The borrowing capacity on our Revolver is $350 million in total, of which approximately $161.3 million was available at the end of the second quarter 2005.

At July 2, 2005 and January 1, 2005, our debt consisted entirely of variable-rate instruments. The average interest rate on our debt was approximately 5.6% and 4.1% at July 2, 2005 and January 1, 2005, respectively.

The following schedule sets forth our long-term debt obligations (and interest rates) at July 2, 2005:

Long-Term Debt

As of July 2, 2005

			Interest
	Balance		Rate
	(in millions)
Revolver due 2009	$	187.0	6.68	%
Term Loan B due 2010	147.7		5.18	%
Additional Term Loan B due 2010	148.9		4.65	%
Total Debt	483.6
Less Current Portion	3.0
Total Long-Term Debt	$	480.6

The Term Loan B and the Revolver bear interest at a rate equal to LIBOR plus 1.75% or, at our option, the alternate base rate (as defined in the Credit Facility) plus 0.75%. The Additional Term Loan B bears interest at a rate equal to LIBOR plus 1.50%, or, at our option, the alternative base rate (as defined in the Credit Facility) plus 0.50%. In addition to paying interest on outstanding principal under the Credit Facility, we are required to pay a commitment fee to the lenders under the Revolver with respect to the unused commitments at a rate equal to 0.375% per year.

Our Credit Facility contains customary covenants, including covenants that, in certain circumstances, 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 Credit Facility also requires us to maintain specified financial ratios and satisfy financial condition tests. The Credit Facility contains customary events of default. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans and declare amounts outstanding to be immediately due and payable.

On January 9, 2004, Standard & Poor’s confirmed its “BB” rating for our corporate credit and our Credit Facility. On March 11, 2005, Moody’s assigned a “Ba1” rating for our Term Loan B and Additional Term Loan B and confirmed its “Ba1” rating for the Credit Facility.

The following schedule sets forth our year-by-year debt obligations:

Total Debt Obligation
(Including Current Portion)
As of July 2, 2005
(in millions)
Remainder of 2005	$	1.5
2006	3.0
2007	3.0
2008	3.0
2009	401.8
Thereafter	71.3
Total	$	483.6

Debt obligations due to be repaid in the next 12 months are expected to be satisfied with operating cash flows. We believe that cash flows from operating activities, together with borrowings available under our Revolver, will be sufficient for the next 12 months to fund currently anticipated capital expenditure requirements, debt service requirements and working capital requirements.

Acquisitions

On May 9, 2004, we completed the acquisition of certain assets of our Washington, D.C. area franchise for a purchase price of $30.5 million, which was financed through cash from operations.

On August 22, 2004, we completed the acquisition of certain assets of our Fort Worth franchise for a purchase price of $30.0 million, which was financed through cash from operations.

As described in Note 2, page 8, WWI increased its ownership interest in WW.com from approximately 20% to 53% for a total cash outlay of $136.4 million, including $107.9 million paid to WW.com and $28.5 million paid to the non-Artal shareholders.

Stock Transactions

On October 9, 2003, our Board of Directors authorized a program to repurchase up to $250.0 million of our outstanding common stock. On June 13, 2005, our Board of Directors authorized adding $250.0 million to this program.

The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal Luxembourg or its affiliates under the program. During fiscal 2003 and 2004, we purchased 5.5 million shares of common stock in the open market for a total purchase price of $205.9 million. During the first half of 2005, we purchased 0.7 million shares of common stock in the open market for a total purchase price of $33.7 million.

Factors Affecting Future Liquidity

Any future acquisitions, joint ventures or other similar transactions could require additional capital and we cannot be certain that any additional capital will be available on acceptable terms or at all. 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.

OFF-BALANCE SHEET TRANSACTIONS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, such as entities often referred to as structured finance or special purpose entities.

RELATED PARTY TRANSACTIONS

For a discussion of related party transactions affecting us, see “Item 13. Certain Relationships and Related Transactions” beginning on page 50 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2005. Other than during the normal course of business and the acquisition of WW.com as discussed in Note 2 and elsewhere, the related party transactions affecting us have not changed since January 1, 2005.

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 (starting in January), spring and fall, with winter having the highest concentration of advertising spending. Our operating income for the first half of the year is generally the strongest.

Based on trends in our business and in the weight-loss industry, WeightWatchers.com’s seasonality is similar to that of Weight Watchers International. However, whereas WeightWatchers.com’s subscriptions are similar, its revenue tends to appear less seasonal because they amortize subscription revenue over the related subscription period.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board issued Statement No. 123R, “Share-Based Payment” (“FAS 123R”), which replaces FAS 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion 25, “Accounting for Stock Issued to Employees.” FAS 123R eliminates the option of using the intrinsic value method to record compensation expense related to stock-based awards to employees and instead requires companies to recognize the cost of such awards based on their grant-date fair value over the related service period of such awards. In April 2005, the Securities and Exchange Commission approved a new rule that amended the effective date of FAS 123R for public companies, whereby we will now be required to adopt this Standard beginning in the first quarter of 2006.

In accordance with the provisions of FAS 123R, we have elected to apply the modified prospective transition method to all past awards outstanding and unvested as of the date of adoption and will recognize the associated expense over the remaining vesting period based on the fair values previously determined and disclosed as part of our pro-forma disclosures. We will not restate the results of prior periods. Prior to the effective date of FAS 123R, we will continue to provide the pro forma disclosures for past award grants as required under FAS 123. We believe the pro forma disclosures in Note 2 to our consolidated financial statements for the year ended January 1, 2005 provide an appropriate short-term indicator of the level of expense that will be recognized in accordance with FAS 123R.

However, the total expense recorded in future periods will depend on several variables, including the number of share-based payment awards that are granted in future periods and the fair value of those awards.

The American Jobs Creation Act of 2004 (the “AJCA”) was enacted on October 22, 2004 and includes a special one-time deduction of 85% of certain foreign earnings repatriated to the U.S. In December 2004, the FASB issued FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the AJCA, allowing companies additional time to evaluate the effect of the AJCA on plans for reinvestment or repatriation of foreign earnings. We do not believe this legislation will have a material impact to our results of operations or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Since 100% of our debt is variable rate-based, any changes in market interest rates will cause an equal change in our interest expense associated with our long-term debt. We entered into interest rate swaps to hedge a substantial portion of our variable rate debt, which mitigates a substantial portion of the associated market risk.

For a more detailed discussion of our quantitative and qualitative disclosures about market risks that affect us, see Item 7A “Quantitative and Qualitative Disclosure About Market Risk” beginning on page 32 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2005. Our exposure to market risks has not changed materially since January 1, 2005.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of July 2, 2005. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

In addition, there was no change in our internal control over financial reporting that occurred during the quarter ended July 2, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Due to the nature of our activities, we are 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 is not expected to have a material effect on our results of operations, financial condition or cash flows.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Below is a summary of our stock repurchases during the quarter ended July 2, 2005:

					Approximate Dollar
	Total			Total Number of	Value of Shares
	Number of	Average		Shares Purchased	that May Yet Be
	Shares	Price Paid		as Part of Publicly	Purchased Under
	Purchased (a)	per Share		Announced Plan (a)	the Plan

April 3, 2005 - May 7, 2005	—	—		—	$	29,106,844
May 8, 2005 - June 4, 2005	—	—		—	29,106,844
June 5, 2005 - July 2, 2005	361,235	$	51.69	361,235	260,434,020
Total	361,235	$	51.69	361,235	$	260,434,020

(a) On October 9, 2003, our Board of Directors authorized a program to repurchase up to $250 million of our outstanding common stock. This plan currently has no expiration date. On June 13, 2005, our Board of Directors authorized adding $250 million to this program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report under this item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s Annual Meeting of Shareholders was held on Friday, April 29, 2005 in Garden City, New York, at which time the following matters were submitted to a vote of the shareholders:

(a) Votes regarding the election of three Directors for a term expiring in 2008 were as follows:

Term expiring in 2008	For	Withheld
Raymond Debbane	97,167,937	1,625,059
John F. Bard	97,450,517	1,342,479
Jonas M. Fagjenbaum	97,167,346	1,625,650

Additional Directors, whose terms of office as Directors continued after the meeting, are as follows:

Term expiring in 2006
Marsha Johnson Evans
Sacha Lainovic
Christopher J. Sobecki

Term expiring in 2007
Linda Huett
Philippe J. Amouyal
Sam K. Reed

(b) Votes regarding ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2005 were as follows:

For		Against		Abstentions		Non-votes
98,562,167		164,244		66,585		0

ITEM 5.

OTHER INFORMATION

Nothing to report under this item.

ITEM 6.

EXHIBITS

Exhibit 10.1		Agreement and Plan of Merger, by and among Weight Watchers International, Inc., Weight Watchers.com, Inc. and SCW Merger Sub, Inc. dated as of June 13, 2005.

Exhibit 10.2		Redemption Agreement, by and among Artal Luxembourg, S.A., WeightWatchers.com Inc., and Weight Watchers International, Inc., dated as of June 13, 2005.

Exhibit 10.3		Principal Stockholders Agreement among Weight Watchers International, Inc., WeightWatchers.com, Inc. and Artal Luxembourg, S.A., dated as of June 13, 2005.

Exhibit 10.4		Amendment, dated as of July 1, 2005, to the Corporate Agreement, dated as of November 5, 2001, by and between Weight Watchers International, Inc. and Artal Luxembourg, S.A.

Exhibit 10.5		Amendment to Weight Watchers International, Inc. 2004 Stock Incentive Plan

Exhibit 10.6		First Amendment, dated as of June 24, 2005, to the Fifth Amended and Restated Credit Agreement, dated as of January 21, 2004, among Weight Watchers International, Inc., certain lenders thereto, Credit Suisse First Boston, as the syndication agent under the Credit Facility and the Bank of Nova Scotia, as the administrative agent and lead arranger for the additional facility under the Supplement.

Exhibit 31.1		Rule 13a-14(a) and Rule 15d-14(a) Certification.

Exhibit 31.2		Rule 13a-14(a) and Rule 15d-14(a) Certification.

Exhibit 32.1*		Certification by Linda Huett, President and Chief Executive Officer, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2*

Certification by Ann M. Sardini, Chief Financial Officer, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Pursuant to Commission Release No. 33-8212, this certification will be treated as “accompanying: this Quarterly Report on form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		WEIGHT WATCHERS INTERNATIONAL, INC.

Date:	August 11, 2005	By: /s/	LINDA HUETT
			Linda Huett
			President, Chief Executive Officer and Director
			(Principal Executive Officer)


Date:	August 11, 2005	By: /s/	ANN M. SARDINI
			Ann M. Sardini
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number		Description
Exhibit 10.1		Agreement and Plan of Merger, by and among Weight Watchers International, Inc., Weight Watchers.com, Inc. and SCW Merger Sub, Inc. dated as of June 13, 2005.

Exhibit 10.2		Redemption Agreement, by and among Artal Luxembourg, S.A., WeightWatchers.com Inc., and Weight Watchers International, Inc., dated as of June 13, 2005.

Exhibit 10.3		Principal Stockholders Agreement among Weight Watchers International, Inc., WeightWatchers.com, Inc. and Artal Luxembourg, S.A., dated as of June 13, 2005.

Exhibit 10.4		Amendment, dated as of July 1, 2005, to the Corporate Agreement, dated as of November 5, 2001, by and between Weight Watchers International, Inc. and Artal Luxembourg, S.A.

Exhibit 10.5		Amendment to Weight Watchers International, Inc. 2004 Stock Incentive Plan

Exhibit 10.6		First Amendment, dated as of June 24, 2004, to the Fifth Amended and Restated Credit Agreement, dated as of January 21, 2004, among Weight Watchers International, Inc., certain lenders thereto, Credit Suisse First Boston, as the syndication agent under the Credit Facility and the Bank of Nova Scotia, as the administrative agent and lead arranger for the additional facility under the Supplement.

Exhibit 31.1		Rule 13a-14(a) and Rule 15d-14(a) Certification.

Exhibit 31.2		Rule 13a-14(a) and Rule 15d-14(a) Certification.

Exhibit 32.1 *		Certification by Linda Huett, President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 *		Certification by Ann M. Sardini, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Pursuant to Commission Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Exhibit 10.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

WEIGHT WATCHERS INTERNATIONAL, INC.,

SCW MERGER SUB, INC.

and

WEIGHTWATCHERS.COM, INC.

Dated as of June 13, 2005

TABLE OF CONTENTS

ARTICLE I	THE MERGER
Section 1.1	The Merger
Section 1.2	Closings
Section 1.3	Effective Time
Section 1.4	Effects of the Merger
Section 1.5	Certificate of Incorporation
Section 1.6	Bylaws
Section 1.7	Directors
Section 1.8	Officers

ARTICLE II	EFFECT OF THE MERGER ON CAPITAL STOCK
Section 2.1	Conversion of Capital Stock
Section 2.2	Surrender of Certificates
Section 2.3	Escrow Fund; Payment of Deferred Merger Consideration
Section 2.4	Stock Options
Section 2.5	Dissenting Shares

ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1	Organization, Standing and Power
Section 3.2	Subsidiaries
Section 3.3	Capital Structure
Section 3.4	Authority; Noncontravention
Section 3.5	Governmental Approvals
Section 3.6	Financial Statements; No Undisclosed Liabilities
Section 3.7	Absence of Certain Changes or Events
Section 3.8	Litigation
Section 3.9	Contracts
Section 3.10	Compliance with Laws
Section 3.11	Environmental Matters
Section 3.12	Employees
Section 3.13	Employee Benefit Plans
Section 3.14	Taxes
Section 3.15	Leases
Section 3.16	Intellectual Property
Section 3.17	Privacy Policy
Section 3.18	Customer Accounts Receivable
Section 3.19	Brokers and Other Advisors

ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1	Organization, Standing and Power
Section 4.2	Authority; Noncontravention
Section 4.3	Governmental Approvals
Section 4.4	Litigation

Section 4.5	Interim Operations of Merger Sub
Section 4.6	Parent Company Common Stock, Warrant and Options
Section 4.7	Opinion of Financial Advisor

ARTICLE V	COVENANTS
Section 5.1	Conduct of Business of the Company
Section 5.2	Other Actions
Section 5.3	Access to Information; Confidentiality
Section 5.4	No Solicitation; No Public Offering
Section 5.5	Notices of Certain Events
Section 5.6	Directors’ and Officers’ Indemnification and Insurance
Section 5.7	Commercially Reasonable Efforts
Section 5.8	Consents; Filings; Further Action
Section 5.9	Public Announcements
Section 5.10	Fees, Costs and Expenses
Section 5.11	Defense of Litigation
Section 5.12	Tax Matters
Section 5.13	Maintenance and Prosecution of Intellectual Property
Section 5.14	Sarbanes-Oxley; Accounting
Section 5.15	Exercise of Warrants
Section 5.16	Charter Amendment and Exchange
Section 5.17	Financing
Section 5.18	Parent Company Options
Section 5.19	Waiver Under Credit Agreement

ARTICLE VI	CONDITIONS
Section 6.1	Conditions to Each Party’s Obligation to Effect the Merger
Section 6.2	Conditions to Obligations of Parent and Merger Sub
Section 6.3	Conditions to Obligations of the Company
Section 6.4	Frustration of Closing Conditions

ARTICLE VII	INDEMNIFICATION
Section 7.1	Survival of Representations and Warranties
Section 7.2	Indemnification by the Principal Company Stockholder and Other Holders
Section 7.3	Indemnification by Parent
Section 7.4	Procedure for Indemnification
Section 7.5	Limits on Indemnification
Section 7.6	Assignment of Claims; Contribution

ARTICLE VIII	TERMINATION, AMENDMENT AND WAIVER
Section 8.1	Termination by Mutual Consent
Section 8.2	Termination by Either Parent or the Company
Section 8.3	Termination by Parent

Section 8.4	Termination by the Company
Section 8.5	Effect of Termination
Section 8.6	Amendment
Section 8.7	Extension; Waiver
Section 8.8	Transfer Taxes

ARTICLE IX	MISCELLANEOUS
Section 9.1	Certain Definitions
Section 9.2	Interpretation
Section 9.3	Survival
Section 9.4	Governing Law
Section 9.5	Submission to Jurisdiction
Section 9.6	WAIVER OF JURY TRIAL
Section 9.7	Notices
Section 9.8	Entire Agreement
Section 9.9	No Third-Party Beneficiaries
Section 9.10	Rules of Construction
Section 9.11	Assignment
Section 9.12	Remedies
Section 9.13	Specific Performance
Section 9.14	Counterparts; Effectiveness

Exhibits

Exhibit A Principal Stockholders Agreement

Exhibit B Redemption Agreement

Exhibit C Letter of Transmittal

Exhibit D Escrow Agreement

iii

INDEX OF DEFINED TERMS

Term		Section

2005 Business Plan		Section 5.1(e)
228 Notice		Section 3.4(a)
affiliated group		Section 3.14(a)
Agreement		Preamble
Annual Financial Statements		Section 3.6(a)
Appraisal Notice		Section 3.4(a)
Certificate of Merger		Section 1.3
Certificates		Section 2.1(c)
Charter Amendment		Section 5.15
Claimant		Section 7.4(a)
Code		Section 2.2(e)
Company		Preamble
Company Board Recommendation		Section 3.4(a)
Company Bylaws		Section 3.1
Company Charter		Section 3.1
Company Class B Common Stock		Section 2.1(d)
Company Common Stock		Recitals
Company Disclosure Letter		ARTICLE III
Company Intellectual Property		Section 3.16(a)
Company Option Plans		Section 2.4(a)
Company Plans		Section 3.13(a)
Company Stock Option		Section 2.4(a)
Confidentiality Agreement		Section 5.3(b)
Copyright Office		Section 5.13(b)
Credit Agreement		Section 5.19
Customer Information		Section 3.17
D&O Indemnified Parties		Section 5.6(a)
debt obligations		Section 3.9(a)(iii)
DGCL		Recitals
Dissenting Shares		Section 2.5(a)
Dissenting Stockholder		Section 2.5(a)
Effective Time		Section 1.3
Environmental Laws		Section 3.11
ERISA		Section 3.13(a)
Escrow Account		Section 2.3(a)
Escrow Agent		Section 2.3(a)
Escrow Agreement		Section 2.3(a)
Escrow Earnings		Section 2.3(a)
Escrow Fund		Section 2.3(a)
Exchange		Section 5.16
Excluded Shares		Section 2.1(b)
Financial Statements		Section 3.6(a)
Financing		Section 5.17

Term		Section

First Closing		Section 1.2(a)
First Closing Date		Section 1.2(a)
Foreign Plan		Section 3.13(b)
Governmental Consents		Section 6.1(c)
Governmental Entity		Section 6.1(c)
Holder Representative		Section 2.3(c)
HSR Act		Section 3.5
Indemnified Parties		Section 7.2(a)
Indemnifier		Section 7.4(a)
Interim Financial Statements		Section 3.6(a)
Invus		Section 1.7
IRS		Section 3.14(m)
Leased Property		Section 3.15(a)
Legal Action		Section 3.8
Letter of Transmittal		Section 2.2(c)(i)
Merger		Recitals
Merger Payments		Section 2.2(c)(iv)
Merger Sub		Preamble
Off-the-Shelf Software		Section 3.16(c)
Option Payment Procedures		Section 2.4(a)
Other Agreements		Section 8.6(b)
Other Holders		Section 2.3(c)
P/C Option Plan		Section 4.6
Parent		Preamble
Parent Company Options		Section 4.6
Paying Agent		Section 2.2(a)
Payment Fund		Section 2.2(b)
Permits		Section 3.10
Post-Signing Returns		Section 5.12(a)
Potential Contributor		Section 7.6(a)
Principal Company Stockholder		Recitals
Principal Stockholders Agreement		Recitals
Principal Stockholders Consent		Recitals
Privacy Policy		Section 3.17
Pro Rata Portion		Section 7.5(b)
Proportionate Damages		Section 7.2(a)
Redemption		Recitals
Redemption Agreement		Recitals
Second Closing		Section 1.2(b)
Second Closing Date		Section 1.2(b)
Secretary		Recitals
Section 3.9 Contracts		Section 3.9(a)
SOXA		Section 5.14
SOXA Obligations		Section 5.14
Stockholder Indemnified Parties		Section 7.3
Stockholders		Section 7.5(b)

Term		Section

Substitute Business Plan		Section 5.1(e)
Surviving Bylaws		Section 1.6
Surviving Charter		Section 1.5
Surviving Corporation		Section 1.1
Tax Sharing Agreements		Section 3.14(j)
Transfer Taxes		Section 8.8
Unregistered Holder		Section 2.2(c)(iii)
Unvested Stock Option		Section 2.4(b)
USPTO		Section 5.13(b)
Vested Stock Option		Section 2.4(a)
Waiver		Section 5.19
Warrants		Section 5.15

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 13, 2005 (this “ Agreement ”), by and among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (“ Parent ”), SCW MERGER SUB, INC., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and WEIGHTWATCHERS.COM, INC., a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS, the respective boards of directors of Merger Sub and the Company have approved and declared advisable, and the board of directors of Parent (based on the unanimous recommendation of the Special Committee) has approved, this Agreement and the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions set forth in this Agreement.

WHEREAS, subject to certain exceptions, by virtue of the Merger, all of the issued and outstanding shares of common stock, par value $0.01 per share, of the Company (the “ Company Common Stock ”) will be converted into the right to receive the Initial Per Share Merger Consideration in cash on the terms and conditions set forth in this Agreement plus, subject to the contingencies and other provisions set forth in the Escrow Agreement and this Agreement, the Deferred Per Share Merger Consideration. The Initial Per Share Merger Consideration plus the full amount of the Deferred Per Share Merger Consideration shall equal $25.21.

WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, Artal Luxembourg S.A. (the “ Principal Company Stockholder ”), the holder of shares of Company Common Stock representing a majority of the voting power of the capital stock of the Company, the Company and Parent are entering into an agreement (the “ Principal Stockholders Agreement ”), in the form attached hereto as Exhibit A pursuant to which the Principal Company Stockholder and Parent each agree, among other things, to take certain actions in furtherance of the Merger, including causing the execution and delivery of written consents in accordance with Section 228 of the DGCL (the “ Principal Stockholders Consent ”) by which the Principal Company Stockholder and Parent will consent to the adoption of this Agreement and the approval of the Merger and the Charter Amendment, without meeting, without prior notice and without any additional stockholder vote.

WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, the Principal Company Stockholder, the Company and Parent are entering into an agreement (the “ Redemption Agreement ”), in the form attached hereto as Exhibit B, pursuant to which the Principal Company Stockholder, the Company and Parent agree to, among other things, the repurchase by the Surviving Corporation (the “ Redemption ”) of the Principal Company Stockholder’s Common Stock, par value $0.01 per share, of the Surviving Corporation, on the terms and conditions set forth therein,

which Common Stock the Principal Company Stockholder will receive in the Merger in accordance with Section 2.1(d).

WHEREAS, immediately following the execution and delivery of this Agreement, the Principal Company Stockholder and Parent will each execute a Principal Stockholders Consent and deliver it to the Secretary of the Company (the “ Secretary ”), and the Secretary shall certify and acknowledge that this Agreement has been adopted and the Merger has been approved by the written consent of the holders of a majority of the shares of the Company entitled to vote in accordance with Section 228 of the Delaware General Corporation Law (the “ DGCL ”).

WHEREAS, promptly following the execution and delivery of the Principal Stockholders Consent, notice shall be given by the Company to the holders of Company Common Stock entitled to receive such notice under Section 228(e) of the DGCL.

WHEREAS, certain capitalized terms used in this Agreement have the meanings specified in Section 9.1.

Accordingly, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:

ARTICLE I

THE MERGER

Section 1.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time (a) Merger Sub shall be merged with and into the Company, (b) the separate corporate existence of Merger Sub shall cease and the Company shall continue its corporate existence under Delaware law as the surviving corporation in the Merger (the “ Surviving Corporation ”) and (c) the Surviving Corporation shall become a majority owned subsidiary of Parent.

Section 1.2 Closings .

(a) Subject to the satisfaction or waiver of all of the conditions to closing contained in ARTICLE VI, the closing of the Merger (the “ First Closing ”) shall take place (i) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York, at 10:00 a.m. on July 1, 2005, effective as of July 2, 2005 or (ii) at such other place and time or on such other date as Parent and the Company may agree in writing. The date on which the First Closing is deemed effective is herein referred to as the “ First Closing Date .”

(b) The closing of the Redemption shall occur as provided for in the Redemption Agreement (the “ Second Closing ”). The date on which the Second Closing occurs is herein referred to as the “ Second Closing Date .”

Section 1.3 Effective Time . Immediately following the First Closing, Parent and the Company shall cause a certificate of merger (the “ Certificate of Merger ”) to be executed, signed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL. The Merger shall become effective at 23:59 (Eastern Time) on July 2, 2005 as set forth in the Certificate of Merger to be duly filed with the Secretary of State of the State of Delaware or at such other subsequent date or time as Parent and the Company may agree and specify in the Certificate of Merger in accordance with the DGCL (the “ Effective Time ”).

Section 1.4 Effects of the Merger . The Merger shall have the effects set forth in Section 259 of the DGCL.

Section 1.5 Certificate of Incorporation . The amended and restated certificate of incorporation of the Company in effect immediately prior to the Effective Time in the form agreed upon by Parent and the Company shall be, from and after the Effective Time, the certificate of incorporation of the Surviving Corporation (the “ Surviving Charter ”) until amended as provided in the Surviving Charter or by applicable Laws.

Section 1.6 Bylaws . The bylaws of Merger Sub in effect immediately prior to the Effective Time in the form agreed upon by Parent and the Company shall be, from and after the Effective Time, the bylaws of the Surviving Corporation (the “ Surviving Bylaws ”) until amended as provided in the Surviving Charter, in the Surviving Bylaws or by applicable Laws.

Section 1.7 Directors . From and after the Effective Time, Parent shall have the right to nominate a majority of the directors of the Surviving Corporation (which majority shall not include any Affiliates of the Principal Company Stockholder or of The Invus Group LLC (“ Invus ”), other than Persons who may be deemed to be Affiliates solely through being directors or officers of Parent) and the Principal Company Stockholder shall have the right to nominate the remaining directors (who may include Affiliates of the Principal Company Stockholder). The number of directors of the Surviving Corporation, as well as the nomination procedure to carry out the agreement set forth in this Section 1.7, shall be as set forth in the Surviving Bylaws.

Section 1.8 Officers . The officers of the Company immediately prior to the Effective Time, as agreed upon by Parent and the Company, shall be, from and after the Effective Time, the officers of the Surviving Corporation until their successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK

Section 2.1 Conversion of Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holder of any shares of capital stock of Merger Sub or the Company:

(a) Conversion of Merger Sub Capital Stock . The sole share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become the number of fully paid and non-assessable shares of common stock, par value $0.01 per share, of the Surviving Corporation equal to the sum of (i) the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time (and after the Exchange) (other than Dissenting Shares, if any) (which shares of Company Common Stock are being converted pursuant to Section 2.1(c)), plus (ii) the number of Option Shares immediately prior to the Effective Time.

(b) Cancellation of Treasury Stock . Each share of Company Common Stock owned by the Company or any of its wholly-owned Subsidiaries immediately prior to the Effective Time shall cease to exist (collectively, the “ Excluded Shares ”), and no consideration shall be paid for those Excluded Shares.

(c) Conversion of Company Common Stock . Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (and after the Exchange) (other than Dissenting Shares, if any) shall automatically be converted into the right to receive an amount per share in cash equal to the Initial Per Share Merger Consideration payable without interest in accordance with Section 2.2, plus, subject to the contingencies and other provisions set forth in the Escrow Agreement and Section 2.3, the Deferred Per Share Merger Consideration. Upon receipt of the requisite shareholder approval and adoption of this Agreement and the Merger, all holders of Company Common Stock will be bound by the terms of this Agreement, including, without limitation, the terms of payment of the applicable amounts of the Initial Per Share Merger Consideration and the Deferred Per Share Merger Consideration. All shares of Company Common Stock that have been converted pursuant to this Section 2.1(c) shall be cancelled automatically and shall cease to exist, and the holders of any certificates that immediately prior to the Effective Time represented those shares (“ Certificates ”) shall cease to have any rights with respect to each of those shares, other than the right to receive the Initial Per Share Merger Consideration upon surrender of their Certificates in accordance with Section 2.2 plus, subject to the contingencies and other provisions set forth in the Escrow Agreement and Section 2.3, the Deferred Per Share Merger Consideration.

(d) Conversion of the Company Class B Common Stock . Each share of Class B Common Stock, par value $0.01 per share, of the Company (the “ Company Class B Common Stock ”) issued and outstanding immediately prior to the Effective Time (and after the Exchange) shall be converted into and become one fully paid and non-assessable

share of common stock, par value $0.01 per share, of the Surviving Corporation.

Section 2.2 Surrender of Certificates .

(a) Paying Agent . Prior to the Effective Time, (i) Parent and the Company shall select a bank or trust company, satisfactory to the Company in its reasonable discretion, to act as the paying agent in the Merger (the “ Paying Agent ”) and (ii) Parent shall enter into a paying agent agreement with the Paying Agent and the Company, the terms and conditions of which are satisfactory to the Company in its reasonable discretion.

(b) Payment Fund . Promptly following the Effective Time, Parent shall provide funds to the Paying Agent in an amount equal to the aggregate Initial Merger Consideration payable under Section 2.1(c) upon surrender of the Certificates (including shares represented by a book-entry account statement as described in Section 2.1(c)). Such funds provided to the Paying Agent are referred to as the “ Payment Fund .”

(c) Payment Procedures .

(i) Letter of Transmittal . Promptly after the Effective Time, and to the extent not previously provided, Parent shall cause the Paying Agent to mail to each holder of record of Company Common Stock (A) a letter of transmittal in substantially the form attached as Exhibit C hereto (“ Letter of Transmittal ”) as may be amended by the Company prior to the Effective Time, specifying (x) that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of Certificates to the Paying Agent, (or, if such shares of Company Common Stock are held in book-entry or other uncertificated form, upon the entry through the Company of the surrender of such shares of Company Common Stock on a book-entry account statement (it being understood that any references in this Agreement to “Certificates” shall be deemed to include references to book-entry account statements relating to the ownership of such shares and any references to the surrender of Certificates shall include the surrender of such Company Common Stock on a book-entry account statement)), (y) that by signing the Letter of Transmittal such holder agrees to and confirms acknowledgment of the terms of the Merger, including, without limitation, the indemnification provisions set out in Article VII, the right to receive the applicable amount of Deferred Merger Consideration, the terms and conditions of the Escrow Agreement, the appointment of the Escrow Agent, the appointment of the Principal Company Stockholder as Holder Representative (upon the terms set out in this Agreement and the Escrow Agreement, including, without limitation, the release of the Principal Company Stockholder from any and all claims which they may have against the Principal Company Stockholder in connection with the Merger) and other transactions contemplated by this Agreement and (B) instructions for surrendering Certificates.

(ii) Surrender of Certificates . Upon surrender of a Certificate for cancellation to the Paying Agent, together with a duly executed Letter of Transmittal and any other documents required by the Paying Agent, the holder of that Certificate

shall be entitled to receive in exchange therefor the product of (A) the number of shares of Company Common Stock evidenced by such Certificate and (B) the result of the Initial Per Share Merger Consideration plus, subject to the contingencies and other provisions set forth in the Escrow Agreement and Section 2.3, the Deferred Per Share Merger Consideration, less any required withholding of Taxes. Any Certificates so surrendered shall be cancelled immediately. No interest shall accrue or be paid on any amount payable upon surrender of Certificates.

(iii) Unregistered Holders . If any Merger Consideration is to be paid to a Person (“ Unregistered Holder ”) other than the Person in whose name the surrendered Certificate is registered, then the applicable amount of the Merger Consideration may be paid to such Unregistered Holder so long as (A) the surrendered Certificate is accompanied by all documents required to evidence and effect that transfer or the Unregistered Holder’s rights and (B) the Unregistered Holder requesting such payment (1) pays any applicable transfer Taxes or (2) establishes to the satisfaction of Parent and the Paying Agent that any such Taxes have already been paid or are not applicable.

(iv) No Other Rights . Until surrendered in accordance with this Section 2.2(c), each Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive the amounts referred to in Section 2.2(c)(ii) (“ Merger Payments ”). Any such amounts paid upon or following the surrender of any Certificate shall be deemed to have been paid in full satisfaction of all rights pertaining to that Certificate and the shares of Company Common Stock formerly represented by it.

(d) Post-Closing Transfers . The stock transfer books of the Surviving Corporation shall remain open following the First Closing.

(e) Required Withholding . Parent, the Surviving Corporation, the Paying Agent and the Escrow Agent shall be entitled to deduct and withhold from any Merger Payments payable under this Agreement such amounts as may be required to be deducted or withheld therefrom under (i) the Internal Revenue Code of 1986, as amended (the “ Code ”), or (ii) any applicable state, local or foreign Tax Laws. To the extent that any amounts are so deducted and withheld, those amounts shall be treated as having been paid to the Person in respect of whom such deduction or withholding was made for all purposes under this Agreement.

(f) No Liability . None of Parent, the Surviving Corporation, Paying Agent or the Principal Company Stockholder shall be liable to any holder of Certificates for any amount properly paid to a public official under any applicable abandoned property, escheat or similar Laws.

(g) Investment of Payment Fund . The Paying Agent shall invest the Payment Fund as directed by Parent. Any interest and other income resulting from such investment shall become a part of the Payment Fund, and any amounts in excess of the amounts payable under Section 2.1(c) shall be applied towards the fees and expenses of the Paying Agent, and thereafter shall be paid promptly to Parent.

(h) Termination of Payment Fund . Any portion of the Merger Payments that remains unclaimed by the holders of Certificates at the end of 18 months and one week after the Effective Time shall, subject to any funds held in escrow, be delivered by the Paying Agent to Parent upon demand. Thereafter, any holder of Certificates who has not complied with this ARTICLE II shall look only to Parent for payment of the applicable Merger Payments.

(i) Lost, Stolen or Destroyed Certificates . If any Certificate is lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in the form required by Parent as indemnity against any claim that may be made against Parent or Principal Company Stockholder on account of the alleged loss, theft or destruction of such Certificate, the Paying Agent shall pay the applicable Initial Merger Consideration to such Person in exchange for such lost, stolen or destroyed Certificate and the Principal Company Stockholder shall cause the Escrow Agent to pay the applicable Deferred Merger Consideration, on the basis, subject to the contingencies and in the manner set forth in the Escrow Agreement and Section 2.3.

Section 2.3 Escrow Fund; Payment of Deferred Merger Consideration .

(a) At or prior to the Effective Time, Parent shall, or shall cause Merger Sub to, deposit with a bank or trust company satisfactory to the Company in its reasonable discretion (who may be the same as the Paying Agent) (the “ Escrow Agent ”), the Deferred Merger Consideration (as such amount may be increased or decreased from time to time in accordance with the terms of this Agreement and the Escrow Agreement, the “ Escrow Fund ”), which shall be held by the Escrow Agent in a separate bank account (the “ Escrow Account ”) pursuant to the terms of an escrow agreement, substantially in the form attached as Exhibit D to this Agreement, which is expressly incorporated into this Agreement as if set out here in full (the “ Escrow Agreement ”), to serve as a source of payment and/or remedy (as appropriate) as set forth in the Escrow Agreement. The Escrow Account shall relate only to the funds payable to or by the Principal Company Stockholder and the Other Holders and in no event shall it relate to the Dissenting Stockholders nor shall any such Dissenting Stockholders have any rights in relation to the Deferred Merger Consideration or the Escrow Fund. Subject to the terms of the Escrow Agreement, during the period in which the Escrow Fund is retained in the Escrow Account, all interest or other income earned from the investment of the Escrow Fund (the “ Escrow Earnings ”) shall be retained in the Escrow Account as additional Escrow Fund.

(b) The Escrow Fund shall be held, invested and distributed by the Escrow Agent in accordance with the terms of the Escrow Agreement.

(c) Appointment of Representative . The Principal Company Stockholder will be, and hereby is, upon the receipt of the appropriate stockholder adoption of the Merger Agreement and approval of the Merger, appointed as the representative of (i) all Shareholders of Company Common Stock immediately prior to the Effective Time who are entitled to receive Merger Payments, both before and after the First Closing, (ii) the holders of Vested Stock Options immediately prior to the

Effective Time, and (iii) the holders of Unvested Stock Options immediately prior to the Effective Time ((i) and (ii) being collectively, the “ Other Holders ”) and shall be designated the holder representative (the “ Holder Representative ”) with the rights and obligations as set forth in this Agreement, the Letter of Transmittal and the Escrow Agreement. Notice or communications to or from the Holder Representative pursuant to this Section 2.3 or the Escrow Agreement shall constitute notice to or from each of the Other Holders and the Unvested Stock Option holders. The Holder Representative shall not be liable for any action taken or not taken as Holder Representative, and no Other Holder, Unvested Stock Option holder or any other Person shall have any cause of action against the Holder Representative for any action taken, decision made or instruction given by the Holder Representative under this Section 2.3 or the Escrow Agreement except for fraud or for willfully disregarding its duties as Holder Representative under this Agreement and the Escrow Agreement. A decision, act, consent or instruction (or failure to take such actions) of the Holder Representative pursuant to this Section 2.3 or the Escrow Agreement shall constitute a decision of all the Other Holders and the Unvested Stock Option holders, and shall be final, binding and conclusive upon each of the Other Holders and the Unvested Stock Option holders, and Parent may rely upon any decision, act, consent or instruction of the Holder Representative for all purposes hereunder. Parent shall not be a third party beneficiary under, or be entitled to any rights or remedies pursuant to, the Escrow Agreement.

Section 2.4 Stock Options .

(a) The Company shall take all requisite action (through its Board of Directors or an appropriate committee thereof) so that, as of the Effective Time, each option (a “ Company Stock Option ”) awarded under the Company’s 2000 Stock Purchase and Option Plan and 2002 Stock Purchase and Option Plan (collectively, the “ Company Option Plans ”) to acquire shares of Company Common Stock, outstanding immediately prior to the Effective Time, to the extent then vested, whether or not then exercisable (“ Vested Stock Option ”), shall be, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, the Surviving Corporation or the holder of each Vested Stock Option, converted into the right to receive solely an amount in cash, without interest, equal to the Initial Option Merger Price plus, subject to the contingencies and other provisions set forth in Section 2.3 and the Escrow Agreement, the Deferred Per Share Merger Consideration. Parent shall contribute to Merger Sub an aggregate amount in cash equal to the aggregate exercise price of the Vested Stock Options plus the aggregate amount of the Option Merger Price for the Option Shares subject thereto. The payment of the Initial Option Merger Price to the holder of a Vested Stock Option shall be reduced by any income, employment or excise Tax withholding required under (i) the Code or (ii) any applicable state, local or foreign Tax Laws. To the extent that any amounts are so withheld, those amounts shall be treated as having been paid to the holder of that Vested Stock Option for all purposes under this Agreement and the Company Option Plans. Following the Effective Time, the Initial Option Merger Price shall be paid by the Surviving Corporation to the Paying Agent for payment to each holder of a Vested Stock Option, and the Deferred Per Share Merger Consideration with respect to such Vested Stock Option shall be placed in the Escrow Fund, at which time

such Vested Stock Option shall be cancelled. The Surviving Corporation will set up appropriate payment procedures substantially similar to those for Parent under Section 2.2, including, without limitation, the required Letters of Transmittal (“ Option Payment Procedures ”).

(b) The Company and Parent shall take all requisite action (through its respective Board of Directors or an appropriate committee thereof) so that, as of the Effective Time, each option awarded under the Company Option Plans to acquire shares of Company Common Stock, outstanding immediately prior to the Effective Time, to the extent not then vested, whether or not then exercisable (“ Unvested Stock Option ”), shall be by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holder of each Unvested Stock Option, converted into the right to receive solely the Unvested Option Merger Price. Parent shall contribute to Merger Sub an aggregate amount in cash equal to the aggregate exercise price of the Unvested Stock Options and shall (i) pay to the Escrow Agent, subject to the terms of the Escrow Agreement, an amount equal to $.22 per share for each Option Share subject to the Unvested Stock Options and (ii) following the Effective Time, and subject to the appropriate Option Payment Procedures, cause to be delivered to each holder of an Unvested Stock Option the Unvested Option Merger Price per Option Share subject to such Unvested Stock Options. Upon payment to the holder of an Unvested Stock Option of the Unvested Option Merger Price for the Option Shares subject to such Unvested Stock Option, such Unvested Stock Option shall be cancelled. The payment of the Unvested Option Merger Price to the holder of an Unvested Stock Option shall be reduced by any income, employment or excise Tax withholding required under (i) the Code or (ii) any applicable state, local or foreign Tax Laws. To the extent that any amounts are so withheld, those amounts shall be treated as having been paid to the holder of that Unvested Stock Option for all purposes under this Agreement and the Company Option Plans. The Surviving Corporation shall set up appropriate procedures for payment of the Unvested Option Merger Price as set forth in the Letter of Transmittal.

(c) For avoidance of doubt, from and after the Effective Time no Vested Stock Option or Unvested Stock Option shall confer on any Person the right to receive Company Common Stock, securities or any other property, other than the payments provided for in Section 2.4(a) and 2.4(b).

Section 2.5 Dissenting Shares .

(a) Notwithstanding any provision of this Agreement to the contrary, any shares of Company Common Stock for which the holder thereof (i) has not voted in favor of or consented in writing to the adoption of this Agreement and approval of the Merger and (ii) has demanded the appraisal of such shares in accordance with, and has complied in all respects with, Section 262 of the DGCL (collectively, the “ Dissenting Shares ” and such holder being a “ Dissenting Stockholder ”) shall not be converted into the right to receive the applicable Merger Consideration in accordance with Section 2.1(c). Any Dissenting Stockholder shall instead be entitled to receive payment of the fair value of such holder’s Dissenting Shares in accordance with Section 262 of the

DGCL. At the Effective Time, (x) all Dissenting Shares shall be cancelled and cease to exist and (y) the Dissenting Stockholders shall be entitled only to such rights as may be granted to them under Section 262 of the DGCL.

(b) Notwithstanding the provisions of Section 2.5(a), if any holder of Dissenting Shares effectively withdraws or loses such appraisal rights (through failure to perfect such appraisal rights or otherwise in accordance with Section 262(k) of the DGCL), then that holder’s shares (i) shall no longer be deemed to be Dissenting Shares and (ii) shall be treated as if they had been converted automatically at the Effective Time into the right to receive the applicable amount of the Initial Merger Consideration, plus, subject to the contingencies and other provisions set forth in the Escrow Agreement and Section 2.3, the Deferred Per Share Merger Consideration without interest thereon, upon surrender of the Certificate representing such shares in accordance with Section 2.2, and Parent shall be obliged to pay to the Escrow Agent as additional Escrow Fund an amount equal to the product of (x) the number of such holder’s shares and (y) the Deferred Per Share Merger Consideration.

(c) The Company shall give Parent (i) prompt notice of any demands for appraisal of any shares of Company Common Stock, the withdrawals of such demands, and any other instrument served on the Company under the provisions of Section 262 of the DGCL and (ii) the right to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not offer to make or make any payment with respect to any demands for appraisal without the prior written consent of Parent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter delivered by the Company to Parent dated as of the date hereof (the “ Company Disclosure Letter ”) (each section of which qualifies the correspondingly numbered representation and warranty to the extent specified therein, as well as all such other representations and warranties to the extent relevant to such other representation and warranty), the Company represents and warrants to Parent and Merger Sub as follows:

Section 3.1 Organization, Standing and Power . Each of the Company and its Subsidiaries (i) is a corporation, limited liability company or other legal entity, duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or formed, as the case may be, and (ii) has all requisite power and authority to carry on its business as now being conducted. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties or other assets makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate has not had and could not reasonably be expected to have a Company Material Adverse Effect. The Company has made available to Parent true and complete copies of

(x) the certificate of incorporation of the Company as in effect on the date hereof (“ Company Charter ”) and the Bylaws of the Company as in effect on the date hereof (“ Company Bylaws ”) and (y) the minutes of all of the formal meetings of the stockholders, the board of directors and each committee of the board of directors of the Company held since September 1, 2002.

Section 3.2 Subsidiaries . Section 3.2 of the Company Disclosure Letter sets forth a true and complete list of all the Subsidiaries of the Company and, for each such Subsidiary, the jurisdiction of incorporation or formation. All the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary are duly authorized, validly issued, fully paid and nonassessable and are owned, directly or indirectly, by the Company free and clear of all Liens (other than relating to the WWI Collateral Assignment Agreement), and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity or voting interests. Except for the capital stock of, or other equity or voting interests in, its Subsidiaries, the Company does not beneficially own, directly or indirectly, any capital stock of, or other equity or voting interests in, any Person.

Section 3.3 Capital Structure .

(a) The authorized capital stock of the Company consists of (i) 50,000,000 shares of Company Common Stock, par value $0.01 per share, and (ii) 5,000,000 shares of preferred stock, par value $0.01 per share. As of the date hereof, (i) 16,606,276 shares of Company Common Stock are issued and outstanding, (ii) no shares of Company Common Stock are held in treasury by the Company and its Subsidiaries, (iii) 2,764,974 shares of Company Common Stock are reserved for issuance by the Company under the Company Option Plans for outstanding Company Stock Options, of which 526,968 are currently subject to Unvested Stock Options, (iv) 6,394,997 shares of Company Common Stock are reserved for issuance in connection with the Warrants, and (v) except for the Redemption Agreement, no shares of Company Common Stock will be (x) subject to a right of repurchase by the Company, (y) subject to forfeiture back to the Company or (z) subject to transfer or lock-up restrictions, in each of cases (x), (y) and (z), following the consummation of the Merger.

(b) Section 3.3 of the Company Disclosure Letter sets forth, as of the date hereof, a true and complete list of all Vested Stock Options and all Unvested Stock Options, and all other rights to purchase or receive Company Common Stock (other than the Warrants and Parent Company Options), the number of shares of Company Common Stock subject to each such Vested Stock Option or other such right (other than the Warrants and Parent Company Options), the grant dates and exercise prices and vesting schedule of each such Company Stock Option, or other right (other than the Warrants and Parent Company Options) and the names of the holder of each such Company Stock Option or other right (other than the Warrants and Parent Company Options). The Company has no obligation to any employee or other Person to grant any options for Company Common Stock, other than the Vested Stock Options and Unvested Stock Options outstanding as of the date hereof. Except as set forth in Section 3.3(a) or in

relation to the Warrants and/or Parent Company Options, (i) as of the date hereof, there are not issued, reserved for issuance or outstanding any (A) shares of capital stock of, or other equity or voting interests in, the Company, (B) securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries or (C) options, warrants or other rights to acquire from the Company or any of its Subsidiaries any capital stock of, or other equity or voting interests in, or securities convertible into or exchangeable or exercisable for capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries and (ii) as of the date of this Agreement, there exists no obligation of the Company or any of its Subsidiaries to issue any capital stock of, or other equity or voting interests in, or securities convertible into or exchangeable or exercisable for capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries. Except as set forth in Section 3.3(a), as of the date hereof, there are no outstanding stock appreciation rights, rights to receive shares of Company Common Stock on a deferred basis or otherwise or other rights that are linked in any way to the value of Company Common Stock issued or granted pursuant to or under the Company Stock Plans or otherwise by the Company. From December 31, 2004 to the date hereof, there have been no issuances by the Company or any of its Subsidiaries of (i) shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries, (ii) securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries or (iii) options, warrants or other rights to acquire from the Company or any of its Subsidiaries any capital stock of, or other equity or voting interests in, or securities convertible into or exchangeable or exercisable for capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries.

(c) All outstanding shares of capital stock of the Company are, and all shares which may be issued upon exercise of the Company Stock Options, Unvested Stock Options, or Warrants, as the case may be, will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except for the Redemption Agreement, those Contracts set forth in Section 3.3(c)(1) of the Company Disclosure Letter or to which Parent or a Subsidiary of Parent is a party, there are no Contracts of any kind to which the Company or any of its Subsidiaries is a party or is bound that obligate the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire (i) shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries or (ii) options, warrants or other rights to acquire shares of capital stock of, or other equity or voting interests in, or securities convertible into or exchangeable for capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries. Other than the Principal Stockholders Agreement or except for those Contracts set forth in Section 3.3(c)(2) of the Company Disclosure Letter or to which Parent or a Subsidiary of Parent is a party, to the Knowledge of the Company, there are no irrevocable proxies and no voting Contracts (or Contracts to execute a written consent or a proxy) with respect to any shares of Company Common Stock or any other voting securities of the Company.

Section 3.4 Authority; Noncontravention .

(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and the Principal Stockholders Agreement and to consummate the Merger and the other transactions contemplated hereby and thereby, subject, in the case of the transactions contemplated by this Agreement, only to receipt of the Principal Stockholders Consent. The execution and delivery of this Agreement and the Principal Stockholders Agreement by the Company and the consummation of the Merger and the other transactions contemplated hereby and thereby and the compliance by the Company with the provisions of this Agreement and the Principal Stockholders Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize or approve this Agreement or the Principal Stockholders Agreement or to consummate the Merger or the other transactions contemplated hereby or thereby, subject, in the case of the transactions contemplated by this Agreement, only to receipt of the Principal Stockholders Consent and the filing of the Certificate of Merger in accordance with the DGCL. This Agreement and the Principal Stockholders Agreement have been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto and thereto, constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with each of their respective terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws affecting creditors’ rights generally from time to time in effect and to general equity principles). The board of directors of the Company, at a meeting duly called and held, at which all directors of the Company were present, duly and unanimously adopted resolutions (i) approving, adopting and declaring advisable this Agreement, the Principal Stockholders Agreement, the Merger, the Charter Amendment and the other transactions contemplated hereby and thereby, (ii) declaring that the Merger, the Charter Amendment and the other transactions contemplated hereby are in the best interests of the stockholders of the Company, (iii) fixing the record date to determine the stockholders entitled to consent to the adoption of this Agreement and approve the Merger and the Charter Amendment and the other transactions contemplated hereby and thereby, which date is the date hereof, (iv) directing that this Agreement and the Charter Amendment be submitted to the Principal Company Stockholder and Parent immediately following the execution and delivery of this Agreement by each of the parties hereto for such stockholders to consider whether to adopt this Agreement and approve the Merger and the Charter Amendment and the other transactions contemplated hereby and thereby, and (v) recommending that the stockholders of the Company adopt this Agreement in accordance with Section 228 of the DGCL and approve the Merger and the Charter Amendment and the other transactions contemplated hereby (the “ Company Board Recommendation ”), which resolutions have not been subsequently rescinded, modified or withdrawn in any way. The only notices required to be delivered to stockholders of the Company with respect to this Agreement and the Merger and the Charter Amendment are the notices required pursuant to Section 262 of the DGCL with respect to the Merger (the “ Appraisal Notice ”), and the notice of action by written consent under Section 228 of the DGCL with respect to the Merger and the Charter Amendment (the “ 228 Notice ”).

(b) The execution and delivery of this Agreement and the Principal Stockholders Agreement do not, and the consummation of the Merger and the other transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof do not and will not, conflict with, or result in any violation or breach of, or constitute a default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, (i) the Company Organizational Documents or the comparable organizational documents of any Subsidiary of the Company, (ii) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease or other Contract, commitment, agreement, instrument, obligation, option, undertaking, concession, franchise or license, binding arrangement or binding understanding to which the Company or any of its Subsidiaries is a party or is bound or any of their respective properties or other assets is bound by or subject to or otherwise under which the Company or any of its Subsidiaries has any rights or benefits, or (iii) subject to the governmental filings and other matters referred to in Section 3.5, any Law applicable to the Company or any of its Subsidiaries or their respective properties or other assets, other than in the case of clauses (ii) and (iii), (A) any Contracts to which Parent or a Subsidiary of Parent is a party or (B) any such conflicts, violations, breaches, defaults, rights, results, losses or Liens that individually or in the aggregate have not had and could not reasonably be expected to have a Company Material Adverse Effect.

Section 3.5 Governmental Approvals . No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any domestic or foreign (whether supernational, national, federal, state, provincial, local or otherwise) government or any court, administrative, regulatory or other governmental agency, commission or authority or any nongovernmental self-regulatory agency, commission or authority is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the Principal Stockholders Agreement by the Company or the consummation by the Company of the Merger or the other transactions contemplated hereby or thereby, except for (a) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), if required, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, and (c) such other consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate have not had and could not reasonably be expected to have a Company Material Adverse Effect or that arise as a result of any facts or circumstances relating to Parent or any of its Subsidiaries.

Section 3.6 Financial Statements; No Undisclosed Liabilities .

(a) Section 3.6 of the Company Disclosure Letter is a copy of the Company’s audited financial statements for the three fiscal years ended December 31,

2004 (the “ Annual Financial Statements ”) , and its unaudited financial statements for the three month period ended March 31, 2005 (the “ Interim Financial Statements ” and together with the Annual Financial Statements, the “ Financial Statements ”), all of which fairly present, in all material respects, the financial position of the Company as at the dates thereof and the results of operations and cash flows for the periods indicated therein on a consolidated basis in accordance with GAAP (except as may be indicated in the notes thereto), subject to normal year end audit adjustments and the absence of notes, in the case of the Interim Financial Statements.

(b) The Company and its Subsidiaries do not have any Liabilities required to be included in the Financial Statements (including any notes thereto) or otherwise disclosed in accordance with GAAP, except for Liabilities (i) included or reserved in, or disclosed by, the Financial Statements, (ii) incurred after March 31, 2005, in the ordinary course of business consistent with past practice and in accordance with the terms hereof, (iii) owed to Parent or to any of its Subsidiaries and (iv) incurred after March 31, 2005 that individually or in the aggregate have not had and could not reasonably be expected to have a Company Material Adverse Effect.

(c) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material Liabilities of, the Company or any of its Subsidiaries in the Financial Statements.

(d) The Company maintains a system of internal accounting controls which is sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) access to monetary funds is permitted only in accordance with management’s general or specific authorization and (iii) the recorded accountability for monetary funds is compared with the existing monetary funds at reasonable intervals and appropriate action is taken with respect to any differences.

(e) As of the date hereof, except with respect to any arrangements and agreements between the Company and Parent, the Company and its Subsidiaries have no outstanding indebtedness for borrowed money. As of the date hereof, there are no guarantees by the Company or any of its Subsidiaries of indebtedness in respect of borrowed money of any person.

Section 3.7 Absence of Certain Changes or Events . Since March 31, 2005, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there have not been:

(a) any events that individually or in the aggregate have had or could reasonably be expected to have a Company Material Adverse Effect;

(b) (i) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock, property or other assets) in respect of any of the Company’s or any of its Subsidiaries’ capital stock, or other equity or voting interests, other than dividends or distributions by a direct or indirect wholly owned Subsidiary of the Company to its parent, (ii) any split, combination or reclassification of any of the Company’s or any of its Subsidiaries’ capital stock, or other equity or voting interests, or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of such capital stock, or other equity or voting interests, or (iii) any purchase, redemption or other acquisition of any shares of capital stock, or other equity or voting interests or any other securities of the Company or any of its Subsidiaries or any warrants, options or other rights to acquire any such shares or other securities except for forfeitures of Company Stock Options or Restricted Stock Awards in accordance with the Company Plan;

(c) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or consultant (other than attorneys, accountants or other similar professional service providers) of the Company or any of its Subsidiaries of any increase in compensation, bonus or other benefits or any such granting of any type of compensation, bonus or other benefits to any current or former director, officer, employee or consultant (other than attorneys, accountants or other similar professional service providers) of the Company or any of its Subsidiaries not previously receiving or entitled to receive such type of compensation, bonus or other benefit, except for increases of cash compensation, bonus or other benefits (i) in the ordinary course of business consistent with past practice, or (ii) as was required under any Company Plan or employment agreement as in effect on December 31, 2004;

(d) any entering into, or any amendment or termination of, any employment, deferred compensation, supplemental retirement, severance, retention, “change in control” or other similar Material Contract with any current or former director, officer, employee or consultant (other than attorneys, accountants or other similar professional service providers) of the Company or any of its Subsidiaries other than Contracts with employees, directors, officers or consultants whose base salary (or equivalent) is less than $150,000 per annum or any Company Plan;

(e) any change in financial or tax accounting methods, principles or practices by the Company or any of its Subsidiaries, except insofar as may have been required by a change in GAAP;

(f) any material election with respect to Taxes by the Company or any of its Subsidiaries or any settlement or compromise of any material Tax liability or refund that is reasonably likely to have a material and adverse effect on the Tax liability of the Company or any of its Subsidiaries after the Effective Time; or

(g) any revaluation by the Company or any of its Subsidiaries of any material assets of the Company or any of its Subsidiaries, except as requested by Parent or its Subsidiaries.

Section 3.8 Litigation . There is no claim, suit, action, investigation or other proceeding to which Parent (or any of its Subsidiaries) is not a party (collectively, a “ Legal Action ”), pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries or any of their respective properties or other assets that individually or in the aggregate has had or could reasonably be expected to have a Company Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against, or, to the Knowledge of the Company, investigation, proceeding, notice of violation, order of forfeiture or complaint by any Governmental Entity involving the Company or any of its Subsidiaries that individually or in the aggregate have had or could reasonably be expected to have a Company Material Adverse Effect. The Company has no plans to initiate any Legal Action against any third party.

Section 3.9 Contracts .

(a) Other than those Contracts to which Parent or a Subsidiary of Parent is a party, or as contemplated by this Agreement, Section 3.9 of the Company Disclosure Letter sets forth (with specific reference to the Subsection to which it relates), as of the date hereof, a true and complete list of, and the Company has made available to Parent true and complete copies of (collectively, the “ Section 3.9 Contracts ”):

(i) all Material Contracts with vendors, suppliers, licensors, licensees, distributors, resellers, service providers, developers, and consultants to which the Company or any of its Subsidiaries is a party, including without limitation Material Contracts that relate to (A) marketing, advertising, and sponsorship, (B) outsourcing, (C) web-hosting, (D) equipment leases and other leases not otherwise disclosed, (E) network communication, (F) software and hardware maintenance and support, (G) disaster recovery, (H) credit card processing, (I) telecommunications, (J) creative design and (K) co-branding, linking or framing.

(ii) all Material Contracts with suppliers, distributors or service providers for revenue sharing, “bounties,” the rebating of charges or other similar arrangements.

(iii) (A) all Material Contracts pursuant to which any indebtedness of the Company or any of its Subsidiaries is outstanding or may be incurred, (collectively, “ debt obligations ”), (B) all Material Contracts of or by the Company or any of its Subsidiaries guaranteeing any debt obligations of any other person (other than the Company or any of its Subsidiaries), including the respective aggregate principal amounts outstanding as of the date hereof, and (C) all Material Contracts involving any “keep well” arrangements or pursuant to which the Company or any of its Subsidiaries has agreed to maintain any financial statement condition of another person, other than the

Company with respect to its Subsidiaries, or any such Subsidiary with respect to its Subsidiary;

(iv) (A) all Contracts pursuant to which the Company or any of its Subsidiaries has agreed not to, or which, following the consummation of the Merger, could restrict the ability of Parent or any of its Subsidiaries, including the Company and its Subsidiaries, to compete with any person in any business or in any geographic area or to engage in any business or other activity, including any restrictions relating to “exclusivity” or any similar requirement in favor of any person other than the Company or any of its Subsidiaries or pursuant to which any benefit is required to be given or lost as a result of so competing or engaging, and (B) all Material Contracts pursuant to which the Company or any of its Subsidiaries has agreed not to, or which, following the consummation of the Merger, could restrict the ability of Parent or any of its Subsidiaries, including the Company and its Subsidiaries, to solicit or to hire any person for positions in which annual compensation would be expected to exceed $150,000 to work for the Company or any of its Subsidiaries (either as an employee or as an independent contractor or other agent) or pursuant to which any benefit is required to be given or lost as a result of so soliciting or hiring;

(v) all Contracts of the Company or any of its Subsidiaries granting the other party to such Contract or a third party “most favored nation” or similar status;

(vi) all joint venture, limited liability company, partnership or other similar Contracts (including all amendments thereto) in which the Company or any of its Subsidiaries holds an interest;

(vii) all standstill or similar Contracts to which the Company or any of its Subsidiaries is a party that impose restrictions on the activities of the Company or any of its Subsidiaries or that, following the Effective Time, would impose restrictions on the activities of Parent or any of its Subsidiaries, including the Surviving Corporation;

(viii) all Contracts and agreements relating to voting rights or obligations of a stockholder of the Company;

(ix) all Contracts regarding the acquisition, issuance or transfer of any securities and each Contract affecting or dealing with any securities of the Company, including, without limitation, any restricted stock agreements or escrow agreements; and

(x) each other Contract of the Company or any of its Subsidiaries involving aggregate annual payments by or to the Company or any of its Subsidiaries, of more than $250,000 (and not otherwise disclosed pursuant to this Section 3.9).

(b) Neither the Company nor any of its Subsidiaries is in violation or breach of or in default under (nor, to the Knowledge of the Company, does there exist

any condition which upon the passage of time or the giving of notice or both would cause such a violation or breach of or default under) any Contract to which it is a party or is bound or by which it or any of its properties or other assets is bound by or subject to or otherwise under which the Company or any of its Subsidiaries has any rights or benefits, except for violations or defaults of any Contract between the Company and Parent or that individually or in the aggregate have not had and could not reasonably be expected to have a Company Material Adverse Effect.

(c) As of the date hereof, no Person that is or was a party to a Section 3.9 Contract (other than the Company or Parent or their respective Subsidiaries) at any time during the period from March 31, 2005 through the date hereof has terminated (including delivering a notice to the Company having such effect) any Section 3.9 Contract or any of its existing relationships with the Company or any of its Subsidiaries or failed to renew or requested any amendment to any Section 3.9 Contract that individually or in the aggregate have had or could reasonably be expected to have a Company Material Adverse Effect.

Section 3.10 Compliance with Laws . Except (i) to the extent that such non-compliance would not individually or in the aggregate reasonably be expected to have a Company Material Adverse Effect, (ii) in relation to actions taken by Parent (or any of its Subsidiaries) on behalf of the Company (or any of its Subsidiaries) and (iii) with respect to Environmental Laws and Taxes, which are the subject of Section 3.11 and Section 3.14, respectively, to the Knowledge of the Company, each of the Company and its Subsidiaries is, and since January 1, 2001, has been, in compliance in all material respects with (a) all Laws applicable to it, its personnel, properties or other assets or its business or operations, and (b) all permits, licenses, variances, exemptions, authorizations, operating certificates, franchises, orders and approvals of all Governmental Entities (collectively, “ Permits ”) issued to the Company or any of its Subsidiaries. None of the Company and its Subsidiaries have received, since January 1, 2001, a notice or other written communication alleging or relating to a possible material violation of any Law applicable to it, its personnel, properties or other assets or its businesses or operations that individually or in the aggregate could reasonably be expected to have a Company Material Adverse Effect. Except to the extent that such non-compliance could not individually or in the aggregate reasonably be expected to result in a Company Material Adverse Effect, (i) the Company and its Subsidiaries have in effect all Permits necessary for them to own, lease or operate their properties and other assets and to carry on their businesses operations as now conducted and (ii) there is no event that has occurred that, to the Knowledge of the Company, has resulted in or is reasonably likely to result in the revocation, cancellation, nonrenewal or adverse modification of any Permit.

Section 3.11 Environmental Matters . Each of the Company and its Subsidiaries is in compliance in all material respects with all applicable Environmental Laws, and there is no environmental condition, claim, suit, action, investigation or other proceeding existing or pending, or, to the Knowledge of the Company, threatened in writing, against or affecting the Company or any of its Subsidiaries alleging

noncompliance with Environmental Laws that individually or in the aggregate could reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, “ Environmental Laws ” shall mean all applicable Laws in effect as of the date hereof relating to the protection of the environment or natural resources and applicable Permits and licenses issued pursuant to such Environmental Laws.

Section 3.12 Employees .

(a) None of the employees of the Company nor any of its Subsidiaries is represented in his or her capacity as an employee by any labor union or similar organization.

(b) Each of the Company and its Subsidiaries is in compliance with all applicable Laws respecting labor, employment, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety, plant closings, mass layoffs, and wages and hours, except to the extent that such non-compliance could not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.

Section 3.13 Employee Benefit Plans .

(a) Section 3.13(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date hereof, of (i) except with respect to such Plans sponsored by Parent or its Subsidiaries, all “employee benefit plans”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and all other material employee benefit or compensation plans, programs, policies, arrangements or payroll practices maintained or required to be maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries contributed or is obligated to contribute thereunder for any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries (the “ Company Plans ”) and (ii) all Company Employment Agreements. There are no Company Plans other than (i) the Company Option Plans and (ii) the Company Plans sponsored or maintained by Parent or its Subsidiaries in which employees of the Company participate. None of the Company Employment Agreements provides for postemployment life or health insurance, benefits or coverage for any participant or any beneficiary of a participant, except as may be required by applicable Law or at the sole expense of the participant or the participant’s beneficiary.

(b) To the Knowledge of the Company with respect to each Company Plan maintained outside the jurisdiction of the United States, including any such plan required to be maintained or contributed to by applicable law, custom or rule of the relevant jurisdiction (“ Foreign Plan ”) and except with respect to such Plans sponsored by Parent or its Subsidiaries:

(i) all employer and employee contributions to each Foreign Plan required by law or by the terms of such Foreign Plan have been made, or, if applicable, accrued in accordance with normal accounting practices;

(ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the Effective Time, with respect to all current or former participants in such plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Foreign Plan and no transaction contemplated by this Agreement shall cause such assets or insurance obligations to be less than such benefit obligations; and

(iii) each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.

(c) Each Company Employment Agreement has been made available to Parent.

(d) Except in relation to Parent Company Options or as specifically provided in this Agreement, neither the execution and delivery of this Agreement nor the consummation of the Merger or the other transactions contemplated by this Agreement will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any director, officer or employee of the Company or any of its subsidiaries other than pursuant to the Company Option Plans with respect to Company Stock Options. Without limiting the generality of the foregoing, no amount paid or payable by Parent or Merger Sub in connection with the Merger or the other transactions contemplated by this Agreement (either solely as a result thereof or as a result of such transactions in conjunction with any other event), will result in an “excess parachute payment” within the meaning of Section 280G of the Code being made to any employee of the Company.

(e) None of the Company Stock Options is an “incentive stock option” as defined in Section 422 of the Code.

Section 3.14 Taxes .

(a) Each of the Company and its Subsidiaries and any consolidated, combined, unitary, affiliated or aggregate group of which the Company and any of its Subsidiaries is a member (an “ affiliated group ”) has timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by it, all Taxes shown due on such tax returns and all other material Taxes as are due have been paid, and all such Tax Returns are true and complete in all material respects.

(b) As of the date hereof, no material deficiencies for any Taxes have been proposed, asserted or assessed against the Company, any of its Subsidiaries or any affiliated group that are still pending and to the Knowledge of the Company, no Liens for Taxes exist with respect to any property or other assets of the Company or any of its Subsidiaries, except for statutory Liens for Taxes not yet due or payable or the validity of

which is being contested in good faith by appropriate proceedings and as to which adequate reserves have been established on the Company’s books and records in accordance with GAAP.

(c) The Federal Income Tax Returns of each of the Company, its Subsidiaries and any affiliated group have been examined by and settled with the IRS (or the applicable statute of limitations has expired) for all years through December 31, 2000.

(d) All material Taxes due with respect to federal income tax returns have been fully paid or have been adequately reserved on the most recent financial statements included in the Financial Statements in accordance with GAAP.

(e) The Company has made available to Parent true and complete copies of (i) all Tax Returns of the Company, its Subsidiaries and affiliated groups for the preceding three taxable years and (ii) any audit report issued within the three years preceding the date hereof (or otherwise with respect to any audit or proceeding in progress) relating to Taxes of the Company, any of its Subsidiaries and any affiliated group.

(f) Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (in each case, within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355(e) of the Code (A) in the two years preceding the date hereof or (B) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

(g) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection or assessment or reassessment of, Taxes due from the Company or any of its Subsidiaries for any taxable period and no request for any such waiver or extension is currently pending.

(h) To the Knowledge of the Company, no claim has been made by any Governmental Entity in a jurisdiction where the Company and its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

(i) To the Knowledge of the Company, the Company and the Company’s Subsidiaries have not taken any reporting position on a Tax Return, which reporting position (i) if not sustained would be reasonably likely, absent disclosure, to give rise to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code (or any similar provision of state, local, or foreign Tax law), and (ii) has not adequately been disclosed on such Tax Return in accordance with Section 6662(d)(2)(B) of the Code (or any similar provision of state, local, or foreign Tax law).

(j) Neither the Company nor any of its Subsidiaries is a party to any agreement relating to the sharing, allocation or indemnification of Taxes, or any similar

agreement, contract or arrangement, (collectively, “ Tax Sharing Agreements ”) or has any liability for Taxes of any Person (other than members of the affiliated group, within the meaning of Section 1504(a) of the Code, filing consolidated federal income tax returns of which the Company is the common parent) under Treasury Regulation § 1.1502-6, Treasury Regulation § 1.1502-78 or similar provision of state, local or foreign law, as a transferee or successor, by contract, or otherwise, except with respect to any agreements that have been (or may be) entered into in connection with this Agreement and the Redemption Agreement.

(k) To the Knowledge of the Company, the Company and its Subsidiaries have each withheld (or will withhold) from their respective employees, independent contractors, creditors, stockholders and third parties and timely paid to the appropriate Governmental Entity proper and accurate amounts in all material respects for all periods ending on or before the First Closing Date in compliance with all material Tax withholding and remitting provisions of applicable laws and have each complied in all material respects with all Tax information reporting provisions of all applicable laws.

(l) None of the Company and its Subsidiaries has agreed, or is required to make, any adjustment under Section 481(a) of the Code, and no Governmental Entity has proposed any such adjustment or change in accounting method.

(m) Each material adjustment of Taxes of the Company or any of its Subsidiaries made by the Internal Revenue Service (the “ IRS ”), which adjustment is required to be reported to the appropriate state, local, or foreign Governmental Entities, has been so reported.

(n) Neither the Company nor any of its Subsidiaries has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local or foreign law, and neither the Company nor any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable ruling of any other Governmental Entity.

(o) INTENTIONALLY OMITTED.

(p) Neither the Company nor any of its Subsidiaries has any (i) ”excess loss accounts” or (ii) ”deferred gains” with respect to any “deferred intercompany transactions,” within the meaning of Treasury Regulation §§ 1.1502-19 and 1.1502-13, respectively.

(q) Neither the Company nor any of its Subsidiaries has entered into a transaction that is being accounted for under the installment method of Section 453 of the Code or similar provision of state, local or foreign law.

(r) The Company and each of its Subsidiaries have never been a person other than a United States person, each within the meaning of the Code.

Section 3.15 Leases .

(a) Neither the Company nor any of its Subsidiaries owns any real property. As of the date hereof, Section 3.15(a) of the Company Disclosure Letter sets forth a true and complete list of all written leases for real property and interests in real property leased by the Company or any of its Subsidiaries other than leases to which Parent is a party (individually, a “ Leased Property ”) and, to the Knowledge of the Company, identifies any material reciprocal easement or operating agreement relating thereto; true and complete copies of all such leases and agreements have been made available to Parent by the Company. Each of the Company and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all its Leased Properties, free and clear of all Liens, except for (i) such as are no longer used or useful in the conduct of its business or as have been disposed of in the ordinary course of business consistent with past practice, (ii) Liens to which Parent is a party or otherwise permitted by a Lien to which Parent is a party and (iii) all Permitted Encumbrances which individually or in the aggregate could not reasonably be expected to have a Company Material Adverse Effect.

(b) Each of the Company and its Subsidiaries has complied in all material respects with the terms of all leases of the Leased Properties to which it is a party and under which it is in occupancy, and all such leases are in full force and effect.

(c) This Section 3.15 does not relate to any matters with respect to intellectual property, which are addressed in Section 3.16.

Section 3.16 Intellectual Property .

(a) Except as provided in Section 3.16(a) of the Company Disclosure Letter and other than in relation to (i) any Intellectual Property owned or licensed to Parent or any of its Subsidiaries which is licensed or sublicensed to the Company by Parent or (ii) any Intellectual Property otherwise provided to or made available to the Company by Parent or any of its Subsidiaries, the Company and its Subsidiaries own, or otherwise have the right under IP Licenses to use, the Company Intellectual Property free and clear of any Liens (other than any Liens under the WWI Collateral Assignment Agreement or Liens arising from infringement by the Company of which the Company has no Knowledge or from any invalidity or unenforceability of any IP Licenses, where the Company has no Knowledge of such invalidity or unenforceability), but subject to the terms, limitations, restrictions, covenants and conditions of any IP Licenses, except to the extent that any failure to so own or to have such right to use could not individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(b) Section 3.16(b) of the Company Disclosure Letter sets forth a true and complete list of all applications for Patents or applications for registration of any Trademark or Copyright filed by the Company or any of its Subsidiaries, as well as all Patents owned by Company or any of its Subsidiaries and all Copyright or Trademark registrations issued to Company or any of its Subsidiaries, specifying as to each item, as applicable: (i) the nature of the item, including the title if any; (ii) the owner of the item; (iii) the jurisdictions in which the item is issued or registered or in which an application

for issuance or registration has been filed; and (iv) the issuance, registration or application numbers and dates.

(c) Except for (i) IP Licenses to which Parent or its Subsidiaries are a Party, and (ii) intercompany IP Licenses between the Company and any of its Subsidiaries or between any of the Company’s Subsidiaries, Section 3.16(c) of the Company Disclosure Letter sets forth a true and complete list of all Material IP Licenses for Company Intellectual Property under which the Company or any of its Subsidiaries is a party, other than IP Licenses for off-the-shelf computer software programs that are commercially available under non-discriminatory pricing terms on a retail basis (“ Off-the-Shelf Software ”). The Company and its Subsidiaries are not in breach of any Material IP Licenses for Company Intellectual Property. To the Knowledge of the Company, all of the Material IP Licenses are valid, enforceable and in full force and effect. Except as set forth in Section 3.16(c) of the Company Disclosure Letter, the transactions contemplated by this Agreement will not result in the termination of, or otherwise require the consent, approval or other authorization of any party (other than a Party to this Agreement or any Subsidiary thereof) to, any Material IP License for Company Intellectual Property.

(d) All of the Company’s Copyrights and Trade Secrets included in the Company Intellectual Property owned by the Company or any of its Subsidiaries are valid, enforceable and in full force and effect, except to the extent that any failure of such rights to be valid, enforceable or in full force and effect could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, the Company’s rights in Patents owned by the Company or any of its Subsidiaries are valid, enforceable and in full force and effect, except to the extent that any failure of such rights to be valid, enforceable or in full force and effect could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company or its Subsidiaries have taken all reasonable steps to maintain and protect the Company Intellectual Property owned by them, except to the extent that any failure of take such steps could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(e) Except as set forth in Section 3.16(e) of the Company Disclosure Schedule or other than in relation to any Patents held jointly by the Company and Parent, the Company and its Subsidiaries have not abandoned and do not intend to abandon any Patent applications they have filed.

(f) The Company and its Subsidiaries have taken all reasonable precautions to protect the secrecy, confidentiality and value of their Trade Secrets, except to the extent that any failure to take such precautions could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. None of the Trade Secrets, the value of which is contingent upon maintenance of confidentiality, have been disclosed to any employee, representative, independent contractor or agent of the Company or any of its Subsidiaries or any other Person not obligated to maintain such Trade Secret in confidence pursuant to either a confidentiality agreement or a policy of

the Company or any of its Subsidiaries, except as required by the applicable patent office pursuant to the filing of a patent application by the Company or to the extent that any disclosure could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(g) Each present or past employee of Company who, while employed by Company, developed any Company Intellectual Property has executed a valid and enforceable agreement with the Company or one of its subsidiaries that (i) conveys any and all right, title and interest in and to all Intellectual Property developed by such employee in connection with such employee’s employment by the Company or the applicable Subsidiary, and (ii) obligates such employee to keep any confidential information of the Company and its Subsidiaries confidential both during and after the term of employment or contract, except to the extent that any failure of any employee to execute such an agreement could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(h) During the two (2) year period prior to the date of this Agreement, no former employer or client of any employee of the Company or any of its Subsidiaries, and no current or former client of any consultant of the Company or any of its Subsidiaries, has notified the Company or any of its Subsidiaries in writing, or to the Knowledge of the Company, notified the Company or any of its Subsidiaries by means other than in writing, that such employee or consultant is utilizing or infringing upon Intellectual Property of such former employer or client in connection with work performed by such employee or consultant for Company or any of its Subsidiaries.

(i) Other than in relation to any Intellectual Property of the Parent or any of its Subsidiaries, to the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries, including without limitation the marketing, distribution, sale or other exploitation of the products and services of the Company and its Subsidiaries, does not infringe upon or otherwise violate any Intellectual Property of others.

(j) To the Knowledge of the Company, no Person is materially infringing upon or otherwise materially violating Company Intellectual Property owned by the Company or any of its Subsidiaries.

(k) There are no Legal Actions pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries, (i) contesting the right of the Company to use, make, have made, sell, offer to sell, import, license or otherwise exploit any of the Company Intellectual Property (other than Intellectual Property of Parent or its Subsidiaries), products or services currently or previously made, sold, offered for sale, licensed, imported, made available to any Person, or used or otherwise exploited, by the Company or (ii) opposing or attempting to cancel any rights of the Company in or to any Company Intellectual Property (other than Intellectual Property of Parent or its Subsidiaries).

(l) All Software owned by the Company or any of its Subsidiaries and material to its business is identified in Section 3.16(l) of the Company Disclosure Letter. Except as identified in Section 3.16(l) of the Company Disclosure Letter, to the Knowledge of the Company, no Software owned or used by the Company includes (i) any errors that, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect, or (ii) any virus, Trojan horse, worm or other malicious code designed to permit unauthorized access to, or to disable, erase or otherwise harm, any computer, systems or Software that could reasonably be expected to have a Company Material Adverse Effect. The Company regularly backs-up its material Software and has maintained such Software at a secure off-site location, except where the failure to back-up or maintain such Software could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 3.17 Privacy Policy . The Company operates its web sites pursuant to the privacy policies which has been previously agreed with Parent (a “ Privacy Policy ”) and no other privacy policies regarding the collection and use of information from website visitors or other parties (“ Customer Information ”). Neither the Company nor any of its Subsidiaries (i) has collected any Customer Information in violation of the Privacy Policy or, to the Knowledge of the Company, in an unlawful manner, (ii) uses any of the Customer Information it receives through its web site or otherwise in a manner that violates the Privacy Policy or, to the Knowledge of the Company, in an unlawful manner, and the Company and its Subsidiaries have adequate security measures in place to protect the Customer Information they receive through their web sites and store in their computer systems from illegal use by third parties.

Section 3.18 Customer Accounts Receivable . All customer accounts receivable of the Company or any of its Subsidiaries have arisen from bona fide transactions in the ordinary course of business consistent with past practice.

Section 3.19 Brokers and Other Advisors . No broker, investment banker, financial advisor or other person, other than J.P. Morgan Securities Inc., the fees and expenses of which will be paid by the Principal Company Stockholder, the Other Holders and the Unvested Stock Option holders, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company that:

Section 4.1 Organization, Standing and Power . Each of Parent and Merger Sub (i) is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated, and (ii) has all requisite power and authority to carry on its business as now being conducted.

Section 4.2 Authority; Noncontravention .

(a) Each of Parent and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement and, in the case of Parent, the Principal Stockholders Agreement and to consummate the Merger and the other transactions contemplated hereby and thereby. The execution and delivery of this Agreement by Parent and Merger Sub and the Principal Stockholders Agreement by Parent and the consummation of the Merger and the other transactions contemplated hereby and thereby and the compliance by Parent and Merger Sub, as the case may be, with the provisions of this Agreement and the Principal Stockholders Agreement have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub (and immediately following the signing hereof will have been adopted by Parent as the sole stockholder of Merger Sub) and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize or approve this Agreement or the Principal Stockholders Agreement or to consummate the Merger or the other transactions contemplated hereby or thereby, subject, in the case of the consummation of the Merger, only to receipt of the Principal Stockholders Consent. This Agreement and the Principal Stockholders Agreement have been duly executed and delivered by Parent and Merger Sub, as applicable, and, assuming the due authorization, execution and delivery by each of the other parties hereto and thereto, constitute legal, valid and binding obligations of Parent and Merger Sub, as applicable, enforceable against Parent and Merger Sub, as applicable, in accordance with each of their respective terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws affecting creditors’ rights generally from time to time in effect).

(b) The execution and delivery of this Agreement and the Principal Stockholders Agreement do not, and the consummation of the Merger and the other transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof do not and will not, conflict with, or result in any violation or breach of, or constitute a default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of Parent or Merger Sub under, (i) the certificate of incorporation or bylaws of each of Parent and Merger Sub, (ii) any Contract to which Parent or Merger Sub is a party or is bound or any of their respective properties or other assets is bound by or subject to or otherwise under which Parent or Merger Sub has any rights or benefits, or (iii) subject to the governmental filings and other matters referred to in Section 4.3, any Law applicable to Parent or Merger Sub or their respective properties or other assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, rights, results, losses or Liens that individually or in the aggregate are not reasonably likely to impair in any material respect the ability of each of Parent and Merger Sub to perform its obligations under this Agreement or prevent or materially impede, interfere with, hinder or delay the consummation of the Merger or any other transactions contemplated by this Agreement.

Section 4.3 Governmental Approvals . No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any domestic or foreign (whether supernational, national, federal, state, provincial, local or otherwise) government or any court, administrative, regulatory or other governmental agency, commission or authority or any nongovernmental self-regulatory agency, commission or authority is required by or with respect to Parent and Merger Sub in connection with the execution and delivery of this Agreement or the Principal Stockholders Agreement by Parent and Merger Sub, as applicable, or the consummation by Parent and Merger Sub of the Merger or the other transactions contemplated hereby or thereby, except for (a) the filing of a premerger notification and report form by the Company under the HSR Act, if required, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (c) the filing with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement, the Principal Stockholders Agreement, the Merger and the other transactions contemplated hereby and thereby, and (d) such other consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate is not reasonably likely to impair in any material respect the ability of each of Parent and Merger Sub to perform its obligations under this Agreement or prevent or materially impede, interfere with, hinder or delay the consummation of the Merger or any other transactions contemplated by this Agreement.

Section 4.4 Litigation . There is no claim, suit, action, investigation or other proceeding pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries that individually or in the aggregate are reasonably likely to impair in any material respect the ability of each of Parent and Merger Sub to perform its obligations under this Agreement or prevent or materially impede, interfere with, hinder or delay the consummation of the Merger or any other transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against, or, to the Knowledge of Parent, investigation, proceeding, notice of violation, order of forfeiture or complaint by any Governmental Entity involving Parent or any of its Subsidiaries that individually or in the aggregate are reasonably likely to impair in any material respect the ability of each of Parent and Merger Sub to perform its obligations under this Agreement or prevent or materially impede, interfere with, hinder or delay the consummation of the Merger or any other transactions contemplated by this Agreement.

Section 4.5 Interim Operations of Merger Sub . Parent owns beneficially and of record all of the outstanding capital stock of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated by this Agreement.

Section 4.6 Parent Company Common Stock, Warrant and Options . As of the date hereof, Parent owns (i) subject to the following sentence, 3,388,622 shares of Company Common Stock, and (ii) Warrants to purchase 6,394,997 shares of Company Common Stock. Parent has granted options to its employees to purchase 102,917 shares

of its Company Common Stock referred to in clause (i) hereof pursuant to the Weight Watchers.com Stock Incentive Plan (the “ P/C Option Plan ”) of Weight Watchers International, Inc. and Subsidiaries (the “ Parent Company Options ”).

Section 4.7 Opinion of Financial Advisor . Parent has received the opinion of an investment bank to the effect that, as of the date of such opinion, the consideration to be paid pursuant to the Merger and the Redemption is fair to Parent from a financial point of view.

ARTICLE V

COVENANTS

Section 5.1 Conduct of Business of the Company . Except as contemplated by this Agreement or required by applicable Laws, the Company shall, and shall cause each of its Subsidiaries to, (x) conduct its operations only in the ordinary course of business consistent with past practice and with no less diligence and effort than would be applied in the absence of this Agreement and (y) use its reasonable best efforts to maintain and preserve intact its business organization, to retain the services of its current officers and key employees, and to preserve the good will of its customers, suppliers and other Persons with whom it has business relationships. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement, the Redemption Agreement and any other transactions contemplated hereby or thereby or set forth in Section 5.1 of the Company Disclosure Letter, or required by applicable Laws, prior to Second Closing, except as indicated below, the Company shall not, and shall not permit any of its Subsidiaries to take any of the following actions, without the prior written consent of Parent (acting solely through the Special Committee):

(a) Organization Documents . Amend any of the Company Organizational Documents;

(b) Dividends . Make, declare or pay any dividend or distribution on any shares of its capital stock;

(c) Capital Stock . (i) Adjust, split, combine or reclassify its capital stock, (ii) redeem, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock or any securities convertible or exchangeable into or exercisable for any shares of its capital stock, (iii) grant any Person any right or option to acquire any shares of its capital stock, (iv) issue, deliver or sell any additional shares of its capital stock or any securities convertible or exchangeable into or exercisable for any shares of its capital stock or such securities or (v) enter into any Contract, understanding or arrangement with respect to the sale, voting, registration or repurchase of its capital stock;

(d) Compensation and Benefits . (i) Increase the compensation or benefits payable or to become payable to any of its directors, officers or employees, (ii) pay any compensation or benefits not required by any existing plan or arrangement (including the granting of stock options, stock appreciation rights, shares of restricted

stock or performance units) to its directors, officers or employees, (iii) grant any severance or termination pay to any of its directors, officers or employees (except pursuant to existing agreements, plans or policies), (iv) enter into any employment or severance agreement with any of its directors, officers or employees or (v) establish, adopt, enter into, amend or take any action to accelerate rights under any Company Employment Agreements, except in each case (A) to the extent required by applicable Laws, (B) for payment of, and increases in, salary, wages, bonuses and benefits of officers or employees consistent with past practice, or (C) in conjunction with new hires, promotions or other changes in job status consistent with past practice;

(e) Acquisitions . Acquire, by merger, consolidation, acquisition of equity interests or assets, or otherwise, any business or any corporation, partnership, limited liability company, joint venture or other business organization or division thereof other than those listed in Schedule 5.1(e ), and those included in, or to be consummated to effect plans included in, the 2005 Annual Operating Plan of the Company, dated February 18, 2005 (the “ 2005 Business Plan ”) or, after the First Closing, in any substitute plan or modified or subsequent plan, approved by the Board of Directors of the Surviving Corporation (the “ Substitute Business Plan ”);

(f) Dispositions . Sell, lease, license, transfer, pledge, encumber, grant or dispose of any assets, including the capital stock of Subsidiaries of the Company, other than in the ordinary course of business consistent with past practice and, after the First Closing, those included in the Substitute Business Plan;

(g) Contracts . (i) Enter into any Contract of the type described in Section 3.9(a)(v), (vi) or (viii), or (ii) other than in the ordinary course of business, terminate, cancel or request any material change in any Section 3.9 Contract;

(h) Indebtedness; Guarantees; Loans . (i) incur, assume or prepay any indebtedness under existing lines of credit, other than after the First Closing, in the ordinary course of business consistent with past practice, (ii) assume, guarantee, endorse or otherwise become liable or responsible for the obligations of any other Person, or (iii) make any loans, advances or capital contributions to, or investments in, any other Person;

(i) Capital Expenditures . Make any capital expenditure, other than capital expenditures provided for in the 2005 Business Plan or within the thresholds listed for certain categories of capital expenditures specified in Schedule 5.1(i) or, after the First Closing Date, in the Substitute Business Plan. The foregoing shall not prohibit any additional items required be reported in the Financial Statements under GAAP as “capital expenditures”;

(j) Accounting . Change its accounting policies or procedures, other than as required by GAAP prior to the First Closing;

(k) Legal Actions . Waive, release, assign, settle or compromise any material Legal Actions where the amount claimed is over $200,000;

(l) Intellectual Property . Other than in relation to any Patents held jointly by the Company and Parent or the Intellectual Property of Parent or its Subsidiaries, and except for the disclosure of Trade Secrets as required by the applicable patent office pursuant to the filing of a patent application, take any action or omit to take any action that causes any material Company Intellectual Property to become invalidated, abandoned or dedicated to the public domain prior to the First Closing;

(m) Related Party Agreements . Amend any of the existing agreements between Parent and the Company, or enter into any new agreements with Parent or enter into any agreements with any Affiliate of Parent or Invus (other than any agreement that can be cancelled upon 30 days’ notice or that, alone or in conjunction with related agreements, involves less than $100,000 in payments by the Company in any 12 month period); or

(n) Related Actions . Authorize, propose, commit or agree to do any of the foregoing.

Section 5.2 Other Actions . Parent and the Company shall not, and shall not permit any of their respective Subsidiaries to, take any action that could reasonably be expected to result in any of the conditions to the Merger set forth in ARTICLE VI of this Agreement not being satisfied or satisfaction of those conditions being delayed.

Section 5.3 Access to Information; Confidentiality .

(a) The Company shall, and shall cause its Subsidiaries, to: (i) provide to Parent and its Representatives access at reasonable times upon prior written notice to the officers, employees, agents, properties, books and records of the Company and its Subsidiaries; (ii) furnish promptly such information concerning the Company and its Subsidiaries as Parent or its Representatives may reasonably request; and (iii) on at least a quarterly basis, information as to the Company’s business, operations and financial results. No investigation conducted under this Section 5.3(a) prior to the Effective Time, however, will affect or be deemed to modify any representation or warranty made in this Agreement.

(b) Parent and the Company shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under the Confidentiality Agreement, dated April 13, 2005 (the “ Confidentiality Agreement ”), between Parent and the Company with respect to the information disclosed under this Section 5.3.

(c) Nothing contained in this Agreement shall give Parent, directly or indirectly, rights to control or direct the Company’s or its Subsidiaries’ operations prior to the Effective Time (other than those rights Parent has as a stockholder of the Company) or pursuant to other agreements in effect as of the date hereof. Prior to the Effective Time, the Company shall, consistent with the terms and conditions of this Agreement, exercise complete control and supervision over the operations of the Company and its Subsidiaries.

Section 5.4 No Solicitation; No Public Offering .

(a) From the date of this Agreement until the Second Closing, the Company shall not, and shall cause each of its Subsidiaries and Representatives not to, directly or indirectly:

(i) solicit, initiate, facilitate or encourage any inquiries, offers or proposals relating to a Takeover Proposal or a Public Offering;

(ii) engage in discussions or negotiations with, or furnish or disclose any non-public information relating to the Company or any of its Subsidiaries to, any Person that has made or indicated an intention to make a Takeover Proposal or with respect to a Public Offering;

(iii) approve, endorse or recommend any Takeover Proposal or a Public Offering;

(iv) enter into any agreement in principle, arrangement, understanding or Contract relating to a Takeover Proposal or a Public Offering; or

(v) propose to do any of the foregoing or take any other action inconsistent with the obligations of the Company under this Section 5.4.

(b) The Company shall, and shall cause each of its Subsidiaries and Representatives to, immediately cease any existing solicitations, discussions or negotiations with any Person that has made or indicated an intention to make a Takeover Proposal or with respect to a Public Offering.

(c) The Company shall notify Parent promptly upon receipt of (i) any Takeover Proposal or indication that any Person is considering making a Takeover Proposal or (ii) any request for non-public information relating to the Company or any of its Subsidiaries.

Section 5.5 Notices of Certain Events .

(a) The Company shall notify Parent promptly of (i) any communication from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the transactions contemplated by this Agreement, (ii) any communication from any Governmental Entity in connection with the transactions contemplated by this Agreement, (iii) any Legal Actions threatened or commenced against or otherwise affecting the Company or any of its Subsidiaries or (iv) any event, change, occurrence, circumstance or development between the date of this Agreement and the Effective Time that (A) makes any of the representations or warranties of the Company contained in this Agreement untrue or inaccurate or (B) causes or is reasonably likely to cause any breach of its obligations under this Agreement.

(b) Parent shall notify the Company promptly of (i) any communication from any Person alleging that the consent of such Person (or other Person) is or may be required in connection with the transactions contemplated by this Agreement, (ii) any communication from any Governmental Entity in connection with the transactions contemplated by this Agreement or (iii) any event, change, occurrence, circumstance or development between the date of this Agreement and the Effective Time that (A) makes any of the representations or warranties of Parent contained in this Agreement untrue or inaccurate or (B) causes or is reasonably likely to cause any breach of the obligations of Parent or Merger Sub under this Agreement.

Section 5.6 Directors’ and Officers’ Indemnification and Insurance .

(a) All rights to indemnification now existing in favor of any director or officer of the Company or any of its Subsidiaries (the “ D&O Indemnified Parties ”) as provided in (i) the Company Organizational Documents, which provisions shall not be amended, repealed or otherwise modified for a period of not less than six years from the Effective Time in any manner that would adversely affect the rights thereunder of the D&O Indemnified Parties, and (ii) any agreements between a D&O Indemnified Party and the Company or one of its Subsidiaries or otherwise in effect on the date of this Agreement, shall survive the Merger and become an obligation of the Surviving Corporation and shall continue in full force and effect for a period of not less than six years after the Effective Time; provided , however , that all rights to indemnification asserted or made within such period shall continue until the disposition of such indemnified liabilities. Parent shall obtain as of the Effective Time “tail” insurance policies with a claims period of at least six years from the Effective Time with respect to the directors’ and officers’ liability insurance in amount and scope at least as favorable as the coverage applicable to the Company’s directors as in effect on the date of this Agreement.

(b) Parent shall indemnify and hold harmless all D&O Indemnified Parties to the fullest extent permitted by applicable Laws with respect to any claim, liability, loss, damage, judgment, fine, penalty, amount paid in settlement or compromise, cost or expense (including reasonable fees and expenses of legal counsel), against any D&O Indemnified Party in his or her capacity as an officer or director of the Company or its Subsidiaries, whenever asserted or claimed, based in whole or in part on, or arising in whole or in part out of, any facts or circumstances occurring at or prior to the Effective Time whether commenced, asserted or claimed before or after the Effective Time, including liability arising under the Securities Act, the Exchange Act or any other Law and including any liability arising out of or pertaining to the transactions contemplated by this Agreement, in each case to the same extent as provided in the Company Organizational Documents or any other applicable contract or agreement in effect on the date of this Agreement. In the event of any claim, liability, loss, damage, judgment, fine, penalty, amount paid in settlement or compromise, cost or expense described in the preceding sentence, Parent shall pay the reasonable fees and expenses of counsel selected by the D&O Indemnified Parties promptly after statements are received in advance of settlement, judgment or other resolution thereof to such D&O Indemnified Party upon

request reimbursement of documented expenses reasonably incurred, provided the applicable D&O Indemnified Parties provide an undertaking to repay all advanced expenses if it is finally judicially determined that such D&O Indemnified Parties are not entitled to indemnification.

Section 5.7 Commercially Reasonable Efforts . Upon the terms and subject to the conditions set forth in this Agreement and in accordance with applicable Laws, each of the parties to this Agreement shall use its reasonable commercial efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to ensure that the conditions set forth in ARTICLE VI are satisfied and to consummate the transactions contemplated by this Agreement as promptly as practicable.

Section 5.8 Consents; Filings; Further Action . Upon the terms and subject to the conditions of this Agreement and in accordance with applicable Laws, each of Parent and the Company shall use its reasonable commercial efforts to obtain any consents, approvals or other authorizations, and make any filings and notifications required in connection with the transactions contemplated by this Agreement, including, but not limited to, the 228 Notice and Appraisal Notice immediately following execution of the Principal Stockholders Agreement.

Section 5.9 Public Announcements . Except as may be required by law, prior to the Second Closing, neither Parent nor the Company shall issue any press release or otherwise make any public statements about this Agreement or any of the transactions contemplated by this Agreement without the consent of the other, which consent shall not be unreasonably withheld or delayed, provided , however , that no consent shall be required for Parent to make such public disclosure as its legal counsel deems necessary, provided that Parent in such circumstances shall, to the extent practicable and as soon as practicable, be obliged to first provide a copy of any anticipated announcement to the Company and have due regard to any comments made thereon by the Company in good faith.

Section 5.10 Fees, Costs and Expenses . Other than as provided for in this Agreement, whether or not the Merger is consummated, all expenses (including those payable to Representatives) incurred by Parent, the Company or the Principal Stockholder in connection with the transactions contemplated by this Agreement shall be paid by the party incurring those expenses.

Section 5.11 Defense of Litigation . The Company shall not settle or offer to settle any Legal Action against the Company, any of its Subsidiaries or any of their respective directors or officers by any stockholder of the Company arising out of or relating to this Agreement or the transactions contemplated by this Agreement without the prior written consent of Parent. The Company shall not cooperate with any Person that may seek to restrain, enjoin, prohibit or otherwise oppose the transactions contemplated by this Agreement, and the Company shall cooperate with Parent and Merger Sub in resisting any such effort to restrain, enjoin, prohibit or otherwise oppose such transactions.

Section 5.12 Tax Matters . During the period from the date of this Agreement to the Effective Time, the Company and its Subsidiaries shall:

(a) prepare and timely file all Tax Returns required to be filed by them on or before the First Closing Date (“ Post-Signing Returns ”) in a manner consistent with past practice, except as otherwise required by applicable Laws;

(b) consult with Parent with respect to all material Post-Signing Returns and deliver drafts of such Post-Signing Returns to Parent no later than ten Business Days prior to the date on which such Post-Signing Returns are required to be filed;

(c) fully and timely pay all Taxes due and payable in respect of such Post-Signing Returns that are so filed;

(d) properly reserve (and reflect such reserve in their books and records and financial statements), for all Taxes payable by them for which no Post-Signing Return is due prior to the Effective Time in a manner consistent with past practice;

(e) promptly notify Parent of any material Legal Action or audit pending or threatened against the Company or any of its Subsidiaries in respect of any material Tax matter, and not settle or compromise any such Legal Action or audit, or consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment, without Parent’s prior written consent which consent may not be unreasonably withheld;

(f) not make or revoke any material Tax election or adopt or change a material Tax accounting method or period without Parent’s prior written consent which consent may not be unreasonably withheld; and

(g) terminate all contracts relating to the sharing, allocation or indemnification of Taxes to which the Company or any of its Subsidiaries is a party such that there are no further Liabilities thereunder.

Section 5.13 Maintenance and Prosecution of Intellectual Property .

(a) The Company shall continue to take all reasonable steps to protect and maintain the Company Intellectual Property consistent with the Company’s past practices. The Company shall continue to back up all material Software and databases and shall maintain such Software and databases at a secure off-site location in accordance with past practices.

(b) Other than in relation to any Patents held jointly by the Company and Parent or the Intellectual Property of Parent or its Subsidiaries, the Company shall promptly notify Parent (i) if it knows that any material Company Intellectual Property will become abandoned or dedicated to the public domain except for the disclosure of

Trade Secrets as required by the applicable patent office pursuant to the filing of a patent application, or (ii) if it has received notice of any material adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the U.S. Patent and Trademark Office (the “ USPTO ”) or the U.S. Copyright Office (the “ Copyright Office ”) or equivalent office in any foreign jurisdiction, any court or tribunal in the United States or any political sub-division thereof, or any court or tribunal in any foreign jurisdiction), other than non-final determinations of the USPTO or the Copyright Office or any equivalent office or any court or tribunal, regarding its ownership of any Company Intellectual Property or its right to register the same or to keep, maintain and/or use the same.

Section 5.14 Sarbanes-Oxley; Accounting . The Company shall, and shall cause each of its Subsidiaries to, cooperate reasonably and in good faith with Parent, and its advisors and representatives, to provide access to such information related to the internal controls, the disclosure controls and procedures and the financial results of its operations (including all relevant balance sheet information) of the Company and its Subsidiaries with a view to permitting Parent subsequent to the Effective Time, to comply with its obligations to (i) file certifications in accordance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“ SOXA ”), (ii) report on internal control over financial reporting under Section 404 of SOXA for the fiscal year ending December 31, 2005 (clauses (i) and (ii) collectively, the “ SOXA Obligations ”), and (iii) prepare the financial statements of Parent and its Subsidiaries in accordance with GAAP.

Section 5.15 Exercise of Warrants . Each of the Company and Parent shall take all requisite actions so that, immediately prior to the First Closing and prior to the Exchange, each warrant to acquire shares of Company Common Stock held by Parent pursuant to the Warrant Agreements (collectively, the “ Warrants ”), outstanding immediately prior to the First Closing, shall be exercised for shares of Company Common Stock in accordance with the terms of the respective Warrant Agreements related thereto and such shares shall be issued.

Section 5.16 Charter Amendment and Exchange . The Company Charter shall be amended prior to the First Closing to create a second class of common stock, to be called “Class B Common Stock, par value $0.01 per share,” which shall have the same rights and privileges as, and shall rank pari passu with, the Company Common Stock (the “ Charter Amendment ”) and an appropriate Certificate of Amendment shall be filed with the Secretary of State of the State of Delaware following receipt by the Company of the Principal Stockholders Consent with respect to the Charter Amendment. Following the effectiveness of the Charter Amendment, Parent and the Principal Company Stockholder shall each exchange its shares of Company Common Stock for Class B Common Stock on a one-for-one basis (the “ Exchange ”). For this purpose, the Certificates held by Parent and the Principal Company Stockholder immediately prior to the Exchange shall be deemed to represent Class B Common Stock after the Exchange and the stock record books of the Company will indicate the issuance of such Class B Common Stock and the cancellation of such Company Common Stock.

Section 5.17 Financing . Parent shall use its reasonable commercial efforts to obtain the funds necessary (taking into account Parent’s available cash) to pay the Merger Consideration, the consideration payable to the holders of Parent Company Options under Section 5.18, the exercise price of the Warrants, and to provide to Merger Sub the aggregate exercise price of the Vested Stock Options, the Unvested Stock Options and the Option Merger Price for the Vested Stock Options, together with its expenses relating to the foregoing and the Merger (the “ Financing ”).

Section 5.18 Parent Company Options . Parent (acting through its Board of Directors or an appropriate committee thereof) shall take all requisite action so that, as of the Effective Time, all Parent Company Options, whether or not vested, and whether or not exercisable, shall be purchased by Parent for a price equal to $25.21 minus the exercise price of such Parent Company Option, it being understood that Parent shall thereafter retain the shares of Company Common Stock that were subject to the Parent Company Options, but such shares of Company Common Stock shall no longer be subject to any option.

Section 5.19 Waiver Under Credit Agreement . (a) Parent shall take all actions necessary to amend or otherwise obtain a waiver (the “ Waiver ”) under the Fifth Amended and Restated Credit Agreement, as amended, among Parent, Various Financial Institutions, Credit Suisse First Boston and the Bank of Nova Scotia, dated as of January 21, 2004 (the “ Credit Agreement ”), so that neither the Company nor the Surviving Corporation shall be required to become a Subsidiary Guarantor (as defined in the Credit Agreement), or otherwise incur or become subject to any Liability or guaranty requirement, under the Credit Agreement.

(b) Parent’s actions under this Section 5.19 shall be directed and approved by a member of the Board of Directors of Parent, who shall be a director selected by the representatives of the Principal Company Stockholder on such Board. The Principal Company Stockholder agrees to reimburse Parent for any bank waiver or amendment fees and any legal, accounting or other out-of-pocket expenses (whether for Parent or the lenders under the Credit Agreement), incurred by Parent in connection with carrying out this Section 5.19, up to a maximum reimbursement of $500,000 in the aggregate.

ARTICLE VI

CONDITIONS

Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger . The respective obligation of each party to this Agreement to effect the Merger is subject to the satisfaction or waiver on or prior to the First Closing Date of each of the following conditions:

(a) Stockholder Approval . The Principal Stockholders Agreement shall be in full force and effect, and there shall be no revocation thereof, and this Agreement and the Charter Amendment shall have been duly adopted and the Merger and the Merger Agreement shall have been approved, and the Charter Amendment shall have

been duly approved by the Principal Stockholders Consent. The Appraisal Notice and the 228 Notice shall have been mailed to all Company stockholders.

(b) Antitrust . Any consents, approvals or other authorizations, and any filings or notifications, required under any Foreign Competition Laws, the absence of which would prohibit consummation of the Merger or limit Parent from exercising full ownership rights with respect to the Company shall have been obtained or made.

(c) Consents . All consents, approvals and other authorizations of any foreign, national, federal, state, provincial or local governmental, regulatory or administrative authority, agency, commission, court, tribunal, arbitral body or self regulated entity, whether domestic or foreign (each, a “ Governmental Entity ”) required to consummate the Merger and the other transactions contemplated by this Agreement (other than the filing of the Certificate of Merger with the Secretary of State of the State of Delaware) (the “ Governmental Consents ”), other than those Governmental Consents that the failure to obtain could not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect, shall have been obtained, free of any condition.

(d) No Injunctions or Restraints . No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Laws or Orders (whether temporary, preliminary or permanent) that prohibits or materially restrains the consummation of the transactions contemplated hereby.

(e) Charter Amendment and Company Class B Common Stock Exchange . The Company shall have filed the Charter Amendment with the Secretary of State of the State of Delaware on or prior to the First Closing Date and the Exchange shall have taken place.

(f) Redemption Agreement . The Redemption Agreement shall be in full force and effect.

(g) Waiver . The Waiver, as contemplated by Section 5.19, shall have been obtained by Parent in form and substance satisfactory to Parent and such Waiver shall be in full force and effect.

Section 6.2 Conditions to Obligations of Parent and Merger Sub . The obligations of each of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent (with respect to waiver, solely by action of the Special Committee) on or prior to the First Closing Date of the following conditions:

(a) Representations and Warranties . (i) The representations and warranties of the Company set forth in this Agreement that are qualified as to materiality or Company Material Adverse Effect shall be true and correct without regard to such materiality qualification, and (ii) the representations and warranties of the Company set forth in this Agreement that are not so qualified shall be true and correct, as though made on and as of the First Closing Date, except for representations or warranties made as of a

specified date, the accuracy of which shall be determined as of that specified date, unless the failure of such representations or warranties referred to in clauses (i) and (ii) to be true and correct (as of the appropriate dates) could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(b) Performance of Obligations . The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the First Closing Date.

(c) Company Material Adverse Effect . Since the date of this Agreement, there shall have been no Company Material Adverse Effect.

(d) Officer’s Certificate . Parent shall have received a certificate, signed by the chief executive officer or chief financial officer of the Company, certifying as to the matters set forth in Section 6.2(a), Section 6.2(b) and Section 6.2(c).

(e) Consents Under Agreements . The Company shall have obtained the consent, approval or other authorization of each Person that is not a Governmental Entity whose consent, approval or authorization is required to consummate the Merger and the other transactions contemplated by this Agreement, except those for which the failure to obtain could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(f) Director Resignations . Parent shall have received written resignation letters, to the extent requested in accordance with implementing Section 1.7, from each of the members of the board of directors of the Company effective as of the Effective Time.

(g) Financing . Parent shall have obtained the Financing.

(h) Warrants . Parent shall have exercised the Warrants as contemplated by Section 5.15 and Parent shall have received the Company Common Stock issued pursuant to such Warrants.

(i) Principal Stockholders Agreement . The Principal Company Stockholders Agreement shall be in full force and effect.

Section 6.3 Conditions to Obligations of the Company . The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company on or prior to the First Closing Date of the following conditions:

(a) Representations and Warranties . (i) The representations and warranties of each of Parent and Merger Sub set forth in this Agreement that are qualified as to materiality or Parent Material Adverse Effect shall be true and correct without regard to such materiality qualification, and (ii) the representations and warranties of Parent and Merger Sub set forth in this Agreement that are not so qualified shall be true and correct, as though made on and as of the First Closing Date, except for

representations or warranties made as of a specified date, the accuracy of which shall be determined as of that specified date, unless the failure of such representations or warranties referred to in clauses (i) and (ii) to be true and correct (as of the appropriate dates) could not, individually or in the aggregate reasonably be expected to have a Parent Material Adverse Effect.

(b) Performance of Obligations . Each of Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the First Closing Date.

(c) Officer’s Certificate . The Company shall have received a certificate, signed by a senior executive officer of Parent, certifying as to the matters set forth in Section 6.3(a) and Section 6.3(b).

Section 6.4 Frustration of Closing Conditions . None of the parties to this Agreement may rely on the failure of any condition set forth in this ARTICLE VI to be satisfied if such failure was caused by such party’s failure to use commercially reasonable efforts to consummate the Merger and the other transactions contemplated by this Agreement.

ARTICLE VII

INDEMNIFICATION

Section 7.1 Survival of Representations and Warranties . All representations and warranties of the Company contained in Article III or of Parent contained in Article IV of this Agreement, and in any certificate, document or instrument delivered in connection therewith, shall survive the First Closing; provided , however , that: the representations and warranties of the Company set forth in Article III of the Merger Agreement shall terminate on the Expiration Date, except for: (i) the representations and warranties of the Company contained in Sections 3.1 (Organization, Standing and Power), 3.3 (Capital Structure), 3.4 (Authority; Non-contravention) and 3.14 (Taxes), which shall terminate upon the expiration of the applicable statute of limitations and (ii) the representations and warranties of Parent and Merger Sub contained in Sections 4.1 (Organization, Standing and Power), 4.4 (Authority; Non-contravention) and 4.6 (Parent Company Common Stock, Warrant and Options), which shall terminate upon the expiration of the applicable statute of limitations. Any investigations by or on behalf of any Indemnified Party shall not constitute a waiver as to enforcement of any representation or warranty. Any claim made by any Indemnified Party prior to the applicable survival date shall survive until such time as such claim is finally resolved.

Section 7.2 Indemnification by the Principal Company Stockholder and Other Holders .

(a) In addition to the indemnification for certain Taxes set forth in the Redemption Agreement, which shall solely govern on such Taxes, subsequent to the First

Closing, subject to the limitations set forth in Section 7.5 and notwithstanding the First Closing:

(A) the Principal Company Stockholder, on a joint and several basis; and

(B) each of the Other Holders, on a several basis only, in relation to each such Other Holder’s Pro Rata Portion of the Proportionate Damages (as such terms are defined below),

shall indemnify and hold Parent and Merger Sub (or the Company, if appropriate) (the “ Indemnified Parties ”) harmless against and with respect to, and shall reimburse the Indemnified Parties for the following (collectively, “ Proportionate Damages ”): an amount equal to (x) the Applicable Percentage multiplied by (y) the amount of any and all liabilities or damages resulting to Parent or Merger Sub (or the Company if appropriate) from (i) any breach of any representation or warranty of the Company (subject to Section 7.1) or (ii) any nonfulfillment prior to the Effective Time of any covenant or agreement by the Company made in this Agreement, including, without limitation, any certificate, document or instrument prepared by the Company and delivered to any of the Indemnified Parties under this Agreement. Notwithstanding the foregoing, no Indemnified Party shall be entitled to recovery from the Principal Company Stockholder or any Other Holder of any Proportionate Damages which result from actual fraud, intentional misrepresentation or criminal activity on the part of such Indemnified Party.

(b) The Indemnified Parties’ right to indemnification under Section 7.2(a) shall be exercised on behalf of Parent or Merger Sub solely through action of the Special Committee, if still in effect, or by the approval of the then independent directors on the Board of Directors of Parent.

(c) Notwithstanding any provision contained in this Agreement to the contrary, the Indemnified Parties shall not be entitled to indemnification hereunder with respect to any breach of any representation, warranty or covenant in this Agreement in circumstances where, and to the extent that, (i) prior to the date hereof, Parent had actual knowledge of a potential or actual breach of such representation, warranty or covenant where such actual knowledge was acquired or derived from written information provided to Parent by the Company or a Subsidiary in written form or in the possession of Parent in written form, in both cases, in the ordinary course of business or (ii) the events, circumstances and consequences of such breach arise from acts or omissions which were taken by, or on behalf of, the Company in conjunction with, after consultation with or at the direction of Parent.

Section 7.3 Indemnification by Parent . Parent shall save, defend, indemnify and hold harmless the Principal Company Stockholder and each of the Other Holders (collectively, the “ Stockholder Indemnified Parties ”) from and against any and all liabilities or damages resulting to such Stockholder Indemnified Party from (i) any breach of any representation or warranty of Parent or Merger Sub (subject to Section 7.1) or (ii) any nonfulfillment of any covenant or agreement by Parent or Merger Sub made in

this Agreement, including, without limitation, any certificate, document or instrument prepared by Parent or Merger Sub and delivered to any of the Stockholder Indemnified Parties under this Agreement. Notwithstanding the foregoing, no Stockholder Indemnified Party shall be entitled to recovery from Parent of any liabilities or damages which result from actual fraud, intentional misrepresentation or criminal activity on the part of such Stockholder Indemnified Party.

Section 7.4 Procedure for Indemnification . The procedure for indemnification shall be as follows:

(a) The Person claiming indemnification (the “ Claimant ”) shall give written notice to the Person from whom indemnification is sought (the “ Indemnifier ”) of any claim, whether between the parties or brought by a third party, promptly after receiving notice or becoming aware thereof, and such notice shall specify in reasonable detail (i) the factual basis for such claim and (ii) the amount of the claim; provided , however , that any delay by the Claimant in giving such notice shall not relieve the Indemnifier of its obligations under this Agreement except and only to the extent that the Indemnifier is prejudiced by such delay.

(b) If such notice from the Claimant pertains to a breach of a representation, warranty, covenant or agreement contained in this Agreement, or other similar demand for direct indemnification pursuant to this Agreement, then the Indemnifier shall have thirty (30) days following receipt of the Claimant’s notice to make such investigation of the claim as the Indemnifier deems necessary or desirable. For the purposes of such investigation, the Claimant agrees to make available to the Indemnifier and its authorized representatives the information relied upon by the Claimant to substantiate the claim. If the Claimant and the Indemnifier agree at or prior to the expiration of said thirty (30) day period (or any mutually agreed upon extension thereof) on the validity and amount of such claim, the Indemnifier shall immediately pay to the Claimant the full amount of the claim. Otherwise, the Claimant and Indemnifier shall have such rights as may be available to them under this Agreement and applicable Laws.

(c) If such notice from the Claimant pertains to a claim or demand by a third party, then as soon as reasonably practicable thereafter the Indemnifier shall (i) make such investigation of the claim or demand as the Indemnifier deems necessary or desirable and (ii) notify the Claimant of whether or not the Indemnifier desires to defend the Claimant against such claim or demand. During such period prior to notification by the Indemnifier, the Claimant shall make such filings, including motions for continuance (and answers if a motion for continuance has not been granted), as may be necessary to preserve the parties’ positions and rights with respect to such claim or demand; provided , however , that any failure by the Claimant to do so shall not relieve the Indemnifier of its obligations under this Agreement except and only to the extent that the Indemnifier is prejudiced by such delay.

(d) The Indemnifier may elect to defend the Claimant against such third party claim or demand, and then the Indemnifier shall have the sole power to direct and control such defense and settlement. The Claimant (i) shall cooperate with the

Indemnifier and its counsel with respect to any such claim or demand by providing the Indemnifier with reasonable access to the Claimant’s relevant employees and business records and (ii) shall use its commercially reasonable efforts to assist, and to cause the Claimant’s employees and counsel to assist, in the defense of such claim or demand. Upon confirmation by the Indemnifier of its desire to assume the defense to such claim or demand on the terms set forth above, the Indemnifier shall not be liable to the Claimant for any reasonable legal fees and expenses subsequently incurred by the Claimant, subject to reimbursement for actual out-of-pocket expenses incurred by the Claimant as the result of a request for cooperation or assistance by the Indemnifier; provided , however , that if, in the reasonable opinion of counsel to the Claimant, there exists a conflict of interest between the Indemnifier and the Claimant, the Indemnifier shall be liable for the reasonable legal fees and expenses of separate counsel to the Claimant. If the Claimant desires to participate in, but not control, any such defense, it may do so at its sole cost and expense; provided , that in any action seeking an injunction or decree, the effect of which would be to limit in any respect the future activity of the Claimant, the Claimant shall be entitled to participate in the defense of such action at the Indemnifier’s expense. The Claimant shall not settle, compromise, discharge or otherwise admit to any liability for any claim or demand without the prior written consent of the Indemnifier (which consent shall not be unreasonably withheld or delayed). The Indemnifier shall not settle, compromise, discharge or otherwise admit to any liability for any claim or demand for equitable relief on a basis that would adversely affect the future activity or conduct of the Claimant without the prior written consent of the Claimant (given or withheld in its sole discretion).

(e) If the Indemnifier elects not to defend the Claimant against such third party claim or demand (or fails to promptly and reasonably prosecute such defense), the Claimant shall have the right to defend the claim or demand through appropriate proceedings and shall have the sole power to direct and control such defense at the Indemnifier’s sole cost and expense if and to the extent that such claim is subject to indemnity hereunder. The Indemnifier shall have the right, at its sole cost and expense, to participate in the defense or settlement of any third party claim for which it may be liable.

Section 7.5 Limits on Indemnification .

(a) No claim may be asserted against any Person for Proportionate Damages, unless written notice of such claim is given pursuant to Section 9.7 to the Principal Company Stockholder or the relevant Other Holder, describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim, on or prior to the date on which the representation, warranty or covenant on which such claim is based ceases to survive as set forth in Section 2.1, in which case such representation, warranty or covenant shall survive as to such claim until such claim has been finally resolved.

(b) Notwithstanding any provision contained in this Agreement to the contrary: (i) neither the Principal Company Stockholder nor any of the Other Holders

(collectively, the “ Stockholders ”) shall be liable to any Indemnified Party for any claim for indemnification unless and until the aggregate amount of indemnifiable Proportionate Damages equals or exceeds $3,000,000, in which case the Stockholders shall be liable only for the Proportionate Damages in excess of such amount; (ii) the maximum aggregate amount of indemnifiable Proportionate Damages which may be recovered by the Indemnified Parties shall be an amount equal to 20% of the result of (x) the Applicable Percentage multiplied by (y) the result of $25.21 multiplied by the Fully Diluted Shares; (iii) no Proportionate Damages may be claimed by any Indemnified Party or shall be reimbursable by or shall be included in calculating the aggregate Proportionate Damages set forth in clause (i) above other than Proportionate Damages in excess of $10,000 resulting from any single claim or aggregated claims arising out of the same facts, events or circumstances; (iv) no party hereto shall have any liability under any provision of this Agreement for any punitive, incidental, consequential, special or indirect damages, including business interruption, loss of future revenue, profits or income, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement; (v) the liability of each Other Holder with respect to any Proportionate Damages hereunder shall be limited to such Other Holder’s Pro Rata Portion of such Proportionate Damages. The “ Pro Rata Portion ” of Proportionate Damages attributable to each Other Holder shall be determined by a fraction, the numerator of which is the aggregate number of shares of Company Common Stock and Option Shares subject to Vested Company Options held by such Other Holder immediately prior to the Effective Time, and the denominator of which is the sum of (x) the number of shares of Company Common Stock and Option Shares subject to Vested Stock Options held by all Other Holders plus (y) the number of shares of Class B Common Stock held by the Principal Company Stockholder, in each case immediately prior to the Effective Time.

(c) For all purposes of this Article VII, “Proportionate Damages” shall be net of (i) any insurance or other recoveries payable to the Indemnified Party or its Subsidiaries in connection with the facts giving rise to the right of indemnification and (ii) any Tax benefit available to such Indemnified Party or its Affiliates arising in connection with the accrual, incurrence or payment of any such Proportionate Damages (including, without limitation, the net present value (using the Indemnified Party’s average cost of borrowing for the year in which such Proportionate Damages are first accrued, incurred or paid) of any Tax benefit arising in subsequent taxable years).

(d) The Indemnified Parties and the Principal Company Stockholder shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder, including by making commercially reasonably efforts to resolve any such claim or liability. In the event that any of Indemnified Parties and the Principal Company Stockholder shall fail to make such commercially reasonably efforts to resolve any claim or liability, then notwithstanding anything else to the contrary contained herein, the other party shall not be required to indemnify any person for any loss, liability, claim, damage or expense that could reasonably be expected to have been avoided if the Indemnified Parties and the Principal Company Stockholder, as the case may be, had made such efforts.

(e) Notwithstanding any provision contained in this Agreement to the contrary, the Principal Company Stockholder shall not be required to make any payment as indemnification hereunder unless and until it has received, pursuant to the Redemption Agreement, an amount at least equal to the amount of any such payment.

Section 7.6 Assignment of Claims; Contribution .

(a) Notwithstanding and in addition to any and all rights to contribution under applicable Law, if any Indemnified Party receives any payment from the Principal Company Stockholder in respect of any Proportionate Damages pursuant to Article VII and the Indemnified Party could have recovered all or a part of such Proportionate Damages from a third party (a “ Potential Contributor ”) based on the underlying claim asserted against the Principal Company Stockholder, the Indemnified Party shall assign, on a non-recourse basis and without any representation or warranty, such of its rights to proceed against the Potential Contributor as are necessary to permit the Principal Company Stockholder to recover from the Potential Contributor the amount of such payment. Any payment received from such third party in respect of such claim shall be distributed to the Principal Company Stockholder in an amount equal to the aggregate payments made by the Principal Company Stockholder to the Indemnified Party in respect of such claim, plus costs and expenses incurred in investigating, defending or otherwise incurred in connection with addressing such claim.

(b) In the event that the Principal Company Stockholder makes a payment, other than a payment from the Escrow Fund, to any of the Indemnified Parties in satisfaction of a liability that any Other Holder would otherwise have owed to such Indemnified Party, the Principal Company Stockholder shall have a corresponding right of contribution from any and all such Other Holders and shall be entitled to satisfy such obligations from the Escrow Fund, and if no monies remain in the Escrow Fund, the Principal Company Stockholder may then commence enforcement proceedings against any and all such Other Holders.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

Section 8.1 Termination by Mutual Consent . This Agreement may be terminated at any time prior to the Effective Time by mutual written consent of Parent (solely by action of the Special Committee) and the Company.

Section 8.2 Termination by Either Parent or the Company . This Agreement may be terminated by either Parent (solely by action of the Special Committee) or the Company at any time prior to the Effective Time (including after the receipt of the Principal Stockholders Consent):

(a) if the Merger has not been consummated by September 30, 2005, except that the right to terminate this Agreement under this clause (a) shall not be available to any party to this Agreement whose failure to fulfill any of its obligations has

been a principal cause of, or resulted in, the failure to consummate the Merger by such date;

(b) if any Law prohibits consummation of the Merger; or

(c) if any Order restrains, enjoins or otherwise prohibits consummation of the Merger, and such Order has become final and nonappealable.

Section 8.3 Termination by Parent . This Agreement may be terminated by Parent (solely by action of the Special Committee) at any time prior to the Effective Time if the Company breaches any of its representations, warranties, covenants or agreements contained in this Agreement, which breach (i) would give rise to the failure of a condition set forth in Section 6.2(a), Section 6.2(b) or Section 6.2(c) and (ii) has not been cured by the Company within twenty (20) Business Days after the Company’s receipt of written notice of such breach from Parent.

Section 8.4 Termination by the Company .

(a) This Agreement may be terminated by the Company at any time prior to the Effective Time if Parent breaches any of its representations, warranties, covenants or agreements contained in this Agreement, which breach (i) would give rise to the failure of a condition set forth in Section 6.3(a) or Section 6.3(b) and (ii) has not been cured by Parent within twenty (20) Business Days after Parent’s receipt of written notice of such breach from the Company.

Section 8.5 Effect of Termination . If this Agreement is terminated pursuant to this ARTICLE VIII, it shall become void and of no further force and effect, with no liability on the part of any party to this Agreement (or any stockholder, director, officer, employee, agent or representative of such party), except that if such termination results from the willful (a) failure of any party to perform its obligations or (b) breach by any party of its representations or warranties contained in this Agreement, then such party shall be fully liable for any Liabilities incurred or suffered by the other parties as a result of such failure or breach. The provisions of Section 5.10, Section 8.5 and ARTICLE IX shall survive any termination of this Agreement.

Section 8.6 Amendment .

(a) This Agreement may be amended by the parties to this Agreement (in the case of Parent, solely by action of the Special Committee) at any time prior to the Second Closing, so long as (a) no amendment that requires stockholder approval under applicable Laws shall be made without such required approval and (b) such amendment has been duly approved by the board of directors of each of Parent (acting solely through the Special Committee), Merger Sub (if prior to the Effective Time) and the Company. This Agreement may not be amended except by an instrument in writing signed by each of the parties (in the case of Parent, solely by action of the Special Committee) to this Agreement.

(b) The Principal Stockholders Agreement and the Redemption Agreement, (collectively, the “ Other Agreements ”), may not be amended without the consent of the Special Committee; provided that notwithstanding the foregoing or clause (a) hereof the Escrow Agreement and the Letter of Transmittal may be amended by the Company at any time, without Parent’s consent, and, prior to execution and delivery thereof by the other party thereto, without such other party’s consent.

Section 8.7 Extension; Waiver . At any time prior to the Second Closing, Parent (solely by action of the Special Committee) and Merger Sub (if prior to the Effective Time), on the one hand, and the Company, on the other hand, may (a) extend the time for the performance of any of the obligations of the other party under this Agreement or any of the Other Agreements, (b) waive any inaccuracies in the representations and warranties of the other party contained in this Agreement or in any document delivered under this Agreement or, (c) subject to applicable Laws, waive compliance with any of the covenants or conditions contained in this Agreement or in any of the Other Agreements. Any agreement on the part of a party to any extension or waiver shall be valid only if set forth in an instrument in writing signed by such party. The failure of any part to assert any of its rights under this Agreement or the Other Agreements or otherwise shall not constitute a waiver of such rights.

Section 8.8 Transfer Taxes . Parent shall be liable for and shall hold the Principal Company Stockholder harmless against any real property transfer or gains, sales, use, transfer, value added, stock transfer, and stamp taxes, any recording, registration, and other fees and any similar Taxes (“ Transfer Taxes ”) which become payable in connection with the transactions contemplated by this Agreement. Parent, after the review and consent of the Principal Company Stockholder, shall file such returns, forms and documents as shall permit any such tax to be assessed and paid over prior to the First Closing Date. The parties will cooperate with each other in timely completing and filing all returns, forms and documents as may be required in connection with the payment of any Transfer Taxes.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Certain Definitions . For purposes of this Agreement:

(a) “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

(b) “ Applicable Percentage ” means, at any given time, 62.03% minus the following expressed as a percentage: 100% multiplied by (x) the sum of the number

of Dissenting Shares and formerly Dissenting Shares plus the Option Shares subject to Unvested Stock Options divided by (y) the number of Fully Diluted Shares.

(c) “ Business Day ” means any day, other than Saturday, Sunday or a U.S. federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time.

(d) “ Company Employment Agreements ” means any Contracts with employees, directors, officers or consultants whose base salary (or equivalent) is greater than $150,000 per annum.

(e) “ Company Intellectual Property ” means Intellectual Property currently used by the Company and its Subsidiaries in their respective businesses as presently conducted.

(f) “ Company Material Adverse Effect ” means any event, change, occurrence, circumstance or development which, individually or together with any one or more other events, changes, occurrences, circumstances or developments has had or could reasonably be expected to have a material adverse effect on the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, or on the ability of the Company to perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement.

(g) “ Company Organizational Documents ” means, with respect to the Company, the Company Charter and the Company Bylaws and, with respect to any of the Company’s Subsidiaries, the certificate of incorporation and bylaws (or the equivalent organizational documents) of the Company’s Subsidiaries, in each case, as in effect on the date of this Agreement.

(h) “ Contracts ” means any written or oral contracts, agreements, licenses, notes, bonds, mortgages, indentures, commitments, leases or other instruments.

(i) “ Deferred Merger Consideration ” means the aggregate of the Deferred Per Share Merger Consideration multiplied by sum of (i) the number of shares of Company Common Stock and (ii) the number of Option Shares subject to Vested Stock Options, in each case immediately prior to the Effective Time.

(j) “ Deferred Per Share Merger Consideration ” means $5.60 allocated to indemnification, fees and expenses as set forth in the Escrow Agreement and Letter of Transmittal.

(k) “ Exchange Act ” means the Securities Exchange Act of 1934.

(l) “ Expiration Date ” means the date which is 18 months after the Effective Time.

(m) “ Fully Diluted Shares ” means the aggregate number of shares of Company Common Stock, Company Class B Common Stock and Option Shares outstanding or, in the case of the Option Shares, subject to the Vested Stock Options and Unvested Stock Options outstanding, immediately prior to the Effective Time.

(n) “ GAAP ” means generally accepted accounting principles, as used in the United States of America.

(o) “ Hazardous Substances ” means: (i) any substance that is listed, classified or regulated as “hazardous” under any Environmental Laws; or (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material or radon.

(p) “ Initial Merger Consideration ” means the aggregate of the Initial Per Share Merger Consideration multiplied by sum of (i) the number of shares of Company Common Stock and (ii) the number of shares of Option Shares subject to Vested Stock Options, in each case immediately prior to the Effective Time.

(q) “ Initial Option Merger Price ” shall be equal to the Option Merger Price minus the Deferred Per Share Merger Consideration.

(r) “ Initial Per Share Merger Consideration ” means $25.21 minus the Deferred Per Share Merger Consideration, or $19.61.

(s) “ Intellectual Property ” shall mean all of the following, as they exist anywhere in the world: (i) patents, patent applications and inventions, designs and improvements described and claimed therein (including any divisions, continuations, continuations-in-part, reissues, reexaminations, or interferences thereof, whether or not patents are issued on any such applications and whether or not any such applications are modified, withdrawn, or resubmitted) (“ Patents ”); (ii) trademarks, service marks, trade dress, trade names, brand names, designs, logos, or corporate names, whether registered or unregistered, and all registrations and applications for registration thereof (“ Trademarks ”); (iii) copyrights and mask work rights, including all renewals and extensions thereof, copyright registrations and applications for registration thereof, and non-registered copyrights (“ Copyrights ”); (iv) trade secrets, including any know-how, inventions, processes, procedures, databases, confidential business information, concepts, ideas, designs, research or development information, techniques, technical information, specifications, operating and maintenance manuals, engineering drawings, methods, technical data, discoveries, modifications, extensions, improvements, and other proprietary information (whether or not patentable or subject to copyright or mask work protection) that constitute trade secrets under applicable law (“ Trade Secrets ” ) (v) Software; and (vi) Internet domain name registrations.

(t) “ IP Licenses ” means any licenses or sublicenses of Intellectual Property, or covenants not to sue for infringement of Intellectual Property.

(u) “ Knowledge ” means, when used with respect to Parent, the actual knowledge of the directors and executive officers of Parent and when used with respect to the Company, the actual knowledge of David Kirchhoff, Daniel Rootenberg, Jeffrey Fiarman and Michael Basone.

(v) “ Laws ” means any domestic or foreign laws, statutes, ordinances, rules, regulations, codes or executive orders enacted, issued, adopted, promulgated or applied by any Governmental Entity.

(w) “ Liabilities ” means liabilities or obligations of any kind, whether accrued, contingent, absolute, inchoate or otherwise.

(x) “ Liens ” means any liens, pledges, security interests, claims, options, rights of first offer or refusal, charges or other encumbrances.

(y) “ Market Value ” shall mean the average of the closing prices of Parent’s Common Stock, no par value, on the New York Stock Exchange for the five (5) trading days ending on the second trading day immediately prior to the date on which the Effective Time occurs.

(z) “ Material Contract ” means any Contract pursuant to which, in 2004, the Company had a total annual expenditure of over $100,000 or received consideration thereunder of over $100,000.

(aa) “ Material IP License ” means any IP License pursuant to which, in 2004, the Company had a total annual expenditure of over $100,000 or received consideration thereunder of over $100,000 or the termination, cancellation, non-renewal or non-extension of which would result in a Company Material Adverse Effect.

(bb) “ Merger Consideration ” means the sum of (i) the Initial Merger Consideration and (ii) the Deferred Merger Consideration.

(cc) “ Option Merger Price ” shall be equal to $25.21 per Option Share subject to a Vested Stock Option minus the exercise price of such Option Share pursuant to the applicable Vested Stock Option.

(dd) “ Optionholders ” mean holders of the Vested Stock Options, Unvested Stock Options and/or Parent Stock Options.

(ee) “ Option Shares ” means the shares of Company Common Stock subject to the Vested Stock Options and the Unvested Stock Options.

(ff) “ Orders ” means any orders, judgments, injunctions, awards, decrees or writs handed down, adopted or imposed by any Governmental Entity.

(gg) “ Parent Material Adverse Effect ” means any event, change, occurrence, circumstance or development which, individually or together with any one or more other events, changes, occurrences, circumstances or developments has had or

could reasonably be expected to have a material adverse effect on the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of Parent and its Subsidiaries, taken as a whole, or on the ability of Parent to perform its obligations under this Agreement, consummate the transactions contemplated by this Agreement or to obtain the financing necessary for Parent to consummate the transactions contemplated hereby.

(hh) “ Permitted Encumbrance ” means any defects in title, exceptions, restrictions, easements, covenants, reservations, encroachments, utility agreements, rights of way and other encumbrances.

(ii) “ Person ” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity and group (which term shall include a “group” as such term is defined in Section 13(d)(3) of the Exchange Act).

(jj) “ Public Offering ” means the filing of a registration statement with the SEC with respect to a public offering by the Company or any stockholder of the Company of all or any portion of Company Common Stock.

(kk) “ Representatives ” means, when used with respect to Parent or the Company, the directors, officers, employees, consultants, accountants, legal counsel, investment bankers, agents and other representatives of Parent or the Company, as applicable, and its Subsidiaries.

(ll) “ Restricted Stock Unit ” means a unit issued under the 2004 Stock Incentive Plan of Parent, which shall have the vesting schedule of the Unvested Stock Option for which such Restricted Stock Unit is being used as payment, and as if such Restricted Stock Unit had been held for the same period of time as such Unvested Stock Option had been held.

(mm) “ SEC ” means the Securities and Exchange Commission.

(nn) “ Special Committee ” means the special committee of independent directors of Parent appointed by Parent effective as of March 21, 2005, authorizing the Special Committee to, among other things, consider the transactions contemplated by this Agreement, as such committee may be reconstituted with the approval of the current members then on the committee.

(oo) “ Software ” means computer software programs, including all source code, object code, specifications, databases, designs and documentation related to such programs other than Off-the-Shelf Software.

(pp) “ Subsidiary ” means, when used with respect to Parent or the Company, any other Person that Parent or the Company, as applicable, directly or indirectly owns or has the power to vote or control 50% or more of any class or series of capital stock of such Person.

(qq) “ Takeover Proposal ” means any proposal or offer relating to (i) a merger, consolidation, share exchange or business combination involving the Company or any of its Subsidiaries, (ii) a sale, lease, exchange, mortgage, transfer or other disposition, in a single transaction or series of related transactions, of 10% or more of the assets of the Company and its Subsidiaries, taken as a whole, (iii) a purchase or sale of shares of capital stock or other securities, in a single transaction or series of related transactions, representing 10% or more of the voting power of the capital stock of Company or any of its Subsidiaries, including by way of a tender offer or exchange offer, (iv) a reorganization, recapitalization, liquidation or dissolution of the Company or any of its Subsidiaries or (v) any other transaction having a similar effect to those described in clauses (i) – (iv), in each case other than the transactions contemplated by this Agreement.

(rr) “ Taxes ” means (i) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, and similar governmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto) including (x) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated withholding, employment, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes, and customs duties, and (ii) any transferee liability in respect of any items described in the foregoing clause (i).

(ss) “ Tax Returns ” means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements required to be supplied to a taxing authority in connection with Taxes, including any schedule or attachment thereto or amendment thereof.

(tt) “ Unvested Option Merger Price ” means, per share subject to the Unvested Stock Option, the number of Restricted Stock Units of Parent equal in Market Value (assuming each such Unit is the equivalent of one share of Common Stock, no par value, of the Parent) to the sum of (i) $25.21 minus (ii) the exercise price per share of such Unvested Stock Option minus (iii) $.22 per share for fees and expenses as set forth in the Escrow Agreement and the Letter of Transmittal.

(uu) “ Warrant Agreements ” means, collectively, the Warrant Agreement, dated as of November 24, 1999, between the Company and Parent; the Warrant Agreement, dated as of October 1, 2001, between the Company and Parent; the Warrant Agreement, dated as of May 3, 2001, between the Company and Parent; and the Warrant Agreement, dated as of September 10, 2001, between the Company and Parent.

(vv) “ WWI Collateral Assignment Agreement ” means the second amended and restated collateral assignment and security agreement entered into by the Company in favor of Parent dated as of September 10, 2001.

Section 9.2 Interpretation . The table of contents and headings in this Agreement are for reference only and shall not affect the meaning or interpretation of this Agreement. Definitions shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references in this Agreement to Articles, Sections and Exhibits shall refer to Articles and Sections of, and Exhibits to, this Agreement unless the context shall require otherwise. The words “include,” “includes” and “including” shall not be limiting and shall be deemed to be followed by the phrase “without limitation.” Unless the context shall require otherwise, any agreements, documents, instruments or Laws defined or referred to in this Agreement shall be deemed to mean or refer to such agreements, documents, instruments or Laws as from time to time amended, modified or supplemented, including (a) in the case of agreements, documents or instruments, by waiver or consent and (b) in the case of Laws, by succession of comparable successor statutes. All references in this Agreement to any particular Law shall be deemed to refer also to any rules and regulations promulgated under that Law. References to a person also refer to its predecessors and permitted successors and assigns.

Section 9.3 Survival . The representations and warranties contained in this Agreement or in any instrument delivered under this Agreement shall survive the Effective Time as provided in the Indemnification Agreement. This Section 9.3 shall not limit any covenant or agreement of the parties to this Agreement which, by its terms, contemplates performance after the Effective Time.

Section 9.4 Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Virginia (the jurisdiction of incorporation of Parent), without regard to the laws that might otherwise govern under applicable principles of conflicts of law, except to the extent that the laws of the State of Delaware mandatorily apply.

Section 9.5 Submission to Jurisdiction . The parties to this Agreement (a) irrevocably submit to the personal jurisdiction of the United States District Court for the Eastern District of Virginia or, if federal court jurisdiction is not available, to the state courts in Virginia and (b) waive any claim of improper venue or any claim that such court is an inconvenient forum. The parties to this Agreement agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.7 or in such other manner as may be permitted by applicable Laws, shall be valid and sufficient service thereof.

Section 9.6 WAIVER OF JURY TRIAL . EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS

CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 9.6.

Section 9.7 Notices . Any notice, request, instruction or other communication under this Agreement shall be in writing and delivered by hand or overnight courier service or by facsimile:

If to Parent or Merger Sub, to:

Weight Watchers International, Inc.
175 Crossway Park West
Woodbury, New York 11797-2055
Facsimile: (516) 390-1795
Attention: Robert Hollweg, Vice President,

General Counsel and Secretary

with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Facsimile: (212) 757-3990
Attention: Judith R. Thoyer, Esq.

If to the Company, to:

WeightWatchers.com, Inc.
888 Seventh Avenue, 8th Floor
New York, New York 10106
Facsimile: 212-315-0709
Attention: Jeffrey Fiarman, Esq.

with a copy to:

Gibson, Dunn & Crutcher LLP
200 Park Avenue
47th Floor
New York, New York 10166-0193
Facsimile: (212) 351-5316
Attention: Steven Shoemate, Esq.

or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above. Each such communication shall be effective (a) if delivered by hand, when such delivery is made at the address specified in this Section 9.7, (b) if delivered by overnight courier service, the next business day after such communication is sent to the address specified in this Section 9.7, or (c) if delivered by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 9.7 and appropriate confirmation is received.

Section 9.8 Entire Agreement . This Agreement (including the Exhibits to this Agreement), the Principal Stockholders Agreement, the Redemption Agreement, the Company Disclosure Letter, and the Confidentiality Agreement constitute the entire agreement and supersede all other prior agreements, understandings, representations and warranties, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. No representation, warranty, inducement, promise, understanding or condition not set forth in this Agreement has been made or relied upon by any of the parties to this Agreement.

Section 9.9 No Third-Party Beneficiaries . Except as provided in Section 5.6 and ARTICLE II, this Agreement is not intended to confer any rights or remedies upon any Person other than the parties to this Agreement.

Section 9.10 Rules of Construction . The parties to this Agreement have been represented by counsel during the negotiation and execution of this Agreement and waive the application of any Laws or rule of construction providing that ambiguities in any agreement or other document shall be construed against the party drafting such agreement or other document.

Section 9.11 Assignment . This Agreement shall not be assignable by operation of law or otherwise, except that Parent may designate, by written notice to the Company, a Subsidiary that is wholly-owned by Parent to be merged with and into the Company in lieu of Merger Sub, in which event all references in this Agreement to Merger Sub shall be deemed references to such Subsidiary, and in that case, all representations and warranties made in this Agreement with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such Subsidiary as of the date of such designation.

Section 9.12 Remedies . Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this

Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.

Section 9.13 Specific Performance . The parties to this Agreement 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. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the United States District Court for the Eastern District of Virginia or, if federal court jurisdiction is not available, to the state courts in Virginia, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 9.14 Counterparts; Effectiveness . This Agreement may be executed in any number of counterparts, all of which shall be one and the same agreement. This Agreement shall become effective when each party to this Agreement shall have received counterparts signed by all of the other parties.

[Signature page follows]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties to this Agreement as of the date first written above.

WEIGHT WATCHERS INTERNATIONAL, INC.


By:	/s/ Linda Huett
	Name:	Linda Huett
	Title:	President and Chief Executive Officer


SCW MERGER SUB, INC.


By:	/s/ Robert W. Hollweg
	Name:	Robert W. Hollweg
	Title:	President and Chief Executive Officer


WEIGHTWATCHERS.COM, INC.


By:	/s/ David P. Kirchhoff
	Name:	David P. Kirchhoff
	Title:	Chief Executive Officer and President

ARTAL LUXEMBOURG S.A.
(Solely for purposes of Article VII and related sections and definitions referred to therein)


By:	/s/ Francoise de Wael
	Name:	Francoise de Wael
	Title:	Managing Director

[Signature page to Merger Agreement]

Exhibi 10.2

EXECUTION COPY

REDEMPTION AGREEMENT

among

ARTAL LUXEMBOURG S.A.

as the Seller

WEIGHTWATCHERS.COM, INC.

as the Company

and

WEIGHT WATCHERS INTERNATIONAL, INC.

as the Parent

Dated as of June 13, 2005

REDEMPTION AGREEMENT

THIS REDEMPTION AGREEMENT (this “ Agreement ”) is entered into as of June 13, 2005 between ARTAL LUXEMBOURG S.A., a Luxembourg corporation (“ Seller ”). WEIGHTWATCHERS.COM, INC., a Delaware corporation (the “ Company ”) and WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (“ Parent ”).

RECITALS

WHEREAS, the Company, SCW Merger Sub, Inc., a Delaware corporation (“ Merger Sub ”), and Parent are parties to an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the “ Merger Agreement ”), pertaining to the merger of the Merger Sub with and into the Company, with the Company being the surviving entity thereunder (the “ Merger ”).

WHEREAS, execution and delivery of this Agreement by the parties hereto is simultaneous with the execution and delivery of and is a condition to Parent’s and Merger Sub’s obligation to enter into the Merger Agreement.

WHEREAS, following the effective time of the Merger, Seller shall own the Shares.

WHEREAS, the Company desires to redeem and Seller desires to have redeemed the Shares at a redemption price of $25.21 per Share, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1
DEFINITIONS

Section 1.1 Certain Defined Terms . For purposes of this Agreement.

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

“ Board of Directors ” means the board of directors of the Company.

“ Business Day ” means any day, other than Saturday, Sunday or a U.S. federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time.

“ Company Common Stock ” means the issued and outstanding shares of common stock, par value $0.01 per share, of the Company.

“ Covenanted Amount ” means such number of shares of Common Stock, without par value, of the Parent (“Parent Common Stock”) that have an aggregate value of at least $100,000,000 on the Redemption Date, calculated using the average closing prices for Parent Common Stock on the New York Stock Exchange, or if not then traded on the New York Stock Exchange, on such exchange or in such system as such stock is then traded, (as reported in the Wall Street Journal) for the 30 trading days prior to the Redemption Date.

“ Effective Time ” means the time at which the Merger becomes effective pursuant to the terms of the Merger Agreement.

“ External Financing ” shall have the meaning as set out in the Schedule.

“ Governmental Entity ” means any foreign, national, federal, state, provincial or local governmental, regulatory or administrative authority, agency or commission.

“ Laws ” means any domestic or foreign laws, statutes, ordinances, rules, regulations, codes or executive orders enacted, issued, adopted, promulgated or applied by any Governmental Entity.

“ Orders ” means any orders, judgments, injunctions, awards, decrees or writs handed down, adopted or imposed by any Governmental Entity.

“ Parent Director ” means any director designated by Parent in accordance with Section 3.3.

“ Person ” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity and group (which term shall include a “group” as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934).

“ Release Date ” means, if the Redemption Date falls during 2005, September 1, 2009, or, if the Redemption Date falls after 2005, September I, 2010.

“ Seller Director ” means (i) any director designated by Seller in accordance with the provisions of Section 3.3 and (ii) any director of the Company who at the Effective Time is a director or officer of Seller or The Invus Group, LLC.

“ Shares ” means the 12,091,811 shares of the Company Common Stock held by Seller immediately following the Effective Time, or such other securities which are derived from such shares of Company Common Stock, whether through merger, tender offer, share-split, reclassification, consolidation or otherwise.

“ Special Committee ” means the Special Committee of the Board of Directors of Parent, as in effect on the date hereof, as such committee may be reconstituted with the approval of the current members then on such committee.

“ Subsidiary ” means, when used with respect to Parent or the Company, any other Person that Parent or the Company, as applicable, directly or indirectly owns or has the power to vote or control 50% or more of any class or series of capital stock of such Person.

ARTICLE 2
REDEMPTION

Section 2.1 Redemption of the Shares . Upon the terms and subject to the fulfillment, expiry or waiver of the conditions of this Agreement as set forth in Section 2.4 below (the “Conditions”), on the Redemption Date, Seller shall sell, assign, transfer and convey to the Company and the Company shall purchase, acquire, and accept from Seller, all of Seller’s right, title and interest in and to the Shares for the Redemption Price (such redemption being, the “ Redemption ”). The “ Redemption Date ” for the purposes of this Agreement shall be (i) December 30, 2005 provided that all of the Conditions have been satisfied as at such date; or if all of such Conditions have not been satisfied, (ii) such later date which is two Business Days following the satisfaction of the Conditions but in no case later than December 29, 2006 unless any Condition in Section 2.4(a)(i) or Section 2.4(a)(iii) remains unsatisfied in which case it be such later date upon which such Condition is satisfied.

Section 2.2 Payment of Redemption Price. The aggregate redemption price to be paid by the Company to Seller for the Shares is $304,834,555.31 (three hundred and four million, eight hundred and thirty-four thousand and five hundred and fifty-five dollars and thirty-one cents) in cash (the “Redemption Price”). The Company shall deliver to Seller on the Redemption Date the Redemption Price for the Shares by wire transfer of immediately available funds to an account designated by Seller.

Section 2.3 Surrender of Redeemed Shares . Seller shall deliver to the Company on the Redemption Date (i) the stock certificate representing the Shares or a statement of lost stock certificate in the form attached hereto as Exhibit A and (ii) a stock power in the form attached hereto as Exhibit B for the transfer of the Shares to the Company. On the Redemption Date, the Company shall record the transfer of the Shares in its corporate records.

Section 2.4 Conditions to Redemption; Notification .

(a) Conditions . The respective obligation of the Company and Seller to effect the Redemption is subject to the satisfaction, expiry or waiver of each of the following conditions:

(i) No Injunctions or Restraints . No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Laws or Orders (whether temporary,

preliminary or permanent) that prohibits or materially restrains the Redemption contemplated hereby;

(ii) Financing . The Company shall have obtained the External Financing; provided, however, that at 23:59 (Eastern time) on December 28, 2006 such condition shall automatically expire and no longer be a condition hereunder; and

(iii) Merger . The Merger shall have become effective pursuant to the terms of the Merger Agreement.

(b) Notifications . The Company shall notify Seller in writing within one Business Day of it obtaining approval from the credit committee of the relevant bank that such bank will provide the External Financing. Each of the Company and Seller shall notify the other in writing within five Business Days in the event that it becomes aware of any circumstances which could reasonably be expected to lead to the Condition set forth in Section 2.4(a)(i) not being satisfied. The failure to give a notification pursuant to this Section 2.4(b) shall not affect the satisfaction of either of the, Conditions set forth in Section 2.4(a).

ARTICLE 3
COVENANTS AND SELLER APPOINTMENT RIGHTS

Section 3.1 Company Covenants. The Company covenants to Seller that:

(a) Between the Effective Time and the Redemption Date, unless Seller shall otherwise agree in writing, the business of the Company and its Subsidiaries shall be conducted only in the ordinary course of business in all material respects, and the Company and its Subsidiaries shall use all their respective commercially reasonable efforts to preserve intact in all material respects their business organization. Between the Effective Time and the Redemption Date, without the prior consent of Seller, the Company shall not take any of the actions contemplated by Article 5 of the Merger Agreement.

(b) Following the Effective Time and prior to December 29, 2006, the Company shall use all its commercially reasonable efforts to obtain the External Financing in the amount needed (when added to available Company cash resources) to redeem all of the Shares.

(c) The Company shall provide to Parent and the Seller information, from time to time, and at such times as may be requested by the Special Committee (in the case of the Parent) or the Seller (as appropriate), regarding the status of the efforts to obtain the External Financing.

(d) The Company shall not amend any of the existing agreements between Parent and the Company, or enter into any new agreements with Parent or with any Affiliate of Parent (other than, in relation to any such new agreements, any agreement that can be cancelled upon 30 days’ notice or that, alone or in conjunction with related agreements, involves less than $100,000 in payments by the Company in any 12 month period) without first receiving the approval of a majority of the Seller Directors.

Section 3.2 Parent Covenants. Parent covenants to Seller that:

(a) Prior to December 29, 2006, Parent will not make, and shall cause its Affiliates not to make, any capital contribution or loan, give any financial assistance or otherwise lend its credit to or enhance the credit of (by guaranty or otherwise) the Company (any such actions being, “Financial Assistance”) in order to facilitate the Financing or fund the Redemption.

(b) Parent will cause the Company to comply with all of the Company’s covenants and other obligations under this Agreement except to the extent that Article 5 of the Merger Agreement may be amended by Parent (acting solely through the Special Committee) and the other parties thereto, provided, however, that Parent shall be under no obligation to provide any Financial Assistance to the Company.

(c) Parent will take no actions inconsistent with the obligations of the Company pursuant to this Agreement, and will cause its Affiliates to take no such actions.

Section 3.3 Seller Appointment Rights .

(a) Following the Effective Time and prior to the Redemption Date, Seller shall have the right to designate and the Company and Parent shall cause the nomination of such number of directors of the Company such that after such election (assuming all such Seller designees are elected to the Board of Directors), the number of Seller Directors will be equal to the number resulting from (i) 0.469 multiplied by (ii) the total number of members on the Board of Directors, rounded down to the nearest whole number; provided, that in no event shall the number of Seller Directors nominated pursuant to this provision constitute less than one member of the Board of Directors. 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 a Seller Director, then Seller 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. At any annual or special meeting of the Company, Parent shall vote all of its shares of Company Common Stock or any other voting securities of the Company (and, with respect to actions taken by written consent, provide such consent) for the election of directors in favor of the nominees designated by the Seller in accordance with this Section 3.3(a).

(b) If, at any time, the total number of directors of the Company is increased or decreased, the number of directors that Seller shall have the right to designate pursuant to Section 3.3(a) above, shall as promptly as practicable be increased or decreased so that the adjusted ratio of Seller Directors to total directors is not less than 0.469:1 (the “Ratio”). In such event, Seller, Parent and the Company shall take such steps consistent with the provisions of Section 3.3(a) to effectuate this increase or decrease of Seller Directors in relation to the Ratio as rapidly as reasonably possible.

(c) Following the Effective Time and prior to the Redemption Date, Parent shall have the right to designate and the Company and Parent shall cause the nomination of such

number of directors of the Company equal to the number resulting from (i) the total number of members on the Board of Directors minus (ii) the Seller Directors. 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 a Parent Director, then Parent 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. At any annual or special meeting of the Company, Seller shall vote all of its shares of Company Common Stock or any other voting securities of the Company (and, with respect to actions taken by written consent, provide such consent) for the election of directors in favor of the nominees designated by the Parent in accordance with this Section 3.3(c).

(d) At the request of Seller, each of the Company and Parent shall use its best efforts to cause the removal of any Seller Director and at the request of Parent, each of the Company and Seller shall use its best efforts to cause the removal of any Parent Director.

(e) Subject to the fiduciary duties of the directors, Seller Directors shall be nominated to serve on each committee of the Board of Directors (other than any committee required by Law) so that after such appointment(s), the ratio of Seller Directors who are members of such committee to the total number of members of such committee is not less than the Ratio; provided that in no event shall the number of Seller Directors appointed to any such committee be less than one.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

Section 4.1 Each of Parent, the Company and Seller represents and warrants to each of the other parties that:

(a) it (i) is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated, (ii) has all requisite power and authority to carry on its business as now being conducted; and (iii) has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby;

(b) the consummation of the Redemption and the other transactions contemplated hereby and its compliance with the provisions of this Agreement (i) have been duly authorized by all necessary corporate action and no other corporate proceedings are necessary to authorize or approve this Agreement or to consummate the Redemption or the other transactions contemplated hereby; and (ii) will not conflict with, or result in any violation or breach of its certificate of incorporation or bylaws (or equivalent constitutional document) or applicable Laws;

(c) this Agreement has been duly executed and delivered by it, and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes legal, valid and binding obligations of it, enforceable against it, in accordance with the terms of

the Agreement (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws affecting creditors’ rights generally from time to time in effect); and

(d) there are no judicial or administrative actions, proceedings or investigations pending or, to the best of its knowledge, threatened, which question the validity of this Agreement or any action taken or to be taken in connection herewith.

Section 4.2 Seller represents and warrants to the Company that:

(a) it is the record and beneficial owner of the Shares; and

(b) it shall transfer the Shares to the Company hereunder free and clear of any mortgages, liens, charges, claims, security interests, easements, pledges or other encumbrances, except for any that may be created by the actions of the Company.

ARTICLE 5
TAX MATTERS

Section 5.1 Withholding . The Redemption Price shall be paid free and clear of any and all U.S. federal, state, local or foreign income or withholding taxes except as provided in this Section 5.1.

(a) If (i) Parent (acting through the Special Committee) or the Company determines that withholding in excess of $1 is legally required based upon its reasonable conclusion that the Seller’s ownership interest in the Company (directly, indirectly and by attribution following the Redemption does not meet the requirements set forth in the “substantially disproportionate redemption of stock” safe harbor of Section 302(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) Parent (acting through the Special Committee) or the Company has notified the Seller in writing of such determination at least 30 days prior to the Redemption Date (such notice a “Section 302 Notice”), then the Company shall withhold an amount that is calculated based on its reasonable estimate of the Company’s current and accumulated earnings and profits for the year in which the Redemption Date occurs, as determined in accordance with Treasury Regulation Section 1.1441-3(c)(2)(ii). The Section 302 Notice shall set out (x) the determination that the Seller’s ownership interest in the Company following the redemption does not meet the requirements set forth in Section 302(b)(2), (y) a reasonable estimate of the amount of the Company’s current and accumulated earnings and profits for the year in which the Redemption Date occurs, as determined in accordance with Treasury Regulation Section I.l441-3(c)(2)(ii) and (z) the amount of the required withholding. Notwithstanding the forgoing, withholding shall not be permitted (or, in the case of an opinion identified in clause (B) below, withholding shall be reduced in accordance with such opinion) pursuant to this Section 5.l(a) if, at least 10 days prior to the Redemption Date, the Seller has provided a “Seller’s Opinion” that is reasonably acceptable to whichever of Parent (acting through the Special Committee) or the Company has delivered the Section 302 Notice, concluding that (A) it is more likely than not that the Seller’s ownership interest in the Company following the Redemption satisfies the requirements set forth in the “substantially disproportionate redemption of stock” safe harbor of Section 302(b)(2) of the Code; or (B) the proposed withholding as set forth in the Section 302 Notice is otherwise in excess of the amount required to be withheld in respect of the earnings and profits of the Company determined pursuant to Treasury Regulation Section 1.1441-3(c)(2)(ii).

(b) If (i) Parent (acting through the Special Committee) or the Company reasonably determines that, based on a change in applicable law subsequent to the date hereof, withholding is legally required in an amount in excess of the amount, if any, determined under Section 5.1 (a), and (ii) Parent (acting through the Special Committee) or the Company has notified the Seller in writing of such determination at least 30 days prior to the Redemption Date (such notice a “Change in Law Notice”), then the Company shall withhold such additional amount. The Change in Law Notice shall set out the basis on which the Company has reasonably determined that additional withholding is required. Notwithstanding the forgoing, withholding shall not be permitted pursuant to this Section 5.1(b) if, at least 10 days prior to the Redemption Date, the Seller has provided a “Seller’s Opinion” that is reasonably acceptable to whichever of Parent (acting through the Special Committee) or the Company has delivered the Change in Law Notice, which opinion shall conclude that it is more likely than not that such withholding is not required on the basis on which the Company had determined that withholding is required as set out in the Change in Law Notice.

(c) For purposes of Sections 5.1(a) and (b) above a “ Seller’s Opinion ” shall mean a legal opinion of nationally recognized counsel (such counsel to be reasonably acceptable to whichever of Parent (acting through the Special Committee) or the Company delivered the Section 302 Notice or Change in Law Notice, as applicable).

(d) Any withholding that is made pursuant to this Section 5.1 shall be made at the rate required by statute, or such lower rate as is provided under an applicable income tax treaty, provided that such lower treaty rate shall apply only if the Seller provides the Company with an IRS Form W-8BEN or such other documentation as is required to obtain the benefits of such treaty.

(e) Any amount withheld by the Company in accordance with this Section 5.1 shall be remitted to the appropriate taxing authority, and such remittance shall be treated for purposes of this Agreement as a payment of a portion of the Redemption Price to the Seller.

Section 5.2 Indemnification . The Seller agrees to indemnify and hold Parent, the Company and its affiliates harmless from and against any amounts incurred by the Company (including penalties, interest and reasonable costs and expenses) resulting from, arising out of or relating in any way to the failure by the Company to withhold any amount of taxes in respect of the Redemption Price, for any reason and without regard to whether the Parent or Company provided a Section 302 Notice or Change in Law Notice or the Seller provided a Seller Opinion.

Section 5.3 Contests and Cooperation .

(a) Parent or the Company shall promptly notify the Seller in writing of any written notice of a proposed assessment or claim in an audit or administrative or judicial proceeding involving the Company which, if determined adversely to the taxpayer, would be grounds for indemnification under this Article V (a “Withholding Tax Liability”); provided, however, that the failure to give such notice will not affect the Seller’s obligation to provide the

indemnification specified in this Article V except to the extent, if any, that, but for such failure, all or a portion of the Withholding Tax Liability in question could have been avoided.

(b) In the case of an audit or administrative or judicial proceeding that relates in whole or in part to a Withholding Tax Liability, the Seller shall have the right at its expense to participate in and control the conduct of the portion of such audit or proceeding to the extent that such audit or proceeding relates to a Withholding Tax Liability. The Company and Parent also may participate in the portion of such audit or proceeding to the extent relating to the Withholding Tax Liability and, if the Seller does not assume the defense of any such audit or proceeding, the Company or Parent may defend the same in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding after ten days’ prior written notice to the Seller setting forth the terms and conditions of the settlement.

(c) Each of the Company, Parent and the Seller will provide each other with such cooperation and information as either of them reasonably may request of the other (i) in filing any tax return, amended tax return or claim for refund, (ii) in the case where Seller owns directly a less than 50% interest in the Company, in determining whether Seller’s ownership interest in the Company meets the requirements set forth in the “substantially disproportionate redemption of stock” safe harbor of Section 302(b)(2), (iii) in determining a Withholding Tax Liability or a right to a refund of such taxes, (iv) in participating in or conducting any audit or other proceeding in respect of a Withholding Tax Liability or (v) in otherwise complying with the provisions of this Article V. Such cooperation and information shall include providing copies (at the expense of the Seller) of relevant tax returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. The Company and Parent shall make its employees available on a basis mutually convenient to both parties to provide explanations of any documents or information provided hereunder. Each of the Company, Parent and Seller shall retain all tax returns, schedules and work papers, records and other documents in its possession relating to the taxable period during which the Redemption occurred until the later of (i) the expiration of the statute of limitations of the taxable period of such return or (ii) six years following the due date for such return.

(d) Any information obtained under this Section 5.3 shall be kept confidential except as may be necessary in connection with the filing of tax returns or claims for refund or in conducting an audit or other proceeding, or as otherwise required by law.

Section 5.4 Payment. Payment by the Seller of any amounts due under this Article V in respect of a Withholding Tax Liability shall be made within five Business Days following an agreement between the Seller and the Company that an indemnity amount is payable or a “determination” as defined in Section I313(a) of the Code.

Section 5.5 Negative Covenant . The Seller agrees that prior to the Release Date, it shall not sell or otherwise transfer any shares of the Parent Common Stock that it owns directly to the extent that as a result of such sale it would own less than the number of shares that constitute the Covenanted Amount as of the Redemption Date; provided, however that at any time the Seller shall be free to replace, on one or more occasions, upon written notice to the Company and the Parent, the assets then subject to such covenant with different assets, or Seller

may substitute a different indemnifying party in lieu of Seller (solely for the purposes of the covenant in this Section 5.5), which substitute party has assets, that have a “fair market value” at such time at least equal to that of the replaced assets; and provided, further, that Seller shall be free to substitute the covenant given hereunder on one or more occasions (whether or not the assets have previously been replaced), upon written notice to the Company and the Parent, with (i) any one of a letter of credit with a face amount of $100,000,000, cash in an amount of $100,000,000 or other assets with a “fair market value” of $100,000,000 or (ii) a substitute indemnifying party in lieu of Seller (solely for the purposes of the covenant in this Section 5.5), which substitute party has provided for any one of the foregoing in clause (i), and such security and/or such indemnifying party, as the case may be, shall remain in effect (unless substituted as permitted by this Section 5.5) until the Release Date. “Fair market value” shall be determined in good faith by the Seller and, with respect to assets other than a letter of credit, cash, marketable securities, or assets with a book value of greater than or equal to the requisite minimum provided for above, if requested by Parent (acting through the Special Committee), shall be supported by an opinion of a nationally recognized investment banking firm reasonably acceptable to Parent (acting through the Special Committee). Seller shall not be deemed to be in breach of the foregoing for failure to give the notice provided for above in a timely manner, unless and to the extent that Company or the Parent has been materially prejudiced thereby.

ARTICLE 6
GENERAL PROVISIONS

Section 6.1 Entire Agreement . This Agreement (including the Schedule and Exhibits to this Agreement), constitutes the entire agreement relating to the Redemption and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. No representation, warranty, inducement, promise, understanding or condition not set forth in this Agreement has been made or relied upon by any of the parties to this Agreement relating to the Redemption.

Section 6.2 Interpretation . The headings in this Agreement are for reference only and shall not affect the meaning or interpretation of this Agreement. Definitions shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references in this Agreement to Articles, Sections and Schedules shall refer to Articles and Sections of, and Schedules to, this Agreement unless the context shall require otherwise. The words “include,” “includes” and “including” shall not be limiting and shall be deemed to be followed by the phrase “without limitation.” Unless the context shall require otherwise, any agreements, documents, instruments or Laws defined or referred to in this Agreement shall be deemed to mean or refer to such agreements, documents, instruments or Laws as from time to time amended, modified or supplemented, including (a) in the case of agreements, documents or instruments, by waiver or consent and (b) in the case of Laws, by succession of comparable successor statutes. All references in this Agreement to any particular Law shall be deemed to refer also to any rules and regulations promulgated under that Law. References to a Person also refer to its predecessors and permitted successors and assigns. The headings and subheadings in this Agreement are included for convenience and identification 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 6.3 Survival . The representations and warranties contained in this Agreement shall survive the Redemption Date.

Section 6.4 No Third-Party Beneficiaries . Except as expressly provided, this Agreement is not intended to confer any rights or remedies upon any Person other than the parties to this Agreement.

Section 6.5 Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (the jurisdiction of incorporation of the Company), without regard to the laws that might otherwise govern under applicable principles of conflicts of law.

Section 6.6 Submission to Jurisdiction . Each party hereto irrevocably and unconditionally agrees that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or assigns shall be brought in the Delaware Chancery Court to the fullest extent permitted by applicable law and, to the extent not so permitted, in any federal or state court sitting in the State of Delaware, and each of the parties hereto hereby (i) irrevocably submits with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive personal jurisdiction of the aforesaid courts in the event any dispute arises out of this Agreement or any transaction contemplated hereby, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any transaction contemplated hereby in any court other than the aforesaid courts. Any service of process to be made in such action or proceeding may be made by delivery of process in accordance with the notice provisions contained in Section 6.8.

Section 6.7 WAIVER OF JURY TRIAL . EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.7.

Section 6.8 Notices . Any notice, request, instruction or other communication under this Agreement shall be in writing and delivered by hand or overnight courier service or by facsimile:

If to Seller, to:

Artal Luxembourg S.A

105, Grand-Rue

L-1661 Luxembourg

Luxembourg

Facsimile: 011 352 22 42 59 22

Attention: Francoise de Wael

with a copies to:

The Invus Group, LLC

135 East 57th Street, 30th Floor

New York, NY 10022

Facsimile: (212)371 - 1829
Attention: Raymond Debbane

and

Gibson, Dunn & Crutcher LLP

200 Park Avenue

47th Floor

New York, New York 10166-0193

Facsimile: (212)351-5316

Attention: Steven Shoemate, Esq.

If to the Company, to:

WeightWatchers.com, Inc.

888 Seventh Avenue, 7th Floor

New York, NY 10106

Facsimile: 212-315-0709

Attention: Jeffrey Fiarman

with a copy, prior to the Effective Time, to:

Gibson, Dunn & Crutcher LLP

200 Park Avenue

47th Floor

New York, New York 10166-0193

Facsimile: (212)351-5316

Attention: Steven Shoemate, Esq.

with a copy, after the Effective Time, to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Facsimile: (212)757-3990

Attention: Judith R. Thoyer, Esq.

If to Parent, to:

Weight Watchers International, Inc.

175 Crossway Park West

Woodbury, NY 11797-2055

Facsimile: (516)390-1795

Attention: Robert Hollweg, Vice President, General

Counsel and Secretary

with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Facsimile: (212)757-3990

Attention: Judith R. Thoyer, Esq.

or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above. Each such communication shall be effective (a) if delivered by hand, when such delivery is made at the address specified in this Section 6.8, (b) if delivered by overnight courier service, the next business day after such communication is sent to the address specified in this Section 6.8, or (c) if delivered by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 6.8 and appropriate confirmation is received.

Section 6.9 Rules of Construction . The parties to this Agreement have been represented by counsel during the negotiation and execution of this Agreement and waive the application of any Laws or rule of construction providing that ambiguities in any agreement or other document shall be construed against the party drafting such agreement or other document.

Section 6.10 Assignment . This Agreement shall not be assignable by operation of law or otherwise.

Section 6.11 Remedies . Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.

Section 6.12 Specific Performance . The parties to this Agreement 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. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches of this Agreement, in addition to any other remedy to which they are entitled at law or in equity.

Section 6.13 Binding Effect . This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns.

Section 6.14 Severability . If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 6.15 Counterparts: Effectiveness . This Agreement may be executed in any number of counterparts, all of which shall be one and the same agreement. This Agreement shall become effective when each party to this Agreement shall have received counterparts signed by all of the other parties.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

ARTAL LUXEMBOURG S.A.


By:	/s/ Francoise de Wael
	Name:		Francoise de Wael
	Title:	Managing Director


WEIGHTWATCHERS.COM, INC.


By:	/s/ David P. Kirchhoff
	Name:		David P. Kirchhoff
	Title:	Chief Executive Officer and President


WATCHERS INTERNATIONAL INC.


By:	/s/ Linda Huett
	Name:		Linda Huett
	Title:	President and Chief Executive Officer

Signature page to Redemption Agreement

Schedule
External Financing

For the purposes of this Agreement, the term “ External Financing ” shall mean a letter of commitment approved by the relevant third party bank’s credit committee which commits it to provide funding to the Company (with no recourse against Parent) on the following basis and subject to customary banking conditions being met:

1. Amount	Such amount equal to the Redemption Price less the amount of any cash available to the Company from its own resources.

2. Maximum Borrowing Rate	The weighted blended interest rate for the External Financing shall not be greater than 450 basis points over Parent’s Borrowing Rate (as defined below) at the time of the commitment for the External Financing.

3. Prepayment Terms or Interest Rate Changes	The External Financing (i) shall provide that it is prepayable, with a prepayment penalty of no greater than 1% on a weighted average basis, with respect to prepayments made on or after December 29, 2006, or (ii) shall otherwise provide for an interest rate reduction on or after such date if appropriate.

4. “Parent’s Borrowing Rate” shall mean the lower of (a) the Alternate Base Rate plus the ApplicableMargin for a Revolving Loan and (b) the LIBO Rate (Reserve Adjusted) plus the Applicable Marginfor a Revolving Loan, without regard to amounts outstanding pursuant to the Credit Agreement. Allcapitalized terms in the definition of Parent’s Borrowing Rate shall be as defined in the FifthAmended and Restated Credit Agreement, as amended, among Weight Watchers International,Various Financial Institutions, Credit Suisse First Boston and the Bank of Nova Scotia, dated as ofJanuary 21, 2004 (the “Credit Agreement”).

Exhibit A to
Redemption Agreement

Statement of Lost Stock Certificate

The undersigned (“Stockholder”) hereby states as follows:

1. The Stockholder is the owner of 12,091,811 shares (the “Shares”) of Common Stock, par value $.01 per share, of WEIGHTWATCHERS.COM, INC., a Delaware corporation (the “Company”).

2. The stock certificate representing the Shares (the “Stock Certificate”) has been lost or destroyed.

3. The Stockholder is the sole legal, beneficial and unconditional owner of the Shares, entitled to full and exclusive possession of the Stock Certificate representing the Shares at the time of loss or destruction.

4. The Stockholder has not sold, endorsed, assigned, transferred, hypothecated, pledged or otherwise transferred or disposed of the Stock Certificate representing the Shares and, is entitled to the full and exclusive possession and benefit of said Stock Certificate representing the Shares; no Person or entity other than the Stockholder has any right, title, claim, equity, or interest in, to or with respect to the Stock Certificate representing the Shares or any proceeds of the Stock Certificate representing the Shares.

5. The Stockholder hereby agrees that the Stockholder shall indemnify and hold the Company, its successors and assigns harmless from and against any and all demands, claims, actions or causes of action, liabilities, losses or damages of any nature whatsoever, that may at any time be made by reason of the fact that the Stock Certificate may be in, or may hereafter come into, the possession of any Person or entity as a result of the failure of any representation or statement made by the Stockholder in this Statement.

6. In the event that the original Stock Certificate representing the Shares is subsequently found by the Stockholder, or again comes into the possession of the Stockholder, the Stockholder will immediately deliver such original Stock Certificate representing the Shares to the Company or its successors or assigns for cancellation.

IN WITNESS WHEREOF, this Statement is executed as of this day of [ ], 200 .

	By:
		Name:
		Title:

Exhibit B to

Redemption Agreement

Stock Power

FOR VALUE RECEIVED, the undersigned hereby assigns, sells and transfers unto WEIGHTWATCHERS.COM, INC., a Delaware corporation (the “Company”‘). 12,091,811 shares of the Common Stock of the Company standing in the name of the undersigned on the books of the Company and represented by Certificate [ ]

Dated: [ ]

	By:
		Name:
		Title:

Exhibit 10.3

EXECUTION COPY

PRINCIPAL STOCKHOLDERS AGREEMENT, dated as of June 13, 2005 (this “ Agreement ”), among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (“ Parent ”), WEIGHTWATCHERS.COM, INC., a Delaware corporation (the “ Company ”), and ARTAL LUXEMBOURG S.A., a Luxembourg corporation (“ Artal ”) (each of Artal and Parent are referred to herein as a “ Stockholder ” and, together, the “ Stockholders ”).

WHEREAS, Parent, SCW Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and the Company are entering into an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the “ Merger Agreement ”);

WHEREAS, Artal and Parent own the number of shares of Company Common Stock set forth opposite its name on Schedule A hereto (such shares of Company Common Stock, collectively referred to herein as the “ Subject Shares ” of such Stockholder);

WHEREAS, Artal, the Company and Parent are entering into an agreement (the “ Redemption Agreement ”), dated as of the date hereof, pursuant to which Artal, the Company and Parent agree to, among other things, the repurchase by the Surviving Corporation (the “ Redemption ”) of Artal’s Common Stock, par value $0.01 per share, of the Surviving Corporation, on the terms and conditions set forth therein.

WHEREAS, as a condition and inducement to their willingness to enter into the Merger Agreement and the transactions contemplated thereby, Parent and Merger Sub have requested that Artal enter into this Agreement and take certain actions set forth herein; and

WHEREAS, certain capitalized terms used in this Agreement, but not defined herein, have the meanings set forth in the Merger Agreement.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, the parties hereto agree as follows:

SECTION 1. Representations and Warranties of Artal . Artal hereby represents and warrants to Parent, as of the date hereof, as follows:

(a) Organization; Authority; Execution and Delivery; No Conflicts; Enforceability . Artal (i) is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization and (ii) has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by Artal have been duly authorized by all necessary corporate or organizational action on the part of Artal and no other corporate or organizational proceedings on the part of Artal are necessary to authorize the execution, delivery and performance of this Agreement by Artal. This Agreement has been duly executed and delivered by Artal and, assuming due

execution and delivery of this Agreement by Parent and the Company, constitutes the legal, valid and binding obligation of Artal, enforceable against Artal in accordance with its terms. The execution and delivery of this Agreement by Artal do not, and the performance by Artal of its obligations hereunder, will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or to the loss of a material benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of Artal under, (i) any organizational documents of Artal, (ii) any Contract to which Artal is a party or is bound or any of its properties or other assets is bound by or subject to or otherwise under which Artal has rights or benefits, or (iii) any Law applicable to Artal or its properties or other assets, other than, in the case of clauses (ii) and (iii) above, any such conflicts, violations, breaches, defaults, rights, losses or Liens that individually or in the aggregate are not reasonably likely to impair in any material respect or prevent or materially impede, interfere with, hinder or delay the ability of Artal to perform its obligations hereunder. No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Artal in connection with its execution, delivery and performance of this Agreement, except for such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to obtained or made individually or in the aggregate are not reasonably likely to impair in any material respect or prevent or materially impede, interfere with, hinder or delay the ability of Artal to perform its obligations hereunder, including the execution and delivery of the Stockholder Consent.

(b) Subject Shares . Artal is the record and beneficial owner of the Subject Shares set forth opposite its name on Schedule A hereto, free and clear of any Liens (other than Liens created pursuant to the terms of this Agreement, the Merger Agreement, the Redemption Agreement or arising under federal or state securities Laws). As of the date hereof, Artal does not own, of record or beneficially, any shares of capital stock of the Company other than its Subject Shares set forth opposite its name on Schedule A hereto. Artal has the sole right to direct the voting of its Subject Shares, and none of such Subject Shares is subject to any voting trust or other Contract with respect to the voting of such Subject Shares.

SECTION 2. Representations and Warranties of Parent .

(a) Parent hereby represents and warrants to Artal, as of the date hereof, as follows: Parent is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by Parent have been duly authorized by all necessary corporate action on the part of Parent (based on the unanimous recommendation of the Special Committee) and no other corporate proceeding on the part of Parent is necessary to authorize the execution, delivery and performance of this Agreement by Parent. This Agreement has been duly executed and delivered by Parent and, assuming due execution and delivery of this Agreement by the Artal and the Company, constitutes the legal, valid and binding obligation of Parent,

enforceable against Parent in accordance with its terms. The execution and delivery of this Agreement by Parent do not, and the performance by Parent of its obligations hereunder will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, termination, cancellation or acceleration of any obligation, or to the loss of a material benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of Parent under, (i) any organizational documents of Parent, (ii) any Contract to which Parent is a party or is bound or any of its properties or other assets is bound by or subject to or otherwise under which Parent has rights or benefits or (iii) subject to the governmental filings and other matters referred to in Section 4.3 of the Merger Agreement, any Law applicable to Parent or its properties or other assets, other than, in the case of clauses (ii) and (iii) above, any such conflicts, violations, breaches, defaults, rights, losses or Liens that individually or in the aggregate are not reasonably likely to impair in any material respect or prevent or materially impede, interfere with, hinder or delay the ability of Parent to perform its obligations hereunder. Except as set forth in Section 4.3 of the Merger Agreement, no consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent in connection with its execution, delivery and performance of this Agreement.

(b) Subject Shares . Parent is the record and beneficial owner of the Subject Shares set forth opposite its name on Schedule A hereto, free and clear of any Liens (other than Liens created pursuant to the terms of this Agreement or arising under federal or state securities Laws). As of the date hereof, Parent does not own, of record or beneficially, any shares of capital stock of the Company other than its Subject Shares set forth opposite its name on Schedule A hereto and the shares of Company Common Stock subject to the Warrants. Parent has the sole right to direct the voting of its Subject Shares, and none of such Subject Shares is subject to any voting trust or other Contract with respect to the voting of such Subject Shares.

SECTION 3. Covenants of the Stockholders .

(a) Each Stockholder covenants and agrees that as promptly as practicable following the execution and delivery of the Merger Agreement by the parties thereto, such Stockholder shall:

(i) consent in writing to the approval and adoption of the Merger Agreement, the Merger, the Redemption Agreement, the Redemption and the Charter Amendment and the other transactions contemplated by the Merger Agreement and the Charter Amendment, without a meeting, without prior notice and without a vote by executing a Stockholder Consent in the form of Exhibit A hereto covering all such Stockholder’s Subject Shares; and

(ii) deliver such Stockholder Consent to the Secretary of the Company.

(b) At any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval of stockholders is sought, such Stockholder shall direct the voting of its Subject Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, share exchange, sale of substantial assets, reorganization, recapitalization, joint venture dissolution, liquidation or winding up of or by the Company or any other business combination involving the Company, (ii) any Takeover Proposal, (iii) any Public Offering, and (iv) any amendment or other change of the Company Charter (other than the Charter Amendment) or the Company Bylaws or other proposal or transaction involving the Company or any of its Subsidiaries, which amendment or other proposal or transaction in any manner could reasonably be expected to impede, frustrate, prevent or nullify any provision of this Agreement, the Merger Agreement, the Charter Amendment, or the consummation of the Merger or any other transactions contemplated hereby or thereby or change in any manner the voting rights of any class of Company Common Stock. Each Stockholder shall not commit or agree to take any action inconsistent with the foregoing.

(c) Other than pursuant to the terms of this Agreement, the Merger Agreement, the Redemption Agreement or the Charter Amendment, each Stockholder shall not, directly or indirectly, (i) sell, transfer, pledge, assign or otherwise dispose of (including by gift or by operation of law) (collectively, “ Transfer ”), or enter into any Contract or other arrangement with respect to Transfer of, or any profit sharing arrangement relating to, any Subject Shares to or with any Person, except an affiliate of such Stockholder or the account or Person for whom such Stockholder is acting on behalf of with respect to such Subject Shares; provided that prior to such Transfer, or entering into such Contract or arrangement, such affiliate, account or Person (or such Stockholder acting on behalf of such affiliate or Person) shall become a party to this Agreement in respect of such Subject Shares pursuant to a joinder agreement satisfactory to Parent or (ii) enter into any voting arrangement, whether by proxy (or written consent in lieu thereof), voting agreement or otherwise, with respect to any Subject Shares and shall not commit or agree to take any of the foregoing actions. In furtherance of the foregoing, each Stockholder agrees that any Transfer in violation of this Agreement shall be void and of no force or effect.

(d) Each Stockholder shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably requested by Parent from such Stockholder to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated hereby and by the Merger Agreement as in effect on the date hereof. Except as may be required by law, prior to the Second Closing, neither Parent nor Artal shall issue any press release or otherwise make any public statements about the Merger Agreement, the Merger or any other transactions contemplated hereby or by the Merger Agreement without the consent of Artal, which consent shall not be unreasonably withheld or delayed, provided , however , that no consent shall be required for Parent to make such public disclosure as its legal counsel deems necessary, provided that Parent in such circumstances shall, to the extent practicable and as soon as practicable, be obliged to first provide a copy of any

anticipated announcement to Artal and have due regard to any comments made thereon by Artal in good faith.

(e) Each Stockholder hereby consents to and adopts and approves the actions taken by the Board of Directors of the Company in adopting, approving and declaring advisable this Agreement, the Merger Agreement, the Merger, the Charter Amendment and the other transactions contemplated hereby or thereby. Each Stockholder hereby waives and agrees not to exercise or assert, any appraisal rights under Section 262 in connection with the Merger.

SECTION 4. Non-Compete .

(a) Artal agrees, prior to the Effective Time, that: (i) Article IV of the Corporate Agreement, dated as of November 5, 2001, between Parent and Artal shall be amended (A) so that following the Closing the reference to the “Company” in that Article will include WeightWatchers.com, Inc., and (B) Section 4.3 of that Article will be amended to include any Internet Diet Business (as defined below); (ii) the Parent’s Code of Business Conduct and Ethics, adopted March 16, 2004, shall be amended to make clear that, following the Closing, the term “Conflicting Business” (as defined therein) shall include the business of WeightWatchers.com, Inc.; and (iii) Artal shall not, and shall cause its respective officers, directors, employees, representatives and agents to not, during the Non-Compete Period (as defined below), engage in, own, manage, operate, provide financing to, control or participate in the ownership, management, operation or control of, or otherwise have an interest, directly or indirectly, in any other Person in the conduct of the Internet Diet Business.

(b) As used herein, “Internet Diet Business” shall mean the use of the Electronic Medium (as defined below) to conduct a business primarily related to diet, weight loss and/or weight control programs, products, services, information, or measurement, including, without limitation, the marketing, advertisement, promotion, sale or distribution of products and services pertaining to weight management, the development and publication via the Electronic Medium of any content or forums pertaining to weight management, and the sale and delivery via the Electronic Medium of subscription electronic products pertaining to weight management, but not including, in each and every case mentioned above, other “life style” and/or “exercise” businesses.

(c) As used herein, “Electronic Medium” shall mean the Internet and any other related or similar forms of electronic or digital transmission, delivery, reception, recordation or display arising from any network or other connection of instruments or devices now known or hereafter invented capable of transmission, delivery, reception, recordation and/or display (such instruments or devices to include, without limitation, computers, laptops, cellular or PCS telephones, pagers, PDAs, wireless transmitters or receivers, modems, radios, televisions, satellite receivers, cable networks, smart cards, set-top boxes, broadband and digital wireless devices).

(d) As used herein, “Non-Compete Period” shall mean the earlier of (i) five years from the date of the First Closing, or (ii) six months after there are no nominees of Artal on the Board of Directors of Parent.

SECTION 5. No Solicitation; No Public Offering . Artal, for itself and its directors, officers, consultants, accountants, legal counsel, investment bankers, agents and other representatives, agrees to be bound by Section 5.4 of the Merger Agreement, which is hereby made applicable to Artal.

SECTION 6. Stockholder Capacity . No Person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such director or officer of the Company. Each Stockholder signs solely in its capacity as the beneficial and record owner of such Stockholder’s Subject Shares. Nothing herein shall limit or affect any actions taken by any Stockholder (or Representatives acting on its behalf) in his or her capacity as an officer or director of the Company.

SECTION 7. Special Committee . Artal hereby agrees and acknowledges that any actions taken by the Special Committee from and after the Effective Time with respect to this Agreement, the Merger Agreement, the Redemption Agreement, and the transactions contemplated hereby and thereby, shall be taken on the sole behalf of Parent and Parent’s stockholders, and the members of the Special Committee shall have no fiduciary obligation or liability to Artal, in its capacity as a stockholder of the Company, or any other stockholder of the Company.

SECTION 8. Stop Transfer . The Company agrees with, and covenants to, Parent that the Company shall not register the transfer of any certificate representing any Stockholder’s Subject Shares in violation of this Agreement.

SECTION 9. Termination . This Agreement shall terminate upon the earlier of (i) the Second Closing and (ii) the termination of the Merger Agreement in accordance with its terms; provided , however , that any such termination shall not relieve any party of any liability of such party arising as a result of the breach of this Agreement prior to such termination. Notwithstanding the foregoing, in the event of a termination pursuant to clause (i), the provisions of Section 4 shall survive this Agreement in accordance with terms of Section 4.

SECTION 10. Additional Matters . Artal shall, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement.

SECTION 11. General Provisions .

(a) Amendments . This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto (in the case of Parent, solely by action of the Special Committee), provided that the approval or consent of the

Company shall not be required for any such amendment except to the extent such amendment imposes additional obligations on the Company.

(b) Notice . All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent or to the Company in accordance with Section 9.7 of the Merger Agreement and to Artal in accordance with Section 6.8 of the Redemption Agreement (or at such other address for a party as shall be specified by like notice).

(c) Interpretation . The headings in this Agreement are for reference only and shall not affect the meaning or interpretation of this Agreement. Definitions shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references in this Agreement to Articles, Sections and Exhibits shall refer to Articles and Sections of, and Exhibits to, this Agreement unless the context shall require otherwise. The words “include,” “includes” and “including” shall not be limiting and shall be deemed to be followed by the phrase “without limitation.” Unless the context shall require otherwise, any agreements, documents, instruments or Laws defined or referred to in this Agreement shall be deemed to mean or refer to such agreements, documents, instruments or Laws as from time to time amended, modified or supplemented, including (a) in the case of agreements, documents or instruments, by waiver or consent and (b) in the case of Laws, by succession of comparable successor statutes. All references in this Agreement to any particular Law shall be deemed to refer also to any rules and regulations promulgated under that Law. References to a Person also refer to its predecessors and permitted successors and assigns.

(d) Counterparts . This Agreement may be executed in any number of counterparts, all of which shall be one and the same agreement. This Agreement shall become effective when each party to this Agreement shall have received counterparts signed by all of the other parties.

(e) Entire Agreement; No Third-Party Beneficiaries . This Agreement, the Redemption Agreement, the Confidentiality Agreement, the Merger Agreement and the Company Disclosure Letter (i) constitute the entire agreement and supersede all prior agreements, understandings and negotiations, both written and oral, among the parties with respect to the subject matter of this Agreement, and (ii) except for the provisions of Article II of the Merger Agreement and Section 5.6 of the Merger Agreement, are not intended to confer upon any Person other than the parties hereto (and their respective successors and assigns) or thereto (and their respective successor and assigns) any rights or remedies hereunder.

(f) Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Virginia, without regard to the laws that might otherwise govern under applicable principles of conflicts of law, except to the extent that the laws of the State of Delaware mandatorily apply.

(g) Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise, by Parent without the prior written consent of Artal or by Artal without the prior written consent of Parent or by the Company without the prior written consent of Parent or Artal. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

(h) Jurisdiction . The parties to this Agreement (a) irrevocably submit to the personal jurisdiction of the United States District Court for the Eastern District of Virginia or, if federal court jurisdiction is not available, to the state courts in Virginia and (b) waive any claim of improper venue or any claim that such court is an inconvenient forum. The parties to this Agreement agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.7 of the Merger Agreement or in such other manner as may be permitted by applicable Laws, shall be valid and sufficient service thereof.

(i) WAIVER OF JURY TRIAL . EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(i).

(j) Specific Performance . The parties to this Agreement 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. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the United States District Court for the Eastern District of Virginia or, if federal court jurisdiction is not available, to the state courts in Virginia or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

(k) Remedies . Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement

shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.

(l) Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

WEIGHT WATCHERS
INTERNATIONAL, INC.


By:	/s/ Linda Huett
	Name:			Linda Huett
	Title:			President and Chief Executive
				Officer


ARTAL LUXEMBOURG S.A.


By:	/s/ Francoise de Wael
	Name:			Francoise de Wael
	Title:			Managing Director


WEIGHTWATCHERS.COM, INC.


By:		/s/ David P. Kirchhoff
	Name:		David P. Kirchhoff
	Title:		President and Chief Executive
			Officer

[Signature page to Principal Stockholders Agreement]

Schedule A

Name and address of Stockholder	Number of shares of Company Common Stock owned	% of the outstanding shares of capital stock of the Company

ARTAL LUXEMBOURG S.A.	12,091,811	72.81%

WEIGHT WATCHERS INTERNATIONAL, INC.	3,388,622	20.41%

Exhibit 10.4

Amendment to the
Corporate Agreement

THIS AMENDMENT (this “ Amendment ”) to the Corporate Agreement (the “ Agreement ”), dated 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 ”), is made as of July 1, 2005 by the Company and Artal.

WHEREAS, the Company and Artal desire to amend Article I and IV of the Agreement as provided in the Principal Stockholders Agreement, dated as of June 13, 2005, by and among the Company, WeightWatchers.com, Inc., a Delaware corporation (“ WW.com ”), and Artal; and

WHEREAS, terms defined in the Agreement shall, unless otherwise defined herein, have the same meaning in this Amendment and the principles of construction set out in the Agreement shall have effect as if set out in this Amendment.

NOW, THEREFORE, the Agreement is hereby amended as follows:

1. Amendment to Section 1.1 . Section 1.1 (Definitions) is hereby amended by adding the following defined terms:

“ Electronic Medium ” shall mean the Internet and any other related or similar forms of electronic or digital transmission, delivery, reception, recordation or display arising from any network or other connection of instruments or devices now known or hereafter invented capable of transmission, delivery, reception, recordation and/or display (such instruments or devices to include, without limitation, computers, laptops, cellular or PCS telephones, pagers, PDAs, wireless transmitters or receivers, modems, radios, televisions, satellite receivers, cable networks, smart cards, set-top boxes, broadband and digital wireless devices).

“ Internet Diet Business ” shall mean the use of the Electronic Medium to conduct a business primarily related to diet, weight loss and/or weight control programs, products, services, information, or measurement, including, without limitation, the marketing, advertisement, promotion, sale or distribution of products and services pertaining to weight management, the development and publication via the Electronic Medium of any content or forums pertaining to weight management, and the sale and delivery via the Electronic Medium of subscription electronic products pertaining to weight management, but not including, in each and every case mentioned above, other “life style” and/or “exercise” businesses.

“ WW.com ” shall mean WeightWatchers.com, Inc., a Delaware corporation.

2. Amendment to Article IV . Article IV (Corporate Opportunities and Conflicts of Interest) is hereby amended so that from and after the date hereof, references to the “Company” shall include WW.com.

3. Amendment to Section 4.3 . Section 4.3 (Corporate Opportunities) is hereby amended in its entirety to read as follows:

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 or the Internet Diet 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.

(iii) 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.

(iv) 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.

4. Ratification of the Agreement . Except as otherwise expressly provided herein, all of the terms and conditions of the Agreement are ratified and shall remain unchanged and continue in full force and effect.

5. Entire Agreement . The Agreement, as amended by this Amendment (the “ Amended Agreement ”), constitutes the entire understanding of the parties hereto with respect to the subject matter thereof. References in the Amended Agreement to “Agreement” shall also be read and construed as a reference to the Amended Agreement.

6. Governing Law . This Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

7. Jurisdiction . The parties to this Amendment 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 Amendment, each party hereto irrevocably submits to the jurisdiction of such courts for itself, himself or herself and in respect of its, his 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.

8. Counterparts . This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

	WEIGHT WATCHERS INTERNATIONAL,
	INC.

	By:	/s/ Linda Huett
		Name: Linda Huett
		Title: President and Chief Executive Officer


	ARTAL LUXEMBOURG S.A.

	By:	/s/ Francoise de Wael
		Name: Francoise de Wael
		Title: Managing Director

[Signature page to Corporate Agreement Amendment]

Exhibit 10.5

AMENDMENT TO
WEIGHT WATCHERS INTERNATIONAL, INC.
2004 STOCK INCENTIVE PLAN

1. Section 8 of the Weight Watchers International, Inc. 2004 Stock Incentive Plan (the “ Plan ”) is hereby amended by adding a new subsection (e) thereto as follows:

(e) Restricted Stock Units . Awards of Restricted Stock may also be granted hereunder on a “Restricted Stock Unit” basis, such that the shares of Restricted Stock shall be credited to a bookkeeping account with the Company, with actual Shares not to be issued unless and until such Restricted Stock Unit has become vested. The applicable Award agreement shall set forth the vesting restrictions and other terms and conditions governing the Award. At the discretion of the Committee, the Award agreement may provide that each Restricted Stock Unit (representing one Share) may be credited with cash and stock dividends paid by the Company in respect of one Share (“Dividend Equivalents”). In such case, the Award agreement may provide that Dividend Equivalents may be (i) currently paid to the Participant, (ii) credited to the Participant’s bookkeeping Restricted Stock Unit account, and interest may be credited on the amount of cash Dividend Equivalents so credited (at a rate and subject to such terms as determined by the Committee), or (iii) credited to the Partcipant’s bookkeeping Restricted Stock Unit account without interest. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed to the Participant upon settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividends Equivalents. Restricted Stock Units and the Shares underlying such Restricted Stock Units shall be subject to all applicable provisions of the Plan, including, without limitation, provisions relating to the adjustment of Awards for splits, mergers, or other corporate transactions.

2. All other terms and conditions of the Plan shall remain in full force and effect.

Exhiit 10.6

[EXECUTION COPY]

FIRST AMENDMENT

This FIRST AMENDMENT, dated as of June 24, 2005 (this “ Amendment Agreement ”), is among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the “ Borrower ”) and certain of the Lenders (such capitalized term, and other terms used in this Amendment Agreement, to have the meanings set forth in Part I below).

W I T N E S S E T H :

WHEREAS, the Borrower, the various financial institutions party thereto, Credit Suisse, acting through its Cayman Islands Branch, as the syndication agent and as a lead arranger, and The Bank of Nova Scotia, as (x) the administrative agent for the Lenders, and (y) a lead arranger for the Lenders are party to the Fifth Amended and Restated Credit Agreement, dated as of January 21, 2004 (as further amended, supplemented or otherwise modified prior to the First Amendment Effective Date, the “ Existing Credit Agreement ”);

WHEREAS, the Borrower has requested that the Lenders amend certain provisions of the Existing Credit Agreement as herein provided; and

WHEREAS, the Lenders have agreed, subject to the terms and conditions set forth below, to amend the Existing Credit Agreement as more specifically set forth herein (the Existing Credit Agreement, as amended by this Amendment, being referred to as the “ Credit Agreement ”);

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto hereby agree as follows.

PART I
DEFINITIONS

SUBPART 1.1. Certain Definitions . The following terms (whether or not underscored) when used in this Amendment Agreement shall have the following meanings (such meanings to be equally applicable to the singular and plural form thereof):

“ Amendment Agreement ” is defined in the preamble .

“ Borrower ” is defined in the preamble .

“ Credit Agreement ” is defined in the third recital .

“ Existing Credit Agreement ” is defined in the first recital .

“ First Amendment Effective Date ” is defined in Subpart 3.1 .

SUBPART 1.2. Other Definitions . Terms for which meanings are provided in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment Agreement with such meanings.

PART II
AMENDMENT AND RESTATEMENT OF THE
CREDIT AGREEMENT

SUBPART 2.1. Amendment to Article I . Article I of the Existing Credit Agreement is hereby amended in accordance with Subparts 2.1.1 and 2.1.2 .

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 the First Amendment, dated as of June 24, 2005, among the Borrower and the Lenders party thereto.

“ Redemption ” means the redemption by WW.com of all of the Capital Securities of WW.com owned by ARTAL.

“ Redemption Debt ” means the Indebtedness incurred by WW.com and its Subsidiaries to fund the Redemption as such Indebtedness may be Refinanced from time to time.

“ WW.com ” means WeightWatchers.com, Inc. a Delaware corporation.

“ Target Date ” means January 31, 2007.

SUBPART 2.1.2. The following definitions set forth in Section 1.1 of the Existing Credit Agreement are modified as follows:

(a) “Debt” is amended by inserting the following proviso at the end of such definition prior to the “.” at the end thereof:

provided that Indebtedness of WW.com and its Subsidiaries shall only be included as Debt if either: (x) the Target Date has occurred but the Redemption has not occurred or (y) the Redemption has occurred and the Redemption Debt is no longer outstanding

(b) “Interest Expense” is amended by inserting the following proviso at the end of such definition prior to the “.” at the end thereof:

provided that interest expense of WW.com and its Subsidiaries shall only be included as Interest Expense if either: (x) the Target Date has occurred but the

Redemption has not occurred or (y) the Redemption has occurred and the Redemption Debt is no longer outstanding.

(c) “Net Income” is amended by inserting the following proviso at the end of such definition prior to the “.” at the end thereof:

provided that net income of WW.com and its Subsidiaries shall only be included as Net Income if either: (x) the Target Date has occurred but the Redemption has not occurred or (y) the Redemption has occurred and the Redemption Debt is no longer outstanding

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 2.2.10 .

SUBPART 2.2.1. Section 7.1.4 of the Existing Credit Agreement is hereby amended by inserting the parenthetical “(other than those with respect to WW.com and its Subsidiaries so long as WW.com and its Subsidiaries are not required to be Guarantors hereunder)” after the word “Section” in the last sentence of such Section.

SUBPART 2.2.2. Section 7.1.8 of the Existing Credit Agreement is hereby amended by inserting the parenthetical “(other than WW.com and its Subsidiaries so long as WW.com and its Subsidiaries are not required to be Guarantors hereunder)” after the words “U.S. Subsidiary” each time they appear in such Section.

SUBPART 2.2.3.Clause (a) of Section 7.1.7 of the Existing Credit Agreement is hereby amended by inserting the following proviso immediately after the phrase “as the case may be” but prior to the “; and” at the end of such clause:

provided, however , that WW.com and its U.S. Subsidiaries shall only be required to execute a supplement to the Subsidiary Guaranty, a supplement to the WWI Security Agreement and a Mortgage, if either: (x) the Target Date has occurred but the Redemption has not occurred or (y) the Redemption has occurred and the Redemption Debt is no longer outstanding

SUBPART 2.2.4. Clause (b) of Section 7.1.7 of the Existing Credit Agreement is hereby amended by inserting the following proviso immediately after the phrase “as the Administrative Agent may reasonably require” but prior to the “.” at the end of such clause:

and provided , further , that the Borrower and WW.com and its U.S. Subsidiaries shall only be required to pledge the Capital Securities of WW.com and its Subsidiaries, as applicable, if either: (x) the Target Date has occurred but the Redemption has not occurred or (y) the Redemption has occurred and the Redemption Debt is no longer outstanding

SUBPART 2.2.5. Section 7.2.2 of the Existing Credit Agreement is hereby amended by deleting the word “and” from the end of clause (j) thereof, inserting the word “and” at the end of clause (k) thereof and inserting the following new clause (l) immediately after clause (k) thereof:

(l) Redemption Debt in an amount not to exceed $250,000,000;

SUBPART 2.2.6. Section 7.2.3 of the Existing Credit Agreement is hereby amended by deleting the word “and” from the end of clause (j) thereof, and inserting new clauses (l) and (m) immediately after clause (k) thereof:

(l) Liens granted by WW.com to secure payment of Indebtedness of the type permitted and described in clause (l) of Section 7.2.2 ; and

(m) Liens on Capital Securities of WW.com granted by the Borrower to secure payment of Indebtedness of the type permitted and described in clause (l) of Section 7.2.2 .

SUBPART 2.2.7. Section 7.2.5 of the Existing Credit Agreement is hereby amended by deleting the word “and” from the end of clause (m) thereof and inserting the following new clauses (o) and (p) immediately after clause (n) thereof:

(o) other Investments made by the Borrower consisting of the exercise of warrants to purchase Capital Securities of WW.com and the purchase of Capital Securities of WW.com from any Person other than ARTAL in an amount not to exceed $150,000,000; and

(p) at any time WW.com and its U.S. Subsidiaries are not required to be Guarantors, other Investments made by WW.com and its Subsidiaries;

SUBPART 2.2.8. Section 7.2.9 of the Existing Credit Agreement is hereby amended by deleting the word “or” from the end of clause (b) thereof, replacing the “.” at the end of clause (c) thereof with “; or” and inserting the following new clause (d) immediately after clause (c) thereof:

(d) at any time WW.com and its U.S. Subsidiaries are not required to be Guarantors, Dispositions made by WW.com and its Subsidiaries;

SUBPART 2.2.9. Section 7.2.11 of the Existing Credit Agreement is hereby amended by deleting the word “and” at the end of clause (a) thereof, replacing the “.” at the end of clause (b) thereof with “; and” and inserting the following new clause (c) immediately after clause (b) thereof:

SUBPART 2.2.10. Section 7.2.12 of the Existing Credit Agreement is hereby amended by replacing the word “or” at the end of clause (iv) in the parenthetical in the first sentence thereof with a “,”, and inserting the following new clause (vi) immediately after clause (v) thereof:

or (vi) in the case of (a)(i) and (b) , any restrictions with respect to WW.com imposed pursuant to the loan agreement entered into in respect of the Redemption Debt

PART III
CONDITIONS TO EFFECTIVENESS

SUBPART 3.1. Effective Date . This Amendment Agreement shall become effective on the date (the “ First Amendment Effective Date ”) when all of the conditions set forth in this Part have been satisfied.

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 Borrower and the Required Lenders.

SUBPART 3.1.2. Satisfactory Legal Form . All documents executed or submitted pursuant hereto by or on behalf of the Borrower 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, documents or instruments as the Administrative Agent or such counsel may reasonably request.

PART IV
REPRESENTATIONS AND WARRANTIES

To induce the Lenders to enter into this Amendment Agreement, the Borrower represents and warrants to the Lenders as set forth below.

SUBPART 4.1. Validity, etc. This Amendment Agreement constitutes the legal, valid and binding obligation of each Borrower enforceable 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.

SUBPART 4.2. Representations and Warranties, etc. Both before and after giving effect to this Amendment Agreement, the statements set forth in Section 5.2.1 of the Credit Agreement are true and correct.

PART V
MISCELLANEOUS

SUBPART 5.1. Cross-References . References in this Amendment Agreement to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendment Agreement.

SUBPART 5.2. Loan Document Pursuant to Existing Credit Agreement . This Amendment Agreement is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement and, after the First Amendment Effective Date, the Credit Agreement.

SUBPART 5.3. Successors and Assigns . This Amendment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SUBPART 5.4. Counterparts . This Amendment Agreement may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment Agreement.

SUBPART 5.5. Governing Law . THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH 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 5.6. Release . Upon the consummation of the Redemption and the incurrence of the Redemption Debt, the Lenders hereby release any Lien they have or the Administrative Agent has on any Capital Securities of WW.com owned by the Borrower on the date hereof until such time, if ever, as the Borrower is required to grant and perfect a Lien on such Capital Securities to the Administrative Agent for the benefit of the Lenders pursuant to the terms of the Credit Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

WEIGHT WATCHERS INTERNATIONAL, INC.


By:	/s/ Linda Huett
		Name: Linda Huett
		Title: President and Chief Executive Officer



[INSERT NAME OF LENDER]


By:
	Name:

EXHIBIT 31.1

CERTIFICATION

I, Linda Huett, President and Chief Executive Officer of Weight Watchers International, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Weight Watchers International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15 (f) and 15d – 15 (f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2005	By: /s/ LINDA HUETT
		Linda Huett
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, Ann M. Sardini, Chief Financial Officer of Weight Watchers International, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Weight Watchers International, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2005	By: /s/ ANN M. SARDINI
		Ann M. Sardini
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Weight Watchers International, Inc. (the “Company”) on Form 10-Q for the period ended July 2, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Linda Huett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 11, 2005	By: /s/ LINDA HUETT
			Linda Huett
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Weight Watchers International, Inc. (the “Company”) on Form 10-Q for the period ended July 2, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ann M. Sardini, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2005	By: /s/ ANN M. SARDINI
		Ann M. Sardini
		Chief Financial Officer
		(Principal Financial and Accounting Officer)