-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UYYp87CVOVmGn8lOZ/o6UB54yuff/FSBWAtrDpJ4kEICQqyNPTg5XGfgsWVDe212 19ossyUZUKrmubenuIXjMw== 0000912057-99-008057.txt : 19991203 0000912057-99-008057.hdr.sgml : 19991203 ACCESSION NUMBER: 0000912057-99-008057 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 67 FILED AS OF DATE: 19991202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS INTERNATIONAL INC CENTRAL INDEX KEY: 0000105319 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 116040273 STATE OF INCORPORATION: VA FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005 FILM NUMBER: 99768106 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 58 WW FOOD CORP CENTRAL INDEX KEY: 0001099641 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132895206 STATE OF INCORPORATION: NY FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-01 FILM NUMBER: 99768107 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAIST WATCHERS INC CENTRAL INDEX KEY: 0001099643 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-02 FILM NUMBER: 99768108 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAIST WATCHERS CAMPS INC CENTRAL INDEX KEY: 0001099644 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 112193880 STATE OF INCORPORATION: NY FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-03 FILM NUMBER: 99768109 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: W W CAMPS & SPAS INC CENTRAL INDEX KEY: 0001099646 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-04 FILM NUMBER: 99768110 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS DIRECT INC CENTRAL INDEX KEY: 0001099647 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 113172982 STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-05 FILM NUMBER: 99768111 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: W W TWENTYFIRST CORP CENTRAL INDEX KEY: 0001099649 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132592960 STATE OF INCORPORATION: NY FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-06 FILM NUMBER: 99768112 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: W W WEIGHT REDUCTION SERVICES INC CENTRAL INDEX KEY: 0001099650 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 112393074 STATE OF INCORPORATION: NY FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-07 FILM NUMBER: 99768113 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: W W I EUROPEAN SERVICES LTD CENTRAL INDEX KEY: 0001099651 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 112530535 STATE OF INCORPORATION: NY FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-08 FILM NUMBER: 99768114 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: W W INVENTORY SERVICE CORP CENTRAL INDEX KEY: 0001099652 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 113025305 STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-09 FILM NUMBER: 99768115 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS NORTH AMERICA INC CENTRAL INDEX KEY: 0001099653 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 521656141 STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-10 FILM NUMBER: 99768116 BUSINESS ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163901400 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS UK HOLDINGS LTD CENTRAL INDEX KEY: 0001099654 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-11 FILM NUMBER: 99768117 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD CENTRAL INDEX KEY: 0001099655 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-12 FILM NUMBER: 99768118 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS UK LTD CENTRAL INDEX KEY: 0001099656 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-13 FILM NUMBER: 99768119 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS EXERCISE LTD CENTRAL INDEX KEY: 0001099657 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-14 FILM NUMBER: 99768120 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS ACCESSORIES & PUBLICATIONS LTD CENTRAL INDEX KEY: 0001099658 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-15 FILM NUMBER: 99768121 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS FOOD PRODUCTS LTD CENTRAL INDEX KEY: 0001099659 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-16 FILM NUMBER: 99768122 BUSINESS ADDRESS: STREET 1: KIDSWELL PARK HOUSE STREET 2: MAIDENHEAD BERSHIRE CITY: ENGLAND BUSINESS PHONE: 011441628415200 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS NEW ZEALAND LTD CENTRAL INDEX KEY: 0001099660 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-17 FILM NUMBER: 99768123 BUSINESS ADDRESS: STREET 1: C/O DAVIS ACCOUNTANTS 28 DAVIS AVENUE STREET 2: PARK VIEW TOWER 4TH FLOOR CITY: MANHATTAN CITY BUSINESS PHONE: 0116492622304 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS INTERNATIONAL PTY CENTRAL INDEX KEY: 0001099661 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-18 FILM NUMBER: 99768124 BUSINESS ADDRESS: STREET 1: 98 ARTHUR STREET 10TH FLOOR STREET 2: 2060 NSW AUSTRALIA CITY: NORTH SYDNEY BUSINESS PHONE: 01161299281300 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORTUITY PTY LTD CENTRAL INDEX KEY: 0001099663 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-19 FILM NUMBER: 99768125 BUSINESS ADDRESS: STREET 1: 98 ARTHUR STREET 10TH FLOOR STREET 2: 2060 NSW AUSTRALIA CITY: NORTH SYDNEY BUSINESS PHONE: 01161299281300 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUTBUSTERS PTY LTD CENTRAL INDEX KEY: 0001099664 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92005-20 FILM NUMBER: 99768126 BUSINESS ADDRESS: STREET 1: 98 ARTHUR STREET 10TH FLOOR STREET 2: 2060 NSW AUSTRALIA CITY: NORTH SYDNEY BUSINESS PHONE: 01161299281300 MAIL ADDRESS: STREET 1: 175 CROSSWAYS PARK WEST CITY: WOODBURY STATE: NY ZIP: 11797 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ WEIGHT WATCHERS INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) VIRGINIA 7299 11-6040273 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
------------------------ 175 CROSSWAYS PARK WEST WOODBURY, NEW YORK 11797 (516) 390-1400 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------ ROBERT W. HOLLWEG, ESQ. WEIGHT WATCHERS INTERNATIONAL, INC. 175 CROSSWAYS PARK WEST WOODBURY, NEW YORK 11797 (516) 390-1400 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ WITH A COPY TO: RISE B. NORMAN, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 (212) 455-2000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration number of the earlier effective Registration Statement for the same offering. / /____________ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Registration Statement number of the earlier effective Registration Statement for the same offering. / /____________ ------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE 13% Senior Subordinated Notes due 2009...... $150,000,000 100% $150,000,000 $41,700.00 13% Senior Subordinated Notes due 2009...... [EURO]100,000,000 100% [EURO]100,000,000 $27,948.73 Guarantees of 13% Senior Subordinated Notes $150,000,000 100% $150,000,000 due 2009(2)............................... [EURO]100,000,000 100% [EURO]100,000,000 (3)
(1) Estimated solely for the purpose of calculating the registration fee. (2) See inside facing page for additional registrant guarantors. (3) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no separate fee for the Guarantees is payable. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANT GUARANTORS
EXACT NAME OF STATE OR OTHER I.R.S. ADDRESS INCLUDING ZIP CODE, REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER AND TELEPHONE NUMBER INCLUDING AREA CODE, AS SPECIFIED INCORPORATION OR IDENTIFICATION OF REGISTRANT GUARANTOR'S IN ITS CHARTER ORGANIZATION NUMBER PRINCIPAL EXECUTIVE OFFICES -------------- ------------ ------ --------------------------- 58 WW Food Corp. New York 13-2895206 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 Waist Watchers, Inc. Delaware N/A 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 Weight Watchers Camps, Inc. New York 11-2193880 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 W.W. Camps and Spas, Inc. Delaware N/A 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 Weight Watchers Direct, Inc. Delaware 11-3172982 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 W/W Twentyfirst Corporation New York 13-2592960 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 W.W. Weight Reduction New York 11-2393074 175 Crossways Park West Services, Inc. Woodbury, NY 11797 (516) 390-1400 W.W.I. European Services, New York 11-2530535 175 Crossways Park West Ltd. Woodbury, NY 11797 (516) 390-1400 W.W. Inventory Service Corp. Delaware 11-3025305 175 Crossways Park West Woodbury, NY 11797 (516) 390-1400 Weight Watchers North Delaware 52-1656141 175 Crossways Park West America, Inc. Woodbury, NY 11797 (516) 390-1400 Weight Watchers UK Holdings United Kingdom N/A Kidswell Park House Ltd Kidswell Park Drive Maidenhead, Berkshire SL6 8YT England 44-1628-415200 Weight Watchers United Kingdom N/A Kidswell Park House International Holdings Ltd Kidswell Park Drive Maidenhead, Berkshire SL6 8YT England 44-1628-415200
EXACT NAME OF STATE OR OTHER I.R.S. ADDRESS INCLUDING ZIP CODE, REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER AND TELEPHONE NUMBER INCLUDING AREA CODE, AS SPECIFIED INCORPORATION OR IDENTIFICATION OF REGISTRANT GUARANTOR'S IN ITS CHARTER ORGANIZATION NUMBER PRINCIPAL EXECUTIVE OFFICES -------------- ------------ ------ --------------------------- Weight Watchers (U.K.) United Kingdom N/A Kidswell Park House Limited Kidswell Park Drive Maidenhead, Berkshire SL6 8YT England 44-1628-415200 Weight Watchers (Exercise) United Kingdom N/A Kidswell Park House Ltd. Kidswell Park Drive Maidenhead, Berkshire SL6 8YT England 44-1628-415200 Weight Watchers United Kingdom N/A Kidswell Park House (Accessories & Kidswell Park Drive Publications) Ltd Maidenhead, Berkshire SL6 8YT England 44-1628-415200 Weight Watchers United Kingdom N/A Kidswell Park House (Food Products) Limited Kidswell Park Drive Maidenhead, Berkshire SL6 8YT England 44-1628-415200 Weight Watchers New Zealand N/A c/o Davies Accountants New Zealand Limited Park View Tower, 4(th) Floor 28 Davies Avenue Manakau City, New Zealand 64-9-262-2304 Weight Watchers Australia N/A 98 Arthur Street International Pty Limited 10(th) Floor North Sydney 2060 NSW Australia 61-2-9928-1300 Fortuity Pty Ltd Australia N/A 98 Arthur Street 10(th) Floor North Sydney 2060 NSW Australia 61-2-9928-1300 Gutbusters Pty Ltd Australia N/A 98 Arthur Street 10(th) Floor North Sydney 2060 NSW Australia 61-2-9928-1300
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED DECEMBER 2, 1999 Prospectus $150,000,000 [EURO]100,000,000 [LOGO]
WEIGHT WATCHERS INTERNATIONAL, INC. Offer to Exchange All Outstanding 13% Senior Subordinated Notes due 2009 for 13% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933 The Exchange Offer - - We will exchange all old notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradeable. - - You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer. - - The exchange offer expires at 5:00 p.m., New York City time, on , 2000, unless extended. We do not currently intend to extend the expiration date. The Exchange Notes - The terms of the exchange notes to be issued in the exchange offer are substantially identical to the old notes, except that the exchange notes will be freely tradeable. Resales of Exchange Notes - The exchange notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. --------------------- Application has been made to list the euro notes on the Luxembourg Stock Exchange. --------------------- You should consider carefully the risk factors beginning on page 17 of this prospectus before participating in the exchange offer. --------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. --------------------- The date of this prospectus is December , 1999. -------------- TABLE OF CONTENTS
PAGE -------- PROSPECTUS SUMMARY..................... 1 RISK FACTORS........................... 17 EXCHANGE RATE INFORMATION.............. 26 SOURCES AND USES OF FUNDS.............. 27 CAPITALIZATION......................... 28 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.... 29 SELECTED HISTORICAL CONDENSED COMBINED FINANCIAL INFORMATION................ 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................... 42 INDUSTRY............................... 50 BUSINESS............................... 52 MANAGEMENT............................. 66 PRINCIPAL STOCKHOLDERS................. 72 DESCRIPTION OF CAPITAL STOCK........... 73
CERTAIN RELATIONSHIPS AND RELATED
PAGE -------- TRANSACTIONS......................... 74 THE EXCHANGE OFFER..................... 79 DESCRIPTION OF NOTES................... 89 DESCRIPTION OF NEW CREDIT FACILITIES... 135 CERTAIN U.S. FEDERAL TAX CONSIDERATIONS....................... 137 PLAN OF DISTRIBUTION................... 141 LUXEMBOURG LISTING INFORMATION......... 142 WHERE YOU CAN FIND MORE INFORMATION.... 143 LEGAL MATTERS.......................... 143 EXPERTS................................ 143 INDEX TO COMBINED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE..... F-1 VALUATION AND QUALIFYING ACCOUNTS SCHEDULE............................. S-1
-------------- i PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO "US," "WE" OR "OUR" ARE TO WEIGHT WATCHERS INTERNATIONAL, INC. AND ITS SUBSIDIARIES. REFERENCES TO PRO FORMA DATA REFLECT THE TRANSACTIONS DESCRIBED UNDER "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" WHICH WE REFER TO AS THE "TRANSACTIONS". HISTORICAL FINANCIAL INFORMATION IN THIS PROSPECTUS IS DERIVED FROM THE COMBINED FINANCIAL STATEMENTS OF OUR CLASSROOM BUSINESS, WHICH CONSISTS OF WEIGHT WATCHERS INTERNATIONAL, INC. AND ITS SUBSIDIARIES AND SUBSIDIARIES OF H.J. HEINZ COMPANY THAT CONDUCT THE WEIGHT WATCHERS BUSINESS IN AUSTRALIA AND NEW ZEALAND. PRIOR TO THE TRANSACTIONS, WE ACQUIRED THE WEIGHT WATCHERS BUSINESSES IN AUSTRALIA AND NEW ZEALAND AND THEIR RESULTS ARE INCLUDED IN OUR CONSOLIDATED FINANCIAL STATEMENTS. WEIGHT WATCHERS INTERNATIONAL, INC. We are the largest provider of weight control programs in the world. We operate in 29 countries through a network of company-owned and franchise operations. At the core of our business are our weekly meetings, in which we present our scientifically designed program, incorporating group support and education about healthy eating patterns, behavior modification and physical activity. In our fiscal year ended April 24, 1999, we estimate we held an average of approximately thirty-three thousand meetings worldwide each week and our average weekly attendance exceeded one million members. An estimated 9,000 classroom leaders, all of whom have lost weight on and are specially trained to teach our program, run our meetings. We have developed the WEIGHT WATCHERS program through continuous improvement over our 36 year history, and we believe our brand name is recognized as the standard for healthy, safe and drug free weight control. Careful management of our brand identity and reputation is a fundamental element of our long-term success. According to a Gallup study conducted in 1998, more than 84% of adults and 94% of dieting adults in the United States recognize our brand. In an independent survey of U.S. doctors in 1998, among those doctors who had recommended weight loss programs in the preceding year, 65% recommended WEIGHT WATCHERS. The next most frequently recommended program received recommendations from less than 13% of those doctors. We believe the combination of our brand recognition, extensive global network and our 9,000 trained classroom leaders provides us with a significant competitive advantage. We believe the quality, flexibility and effectiveness of our program enable us to attract new members and contribute to the high level of repeat enrollments. Our flexible program: - allows members to attend on a pay-as-you-go basis at an average cost of less than $10 per weekly meeting - allows our members to choose any food they want and does not require the purchase or consumption of prepackaged meals - offers meetings at multiple and convenient locations Our members demonstrate consistent and predictable repeat enrollment patterns that support our belief that weight control is a life-long challenge. For example, in our North American company-owned (NACO) operations: - our members attend an average of 8 weekly sessions in an enrollment cycle - approximately 75% of returning members re-enroll in the future - since 1991, our members have enrolled in an average of four separate program cycles 1 For the twelve months ended July 24, 1999, on a pro forma basis, we generated revenue of $403.6 million and adjusted EBITDA (as defined) of $100.3 million. COMPETITIVE STRENGTHS We believe that we will be able to develop our business because we possess the following attributes: - entrepreneurial management; - continual program enhancement and development; - strong domestic and international franchise operations; and - a variable cost structure with a high return on invested capital. INDUSTRY OVERVIEW The demographics of overweight people drive the demand for our programs. The number of overweight and obese people in the United States and other developed countries has increased greatly over the past four decades due to improving living standards, the aging of the population (as people tend to gain weight with age) and increasingly sedentary lifestyles. The National Institute of Health recently issued a report indicating that approximately 55% of American adults are overweight or obese. A 1997 World Health Organization publication titled, "Obesity: Preventing and Managing the Global Epidemic," reported that the world's population is becoming overweight at a rapid pace and that there exists an urgent need to deal with this problem. In addition, the health risks associated with being overweight are becoming increasingly recognized. The World Health Organization stated: "The prevalence of overweight and obesity is escalating rapidly worldwide" and that "obesity should be regarded as today's principal neglected public health problem." In addition, our market is growing because of the following other trends: - greater awareness that achieving/maintaining a healthy weight will reduce the risk of serious medical problems and significantly improve the quality of life - the recognition that drugs are not an effective stand-alone remedy and may have undesirable side effects - an increasing willingness of employers and insurers to promote and contribute towards the cost of weight loss programs HISTORY Since our founding in 1963, we have grown to be the leading commercial weight control program in the world. We have developed our program around the core principles of group support, behavior modification, diet and exercise and have implemented these principles in our programs world-wide. Heinz acquired us in 1978. In fiscal year 1990, Heinz altered our successful model by introducing the sale of prepackaged meals through the NACO network. These changes forced our group leaders to become food sales people and retail managers for food products, detracting from their function as role models and motivators for our members. This caused a significant drop in customer satisfaction and employee morale, and NACO's attendance declined. Prior to the introduction of prepackaged meals sales in fiscal year 1990, NACO's annual classroom attendance was 12.9 million, but by fiscal year 1997, attendance had dropped to 7.8 million. In contrast, in our international operations where the prepackaged meals sales strategy was not implemented, our attendance remained stable over this period. As we turned our North American focus to promoting and selling our prepackaged meals, our program development began to suffer. In response, we shifted to a more decentralized management 2 approach allowing the management of our international operations to begin to develop on their own local business strategies and program innovations. This approach was successful and by 1996 our international growth began to accelerate rapidly. Beginning in 1997, we restructured our NACO operations by eliminating the prepackaged meals program, improving customer service, restoring employee morale and introducing 1-2-3 SUCCESS and LIBERTY/LOYALTY. 1-2-3 SUCCESS is our state-of-the-art diet that helps guide dieters to low fat foods instead of high fat foods. LIBERTY/LOYALTY is a pricing structure that provides members the option of committing to consecutive weekly attendance and paying a lower weekly fee and missed meeting fees (Loyalty) or paying a higher weekly fee without the missed meeting fees (Liberty). In connection with the discontinuation of our prepackaged meals program, we eliminated over $18.0 million in costs. As a result of these efforts, we have grown NACO attendance by 40% from 7.8 million in fiscal year 1997 to 10.9 million in fiscal year 1999. Our near-term objective is to surpass the NACO attendance level of 12.9 million experienced prior to the introduction of our prepackaged meals program. GROWTH STRATEGY We believe we have multiple opportunities for growth which will be enhanced by our new focus on the sharing of best practices across our world-wide network. These opportunities include: - increasing attendance through our existing classroom network; - expanding our customer base; - growing product sales and licensing royalties; - expanding our geographic presence; and - participating in Internet growth. 3 THE TRANSACTIONS On July 22, 1999, we and our then-existing parent company, Heinz, entered into a recapitalization and stock purchase agreement with an affiliate of Artal Luxembourg S.A. and one of its affiliates. Under the agreement, on September 29, 1999: - we effected a stock split in which each share of our common stock, par value $0.25 per share, was split into 58,747.60 shares of our common stock, no par value per share; - we redeemed a portion of our shares of our common stock held by Heinz for $349.5 million (the "Redemption"), which we paid for with $324.5 million of cash and $25.0 million of our redeemable preferred stock which was issued to Heinz; and - after the Redemption, Artal purchased 94% of our remaining common stock from Heinz for $223.7 million (the "Equity Purchase"). After the completion of the Redemption and the Equity Purchase, Artal owned 94% of our common stock and Heinz owned 6% of our common stock. On September 30, 1999, Artal sold 4.1% of our common stock to five investors. In order to finance the foregoing transactions, we: - entered into and made initial borrowings of $239.0 million under, new senior secured bank credit facilities (the "New Credit Facilities") which provide for borrowings of up to $267.0 million, and - issued the notes. We used the proceeds from the notes and the New Credit Facilities to finance the cash portion of the Redemption, to refinance debt incurred in connection with the acquisition of the businesses that conduct our business in Australia and New Zealand and to pay transaction fees and expenses. As a result of the Transactions, we have a stepped-up tax basis in our assets, which is expected to reduce our future cash tax payments by $72.1 million. SOURCES AND USES OF FUNDS The following table sets forth the sources and uses of funds in connection with the foregoing transactions. (IN (IN SOURCES: MILLIONS) USES: MILLIONS) Recapitalization New Credit Facilities(1)........ $239.0 consideration(2)................ $573.2 Senior Subordinated Notes Refinancing of debt(4).......... 147.5 due 2009...................... 255.0 Heinz rollover equity(3)........ 14.3 Artal Equity Purchase(2)........ 223.7 Transaction fees and expenses... 22.0 ------ ------ Total cash sources.......... 717.7 Redeemable preferred stock issued to Heinz(2)............ 25.0 Heinz rollover equity(3)........ 14.3 ------ Total Sources........... $757.0 Total Uses...................... $757.0 ====== ======
- ------------------------ (1) Represents borrowings under the New Credit Facilities made on the closing date of the Transactions, consisting of $75.0 million under the term loan A facility, $75.0 million under the 4 term loan B facility, $87.0 million under the transferable loan certificate ("TLC") facility and $2.0 million under the revolving credit facility. Upon consummation of the Transactions, we had $28.0 million of additional borrowing capacity under the revolving credit facility. (2) The recapitalization consideration consisted of (a) $349.5 million for the Redemption, which we paid for with $324.5 million of cash and $25.0 million of redeemable preferred stock issued to Heinz and (b) $223.7 million for the Equity Purchase of 94% of our common stock by Artal. (3) Represents the imputed value of Heinz's remaining ownership, which we refer to as rollover equity, of 6% of our issued and outstanding common stock following the recapitalization. (4) Reflects the refinancing of debt which we incurred after July 24, 1999 and prior to the Transactions relating to the acquisition of the businesses that conduct our business in Australia and New Zealand. THE SPONSOR In 1985, The Invus Group, Ltd. was independently formed in New York and engaged by Artal Luxembourg S.A., a private European investment company, to develop and implement a private equity investment strategy. Over the past fifteen years, Invus has focused on creating value primarily through building and enhancing strong branded businesses. Invus works actively with its management teams in developing the portfolio company's strategic and operational plans. Invus' diverse experience with branded businesses includes the creation of the $100 million Polaner All Fruit brand, revitalization and growth of the Keebler cookies and cracker brand, and the development and enhancement of license relationships with a number of brands including DKNY and Timberland. Keebler Foods Company and the Sunshine Biscuit Company were acquired in 1996 for approximately $650 million and the combined company achieved growth, synergies and cost savings ahead of schedule, completing a successful initial public offering in January 1998 and a second equity offering in 1999. THE ISSUER Weight Watchers International, Inc. is a Virginia corporation incorporated in 1974. Our executive offices are located at 175 Crossways Park West, Woodbury, NY 11797. Our telephone number is 516-390-1400. 5 SUMMARY OF TERMS OF THE EXCHANGE OFFER On September 29, 1999, we completed the private offering of the old notes. References to "notes" in this prospectus are references to both the old notes and the exchange notes. We entered into a registration rights agreement with the initial purchasers in the private offering in which we agreed to deliver to you this prospectus and we agreed to complete the exchange offer within 220 days after the date of original issuance of the old notes. You are entitled to exchange in the exchange offer your old notes for exchange notes which are identical in all material respects to the old notes except that: - the exchange notes have been registered under the Securities Act; - the exchange notes are not entitled to certain registration rights which are applicable to the old notes under the registration rights agreement; and - certain contingent interest rate provisions are no longer applicable. The Exchange Offer................... We are offering to exchange up to $150.0 million aggregate principal amount of dollar-denominated exchange notes for up to $150.0 million aggregate principal amount of dollar-denominated old notes, and we are offering to exchange up to [EURO]100.0 million aggregate principal amount of euro-denominated exchange notes for up to [EURO]100.0 million aggregate principal amount of euro- denominated old notes. Old notes may be exchanged only in integral multiples of $1,000 or [EURO]1,000. Resales.............................. Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for old notes may be offered for resale, resold and otherwise transferred by you, unless you are an "affiliate" of Weight Watchers International, Inc. within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that you are acquiring the exchange notes in the ordinary course of your business and that you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes. Each participating broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See "Plan of Distribution." Any holder of old notes who - is an affiliate of Weight Watchers International, Inc.; - does not acquire exchange notes in the ordinary course of its business; or
6 - tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes, cannot rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters and, in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the exchange notes. Expiration Date; Withdrawal of Tenders............................ The exchange offer will expire at 5:00 p.m., New York City time, on , 2000, or on a later date and time to which we may extend it, referred to as the "expiration date". We do not currently intend to extend the expiration date. A tender of old notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. The expiration date for the exchange offer will not in any event be extended to a date later than , 2000. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. Certain Conditions to the Exchange Offer.............................. The exchange offer is subject to customary conditions, which we may waive. Please read the section captioned "The Exchange Offer--Certain Conditions to the Exchange Offer" of this prospectus for more information regarding the conditions to the exchange offer. Procedures for Tendering Old Notes... If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the old notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. If you hold old notes through The Depository Trust Company ("DTC") and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things: - any exchange notes that you receive will be acquired in the ordinary course of your business; - you have no arrangement or understanding with any person or entity to participate in a distribution of the exchange notes;
7 - if you are a broker-dealer that will receive exchange notes for your own account in exchange for old notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes; and - you are not an "affiliate," as defined in Rule 405 of the Securities Act, of Weight Watchers International, Inc. or, if you are an affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act. Special Procedures for Beneficial Owners............................. If you are a beneficial owner of old notes which are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender the old notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the accompanying letter of transmittal and delivering your old notes, either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. Guaranteed Delivery Procedures......................... If you wish to tender your old notes and your old notes are not immediately available or you cannot deliver your old notes, the accompanying letter of transmittal or any other documents required by the accompanying letter of transmittal or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date, you must tender your old notes according to the guaranteed delivery procedures set forth in this prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." Effect on Holders of Old Notes.......................... As a result of the making of, and upon acceptance for exchange of all validly tendered old notes pursuant to the terms of the exchange offer, we will have fulfilled a covenant contained in the registration rights agreement and, accordingly, we will not be obligated to pay liquidated damages as described in the registration rights agreement. If you are a holder of old notes and you do not tender your old notes in the exchange offer, you will continue to hold the old notes and you will be entitled to all the rights and limitations applicable to the old notes in the indentures, except for any rights under the registration rights agreement that by their terms terminate upon the consummation of the exchange offer. To the extent that old notes are tendered and accepted in this exchange offer, the trading market for old notes could be adversely affected.
8 Consequences of Failure to Exchange........................... All untendered old notes will continue to be subject to the restrictions on transfer provided for in the old notes and in the indentures. In general, the old notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the old notes under the Securities Act. Certain U.S. Federal Income Tax Considerations..................... The exchange of old notes for exchange notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. See "Certain U.S. Federal Tax Considerations." Use of Proceeds...................... We will not receive any cash proceeds from the issuance of exchange notes pursuant to the exchange offer. Exchange Agent....................... Norwest Bank Minnesota, National Association is the exchange agent for the exchange offer. The address and telephone number of the exchange agent are set forth in the section captioned "Exchange Offer--Exchange Agent" of this prospectus.
9 SUMMARY OF TERMS OF THE EXCHANGE NOTES Issuer............................... Weight Watchers International, Inc. Securities Offered Dollar Notes....................... $150,000,000 aggregate principal amount of 13% Senior Subordinated Notes Due 2009. Euro Notes......................... [EURO]100,000,000 aggregate principal amount of 13% Senior Subordinated Notes Due 2009. Dollar Notes Interest......................... 13% per year. Interest Payment Dates........... April 1 and October 1 of each year, commencing April 1, 2000. Maturity......................... October 1, 2009. Euro Notes Interest......................... 13% per year. Interest Payment Dates........... April 1 and October 1 of each year, commencing April 1, 2000. Maturity......................... October 1, 2009. Guarantees........................... We will cause each subsidiary (other than certain special purpose vehicles used to lend cash to guarantors under the New Credit Facility) that is a guarantor under the New Credit Facility (the "subsidiary guarantors") to jointly and severally guarantee the old notes and the exchange notes on full and unconditional basis on or before the later of - the date the subsidiary becomes a guarantor under the New Credit Facility and - July 29, 2000. As of the date of this prospectus, the notes are guaranteed by the subsidiaries listed under "Description of Notes--Guarantees". Ranking.............................. The notes are unsecured and subordinated in right of payment to all of our existing and future senior indebtedness, including all of our borrowings under the New Credit Facility. The notes rank equally in right of payment with all of our existing and future senior subordinated indebtedness and senior to all of our existing and future subordinated obligations. We are a holding company and therefore we derive a significant proportion of our operating income and cash flow from our subsidiaries. The note guarantees are unsecured and subordinated in right of payment to all existing and future senior indebtedness of the subsidiary guarantors, including all guarantees of the subsidiary guarantors under the New Credit Facility. The guarantees rank equally in right of payment with all of the existing and future senior subordinated indebtedness of the subsidiary guarantors and senior to all of the existing and future subordinated obligations of the subsidiary guarantors. As of July 24, 1999, on a pro forma basis, we had outstanding:
10 - $239.0 million of senior indebtedness, all of which would have been secured indebtedness, excluding unused commitments under the New Credit Facility; - no senior subordinated indebtedness (other than the notes) and no indebtedness that is subordinate or junior in right of repayment to the notes; and - $5.1 million in total liabilities, excluding accrued restructuring costs and deferred revenues; and the subsidiary guarantors had outstanding: - no senior indebtedness, excluding their guarantees of indebtedness under the New Credit Facility; - no senior subordinated indebtedness (other than the guarantees) and no indebtedness that is subordinate or junior in right of payment to the guarantees; and - $16.5 million in total liabilities, excluding liabilities owed to us, accrued restructuring costs and deferred revenues. As of July 24, 1999 on a pro forma basis, our subsidiaries that are not guaranteeing the notes had total liabilities, excluding liabilities owed to us, accrued restructuring costs and deferred revenues, of $8.4 million. The indentures permit us and our subsidiaries to incur a significant amount of additional senior indebtedness. Optional Redemption.................. We cannot redeem the notes until October 1, 2004, except as described below. After that date, we can redeem some or all of the notes at the redemption prices listed under the heading "Description of Notes--Optional Redemption" in this prospectus, plus accrued interest. At any time and from time to time before October 1, 2002, we can choose to redeem up to 35% of the original principal amount of each of the dollar and euro notes, including original principal amount of any additional notes, with money that we raise in equity offerings, as long as: - we pay to holders of the notes a redemption price of 113% of the principal amount of the notes we redeem, plus accrued interest, - we redeem the notes within 90 days of completing the equity offering, and - at least 65% of the original principal amount of each of the dollar and euro notes, including the original principal amount of any additional notes, issued remains outstanding after each redemption. Change of Control.................... If there is a change of control, we must give holders of the notes the opportunity to sell to us their notes at a purchase price of 101% of their principal amount, plus accrued interest, unless (1) we have previously provided to the trustee under the indentures governing the notes an irrevocable notice of redemption to redeem all outstanding notes at a time when such redemption is permitted
11 under the indentures or (2) we have exercised our optional change of control call. See "Description of Notes--Change of Control". Optional Change of Control Call...... At any time prior to October 1, 2004, we may redeem all of the notes upon a change of control at a redemption price equal to 100% of the principal amount of the notes plus a premium equal to the greater of (1) 1.0% of the principal amount of the notes or (2) the excess of (a) the present value of (i) the redemption price of the notes on October 1, 2004 plus (ii) all required interest payments due on the notes through October 1, 2004, computed using a discount rate equal to the Treasury Rate, in the case of the dollar notes, and the Bund Rate, in the case of the euro notes, plus 0.50%, over (b) the principal amount of the notes. Restrictive Covenants................ The indentures governing the notes contain covenants that limit our ability and that of our restricted subsidiaries to: - incur additional indebtedness, - pay dividends or distributions on, or redeem or repurchase, our capital stock, - make investments, - engage in transactions with affiliates, - transfer or sell assets, - create restrictions on the payment of dividends or other amounts to us and - consolidate, merge or transfer all or substantially all of our assets and the assets of subsidiaries. For more details, see "Description of Notes--Certain Covenants." Absence of a Public Market for the Exchange Notes...................... The exchange notes generally will be freely transferable but will also be new securities for which there will not initially be a market. Accordingly, we cannot assure you whether a market for the exchange notes will develop or as to the liquidity of any such market. The initial purchasers in the private offering of the old notes have advised us that they currently intend to make a market in the exchange notes. However, they are not obligated to do so, and any market making with respect to the exchange notes may be discontinued without notice. Use of Proceeds...................... There will be no cash proceeds to us from the exchange offer.
RISK FACTORS You should carefully consider the information under the caption "Risk Factors" and all other information in this prospectus before tendering your old notes. 12 SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following Summary Unaudited Pro Forma Condensed Consolidated Financial Information has been derived from the Unaudited Pro Forma Condensed Consolidated Financial Statements and the related notes included elsewhere in this prospectus. The Summary Unaudited Pro Forma Condensed Consolidated Financial Information gives effect to the Transactions. The summary unaudited pro forma consolidated statement of income information and other financial information for the fiscal year ended April 24, 1999 and the quarters ended July 25, 1998 and July 24, 1999 give effect to the Transactions as if they had occurred at April 26, 1998. The summary unaudited pro forma consolidated balance sheet information as of July 24, 1999 gives effect to the Transactions as if they had occurred on such date. The Summary Unaudited Pro Forma Condensed Consolidated Financial Information is for informational purposes only. It does not purport to represent our financial position or the results of our operations that would have actually been obtained had the Transactions in fact occurred as of the assumed dates or for the periods presented, nor purport to be indicative of, or a projection for, our results of operations or financial position for any future period or date. The pro forma adjustments, as described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements included elsewhere, are based on available information and upon certain assumptions which we believe are reasonable. You should read the following Summary Unaudited Pro Forma Condensed Consolidated Financial Information in conjunction with "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus. 13 SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FISCAL QUARTER ENDED FISCAL YEAR ENDED ----------------------------- TWELVE MONTHS ENDED APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 JULY 24, 1999 ----------------- ------------- ------------- ------------------- (IN MILLIONS, EXCEPT RATIOS) STATEMENT OF INCOME INFORMATION: Total revenue....................... $ 399.5 $ 91.2 $ 95.3 $ 403.6 Cost of revenues.................... 177.1 40.7 42.3 178.7 -------- -------- -------- --------- Gross profit...................... 222.4 50.5 53.0 224.9 Marketing expenses.................. 92.7 16.6 13.0 89.1 Selling, general and administrative expenses.......................... 42.6 10.4 10.8 43.0 -------- -------- -------- --------- Operating income.................. 87.1 23.5 29.2 92.8 Interest income..................... 1.0 .1 .2 1.1 Interest expense.................... (57.5) (14.4) (14.4) (57.5) Other expenses, net................. (2.5) (.6) (.5) (2.4) -------- -------- -------- --------- Income before income taxes and minority interests.............. 28.1 8.6 14.5 34.0 Provision for income taxes.......... 13.3 4.0 5.6 14.9 -------- -------- -------- --------- Income before minority interests....................... 14.8 4.6 8.9 19.1 Minority interests.................. .3 .1 .4 -------- -------- -------- --------- Net income........................ 14.5 4.6 8.8 18.7 Dividends on preferred stock........ 1.5 .4 .4 1.5 -------- -------- -------- --------- Net income attributable to common stockholders.................... $ 13.0 $ 4.2 $ 8.4 $ 17.2 ======== ======== ======== ========= OTHER FINANCIAL INFORMATION: EBITDA(1)........................... $ 94.6 $ 25.2 $ 31.0 $ 100.5 Adjusted EBITDA(2).................. 95.3 26.6 31.5 100.3 Depreciation and amortization....... 10.0 2.3 2.3 10.1 Capital expenditures................ 2.5 .3 .3 2.4 Cash interest expense(3)............ 55.4 13.9 13.9 55.4 Ratio of earnings to fixed charges(4)........................ 1.5x 1.6x 2.0x 1.6x Ratio of Adjusted EBITDA to cash interest expense.................. 1.7x 1.9x 2.3x 1.8x Ratio of Adjusted EBITDA less capital expenditures to cash interest expense........................... 1.7x 1.9x 2.2x 1.8x Ratio of total debt to Adjusted EBITDA 4.9x BALANCE SHEET INFORMATION (AT END OF PERIOD): Working capital deficit................................................................ $ (25.9) Total assets........................................................................... 295.1 Total debt and redeemable preferred stock.............................................. 519.0 Total stockholders' deficit............................................................ (263.1)
- ------------------------ (1) EBITDA represents income before income taxes and minority interest plus depreciation, amortization and net interest expense. EBITDA should not be construed as an alternative to 14 operating income or cash flows from operating activities, as determined in accordance with generally accepted accounting principles. We believe that EBITDA is a useful supplement to net income and other income statement data in understanding cash flows generated from operations that are available for taxes, debt service and capital expenditures. However, our method of computation may or may not be comparable to other similarly titled measures of other companies. (2) Adjusted EBITDA equals EBITDA less (a) the amount of revenue recognized under the Warnaco licensing agreement in the fiscal year ended April 24, 1999, net of the average minimum annual cash receipts from that agreement, plus (b) the amount of cost savings that management believes can be achieved as a stand-alone entity, which include savings resulting from certain Heinz related expenses and the reversal of certain one-time charges, and (c) the amount of management incentive bonus expense which would not have been incurred, had a new plan, with higher budgeted performance hurdles, which will be implemented after the closing of the Transactions, been in effect. While we consider the numerical specificity of the foregoing preliminary estimates and the anticipated cost savings to be reasonable, these estimates and savings are based on various assumptions that are subject to inherent uncertainty. The actual cost savings could vary from these estimates. See Note 4 of the Unaudited Pro Forma Condensed Consolidated Financial Statements for the reconciliation of EBITDA to Adjusted EBITDA. (3) Cash interest expense represents pro forma interest expense less amortization of deferred debt issuance costs. (4) Earnings used in computing the ratio of earnings to fixed charges consist of income before income tax expense and minority interest plus fixed charges. Fixed charges consist of interest expense, which includes amortization of deferred financing costs, and one-third of the rental expense from operating leases, which management believes is a reasonable approximation of the interest component of rental expense. 15 SUMMARY HISTORICAL CONDENSED COMBINED FINANCIAL INFORMATION The following tables set forth certain of our historical combined financial information and the related notes. The Summary Historical Condensed Combined Financial Information as of and for the fiscal years ended April 26, 1997, April 25, 1998 and April 24, 1999 has been derived from, and should be read in conjunction with, our audited historical combined financial statements and the related notes, which are included elsewhere in this prospectus. The Summary Historical Condensed Combined Financial Information as of and for the fiscal quarters ended July 25, 1998 and July 24, 1999 has been derived from, and should be read in conjunction with, our unaudited combined financial statements and the related notes included elsewhere in this prospectus. In our opinion, all adjustments (which consist only of normal recurring entries) considered necessary for a fair presentation have been included in our unaudited combined financial statements. Interim results for the fiscal quarter ended July 24, 1999 are not necessarily indicative of, and are not projections for, the results to be expected for the full fiscal year. You should read the following Summary Historical Condensed Combined Financial Information in conjunction with "Selected Historical Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus.
FISCAL YEAR ENDED FISCAL QUARTER ENDED ------------------------------------------------ ----------------------------- APRIL 26, 1997 APRIL 25, 1998 APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 -------------- -------------- -------------- ------------- ------------- (IN MILLIONS, EXCEPT RATIOS) STATEMENT OF INCOME INFORMATION: Total revenue............................. $ 332.7 $ 334.3 $ 404.8 $ 92.3 $ 96.4 Cost of revenues(1)....................... 230.4 160.0 178.9 41.1 42.7 -------- -------- -------- -------- -------- Gross profit............................ 102.3 174.3 225.9 51.2 53.7 Marketing expenses........................ 88.8 86.3 93.1 16.7 13.0 Selling, general and administrative expenses(1)............................. 45.5 44.1 48.9 12.0 12.4 -------- -------- -------- -------- -------- Operating income (loss)................. (32.0) 43.9 83.9 22.5 28.3 Interest income........................... 12.8 13.5 16.0 3.4 3.1 Interest expense.......................... (13.8) (8.6) (8.9) (2.0) (1.4) Other expenses, net....................... (3.3) (4.3) (5.2) (1.3) (1.2) -------- -------- -------- -------- -------- Income (loss) before income taxes and minority interests.................... (36.3) 44.5 85.8 22.6 28.8 Provision for (benefit from) income taxes................................... (12.9) 19.9 36.4 9.6 11.3 -------- -------- -------- -------- -------- Income (loss) before minority interests............................. (23.4) 24.6 49.4 13.0 17.5 Minority interests........................ .6 .8 1.5 .3 .4 -------- -------- -------- -------- -------- Net income (loss)....................... $ (24.0) $ 23.8 $ 47.9 $ 12.7 $ 17.1 ======== ======== ======== ======== ======== OTHER FINANCIAL INFORMATION: Net cash provided by (used in) operating activities.............................. $ 9.7 $ 36.2 $ 59.2 $ (22.7) $ 146.8 Net cash used in investing activities..... (1.4) (4.9) (3.0) (0.2) (0.2) Net cash provided by (used in) financing activities.............................. (4.4) (30.5) (48.9) 20.9 (139.0) EBITDA(2)................................. (21.1) 48.4 88.3 23.4 29.4 Depreciation and amortization............. 14.2 8.8 9.6 2.2 2.3 Capital expenditures...................... 2.7 3.4 2.5 .3 .3 Ratio of earnings to fixed charges(3)..... -- 4.5x 7.8x 9.1x 14.1x BALANCE SHEET INFORMATION (AT END OF PERIOD): Working capital (deficit)................. $ 64.9 $ 65.8 $ 91.2 $ 104.5 $ (18.0) Total assets.............................. 373.0 370.8 371.4 360.5 236.9 Total debt................................ 97.0 41.1 39.6 40.4 32.8 Total parent company investment(4)........ 188.9 229.1 248.9 265.1 144.0
- ---------------------------------- (1) Includes non-recurring restructuring costs of $49.7 million included in cost of revenues and $2.0 million, included in selling, general and administrative expenses for the fiscal year ended April 26, 1997 which reflect the discontinuation of the prepackaged meals program and the elimination of related fixed costs, rationalization of certain product lines and termination and severance costs relating to the reorganization of classroom operations. (2) EBITDA represents income before income taxes and minority interest plus depreciation, amortization and net interest expense. EBITDA should not be construed as an alternative to operating income or cash flows from operating activities, as determined in accordance with generally accepted accounting principles. We believe that EBITDA is a useful supplement to net income and other income statement data in understanding cash flows generated from operations that are available for taxes, debt service and capital expenditures. However, our method of computation may or may not be comparable to other similarly titled measures of other companies. (3) Earnings used in computing the ratio of earnings to fixed charges consist of income (loss) before income tax expense (benefit) and minority interest plus fixed charges. Fixed charges consist of interest expense, which includes amortization of deferred financing costs, and one-third of the rental expense from operating leases, which management believes is a reasonable approximation of the interest component of rental expense. For the year ended April 26, 1997, earnings were insufficient to cover fixed charges by $36.3 million. (4) Includes stockholders' equity. 16 RISK FACTORS BEFORE YOU PARTICIPATE IN THE EXCHANGE OFFER, YOU SHOULD BE AWARE THAT THERE ARE VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE YOU DECIDE TO PARTICIPATE IN THE EXCHANGE OFFER. THERE MAY BE ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE YOUR OLD NOTES. If you do not exchange your old notes for exchange notes under the exchange offer, then you will continue to be subject to the transfer restrictions on the old notes as set forth in the offering memorandum distributed in connection with the offering of the old notes. In general, the old notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the exchange and registration rights agreement, we do not intend to register resales of the old notes under the Securities Act. You should refer to "Prospectus Summary--Summary of Terms of the Exchange Offer" and "The Exchange Offer" for information about how to tender your old notes. The tender of old notes under the exchange offer will reduce the principal amount of the old notes outstanding, which may have an adverse effect upon, and increase the volatility of, the market price of the old notes due to a reduction in liquidity. OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS COULD IMPEDE OUR OPERATIONS AND FLEXIBILITY. As a result of the Transactions, we incurred a substantial amount of debt. Assuming that the Transactions had taken place on July 24, 1999, we would have had as of such date total debt and redeemable preferred stock of $519.0 million and stockholders' deficit of $263.1 million. We would also have had additional availability under our revolving credit facility of $28.0 million. After giving pro forma effect to the Transactions, our interest expense for the twelve months ended July 24, 1999 would have been $57.5 million. After giving pro forma effect to the Transactions, our ratio of earnings to fixed charges for the fiscal year ended April 24, 1999, would have been 1.5 to 1 and for the twelve months ended July 24, 1999 would have been 1.6 to 1. Our high level of debt could have important consequences for you, including the following: - we may have difficulty borrowing money in the future for acquisitions or other purposes, - we will need to use a large portion of the money we earn to pay principal and interest on the New Credit Facilities, the notes and other debt, which will reduce the amount of money available to us to finance our operations and other business activities, - debt under the New Credit Facilities will be secured and will mature prior to the notes, - we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage, and - our debt level makes us more vulnerable to economic downturns and adverse developments in our business. We expect to obtain the money to pay our expenses and to pay the principal and interest on the notes, the New Credit Facilities and other debt from our operations. Our ability to meet our expenses and debt service obligations thus depends on our future performance, which will be affected by financial, business, economic, demographic and other factors. We will not be able to control many of these factors, such as economic conditions, demographics and attitudes toward weight loss and pressure from competitors. We cannot be certain that our earnings will be sufficient to allow us to pay principal and interest on our debt (including the notes) and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, including the notes, 17 sell assets, borrow more money or raise equity. We cannot guarantee that we will be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us or at all. THE NOTES AND SUBSIDIARY GUARANTEES ARE CONTRACTUALLY JUNIOR IN RIGHT OF PAYMENT TO OUR SENIOR DEBT. The notes are contractually junior in right of payment to all of our senior indebtedness and the subsidiary guarantees are contractually junior in right of payment to all senior indebtedness of the subsidiary guarantors. Assuming the Transactions had occurred on July 24, 1999, we would have had approximately $239.0 million of senior indebtedness as of such date, all of which would have been secured and the subsidiary guarantors would have had no senior indebtedness, other than their guarantees of the New Credit Facilities. The indentures permit us and our subsidiaries to borrow certain additional debt, which may be senior indebtedness. We may not pay principal, premium (if any), interest or other amounts on account of the notes in the event of a payment default or certain other defaults in respect of certain senior indebtedness (including debt under the New Credit Facilities) unless such indebtedness has been paid in full or the default has been cured or waived. In addition, in the event of certain other defaults with respect to our senior indebtedness, we may not be permitted to pay any amount on account of the notes or the subsidiary guarantees for a designated period of time. If we or the subsidiary guarantors are declared bankrupt or insolvent, or if there is a payment default under, or an acceleration of, any senior indebtedness, we are required to pay the lenders under the New Credit Facilities and any other creditors who are holders of senior indebtedness in full before we apply any of our assets to pay you. Accordingly, we may not have enough assets remaining after payments to holders of the senior indebtedness to pay you. Further, the New Credit Facilities do, and our future senior indebtedness may, prohibit us from repurchasing any notes prior to maturity, even though the indentures require us to offer to repurchase notes in certain circumstances. If we make certain asset sales or if a change of control occurs when we are prohibited from repurchasing notes, we could ask our lenders under the New Credit Facilities (or such future senior indebtedness) for permission to repurchase the notes or we could attempt to refinance the borrowings that contain such prohibitions. If we do not obtain the consent to repay these borrowings or are unable to refinance the borrowings, we would be unable to repurchase the notes. Our failure to repurchase tendered notes at a time when repurchase is required by the indentures would constitute an event of default under the indentures, which, in turn, would constitute a default under the New Credit Facilities and may constitute an event of default under our future senior indebtedness. In these circumstances, the subordination provisions in the indentures would restrict payments to you. See "Description of New Credit Facilities," "Description of Notes--Ranking," "Description of Notes--Change of Control" and "Description of Notes--Certain Covenants." THE NOTES ARE JUNIOR IN RIGHT OF PAYMENT TO THE LIABILITIES OF OUR NON-GUARANTOR SUBSIDIARIES. We conduct a substantial portion of our operations through our subsidiaries, including foreign subsidiaries. We are dependent upon dividends or other intercompany transfers of funds from our subsidiaries to meet our debt service and other obligations. Generally, creditors of a subsidiary will have a claim to the assets and earnings of that subsidiary that is superior to the claims of creditors of its parent company, except to the extent the claims of the parent's creditors are guaranteed by the subsidiary. Although the subsidiary guarantees provide the holders of the notes with a direct claim against the assets of the subsidiary guarantors, enforcement of the subsidiary guarantees may be subject to legal challenge in a bankruptcy or a reorganization case or a lawsuit by or on behalf of creditors of the subsidiary guarantor, and would be subject to certain defenses available to guarantors generally. If the subsidiary guarantees are not enforceable, the notes would be effectively junior in ranking to all liabilities of the subsidiary guarantors, including trade payables of the subsidiary guarantors. As of July 24, 1999, on a pro forma basis, subsidiaries that are non-guarantor subsidiaries had no senior 18 indebtedness, other than borrowings by special purpose vehicles used to lend cash to subsidiary guarantors and trade payables. Together, the non-guarantor subsidiaries accounted for approximately $70.9 million of revenue for the year ended April 24, 1999 and had operating income of approximately $8.9 million. Although the indentures limit the ability of our subsidiaries to incur indebtedness and issue preferred stock, there are certain significant qualifications and exceptions. See "Description of Notes--Certain Covenants--Limitation on Indebtedness." In addition, the ability of our subsidiaries to pay dividends and make other payments to us may be restricted by, among other things, applicable corporate and other laws and regulations and agreements of the subsidiaries. Although the indentures limit the ability of the subsidiaries to enter into consensual restrictions on their ability to pay dividends and make other payments, the limitations are subject to a number of significant qualifications and exceptions. See "Description of Notes--Certain Covenants--Limitation on Restrictions on Distributions from Restricted Subsidiaries." WE ARE SUBJECT TO RESTRICTIVE DEBT COVENANTS. The indentures contain covenants with respect to us and our restricted subsidiaries that restrict, among other things, - the incurrence of additional indebtedness and the issuance of disqualified stock and preferred stock, - the payment of dividends on and redemptions of, capital stock and the redemption of indebtedness that is junior in right of payment to the notes, - certain other restricted payments including, without limitation, investments, - certain sales of assets, - certain transactions with affiliates, - consolidations, mergers and transfers of all or substantially all of our assets, - the creation of restrictions on distributions from subsidiaries, and - the sale of stock of subsidiaries. In addition, the New Credit Facilities contain other and more restrictive covenants, and prohibit us from prepaying our other indebtedness (including the notes) while indebtedness under the New Credit Facilities is outstanding. The New Credit Facilities also require us to maintain specified financial ratios and satisfy financial condition tests. These tests and financial ratios become more restrictive over the life of the New Credit Facilities. Our ability to meet those financial ratios and tests can be affected by events beyond our control and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants, ratios, tests or restrictions could result in an event of default under the New Credit Facilities and/or the indentures. Upon the occurrence of an event of default under the New Credit Facilities, the lenders could elect to declare all amounts outstanding under the New Credit Facilities, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure such indebtedness. If the lenders under the New Credit Facilities accelerate the payment of the indebtedness, we cannot assure you that our assets would be sufficient to repay in full that indebtedness and our other indebtedness, including the notes. See "Description of New Credit Facilities," and "Description of Notes--Certain Covenants." OUR ASSETS ARE PLEDGED TO SECURE PAYMENT OF THE NEW CREDIT FACILITIES. In addition to being junior to all existing and future senior indebtedness, our obligations under the notes are unsecured while our obligations under the New Credit Facilities are secured. We have 19 granted the lenders under the New Credit Facilities security interests in substantially all of our current and future assets and the current and future assets of our domestic and certain significant foreign subsidiaries, including a pledge of all of our capital stock and the capital stock of our domestic and certain significant foreign subsidiaries. If we default under the New Credit Facilities, the lenders will have a superior claim on our stock and assets. During the period that any such default is continuing, the lenders under the New Credit Facilities may be able to prevent payments under the notes, either by way of their ability to "block" payments for a designated period of time or by limiting our use of cash. If we were unable to repay this indebtedness, the lenders could foreclose on the pledged stock of our subsidiaries to your exclusion, even if an event of default exists under the indentures at such time. On a pro forma basis, as of July 24, 1999, we had $239.0 million of secured debt outstanding (all of which are borrowings under the New Credit Facilities) and $28.0 million was available for additional borrowings. YOU MAY FACE FOREIGN EXCHANGE RISKS BY INVESTING IN THE EURO NOTES. A portion of the notes are denominated and payable in euros. If you are a U.S. investor, an investment in the euro notes entails foreign exchange-related risks due to, among other factors, possible significant changes in the value of the euro relative to the U.S. dollar because of economic, political and other factors over which we have no control. Depreciation of the euro against the U.S. dollar could cause a decrease in the effective yield of the euro notes below their stated coupon rates and could result in a loss to you on a U.S. dollar basis. WE FACE COMPETITION FROM A VARIETY OF OTHER WEIGHT LOSS METHODS, SOME OF WHICH MAY HAVE GREATER RESOURCES THAN WE DO. The weight loss business is highly competitive and we compete against a large number of alternative providers of various sizes, some of which may have greater financial resources than us. We compete against self-administered weight loss regimens, other commercial weight loss programs, nutritionists, dietitians, the pharmaceutical industry and certain government agencies and non-profit groups which offer weight control help by means of diets, exercise and weight loss drugs. Competition among commercial weight loss programs is largely based on the effectiveness of the program and price. Although we have different business models, we believe our most significant direct competitors in the United States commercial weight loss industry are Jenny Craig, The Diet Workshop, Nutri/System and Diet Center. Our most significant direct competitor in the United Kingdom is Slimming World. There are few direct competitors in Continental Europe. Our most significant competition in Australia and New Zealand is Jenny Craig. We also compete against food manufacturers and distributors which are developing and marketing low-calorie and diet products to weight-conscious consumers. In addition, new or different products or methods of weight control are continually being introduced. Such competition and any increase in competition, including new pharmaceuticals and other technological and scientific developments in weight control, may have a material adverse impact on us. FINANCIAL DIFFICULTIES OF AND/OR DISPUTES WITH OUR FRANCHISE OPERATORS COULD ADVERSELY AFFECT OUR RESULTS. We derived 5.7% of our revenue in fiscal year 1999 from franchises worldwide which are run by 52 franchisees. If a significant number of franchises were to experience financial difficulties, our results could be adversely affected. Because our franchisees are independent, it is possible that one or more of them could take actions contrary to our interests, such as not following our diets or not maintaining the quality of our programs. In addition, we have had and continue to have disputes with our franchisees regarding operations and revenue sharing, including the interpretation of franchise territories as they relate to new media. 20 OUR INTERNATIONAL OPERATIONS EXPOSE US TO ECONOMIC, POLITICAL AND SOCIAL RISKS IN THE COUNTRIES IN WHICH WE OPERATE. The international nature of our existing and planned operations involves a number of risks, including changes in U.S. and foreign government regulations, tariffs, taxes, exchange controls, economic downturns, inflation, political and social instability and dependence on foreign personnel. Foreign governmental regulations may also restrict our ability to own or operate subsidiaries in those countries, acquire new businesses or repatriate dividends from foreign subsidiaries back to the United States. We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate. WE ARE EXPOSED TO FOREIGN CURRENCY RISKS. A significant portion of our revenue and operating costs are and a portion of our indebtedness is denominated in foreign currencies. We are therefore exposed to fluctuations in the exchange rates between the U.S. dollar and the currencies in which our foreign operations receive revenues and pay expenses, including debt service. Our consolidated financial results will be denominated in U.S. dollars and therefore will require translation adjustments for purposes of reporting results from foreign operations. Such adjustments may from time to time be significant. OUR ADVERTISING AND FRANCHISE OPERATIONS ARE SUBJECT TO LEGISLATIVE AND REGULATORY RESTRICTIONS. A number of laws and regulations govern our advertising, franchise operations and relations with consumers. The Federal Trade Commission and certain states regulate advertising, disclosures to consumers and franchisees, and other consumer matters. Our customers may file actions on their own behalf, as a class or otherwise, and may file complaints with the FTC or state or local consumer affairs offices and these agencies may take action on their own initiative or on a referral from consumers or others. We and the FTC have entered into a Consent Order settling all contested issues raised in a complaint filed against us alleging that we violated the Federal Trade Commission Act by the use and content of certain advertisements for our weight loss program featuring testimonials, claims for the program's success and safety, and statements as to the programs's costs to participants. The Consent Order does not admit any issue of fact or law or any violation by us of any law or regulation, and does not involve payment by us of any civil money penalty, damages, or other financial relief. The Consent Order requires certain procedures and disclosures in connection with our advertisements of products and services. The FTC accepted the Consent Order, and it became effective as of December 24, 1997. We do not believe that compliance with the Consent Order will have a material adverse effect on our consolidated financial position or results of operations or our current advertising and marketing practices. Future legislation or regulations including, without limitation, legislation or regulations affecting our marketing and advertising practices, relations with consumers or franchisees or our food products, could have a material adverse impact on us. Our foreign operations and franchises are also generally subject to regulations of the applicable country regarding the offer and sale of franchises, the content of advertising and promotion of diet products and programs. WE ARE CONTROLLED BY A PRINCIPAL STOCKHOLDER. Artal controls us. As a result, Artal controls our policies and operations and has the power to appoint management and the board of directors and approve any action requiring stockholder approval, including adopting amendments to our certificate of incorporation and approving mergers or sales of 21 substantially all our assets. We cannot assure you that the interests of Artal will coincide with your interests. See "Management," "Principal Stockholders" and "Certain Relationships and Related Transactions." OUR OPERATING RESULTS ARE DEPENDENT UPON THE EFFECTIVENESS OF OUR MARKETING AND ADVERTISING PROGRAMS. Our business is marketing intensive. Its success depends upon our ability to attract new participants to the program and retain existing participants. The effectiveness of our marketing practices, in particular our advertising campaigns, is important to our financial performance. If our marketing and advertising programs do not generate sufficient "leads" and "sales," our results of operations will be materially adversely affected. OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW PROGRAMS. Our future success will depend on our ability to enhance our existing products and services and to develop and market new programs on a timely basis that respond to new and evolving customer demands, achieve market acceptance and keep pace with new nutritional and weight loss developments. We may not be successful in developing, introducing on a timely basis or marketing any new products and services, and we cannot assure you that any new products or services will be accepted by the market. The failure of our products and services to be accepted by the market could have a material adverse impact on us. FRANCHISEES AND LICENSEES MAY HARM OUR BRAND OR REPUTATION. We believe the WEIGHT WATCHERS brand is one of our most valuable assets and that our reputation provides a competitive advantage. We allow our franchisees to use our brand to conduct business. In addition, we license our brand to third-party manufacturers of a variety of goods, including food products. Because our franchisees and licensees are independent third parties with their own financial objectives, it is possible that actions taken by them could harm our brand name or reputation. Also, the products we license to third parties may be subject to product recalls. Any negative publicity associated with these recalls may adversely affect classroom attendance and our revenues. OUR OPERATING RESULTS FLUCTUATE FROM QUARTER TO QUARTER. We have experienced and expect to continue to experience fluctuations in our quarterly results of operations. Our revenues are affected by a number of factors, including the volume and timing of customer leads, success of marketing and advertising programs, success of introductions of new services and products, activities of competitors and our ability to penetrate new markets. Our business is seasonal with revenues generally decreasing at year end and during the summer months. We may also choose to reduce prices or increase spending in response to competition or to pursue new market opportunities. All of the foregoing may materially adversely affect our results of operations. WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURES. Upon a change of control under the indentures, we will be required to offer to purchase all of the notes then outstanding at 101% of their principal amount, plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase. If a change of control were to occur, we cannot assure you that we would have sufficient funds to pay the purchase price of the outstanding notes, and we expect that we would require third party financing to do so. We cannot assure you that we would be able to obtain this financing on favorable terms, if at all. In addition, the New Credit Facilities restrict our ability to repurchase the notes, including pursuant to an offer in connection with a change of control. A change of control under the indentures may result in an event of default under the New Credit Facilities and may cause the acceleration of other senior indebtedness, if any, in which case the 22 subordination provisions of the notes would require payment in full of the New Credit Facilities and any other senior indebtedness before repurchase of the notes. Our future indebtedness may also contain restrictions on repayment requirements with respect to certain events or transactions that could constitute a change of control under the indentures. See "Description of New Credit Facilities" and "Description of Notes--Change of Control." The inability to repay senior indebtedness, if accelerated, and to purchase the tendered notes, would each constitute an event of default under the indentures. U.S. BANKRUPTCY OR FRAUDULENT CONVEYANCE LAW MAY INTERFERE WITH THE PAYMENT OF THE NOTES AND THE SUBSIDIARY GUARANTEES. Under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the notes and the guarantees issued by the subsidiary guarantors could be voided or subordinated to all of our other debt if, among other things, we or any subsidiary guarantor - incurred the debt or guarantee with the intent of hindering, delaying or defrauding current or future creditors, - received less than reasonably equivalent value or fair consideration for incurring the debt or guarantee, and - were insolvent or were rendered insolvent by reason of the incurrence, - were engaged, or about to engage, in a business or transaction for which the assets remaining with it constituted unreasonably small capital to carry on our business, - intended to incur, or believed that it would incur, debts beyond our ability to pay as these debts matured, or - were a defendant in an action for money damages, or had a judgment for money damages docketed against it if, in either case, after final judgment the judgment was unsatisfied. The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction that is being applied in any proceeding. Generally, however, a debtor would be considered insolvent if, at the time the debtor incurred the indebtedness, either - the sum of the debtor's debts, including contingent liabilities, is greater than the debtor's assets, at fair valuation; or - the present fair saleable value of the debtor's assets is less than the amount required to pay the probable liability on the debtor's total existing debts and liabilities, including contingent liabilities, as they become absolute and matured. On the basis of our analysis, internal cash flow projections, estimated values of our assets and liabilities and other factors, we believe that at the time we initially incurred indebtedness represented by the outstanding notes, we - were not insolvent nor rendered insolvent as a result of the issuance of the notes, - were in possession of sufficient capital to run our business effectively, - were incurring debts within our ability to pay as they matured or became due, and - had sufficient assets to satisfy any probable money judgment against us in any pending action. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court passing on these questions would reach the same conclusions. THE YEAR 2000 PROBLEM MAY ADVERSELY AFFECT US. The Year 2000 issue is the result of computer programs that were written using only two digits, rather than four, to represent a year. Date-sensitive software or hardware may not be able to 23 distinguish between the years 1900 and 2000 and programs that perform arithmetic operations, comparisons or sorting of date fields may begin yielding incorrect results. This could potentially cause a system failure or miscalculations that could disrupt operations. To address the impact of the Year 2000 issue on our computer programs, embedded chips and significant third-party suppliers of goods and services, we formed a task force led by our information services department. This task force took an inventory of potential Year 2000 issues and has substantially completed its assessment of their impact. Our key systems, including financial applications, and computer hardware have been identified as Year 2000 compliant. In addition, to address Year 2000 issues, we commenced in early 1997 a program of remediation, through modification or replacement. The program, including final user testing, is substantially complete. The cost of the Year 2000 project was approximately $1.35 million, and was funded through cash flows from operations. Approximately $0.6 million of the Year 2000 costs related to hardware and software purchases and have been capitalized, with the remainder expensed as incurred. At present, we believe our technology systems are Year 2000 compliant and the Year 2000 issue will not present a material adverse risk to our future results of operations, financial position or cash flow. Significant suppliers of goods and services have given positive statements as to their efforts to ensure no disruption to normal business operations. However, we cannot assure you that our systems will be Year 2000 compliant prior to December 31, 1999 or that the costs incurred will not materially exceed the amounts budgeted. If there are incidences of noncompliance, we plan to allocate internal resources to address these incidences. If our computers are not Year 2000 compliant by December 31, 1999, and interruptions occur, we could incur increases in expenses due to these business interruptions, which could have a material adverse effect on our future results of operations, financial position or cash flow. YOU MAY NOT BE ABLE TO SELL YOUR EXCHANGE NOTES. There is no existing market for the exchange notes, and we cannot assure you as to: - the liquidity of any markets that may develop for the exchange notes; - your ability to sell your exchange notes; or - the prices at which you would be able to sell your exchange notes. Future trading prices of the exchange notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. The initial purchasers of the old notes have advised us that they currently intend to make a market in the exchange notes. However, they are not obligated to do so and any market making may be discontinued at any time without notice. Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in prices. It is possible that the market for the exchange notes will be subject to disruptions. Any such disruptions may have a negative effect on you, as a holder of the exchange notes, regardless of our prospects and financial performance. 24 FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements including, in particular, the statements about our plans, strategies and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry" and "Business." We have used the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" and similar expressions in this prospectus to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: - risks associated with our ability to meet our debt obligations; - risks associated with the relative success of our marketing and advertising; - risks associated with the continued attractiveness of our diets; - competition, including price competition and competition with self-help weight loss and medical programs; - adverse results in litigation and regulatory matters, the adoption of adverse legislation or regulations, more aggressive enforcement of existing legislation or regulations or a change in the interpretation of existing legislation or regulations; and - risks associated with the Year 2000 issue, including our ability to convert our information systems and our non-information systems successfully, and the ability of our partners to successfully convert their systems to be Year 2000 compliant. 25 EXCHANGE RATE INFORMATION The euro was launched as the single European currency on January 1, 1999. Given its recent introduction, there is insufficient historical exchange rate data concerning the euro for inclusion in this prospectus. As a result, this section also provides historical exchange rate data concerning the European Currency Unit ("ECU"). The ECU, the predecessor to the euro, is a composite currency, consisting of specified amounts of currencies of 12 European Union member states. The ECU basket is composed of specified amounts of the German mark, the U.K. pound sterling, the French franc, the Italian lira, the Dutch guilder, the Belgian franc, the Luxembourg franc, the Danish kroner, the Irish punt, the Greek drachma, the Spanish peseta and the Portuguese escudo. In accordance with European Council Regulation No. 1103/97, substitution of the euro for the ECU is at the rate of one euro for one ECU. Since the United Kingdom, Denmark and Greece are not currently participating in the European Monetary Union, some of the currencies (U.K. pound sterling, Danish kroner and Greek drachma) in the ECU basket will not be considered for euro purposes. Accordingly, ECU exchange rates cannot be regarded as perfectly comparable with euro exchange rates for historical purposes. The following table sets forth, for the periods indicated, certain information regarding the Noon Buying Rate for ECU and euro, expressed in U.S. dollars per ECU and euro.
U.S. DOLLARS PER EURO AT AND FOR THE PERIOD U.S. DOLLARS PER ECU ENDED AT AND FOR THE YEAR ENDED DECEMBER 31, NOVEMBER 30, ---------------------------------------------------- ------------- 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- Exchange rate at end of period............... $1.22 $1.22 $1.28 $1.10 $1.18 $1.01 Average exchange rate during period(1)....... 1.19 1.29 1.25 1.13 1.10 1.06 Highest exchange rate during period(1)....... 1.27 1.35 1.29 1.25 1.18 1.18 Lowest exchange rate during period(1)........ 1.10 1.22 1.22 1.05 1.08 1.01
- ------------------------ (1) The average of the Noon Buying Rates on the last business day of each month during the applicable period. 26 SOURCES AND USES OF FUNDS We will receive no proceeds from the exchange of old notes pursuant to this exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of old notes, the terms of which are identical in all material respects to the exchange notes. The old notes surrendered in exchange for the exchange notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the exchange notes will not result in any change in our capitalization. The net proceeds from the issuance and sale of the old notes were approximately $246.4 million after deduction of the initial purchasers' discount and other expenses related to the offerings. We applied the net proceeds from the note offerings, together with the borrowings under the New Credit Facilities, to fund the cash portion of the Redemption, to refinance debt incurred in connection with the acquisition of the businesses that conduct our business in Australia and New Zealand and to pay transaction fees and expenses. For a further discussion of the estimated sources and uses of funds relating to the Transactions see "Prospectus Summary--The Transactions." 27 CAPITALIZATION The following table sets forth our capitalization as of July 24, 1999 on an actual basis and on a pro forma basis after giving effect to the Transactions as if they had been consummated on such date. You should read the table in conjunction with "Sources and Uses of Funds," "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus.
JULY 24, 1999 -------------------- ACTUAL PRO FORMA -------- --------- (IN MILLIONS) Long-term debt (including current maturities): New Credit Facilities(1).................................. $ -- $239.0 Senior Subordinated Notes due 2009........................ -- 255.0 Other..................................................... 16.2 -- ------ ------ Total long-term debt.................................... 16.2 494.0 Redeemable preferred stock.................................. -- 25.0 Stockholders' equity (deficit): Common stock(2)........................................... 11.6 -- Additional paid-in capital................................ 124.7 -- Other comprehensive income................................ (2.8) (2.8) Retained earnings (deficit)............................... 10.5 (260.3) Total parent company investment/stockholders' deficit... 144.0 (263.1) ------ ------ Total capitalization.................................. $160.2 $255.9 ====== ======
- ------------------------ (1) Represents borrowings under the New Credit Facilities made on the closing date of the Transactions, consisting of $75.0 million under the term loan A facility, $75.0 million under the term loan B facility, $87.0 million under the TLC facility and $2.0 million under the revolving credit facility. We have $28.0 million of additional borrowing capacity under the revolving credit facility. (2) As of July 24, 1999, we had 1,000 shares of our common stock, par value $0.25 per share, authorized and 1,000 shares issued and outstanding. As of the date of this prospectus, we have 100,000,000 shares of our common stock, no par value per share, authorized and 23,800,000 shares issued and outstanding. 28 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared by applying pro forma adjustments to our historical combined financial statements included elsewhere in this prospectus. The pro forma adjustments give effect to the transactions contemplated by the recapitalization and stock purchase agreement, including: - the reorganization of our business, including the assignment of certain of our assets and liabilities to Heinz, the acquisition of the WEIGHT WATCHERS businesses in Australia and New Zealand and the establishment of certain trademark and licensing arrangements with Heinz; - the redemption of a portion of our common stock held by Heinz in exchange for $349.5 million, consisting of $324.5 million of cash and $25.0 million of our redeemable preferred stock; - the purchase by Artal of 94% of our remaining common stock held by Heinz for $223.7 million; - our refinancing of debt incurred by our Australian and New Zealand businesses in connection with their acquisition; - the payment of transaction fees and expenses; and - the common stock retained by Heinz having an imputed value of $14.3 million. The pro forma adjustments also give effect to the following financing transactions: - the issuance of the notes, and - $239.0 million of borrowings under the New Credit Facilities. We refer to the transactions contemplated by the recapitalization and stock purchase agreement and the foregoing financings as the "Transactions." The unaudited pro forma condensed consolidated balance sheet as of July 24, 1999 gives effect to the Transactions as if they had occurred on such date. The unaudited pro forma condensed consolidated statements of income for the fiscal year ended April 24, 1999 and the fiscal quarters ended July 25, 1998 and July 24, 1999, give effect to the Transactions as if they had occurred on April 26, 1998. Information for the twelve months ended July 24, 1999 represents the sum of the amounts set forth in the unaudited pro forma condensed consolidated statement of income for the fiscal year ended April 24, 1999, and the amounts set forth in the unaudited pro forma condensed consolidated statement of income for the three months ended July 24, 1999, less the amounts set forth in the unaudited pro forma condensed consolidated statement of income for the three months ended July 25, 1998. The unaudited pro forma condensed consolidated financial statements are for informational purposes only. They do not purport to represent our financial position or the results of our operations that would have actually been obtained had the Transactions in fact occurred as of the assumed dates or for the periods presented, nor are they indicative of, or projections for our results of operations or financial position for any future period or date. The pro forma adjustments, as described in the accompanying notes, are based on available information and upon certain assumptions which we believe are reasonable. The recapitalization has been accounted for as a leveraged recapitalization, which will have no impact on the historical book basis of our assets and liabilities. For U.S. federal and state income tax purposes, the Transactions are being treated as a taxable sale under Section 338 (h)(10) of the Internal Revenue Code of 1986, as amended. As a result, there will be a step-up in the tax basis of our net assets, which is expected to reduce our cash tax payments in the future by $72.1 million. You should read the following Unaudited Pro Forma Condensed Consolidated Financial Statements in conjunction with "Sources and Uses of Funds", "Selected Historical Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus. 29 WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JULY 24, 1999 (IN MILLIONS)
PRE-RECAPITALIZATION REORGANIZATION AND COMPANY ASSETS/LIABILITIES PRO FORMA HISTORICAL RETAINED BY HEINZ(1) ADJUSTMENTS(2) PRO FORMA ---------- -------------------- -------------- ---------- ASSETS Current assets: Cash and cash equivalents......................... $ 26.0 $(26.0)(a) $ -- $ -- Receivables, net.................................. 7.4 -- 7.4 Notes receivables, current........................ 2.0 (1.3)(b) -- .7 Inventories....................................... 7.7 -- 7.7 Prepaid expenses and other current assets......... 7.1 -- -- 7.1 Deferred income taxes, net........................ 3.3 (3.3)(d) -- -- Due from related parties.......................... 1.1 (1.1)(b) -- -- ------ ------ ------- -------- Total current assets............................ 54.6 (31.7) -- 22.9 Property, plant and equipment, net.................. 8.1 -- -- 8.1 Notes and other receivables, non-current............ 19.2 (11.3)(b) -- 7.9 Goodwill, net....................................... 142.4 15.9 (f) -- 158.3 Trademarks and other intangible assets, net......... 7.9 -- 7.9 Deferred income taxes............................... 3.8 (3.8)(d) 72.1 (b) 72.1 Other non-current assets .9 -- 17.0 (c) 17.9 ------ ------ ------- -------- Total assets.................................... $236.9 $(30.9) $ 89.1 $ 295.1 ====== ====== ======= ======== LIABILITIES AND PARENT COMPANY INVESTMENT/STOCKHOLDERS' DEFICIT Current liabilities: Short-term borrowings and line of credit.......... $ .4 $ (.4)(e) $ -- $ -- Short-term borrowings due to related parties...... 16.3 (16.3)(e) -- -- Portion of long-term debt due within one year..... 6.5 (6.5)(e) 10.6 (a) 10.6 Accounts payable.................................. 7.2 (1.7)(c) -- 5.5 Salaries and wages................................ 7.7 -- -- 7.7 Accrued restructuring costs....................... 6.9 -- -- 6.9 Other accrued liabilities......................... 15.8 -- -- 15.8 Income taxes...................................... 9.7 (9.7)(d) -- -- Deferred revenues................................. 2.3 -- -- 2.3 ------ ------ ------- -------- Total current liabilities......................... 72.8 (34.6) 10.6 48.8 Senior credit facilities Term loan A....................................... -- -- 65.7 (a) 65.7 Term loan B....................................... -- -- 74.4 (a) 74.4 TLC............................................... -- -- 86.3 (a) 86.3 Senior Subordinated Notes due 2009................ -- -- 255.0 (a) 255.0 Other long-term debt................................ 9.6 (9.6)(e) 2.0 (a) 2.0 147.5 (g) (147.5)(a) Deferred income taxes............................... 8.2 (8.2)(d) -- -- Other long-term liabilities......................... 2.3 (1.3)(f) -- 1.0 ------ ------ ------- -------- Total liabilities................................. 92.9 93.8 346.5 533.2 ------ ------ ------- -------- Redeemable preferred stock........................ -- -- 25.0 (a) 25.0 Parent company investment/stockholders' deficit... 144.0 (124.7) (282.4)(c) (263.1) ------ ------ ------- -------- Total liabilities and Parent company investment/ stockholders' equity deficit.................. $236.9 $(30.9) $ 89.1 $ 295.1 ====== ====== ======= ========
See accompanying notes to this unaudited statement. 30 WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED APRIL 24, 1999 (IN MILLIONS, EXCEPT RATIO)
COMPANY PRO FORMA HISTORICAL ADJUSTMENTS(3) PRO FORMA ---------- -------------- --------- Total revenues.......................................... $ 404.8 $ (5.3)(a) $ 399.5 Cost of revenues........................................ 178.9 (.6)(a) 177.1 (.7)(b) (.5)(c) Marketing expenses...................................... 93.1 (.4)(a) 92.7 Selling, general and administrative expenses............ 48.9 (3.9)(b) 42.6 (2.4)(d) -------- -------- -------- Operating income........................................ 83.9 3.2 87.1 Interest income......................................... 16.0 (15.0)(e) 1.0 Interest expense........................................ (8.9) 8.9 (e) (57.5) (57.5)(e) Other expenses, net..................................... (5.2) 1.5 (f) (2.5) 1.1 (g) .5 (h) (.4)(h) -------- -------- -------- Income before income taxes and minority interests....... 85.8 (57.7) 28.1 Provision for income taxes.............................. 36.4 (23.1)(i) 13.3 -------- -------- -------- Income before minority interests........................ 49.4 (34.6) 14.8 Minority interests...................................... 1.5 (1.2)(h) .3 -------- -------- -------- Net income.............................................. 47.9 (33.4) 14.5 Dividends on preferred stock............................ 1.5 (j) 1.5 -------- -------- -------- Net income attributable to common stockholders.......... $ 47.9 $ (34.9) $ 13.0 ======== ======== ======== OTHER FINANCIAL DATA: EBITDA (4)........................................................................... $ 94.6 Adjusted EBITDA(4)................................................................... 95.3 Depreciation and amortization........................................................ 10.0 Capital expenditures................................................................. 2.5 Ratio of earnings to fixed charges (5)............................................... 1.5x
See accompanying notes to this unaudited statement 31 WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL QUARTER ENDED JULY 25, 1998 (IN MILLIONS, EXCEPT RATIO)
COMPANY PRO FORMA HISTORICAL ADJUSTMENTS(3) PRO FORMA ---------- -------------- --------- Total revenues............................................ $ 92.3 $ (1.1)(a) $ 91.2 Cost of revenues.......................................... 41.1 (.1)(a) 40.7 (.2)(b) (.1)(c) Marketing expenses........................................ 16.7 (.1)(a) 16.6 Selling, general and administrative expenses.............. 12.0 (1.0)(b) 10.4 (.6)(d) --------- -------- -------- Operating income.......................................... 22.5 1.0 23.5 Interest income........................................... 3.4 (3.3)(e) .1 Interest expense.......................................... (2.0) 2.0 (e) (14.4) (14.4)(e) Other expenses, net....................................... (1.3) .4 (f) (.6) .3 (g) .1 (h) (.1)(h) --------- -------- -------- Income before income taxes and minority interests......... 22.6 (14.0) 8.6 Provision for income taxes................................ 9.6 (5.6)(i) 4.0 --------- -------- -------- Income before minority interests.......................... 13.0 (8.4) 4.6 Minority interests........................................ .3 (.3)(h) --------- -------- -------- Net income................................................ 12.7 (8.1) 4.6 Dividends on preferred stock.............................. -- .4 (j) .4 --------- -------- -------- Net income attributable to common stockholders............ $ 12.7 $ (8.5) $ 4.2 ========= ======== ======== OTHER FINANCIAL DATA: EBITDA (4)............................................................................. $ 25.2 Adjusted EBITDA (4).................................................................... 26.6 Depreciation and amortization.......................................................... 2.3 Capital expenditures................................................................... .3 Ratio of earnings to fixed charges (5)................................................. 1.6x
See accompanying notes to this unaudited statement 32 WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL QUARTER ENDED JULY 24, 1999 (IN MILLIONS, EXCEPT RATIO)
COMPANY PRO FORMA HISTORICAL ADJUSTMENTS(3) PRO FORMA ---------- -------------- --------- Total revenues............................................. $ 96.4 $ (1.1)(a) $ 95.3 Cost of revenues........................................... 42.7 (.2)(a) 42.3 (.2)(b) Marketing expenses......................................... 13.0 -- 13.0 Selling, general and administrative expenses............... 12.4 (1.0)(b) 10.8 (.6)(d) -------- -------- -------- Operating income........................................... 28.3 .9 29.2 Interest income............................................ 3.1 (2.9)(e) .2 Interest expense........................................... (1.4) 1.4 (e) (14.4) (14.4)(e) Other expenses, net........................................ (1.2) .4 (f) (.5) .3 (g) .1 (h) (.1)(h) -------- -------- -------- Income before income taxes and minority interests.......... 28.8 (14.3) 14.5 Provision for income taxes................................. 11.3 (5.7)(i) 5.6 -------- -------- -------- Income before minority interests........................... 17.5 (8.6) 8.9 Minority interests......................................... .4 (.3)(h) .1 -------- -------- -------- Net income................................................. 17.1 (8.3) 8.8 Dividends on preferred stock............................... -- .4 (j) .4 -------- -------- -------- Net income attributable to common stockholders............. $ 17.1 $ (8.7) $ 8.4 ======== ======== ======== OTHER FINANCIAL DATA: EBITDA (4).............................................................................. $ 31.0 Adjusted EBITDA (4)..................................................................... 31.5 Depreciation and amortization........................................................... 2.3 Capital expenditures.................................................................... .3 Ratio of earnings to fixed charges (5).................................................. 2.0x
See accompanying notes to this unaudited statement 33 WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED JULY 24, 1999 (IN MILLIONS, EXCEPT RATIO)
COMPANY PRO FORMA HISTORICAL ADJUSTMENTS(3) PRO FORMA ---------- -------------- --------- Total revenues.......................................... $ 408.9 $ (5.3)(a) $ 403.6 Cost of revenues........................................ 180.5 (.7)(a) 178.7 (.7)(b) (.4)(c) Marketing expenses...................................... 89.4 (.3)(a) 89.1 Selling, general and administrative expenses............ 49.3 (3.9)(b) 43.0 (2.4)(d) -------- -------- -------- Operating income........................................ 89.7 3.1 92.8 Interest income......................................... 15.7 (14.6)(e) 1.1 Interest expense........................................ (8.3) 8.3 (e) (57.5) (57.5)(e) Other expenses, net..................................... (5.1) 1.5 (f) (2.4) 1.1 (g) .5 (h) (.4)(h) -------- -------- -------- Income before income taxes and minority interests....... 92.0 (58.0) 34.0 Provision for income taxes.............................. 38.1 (23.2)(i) 14.9 -------- -------- -------- Income before minority interests........................ 53.9 (34.8) 19.1 Minority interests...................................... 1.6 (1.2)(h) .4 -------- -------- -------- Net income.............................................. 52.3 (33.6) 18.7 Dividends on preferred stock............................ -- 1.5 (j) 1.5 -------- -------- -------- Net income attributable to common stockholders.......... $ 52.3 $ (35.1) $ 17.2 ======== ======== ======== OTHER FINANCIAL DATA: EBITDA (4)........................................................................... $ 100.5 Adjusted EBITDA (4).................................................................. 100.3 Depreciation and amortization........................................................ 10.1 Capital expenditures................................................................. 2.4 Ratio of earnings to fixed charges (5)............................................... 1.6x
See accompanying notes to this unaudited statement 34 WEIGHT WATCHERS INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Reflects adjustments for assets retained and liabilities assumed by Heinz pursuant to the recapitalization and stock purchase agreement, and the acquisition of our Australia and New Zealand businesses. The assets retained and liabilities assumed by Heinz are as follows:
(IN MILLIONS) (a) Cash and cash equivalents............................... $ 26.0 (b) Notes receivable and due from related parties (1)....... 13.7 (c) Book overdrafts included in accounts payable............ (1.7) (d) Income taxes (2)........................................ (10.8) (e) Current and long-term debt (3).......................... (32.8) -------- Net assets retained/(liabilities assumed) by Heinz........ $ (5.6) ========
----------------------------------- (1) Represents the sum of $1.3 million of Notes receivable, current, $1.1 million classified as Due from related parties and $11.3 million of Notes and other receivables, non-current. (2) Represents the net adjustment in respect of the elimination of deferred tax assets consisting of $3.3 million of current deferred tax assets, net, and long-term deferred tax assets of $3.8 million and tax liabilities consisting of $9.7 million of taxes currently payable and $8.2 million of deferred tax credits. (3) Represents the net adjustment in respect of $.4 million of Short-term borrowings and line of credit, $16.3 million of Short-term borrowings due to related parties, $6.5 million of Portion of long-term debt due within one year and $9.6 million of Other long-term debt. (f) Reflects the acquisition of the minority interests in the WEIGHT WATCHERS businesses in Australia and New Zealand for $17.2 million. For the purposes of these pro forma financial statements, the excess purchase price ($15.9 million) over the fair value of the assets acquired ($1.3 million), has been allocated to goodwill. (g) Our Australia and New Zealand businesses borrowed an aggregate of $147.5 million in connection with their acquisition. These amounts were repaid at the time of the closing of the Transactions. 35 WEIGHT WATCHERS INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) The Recapitalization and Related Financings (a) Reflects the adjustments for the effects of the recapitalization and stock purchase agreement and related financings as follows:
SOURCES: (IN MILLIONS) USES: (IN MILLIONS) New Credit Facilities(1)....... $ 239.0 Recapitalization consideration(2)............... $ 573.2 Senior Subordinated Notes due 2009......................... 255.0 Refinancing of debt(4)......... 147.5 Heinz rollover equity(3)....... 14.3 Artal Equity Purchase(2)....... 223.7 Transaction fees and expenses....................... 17.0 -------- Other fees and expenses........ 5.0 ---------- Total cash sources........... 717.7 Redeemable preferred stock issued to Heinz(2)........... 25.0 Heinz rollover equity(3)....... 14.3 -------- Total Uses................. $ 757.0 ========== Total Sources.............. $ 757.0 ========
(1) Represents borrowings under the New Credit Facilities expected to be made on the closing date of the Transactions, consisting of $75.0 million under the term loan A facility, $75.0 million under the term loan B facility, $87.0 million under the TLC facility and $2.0 million under the revolving credit facility. Upon consummation of the Transactions, we had $28.0 million of additional borrowing capacity under the revolving credit facility. (2) The recapitalization consideration consisted of (a) $349.5 million for the Redemption, which we paid for with $324.5 million of cash and $25.0 million of redeemable preferred stock issued to Heinz and (b) the Equity Purchase, pursuant to which Artal purchased $223.7 million of our common stock from Heinz. (3) Represents the imputed value of Heinz's remaining ownership, which we refer to as rollover equity, of 6% of our issued and outstanding common stock following the recapitalization. (4) Reflects the refinancing of debt which we incurred after July 24, 1999 and prior to the Transactions relating to the acquisition of the businesses that conduct our business in Australia and New Zealand. (b) For U.S. federal and state income tax purposes, the recapitalization is being treated as a taxable sale under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. As a result, for tax purposes we will record a step-up in the tax basis of our net assets, which is expected to reduce our future cash tax payments by $72.1 million. (c) The adjustment to Parent company investment/stockholders' equity reflects the following:
(IN MILLIONS) Redemption consideration(1)................................. $ (349.5) Transaction fees and expenses not capitalized(2)............ (5.0) Deferred income taxes....................................... 72.1 --------- Net adjustment.......................................... $ (282.4) =========
--------------------------------------- (1) Represents the redemption of a portion of our common stock from Heinz for consideration consisting of $25.0 million in our redeemable preferred stock and cash of $324.5 million. (2) Transaction fees and expenses not capitalized were charged to expense upon the closing of the Transactions. As a result of the Transactions, $17.0 million of financing costs was capitalized. 36 WEIGHT WATCHERS INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (3) Set forth below are adjustments to reflect the Transactions as if they had occurred on April 26, 1998.
FISCAL QUARTER ENDED TWELVE MONTHS FISCAL YEAR ENDED ----------------------------- ENDED APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 JULY 24, 1999 ----------------- ------------- ------------- -------------- (IN MILLIONS) Elimination of food license royalties and related expenses(a) Lost royalty revenues.................. $ (5.3) $ (1.1) $ (1.1) $ (5.3) Cost of revenues....................... .6 .1 .2 .7 Marketing rebates...................... .4 .1 -- .3 Cost savings from restructuring(b) Selling, general and administrative.... 3.9 1.0 1.0 3.9 Cost of revenues....................... .7 .2 .2 .7 Elimination of expenses related to third-party publisher(c)............... .5 .1 -- .4 Decrease in pension and benefit expense(d)............................. 2.4 .6 .6 2.4 Increase in interest expense and elimination of interest income(e) Interest expense on new debt........... (57.5) (14.4) (14.4) (57.5) Interest income........................ (15.0) (3.3) (2.9) (14.6) Elimination of historical interest expense.............................. 8.9 2.0 1.4 8.3 Elimination of management fee(f)......... 1.5 .4 .4 1.5 Income related to custodial fee(g)....... 1.1 .3 .3 1.1 Purchase of Australia/New Zealand minority interests(h) Minority interests..................... 1.2 .3 .3 1.2 Additional amortization................ (.4) (.1) (.1) (.4) Minority interest expense.............. .5 .1 .1 .5 Decrease in provision for income taxes(i)............................... 23.1 5.6 5.7 23.2 Redeemable preferred stock dividends(j)........................... (1.5) (.4) (.4) (1.5) -------- -------- ------- -------- Total pro forma adjustments.............. $ (34.9) $ (8.5) $ (8.7) $ (35.1) ======== ======== ======= ========
---------------------------- (a) Reflects the net effect of food licenses that Heinz retained subsequent to the Transactions. Such amount includes lost royalty revenues, offset by a reduction in associated cost of revenues and marketing rebates. (b) Under the recapitalization and stock purchase agreement, we restructured certain of our operations, which included the elimination of several management and staff positions and the closing of certain offices. This adjustment reflects cost savings that resulted from this restructuring. (c) Reflects elimination of publication royalty expenses associated with a licensing agreement with a third-party publisher. (d) Reflects the elimination of certain Heinz allocated corporate expenses related to pension, post-retirement and benefit plans, net of our estimate of the stand-alone costs we incurred in order to replace these services. (e) Reflects elimination of interest income on cash and intercompany investments and interest expense associated with borrowings under various lines of credit, promissory notes and related party loans, all of which were retained by Heinz. The pro forma adjustment to interest expense also reflects interest expense on the notes and borrowings and fees under the New 37 WEIGHT WATCHERS INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Credit Facilities (revolver, term loan A, B and C). Pro forma interest expense has been calculated as set forth below.
FISCAL QUARTER FISCAL ENDED TWELVE MONTHS YEAR ENDED ----------------------------- ENDED APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 JULY 24, 1999 -------------- ------------- ------------- -------------- (IN MILLIONS) Interest on notes (13% on $255.0)........... $ 33.1 $ 8.3 $ 8.3 $ 33.1 Estimated interest on New Credit Facilities Term loan A (8.76% on $75.0).............. 6.5 1.6 1.6 6.5 Term loan B (9.51% on $75.0).............. 7.1 1.8 1.8 7.1 TLC (9.51% on $87.0)...................... 8.3 2.1 2.1 8.3 Revolving credit facility (8.76% on $2.0)................................... .4 .1 .1 .4 ------- ------- ------- -------- Total cash interest expense............. 55.4 13.9 13.9 55.4 Amortization of deferred financing fees..... 2.1 .5 .5 2.1 ------- ------- ------- -------- Total interest expense.................. $ 57.5 $ 14.4 $ 14.4 $ 57.5 ======= ======= ======= ========
An increase or decrease of 0.125% in the assumed weighted average interest rate for the New Credit Facilities would change pro forma interest expense by $.3 million for the fiscal year ended April 24, 1999 and $.1 million for each of the fiscal quarters ended July 25, 1998 and July 24, 1999. (f) Reflects elimination of corporate overhead costs allocated to us by Heinz for general and administrative expenses, net of approximately $.6 million of related annual costs which management estimates will be incurred as a stand alone entity. (g) Reflects the net custodial fee we will receive from Heinz for the maintenance of certain trademarks. See "Certain Relationships and Related Transactions--Licensing Agreements." (h) Reflects the elimination of the minority interests in the WEIGHT WATCHERS businesses in Australia and New Zealand. The adjustment consists of the elimination of a payment made to the minority interest owner, additional amortization expense related to the goodwill created by the purchase of the minority interest, and the elimination of the minority interest expense recorded in each respective period. (i) Reflects the tax effect of the pro forma adjustments assuming an estimated effective tax rate of 40%. (j) Reflects dividends on the $25.0 million of redeemable preferred stock issued to Heinz. (4) Pro forma EBITDA represents income before income taxes and minority interest plus depreciation, amortization and net interest expense. EBITDA should not be construed as an alternative to operating income or cash flows from operating activities, as determined in accordance with generally accepted accounting principles. We believe that EBITDA is a useful supplement to net income and other income statement data in understanding cash flows generated from operations that are available for taxes, debt service and capital expenditures. However, our method of computation may or may not be comparable to other similarly titled measures of other companies. Pro forma Adjusted EBITDA equals EBITDA less (a) the amount of revenue recognized under the Warnaco licensing agreement in the fiscal year ended April 24, 1999, net of the average minimum annual cash receipts from that agreement, plus (b) the amount of cost savings that management believes can be achieved as a stand-alone entity, which include savings resulting from certain Heinz related expenses and the reversal of certain one-time charges, and (c) the amount of 38 WEIGHT WATCHERS INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) management incentive bonus expense which would not have been incurred, had a new plan, with higher budgeted performance hurdles, which will be implemented after the closing of the Transactions, been in effect. The following is a reconciliation of EBITDA to Adjusted EBITDA for each of the periods presented:
FISCAL FISCAL FISCAL QUARTER QUARTER TWELVE-MONTHS YEAR ENDED ENDED ENDED ENDED APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 JULY 24, 1999 -------------- ------------- ------------- ------------- (DOLLARS IN MILLIONS) EBITDA.......................... $ 94.6 $ 25.2 $ 31.0 $ 100.5 Warnaco adjustment.............. (6.6) -- -- (6.6) Cost-savings as a stand-alone entity........................ 2.0 .2 .2 2.0 Management incentive bonus...... 5.3 1.2 .3 4.4 ------- ------- ------- -------- Adjusted EBITDA................. $ 95.3 $ 26.6 $ 31.5 $ 100.3 ======= ======= ======= ========
(5) Earnings used in computing the ratio of earnings to fixed charges consists of income (loss) before income tax expense (benefit) plus fixed charges. Fixed charges consist of interest expense, which includes amortization of deferred financing costs, and one-third of the rental expense from operating leases, which management believes is a reasonable approximation of the interest component of rental expense. 39 SELECTED HISTORICAL CONDENSED COMBINED FINANCIAL INFORMATION The following table sets forth our Selected Historical Condensed Combined Financial Information and the related notes. The Selected Historical Condensed Combined Financial Information as of and for the fiscal years ended April 25, 1995 and April 27, 1996 have been derived from our unaudited historical combined financial statements which are not included in this prospectus. The Selected Historical Condensed Combined Financial Information as of and for the fiscal years ended April 26, 1997, April 25, 1998 and April 24, 1999 have been derived from, and should be read in conjunction with, our audited historical combined financial statements and the related notes, which are included elsewhere in this prospectus. The Selected Historical Combined Financial Information as of and for the fiscal quarters ended July 25, 1998 and July 24, 1999 have been derived from our unaudited combined financial statements included elsewhere in this prospectus. In our opinion, all adjustments (which consist only of normal recurring entries) considered necessary for a fair presentation have been included in our unaudited condensed combined financial statements. Interim results for the fiscal quarter ended July 24, 1999 are not necessarily indicative of, and are not projections for, the results to be expected for the full fiscal year. You should read the following Selected Historical Condensed Combined Financial Information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus. 40
FISCAL YEAR ENDED FISCAL QUARTER -------------------------------------------------------- ENDED APRIL ------------------- APRIL 25, 27, APRIL 26, APRIL 25, APRIL 24, JULY 25, JULY 24, 1995 1996 1997 1998 1999 1998 1999 --------- -------- --------- --------- --------- -------- -------- (IN MILLIONS, EXCEPT RATIOS) STATEMENT OF INCOME INFORMATION: Total revenue............................... $346.2 $357.7 $332.7 $334.3 $404.8 $ 92.3 $ 96.4 Cost of revenues............................ 185.7 190.9 230.4 160.0 178.9 41.1 42.7 ------ ------ ------ ------ ------ ------ ------- Gross profit.............................. 160.5 166.8 102.3 174.3 225.9 51.2 53.7 Marketing expenses.......................... 89.3 88.3 88.8 86.3 93.1 16.7 13.0 Selling, general and administrative expenses.................................. 52.3 51.9 45.5 44.1 48.9 12.0 12.4 ------ ------ ------ ------ ------ ------ ------- Operating income (loss)................... 18.9 26.6 (32.0) 43.9 83.9 22.5 28.3 Interest income............................. 4.0 15.1 12.8 13.5 16.0 3.4 3.1 Interest expense............................ (13.8) (18.4) (13.8) (8.6) (8.9) (2.0) (1.4) Other expenses, net......................... (4.2) (4.8) (3.3) (4.3) (5.2) (1.3) (1.2) ------ ------ ------ ------ ------ ------ ------- Income (loss) before income taxes and minority interests...................... 4.9 18.5 (36.3) 44.5 85.8 22.6 28.8 Provision for (benefit from) income taxes... 4.6 (3.6) (12.9) 19.9 36.4 9.6 11.3 ------ ------ ------ ------ ------ ------ ------- Income (loss) before minority interests... .3 22.1 (23.4) 24.6 49.4 13.0 17.5 Minority interests.......................... .4 .6 .6 .8 1.5 .3 .4 ------ ------ ------ ------ ------ ------ ------- Net income (loss)......................... $ (.1) $ 21.5 $(24.0) $ 23.8 $ 47.9 $ 12.7 $ 17.1 ====== ====== ====== ====== ====== ====== ======= OTHER FINANCIAL INFORMATION: Net cash provided by (used in) operating activities................................ -- -- $ 9.7 $ 36.2 $ 59.2 $(22.7) $ 146.8 Net cash used in investing activities....... -- -- (1.4) (4.9) (3.0) (0.2) (0.2) Net cash provided by (used in) financing activities................................ -- -- (4.4) (30.5) (48.9) 20.9 (139.0) EBITDA(1)................................... -- -- (21.1) 48.4 88.3 23.4 29.4 Depreciation and amortization............... 10.7 10.4 14.2 8.8 9.6 2.2 2.3 Capital expenditures........................ 3.7 5.3 2.7 3.4 2.5 .3 .3 Ratio of earnings to fixed charges(2)....... 1.2x 1.7x -- 4.5x 7.8x 9.1x 14.1x BALANCE SHEET INFORMATION (AT END OF PERIOD): Working capital (deficit)................... $(32.2) $ 83.6 $ 64.9 $ 65.8 $ 91.2 $104.5 $ (18.0) Total assets................................ 268.9 393.4 373.0 370.8 371.4 360.5 236.9 Total debt.................................. 101.5 97.2 97.0 41.1 39.6 40.4 32.8 Parent company investment................... 110.4 231.7 188.9 229.1 248.9 265.1 144.0
- ------------------------ (1) EBITDA represents income before income taxes and minority interest plus depreciation, amortization and net interest expense. EBITDA should not be construed as an alternative to operating income or cash flows from operating activities, as determined in accordance with generally accepted accounting principle. We believe that EBITDA is a useful supplement to net income and other income statement data in understanding cash flows generated from operations that are available for taxes, debt service and capital expenditures. However, our method of computation may or may not be comparable to other similarly titled measures of other companies. (2) Earnings used in computing the ratio of earnings to fixed charges consist of income (loss) before income tax expense and minority interest plus fixed charges. Fixed charges consist of interest expense, which includes amortization of deferred financing costs, and one-third of the rental expense from operating leases, which management believes is a reasonable approximation of the interest component of rental expense. For the year ended April 26, 1997 earnings were insufficient to cover fixed charges by $36.3 million. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING IS A DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED APRIL 26, 1997, APRIL 25, 1998 AND APRIL 24, 1999 AND THE FISCAL QUARTERS ENDED JULY 25, 1998 AND JULY 24, 1999. YOU SHOULD READ THIS DISCUSSION IN CONJUNCTION WITH OUR COMBINED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS COVER PERIODS PRIOR TO THE CONSUMMATION OF THE TRANSACTIONS. ACCORDINGLY, MANAGEMENT'S DISCUSSION AND ANALYSIS OF HISTORICAL PERIODS DOES NOT REFLECT THE IMPACT ON US OF THESE EVENTS OR OF THE BUSINESS STRATEGY TO BE IMPLEMENTED AFTER CONSUMMATION OF THE TRANSACTIONS. SEE "RISK FACTORS," "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" AND "BUSINESS--GROWTH STRATEGY." OVERVIEW We are the largest provider of weight control programs in the world, operating in 29 countries through a network of company-owned and franchise operations. We earn revenues by conducting meetings, selling products, collecting commissions from our franchisees operating under our name and by collecting royalties related to licensing agreements. We run our domestic and international operations through a combination of owned and franchise operated locations. We estimate that, in fiscal 1999, 40% of our U.S. attendance and 75% of our international attendance were at company-owned classes, with the balance of members attending our franchise locations. Franchisees typically pay a royalty fee of 10% of their meeting fee revenues to us. For the fiscal year ended April 24, 1999, franchise revenues totaled $23.2 million. A number of factors have affected our revenues and profitability over the last several years. In fiscal year 1990, Heinz began introducing and promoting the sale of prepackaged meals through the NACO network. These changes forced our group leaders to become food salespeople and retail managers for food products, detracting from their function as role models and motivators for our members. These changes caused a significant drop in customer satisfaction and employee morale, and NACO's attendance declined. Prior to the introduction of prepackaged meal sales in fiscal year 1990, NACO's annual classroom attendance was 12.9 million, but by fiscal year 1997, attendance had dropped to 7.8 million. In contrast, in our international operations, where the prepackaged meals sales strategy was not implemented, our attendance remained stable over this period. As we turned our North American focus to promoting and selling our prepackaged meals, our program development began to suffer. In response, we shifted to a more decentralized management approach, allowing the management of our international operations to begin to develop on their own local business strategies and program innovations. This approach was successful and by 1996 our international growth began to accelerate rapidly. Beginning in 1997, we restructured our NACO operations by: - eliminating the prepackaged meals program, - introducing 1-2-3 SUCCESS and LIBERTY/LOYALTY, - improving customer service, - restoring employee morale, - relocating classes from fixed to rented meeting rooms, - reducing back office and field headcount, and - eliminating certain field offices. 42 This restructuring allowed us to eliminate over $18.0 million in costs related to the food sales system. As a result of these efforts, we have grown NACO attendance by 40% from 7.8 million in fiscal year 1997 to 10.9 million in fiscal year 1999. Over this period our international operations continued to generate significant growth which had started when local management was allowed to create new strategies and program innovations. Between fiscal 1997 and 1999, in continental Europe, attendance grew by 47.6%, in the United Kingdom revenues increased by 24.5% and, in New Zealand, where we acquired the WEIGHT WATCHERS business in 1998, revenues and attendance grew significantly. The combination of the revitalization of our North American operations and continued strong performance of our international business contributed to the strong growth in revenues and profitability. Revenue has increased from $332.7 million in fiscal year 1997 to $404.8 million in fiscal year 1999 and cost of revenues has decreased from $180.7 million (before a restructuring charge of $49.7 million) for fiscal year 1997 to $178.9 million for fiscal year 1999. In addition to franchise revenue and company-owned classroom revenues, we also sell to our members ancillary products which complement our program such as calendars, books, healthy snack bars and CD-ROMS. For the fiscal year ended April 24, 1999, these revenues totalled $56.6 million. Our business is seasonal with revenues generally decreasing at year end and during the summer months. The recapitalization has been accounted for as a leveraged recapitalization, which will have no impact on the historical book basis of our assets or liabilities. RESULTS OF OPERATIONS The following table summarizes our historical results of operations as a percentage of revenues for the fiscal years ended April 26, 1997, April 25, 1998 and April 24, 1999 and the fiscal quarters ended July 25, 1998 and July 24, 1999.
FISCAL YEAR ENDED FISCAL QUARTER ENDED ------------------------------------------------ ----------------------------- APRIL 26, 1997 APRIL 25, 1998 APRIL 24, 1999 JULY 25, 1998 JULY 24, 1999 -------------- -------------- -------------- ------------- ------------- Total revenue................... 100% 100% 100% 100% 100% Cost of revenues................ 69.3 47.8 44.2 44.5 44.3 ----- ----- ----- ----- ----- Gross profit.................. 30.7 52.2 55.8 55.5 55.7 Marketing expenses.............. 26.7 25.8 23.0 18.1 13.5 Selling, general and administrative expenses....... 13.7 13.2 12.1 13.0 12.8 ----- ----- ----- ----- ----- Operating income (loss)....... (9.7)% 13.2% 20.7% 24.4% 29.4%
COMPARISON OF FISCAL QUARTER ENDED JULY 24, 1999 TO FISCAL QUARTER ENDED JULY 25, 1998 Total revenues were $96.4 million for the fiscal quarter ended July 24, 1999, an increase of $4.1 million or 4.4% from $92.3 million for the fiscal quarter ended July 25, 1998. This increase in total revenues was a result of increased product sales, franchise commissions and classroom fees from our European company-owned operations, partially offset by a reduction in fees from domestic company-owned operations. Domestic company-owned (NACO) classroom meeting fee revenues were $32.9 million for the fiscal quarter ended July 24, 1999, a decrease of 5.2% from $34.7 million for the fiscal quarter ended July 25, 1998. This decrease of $1.8 million in revenue was more than offset by a corresponding reduction of $4.1 million in promotional allowances, each resulting from the implementation of the LIBERTY/LOYALTY pricing structure. Foreign company-owned classroom meeting fee revenues were $40.1 43 million for the fiscal quarter ended July 24, 1999, an increase of 5.0% from $38.2 million for the fiscal quarter ended July 25, 1998. This increase in foreign company-owned classroom meeting fee revenues was the result of a price increase in the United Kingdom and increased volume in continental Europe. Domestic franchise revenues were $5.1 million for the fiscal quarter ended July 24, 1999, an increase of 24.4% from $4.1 million for the fiscal quarter ended July 25, 1998. This increase in domestic franchise revenues was primarily the result of increased volume. Foreign franchise revenues were $1.1 million for the fiscal quarter ended July 24, 1999, an increase of 22.2% from $0.9 million for the fiscal quarter ended July 25, 1998. Product revenues were $15.5 million for the fiscal quarter ended July 24, 1999, an increase of 23.0% from $12.6 million for the fiscal quarter ended July 25, 1998. This increase in product revenues was primarily the result of the introduction of healthy snack bars in NACO. Licensing royalties were $1.5 million for the fiscal quarter ended July 24, 1999, a decrease of 11.8% from $1.7 million for the fiscal quarter ended July 25, 1998. This decrease in licensing revenues was the result of a currency devaluation in Brazil. Cost of revenues was $42.7 million for the fiscal quarter ended July 24, 1999, an increase of 3.9% from $41.1 million for the fiscal quarter ended July 25, 1998. This increase was primarily the result of an increased number of meetings to accommodate increased volume. Marketing expenses were $13.0 million for the fiscal quarter ended July 24, 1999, a decrease of 22.2% from $16.7 million for the fiscal quarter ended July 25, 1998. This decrease in marketing expenses was the result of a reduction in promotional allowances in NACO associated with LIBERTY/ LOYALTY. Selling, general and administrative expenses remained relatively flat at $12.4 million for the fiscal quarter ended July 24, 1999, as compared to the fiscal quarter ended July 25, 1998. As a result of the above, operating income was $28.3 million for the fiscal quarter ended July 24, 1999, an increase of 25.8% from $22.5 million for the fiscal quarter ended July 25, 1998. COMPARISON OF FISCAL YEAR ENDED APRIL 24, 1999 TO FISCAL YEAR ENDED APRIL 25, 1998 Total revenues were $404.8 million for the fiscal year ended April 24, 1999, an increase of $70.5 million, or 21.1%, from $334.3 million for the fiscal year ended April 25, 1998. Of the $70.5 million increase, $32.1 million was attributable to domestic company-owned classrooms, $14.4 million to foreign company-owned classrooms, $4.7 million to domestic franchises, $10.5 million to products sales and $9.0 million to royalties. Domestic company-owned classroom meeting fee revenues were $145.3 million for the fiscal year ended April 24, 1999, an increase of 28.4% from $113.2 million for the fiscal year ended April 25, 1998. This increase in domestic company-owned classroom meeting fee revenues was the result of a 29% increase in member attendance. We believe the increase in member attendance was due to the continued improvement in member satisfaction which resulted from the full year impact of 1-2-3 SUCCESS and the elimination of our prepackaged meals program. Foreign company-owned classroom meeting fee revenues were $161.0 million for the fiscal year ended April 24, 1999, an increase of 9.8% from $146.6 million for the fiscal year ended April 25, 1998. This increase in foreign company-owned classroom meeting fee revenues was the result of a 6% increase in international attendance in continental Europe and Australia. Domestic franchise revenues were $19.1 million for the fiscal year ended April 24, 1999, an increase of 32.6% from $14.4 million for the fiscal year ended April 25, 1998. This increase in domestic franchise revenues was primarily the result of an increase in member attendance, which was due to the full year impact of 1-2-3 SUCCESS, improved training and support and increased marketing effectiveness. 44 Foreign franchise revenues were $4.1 million for the fiscal year ended April 24, 1999, an increase of 17.1% from $3.5 million for the fiscal year ended April 25, 1998. This increase was primarily the result of a strong performance in Canada and Ireland. Product revenues were $56.6 million for the fiscal year ended April 24, 1999, an increase of 22.8% from $46.1 million for the fiscal year ended April 25, 1998. This increase in product revenues was primarily the result of increased member attendance. In addition, the elimination of approximately two- thirds of our items in NACO allowed us to focus our sales efforts on our core products. Royalties from licensing, publications and other were $18.0 million for the fiscal year ended April 24, 1999, an increase of 100% from $9.0 million for the fiscal year ended April 25, 1998. This increase in royalty revenues was attributable to a new licensing agreement with Warnaco for the manufacturing of women's shapewear. Cost of revenues was $178.9 million for the fiscal year ended April 24, 1999, an increase of 11.8% from $160.0 million for the fiscal year ended April 25, 1998. This increase was attributable to the increased levels of attendance. Gross profit margin, however, increased from 52.2% for the fiscal year ended April 25, 1998 to 55.8% for the fiscal year ended April 24, 1999. This increase in gross margin was due to various factors, including an increase in attendance per meeting, an increase in the ratio of third-party locations to total locations, and a change in product mix with a focus on higher margin core products. Marketing expenses were $93.1 million for the fiscal year ended April 24, 1999, an increase of 7.9% from $86.3 million for the fiscal year ended April 25, 1998. This increase in marketing expenses was the result of an increase in advertising and an increase in promotional allowances as a result of increased attendance. Selling, general and administrative expenses were $48.9 million for the fiscal year ended April 24, 1999, an increase of 10.9% from $44.1 million for the fiscal year ended April 25, 1998. As a percentage of total revenues, these costs were 12.1% for fiscal 1999 compared to 13.2% for fiscal 1998. This percentage decrease was due to the continued benefit of our restructuring and reorganization program, which allowed us to eliminate certain costs that were not directly associated with our core business, classroom operations and related products. As a result of the above, operating income was $83.9 million for the year ended April 24, 1999, an increase of 90.7% from operating income of $43.9 million for the year ended April 25, 1998. COMPARISON OF FISCAL YEAR ENDED APRIL 25, 1998 TO FISCAL YEAR ENDED APRIL 26, 1997. Total revenues were $334.3 million for the fiscal year ended April 25, 1998, an increase of $1.6 million from $332.7 million for the fiscal year ended April 26, 1997. Our results reflected strong growth in our core business offset by a revenue decline of $33.3 million as a result of the elimination of prepackaged meals sales in 1997. Domestic company-owned classroom meeting fee revenues were $113.2 million for the fiscal year ended April 25, 1998, an increase of 7.6% from $105.2 million for the fiscal year ended April 26, 1997. This increase in domestic company-owned classroom meeting fee revenues was the result of the introduction of 1-2-3 SUCCESS in the United States mid-year in fiscal 1998. Foreign company-owned classroom meeting fee revenues were $146.6 million for the fiscal year ended April 25, 1998, an increase of 8.8% from revenues of $134.8 million for the fiscal year ended April 26, 1997. This increase in foreign company-owned classroom meeting fee revenues was the result of a 26.7% increase in attendance in continental Europe and a 13.9% increase in the United Kingdom. Domestic franchise revenues were $14.4 million for the fiscal year ended April 25, 1998, an increase of 34.6% from $10.7 million for the fiscal year ended April 26, 1997. This increase in domestic 45 franchise revenues was the result of the introduction of 1-2-3 SUCCESS during mid-year fiscal 1998. Foreign franchise revenues were $3.5 million for the fiscal year ended April 25, 1998, an increase of 9.4% from $3.2 million for the fiscal year ended April 26, 1997. The increase in foreign franchise revenues was the result of the introduction of 1-2-3 SUCCESS to certain foreign franchises during fiscal 1998. Product revenues were $46.1 million for the fiscal year ended April 25, 1998, an increase of 53.7% from $30.0 million for the fiscal year ended April 26, 1997. This increase in product revenues reflects the positive impact of our restructuring and reorganization program, which allowed us to focus on selling certain core products in the United States by discontinuing prepackaged meals sales and reformulating and repackaging core products in the United Kingdom and continental Europe. Royalties from licensing, publications and other were $9.0 million for the fiscal year ended April 25, 1998, a decrease of 36.2% from $14.1 million for the fiscal year ended April 26, 1997. This decrease in royalty revenues was the result of a decrease in publishing royalties of $1.0 million, Brazilian meeting fee royalties of $1.0 million and the sale of a minority interest in Finland. In addition, during fiscal 1997, we sold two franchise areas and granted a food license in Brazil, which resulted in additional revenues of $2.6 million, which did not recur in fiscal 1998. Cost of revenues was $160.0 million for the fiscal year ended April 25, 1998, a decrease of 30.6% from $230.4 million for the fiscal year ended April 26, 1997. Cost of revenues for fiscal 1997 included a restructuring charge of $49.7 million. This charge included certain non-recurring restructuring costs, relating to the discontinuation of the prepackaged meals program and the elimination of related fixed costs, rationalization of certain product lines and termination and severance costs relating to the reorganization of classroom operations. This initiative generated $18.0 million in operational cost savings in fiscal year 1998. Gross profit margin increased from 30.8% for the fiscal year ended April 26, 1997 to 52.2% for the fiscal year ended April 25, 1998. Marketing expenses were $86.3 million for the fiscal year ended April 25, 1998, a decrease of 2.8% from $88.8 million for the fiscal year ended April 26, 1997. This decrease in marketing expenses was primarily the result of a 7% decrease in promotional allowances given to members. Selling, general and administrative expenses were $44.1 million for the fiscal year ended April 25, 1998, a decrease of 3.2% from $45.5 million, including a restructuring charge of $2.0 million, for the fiscal year ended April 26, 1997. As a percentage of total revenues, these costs were 13.2% for the fiscal year ended April 25, 1998 compared to 13.7% for the fiscal year ended April 26, 1997. This decrease reflects the benefit of our restructuring and reorganization program which began in fiscal 1997. As a result of the above, operating income increased from a loss of $32.0 million for the fiscal year ended April 26, 1997 to $43.9 million for the fiscal year ended April 25, 1998. Before the restructuring charge of $51.7 million, our operating income grew by $24.4 million. LIQUIDITY AND CAPITAL RESOURCES During fiscal 1999, our primary source of funds to meet working capital needs was cash from operations. Cash and cash equivalents increased $7.7 million during the fiscal year ended April 24, 1999. Cash flows provided by operating activities of $59.2 million were in excess of cash flows used in investing activities of $3.0 million and cash flows used in financing activities of $48.9 million. Cash flows used for investing activities were principally related to capital expenditures. Cash flows used in financing activities were principally related to the payment of dividends and other transfers to Heinz. The total cash we required to effect the Transactions was $494.0 million. We funded these costs from the proceeds of the notes and $239.0 million in borrowings under the New Credit Facilities. 46 Capital spending has averaged $2.9 million annually over the last three years and has consisted primarily of leasehold improvements for meeting locations and administrative offices, computer equipment for field staff and call centers and Year 2000 upgrades. We expect to make capital expenditures of $3.5 million in fiscal year 2000. We are significantly leveraged. As of July 24, 1999, on a pro forma basis after giving effect to the Transactions, we would have had outstanding $494.0 million in aggregate indebtedness, with $28.0 million of additional borrowing capacity available under the revolving credit facility, and total stockholders' deficit of $238.1 million. After giving pro forma effect to the Transactions, our ratio of earnings to fixed charges for the fiscal year ended April 24, 1999 would have been 1.5 to 1. As a result of the Transactions, our liquidity requirements are significantly increased, primarily due to increased debt service obligations. We believe that cash flow from operating activities, together with borrowings available under the revolving credit facility, will be sufficient to fund our currently anticipated capital investment requirements, debt service requirements and working capital requirements. Any future acquisitions, joint ventures or other similar transaction will likely require additional capital and we cannot assure you that any such capital will be available to us on acceptable terms or at all. The New Credit Facilities provide senior secured financing of up to $267.0 million, consisting of the $75.0 million term loan A facility with a maturity of six years, the $75.0 million term loan B facility with a maturity of seven years, the $87.0 million TLC facility with a maturity of seven years and a $30.0 million revolving credit facility. We drew the full amount of the term loan A facility, the term loan B facility and the TLC facility upon closing of the Transactions. The revolving credit facility commitment will terminate six years from the date of the closing of the New Credit Facilities. The term loan A facility, the term loan B facility, the TLC facility and the revolving credit facility will initially bear interest, subject to performance based stepdowns applicable to the term loan A facility and the revolving credit facility, at a rate equal to (a) in the case of the term loan A facility and the revolving credit facility, LIBOR plus 3.25% or, at our option, the alternate base rate (as defined in the New Credit Facilities) plus 2.25% or (b) in the case of the term loan B facility and the TLC facility, LIBOR plus 4.00% or, at our option, the alternate base rate plus 3.00%. In addition to paying interest on outstanding principal under the New Credit Facilities, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unused commitments at a rate equal to 0.50% per year. The term loan A facility, the term loan B facility and the TLC facility will amortize each year in equal quarterly amounts in the following approximate aggregate principal amounts for each year set forth below:
TERM TERM LOAN A LOAN B TLC YEAR FACILITY FACILITY FACILITY - ---- -------- -------- -------- (IN MILLIONS) 1................................................ $ 9.38 $ 0.56 $ 0.65 2................................................ 12.50 0.75 0.87 3................................................ 12.50 0.75 0.87 4................................................ 12.50 0.75 0.87 5................................................ 12.50 0.75 0.87 6................................................ 15.62 0.75 0.87 7................................................ -- 70.69 82.00 ------ ------ ------ Total............................................ $75.00 $75.00 $87.00 ====== ====== ======
Amounts outstanding under the revolving credit facility are due and payable in full at maturity, six years from the date of the closing of the New Credit Facilities. 47 The New Credit Facilities contain a number of covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, repay other indebtedness, make certain restricted payments and dividends, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations, make capital expenditures, enter into sale and leaseback transactions, or engage in certain transactions with affiliates and otherwise restrict our corporate activities. In addition, under the New Credit Facilities, we are required to comply with specified financial ratios and tests, including minimum fixed charge coverage and interest coverage ratios and maximum leverage ratios. The New Credit Facilities also contain certain customary events of default. The notes will mature in 2009. Our obligations under the notes are subordinate and junior in right of payment to all of our existing and future senior indebtedness, including all indebtedness under the New Credit Facilities. The indentures restrict, among other things, our ability to incur additional indebtedness, issue shares of disqualified stock and preferred stock, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates, and prohibit certain restrictions on the ability of our subsidiaries to pay dividends or make certain payments to us, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. In addition, we have 1.0 million shares of Series A Preferred Stock issued and outstanding. Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 6% payable annually in arrears. Our ability to fund our capital investment 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. MARKET RISK We are exposed to foreign currency fluctuations and interest rate changes. Our exposure to market risk for changes in interest rates relates to the fair value of long-term fixed rate debt and interest expense of variable rate debt. We have historically managed interest rates through the use of, and our long-term debt is currently composed of, a combination of fixed and variable rate borrowings. Generally, the fair market value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. Based on the overall interest rate exposure on our fixed rate borrowings at April 24, 1999 and at July 24, 1999, on a pro forma basis, a 10 percent change in market interest rates would have less than an 8 percent impact on the fair value of our long-term debt. Based on variable rate debt levels at April 24, 1999 and at July 24, 1999, on a pro forma basis, a 10 percent change in market interest rates would have less than a 3 percent impact on our interest expense, net. Other than intercompany transactions between our domestic and foreign entities and the portion of the notes which are denominated in euro dollars, we generally do not have significant transactions that are denominated in a currency other than the functional currency applicable to each entity. Fluctuations in currency exchange rates may also impact our stockholders' equity. The assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into U.S. dollars at the weighted average exchange rate for the year. The resulting translation adjustments are recorded in stockholders' equity as accumulated other comprehensive income/loss. In addition, fluctuations in the value of the euro will cause the U.S. dollar translated amounts to change in comparison to prior periods and may impact 48 interest expense. Furthermore, we will revalue the outstanding euro notes at the end of each period, and the resulting change in value will be reflected in the income statement of the corresponding period. Each of our subsidiaries derives revenues and incurs expenses primarily within a single country, and consequently, does not generally incur currency risks in connection with the conduct of normal business operations. Foreign exchange gains and losses are included in our consolidated statements of income and historically have not been significant. We generally do not engage in hedging activities. YEAR 2000 RISK The Year 2000 issue is the result of computer programs that were written using only two digits, rather than four, to represent a year. Date-sensitive software or hardware may not be able to distinguish between the years 1900 and 2000 and programs that perform arithmetic operations, comparisons or sorting of date fields may begin yielding incorrect results. This could potentially cause a system failure or miscalculations that could disrupt operations. To address the impact of the Year 2000 issue on our computer programs, embedded chips and significant third-party suppliers of goods and services, we formed a task force led by our information services department. This task force took an inventory of potential Year 2000 issues and has substantially completed its assessment of their impact. Our key systems (including financial applications) and computer hardware have been identified as Year 2000 compliant. In addition, to address Year 2000 issues, we commenced in early 1997 a program of remediation, through modification or replacement. The program, including final user testing, is substantially complete. The cost of the Year 2000 project was approximately $1.35 million, and was funded through cash flows from operations. Approximately $0.6 million of the Year 2000 costs related to hardware and software purchases and have been capitalized, with the remainder expensed as incurred. At present, we believe our technology systems are Year 2000 compliant and that the Year 2000 issue will not present a materially adverse risk to our future results of operations, financial position or cash flow. Significant suppliers of goods and services have given positive statements as to their efforts to ensure no disruption to normal business operations. If there are incidences of noncompliance, we plan to allocate internal resources to address these incidences. If our computers are not Year 2000 compliant by December 31, 1999, and interruptions occur, we could incur significant losses in revenues due to these business interruptions, which could have a material adverse effect on our future results of operations, financial position or cash flow. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of Statement 133," which postponed the adoption date of SFAS No. 133. As such, we are not required to adopt the statement until fiscal 2002. We do not believe this standard will have a material impact on our financial statements. 49 INDUSTRY OVERVIEW The number of overweight and obese people in the United States and other developed countries has increased greatly over the past four decades due to improving living standards, the aging of the population (as people tend to gain weight with age) and increasingly sedentary lifestyles. The National Institute of Health ("NIH") recently issued a report indicating that approximately 55% of American adults are overweight or obese. A 1997 World Health Organization ("WHO") publication titled, "Obesity: Preventing and Managing the Global Epidemic," reported that the world's population is becoming overweight at a rapid pace and that there exists an urgent need to deal with this problem. In addition, the health risks associated with being overweight are becoming increasingly recognized. The WHO stated: "The prevalence of overweight and obesity is escalating rapidly worldwide" and that "obesity should be regarded as today's principal neglected public health problem." Obesity is considered a chronic disease by the medical community. According to a 1998 Gallup survey, the reasons people diet have been shifting towards health rather than appearance over the last several years. While "fitting into clothes" is still an important reason stated for starting to diet, the desire to use weight loss to feel better physically and improve general health is increasing. Demand for non-drug based weight control programs is also growing as a result of: - greater awareness that achieving/maintaining a healthy weight will reduce the risk of serious medical problems and significantly improve the quality of life; - the recognition that drugs are not an effective stand-alone remedy and may have undesirable side effects; and - an increasing willingness of employers and insurers to promote and contribute towards the cost of weight loss programs. WEIGHT AND HEALTH CORRELATION Being overweight or obese raises risks associated with numerous diseases, including heart disease, high blood pressure and type II diabetes. According to the WHO, there is strong evidence that weight loss reduces the risk of developing many of these diseases and benefits patients already diagnosed with the conditions. The prevalence of disease, particularly cardiovascular disease, among the overweight clearly increases with age. According to the WHO, obesity is a major predictor of impaired mobility in older adults. The number of people over the age of 50 is expected to increase 25% in the United States from 1997 to 2005. Weight control problems are affecting more children as well and a large increase in the number of overweight youths has occurred over the past 20 years. Currently almost 11% of American children and adolescents are classified as overweight and an additional 14% are considered at risk of becoming overweight. INCREASING SUPPORT FROM EMPLOYERS AND INSURERS As the costs of health insurance and medical treatments increase, employers and insurers are trying to find ways to decrease expenses. By encouraging enrollment in a weight reduction program, employers and insurers may reduce their healthcare expenses. Many companies have included preventative weight loss as an integral part of their preventative healthcare programs. For example, Independence Blue Cross, located in Wilmington, Delaware, which has approximately 74,000 employees reimburses employees for 50% of their weekly meeting fees upon 50 reaching goal weight and the remaining 50% of their weekly meeting fees if they maintain the weight for six months. In addition, large companies, such as IBM and Disney, share the cost of meetings with their employees. Attendance in our AT WORK program, where meetings are at the place of business, has grown from 450,000 in fiscal 1997 to 1.1 million in fiscal 1999. COMPETITION The overall U.S. market for products and services directed at weight control generated more than $16.5 billion in revenues in 1998 according to Marketdata Enterprises. This market includes commercial weight loss programs, self-help weight loss products, weight loss services administered by doctors, nutritionists and dieticians and weight loss drugs. Competition among commercial weight loss programs is largely based on the effectiveness of the program and price. Our most significant direct competitor in the United Kingdom is Slimming World. Our estimated 42% market share of the U.K. commercial weight control market, however, greatly exceeds Slimming World's estimated 26% market share. We have few direct competitors in the rest of Europe. In Australia/New Zealand we are more than twice as large as our closest competitor, Jenny Craig, despite Jenny Craig having been founded in Australia. In the United States, we compete in the commercial weight control segment, along with other companies such as Jenny Craig, The Diet Workshop, Nutri/ System and Diet Center, although we believe our business platforms are not comparable. For example, many of our competitors' businesses are based on the sale of prepackaged meals and meal replacements, whereas our program uses group support, education and behavior modification to help members change their eating habits without prepackaged foods. During the 1980's, the U.S. commercial weight loss industry grew significantly with many competitors focusing their programs on meal replacement and prepackaged food products. We believe that weight control is a lifelong challenge and that quick results offered by these products are not sustainable and may have side-effects. In fact, diets offered by some of our competitors proved to be ineffective or to cause side-effects, leading the U.S. government to increase its scrutiny of claims made by the industry. Some competitors were forced into bankruptcy, such as Nutri/System, or to drastically reduce advertising and scale back the size of their operations, such as Jenny Craig. When the diet drugs Phen/Fen and Redux became popular in 1996, many of these weakened competitors turned to prescription drug sales as a way to boost sagging profitability. In September 1997, the United States Food and Drug Administration requested the withdrawal of fenfluramine (one of the pharmaceuticals used in "Phen/Fen") and dexfenfluramine ("Redux"), from the U.S. market citing potential health risks. The manufacturer and distributor of these pharmaceuticals agreed to an immediate recall of these drugs. The resultant negative publicity and lawsuits over these drugs further weakened these competitors. While our U.S. operations suffered from the introduction of our prepackaged meals program, we remained consistent in our core behavior modification philosophy and never promoted diet drugs. As a result, we maintained a reputation for safety and scientific support. Since we eliminated our prepackaged meals program in NACO and refocused our operations on our core programs, NACO and our U.S. franchises have resumed their growth pattern. 51 BUSINESS COMPANY OVERVIEW We are the largest provider of weight control programs in the world. We operate in 29 countries through a network of company-owned and franchise operations. At the core of our business are our weekly meetings, in which we present our scientifically designed program, incorporating group support and education about healthy eating patterns, behavior modification and physical activity. In our fiscal year ended April 24, 1999, we estimate we held an average of approximately thirty-three thousand meetings worldwide each week and our average weekly attendance exceeded one million members. An estimated 9,000 classroom leaders, all of whom have lost weight on and are specially trained to teach our program, run our meetings. We have developed the WEIGHT WATCHERS program through continuous improvement over our 36 year history and we believe our brand name is recognized globally today as the standard for healthy, safe and drug free weight control. Careful management of our brand identity and reputation is a fundamental element of our long-term success. According to a Gallup study conducted in 1998, more than 84% of adults and 94% of dieting adults in the United States recognize our brand. In an independent survey of U.S. doctors in 1998, among those doctors who had recommended weight loss programs in the preceeding year, 65% recommended WEIGHT WATCHERS. The next most frequently recommended program received recommendations from less than 13% of those doctors. We believe that the combination of our brand recognition, extensive global network and our 9,000 classroom leaders provides us with a significant competitive advantage. For the twelve month period ended July 24, 1999, we generated pro forma revenue of $403.6 million and adjusted EBITDA of $100.3 million. Set forth below is a diagram showing the percentage of pro forma revenue for the twelve months ended July 24, 1999, represented by the sources of our revenue. PRO FORMA REVENUE FOR THE TWELVE MONTHS ENDED JULY 24, 1999 = $403.6 MILLION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
U.S. MEETING FEES 36% International Meeting Fees 40% Franchise Commisions 6% Product Sales 15% Other 3%
52 [LOGO] CORE PROGRAM APPROACH Throughout our history, we have based our program on four core elements: group support, behavior modification, diet and exercise. The group support system remains the cornerstone method of presenting our program. Group support assists members in dealing with issues such as depression-eating and habitual eating behaviors. We offer this support through meetings that are interactive and encourage learning through group activities and discussions. Members learn strategies from leaders who have learned how to lose weight and maintain their weight loss on our program. These leaders are trained to respond to member needs by using our techniques and actively modeling our principles. The group support system continues throughout the maintenance period of the program when members learn how to stay within their appropriate weight range. Behavior modification and education on eating habits have also always been key elements of our program. We use motivation, education and support to help members manage their weight and to change their habits. Members are taught how to meet and overcome these challenges. Discussions on topics such as staying motivated, overeating and managing stress offer valuable insight and provide the reassurance that no one must diet alone. U.S. members currently also learn "Tools for Living," eight fundamental goal-setting and motivational principles. In addition, U.S. members currently receive a booklet titled "Managing Your Weight From the Inside Out" that teaches members how to develop a positive mind-set about weight control, new approaches to problem solving, and specific ideas for handling some of the most common weight management issues. International members learn similar principles and receive similar publications. 53 Exercise is an important component of weight management and our overall program to lose weight. U.S. members currently receive THE WEIGHT WATCHERS ACTIVITY GUIDE which is designed to promote exercise and activity outside of the classroom. It is consistent with the recommendations for physical activity outlined by both the Center for Disease Control and Prevention and the American College of Sports Medicine. International members receive similar publications. The final key element of our program is diet which we describe in detail below. Our diets are based on healthy food selection rather than prepackaged meals. This allows members to tailor and modify their diet to their personal tastes. DIETS In order to keep our diets at the forefront of weight loss science, each of our diets is designed in consultation with doctors and other scientific advisors. We continually strive to improve our diets by periodically testing, then introducing, new features. We currently have two diets: 1-2-3 SUCCESS and SUCCESS SIGNALS. 1-2-3 SUCCESS In 1996, our United Kingdom subsidiary developed and introduced 1-2-3 SUCCESS, a state-of-the-art diet management system that helps participants manage their calorie intake through a simple and flexible POINTS system. Unlike some competing diets, 1-2-3 SUCCESS allows participants to eat regular meals instead of prepackaged servings, allowing our members freedom to choose what they eat. In 1997, the 1-2-3 SUCCESS diet was successfully rolled out to select international operations, North American franchises and NACO operations. 1-2-3 SUCCESS features the POINTS food system, which is based on a formula involving calories, fat and fiber. The formula for POINTS differs from country to country in order to suit local tastes, as well as package labeling differences between countries. In the 1-2-3 SUCCESS diet, members have the freedom to participate in special occasions and eat out, because no food is forbidden. Our POINTS Guide helps members stay within program guidelines when eating outside the home. Members are given a daily POINTS goal to spend on whatever combination of food they prefer as long as the total does not exceed the goal. In January 1999, we enhanced 1-2-3 SUCCESS in the United States by adding the DAILY COACH. This addition to the regular written materials consists of a series of booklets containing tips, inspirational stories and proven weight-loss strategies. Our U.K. operations also recently updated all of their program material and repackaged the program as 1-2-3 SUCCESS 2000. We believe 1-2-3 SUCCESS encourages members to eat a wide variety of foods in amounts that promote healthy weight loss. The formula helps members choose a diet low in fat, high in complex carbohydrates and moderate in protein. Members can calculate POINTS on our free POINTS finder or they may purchase our electronic POINTS calculator. 54 POINTS CALCULATORS [LOGO] [LOGO] SUCCESS SIGNALS In 1996, our local management in Europe also successfully developed a diet called SUCCESS SIGNALS based on a green-yellow-red food selection system. SUCCESS SIGNALS helps guide dieters to low fat foods (green) instead of high fat foods (red). This system is similar to 1-2-3 SUCCESS in that it does not require weighing of portions. It is now used in nine Continental European countries and Brazil. We believe a POINTS based plan can be introduced in these markets as a program innovation. SCIENTIFIC SUPPORT We work closely with doctors, scientists and nutritionists, to ground our program in scientific and medically sound principles of weight control. As part of our program we are sponsoring a two-year scientific study to quantify the health benefits of our program as compared to self-help dieting. We believe that the publication of this study will serve to encourage a greater number of employers and health insurance companies to partner with us to cover or reimburse the cost of joining the WEIGHT WATCHERS program. DELIVERY METHODS CLASSROOM MEETINGS At the core of our business is the classroom meeting, which members attend to learn the key weight loss techniques, to celebrate their success with other dieters, and to receive motivation and group support. Our estimated 9,000 classroom leaders run our meetings and educate members on the process of successful and sustained weight loss. Field management and current leaders constantly identify new leaders as members with strong inter-personal skills, personality and communication skills. Leaders are part-time employees and earn an hourly wage and commissions based on sales. 55 We present our program in a series of weekly classes which average one hour in duration. Classes are conveniently scheduled throughout the day. We hold classes in either leased locations, such as space at shopping malls, or in meeting rooms typically rented from civic or religious organizations. We designed our AT WORK program to address the weight loss needs of people in the workforce by operating on-site in their place of employment. This program represents a significant amount of total revenue for NACO operations and is expanding in other countries. Employees can attend the AT WORK program meetings that are held either before work, during lunch hours, or after work. AT WORK is particularly popular in the United States as employees, and increasingly employers, are receptive to our classes in the work place. In many cases employers subsidize employee participation and typically provide meeting space without charge. We designed our COMMUNITY MEETINGS program to meet the needs of people in rural areas that would otherwise be unable to support traditional meetings. Members in COMMUNITY MEETINGS prepay for a series of meetings to ensure adequate enrollment. Typically our classes begin with registration and a weigh-in where the weight change of attendees since their last session is noted in their attendance book which serves as a permanent record of the participants' progress. Leaders are trained to engage the members at the weigh-in to talk about their weight control efforts during the previous week and provide encouragement and advice, making them feel at ease. After the weigh-in, the leader introduces the class. Part of the class is educational, where the leader uses personal anecdotes, games or open questions to demonstrate some of the core aspects of weight loss, such as self-belief and discipline. During another part of the class, the leader focuses on a variety of topics selected by us, such as achievements people have made in the prior week and celebrating and applauding successes. Participants who have reached their weight goal are singled out for their accomplishment. Discussions can range from dealing with a holiday office party to making time to exercise. The leader encourages substantial class participation and promotes supporting products and materials as appropriate. At the end of the class, new members are given special tutoring in the 1-2-3 SUCCESS plan. Generally, group leaders help set a member's weight goal within a healthy range by using a body mass index. When members reach their weight goal and maintain it for six weeks, they achieve lifetime member status. This gives them the privilege to attend our meetings free of charge as long as they maintain their weight within a certain range. Successful members also become eligible to apply for class leader positions. NONCLASSROOM DELIVERY METHODS We provide additional programs designed for people who, either through circumstance or personal preference, do not wish to attend our traditional classes. For example, we have developed an AT HOME self-help program that provides guidance and support needed to lose weight without having to attend classes. In January 1999, an AT HOME CD-ROM version of the successful 1-2-3 SUCCESS program was launched in the United Kingdom with promising initial results. The program, in a user-friendly manner, helps set an appropriate goal weight by calculating the user's body mass index, calculates POINTS for selected foods, assists in meal planning, tracks daily POINTS usage and charts the dieter's progress. The CD-ROM is appealing to men and younger dieters because of its technological nature and the privacy, flexibility and convenience it offers. We believe the roll out of an AT HOME CD-ROM in the United States could provide revenue enhancement opportunities. In Australia we are testing the GUT BUSTER mail-order program which has been scientifically designed for male weight control. Customers who order this program receive audio cassettes and literature. In France, we also have our ONE-ON-ONE program which offers our members supplemental private tutoring. 56 MARKETING AND PROMOTION PRICING STRUCTURE AND PROMOTIONS Our most popular payment structure is a "pay-as-you-go" arrangement without contracts, although we also offer discounted pre-pay options. A new member pays an initial registration fee and then a weekly fee for each class attended, although free registration is often offered as a promotion. In 1996 a new pricing structure, called LIBERTY/LOYALTY, was developed in France. LIBERTY/LOYALTY provides members the option of committing to consecutive weekly attendance and paying a lower weekly fee with penalties for missed classes, or paying a higher weekly fee without the missed meeting penalties. Following the successful introduction in France, we rolled out the LIBERTY/LOYALTy pricing plan to most of the rest of Europe and, following a successful test marketing, we rolled it out to our NACO operations in April/May 1999. Based on the results from our international and North American markets where the program has been in place, we believe that LIBERTY/LOYALTY will result in higher revenues, through increased enrollments, higher product sales and longer average attendance per enrollment, partially offset by a reduced average fee per attendance. MEDIA ADVERTISING Our advertising supports the three key enrollment-generating seasons of the year--winter, spring and fall. In addition to enhancing our brand image and awareness, our advertising is designed to motivate both former members and potential members to take immediate action and join. Media investments are allocated on a market-by-market basis, as well as by media vehicle (television, radio, magazines and newspaper), taking into account such characteristics as penetration, market vitality, media efficiencies and effectiveness. DIRECT MAIL Direct mail is a critical element of our marketing mix because it targets former members who account for the majority of our attendance. During fiscal year 1999, for example, NACO mailed 11.3 million pieces of seasonal (winter, spring and fall) direct mail. PUBLIC RELATIONS/CELEBRITY ENDORSEMENTS The focus of our public relations efforts is at the grass roots level. Leaders and successful members engage in local promotions, information presentations and charity events to promote WEIGHT WATCHERS and demonstrate the program's efficacy. Public relations programs are specifically designed to facilitate this type of promotion. For many years we have also used celebrities to promote and endorse the program. Since 1997, we have retained Sarah Ferguson, the Duchess of York to promote and endorse the program in North America. Her contract with us, which runs through 2000, requires her to devote approximately 20 days per year on activities such as appearances at major events and filming television advertisements. The Duchess will continue to make appearances throughout the upcoming year to keep us in the press and maintain the strong momentum of the program. Prior to the Duchess, we used Kathleen Sullivan and Lynn Redgrave as our celebrity spokespersons. In Brazil, we have used a Brazilian television star as our celebrity spokesperson. MEMBER REFERRALS An important source of new members is through referrals from existing or prior members. In fiscal year 1999, approximately 4.8 million people enrolled in our classes worldwide. Given our 36-year operating history, we have created a powerful referral network. We have incentive programs for member referrals, such as our bring a friend promotions. 57 AT WORK CORPORATE SALES In the United States, the AT WORK plan has become an important component of our business. Many corporations, including IBM, Time Warner, Hallmark Cards, Disney, and Readers Digest, hold AT WORK meetings throughout the country. Since fiscal year 1997, our company-owned AT WORK operations have more than doubled in size. Attendance in our AT WORK program, where meetings are at the place of business, has grown from 450,000 in fiscal 1997 to 1.1 million in fiscal 1999. Many franchise operations in the United States also have significant AT WORK programs. CLASSROOM PRODUCT SALES We offer a range of ancillary products which complement our core program such as calendars, books, healthy snack bars and CD-ROMS. These products are regularly updated to maintain their appeal. Franchisees can buy these products from us or from licensed manufacturers at wholesale prices to sell to their members. We introduced our JUST 2 POINTS healthy snack bar in March, 1999 in NACO that plays to the strength of the POINTS diet system. Additionally, in Europe we sell such products as cooking aids, cereal bars and diet candies. LICENSING PUBLISHING LICENSES Under an agreement between Weight Watchers International, Inc. and a third-party publisher, we granted the publisher the exclusive right to use our trademarks in developing, publishing, licensing, selling and distributing books, audio products, video products, calendars, recipe cards and other products for sale at meetings, book clubs and retail stores. The publisher holds this exclusive license through October 2001. In return for this license, the publisher agreed to pay to us a non-returnable fee of $7.0 million and certain ongoing royalties. Nearly 4 million copies of recipe collections have been sold since 1994. The most recent launch was the Duchess of York's recipe collection, "Dieting with the Duchess," which sold 125,000 copies in the first 3 months after publication in January 1999. WEIGHT WATCHERS MAGAZINE, with a U.S. circulation of 1.1 million and readership of 4.1 million, is published in North America and the United Kingdom by Southern Progress and by us in Australia. We do not receive a royalty from Southern Progress. Southern Progress also has the exclusive right to publish WEIGHT WATCHERS books through direct response marketing. The Learning Company, under a license agreement, has produced a CD-ROM compilation of cookbook recipes. This product provides an interactive recipe guide and has sold more than 75,000 copies since its introduction in 1997. FOOD LICENSING We believe there are significant opportunities for the licensing of food products. In connection with the Transactions, we have entered into an ongoing partnership with Heinz to develop and market the WEIGHT WATCHERS brand for food products. Under our agreement, we retain all food licenses except that Heinz retains an exclusive, royalty-free global license to use the brand for certain food categories including frozen foods, soups, condiments, canned fish and canned pasta. Heinz will also receive royalty payments from an existing portfolio of third-party licenses for various food products through 2004. After 2004, Heinz will assign those licenses to us. Management estimates that for our fiscal year ended April 24, 1999, this portfolio generated royalty revenue of approximately $5 million. OTHER LICENSING A component of our strategy is to selectively license our brand in other categories. For example, in January 1999, we entered into a licensing agreement with Warnaco, an established clothing/shapewear 58 manufacturer, to produce a broad range of WEIGHT WATCHERS branded shapewear in the United States and Canada. The product line was launched in North America in June, 1999 and is exceeding initial expectations. Under this agreement, we will receive minimum average royalty payments of $2.1 million per year. Warnaco's exclusive license runs through July 31, 2004, and is renewable at Warnaco's option for an additional five years. REVIEW OF OPERATIONS BY REGION We run our domestic and international operations through a combination of owned and franchise operated locations. During the past 36 years, we have developed a strong group of franchisees throughout the world. We estimate that, in fiscal 1999, 40% of our U.S. attendance and 75% of our international attendance were at company-operated classes with the balance of members attending our franchise locations. Franchisees typically pay a fee to us equal to 10% of their gross revenues. For the fiscal year ended April 24, 1999, franchise revenues were $23.2 million. Set forth below is information on enrollment, attendance, number of weekly meetings, average class size and retention. U.S. information includes North American franchisees and franchisee information reflects our estimates. MEMBERSHIP STATISTICS--FISCAL YEAR 1999
CONTINENTAL AUSTRALIA/ INTERNATIONAL U.S. U.K. EUROPE NEW ZEALAND FRANCHISEES TOTAL -------- -------- ----------- ----------- ------------- --------------- Enrollment (thousands)............. 2,634 909 520 255 568 4,886 Attendance (millions).............. 27.5 9.8 5.7 3.4 6.2 52.6 Number of weekly meetings.......... 19,000 5,100 3,400 1,880 3,900 33,280 Average class size................. 28 37 32 34 31 30 Retention (ratio of attendance to enrollments)..................... 10.4 10.8 11.0 13.3 10.9 10.8
COMPANY OWNED OPERATIONS Our NACO operations consist of approximately 1,300 meeting locations, that for the fiscal year ended April 24, 1999 attracted 10.9 million attendances and generated $159.9 million in revenue including product sales. We have revitalized our NACO operations following the elimination in 1997 of prepackaged meals sales through our NACO network. In 1997, we restructured our NACO operations by eliminating the prepackaged meals program, improving customer service, restoring employee morale and introducing 1-2-3 SUCCESS and LIBERTY/LOYALTY programs. In connection with the elimination of our prepackaged meals program, we eliminated over $18.0 million in costs. As a result of all these efforts, we have grown NACO attendance by 40% from 7.8 million in fiscal year 1997 to 10.9 million in fiscal year 1999. Our near-term objective is to surpass the NACO attendance level of 12.9 million experienced prior to the introduction of our prepackaged meals. Our international company-owned operations consist of approximately 6,825 meeting locations in 13 countries outside of the United States. In the fiscal year ended April 24, 1999, these operations attracted 18.9 million attendances and generated meeting fee revenue of $161.0 million. In our international operations, we did not introduce the Heinz prepackaged meals program into our classrooms and our attendance remained stable. Management believes the contrast between our international performance and NACO is largely a result of the prepackaged meals program, the entrepreneurial management style outside of North America and the autonomy of the international management teams. 59 In fiscal year 1999, in the United Kingdom there were on average 5,100 weekly meetings in 3,600 different locations, with approximately 97% in third-party locations, such as meeting rooms rented from civil organizations and church halls. In the rest of Europe there were on average 3,400 weekly meetings in 2,200 different locations, with approximately 95% in third-party locations. In Australia/New Zealand there were on average 1,880 weekly meetings in 1,025 different locations, with approximately 97% in third-party locations. The following chart illustrates NACO and international attendance for our owned operations from fiscal year 1987 to fiscal year 1999. [CHART] FRANCHISE OPERATIONS We run our domestic and international operations through a combination of owned and franchise operations. Over the last 36 years, we have developed a strong group of franchisees throughout the world. We have franchise operations in 16 countries, including the United States. We estimate that in the fiscal year ended April 24, 1999, these franchised operations attracted attendance of 22.8 million and generated revenue of $23.2 million, including product sales. Our franchisees are responsible for running operations in their territory using the program we have developed. Franchisees are obliged to adhere strictly to the program content guidelines, with the freedom to control pricing, locations, operational structure and local promotions. Franchisees have the option to buy approved merchandise from us or from other vendors to sell to members. Franchisees are required to keep accurate attendance records that we audit on a periodic basis. Most franchise agreements are in perpetuity and can only be terminated upon a material breach or bankruptcy of the franchisee. We have enjoyed a mutually beneficial relationship with our franchisees over many years. The recent successful launch of the 1-2-3 SUCCESS diet across North America has served to enhance that relationship. We provide a central support system for the program and the brand. We also produce and sell program and marketing materials to the franchisees. Franchisees provide local operational 60 expertise, advertising and public relations. The franchise owners are typically close to the business and participate actively in all aspects of the business. During the period in which NACO emphasized the sale of prepackaged meals in the early and mid-1990s, although the franchisees did not participate in the prepackaged meals program, their operations were negatively impacted by NACO's advertising campaign which focused on its prepackaged meals sales and the lack of program innovation. Since NACO eliminated prepackaged meals sales and introduced program innovations in 1997 our U.S. franchisees experienced significant growth in enrollment and attendance levels. We have not offered a franchise location (or territory) for sale since 1997. However, from time to time we do repurchase territories, the last repurchase being in 1992. COMPETITIVE STRENGTHS GLOBAL BRAND AND NETWORK WEIGHT WATCHERS is the largest provider of weight control programs in the world. We attract, on average, more than 1.0 million members per week and conduct more than 1.5 million meetings per year, significantly more than any other commercial weight control operator. According to a Gallup study conducted in 1998, more than 84% of adults and 94% of dieting adults in the United States recognized our brand. In an independent survey of U.S. doctors in 1998, among those doctors who had recommended weight loss programs in the preceding year, 65% recommended WEIGHT WATCHERS. Management believes the combination of our strong global brand, our large membership and our approximately 9,000 trained classroom leaders creates significant scale advantages and a foundation for future growth which is unique in the weight loss industry. MEMBER BEHAVIOR Members have demonstrated strong loyalty towards our program, a program characterized by a high predictable pattern of repeat consumer behavior. We believe the quality and flexibility of our program helps attract and retain new members and contributes to significant repeat enrollments. In calendar year 1999, U.S. members enrolled for an average of 8 weeks. Approximately 75% of our returning members will re-enroll one or more times. Our returning members' re-enrollment behavior has been consistent through different economic cycles, irrespective of the number of times members previously enrolled. ENTREPRENEURIAL MANAGEMENT We run our international and franchise operations in a decentralized and entrepreneurial manner that has allowed our local managers to compete effectively, to consistently grow attendance, market share and profitability and to develop successful program features and innovations. This structure allows us to develop and test new ideas on a local basis, implementing only the most successful ideas across our network. Local country managers are responsible for the profitability of their territory and for adopting and implementing the best practices from other regions. Our local international management teams have created successful innovations of our diet. For example, local management in the United Kingdom developed our 1-2-3 SUCCESS diet. Our country managers have also designed customized pricing strategies such as the LIBERTY/LOYALTY plan which was first introduced in France. The LIBERTY/LOYALTY pricing structure provides members the option of committing to consecutive weekly attendance and paying a lower weekly fee with penalties for missed classes (Loyalty) or paying a higher weekly fee without the missed meeting penalties (Liberty). Management plans to further facilitate the adoption of the best practices and programs throughout our global system, while also developing a more entrepreneurial and decentralized management culture at our NACO operations. 61 VARIABLE COST STRUCTURE WITH HIGH RETURN ON INVESTED CAPITAL Our business model is unique, requiring limited capital investments while producing high cash flows. We pay our classroom leaders and receptionists on a per meeting basis and we typically lease or rent meeting space on a short-term basis. This enables us to increase or decrease the number of meetings we hold quickly based on demand. On average, over the last three fiscal years we spent approximately $2.9 million in annual capital expenditures. Our working capital requirements are also low as members typically pay meeting fees in cash at each meeting. We believe that our low capital requirements will enable us to grow rapidly while at the same time generating strong cash flow for debt repayments. GROWTH STRATEGY INCREASE ATTENDANCE THROUGH EXISTING CLASSROOM NETWORK We believe the demand for weight control programs is large and growing, providing significant opportunities to increase attendance through our existing classroom network. Our brand recognition, proven program, reputation with the medical community and high level of member referrals position us to benefit from the growth in the weight loss industry. We believe that the relatively low penetration of commercial weight loss programs in some of our major markets, such as the United States and Germany, can be increased to the significantly higher levels achieved in some of our other major markets, such as the United Kingdom and Sweden. We expect to continue to grow attendance as demand for weight control programs increases and through the completion of the roll-out of 1-2-3 SUCCESS, ongoing program development, more effective marketing and improvements in related products and services. EXPAND CUSTOMER BASE We believe there are significant opportunities to expand our customer base by developing programs designed to meet the needs of different audiences. In fiscal 1998, 96% of our NACO members were women. We are currently implementing new programs designed to better serve the male market segment. For example, in January 1999, we introduced the AT HOME program on CD-ROM in the United Kingdom, targeting self-help dieters, men and those who prefer a nonclassroom approach because of the privacy, flexibility and convenience it offers. Additionally, to further address the largely untapped male customer segment, we are testing in Australia the GUT BUSTER mail-order program which has been scientifically designed for male weight control. In the United States, we will continue developing our AT WORK program that involves employers and insurers supporting our program by providing meeting space, allowing employees time to participate in meetings and sometimes paying a portion of their membership fees. We believe employers and insurers are increasingly willing to support our programs because of their recognition of the link between health care costs and the weight of their employees and because of our widely recognized brand, high quality reputation, long history, convenience of proximity, low cost and drug-free platform. NACO AT WORK attendance has grown from 450,000 in fiscal year 1997 to 1.1 million in fiscal year 1999. GROW PRODUCT SALES AND LICENSING ROYALTIES Through our classroom operations, we currently sell books, CD-ROMs, 1-2-3 SUCCESS POINTS calculators, healthy snack bars and other items. We believe we can grow our classroom sales by selectively introducing products that complement our program. Classroom product sales for the quarter ended July 24, 1999 were $15.5 million, a 23.1% increase from classroom product sales for the quarter ended July 25, 1998. 62 We believe significant opportunities exist globally for additional product sales and licensing of our brands outside of our classroom channel. For example, we recently entered into a five year agreement with Warnaco to license the WEIGHT WATCHERS brand for women's undergarments. Under this agreement, we will receive minimum average royalty payments of $2.1 million per year. We also license our brand for cookbooks, weighing scales, exercise videos and other products. We believe we can capitalize on the popularity of our brand by licensing food products. In connection with the Transactions, we entered into an ongoing partnership with Heinz to develop and market the WEIGHT WATCHERS brand for food products. Under our agreement, we retain all food licensing rights to the WEIGHT WATCHERS name except that Heinz retains an exclusive, royalty-free global license to use the brand for certain food categories, including frozen foods, soups, condiments, canned fish and canned pasta. Heinz will also receive royalty payments from an existing portfolio of third-party licenses for various food products through 2004. After 2004, Heinz will assign these licenses to us. Management estimates that for our fiscal year ended April 24, 1999, this portfolio generated royalty revenue of approximately $5 million. EXPAND GEOGRAPHIC PRESENCE The WEIGHT WATCHERS brand is recognized worldwide and our program has proven to be adaptable to different geographies and cultures. While the details of the program's delivery, such as language, locations and local food preferences, can be customized for each geographic setting, we believe the core concepts are effective worldwide. We believe significant geographic expansion opportunities exist. We plan to focus in the near term on growing in Europe by expanding into new markets such as Spain and Denmark. PARTICIPATE IN INTERNET GROWTH The WEIGHT WATCHERS web site at www.weightwatchers.com provides users access to a broad array of information organized by country, including: (1) nearest meeting locations, directions and times, (2) low-calorie recipes, (3) current and past weight loss news articles and (4) support forums. Since January 1998, the web site has averaged over 100,000 hits per day and was rated in the top 5% of web sites by the search engine Lycos. The average viewer reads more than 20 pages per visit. The WEIGHT WATCHERS web site currently serves many functions, and we believe it has potential to grow our business if it is fully developed. Full development of the website will expand the breadth of products and services offered. Because this development is expected to require significant investment and result in significant losses, an affiliate of ours, in which we expect to have a 19.8% ownership interest and the right to acquire an additional 20.2% interest, has an exclusive right to develop the WEIGHT WATCHERS internet business. We will receive income-based royalties from this company. REGULATION AND LITIGATION A number of laws and regulations govern our advertising, franchise operations and relations with consumers. The Federal Trade Commission and certain states regulate advertising, disclosures to consumers and franchisees, and other consumer matters. Our customers may file actions on their own behalf, as a class or otherwise, and may file complaints with the FTC or state or local consumer affairs offices and these agencies may take action on their own initiative or on a referral from consumers or others. We and the FTC have entered into a Consent Order settling all contested issues raised in a complaint filed against us alleging that we violated the Federal Trade Commission Act by the use and content of certain advertisements for our weight loss program featuring testimonials, claims for the 63 program's success and safety, and statements as to the program's costs to participants. The Consent Order does not admit any issue of fact or law or any violation by us of any law or regulation, and does not involve payment by us of any civil money penalty, damages, or other financial relief. The Consent Order requires certain procedures and disclosures in connection with our advertisements of products and services. The FTC accepted the Consent Order, and it became effective as of December 24, 1997. We do not believe that compliance with the Consent Order will have a material adverse effect on our consolidated financial position or results of operations or our current advertising and marketing practices. Future legislation or regulations including, without limitation, legislation or regulations affecting our marketing and advertising practices, relations with consumers or franchisees or our food products, could have a material adverse impact on us. Our foreign operations and franchises are also generally subject to regulations of the applicable country regarding the offer and sale of franchises, the content of advertising and promotion of diet products and programs. We are involved in legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, management believes that none of these matters will have a material adverse effect on our financial condition, results of operations or cash flows. EMPLOYEES As of July 24, 1999, we had approximately 22,642 service providers including employees, of which 6,960 were located in the United States or Canada, 8,373 were located in the United Kingdom, 2,609 were located in Continental Europe and 4,823 were located in Australia or New Zealand. 123 of our employees work full-time as management and support personnel at our Woodbury, New York offices, 172 of our employees work full-time as management and support personnel at the regional offices of our three NACO regions, and 221 of our employees work full-time as management and support personnel in the head offices of the other countries in which we operate worldwide. Approximately 6,911 of our employees work part-time as leaders and approximately 14,864 work part-time as receptionists worldwide. None of our employees is represented by a labor union. We consider our employee relations to be good. FACILITIES We are headquartered in Woodbury, New York in a 35,000 square-foot leased office. Each of our three NACO regions has a small regional office. The Woodbury lease expires in 2005 and the Paramus, New Jersey call center lease expires in 2007. The remaining North American office leases are short-term. Each country operation also has one head office. We hold our classes either in retail centers (typically leased spaces in strip malls for short-terms, generally less than five years) or third-party locations (typically meeting rooms in well-located civic or religious organizations). In fiscal year 1999, there were approximately 1,300 NACO meeting locations in North America, including approximately 300 retail centers and 1,000 third-party locations. In the United Kingdom there are approximately 3,600 meeting locations, with approximately 97% in traveling locations. In Continental Europe there are approximately 2,200 locations, with approximately 95% in traveling locations. 64 SUBSIDIARIES We have the following subsidiaries:
NAME OF SUBSIDIARY PERCENTAGE OWNERSHIP - ------------------ -------------------- W.W. Inventory Service Corp. ............................... 100% W.W. Weight Reduction Services, Inc. ....................... 100% W/W Twentyfirst Corporation................................. 100% Weight Watchers Direct, Inc. ............................... 100% W.W.I. European Services, Ltd. ............................. 100% Weight Watchers North America, Inc. ........................ 100% Weight Watchers (U.K.) Limited.............................. 100% Weight Watchers France SARL................................. 100% Weight Watchers Sweden Vikt-Vaktarna Akiebolag.............. 90% Il Salvalinea, S.R.L. ...................................... 100% Weight Watchers Belgium, N.V. .............................. 100% Weight Watchers Deutschland GmbH............................ 100% Weight Watchers Eesti Aktsiaselts........................... 100% Weight Watchers Suomi Oy.................................... 90% Gutbusters Pty Ltd.......................................... 100% Fortuity Pty Ltd............................................ 100% Weight Watchers (Switzerland) S.A. ......................... 100% Weight Watchers Polska Sp. z.o.o. ......................... 100% Weight Watchers Latvia...................................... 100% Weight Watchers Nederlands, B.V. ........................... 100% Weight Watchers International Pty Limited................... 100% Weight Watchers (Accessories & Publications) Ltd............ 100% Weight Watchers (Exercise) Ltd. ............................ 100% Weight Watchers (Food Products) Limited..................... 100% Waist Watchers, Inc. ....................................... 100% Weight Watchers UK Holdings Ltd............................. 100% Weight Watchers International Holdings Ltd.................. 100% Weight Watchers New Zealand Limited......................... 100% Weight Watchers Funding, Inc. .............................. 100% 58 WW Food Corp. ........................................... 100% Weight Watchers Camps, Inc. ................................ 100% W.W. Camps and Spas, Inc. .................................. 100% WW Foods, Inc. ............................................. 50%
65 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information concerning each of our executive officers and directors. All officers serve at the pleasure of the Board of Directors.
NAME AGE POSITION - ---- -------- -------- Linda Huett............................ 55 President and Director Clive Brothers......................... 46 Vice President, Continental Europe Dennis Sweeney......................... 38 Controller John Dennis............................ 43 General Manager, United Kingdom Bob Mallow............................. 42 Vice President, NACO Operations Scott Penn............................. 28 Vice President, Australasia Raymond Debbane........................ 44 Chairman of the Board Jonas M. Fajgenbaum.................... 27 Director Kent Q. Kreh........................... 64 Director Sacha Lainovic......................... 42 Director Richard Penn........................... 54 Director Christopher J. Sobecki................. 41 Director
LINDA HUETT. Ms. Huett became the President and a Director upon completion of the Transactions. Ms. Huett joined us in 1984 as a classroom leader. Ms. Huett was promoted to U.K. Training Manager in 1986. In 1990, Ms. Huett was appointed Director of our United Kingdom operation and in 1993 was appointed Vice President of Weight Watchers U.K. Ms. Huett graduated from Gustavas Adolphus College and received her Masters in Theater from Yale University. CLIVE BROTHERS. Mr. Brothers is our Vice President Continental Europe. Mr. Brothers was appointed to this position in 1993. Mr. Brothers joined us in 1985 as Marketing Manager, U.K. In 1990, Mr. Brothers was appointed General Manager, France. Mr. Brothers received a B.A. from Leeds Polytechnic in England and a Diploma in Marketing from the Chartered Institute of Marketing. DENNIS SWEENEY. Mr. Sweeney became Controller in November 1999. Mr. Sweeney joined us in 1989 and was promoted in 1990 to Senior Financial Analyst. In 1992 he was appointed Manager, Business Planning and in 1998 was appointed Senior Manager, Business Analysis. In 1999 he was named General Manager, Finance. Mr. Sweeney received a B.A. in Economics from the State University of New York at Cortland, an M.B.A. from Adelphi University and an M.S. in Accounting from C.W. Post/Long Island University. JOHN DENNIS. Mr. Dennis is General Manager, Weight Watchers (U.K.) Limited. Mr. Dennis was appointed to this position in 1999. He joined Weight Watchers (U.K.) Limited in 1992 as Head of Finance, having previously worked for Nabisco Brands Ltd. and Grand Metropolitan Foods Ltd. Mr Dennis qualified as a member of the Chartered Institute of Management Accountants in 1984. BOB MALLOW. Mr. Mallow is Vice President, NACO Operations. He joined Weight Watchers International, Inc. in 1983 as Northeastern Regional Manager, Franchise Department. In January 1986, Mr. Mallow was promoted to National Franchise Manager, Weight Watchers International Inc. In April 1987, he became Vice President, General Manager Business Operations, Weight Watchers of Syracuse, 66 Inc. In November 1991, Mr. Mallow was promoted to Regional Field Director, Weight Watchers North America, Inc. In September, 1996 Mr. Mallow was appointed to his present position. Mr. Mallow received a B.A. in Economics from State University of New York at Cortland and an M.B.A. from State University of New York at Binghamton. SCOTT PENN. Mr. Penn is our Vice President, Australasia operations. Mr. Penn joined us in 1994 as a Marketing Services Manager in Australia. In 1996 Mr. Penn was promoted in Australia to Group Marketing Manager and in 1997 he was promoted to General Manager-Marketing & Finance. In 1999, Mr. Penn was promoted to his present position. Scott Penn is the son of Richard Penn. RAYMOND DEBBANE. Mr. Debbane became Chairman of the Board upon completion of the Transactions. Mr. Debbane is a co-founder and President of Invus. Prior to forming Invus in 1985, Mr. Debbane was a manager and consultant for The Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate School of Business, an M.S. in Food Science and Technology from the University of California, Davis and a B.S. in Agricultural Sciences and Agricultural Engineering from American University of Beirut. Mr. Debbane is director of Artal Group S.A., Ceres Inc., Financial Technologies International Inc., Nellson Neutraceuticals, Inc. and the Advisory Board of Oxford BioScience Partners and also served as a director of Keebler Foods Company from 1996 to 1999. JONAS M. FAJGENBAUM. Mr. Fajgenbaum became a Director upon completion of the Transactions. Mr. Fajgenbaum is a director at Invus. He joined the firm in 1996. Prior to joining Invus, Mr. Fajgenbaum was a consultant for McKinsey & Company in New York from 1994 to 1996. He graduated with a B.S. from the Wharton School of Business and a B.A. in Economics from the University of Pennsylvania in 1994. KENT Q. KREH. Mr. Kreh, a Director since 1997, served as President and Chief Executive Officer of Weight Watchers International, Inc. from 1997 to 1999. He joined Weight Watchers in 1972 as Marketing Director and was named Executive Vice President and Publisher of WEIGHT WATCHERS publications in 1983. Prior to joining, he was employed by General Mills, Bristol Myers and Ford Motor Company. Mr. Kreh received his B.A. from the University of Missouri, Columbia. Mr. Kreh is a board member of the Public Health Research Institute, New York City, the American Obesity Association, Washington D.C. and the American Heart Association, New York City. SACHA LAINOVIC. Mr. Lainovic became a Director upon completion of the Transactions. Mr. Lainovic is a co-founder and Executive Vice President of Invus. Prior to forming Invus in 1985, Mr. Lainovic was a manager and consultant for The Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate School of Business and an M.S. in Engineering from Insa de Lyon in Lyon, France. Mr. Lainovic is a director of Financial Technologies International Inc., Nellson Nutraceuticals, Inc., and Delta Radio, and also served as a director of Keebler Foods Company from 1996 to 1999. RICHARD PENN. Mr. Penn became a Director upon completion of the Transactions. From 1984 to 1999, Mr. Penn was Managing Director of Weight Watchers Australia. Mr. Penn began his career with McCann Erickson in advertising and joined the Coca-Cola Company (Australia) in 1968. Mr. Penn served as the first President of the International Weight Watchers Franchise Association from 1993 to 1995. Richard Penn is the father of Scott Penn. CHRISTOPHER J. SOBECKI. Mr. Sobecki became a Director upon completion of the Transactions. Mr. Sobecki, a Managing Director of Invus, joined the firm in 1989. He received an M.B.A. from Harvard Business School. He also holds a B.S. in Industrial Engineering from Purdue University. Mr. Sobecki is a director of Nellson Neutraceuticals, Inc., Financial Technologies International Inc. and Caring Technologies, Inc. He also served as a director of Keebler Foods Company from 1996 to 1998. 67 COMMITTEES OF THE BOARD OF DIRECTORS Our board of directors does not have any committees. COMPENSATION OF EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following information sets forth, for the fiscal year end April 24, 1999, the compensation paid to our Chief Executive Officer and to each of the next four most highly compensated executive officers whose total annual salary and bonus was in excess of $100,000 for fiscal year 1999.
LONG-TERM COMPENSATION ---------------- ANNUAL AWARDS (2) COMPENSATION ---------------- ------------------------------------ SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER SALARY BONUS COMPENSATION OPTIONS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (1) (NO. AWARDED)(3) ($) (4) - -------------------------------- -------- -------- ---------- ------------ ---------------- ------------ Kent Q. Kreh(5) President and Chief Executive Officer ...................... 1999 231,048 651,511 13,837 90,000 140,552 Carmen Dubroc(5) Executive Vice President ..... 1999 247,145 463,307 21,618 41,500 57,791 Linda Huett Vice President U.K. .......... 1999 138,574 219,435 -- 40,000 -- Clive Brothers Vice President Continental Europe ........... 1999 138,574 219,435 -- 40,000 -- Bob Mallow Vice President Weight Watchers North America 1999 124,380 213,547 -- 35,000 27,218
- ------------------------ (1) Includes for Mr. Kreh $3,850 for personal financial counseling and $9,987 for automobile expenses. Includes for Ms. Dubroc $8,981 for personal planning and $12,637 for automobile expenses. (2) No awards of restricted stock were made to the named executives during the covered period. (3) Options to acquire shares of Heinz common stock granted under Heinz's 1996 Stock Option Plan. (4) Includes amounts we contributed under the Heinz Employee Retirement and Savings Plan of $117,697 for Mr. Kreh, $57,791 for Ms. Dubroc and $27,218 for Mr. Mallow. Includes for Mr. Kreh $22,855 attributable to "split dollar" life insurance provided by us. (5) Upon completion of the Transactions, Mr. Kreh and Ms. Dubroc resigned from their positions. 68 The following table sets forth certain information regarding Heinz options granted during fiscal 1999 to the named executive officers: OPTION GRANTS IN FISCAL YEAR 1999
INDIVIDUAL GRANTS ------------------------------------------------------------------------------------ PERCENT OF NUMBER OF TOTAL OPTIONS SECURITIES UNDERLYING GRANTED TO EXERCISE OR GRANT DATE OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE NAME GRANTED IN FISCAL YEAR(3) ($/SHARE) DATE ($)(4) - ---------------------------- --------------------- ----------------- ----------- ---------- ------------- Kent Q. Kreh................ 40,000(1) 0.45% 54.625 6/9/08 467,200 50,000(2) 0.56% 49.6875 4/20/09 634,000 Carmen Dubroc............... 16,500(1) 0.18% 54.625 6/9/08 192,720 25,000(2) 0.28% 49.6875 4/20/09 317,000 Linda Huett................. 15,000(1) 0.17% 54.625 6/9/08 175,200 25,000(2) 0.28% 49.6875 4/20/09 317,000 Clive Brothers.............. 15,000(1) 0.17% 54.625 6/9/08 175,200 25,000(2) 0.28% 49.6875 4/20/09 317,000 Bob Mallow.................. 10,000(1) 0.11% 54.625 6/9/08 116,800 25,000(2) 0.28% 49.6875 4/20/09 317,000
- ------------------------ (1) Options were granted on June 10, 1998 pursuant to the terms of Heinz's 1996 Stock Option Plan. The fair value of the stock was $54.625 on the date of grant. Options to purchase 40% of the shares granted vested on June 10, 1999 and the remaining options became exercisable upon closing of the Transactions. (2) Options were granted on April 21, 1999 pursuant to the terms of Heinz's 1996 Stock Option Plan and these options vested upon closing of the Transactions. (3) Percentages of total options granted are based on total grants made to all Heinz employees. (4) The estimated grant date present value is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the option grants referred to in Note (1) include the following: (a) exercise price of the options equal to the fair market value of the underlying stock on the date of grant; (b) option term of 10 years; (c) dividend yield of 2.15%; (d) a risk-free interest rate of 5.8%; and (e) volatility of 22.8%. The material assumptions and adjustments with respect to the options grants referred to in Note (2) include the following: (a) exercise price of the options equal to the fair market value of the underlying stock on the date of grant; (b) option term of 10 years; (c) dividend yield of 2.6%; (d) a risk-free interest rate of 5.18%; and (e) volatility of 27.1%. The ultimate values of the options will depend on the future market price of Heinz's stock, which cannot be forecast. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of Heinz's common stock over the exercise price on the date the option is exercised. 69 The following table sets forth certain information with respect to options held at the end of fiscal 1999 by each of the named executive officers: AGGREGATED OPTIONS/SAR EXERCISES IN 1999 FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUE
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END($)(2) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ----------------------------- ----------- -------------- ----------- ------------- ----------- ------------- Kent Q. Kreh................. 1,000 28,500 42,167 145,333 1,041,329 92,327 Carmen Dubroc................ 0 N/A 0 81,500 N/A 237,500 Linda Huett.................. 1,000 31,313 8,500 84,000 175,594 229,563 Clive Brothers............... 0 N/A 14,000 84,000 311,000 229,563 Bob Mallow................... 3,500 122,427 1,667 43,333 28,860 111,140
- ------------------------ (1) The "Value Realized" is equal to the fair market value on the date of exercise, less the exercise price, times the number of shares acquired. No stock appreciation rights were exercised during the last fiscal year. (2) The "Value of Unexercised In-the-Money Options at Fiscal Year-End" is equal to $49.4375, the fair market value of each share underlying the options at April 23, 1999, (the last trading day during the fiscal year) less the exercise price, times the number of options. Prior to the consummation of the Transactions, the foregoing individuals participated in certain employee benefit plans of Heinz under which, after consummation of the Transactions, the individuals ceased to continue to accrue benefits. These benefit plans included the Heinz Retirement System (to the extent that any of the foregoing individuals were hired before January 1, 1993), which is a defined benefit pension plan. The foregoing individuals also participated in the Heinz Employees Retirement and Saving Plan, a qualified defined contribution plan (the "Savings Plan"), and the Heinz Employees Retirement and Savings Excess Plan, a nonqualified excess benefit pension plan (the "Excess Plan"). The Savings Plan provides for employer contributions, including a stock component, into a contribution account set aside for each plan participant and the Excess Plan compensates participants for reductions in benefits under the Savings Plan due to limitations imposed by the Internal Revenue Code of 1986, as amended. Heinz also provided certain of the foregoing individuals with additional retirement benefits under a Supplemental Executive Retirement Plan (the "SERP"), which compensates participants for reductions in benefits under qualified pension plans due to limitations imposed by the Internal Revenue Code of 1986, as amended. The SERP benefits are a lump sum payment equal to a multiple of the individual's final average eligible compensation during any five of the last ten years prior to retirement. DIRECTOR COMPENSATION Our directors do not receive compensation, except in their capacity as officers or employees. EMPLOYMENT AGREEMENTS AND SEVERANCE POLICIES As of August 30, 1996, Weight Watchers entered into an employment agreement with Bob Mallow, Vice President of NACO Operations. Mr. Mallow's employment agreement provides for a base salary, subject to increases, and for participation in an annual incentive bonus scheme. Under the letter agreement, in the event of a termination of Mr. Mallow's employment by us for just cause (which term 70 is not defined in the agreement), Mr. Mallow is eligible for salary continuation for a period of one year from the date of termination. We are in the process of establishing a severance policy to cover all full-time salaried employees. It is intended that the severance policy will provide continuation of base salary for employees for some period of time after an individual's employment is terminated under specified circumstances. We are still in the process of establishing the guidelines for this policy. SAVINGS PLANS We sponsor the Weight Watchers Savings Plan for our salaried and hourly employees, a defined contribution plan which provides for employer matching contributions up to 100% of the first 3% of an employee's eligible compensation. The Savings Plan also permits employees to contribute between 1% and 13% of eligible compensation on a pre-tax basis. We also sponsor the Weight Watchers Profit Sharing Plan for all full-time salaried employees who are eligible to participate in the Savings Plan (except for some key management personnel), which provides for a guaranteed monthly employer contribution on behalf of each participant based on the participant's age and a percentage of the participant's eligible compensation. The Profit Sharing Plan also has a discretionary employer contribution component, based on our achievement of certain annual performance targets, which may be determined annually by our board of directors. We also reserve the right to make additional discretionary contributions to the Profit Sharing Plan. We are in the process of establishing a nonqualified profit sharing plan for key management personnel who are not eligible to participate in the Weight Watchers Profit Sharing Plan. This nonqualified profit sharing plan is intended to have the same or similar features as the Weight Watchers Profit Sharing Plan. 71 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of our common stock by (1) all persons known by us to own beneficially more than 5% of our common stock, (2) each director who is a stockholder, (3) the President and each of the named executive officers and (4) all directors and executive officers as a group.
SHARES NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OF CLASS - ------------------------------------ ---------- ---------------- Artal Luxembourg S.A. (1)(2)................................ 21,402,000 89.9% 105 Grand-Rue Luxembourg City, Luxembourg L-1661 H.J. Heinz Company.......................................... 1,428,000 6.0% 600 Grant Street Pittsburgh, Pennsylvania 15219 Linda Huett................................................. -- -- Clive Brothers.............................................. -- -- Bob Mallow.................................................. -- -- Raymond Debbane............................................. -- -- Jonas M. Fajgenbaum......................................... -- -- Kent Q. Kreh................................................ -- -- Sacha Lainovic.............................................. -- -- Richard Penn................................................ 230,000 1.0% Christopher J. Sobecki...................................... -- -- All directors and executive officers as a group (12 persons) (3)............................... 230,000 1.0%
- -------------------------- (1) The parent entity of Artal Luxembourg S.A. is Artal Group S.A. ("Artal Group"). The address of Artal Group is the same as the address of Artal Luxembourg. (2) On September 30, 1999, Artal Luxembourg S.A. sold an aggregate of 970,000 shares of our common stock, approximately 4.1% of all outstanding shares, to the following five investors:
SHARES NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OF CLASS - ------------------------------------ -------- ---------------- Envoy Partners........................................... 200,000 0.8% c/o Blair Effron 28 E. 73rd Street, Apt. 11F New York, New York 10021 Logo Incorporated Pty. Ltd. ............................. 230,000 1.0% Greencliffe 502/1 Kirribilli Avenue Kirribilli, N.S.W. 2061 Australia Longisland International Limited......................... 140,000 0.6% c/o Ansbacher (Monaco) S.A.M 14, Avenue de Grande-Bretagne MO 98000 Monaco Merchant Capital, Inc. .................................. 200,000 0.8% c/o Credit Suisse First Boston Eleven Madison Avenue New York, New York 10010-3629 Attention: Malcolm Price Scotiabanc, Inc. ........................................ 200,000 0.8% 600 Peachtree Street, NE Atlanta, Georgia 30308 Attention: William Brown
Logo Incorporated Pty. Ltd. subsequently sold its 230,000 shares to Richard Penn. (3) Our directors and officers may be contacted c/o Weight Watchers International, Inc., 175 Crossways Park West, Woodbury, New York 11797. 72 DESCRIPTION OF CAPITAL STOCK The following summary of certain provisions of our common stock and our preferred stock is not complete. You should read our certificate of incorporation and by-laws as well as the provisions of applicable law for all the information. COMMON STOCK Except as provided by applicable law, the holders of our common stock are entitled to one vote per share on all matters to be voted on by our stockholders. All shares of common stock are entitled to share equally in dividends declared by our board of directors. The New Credit Facilities and the indentures impose certain restrictions on our ability to declare dividends with respect to the common stock. Upon our liquidation or dissolution, whether voluntary or involuntary, all shares of our common stock are entitled to share equally in the assets available for distribution to our shareholders after payment of all our prior obligations, including the preferred stock. The holders of our common stock have no preemptive rights. All outstanding shares of our common stock are fully paid and non-assessable. REDEEMABLE PREFERRED STOCK We have 1.0 million shares of Series A Preferred Stock issued and outstanding. Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 6% payable annually in arrears. The liquidation preference of the Series A Preferred Stock is $25 per share. If there is a liquidation, dissolution or winding up, the holders of shares of Series A Preferred Stock are entitled to be paid out of our assets available for distribution to our shareholders an amount in cash equal to the $25 liquidation preference per share plus all accrued and unpaid dividends prior to the distribution of any assets to holders of shares of common stock. Except as required by law, the holders of the preferred stock have no voting rights with respect to their shares of preferred stock, except that (1) the approval of holders of a majority of the outstanding shares of preferred stock, voting as a class, is required to amend, repeal or change any of the provisions of our certificate of incorporation in any manner that would alter or change the powers, preferences or special rights of the shares of preferred stock in a way that would affect them adversely and (2) the consent of each holder of Series A Preferred Stock is required for any amendment that reduces the dividend payable on or the liquidation value of the Series A Preferred Stock. We may redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, at our option at a price per share equal to 100% of its liquidation value plus all accrued and unpaid dividends. In addition, the Series A Preferred Stock is redeemable at the option of its holders upon the occurrence of a change of control or upon a sale of our common stock by Artal in a registered public offering. If that occurs, the redemption price will be equal to 100% of the liquidation value plus accrued and unpaid dividends. 73 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The summaries of the agreements described below are not complete. You should read the agreements in their entirety, copies of which are available upon request from us. STOCKHOLDERS' AGREEMENT Simultaneously with the closing of our recapitalization, we entered into a stockholders' agreement with Artal and Heinz governing the relationship between and among ourself and these holders of our common stock. Subsequent transferees of Artal and Heinz must, subject to certain limited exceptions, agree to be bound by the terms and provisions of the agreement. The stockholders' agreement imposes on Heinz certain restrictions on the transfer of our common stock until the earlier to occur of (1) the fifth anniversary of the recapitalization and (2) our initial public offering of common stock under the Securities Act, subject to certain exceptions. Heinz will have the right to participate pro rata in certain transfers of our common stock by Artal, and Artal will have the right to force Heinz to participate on a pro rata basis in certain transfers of our common stock by Artal. REGISTRATION RIGHTS AGREEMENT Simultaneously with the closing of our recapitalization, we entered into a registration rights agreement with Artal and Heinz. The registration rights agreement grants Artal certain demand rights and grants Artal and Heinz certain incidental registration rights to register their shares of our common stock for public sale under the Securities Act. PREFERRED STOCKHOLDERS' AGREEMENT Simultaneously with the closing of our recapitalization, we entered into a preferred stockholders' agreement with Heinz governing the relationship between and among ourself and the holders of our Series A Preferred Stock. Subsequent transferees of Heinz, subject to certain limited exceptions, must agree to be bound by the terms and provisions of this agreement. The preferred stockholders' agreement imposes on Heinz certain restrictions on transfer of our Series A Preferred Stock until the second anniversary of the recapitalization. In addition, at any time after the second anniversary but prior to the fifth anniversary of the recapitalization, we, Artal and our respective designees will have a right of first refusal with respect to transfers of our preferred stock by Heinz. LIMITED LIABILITY COMPANY AGREEMENT Simultaneously with the closing of our recapitalization, we contributed $2,500 in exchange for a 50% membership interest in WW Foods, LLC (the "LLC"), a Delaware limited liability company. Heinz owns the remaining 50% interest. The purpose of the LLC is to own, maintain and preserve certain food and beverage trademarks to be contributed to the LLC by Heinz. The LLC serves as the vehicle for licensing certain rights in those food and beverage trademarks to us and to Heinz, and for the licensing of program information by us to Heinz. LICENSING AGREEMENTS The licensing agreements govern the ownership and rights to use WEIGHT WATCHERS and other trademarks, service marks and related rights among us, Heinz and the LLC. As described below, the licensing agreements and the recapitalization and stock purchase agreement address the parties' respective ownership and rights to use food and beverage trademarks, service marks, program standards, program information, program information trademarks and third party licenses. Heinz is also 74 a party to the operating agreement, which will help preserve and enhance these trademarks, service marks and related rights and will facilitate their orderly use by each party. FOOD AND BEVERAGE TRADEMARKS. Under the licensing agreements and recapitalization and stock purchase agreement, we distributed to Heinz and Heinz contributed to the LLC all WEIGHT WATCHERS trademarks and certain other trademarks we owned relating to food and beverage products ("Food & Beverage Trademarks"), except for certain trademarks previously used by Heinz in connection with the Food & Beverage Trademarks that do not include the WEIGHT WATCHERS name (including, for example, SMART ONES), which we distributed to Heinz and Heinz retained (the "Heinz Retained Trademarks"). At the closing of our recapitalization, the LLC granted an exclusive, worldwide, royalty-free license to use the Food & Beverage Trademarks (1) to Heinz, for worldwide use on food products in certain defined product categories (including frozen dinners, frozen breakfasts, frozen desserts (excluding ice cream), frozen pizza and pizza snacks, frozen potatoes, frozen rice products, ketchup, tomato sauce, gravy, canned tuna or salmon products, soup, noodles (excluding pasta), and canned beans and pasta products), and for use only in Australia and New Zealand in certain additional food product categories (including mayonnaise, frozen vegetables, canned fruits and canned vegetables) (the "Heinz Licensed Products"); and (2) to us, for use on all other food and beverage products (the "Weight Watchers Licensed Products"). We may promote, endorse and sell both Heinz Licensed Products and Weight Watchers Licensed Products through our classroom business and related activities, subject to certain non-competition provisions with Heinz. Additionally, we may continue to sell any food and beverage product (or comparable product) sold by us in a particular country within the year preceding the closing of our recapitalization, even if that product is a Heinz Licensed Product, but may do so only within that country and by using the same channels of distribution through which the product was sold during that one-year period. Certain Food & Beverage Trademarks and trademark applications were not distributed to Heinz for contribution to the LLC. These trademarks and trademark applications include (1) trademarks consisting of registrations in multiple trademark classes, where such classes include both food and beverage product classes and classes relating to other types of products or services ("Multi-Class Registrations"); (2) pending applications that could not be transferred until a registration is granted; (3) trademark registrations and applications in countries that do not recognize ownership of trademarks by an entity such as the LLC; (4) trademark registrations and applications in countries where the local law imposes restrictions or limitations on the ownership or registration of similar trademarks by unrelated parties; and (5) the Program Information Trademarks (as defined below). We retained legal ownership of the Food & Beverage Trademarks identified in clauses (1) through (4) above (the "Custodial Trademarks") which are held in custody for the benefit of the LLC. At the closing of our recapitalization, we granted to Heinz an exclusive, worldwide, royalty-free license to use the Custodial Trademarks (or any portion covering food and beverage products) in connection with Heinz Licensed Products. We have undertaken to contribute any of the Custodial Trademarks (or any portion covering food and beverage products) to the LLC if the LLC determines that the transfer may be achieved under local law. If local law does not permit an existing Multi-Class Registration to be severed so as to reflect separate ownership of registrations in food and beverage product classes from registrations in classes covering other types of products or services, (1) the LLC will apply for new registrations to cover the food and beverage products, (2) we will cancel the portion of the Multi-Class Registration covering food and beverage products upon issuance of the new registrations and (3) we will retain ownership of all remaining portions of the Multi-Class Registration. Heinz will pay us an annual fee of $1.2 million for five years in exchange for our serving as the custodian of the Custodial Trademarks. OTHER MARKS. The licensing agreements provide that we retain exclusive ownership of all service marks and trademarks other than food and beverage trademarks and, except for the rights granted to 75 the LLC and to Heinz, we have the exclusive right to use all these marks for any purpose, including their use as trademarks for all products other than food and beverage products. PROGRAM STANDARDS. The licensing agreements and operating agreement provide that we have exclusive control of the dietary principles (the "Standards") to be followed in any eating or lifestyle regimen to facilitate weight loss or weight control employed by the classroom business (a "Program"), such as 1-2-3 SUCCESS. Except for certain limitations concerning products currently sold and extensions of existing product lines, Heinz will use the Food & Beverage Trademarks and Custodial Trademarks only on Heinz Licensed Products that have been specially formulated to be compatible with the then-current Program Standards. We will have exclusive responsibility for enforcing compliance with the Standards. PROGRAM INFORMATION AND PROGRAM INFORMATION TRADEMARKS. The licensing agreements and the recapitalization and stock purchase agreement provide that we retain exclusive ownership of all Program Information, consisting of (1) all information and know-how relating to any Program, (2) all terminology and (3) all trademarks or service marks used to identify the programs or terminology ("Program Information Trademarks"). We granted an exclusive, worldwide, royalty-free license to the LLC (for sublicense to Heinz) to use the terminology and Program Information Trademarks on Heinz Licensed Products, and we provided the LLC (and through the LLC, Heinz) with access to and a right to use this information as may be reasonably necessary to develop, manufacture or market food and beverage products in accordance with the Standards. Heinz granted a worldwide, royalty-free license to the LLC to use certain improvements that Heinz may develop in the course of its use of Program Information, which the LLC sublicensed in turn to us. THIRD PARTY LICENSES. Under the licensing agreements we assigned to Heinz all licenses that we previously granted to third parties, and Heinz retained all existing sublicenses granted by it to third parties under a license previously granted to Heinz, that relate to the manufacture, distribution or sale of food and beverage products ("Third Party Licenses"). Heinz assumed our obligations under the Third Party Licenses, and has the right to collect and keep all proceeds from the Third Party Licenses for a period of five years. Ownership of the Third Party Licenses, to the extent they pertain to Weight Watchers Licensed Products, will be transitioned to us over the five-year period. All proceeds from any Third Party License that cannot be transitioned to us by the end of that five-year period will thereafter be collected by Heinz and paid over to us. Any sublicense granted after the closing date of the Transactions by Heinz or us relating to use of the Food & Beverage Trademarks must conform to the terms of the licenses granted to each of them by the LLC. JOINT PROMOTIONAL AGREEMENT We expect to enter into a Joint Promotional Agreement with Heinz with respect to cross-promotional activities between ourself and Heinz and its affiliates. MANAGEMENT AGREEMENT Simultaneously with the closing of our recapitalization, we entered into a management agreement with Invus pursuant to which Invus renders to us management, consulting and certain other services in exchange for an annual fee equal to the greater of $1.0 million and 1.0% of our EBITDA (as defined in the indentures) and any related out-of-pocket expenses. TRANSITION SERVICES The recapitalization and stock purchase agreement provides that Heinz will continue to provide administrative services to us for approximately one year. 76 WEIGHTWATCHERS.COM SUBSCRIPTION AGREEMENT We entered into a subscription agreement with WeightWatchers.com, Artal and Heinz under which Artal, Heinz and we purchased common stock of WeightWatchers.com for a nominal amount. We own approximately 19.8% of WeightWatchers.com's common stock while Artal and Heinz own 75.4% and 4.8% of WeightWatchers.com's common stock. WEIGHTWATCHERS.COM NOTE We have agreed to loan to WeightWatchers.com up to an aggregate principal amount of $10.0 million at any time or from time to time prior to October 31, 2000. The unpaid principal amount under the note will bear interest at a rate of 11% per year. All principal and interest outstanding under the note will be repayable on December 30 , 2000. The note may be prepaid at any time and from time to time, in whole or in part, without premium or penalty. WeightWatchers.com currently has no outstanding borrowings under the note. WEIGHTWATCHERS.COM WARRANT AGREEMENT Under a warrant agreement entered into between WeightWatchers.com and us, we have received warrants to purchase an additional 20.2% of WeightWatchers.com's common stock in connection with the loans that we have made to WeightWatchers.com under the WeightWatchers.com note described above. These warrants will expire on November 24, 2009 and may be exercised at a price of $500.00 per share of WeightWatchers.com's common stock until then. The exercise price and the number of shares of WeightWatchers.com's common stock available for purchase upon exercise of the warrants may be adjusted from time to time upon the occurrence of certain events. WEIGHTWATCHERS.COM INTERNET LICENSE AGREEMENT WeightWatchers.com will develop a web site on the Internet that uses the WEIGHTWATCHERS brand name and other proprietary information for "e-commerce" and related purposes. Prior to the closing of our recapitalization, and except for some existing agreements, we granted WeightWatchers.com an exclusive license to use all of our trademarks, copyrights and domain names on the Internet and any other similar or related forms of electronic delivery or digital transmission (other than broadband technology) that now exist or may be developed later. In exchange for these rights, WeightWatchers.com will pay us 10% of its annual net profit related to its Internet activities. We and WeightWatchers.com are currently renegotiating the provisions of the license agreement and, among other things, expect to amend the licensing fee to reflect a revenue-based royalty scheme. WEIGHTWATCHERS.COM STOCKHOLDERS' AGREEMENT We entered into a stockholders' agreement with WeightWatchers.com, Artal and Heinz governing the relationship between and among WeightWatchers.com and Artal, Heinz and us as holders of common stock of WeightWatchers.com. Subsequent transferees of Artal, Heinz and us must, except for some limited exceptions, agree to be bound by the terms and provisions of the agreement. The stockholders' agreement imposes on Heinz and us certain restrictions on the transfer of common stock of WeightWatchers.com until the earlier to occur of (1) the fifth anniversary of the recapitalization and (2) WeightWatchers.com's initial public offering of common stock under the Securities Act, except for certain exceptions. Heinz and we have the right to participate pro rata in certain transfers of common stock of WeightWatchers.com by Artal, and Artal has the right to force Heinz and us to participate on a pro rata basis in certain transfers of WeightWatchers.com's common stock by Artal. 77 WEIGHTWATCHERS.COM REGISTRATION RIGHTS AGREEMENT We entered into a registration rights agreement with WeightWatchers.com, Artal and Heinz with respect to our shares in WeightWatchers.com. The registration rights agreement grants Artal certain demand rights and grants Artal, Heinz and us certain incidental registration rights to register shares of WeightWatchers.com's common stock for public sale under the Securities Act. NELLSON CO-PACK AGREEMENT On February 8, 1999, we entered into an agreement with Nellson Neutraceutical, Inc., a wholly-owned subsidiary of Artal, to purchase nutrition bar products manufactured by Nellson for sale at our meetings. Under the agreement, Nellson agrees to produce sufficient nutrition bar products to fill our purchase orders within 30 days of Nellson's receipt of these purchase orders, and we are not bound to purchase a minimum quantity of nutrition bar products. The term of the agreement is one year, and we may renew the agreement for successive one-year periods by providing written notice to Nellson. This agreement was negotiated prior to the recapitalization transactions on an arm's-length basis and is unrelated to the recapitalization transactions. 78 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We have entered into a registration rights agreement with the initial purchasers of the old notes in which we agreed, under certain circumstances, to file a registration statement relating to an offer to exchange the old notes for exchange notes. We also agreed to use our best efforts to cause the offer to be consummated within 220 days following the original issue of the old notes. The exchange notes will have terms substantially identical to the old notes except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the exchange and registration rights agreement. The old notes were issued on September 29, 1999. Under the circumstances set forth below, we will use our best efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the old notes and keep the statement effective for up to two years after the effective date of the shelf registration statement. These circumstances include: - if pursuant to any changes in law, SEC rules or regulations or applicable interpretations of these rules and regulations by the staff of the SEC do not permit us to effect the exchange offer as contemplated by the exchange and registration rights agreement; - if for any other reason we do not consummate the exchange offer within 220 days after the original issue of the old notes; - if either initial purchaser of the old notes so requests (but only with respect to any old notes not eligible to be exchanged for exchange notes in the exchange offer); or - if any holder of the old notes notifies us that it is not permitted to participate in the exchange offer or would not receive fully tradable exchange notes pursuant to the exchange offer and so requests. If we fail to comply with certain obligations under the exchange and registration rights agreement, we will be required to pay liquidated damages to holders of the old notes. Each holder of old notes that wishes to exchange such old notes for transferable exchange notes in the exchange offer will be required to make the following representations: - any exchange notes will be acquired in the ordinary course of its business; - the holder has no arrangement with any person to participate in the distribution of the exchange notes; - the holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of ours or if it is an affiliate, that it will comply with applicable registration and prospectus delivery requirements of the Securities Act; - if the holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the exchange notes; and - if the holder is a broker-dealer, that it will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. RESALE OF EXCHANGE NOTES Based on interpretations of the SEC staff set forth in no action letters issued to unrelated third parties, we believe that exchange notes issued under the exchange offer in exchange for old notes may 79 be offered for resale, resold and otherwise transferred by any exchange note holder without compliance with the registration and prospectus delivery provisions of the Securities Act, if: - such holder is not an "affiliate" of ours within the meaning of Rule 405 under the Securities Act; - such exchange notes are acquired in the ordinary course of the holder's business; and - the holder does not intend to participate in the distribution of such exchange notes. Any holder who tenders in the exchange offer with the intention of participating in any manner in a distribution of the exchange notes: - cannot rely on the position of the staff of the SEC enunciated in "Exxon Capital Holdings Corporation" or similar interpretive letters; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. This prospectus may be used for an offer to resell, for the resale or for other retransfer of exchange notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the old notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Please read the section captioned "Plan of Distribution" for more details regarding the transfer of exchange notes. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange any old notes properly tendered and not withdrawn prior to the expiration date. We will issue $1,000 or [EURO]1,000, as the case may be, principal amount of exchange notes in exchange for each $1,000 or [EURO]1,000, as the case may be, principal amount of old notes surrendered under the exchange offer. Old notes may be tendered only in integral multiples of $1,000 or [EURO]1,000. The form and terms of the exchange notes will be substantially identical to the form and terms of the old notes except the exchange notes will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any liquidated damages upon our failure to fulfill our obligations under the exchange and registration rights agreement to file, and cause to be effective, a registration statement. The exchange notes will evidence the same debt as the old notes. The exchange notes will be issued under and entitled to the benefits of the same indentures that authorized the issuance of the old notes. The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange. As of the date of this prospectus, $150.0 million and [EURO]100.0 million aggregate principal amount of the old notes are outstanding. This prospectus and a letter of transmittal are being sent to all registered holders of old notes. There will be no fixed record date for determining registered holders of old notes entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934 and the rules and regulations of the SEC. Old notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits the holders have under the indentures relating to the old notes, except for any rights 80 under the registration rights agreement that by their terms terminate upon the consummation of the exchange offer. We will be deemed to have accepted for exchange properly tendered old notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from us and delivering exchange notes to the holders. Under the terms of the registration rights agreement, we reserve the right to amend or terminate the exchange offer, and not to accept for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions specified below under the caption "--Certain Conditions to the Exchange Offer." Holders who tender old notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled "--Fees and Expenses" below for more details regarding fees and expenses incurred in the exchange offer. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time on , 2000, unless in our sole discretion we extend it. In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of old notes of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: - to delay accepting for exchange any old notes; - to extend the exchange offer or to terminate the exchange offer and to refuse to accept old notes not previously accepted if any of the conditions set forth below under "--Certain Conditions to the Exchange Offer" have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; or - under the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner. Any delay in acceptance, extension, termination, or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of old notes. If we amend the exchange offer in a manner that we determine constitutes a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holder of old notes of the amendment. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we will have no obligation to publish, advertise, or otherwise communicate any public announcement, other than by making a timely release to a financial news service. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Despite any other term of the exchange offer, we will not be required to accept for exchange, or exchange any exchange notes for, any old notes, and we may terminate the exchange offer as provided in this prospectus before accepting any old notes for exchange if in our reasonable judgment: - the exchange notes to be received will not be tradable by the holder, without restriction under the Securities Act, the Securities Exchange Act of 1934 and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; 81 - the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or - any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. In addition, we will not be obligated to accept for exchange the old notes of any holder that has not made to us: - the representations described under "--Purpose and Effect of the Exchange Offer," "--Procedures for Tendering" and "Plan of Distribution"; and - such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to it an appropriate form for registration of the exchange notes under the Securities Act. We expressly reserve the right, at any time or at various times, to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any old notes by giving oral or written notice of the extension to their holders. During any such extensions, all notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange. We will return any old notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable. In the case of any extension, a notice will be issued no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of this right. Each right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any old notes tendered, and will not issue exchange notes in exchange for any old notes, if at the time any stop order will be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indentures under the Trust Indenture Act of 1939. PROCEDURES FOR TENDERING Only a holder of old notes may tender the old notes in the exchange offer. To tender in the exchange offer, a holder must: - complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date; or - comply with DTC's Automated Tender Offer Program procedures described below. In addition, either: - the exchange agent must receive the old notes along with the accompanying letter of transmittal; or 82 - the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of the old notes into the exchange agent's account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent's message; or - the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the exchange agent must receive any physical delivery of a letter of transmittal and other required documents at the address set forth below under "--Exchange Agent" prior to the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. The method of delivery of old notes, the letter of transmittal and all other required documents to the exchange agent is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent before the expiration date. Holders should not send the letter of transmittal or old notes to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for them. Any beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owners' behalf. If the beneficial owner wishes to tender on its own behalf, it must, prior to completing and executing the accompanying letter of transmittal and delivering its old notes either: - make appropriate arrangements to register ownership of the old notes in such owner's name; or - obtain a properly completed bond power from the registered holder of old notes. The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. Signatures on a letter of transmittal or a notice of withdrawal described below must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Exchange Act, unless the old notes are tendered: - by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the accompanying letter of transmittal; or - for the account of an eligible institution. If the accompanying letter of transmittal is signed by a person other than the registered holder of any old notes listed on the old notes, the old notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the old notes and an eligible institution must guarantee the signature on the bond power. If the accompanying letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the accompanying letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer program to tender. Participants in the program 83 may, instead of physically completing and signing the accompanying letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the old notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that: - DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering old notes that are the subject of the book-entry confirmation; - the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal (or, in the case of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery); and - the agreement may be enforced against such participant. We will determine in our sole discretion all questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered old notes and withdrawal of tendered old notes. Our determination will be final and binding. We reserve the absolute right to reject any old notes not properly tendered or any old notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular old notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the accompanying letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of old notes, neither we, the exchange agent nor any other person will incur any liability for failure to give such notification. Tenders of old notes will not be deemed made until any defects or irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. In all cases, we will issue exchange notes for old notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives: - old notes or a timely book-entry confirmation of the old notes into the exchange agent's account at DTC; and - a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message. By signing the accompanying letter of transmittal, each tendering holder of old notes will represent to us that, among other things: - any exchange notes that the holder receives will be acquired in the ordinary course of its business; - the holder has no arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; - if the holder is not a broker-dealer, that is not engaged in and does not intend to engage in the distribution of the exchange notes; - if the holder is a broker-dealer that will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities, that it will deliver a prospectus, as required by law, in connection with any resale of any exchange notes; and 84 - the holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of ours or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the old notes at DTC for purposes of the exchange offer promptly after the date of this prospectus; and any financial institution participating in DTC's system may make book-entry delivery of old notes by causing DTC to transfer the old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Holders of old notes who are unable to deliver confirmation of the book-entry tender of their old notes into the exchange agent's account at DTC or all other documents required by the letter of transmittal to the exchange agent on or prior to the expiration date must tender their old notes according to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders wishing to tender their old notes but whose old notes are not immediately available or who cannot deliver their old notes, the accompanying letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date may tender if: - the tender is made through an eligible institution; - prior to the expiration date, the exchange agent receives from the eligible institution either a properly completed and duly executed notice of guaranteed delivery (by facsimile transmission, mail or hand delivery) or a properly transmitted agent's message and notice of guaranteed delivery: - setting forth the name and address of the holder, the registered number(s) of the old notes and the principal amount of old notes tendered; - stating that the tender is being made thereby; and - guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the accompanying letter of transmittal, or facsimile thereof, together with the old notes or a book-entry confirmation, and any other documents required by the accompanying letter of transmittal will be deposited by the eligible institution with the exchange agent; and - the exchange agent receives the properly completed and executed letter of transmittal, or facsimile thereof, as well as all tendered old notes in proper form for transfer or a book-entry confirmation, and all other documents required by the accompanying letter of transmittal, within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their old notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, holders of old notes may withdraw their tenders at any time prior to the expiration date. For a withdrawal to be effective: - the exchange agent must receive a written notice (which may be by telegram, telex, facsimile transmission or letter) of withdrawal at one of the addresses set forth below under "--Exchange Agent", or 85 - holders must comply with the appropriate procedures of DTC's Automated Tender Offer Program system. Any notice of withdrawal must: - specify the name of the person who tendered the old notes to be withdrawn; - identify the old notes to be withdrawn (including the principal amount of the old notes); and - where certificates for old notes have been transmitted, specify the name in which the old notes were registered, if different from that of the withdrawing holder. If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates, the withdrawing holder must also submit: - the serial numbers of the particular certificates to be withdrawn; and - a signed notice of withdrawal with signatures guaranteed by an eligible institution unless the holder is an eligible institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of such facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) of the notices, and our determination will be final and binding on all parties. We will deem any old notes so withdrawn not to have validly tendered for exchange for purposes of the exchange offer. Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder (or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, the old notes will be credited to an account maintained with DTC for old notes) as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to the expiration date. EXCHANGE AGENT Norwest Bank Minnesota, National Association has been appointed as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies 86 of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as follows: FOR DELIVERY BY REGISTERED OR CERTIFIED MAIL: FOR OVERNIGHT DELIVERY ONLY: Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association Sixth Street and Marquette Avenue 608 Second Avenue South MAC N9303-121 Northstar East Building, 12th Floor Minneapolis, MN 55479-0069 MAC N9303-121 Attention: Corporate Trust Department Minneapolis, MN 55479-0069 Attention: Corporate Trust Department BY HAND: BY FACSIMILE TRANSACTION Norwest Bank Minnesota, (FOR ELIGIBLE INSTITUTIONS ONLY): National Association (612) 667-4927 608 Second Avenue South CONFIRM FACSIMILE BY TELEPHONE ONLY: Northstar East Building, 12th Floor (612) 667-9764 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitations by telephone or in person by our officers and regular employees and those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptance of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. We will pay the cash expenses to be incurred in connection with the exchange offer. The expenses are estimated in the aggregate to be approximately . They include: - SEC registration fees; - fees and expenses of the exchange agent and trustee; - accounting and legal fees and printing costs; and - related fees and expenses. TRANSFER TAXES We will pay all transfer taxes, if any, applicable to the exchange of old notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes (whether imposed on the registered holder or any other person) if: - certificates representing old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old notes tendered; - tendered old notes are registered in the name of any person other than the person signing the letter of transmittal; or 87 - a transfer tax is imposed for any reason other than the exchange of old notes under the exchange offer. If satisfactory evidence of payment of the taxes is not submitted with the letter of transmittal, the amount of the transfer taxes will be billed to that tendering holder. Holders who tender their old notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register exchange notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of old notes who do not exchange their old notes for exchange notes under the exchange offer will remain subject to the restrictions on transfer of the old notes: - as set forth in the legend printed on the notes as a consequence of the issuance of the old notes under the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and - otherwise as set forth in the offering memorandum distributed in connection with the private offering of the old notes. In general, you may not offer or sell the old notes unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the old notes under the Securities Act. Based on interpretations of the SEC staff, exchange notes issued under the exchange offer may be offered for resale, resold or otherwise transferred by their holders (other than any holder that is our "affiliate" within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holders acquired the exchange notes in the ordinary course of the holders' business and the holders have no arrangement or understanding with respect to the distribution of the exchange notes to be acquired in the exchange offer. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the exchange notes: - cannot rely on the applicable interpretations of the SEC; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. ACCOUNTING TREATMENT We will record the exchange notes in our accounting records at the same carrying value as the old notes, which is the aggregate principal amount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will record the expenses of the exchange offer as incurred. OTHER Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take. We may in the future seek to acquire untendered old notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any old notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered old notes. 88 DESCRIPTION OF NOTES Weight Watchers International, Inc. issued the dollar Notes under an indenture (the "Dollar Notes Indenture") between itself and Norwest Bank Minnesota, National Association, as trustee (the "Dollar Notes Trustee"). Weight Watchers International, Inc. issued the euro Notes under an indenture (the "Euro Notes Indenture" and, together with the Dollar Notes Indenture, the "Indentures") between itself and Norwest Bank Minnesota, National Association, as trustee (the "Euro Notes Trustee" and, together with the Dollar Notes Trustee, the "Trustee"). The terms of the Notes include those stated in the Indentures and those made part of the Indentures by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). Certain terms used in this description are defined under the subheading "--Certain Definitions". In this description, the word "Company" refers only to Weight Watchers International, Inc. and not to any of its subsidiaries. We urge you to read the Indentures, and the Registration Rights Agreement because they, not this description, define your rights as holders of these Notes. You may request copies of these agreements at our address set forth under the heading "Where You Can Find More Information". BRIEF DESCRIPTION OF THE NOTES These Notes: - are unsecured senior subordinated obligations of the Company; - are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; - are senior in right of payment to any future Subordinated Obligations of the Company; and - are subject to registration with the SEC pursuant to the Registration Rights Agreement. PRINCIPAL, MATURITY AND INTEREST We issued the Notes initially with a maximum aggregate principal amount of $150.0 million, in the case of the dollar Notes and [EURO]100.0 million, in the case of the euro Notes. We issued the dollar Notes in denominations of $1,000 and any integral multiple of $1,000 and euro Notes in denominations of [EURO]1,000 and any integral multiples of [EURO]1,000. The Notes will mature at par on October 1, 2009. Subject to our compliance with the covenant described under the subheading "--Certain Covenants--Limitation on Indebtedness", we are permitted to issue more Notes under the Indentures in an unlimited principal amount (the "Additional Notes"). Any such Additional Notes that are actually issued will be treated as issued and outstanding Notes (and as the same class as the initial dollar Notes or euro Notes, as the case may be) for all purposes of the applicable Indenture and this "Description of Notes" unless the context indicates otherwise. Interest on the dollar and euro Notes accrues at the rate of 13% per year. The Notes are payable semiannually in arrears on April 1 and October 1, commencing on April 1, 2000. We will make each interest payment to the holders of record of these Notes on the immediately preceding March 15 and September 15. Interest on these Notes accrues from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Additional interest may accrue on the Notes in certain circumstances pursuant to the Registration Rights Agreement. In all circumstances, we will ensure that (1) a payment agent is maintained within The City and State of New York (which, until otherwise designated by us, will be the Corporate Trust Office of the Trustee in the City and State of New York), (2) for so long as the euro Notes are listed 89 on the Luxembourg Stock Exchange and the rules of this stock exchange so require, a payment agent is maintained in Luxembourg with respect to the euro Notes and (3) if and so long as the Notes are listed on any other securities exchange, any requirement or rule of that securities exchange as to paying agents is satisfied. OPTIONAL REDEMPTION Except as set forth below, we are not entitled to redeem the Notes at our option prior to October 1, 2004. On and after October 1, 2004, we are entitled at our option to redeem all or a portion of these Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on October 1 of the years set forth below:
REDEMPTION PERIOD PRICE - ------ ---------- 2004........................................................ 106.500% 2005........................................................ 104.333 2006........................................................ 102.167 2007 and thereafter......................................... 100.000
In addition, before October 1, 2002, we may at our option on one or more occasions redeem Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the dollar Notes or 35% of the aggregate principal amount of the euro Notes (which includes, in each case, Additional Notes, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 113%, in the case of the dollar Notes, and 113% in the case of the euro Notes, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more Equity Offerings; PROVIDED that (1) at least 65% of such aggregate principal amount of both of the dollar Notes and euro Notes (which includes Additional Notes, if any) remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. In addition, at any time prior to October 1, 2004, the Notes may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control (as defined), upon not less than 30 nor more than 60 days, notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium at the time plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). "Applicable Premium" means, with respect to a Note at any time, the greater of: (1) 1.0% of the principal amount of such Note and (2) the excess of (a) the present value at such time of (i) the redemption price of such Note on October 1, 2004 plus (ii) all required interest payments due on such Note through October 1, 2004, computed using a discount rate equal to, with respect to the dollar Notes, the 90 Treasury Rate plus 50 basis points and, with respect to the euro Notes, the Bund Rate plus 50 basis points, over (b) the principal amount of such Note. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for repayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to October 1, 2004; PROVIDED, HOWEVER, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that, if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Bund Rate" means the five day average of the daily fixing on the Frankfurt Stock Exchange of the rate for German Bund securities having a constant maturity most nearly equal to the period from the redemption date to October 1, 2004; PROVIDED, HOWEVER, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a German Bund security for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of German Bund securities for which such yields are given, except that if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded German Bund securities adjusted to a constant maturity of one year shall be used. SELECTION AND NOTICE OF REDEMPTION If we are redeeming less than all the Notes at any time, the Trustee will select Notes on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate. We will redeem dollar Notes of $1,000 or less and euro Notes of [EURO]1,000 or less in whole and not in part. We will cause notices of redemption to be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed. We will issue a new Note in principal amount equal to the unredeemed portion of the original Note in the name of the holder thereof upon cancelation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to offer to purchase the Notes as described under the captions "--Change of Control" and "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock". We may at any time and from time to time purchase Notes in the open market or otherwise. 91 GUARANTEES We will cause each Subsidiary Guarantor to jointly and severally guarantee, on a senior subordinated, unsecured basis, our obligations under these Notes on or before the later of - the date such Subsidiary Guarantor became a guarantor under the Credit Agreement and - July 29, 2000. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to ensure enforceability and to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors--U.S. bankruptcy or fraudulent conveyance law may interfere with the payment of the notes and the subsidiary guarantees." As of the date of this prospectus, the following subsidiaries were Subsidiary Guarantors: 58 WW Food Corp.; Waist Watchers, Inc.; Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services, Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.; Weight Watchers UK Holdings Ltd; Weight Watchers International Holdings Ltd; Weight Watchers (U.K.) Limited; Weight Watchers (Exercise) Ltd.; Weight Watchers (Accessories & Publications) Ltd; Weight Watchers (Food Products) Limited; Weight Watchers New Zealand Limited; Weight Watchers International Pty Limited; Fortuity Pty Ltd; and Gutbusters Pty Ltd. Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's PRO RATA portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. If a Subsidiary Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor's liability on its Subsidiary Guarantee could be reduced to zero. See "Risk Factors-- The notes and subsidiary guarantees are contractually junior in right of payment to our senior debt". The Subsidiary Guarantee of a Subsidiary Guarantor will be released: (1) upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor; or (2) upon the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor; in each case other than to the Company or an Affiliate of the Company and as permitted by the Indentures. The Subsidiary Guarantee of a Subsidiary Guarantor will also be released at such time as such Subsidiary Guarantor ceases for any reason to be a guarantor of the Credit Agreement. RANKING SENIOR INDEBTEDNESS VERSUS NOTES The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Subsidiary Guarantee will be subordinate in right of payment to the prior payment in full of all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor, including the Bank Indebtedness of the Company and such Subsidiary Guarantor under the Credit Agreement and related Loan Documents (as defined therein). As of July 24, 1999, after giving pro forma effect to the Transactions, the Company's Senior Indebtedness would have been approximately $239.0 million. Although the Indentures contain limitations on the amount of additional Indebtedness that we may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any 92 case, such Indebtedness may be Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness". LIABILITIES OF SUBSIDIARIES VERSUS NOTES A substantial portion of our operations are conducted through our subsidiaries. Claims of creditors of our non-guarantor subsidiaries, including trade creditors and creditors holding indebtedness or guarantees issued by such subsidiaries, and claims of preferred stockholders of such subsidiaries generally will have priority with respect to the assets and earnings of such subsidiaries over the claims of our creditors, including holders of the Notes. Accordingly, the Notes and each Subsidiary Guarantee will be effectively subordinated to creditors (including trade creditors) and preferred stockholders, if any, of such non-guarantor subsidiaries. At July 24, 1999 after giving pro forma effect to the Transactions, the total indebtedness of our subsidiaries would have been approximately $239.0 million. Our subsidiaries also have other liabilities, including trade payables. Although the Indentures limit the incurrence of Indebtedness and preferred stock of certain of our subsidiaries, such limitation is subject to a number of significant qualifications. Moreover, the Indentures do not impose any limitation on the incurrence by such subsidiaries of liabilities that are not considered Indebtedness under the Indentures. See "--Certain Covenants-- Limitation on Indebtedness". OTHER SENIOR SUBORDINATED INDEBTEDNESS VERSUS NOTES Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the Notes and the relevant Subsidiary Guarantee in accordance with the provisions of the Indentures. The Notes and each Subsidiary Guarantee will in all respects rank PARI PASSU with all other Senior Subordinated Indebtedness of the Company and the relevant subsidiary Guarantor, respectively. As of July 24, 1999, after giving pro forma effect to the Transactions, we and the Subsidiary Guarantors would have had no Senior Subordinated Indebtedness (other than the Notes and Subsidiary Guarantees) outstanding. We and the Subsidiary Guarantors have agreed in the Indentures that we and they will not Incur, directly or indirectly, any Indebtedness that is contractually subordinate or junior in right of payment to our Senior Indebtedness or the Senior Indebtedness of such Subsidiary Guarantor, unless such Indebtedness is Senior Subordinated Indebtedness of the applicable Person or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person. The Indentures do not treat unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured. PAYMENT OF NOTES We are not permitted to pay principal of, premium, if any, or interest on the Notes or make any deposit pursuant to the provisions described under "--Defeasance" below and may not purchase, redeem or otherwise retire any Notes whether pursuant to the terms of the Notes or otherwise (collectively, "pay the Notes") if either of the following occurs (a "Payment Default"): (1) any Designated Senior Indebtedness of the Company is not paid in full in cash or Temporary Cash Investments when due; or (2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms; unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash or Temporary Cash Investments. Regardless of the foregoing, we are permitted to pay the Notes if we and the 93 Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing. During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we are not permitted to pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to us) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and us from the Person or Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior Indebtedness has been discharged or repaid in full in cash or Temporary Cash Investments. Notwithstanding the provisions described above, unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness have accelerated the maturity of such Designated Senior Indebtedness, we are permitted to resume paying the Notes after the end of such Payment Blockage Period. The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full in cash or Temporary Cash Investments of such Senior Indebtedness before the holders of the Notes are entitled to receive any payment or distribution of cash, securities or other property, except that holders of Notes may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust as described under "--Defeasance" so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating the subordination provisions described herein; (2) until the Senior Indebtedness of the Company is paid in full in cash or Temporary Cash Investments, any payment or distribution to which holders of the Notes would be entitled but for the subordination provisions of the Indentures will be made to holders of such Senior Indebtedness as their interests may appear, except that holders of Notes may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust as described under "--Defeasance" so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating the subordination provisions described herein; and (3) if a distribution is made to holders of the Notes that, due to the subordination provisions, should not have been made to them, such holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee must promptly notify the holders of Designated Senior Indebtedness or the Representative of such holders of the acceleration. 94 A Subsidiary Guarantor's obligations under its Subsidiary Guarantee are senior subordinated obligations. As such, the rights of Noteholders to receive payment by a Subsidiary Guarantor pursuant to its Subsidiary Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Subsidiary Guarantor and the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee. By reason of the subordination provisions contained in the Indentures, in the event of a liquidation or insolvency proceeding, creditors of the Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, may recover more, ratably, than the holders of the Notes, and creditors of ours who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Notes. The terms of the subordination provisions described above will not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to the provisions described under "--Defeasance". BOOK-ENTRY, DELIVERY AND FORM The summary is not complete and is subject to all the provisions of the Indentures, copies of which are available from the Company upon request. The dollar Notes are represented by a dollar global Note and the euro Notes are represented by a euro global Note. Each of the global Notes will be issued in registered form without coupons and the global Notes in aggregate represent the aggregate principal amount of the outstanding Notes. The global notes will be deposited with, or on behalf of, The Depository Trust Company ("DTC") and registered in the name of DTC or its nominee, The Company expects that pursuant to procedures established by DTC, upon the deposit of the global Notes with DTC, DTC will credit on its book-entry registration and transfer system, the principal amount of the Notes represented by such global Notes to the accounts of the participants. Book-entry Interests are recorded in denominations of $1,000 or [EURO]1,000, as the case may be, and integral multiples thereof. Ownership of book-entry interests is limited to persons that have accounts with DTC ("participants") or persons that hold interests in the book-entry interests through participants ("indirect participants"), including Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), Cedelbank, banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with DTC, either directly or indirectly. Indirect participants also include persons that hold through such indirect participants. The book-entry interests will not be held in definitive form. Ownership of book-entry interests will be shown on, and the transfer of book-entry interests or interests will occur only through records maintained by DTC (with respect to interests of its participants) and on the records of participants or indirect participants (with respect to interests of indirect participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Book-entry limitations may impair your ability to own, transfer or pledge interests. The holder of the global Notes will be considered the sole legal owner of the global Notes for all purposes under the Indentures. Except as set forth below, participants and indirect participants will not be entitled to have notes registered in their names, will not receive or be entitled to receive physical delivery of Notes in definitive form and will not be considered the legal owners or the holders under the Indentures. Accordingly, each person holding a book-entry interest must rely on the procedures of DTC, and indirect participants must rely on the procedures of the participants or indirect participants through which they own their interest. If any definitive Notes are issued, they will only be issued in registered form. 95 Transfer of all or any portion of the book-entry interests may be made only through the book-entry system maintained by DTC, and unless and until book-entry interests are exchanged for definitive notes, the global notes held by DTC may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee of such successor. Although DTC, Euroclear and Cedelbank have agreed to certain procedures to facilitate transfers of book-entry interests in the global notes among participants of DTC and account holders of Euroclear and Cedelbank, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, the Trustee or any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Cedelbank or their respective participants or account holders of their respective obligations under the rules and procedures governing their operations. Payment of principal and interest on, and any other amount due in respect of, the global Notes will be made to the paying agents. Norwest Bank Minnesota, National Association is initially acting as principal paying agent for the dollar Notes and Citibank, N.A. is initially acting as principal paying agent for the euro Notes. All such amounts will be payable in U.S. dollars in respect of the global Notes representing the dollar Notes and in euro in respect of the global Notes representing the euro Notes (except as otherwise provided below). The Company will maintain a paying agent in Luxembourg with respect to the euro Notes as long as the euro Notes are listed on the Luxembourg Stock Exchange. Upon receipt of any payment, the principal paying agent will distribute such payments to Cede & Co., as nominee of DTC. Payments will be made in such amounts and at such times as provided in the Indentures. DTC, upon receipt of any payment from the principal paying agent, will promptly credit participants' accounts with payments in amounts proportionate to their respective ownership of book-entry interests, as shown on the records of DTC. The Company expects that payments by participants to owners of book-entry interests held through such participants or indirect participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers registered in "street names," and will be the responsibility of such participants or indirect participants. CURRENCY CONVERSIONS FOR HOLDERS OF BOOK-ENTRY INTERESTS IN EURO GLOBAL NOTES Notwithstanding the payment provisions described above, participants who hold book-entry interests in the euro global Note will be paid in U.S. dollars converted from payments in euro by the paying agent following the receipt of such payments, unless Cede & Co., as nominee of DTC, on behalf of any participant holding such book-entry interests, elects, following a direction from the participant to DTC, to receive payment in euro. All costs of conversion, if any, will be borne by participants holding book-entry interests in the euro global Note receiving U.S. dollar payments by deduction from such payments. The U.S. dollar amount of any payment of principal or interest or other distributions, as the case may be, to be received by such a participant not electing to receive payments in euro will be based on the paying agent's bid quotation, at or prior to 11:00 a.m., New York time, on the second New York business day preceding the applicable payment date, for the purchase of U.S. dollars with euro for settlement on such payment date. If such bid quotation is not available, all such payments will be made in euro. As long as euro Notes continue to be represented by the euro global Note, euro converted into U.S. dollars will be paid to Cede & Co. for payment to participants in DTC in accordance with customary procedures established from time to time by DTC. An investor holding book-entry interests in the euro global Note may receive payment in respect of principal of or interest on the euro Notes in euro by notifying the DTC participant through which its book-entry interest in the euro global Note is held on or prior to the record date of (1) such investor's election to receive payment in euro and (2) wire transfer instructions to an account entitled to receive the relevant payment. Such DTC participant must notify DTC of such election and wire transfer 96 instructions on or prior to the third Business Day after the record date for any payment of interest and on or prior to the twelfth Business Day prior to the payment of principal. DTC will notify the paying agent of such election and wire transfer instructions on or prior to the fifth Business Day after the record date for any payment of interest and on or prior to the tenth Business Day prior to the payment of principal. If complete instructions are received by the DTC participant and forwarded by the DTC participant to DTC and by DTC to the paying agent on or prior to such dates, such investor will receive payment in euro, otherwise only U.S. dollar payments will be made by the paying agent. All costs of such payment by wire transfer will be borne by holders of book-entry interests receiving such payments by deduction from such payments. Euroclear and Cedelbank, acting on behalf of their respective participants, are expected, prior to each payment date, to elect to receive payments of principal and interest and any other amounts owing thereunder in euro. In the event that Euroclear and Cedelbank become unwilling or unable to make such an election on behalf of their participants, each individual holder of a beneficial interest in the euro global Note will be required to make its own currency election (in accordance with the procedures set forth above) in order to avoid payment in U.S. dollars. CERTIFICATED NOTES Subject to certain conditions, the Notes represented by a global Note are exchangeable for certificated Notes in definitive form if: (1) the book-entry depositary notifies us that it is unwilling or unable to continue as depository for the global Notes or the book-entry depositary ceases to be a clearing agency registered under the Exchange Act and, in either case, we are unable to locate a qualified successor within 90 days; (2) we in our discretion at any time determine not to have all the Notes represented by the global Notes; or (3) a default entitling the holders of the Notes to accelerate the maturity thereof has occurred and is continuing. Any Note that is exchangeable as described above is exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the book-entry depositary shall direct. Subject to the foregoing, the global Notes are not exchangeable, except for a global Note of the same aggregate denomination to be registered in the name of the book-entry depositary or its nominee. The holder of a definitive note may transfer such note by surrendering it at the office or agency maintained by us for such purpose in the Borough of Manhattan, The City of New York, which initially will be the office of the Trustee or, so long as the notes are listed on the Luxembourg Stock Exchange, the Luxembourg transfer agent. SAME-DAY PAYMENT The Indentures require us to make payments in respect of Notes (including principal, premium and interest) by wire transfer of immediately available funds to accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS We have agreed pursuant to the Registration Rights Agreement that we will, subject to certain exceptions, (1) within 90 days after the Issue Date, file a registration statement (the "Exchange Offer Registration Statement") with the SEC with respect to a registered offer (the "Registered Exchange Offer") to exchange the Notes for new notes of the Company (the "Exchange 97 Notes") having terms substantially identical in all material respects to the Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions); (2) use our best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 180 days after the Issue Date; (3) as soon as practicable after the effectiveness of the Exchange Offer Registration Statement (the "Effectiveness Date"), offer the Exchange Notes in exchange for surrender of the Notes; and (4) keep the Registered Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the holders of the Notes. For each Note tendered to us pursuant to the Registered Exchange Offer, we will issue to the holder of such Note an Exchange Note having a principal amount equal to that of the surrendered Note. Interest on each Exchange Note will accrue from the last interest payment date on which interest was paid on the Note surrendered in exchange therefor, or, if no interest has been paid on such Note, from the date of its original issue. Under existing SEC interpretations, the Exchange Notes will be freely transferable by holders other than our affiliates after the Registered Exchange Offer without further registration under the Securities Act if the holder of the Exchange Notes represents to us in the Registered Exchange Offer that it is acquiring the Exchange Notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes and that it is not an affiliate of the Company, as such terms are interpreted by the SEC; PROVIDED, HOWEVER, that broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the Registered Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Notes. The SEC has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Notes for 180 days following the effective date of such Exchange Offer Registration Statement (or such shorter period during which Participating Broker-Dealers are required by law to deliver such prospectus). A Holder of Notes (other than certain specified holders) who wishes to exchange such Notes for Exchange Notes in the Registered Exchange Offer will be required to represent that any Exchange Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Registered Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and that it is not an "affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In the event that: (1) applicable interpretations of the staff of the SEC do not permit us to effect such a Registered Exchange Offer; or (2) for any other reason we do not consummate the Registered Exchange Offer within 220 days of the Issue Date; or 98 (3) an Initial Purchaser shall notify us following consummation of the Registered Exchange Offer that Notes held by it are not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer; or (4) certain holders are prohibited by law or SEC policy from participating in the Registered Exchange Offer or may not resell the Exchange Notes acquired by them in the Registered Exchange Offer to the public without delivering a prospectus, then, we will, subject to certain exceptions, (1) promptly file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Notes or the Exchange Notes, as the case may be; (2) use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act; and (3) keep the Shelf Registration Statement effective, subject to certain exceptions, until the earliest of (A) the time when the Notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h) of Rule 144, (B) two years from the effective date and (C) the date on which all Notes registered thereunder are disposed of in accordance therewith. We will, in the event a Shelf Registration Statement is filed, among other things, provide to each holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Notes or the Exchange Notes, as the case may be. A holder selling such Notes or Exchange Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such holder (including certain indemnification obligations). We will pay additional cash interest on the applicable Notes and Exchange Notes, subject to certain exceptions, (1) if the Company fails to file an Exchange Offer Registration Statement with the SEC on or prior to the 90th day after the Issue Date, (2) if the Exchange Offer Registration Statement is not declared effective by the SEC on or prior to the 180th day after the Issue Date, (3) if the Exchange Offer is not consummated on or before the 40th day after the Exchange Offer Registration Statement is declared effective, (4) if obligated to file the Shelf Registration Statement, the Company fails to file the Shelf Registration Statement with the SEC on or prior to the 60th day after such filing obligation arises, (5) if obligated to file a Shelf Registration Statement, the Shelf Registration Statement is not declared effective on or prior to the 180th day after the obligation to file a Shelf Registration Statement arises, or (6) after the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective, such Registration Statement thereafter ceases to be effective or usable (subject to certain exceptions) (each such event referred to in the preceding clauses (1) through (6) a "Registration Default"); from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. 99 The rate of the additional interest will be 0.50% per annum for the first 90-day period immediately following the occurrence of a Registration Default, and such rate will increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum additional interest rate of 2.0% per annum. We will pay such additional interest on regular interest payment dates. Such additional interest will be in addition to any other interest payable from time to time with respect to the Notes and the Exchange Notes. All references in the Indentures, in any context, to any interest or other amount payable on or with respect to the Notes shall be deemed to include any additional interest pursuant to the Registration Rights Agreement. If we effect the Registered Exchange Offer, we will be entitled to close the Registered Exchange Offer 30 days after the commencement thereof provided that we have accepted all Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), each Holder shall have the right to require that the Company repurchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date): (1) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of a Person (the "specified person") held by any other Person (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (2) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; PROVIDED, HOWEVER, that the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); 100 (3) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66 2/3% of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (4) the adoption of a plan relating to the liquidation or dissolution of the Company; or (5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person (other than, in all such cases, a Person that is controlled by the Permitted Holders), other than a transaction following which (A) in the case of a merger or consolidation transaction, securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) constitute at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction, and (B) in the case of a sale of assets transaction, the transferee Person becomes the obligor in respect of the Notes and a Subsidiary of the transferor of such assets. Within 30 days following any Change of Control, unless we have exercised our option to redeem the Notes as described under "--Optional Redemption", we will mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require us to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased. We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indentures applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer or if the Company exercises its option to purchase the Notes. We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations. The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent 101 management. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchasers. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are contained in the covenant described under "--Certain Covenants--Limitation on Indebtedness". Such restrictions can only be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenant, however, which limitations will terminate if the Company achieves Investment Grade Status, the Indentures will not contain any covenants or provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction. The Credit Agreement prohibits us from purchasing any Notes and also provides that the occurrence of certain change of control events with respect to the Company would constitute a default thereunder. In the event a Change of Control occurs at a time when we are prohibited from purchasing Notes, we may seek the consent of our lenders to the purchase of Notes or may attempt to refinance the borrowings that contain such prohibition. If we do not obtain such a consent or repay such borrowings, we will remain prohibited from purchasing Notes. In such case, our failure to offer to purchase Notes would constitute a Default under the Indentures, which would, in turn, constitute a default under the Credit Agreement. Future indebtedness that we may incur may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require the repurchase of such indebtedness upon a Change of Control. Moreover, the exercise by the holders of their right to require us to repurchase the Notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the holders of Notes following the occurrence of a Change of Control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. The provisions under the Indentures relating to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the Notes. The definition of Change of Control includes a phrase relating to the direct or indirect sale of "all or substantially all" the assets of the Company (determined on a consolidated basis). Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale of less than all the assets of the Company (determined on a consolidated basis) to another Person may be uncertain. CERTAIN COVENANTS Set forth below are certain covenants contained in the Indentures. Following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing under the Indenture (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or default under the Indentures), the Company and its Restricted Subsidiaries will not be subject to the provisions of the Indentures described below under "Limitation on Indebtedness", "Limitation on Restricted Payments", "Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries", "Limitation on Restrictions on 102 Distributions from Restricted Subsidiaries", "Limitation on Sales of Assets and Subsidiary Stock", "Limitation on Affiliate Transactions", and clause (3) under "Merger and Consolidation". LIMITATION ON INDEBTEDNESS (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries will be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on a PRO FORMA basis, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such Indebtedness is Incurred prior to October 1, 2002 or 2.25 to 1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Credit Agreement; PROVIDED, HOWEVER, that, after giving effect to any such Incurrence, the aggregate principal amount of such Indebtedness then outstanding does not exceed $292 million less the sum of all principal payments with respect to such Indebtedness pursuant to paragraph (a)(3)(A) of the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock"; (2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such Indebtedness (other than Credit Agreement Intercompany Indebtedness), such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes; (3) the Notes, the Subsidiary Guarantees and the Exchange Notes (other than any Additional Notes); (4) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this covenant); (5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); PROVIDED, HOWEVER, that on the date of such acquisition and after giving pro forma effect thereto, the Company would have been able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of this covenant; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) or this clause (6); PROVIDED, HOWEVER, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be Incurred only by such Subsidiary; (7) Hedging Obligations consisting of (A) Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Company or a Restricted Subsidiary pursuant to the Indentures or (B) Currency Agreements entered into in respect of Credit Agreement Intercompany Indebtedness or in the ordinary course of business and not for the purpose of speculation; 103 (8) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when taken together with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (8), does not exceed 5.0% of Total Assets at the time of Incurrence; (9) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of the Indentures, other than guarantees of Indebtedness Incurred by any person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; (10) obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (11) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Company or such Restricted Subsidiary is permitted under the terms of the Indentures; (12) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within two Business Days of its Incurrence; and (13) Indebtedness of the Company or any Restricted Subsidiaries in an aggregate principal amount which, when taken together with all other Indebtedness of the Company or any Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (12) above or paragraph (a)) does not exceed $25 million. (c) Notwithstanding the foregoing, neither the Company nor any Restricted Subsidiary will Incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Restricted Subsidiary unless such Indebtedness shall be subordinated to the Notes or the applicable Restricted Subsidiary to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with this covenant, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses (provided that any Indebtedness classified as Incurred pursuant to clause (b)(13) above may later be reclassified as having been Incurred pursuant to paragraph (a) above to the extent that such reclassified Indebtedness could be Incurred pursuant to paragraph (a) above at the time of such reclassification) and (2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above. (e) Notwithstanding paragraphs (a) and (b) above, neither the Company nor any Subsidiary Guarantor will Incur (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of such Person, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person or (2) any Secured Indebtedness that is not Senior Indebtedness of such Person unless contemporaneously therewith such Person makes effective provision to secure the Notes 104 equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (f) For purposes of determining compliance with any U.S. dollar denominated restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness; PROVIDED, HOWEVER, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess will be determined on the date such Refinancing Indebtedness is Incurred. LIMITATION ON RESTRICTED PAYMENTS (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of (without duplication): (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); PLUS (B) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and 100% of any cash contribution subsequent to the Issue Date; PLUS (C) the amount by which Indebtedness of the Company or any of its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or any of its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); PLUS (D) an amount equal to the sum of (x) the net reduction in the Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person 105 resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment, proceeds representing the return of capital (excluding dividends and distributions) and from repayments of loans or advances which constituted Restricted Payments, in each case received by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The preceding provisions will not prohibit: (1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) or a substantially concurrent capital contribution; PROVIDED, HOWEVER, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness which is permitted to be Incurred pursuant to the covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock"; PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in subsequent calculations of the amount of Restricted Payments; (4) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; PROVIDED, HOWEVER, that such dividend shall be included in the calculation of the amount of Restricted Payments; (5) so long as no Default has occurred and is continuing, the repurchase or other acquisition of shares of Capital Stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; PROVIDED, HOWEVER, that the aggregate amount of such repurchases and other acquisitions shall not exceed $2 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over for the two succeeding calendar years); PROVIDED, FURTHER, HOWEVER, that such amount may be increased by an amount not to exceed (a) the cash proceeds from sales of Capital Stock of the Company (other than Disqualified Stock) to members of management or directors or consultants of the Company and its Subsidiaries that occur after 106 the Issue Date plus (b) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date (PROVIDED, HOWEVER, that to the extent such amount is increased by the receipt of any such cash proceeds, such cash proceeds shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above and the calculation of Consolidated Net Income); and PROVIDED FURTHER, HOWEVER, that such repurchases and other acquisitions shall be excluded in the calculation of the amount of Restricted Payments; (6) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock (other than the Seller Preferred Stock) of the Company or any of its Restricted Subsidiaries issued or Incurred in accordance with the covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that, to the extent included in the calculation of Consolidated Interest Expense, such dividends or distributions shall be excluded in the calculation of the amount of Restricted Payments; (7) Investments in Unrestricted Subsidiaries in an aggregate amount which, when taken together with all other Investments made pursuant to this clause (7), do not exceed $10 million; PROVIDED, HOWEVER, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; (8) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1 million and 1.0% of EBITDA and any related out-of-pocket expenses; PROVIDED, HOWEVER, that such payments shall be excluded in the calculation of the amount of Restricted Payments; (9) the payment of dividends on the Company's common stock following the first public offering of common stock of the Company, after the Issue Date, of up to 6% per annum of the net proceeds received by the Company from such public offering; PROVIDED, HOWEVER, that (1) the aggregate amount of all such dividends shall not exceed the aggregate amount of net proceeds received by the Company from such public offering, (2) at the time of, and after giving effect to, any payment permitted under this clause (9), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (3) any such payment shall be included in subsequent calculations of the amount of Restricted Payments; (10) other Restricted Payments (other than dividends in respect of the Seller Preferred Stock) in an aggregate amount not to exceed $5 million; PROVIDED, HOWEVER, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments; (11) so long as no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock issued after the Issue Date; PROVIDED, HOWEVER, that for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of such determination for which financial statements are available immediately preceding the declaration of any such dividend or distribution after giving effect to such dividend or distribution on a pro forma basis, the Company would have had a Consolidated Coverage Ratio of at least 2.0 to 1; PROVIDED, HOWEVER, that such dividends shall be included in the calculation of the amount of Restricted Payments; (12) Investments that are made with Excluded Contributions; PROVIDED, HOWEVER, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; and (13) repurchases of Capital Stock deemed to occur upon exercise of stock options if such Capital Stock represents a portion of the exercise price of such options; PROVIDED, HOWEVER, that such repurchases shall be excluded in the calculation of the amount of Restricted Payments. 107 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order or an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this covenant or this clause (3) or contained in any amendment to an agreement referred to in clause (1) or (2) of this covenant or this clause (3); PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Noteholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements; (4) any such encumbrance or restriction consisting of customary non assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (5) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; (6) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (7) any restriction on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (8) encumbrances and restrictions contained in the agreements evidencing other Indebtedness of Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that the encumbrances or restrictions apply only in the event of and during the continuance of a default contained in such Indebtedness or agreement; and (9) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: 108 (1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Company, of the shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; PROVIDED that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes), that are assumed by the transferee of any such assets (PROVIDED that the Company or such Restricted Subsidiary is released from all liability with respect thereto), (B) any notes, other obligations or securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Disposition and (C) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Disposition having an aggregate fair market value, when taken together with all other Designated Noncash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed $5 million at time of receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for purposes of this provision and for no other purpose; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an offer to the holders of the Notes (and to holders of other Senior Subordinated Indebtedness designated by the Company) to purchase Notes (and such other Senior Subordinated Indebtedness) pursuant to and subject to the conditions contained in the Indentures; and (D) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), for any general corporate purpose permitted pursuant to the terms of the Indentures; PROVIDED, HOWEVER, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. 109 Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $15 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness. (b) In the event of an Asset Disposition that requires the purchase of the Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(3)(C) above, the Company will purchase Notes tendered pursuant to an offer by the Company for the Notes (and such other Senior Subordinated Indebtedness) at a purchase price of 100% of their principal amount (or, in the event such other Senior Subordinated Indebtedness was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indentures. If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Notes will be denominations of $1,000 principal amount or multiples thereof. The Company shall not be required to make such an offer to purchase Notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash available therefor is less than $15 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this clause by virtue of its compliance with such securities laws or regulations. LIMITATION ON AFFILIATE TRANSACTIONS (a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm's-length dealings with a Person who is not an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5 million, the terms of the Affiliate Transaction are set forth in writing and a majority of directors of the Company have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a Board Resolution; and (3) if such Affiliate Transaction involves an amount in excess of $25 million, the Board of Directors shall also have received a written opinion from an investment banking, accounting or appraisal firm of national prominence that is not an Affiliate of the Company to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. 110 (b) The provisions of the preceding paragraph (a) will not prohibit: (1) any Investment or other Restricted Payment, in each case permitted to be made pursuant to the covenant described under "--Limitation on Restricted Payments"; (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (3) loans or advances to employees or consultants in the ordinary course of business of the Company or its Restricted Subsidiaries, but in any event not to exceed $3 million in the aggregate outstanding at any one time; (4) the payment of reasonable fees to officers, employees, consultants or directors of the Company or its Restricted Subsidiaries and indemnity provided on behalf of officers, employees, consultants or directors of the Company or its Restricted Subsidiaries; (5) any transaction with a Restricted Subsidiary or joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity; (6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company; (7) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1 million and 1.0% of EBITDA and any related out-of-pocket expenses; (8) the payment by the Company or any of its Restricted Subsidiaries of fees to The Invus Group, Ltd. and its Affiliates in connection with any acquisition or divestiture transaction entered into by the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that the aggregate amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of any acquisition or divestiture transaction shall not exceed 1% of the total amount of such transaction; (9) any agreement as in effect on the Issue Date and described in the Offering Circular or any renewals, extensions or amendments of any such agreement (so long as such renewals, extensions or amendments are not less favorable to the Company or the Restricted Subsidiaries) and the transactions evidenced thereby; (10) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; PROVIDED, HOWEVER, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (10) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Notes in any material respect; and (11) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case in the ordinary course of business and otherwise in compliance with the terms of the applicable Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. 111 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES The Company (1) will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Subsidiary), and (2) will not permit any Restricted Subsidiary to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' or other legally required qualifying shares) to any Person (other than to the Company or a Wholly Owned Subsidiary), unless (A) immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary; (B) immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described under "--Limitation on Restricted Payments" if made on the date of such issuance, sale or other disposition; or (C) such issuance or sale is made pursuant to a Local Management Plan and, immediately after giving effect to such issuance or sale, the Company or a Wholly Owned Subsidiary owns at least 85% of the Capital Stock of such Restricted Subsidiary. MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indentures; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "--Limitation on Indebtedness"; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indentures; PROVIDED, HOWEVER, that clauses (3) and (4) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company or to another Restricted Subsidiary or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction or changing the form of organization of the Company. 112 The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless: (1) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to another Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Company provides an Officers' Certificate to the Trustee to the effect that the Company will comply with its obligations under the convenant described under "--Limitation on Sales of Assets and Subsidiary Stock" in respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guarantee; (2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction ), no Default shall have occurred and be continuing; and (3) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with the applicable Indenture. The Successor Company will be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indentures, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Notes. FUTURE GUARANTORS The Company will cause each Subsidiary Guarantor to execute and deliver to the Trustee a Guarantee Agreement pursuant to which such Subsidiary Guarantor will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indentures on or before the later of (1) the date such Subsidiary Guarantor became a guarantor under the Credit Agreement and (2) July 29, 2000. SEC REPORTS Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC and provide the Trustee and Holders and prospective Holders (upon request in the case of prospective Holders) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act; PROVIDED, HOWEVER, that the Company shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Company will make available such information to the Trustee, Holders and prospective investors (upon request in the case of prospective investors) within 15 days after the time the Company would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the exchange offer or the effectiveness of the Shelf Registration Statement by the filing with the SEC of the Exchange Offer Registration Statement and/or Shelf Registration Statement, 113 and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act. The Company also will comply with the other provisions of Section 314(a) of the TIA. In addition, the Company shall furnish to the Holders of the Notes and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act. DEFAULTS Each of the following is an Event of Default: (1) a default in the payment of interest on the Notes when due, continued for 30 days; (2) a default in the payment of principal of any Note when due at its Stated Maturity, upon optional redemption, upon required purchase, upon declaration or otherwise; (3) the failure by the Company to comply with its obligations under "--Certain Covenants--Merger and Consolidation" above; (4) the failure by the Company to comply for 30 days after notice with any of its obligations in the covenants described above under "--Change of Control" (other than a failure to purchase Notes) or under "--Certain Covenants" under "--Limitation on Indebtedness", "--Limitation on Restricted Payments", "--Limitation on Restrictions on Distributions from Restricted Subsidiaries", "--Limitation on Sales of Assets and Subsidiary Stock" (other than a failure to purchase Notes), "--Limitation on Affiliate Transactions", "--Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries," "--Future Guarantors" or "--SEC Reports"; (5) the failure by the Company or a Subsidiary Guarantor to comply for 60 days after notice with its other agreements contained in the applicable Indenture; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10 million (the "cross acceleration provision"); (7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"); (8) any judgment or decree for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $10 million is entered against the Company or a Significant Subsidiary, remains outstanding for a period of 60 consecutive days following such judgment and is not discharged, waived or stayed within 10 days after notice (the "judgment default provision"); or (9) a Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee. However, a default under clauses (4), (5), (6) and (8) will not constitute an Event of Default until the Trustee or the holders of 25% in principal amount of the applicable outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the applicable outstanding Notes may declare the principal of and accrued but 114 unpaid interest on all the Notes to be due and payable; PROVIDED, HOWEVER, that so long as any Bank Indebtedness remains outstanding, no such acceleration shall be effective until the earlier of (1) five business days after the giving of written notice to the Company and the administrative agent (or similar agent if there is no administrative agent) under the Credit Agreement and (2) the day on which any Bank Indebtedness is accelerated. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the Notes. Under certain circumstances, the holders of a majority in principal amount of the applicable outstanding Notes may rescind any such acceleration with respect to the applicable Notes and its consequences. Subject to the provisions of the Indentures relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indentures at the request or direction of any of the holders of the Notes unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with respect to the Indentures or the Notes unless: (1) such holder has previously given the Trustee notice that an Event of Default is continuing; (2) holders of at least 25% in principal amount of the applicable outstanding Notes have requested the Trustee to pursue the remedy; (3) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and (5) holders of a majority in principal amount of the applicable outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the holders of a majority in principal amount of the applicable outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indentures or that the Trustee determines is unduly prejudicial to the rights of any other holder of a Note or that would involve the Trustee in personal liability. If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each holder of the applicable Notes notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not opposed to the interest of the holders of the Notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. We are required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are taking or propose to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indentures may be amended with the consent of the holders of a majority in principal amount of the applicable Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any 115 provisions may also be waived with the consent of the holders of a majority in principal amount of the applicable Notes then outstanding. However, without the consent of each holder of an outstanding Note affected thereby, an amendment may not, among other things: (1) reduce the amount of Notes whose holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "--Optional Redemption" above; (5) make any Note payable in money other than that stated in the Note; (6) impair the right of any holder of the Notes to receive payment of principal of and interest on such holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Notes; (7) make any change in the amendment provisions which require each holder's consent or in the waiver provisions; (8) make any change in the ranking or priority of any Note that would adversely affect the Noteholders; or (9) make any change in any Subsidiary Guarantee that would adversely affect the Noteholders. Notwithstanding the preceding, without the consent of any holder of the applicable Notes, the Company and Trustee may amend the applicable Indenture: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to provide for the assumption by a Successor Company of the obligations of the Company under the applicable Indenture; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code); (4) to add guarantees with respect to the Notes or to secure the Notes; (5) to add to the covenants of the Company for the benefit of the holders of the Notes or to surrender any right or power conferred upon the Company; (6) to make any change that does not adversely affect the rights of any holder of the Notes; or (7) to comply with any requirement of the SEC in connection with the qualification of the applicable Indenture under the Trust Indenture Act. However, no amendment may be made to the subordination provisions of the applicable Indenture that adversely affects the rights of any holder of Senior Indebtedness of the Company then outstanding unless the holders of such Senior Indebtedness (or their Representative) consent to such change. The consent of the holders of the Notes is not necessary under the Indentures to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indentures becomes effective, we are required to mail to holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment. 116 TRANSFER The Notes are issued in registered form and are transferable only upon the surrender of the Notes being transferred for registration of transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges. DEFEASANCE At any time, we may terminate all our obligations under the Notes and the Indentures ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. In addition, at any time we may terminate our obligations under "--Change of Control" and under the covenants described under "--Certain Covenants" (other than the covenant described under "--Merger and Consolidation"), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "--Defaults" above and the limitations contained in clause (3) under "--Certain Covenants--Merger and Consolidation" above ("covenant defeasance"). We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If we exercise our covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (6), (7) (with respect only to Significant Subsidiaries) or (8) under "--Defaults" above or because of the failure of the Company to comply with clause (3) of the covenant described under "--Certain Covenants--Merger and Consolidation" above. If we exercise our legal defeasance option or our covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee. In order to exercise either of our defeasance options, we must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). CONCERNING THE TRUSTEE Norwest Bank Minnesota, National Association is the Trustee under the Indentures. We have appointed Norwest Bank Minnesota, National Association as Registrar with regard to the Notes. The Indentures contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; PROVIDED, HOWEVER, if it acquires any conflicting interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign. The Holders of a majority in principal amount of the applicable outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy 117 available to the Trustee, subject to certain exceptions. If an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indentures at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the applicable Indenture. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company will have any liability for any obligations of the Company under the Notes or the Indentures or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver and release may not be effective to waive liabilities under the U.S. federal securities laws, and it is the view of the SEC that such a waiver is against public policy. GOVERNING LAW The Indentures and the Notes are governed by, and construed in accordance with, the laws of the State of New York. NOTICES As long as the notes are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, notices to the Noteholders will be valid if published in a leading newspaper having general circulation in Luxembourg, which is expected to be the Luxembourg Wort. CERTAIN DEFINITIONS "ADDITIONAL ASSETS" means any: (1) property, plant, equipment or intellectual property used in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Related Business. "AFFILIATE" of any specified Person means: (1) any other Person, directly or indirectly, controlling or controlled by; or (2) under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the covenants described under "--Certain Covenants--Limitation on Restricted Payments", "--Certain Covenants--Limitation on Affiliate Transactions" and "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to 118 purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "ASSET DISPOSITION" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "DISPOSITION"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of clauses (1), (2) and (3) (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (B) any sale of Capital Stock in, or indebtedness or other securities of, an Unrestricted Subsidiary; (C) a disposition of Temporary Cash Investments; (D) the disposition of all or substantially all the assets of the Company in a manner permitted pursuant to the covenant described above under "--Certain Covenants--Merger and Consolidation" or any disposition that constitutes a Change of Control; (E) sales of assets received by the Company upon the foreclosure on a Lien; (F) for purposes of the covenant described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment permitted by the covenant described under "--Certain Covenants--Limitation on Restricted Payments" or a Permitted Investment; and (G) a disposition of assets with a fair market value of less than $1 million. "ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing: (1) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments. 119 "BANK INDEBTEDNESS" means any and all Indebtedness and other amounts payable under or in respect of the Credit Agreement or Hedging Obligations related to the Credit Agreement, including principal, premium (if any), interest (including interest accruing at the contract rate specified in the Credit Agreement (including any rate applicable on default) on or after the filing of any petition in bankruptcy or the commencement of any similar state, Federal or foreign reorganization or liquidation proceeding relating to the Company and interest that would accrue but for the commencement of such proceeding whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITAL LEASE OBLIGATION" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "CAPITAL STOCK" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "CODE" means the Internal Revenue Code of 1986, as amended. "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period; (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for 120 such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition, including any acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment, acquisition or cost-reduction program occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and Consolidated Interest Expense for such such shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment, acquisition or cost-reduction program occurred on the first day of such period. For purposes of this definition, whenever PRO FORMA effect is to be given to an acquisition or cost-reduction program, the amount of income, earnings or cost savings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition or cost-reduction program which is being given pro forma effect, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable, PROVIDED THAT, in either case, such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states (a) the amount of such adjustment or adjustments, (b) that such adjustment or adjustments are based on the reasonable good faith belief of the Officers executing such Officers' Certificate at the time of such execution and (c) that any related Incurrence of Indebtedness is permitted pursuant to the Indenture. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication: (1) interest expense attributable to Capital Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; 121 (2) capitalized interest; (3) non-cash interest expenses; (4) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (5) net payments pursuant to Hedging Obligations; (6) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Restricted Subsidiary (other than the Seller Preferred Stock and other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the issuer of such Preferred Stock); (7) interest incurred in connection with Investments in discontinued operations; (8) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary; and (9) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "CONSOLIDATED NET INCOME" means, for any period, the sum of (1) the net income of the Company and its consolidated Subsidiaries and (2) to the extent not otherwise included in the calculation of the net income of the Company and its consolidated Subsidiaries, amounts received by the Company from Warnaco Inc. in respect of the license agreement, dated as of January 8, 1999, between the Company and Warnaco Inc. and (3) to the extent deducted in calculating net income of the Company and its consolidated Subsidiaries, (A) any non-recurring fees, expenses or charges related to the Transactions and (B) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with the Transactions; PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and (B) the Company's equity in a net loss of any such Person (other than a Person the Company's interest in which is accounted for pursuant to the equity method of accounting) for such period shall be included in determining such Consolidated Net Income; (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary 122 as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); PROVIDED, HOWEVER, that such net income shall not be excluded in calculating Consolidated Net Income as a component of EBITDA for purposes of calculating the Consolidated Coverage Ratio; and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain (or loss) realized upon the sale or other disposition of any assets of the Company, its consolidated Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (5) extraordinary gains or losses; (6) any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes; and (7) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of the covenant described under "--Certain Covenants--Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of the Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "CREDIT AGREEMENT" means the Credit Agreement entered into by and among the Company, certain of its Subsidiaries, the lenders referred to therein, The Bank of Nova Scotia, as Administrative Agent, and Credit Suisse First Boston, New York branch, as Syndication Agent, together with the related documents thereto (including, without limitation, the deed poll and transferable loan certificates issued in connection therewith, the term loans and revolving loans thereunder, any notes, instruments, guarantees, pledge agreements and security documents), in each case as amended, extended, waived, replaced, restructured, repaid, refunded, refinanced, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders and agents. Without limiting the generality of the foregoing, the term "Credit Agreement" shall include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to the Credit Agreement and all refundings, restructurings, renewals, refinancing and replacements of any facility provided for in the Credit Agreement, including any agreement or agreements (a) extending the maturity of any Indebtedness incurred thereunder or contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder or (c) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder to the extent permitted under the Indenture. "CREDIT AGREEMENT INTERCOMPANY INDEBTEDNESS" means Indebtedness of the Company or a Restricted Subsidiary (the "obligor") owing to a Restricted Subsidiary of the Company (the "obligee") that is a borrower under the Credit Agreement in respect of an advance to the obligor by the obligee of funds borrowed by the obligee under the Credit Agreement; PROVIDED, HOWEVER, that the amount of such Indebtedness constituting Credit Agreement Intercompany Indebtedness shall be limited to the amount 123 actually owed by the obligee in respect of the funds advanced to the obligor under the Credit Agreement. "CURRENCY AGREEMENT" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as Designated Noncash Consideration pursuant to an Officers' Certificate setting forth the basis of such valuation, less the amount of Temporary Cash Investments received in connection with a subsequent sale of such Designated Noncash Consideration. "DESIGNATED PREFERRED STOCK" means Preferred Stock of the Company (other than Disqualified Stock) that is issued for cash (other than to the Company, a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of the covenant described under "--Certain Covenants--Limitation on Restricted Payments." "DESIGNATED SENIOR INDEBTEDNESS with respect to a Person" means: (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such Person which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $20 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the first anniversary of the Stated Maturity of the Notes; PROVIDED, HOWEVER, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy obligations as a result of such employee's death or disability; and PROVIDED FURTHER, HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Notes shall not constitute Disqualified Stock if: (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes 124 and described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "--Certain Covenants--Change of Control"; and (2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto; and, PROVIDED FURTHER, HOWEVER, that the Seller Preferred Stock shall constitute Disqualified Stock. "EBITDA" for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: (1) all income tax expense of the Company and its consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid operating activity item that was paid in cash in a prior period); (4) any non-recurring fees, expenses or charges related to any Equity Offering, Permitted Investment, acquisition or Indebtedness permitted to be Incurred by the Indentures (in each case, whether or not successful) deducted (and not subsequently added back) in such period in computing Consolidated Net Income; (5) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with acquisitions consummated after the Issue Date deducted (and not subsequently added back) in such period in computing Consolidated Net Income; and (6) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period); in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "EQUITY OFFERING" means any primary offering of common stock or Preferred Stock of the Company (other than Disqualified Stock) to Persons who are not Affiliates of the Company other than (1) public offerings with respect to the Company's common stock registered or Form S-8 and (2) issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the debt securities of the Company issued pursuant to the Indentures in exchange for, and in an aggregate principal amount at maturity equal to, the Notes, in compliance with the terms of the Registration Rights Agreement. "EXCLUDED CONTRIBUTIONS" means the net cash proceeds received by the Company after the Issue Date from (1) contributions to its common equity capital and (2) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan of the Company or a Restricted Subsidiary or any other management or employee benefit plan or agreement of the Company or a Restricted Subsidiary) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' 125 Certificate, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of the "--Certain Covenants--Limitation on Restricted Payments" covenant. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entity as approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including PRO FORMA financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "GUARANTEE AGREEMENT" means a guarantee agreement, in substantially the form provided in the Indentures, pursuant to which a Subsidiary Guarantor guarantees the Company's obligations with respect to the Notes on the terms provided for in the Indentures. "HEDGING OBLIGATIONS" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Registrar's books. "INCUR" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness. "INDEBTEDNESS" means, with respect to any Person on any date of determination (without duplication): (1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the 126 payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; PROVIDED, HOWEVER, that unpaid dividends in respect of the Seller Preferred Stock shall not constitute Indebtedness; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/ Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the twentieth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with the Indentures (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "INTEREST RATE AGREEMENT" means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates. "INVESTMENT" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. 127 For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and the covenant described under "--Certain Covenants--Limitation on Restricted Payments": (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company. "INVESTMENT GRADE RATING" means a rating equal to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent) by Moody's and S&P, respectively. "INVESTMENT GRADE STATUS" shall be deemed to have been reached on the date the Notes have an Investment Grade Rating from both S&P and Moody's. "ISSUE DATE" means the date on which the Notes were originally issued. "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "LOCAL MANAGEMENT PLAN" means an equity plan or program for the sale or issuance of Capital Stock to local management or a plan or program for the issuance or sale of Capital Stock to local strategic investors in respect of Subsidiaries of the Company whose principal business is conducted outside of the United States. "MOODY'S" means Moody's Investor Services, Inc. or any successor to the rating agency business thereof. "NET AVAILABLE CASH" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of: (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such 128 Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "NET CASH PROCEEDS", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "NOTES" means the $150.0 million aggregate principal amount and [EURO]100.0 million aggregate principal amount of 13% senior subordinated notes of the Company due 2009. "OBLIGATIONS" means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness; PROVIDED, HOWEVER that Obligations with respect to the Notes shall not include fees or indemnification in favor of the Trustee and other third parties other than the holders of the Notes. "PERMITTED HOLDERS" means Artal Luxembourg S.A., H.J. Heinz Company and each of their respective Affiliates. "PERMITTED INVESTMENT" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a Related Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is a Related Business; (3) cash and Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to the covenant described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"; (9) any Investment existing on the Issue Date; (10) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (10), not to exceed $15 million at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); 129 (11) Investments the payment for which consists of Capital Stock of the Company (other than Disqualified Stock); (12) any Guarantee Incurred in connection with a "synthetic lease" or similar financing of an acquisition or construction of property used in a Related Business by the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Guarantee and any other Indebtedness Incurred in connection with such transaction is permitted to be Incurred pursuant to the provisions of the covenant described under "--Certain Covenants--Limitation on Indebtedness"; (13) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (14) Investments of up to $10 million in WeightWatchers.com, our Internet affiliate. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "PERMITTED JUNIOR SECURITIES" shall mean debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then-outstanding Senior Indebtedness of the Company at least to the same extent that the Notes are subordinated to the payment of all Senior Indebtedness of the Company on the Issue Date, so long as to the extent that any Senior Indebtedness of the Company outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash or Temporary Cash Investments on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment. "PRINCIPAL" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "REFINANCE" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indentures, including Indebtedness that Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that: (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and 130 (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (A) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary; and provided further that clauses (1) and (2) of this clause will not apply to any refunding or refinancing of any Senior Indebtedness. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated September 22, 1999, among the Company, Credit Suisse First Boston Corporation and Scotia Capital Markets. "RELATED BUSINESS" means any business in which the Company was engaged on the Issue Date and any business related, ancillary or complementary to any business of the Company in which the Company was engaged on the Issue Date. "REPRESENTATIVE" means with respect to a Person any trustee, agent or representative (if any) for an issue of Senior Indebtedness of such Person. "RESTRICTED PAYMENT" with respect to any Person means: (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition or Indebtedness Incurred pursuant to clause (2) of paragraph (b) of the covenant described under "--Certain Covenants-- Limitation on Indebtedness" and not subsequently transferred to a Person other than the Company or its Restricted Subsidiaries); or (4) the making of any Investment (other than a Permitted Investment) in any Person. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted 131 Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. "SECURED INDEBTEDNESS" means any Indebtedness of the Company secured by a Lien. "SELLER PREFERRED STOCK" means the 6% preferred stock issued to H.J. Heinz Company on the Issue Date. "SENIOR INDEBTEDNESS" with respect to a Person means, without duplication: (1) Bank Indebtedness; (2) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and (3) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person to the extent post-filing interest is allowed in such proceeding) and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of clauses (1), (2) and (3), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes or the Subsidiary Guarantees, as the case may be; PROVIDED, HOWEVER, that Senior Indebtedness shall not include: (1) any obligation of such Person to any Subsidiary (other than Credit Agreement Intercompany Indebtedness); (2) any liability for Federal, state, local or other taxes owed or owing by such Person; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person; or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indentures; PROVIDED, HOWEVER, that such Indebtedness shall be deemed not to have been Incurred in violation of the Indentures for purposes of this clause (5) if (x) the holders of such Indebtedness or their representative or the Company shall have furnished to the Trustee an opinion of recognized independent legal counsel, unqualified in all material respects, addressed to the Trustee (which legal counsel may, as to matters of fact, rely upon an Officers' Certificate) to the effect that the Incurrence of such Indebtedness does not violate the provisions of the Indentures or (y) such Indebtedness consists of Bank Indebtedness, and the holders of such Indebtedness or their agent or representative (1) had no actual knowledge at the time of the Incurrence that the Incurrence of such Indebtedness violated the Indentures and (2) shall have received an Officers' Certificate to the effect that the Incurrence of such Indebtedness does not violate the provisions of the Indentures. "SENIOR SUBORDINATED INDEBTEDNESS" means with respect to a Person, the Notes (in the case of the Company), a Subsidiary Guarantee (in the case of a Subsidiary Guarantor) and any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank PARI PASSU with the Notes or such Subsidiary Guarantee, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person. 132 "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "S&P" means Standard & Poor's Rating Group (or any successor to the rating agency business thereof). "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "SUBORDINATED OBLIGATION" means with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Subsidiary Guarantee of such Person as the case may be, pursuant to a written agreement to that effect. "SUBSIDIARY" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "SUBSIDIARY GUARANTOR" means any Subsidiary that provides a Guarantee under the Credit Agreement (other than certain special purpose vehicles used to lend cash to guarantors of the Credit Facility.) "SUBSIDIARY GUARANTEE" means a Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Notes pursuant to a Guarantee Agreement. "TEMPORARY CASH INVESTMENTS" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; and 133 (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's. "TOTAL ASSETS" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "TRANSACTIONS" means the transactions contemplated by the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal International S.A. and any financings related thereto. "UNRESTRICTED SUBSIDIARY" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the covenant described under "--Certain Covenants--Limitation on Restricted Payments". The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Certain Covenants--Limitation on Indebtedness" and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. DOLLAR EQUIVALENT" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in THE WALL STREET JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. Except as described under "--Certain Covenants--Limitation on Indebtedness", whenever it is necessary to determine whether the Company has complied with any covenant in the Indentures or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "VOTING STOCK" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries. 134 DESCRIPTION OF NEW CREDIT FACILITIES The New Credit Facilities are provided by a syndicate of banks and other financial institutions led by The Bank of Nova Scotia, as administrative agent, letter of credit issuer, co-lead arranger and co-book manager, and Credit Suisse First Boston, New York branch as syndication agent, co-lead arranger and co-book manager. We and one of our subsidiaries are the borrowers under the New Credit Facilities. The New Credit Facilities provide senior secured financing of up to $267.0 million, consisting of the $75.0 million term loan A facility with a maturity of six years, the $75.0 million term loan B facility with a maturity of seven years, the $87.0 million TLC facility with a maturity of seven years and a $30.0 million revolving credit facility. The revolving credit facility commitment will terminate six years from the date of the closing of the New Credit Facilities. The term loan A facility, the term loan B facility, the TLC facility and the revolving credit facility initially bear interest (subject to performance based stepdowns applicable to the term loan A facility and the revolving credit facility) at a rate equal to LIBOR plus (a) in the case of the term loan A facility and the revolving credit facility, 3.25% or, at our option, the alternate base rate (as defined in the New Credit Facilities) plus 2.25% or (b) in the case of the term loan B facility and the TLC facility, 4.00% or, at our option, the alternate base rate plus 3.00%. In addition to paying interest on outstanding principal under the New Credit Facilities, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder at a rate equal to 0.50% per annum. The New Credit Facilities are subject to a mandatory prepayment with, in general - 100% of the proceeds of asset sales - 75% of our excess cash flow (as defined in the New Credit Facilities) and - 50% of the proceeds of equity offerings. We may voluntarily repay outstanding loans under the New Credit Facilities without penalty. The obligations under the New Credit Facilities and the related documents are secured by a first priority lien upon substantially all of the real and personal property, and a pledge of substantially all of the common stock, of Weight Watchers International, Inc. and our subsidiaries, including certain significant foreign subsidiaries. Our obligations under the New Credit Facilities are guaranteed by substantially all of our subsidiaries, including certain significant foreign subsidiaries to the extent guarantees would not result in material increases in taxes or liabilities to us. The term loan A facility, the term loan B facility and the TLC facility will amortize each year in equal quarterly amounts in the following approximate aggregate principal amounts for each year set forth below:
TERM TERM LOAN A LOAN B TLC YEAR FACILITY FACILITY FACILITY - ---- -------- -------- -------- (DOLLARS IN MILLIONS) 1............................................... $ 9.38 $ 0.56 $ 0.65 2............................................... 12.50 0.75 0.87 3............................................... 12.50 0.75 0.87 4............................................... 12.50 0.75 0.87 5............................................... 12.50 0.75 0.87 6............................................... 15.62 0.75 0.87 7............................................... -- 70.69 82.00 ------- ------- ------ Total........................................... $ 75.00 $ 75.00 $87.00 ======= ======= ======
135 Principal amounts outstanding under the revolving credit facility will be due and payable in full at maturity, six years from the date of the closing of the New Credit Facilities. The New Credit Facilities contain a number of covenants that, among other things, restrict our ability to: - dispose of assets, - incur additional indebtedness, - incur guarantee obligations, - repay other indebtedness, - make certain restricted payments and dividends, - create liens on assets, - make investments, loans or advances, - make certain acquisitions, - engage in mergers or consolidations, - make capital expenditures, - enter into sale and leaseback transactions, or - engage in certain transactions with affiliates and otherwise restrict corporate activities. In addition, under the New Credit Facilities, we are required to comply with specified financial ratios and tests, including minimum fixed charge coverage and interest coverage ratios and maximum leverage ratios. The New Credit Facilities also contain certain customary events of default. 136 CERTAIN U.S. FEDERAL TAX CONSIDERATIONS TAX CONSIDERATIONS OF THE EXCHANGE OFFER The following summarizes some U.S. federal income tax considerations of the exchange offer. The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial decisions as of the date of this prospectus. The exchange of old notes for exchange notes will not constitute a recognition event for U.S. federal income tax purposes. Consequently, no gain or loss will be recognized by holders upon receipt of the exchange notes. For purposes of determining gain or loss upon the subsequent sale or exchange of exchange notes, a holder's basis in exchange notes will be the same as the holder's basis in the old notes exchanged. Holders will be considered to have held the exchange notes from the time of their original acquisition of the old notes. PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER FOREIGN, STATE OR LOCAL TAXING JURISDICTION. TAX CONSIDERATIONS OF THE OWNERSHIP OF NOTES The following summary describes the material U.S. federal income tax consequences of the ownership of notes as of the date of this prospectus. It deals only with notes held as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, tax-exempt entities, life insurance companies, persons holding notes as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, holders of notes whose "functional currency" is not the U.S. dollar, controlled foreign corporations, passive foreign investment companies, foreign personal holding companies and corporations that accumulate earnings to avoid U.S. federal income taxes. Furthermore, the summary is based upon the current provisions of the Internal Revenue Code of 1986, as amended (the "Code") and regulations, rulings and judicial decisions pertaining to the Code. We can not assure you that a change in the law will not alter significantly the tax considerations that we describe in this summary. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO YOU OF THE OWNERSHIP OF THE NOTES, AS WELL AS THE CONSEQUENCES TO YOU ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. As used in this section, a "U.S. person" means; - a citizen or resident of the United States; - a corporation or partnership created or organized in or under the laws of the United States or any political subdivision of the United States; - an estate the income of which is subject to U.S. federal income taxation regardless of its source or - a trust that is subject to the supervision of a court within the United States and the control of one or more U.S. persons as described in section 7701(a)(30) of the Code or that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A "non-U.S. person" means a person that is not a U.S. person. U.S. PERSONS PAYMENTS OF INTEREST It is anticipated that the notes will not be issued with more than a DE MINIMIS amount of original issue discount for U.S. federal income tax purposes. In this case, interest on a note will generally be taxable to a U.S. person as ordinary income at the time it is paid or accrued in accordance with the U.S. person's method of accounting for tax purposes. 137 In the case of notes denominated in euros, U.S. persons on the cash method of accounting are required to include in income the U.S. dollar value of the amount received, based on the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. No exchange gain or loss is recognized with respect to the receipt of such payment. U.S. persons on the accrual method of accounting may determine the amount of income recognized with respect to an interest payment in euros in accordance with either of two methods. Under the first method, the U.S. person will be required to include in income for each taxable year the U.S. dollar value of the interest that has accrued during the taxable year, determined by translating the interest at the average rate of exchange for the period or periods during which the interest accrued. Under the second method, the U.S. person may elect to translate interest income at a spot rate on the last day of the accrual period (or last day of the taxable year in the case of an accrual period that straddles the U.S. person's taxable year) or on the date the interest payment is received if the date is within five business days of the end of the accrual period. Upon receipt of an interest payment on the note, a U.S. person will recognize ordinary income or loss in an amount equal to the difference between the U.S. dollar value of the payment of euros (determined by translating the euros received at the "spot rate" for the euros on the date received) and the U.S. dollar value of the interest income that the U.S. person has previously included in income with respect to the payment. SALE, EXCHANGE AND RETIREMENT OF NOTES A U.S. person's tax basis in a note will, in general, be the U.S. person's cost (in the case of notes denominated in euros, the U.S. dollar value of the euros paid for the note determined at the time of purchase). Upon the sale, exchange, retirement or other disposition of a note, a U.S. person will recognize gain or loss equal to the difference between the U.S. dollar value of the amount realized determined at the time of the sale, exchange, retirement or other disposition (less any accrued qualified stated interest, which will be taxable interest) and the adjusted tax basis of the note. The gain or loss will generally be capital gain or loss. However, in the case of notes denominated in euros, the gain or loss on the sale, exchange, retirement or other disposition of the euro notes will be ordinary income or loss to the extent attributable to the movement in exchange rates between the time of purchase and the time of disposition of the notes. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. EXCHANGE GAIN OR LOSS WITH RESPECT TO EUROS A U.S. person's tax basis in euros received as interest on notes denominated in euros, or received on the sale, exchange, retirement or other disposition of notes denominated in euros will be the U.S. dollar value of the payment at the spot rate at the time the U.S. person receives the euros. Any gain or loss recognized by a U.S. person on a sale, exchange, retirement, or other disposition of euros will be ordinary income or loss and will not be treated as interest income or expense, except to the extent set forth in Treasury regulations or administrative pronouncements of the Internal Revenue Service. NON-U.S. PERSONS U.S. FEDERAL WITHHOLDING TAX The 30% U.S. federal withholding tax will not apply to any payment of principal or interest on a note to a non-U.S. person provided that: - the non-U.S. person does not actually (or constructively) own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of the Code and the U.S. Treasury regulations; - the non-U.S. person is not a controlled foreign corporation that is related to us through stock ownership; 138 - the non-U.S. person is not a bank whose receipt of interest on the notes is described in section 881(c)(3)(A) of the Code; and - (a) the non-U.S. person provides its name and address on an Internal Revenue Service Form W-8 or W-8BEN (or successor from), and certifies, under penalty of perjury, that the non-U.S. person is not a U.S. person or (b) a financial institution holds the notes on a non-U.S. person's behalf and certifies, under penalty of perjury, that it has received an Internal Revenue Service Form W-8 or W-8BEN (or successor form) from the beneficial owner and provides us with a copy. If the non-U.S. person cannot satisfy the requirements described above, payments of interest will be subject to the 30% U.S. federal withholding tax, unless the non-U.S. person provides us with a properly executed (1) Internal Revenue Service Form 1001 or W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of a tax treaty or (2) Internal Revenue Service Form 4224 or W-8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with the non-U.S. person's conduct of a trade or business in the United States. The 30% U.S. federal withholding tax will not apply to any gain that a non-U.S. person realizes on the sale, exchange, retirement or other disposition of the note. U.S. FEDERAL ESTATE TAX The estate of an individual non-U.S. person will not be subject to U.S. federal estate tax on a note beneficially owned by the individual at the time of his death, provided that (1) such individual did not own 10% or more of the total combined voting power of all classes of our voting stock (within the meaning of the Code and the U.S. Treasury regulations) and (2) interest on the note would not have been, if received at the time of the individual's death, effectively connected with his conduct of a trade or business in the United States. U.S. FEDERAL INCOME TAX If a non-U.S. person is engaged in a trade or business in the United States and interest on the notes is effectively connected with the conduct of that trade or business, the non-U.S. person will be subject to U.S. federal income tax on that interest on a net income basis (although exempt from the 30% withholding tax) in the same manner as if the non-U.S. person were a U.S. person. In addition, if the non-U.S. person is a foreign corporation, it may be subject to a branch profit tax equal to 30% (or lower applicable treaty rate) of its effectively connected earnings and profits for the taxable year (within the meaning of the Code), subject to adjustments. For this purpose, interest on the notes will be included in earnings and profits. Any gain realized on the disposition of a note generally will not be subject to U.S. federal income tax unless (1) that gain is effectively connected with the conduct by the non-U.S. person of a trade or business in the United States or (2) the non-U.S. person is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met. INFORMATION REPORTING AND BACKUP WITHHOLDING In general, information reporting requirements will apply to some payments of principal or interest paid on the notes and to the proceeds of sale of the notes made to U.S. persons other than some exempt recipients (such as corporations). A 31% backup withholding tax will apply to payments of principal or interest paid on the notes if the U.S. person fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. 139 In general, a non-U.S. person will not be subject to backup withholding and information reporting with respect to payments that we make provided that we have received from the non-U.S. person the statement described above under "--U.S. Federal Withholding Tax." In addition, a non-U.S. person will generally not be subject to backup withholding or information reporting with respect to the proceeds of the sale of a note within the United States or conducted through some U.S.-related financial intermediaries, provided that the payor receives the statement described above under "--U.S. Federal Income Tax" or the non-U.S. person otherwise established an exemption. U.S. Treasury regulations were recently issued that generally modify the information reporting and backup withholding rules applicable to some payments made after December 31, 2000. In general, the new U.S. Treasury regulations would not significantly alter the present rules discussed above, except in some special situations. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS. 140 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the date on which the exchange offer is consummated, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2000, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of these methods of resale, at prevailing market prices at the time of resale, at prices related to prevailing market prices or at negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any resale of exchange notes and any commissions or concessions received by any persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the date on which the exchange offer is consummated, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. We have agreed to pay all expenses relating to the exchange offer, including the expenses of one counsel for the holders of old notes, other than commissions and concessions of any broker-dealers and will indemnify the holders of old notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 141 LUXEMBOURG LISTING INFORMATION (1) The listing of the old euro notes on the Luxembourg Stock Exchange became effective on November 5, 1999. Application has also been made to list the exchange notes on the Luxembourg Stock Exchange. Our certificate of incorporation and a legal notice relating to the issue of the notes were deposited prior to listing with the Chief Registrar of the District Court of Luxembourg (GREFFIER EN CHEF DU TRIBUNAL D'ARRONDISSEMENT DE ET A LUXEMBOURG) where copies may be obtained on request. Notice of any optional redemption, change of control or any change in the rate of interest payable on the euro notes will be published in a Luxembourg newspaper of general circulation. The Luxembourg Stock Exchange will be informed and a notice will be published in a Luxembourg newspaper in the event of any accrual of additional interest (no later than the commencement of the accrual). In connection with the exchange offer, (a) notice was given to the Luxembourg Stock Exchange and published in a Luxembourg newspaper announcing the beginning of the registered exchange offer and, following completion of the offer, the results of the offer will be published, (b) we appointed Banque Generale de Luxembourg S.A. as the Luxembourg exchange agent, through which all relevant documents with respect to the registered exchange offer will be made available, and (c) Banque Generale de Luxembourg S.A. will be able to perform all agency functions to be performed by any exchange agent, including providing a letter of transmittal and other relevant documents to holders, and accepting these documents on our behalf. The exchange notes will be accepted for clearance through DTC and notice will be given to the Luxembourg Stock Exchange and published in a Luxembourg newspaper announcing the relevant CUSIP numbers and International Securities Identification Numbers (ISIN). In addition, copies of this prospectus are available at the Luxembourg Stock Exchange where copies may be obtained on request. (2) Throughout the term of the notes, copies of our certificate of incorporation, the indentures (incorporating forms of the global notes) and the registration rights agreement may be inspected and our most recent quarterly and annual financial statements may be obtained free of charge at the office of Banque Generale de Luxembourg S.A., the paying agent in Luxembourg. (3) The indentures have been approved and notes will be issued pursuant to authority granted by our board of directors on September 21, 1999. (4) Except as disclosed in this prospectus, there has been no material adverse change in our consolidated financial position since July 24, 1999. No interim financial information is available since July 24, 1999. Non-consolidated financial statements for Weight Watchers International, Inc. are not publicly available. (5) Except as disclosed in this prospectus, we are not involved in, and we have no knowledge of a threat of, any litigation, administrative proceedings or arbitration which is or may be material in the context of the issue or exchange of notes. (6) The dollar exchange notes have been accepted for clearance through DTC with CUSIP and ISIN numbers as follows: The dollar exchange note has a CUSIP number of 948628AB8 and an ISIN number of US948628AB82. The euro exchange notes have been accepted for clearance through DTC with CUSIP and ISIN numbers as follows: The euro exchange note has a CUSIP number of 948628AD4 and an ISIN number of US948628AD49. (7) We have made all reasonable inquiries, and confirm that this prospectus contains all information with regard to us and the notes which is material in the context of the exchange of the notes, that the information contained in this prospectus is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed herein are honestly held and there are no other facts, the omission of which would make this prospectus materially misleading. We accept responsibility for the information contained in this prospectus. 142 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act of 1933 with respect to the exchange notes. This prospectus, which is a part of that registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the exchange notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have included copies of these documents as exhibits to our registration statement. We are not currently subject to the information requirements of the Securities Exchange Act of 1934. As a result of this offering, we will become subject to the information requirements of the Exchange Act. Accordingly, we will file reports and other information with the SEC unless and until we obtain an exemption from the requirement to do so. Our registration statement and other SEC filings can be inspected and copied at the Public Reference Section of the SEC located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional public reference facilities maintained by the SEC located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. You may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. Copies of these materials can be obtained from the Public Reference Section of the SEC at prescribed rates. The materials may also be accessed electronically by means of the SEC's home page on the Internet at http://www.sec.gov. For so long as any exchange notes remain outstanding, we will furnish to you the information that would be required to be furnished by us under Section 13 of the Exchange Act. LEGAL MATTERS Certain legal matters with respect to the exchange notes are being passed upon on our behalf by Simpson Thacher & Bartlett, New York, New York. EXPERTS The Weight Watchers Classroom Business' financial statements as of April 24, 1999 and April 25, 1998 and for each of the three years in the period ended April 24, 1999 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in auditing and accounting. 143 INDEX TO COMBINED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE -------- Report of Independent Accountants........................... F-2 Combined Financial Statements: Combined Balance Sheets as of April 25, 1998, April 24, 1999 and July 24, 1999 (unaudited)............................. F-3 Combined Statements of Income, Comprehensive Income and Parent Company's Investment for the fiscal years ended April 26, 1997, April 25, 1998, and April 24, 1999 and the three months ended July 25, 1998 and July 24, 1999 (unaudited)............................. F-4 Combined Statements of Cash Flows for the fiscal years ended April 26, 1997, April 25, 1998, and April 24, 1999 and the three months ended July 25, 1998 and July 24, 1999 (unaudited)............................. F-5 Notes to Combined Financial Statements...................... F-6 Report of Independent Accountants on Financial Statement Schedule.................................................. S-1 Schedule II -- Valuation and Qualifying Accounts............ S-2
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors H.J. Heinz Company: In our opinion, the accompanying combined balance sheets and the related combined statements of income, comprehensive income and parent company's investment and of cash flows present fairly, in all material respects, the financial position of the Weight Watchers Classroom Business (the Company) at April 25, 1998 and April 24, 1999 and the results of their operations and their cash flows for each of the three years in the period ended April 24, 1999, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. [LOGO] Melville, New York July 23, 1999, except for Note 18, for which the date is September 29, 1999 F-2 WEIGHT WATCHERS CLASSROOM BUSINESS COMBINED BALANCE SHEETS (IN THOUSANDS)
APRIL 25, APRIL 24, JULY 24, 1998 1999 1999 --------- --------- ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 11,829 $ 19,515 $ 26,034 Receivables (net of allowances: 1998--$876; 1999--$994)... 11,647 11,403 7,435 Notes receivable, current................................. 2,246 3,266 2,025 Inventories............................................... 7,652 7,580 7,697 Prepaid expenses and other current assets................. 6,139 7,598 7,123 Deferred income taxes..................................... 5,741 3,609 3,338 Due from related parties.................................. 137,478 133,783 1,184 -------- -------- -------- Total current assets.................................. 182,732 186,754 54,836 Property and equipment, net................................. 10,006 8,725 8,065 Notes and other receivables, noncurrent..................... 12,767 19,165 19,167 Goodwill (net of accumulated amortization: 1998--$44,722; 1999--$49,888)............................................ 148,942 143,714 142,348 Trademarks and other intangible assets (net of accumulated amortization: 1998--$21,576; 1999--$18,982)............... 8,355 8,113 7,935 Deferred income taxes....................................... 7,130 4,133 3,797 Other noncurrent assets..................................... 867 830 799 -------- -------- -------- Total assets.......................................... $370,799 $371,434 $236,947 ======== ======== ======== LIABILITIES AND PARENT COMPANY'S INVESTMENT Current liabilities: Short-term borrowings and line of credit.................. $ 7,097 $ 6,690 $ 387 Short-term borrowings due to related party................ 16,250 16,250 16,250 Portion of long-term debt due within one year............. 1,081 1,164 6,549 Accounts payable.......................................... 8,375 12,710 7,169 Salaries and wages........................................ 8,569 11,285 7,716 Accrued restructuring costs............................... 11,645 7,690 6,956 Foreign currency contract payable......................... 34,995 7,169 -- Other accrued liabilities................................. 18,681 18,220 15,822 Income taxes.............................................. 3,117 7,962 9,715 Deferred revenue.......................................... 7,130 6,414 2,254 -------- -------- -------- Total current liabilities............................. 116,940 95,554 72,818 Long-term debt.............................................. 16,664 15,500 9,651 Deferred income taxes....................................... 5,252 8,228 8,207 Other....................................................... 2,854 3,204 2,296 -------- -------- -------- Total long-term debt and other liabilities............ 24,770 26,932 20,154 Parent company's investment................................. 229,089 248,948 143,975 -------- -------- -------- Total liabilities and Parent company's investment... $370,799 $371,434 $236,947 ======== ======== ========
The accompanying notes are an integral part of the combined financial statements. F-3 WEIGHT WATCHERS CLASSROOM BUSINESS COMBINED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND PARENT COMPANY'S INVESTMENT (IN THOUSANDS)
FISCAL YEAR ENDED THREE MONTHS ENDED --------------------------------- -------------------- APRIL 26, APRIL 25, APRIL 24, JULY 25, JULY 24, 1997 1998 1999 1998 1999 --------- --------- --------- -------- --------- (UNAUDITED) Revenue: Fees--company operated classes: Domestic............................. $105,185 $113,247 $145,336 $ 34,721 $ 32,863 Foreign.............................. 134,774 146,595 161,038 38,171 40,104 Franchise commissions: Domestic............................. 10,720 14,403 19,135 4,066 5,052 Foreign.............................. 3,223 3,521 4,060 927 1,148 Products and aids...................... 30,012 46,088 56,551 12,558 15,460 Food sales............................. 34,736 1,465 762 125 249 Royalties--licensing, publications and other................................ 14,089 8,994 17,960 1,725 1,539 -------- -------- -------- -------- --------- Total revenue...................... 332,739 334,313 404,842 92,293 96,415 Cost of revenues: Products and aids...................... 17,004 23,089 26,631 6,069 5,518 Food................................... 13,787 678 427 68 135 Classroom operating expenses........... 199,649 136,194 151,867 34,979 37,056 -------- -------- -------- -------- --------- Total costs........................ 230,440 159,961 178,925 41,116 42,709 -------- -------- -------- -------- --------- Gross profit....................... 102,299 174,352 225,917 51,177 53,706 Marketing expenses....................... 88,843 86,295 93,090 16,699 13,010 Selling, general and administrative...... 45,515 44,067 48,912 11,990 12,394 Interest income.......................... 12,806 13,452 16,027 3,479 3,124 Interest expense......................... 13,849 8,576 8,859 2,015 1,454 Other expenses, net...................... 3,346 4,281 5,248 1,304 1,165 -------- -------- -------- -------- --------- Income (loss) before income taxes and minority interest...................... (36,448) 44,585 85,835 22,648 28,807 Provision for (benefit from) income taxes.................................. (12,997) 19,969 36,360 9,642 11,338 -------- -------- -------- -------- --------- Income (loss) before minority interest... (23,451) 24,616 49,475 13,006 17,469 Minority interest........................ 638 845 1,493 298 374 -------- -------- -------- -------- --------- Net income (loss)........................ (24,089) 23,771 47,982 12,708 17,095 Other comprehensive income (loss): Foreign currency translation adjustments.......................... (14,598) (10,212) 19,660 1,868 9,946 -------- -------- -------- -------- --------- Comprehensive income (loss).............. $(38,687) $ 13,559 $ 67,642 $ 14,576 $ 27,041 ======== ======== ======== ======== ========= Parent company's investment, beginning of year................................... $231,748 $188,936 $229,089 229,089 248,948 Net income (loss)........................ (24,089) 23,771 47,982 12,708 17,095 Dividends paid........................... (9,260) (8,470) (10,368) (2,884) (1,923) Other comprehensive income (loss)........ (14,598) (10,212) 19,660 1,868 9,946 Net parent (settlements) advances........ 5,135 35,064 (37,415) 24,328 (130,091) -------- -------- -------- -------- --------- Parent company's investment, end of year*.................................. $188,936 $229,089 $248,948 $265,109 $ 143,975 ======== ======== ======== ======== =========
* Includes cumulative translation adjustment of $(22,212), $(32,424) and $(12,764) at April 26, 1997, April 25, 1998 and April 24, 1999, respectively. The accompanying notes are an integral part of the combined financial statements. F-4 WEIGHT WATCHERS CLASSROOM BUSINESS COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FISCAL YEAR ENDED THREE MONTHS ENDED --------------------------------- -------------------- APRIL 26, APRIL 25, APRIL 24, JULY 25, JULY 24, 1997 1998 1999 1998 1999 --------- --------- --------- -------- --------- (UNAUDITED) Operating activities: Net income (loss)....................... $(24,089) $ 23,771 $ 47,982 $ 12,708 $ 17,095 Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: Depreciation and amortization......... 14,189 8,775 9,586 2,249 2,301 Deferred tax provision (benefit)...... (13,385) 15,563 9,279 1,729 382 Provision for restructuring........... 51,694 -- -- -- -- Other items, net...................... (368) 415 38 (130) (129) Increase (decrease) in cash due to changes in: Receivables......................... 1,784 (2,491) (7,159) 4,042 5,198 Inventories......................... (1,290) (2,825) 74 285 (121) Prepaid expenses and other current assets............................ (997) 1,913 (1,454) (1,173) 472 Due from related parties............ (6,336) (8,610) 3,693 2,956 132,601 Accounts payable.................... (6,132) (2,383) 4,346 (4,249) (5,539) Accrued liabilities and deferred revenue........................... (1,305) 1,458 (10,792) (43,902) (7,468) Income taxes........................ (4,109) 647 3,571 2,797 2,021 -------- -------- -------- -------- --------- Cash provided by (used for) operating activities............ 9,656 36,233 59,164 (22,688) 146,813 -------- -------- -------- -------- --------- Investing activities: Capital expenditures.................... (2,709) (3,389) (2,474) (309) (301) Acquisitions, net of cash acquired...... (681) (1,412) -- -- -- Proceeds from divestitures.............. 2,700 -- -- -- -- Other items, net........................ (726) (121) (565) 126 81 -------- -------- -------- -------- --------- Cash used for investing activities...................... (1,416) (4,922) (3,039) (183) (220) -------- -------- -------- -------- --------- Financing activities: Net increase (decrease) in short-term borrowings............................ 1,176 (2,041) (407) (690) (6,766) Payments on long-term debt.............. (1,337) (1,368) (1,081) -- -- Payment of dividends.................... (9,260) (8,470) (10,368) (2,884) (1,923) Net parent (settlements) advances....... 5,067 (18,630) (37,076) 24,514 (130,345) -------- -------- -------- -------- --------- Cash provided by (used for) financing activities............ (4,354) (30,509) (48,932) 20,940 (139,034) -------- -------- -------- -------- --------- Effect of exchange rate changes on cash and cash equivalents.................... 61 (44) 493 1,854 (1,040) Net increase (decrease) in cash and cash equivalents............................. 3,947 758 7,686 (77) 6,519 Cash and cash equivalents, beginning of year.................................... 7,124 11,071 11,829 11,829 19,515 -------- -------- -------- -------- --------- Cash and cash equivalents, end of year.... $ 11,071 $ 11,829 $ 19,515 $ 11,752 $ 26,034 ======== ======== ======== ======== =========
The accompanying notes are an integral part of the combined financial statements. F-5 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (IN THOUSANDS) 1. DESCRIPTION OF BUSINESS: The accompanying combined financial statements include the accounts of Weight Watchers International, Inc. and its subsidiaries (WWI), and are combined with the accounts of Fortuity Australia (Weight Watchers Australia) and Fortuity New Zealand Ltd. (Weight Watchers New Zealand). WWI, Fortuity Australia and Fortuity New Zealand Ltd. are collectively referred to as ("the Company"). All intercompany accounts and transactions between WWI, Fortuity Australia and Fortuity New Zealand Ltd. have been eliminated. The Company is an affiliate of H.J. Heinz Company (Heinz). The Company operates and franchises territories offering weight loss and control programs through the operation of classroom type meetings to the general public in the United States, Canada, Mexico, the United Kingdom, Continental Europe, Australia, New Zealand, South Africa, Latin America and South America. All of the assets are directly or indirectly wholly-owned by Heinz except for (i) classroom operations in Finland and Sweden which are each owned 90% and (ii) classroom operations in Australia and New Zealand which are owned 90% and 75%, respectively. INTERIM FINANCIAL INFORMATION: The combined financial statements of WWI as of July 24, 1999 and for the three months ended July 25, 1998 and July 24, 1999 are unaudited. Adjustments, consisting of normal recurring adjustments and adjustments necessary to present the combined results of operations and financial position of WWI have been made which in the opinion of management are necessary for a fair presentation. Results of operations for the three months ended July 25, 1998 and July 24, 1999 are not necessarily indicative of the results that may be expected for the full year or for any future period. 2. SIGNIFICANT ACCOUNTING POLICIES: FISCAL YEAR: The Company operates on a 52- or 53-week fiscal year. However, certain foreign subsidiaries have earlier closing dates to facilitate timely reporting. Fiscal years for the financial statements included herein ended April 26, 1997, April 25, 1998, and April 24, 1999. USE OF ESTIMATES: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. TRANSLATION OF FOREIGN CURRENCIES: For all foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of parent company's investment. Gains and losses from foreign currency transactions are included in net income for the period. F-6 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) CASH EQUIVALENTS: Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less. INVENTORIES: Inventories, which consist of finished goods, are stated at the lower of cost or market on a first-in, first-out basis, net of reserves. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost. For financial reporting purposes, depreciation is provided on the straight-line method over the estimated useful lives of the assets (5-10 years for equipment and the duration of the lease for leasehold improvements). Accelerated depreciation methods are generally used for income tax purposes. Expenditures for new facilities and improvements that substantially extend the useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. INTANGIBLES: Goodwill, trademarks and other intangibles arising from acquisitions, including the acquisition of previously franchised areas, are being amortized on a straight-line basis over periods ranging from three to 40 years. The Company regularly reviews the individual components of the balances by evaluating the future cash flows of the businesses to determine the recoverability of the assets and recognizes, on a current basis, any diminution in value. PARENT COMPANY'S INVESTMENT: Heinz's investment includes the stockholders equity of the Company. The equity of the Company represents the original investment by Heinz plus accumulated comprehensive net income, less dividends, certain intercompany accounts and current domestic federal income taxes payable. REVENUE RECOGNITION: The Company earns revenue by conducting meetings and selling products and aids in its own facilities, by collecting commissions from franchisees operating under the Weight Watchers name and by collecting royalties related to licensing agreements. Revenue is recognized when services are rendered, products are sold and commissions and royalties are earned. Deferred revenue consisting of prepaid lecture income is amortized into income over the period earned. MARKETING EXPENSES: Marketing expenses are comprised of promotion and advertising costs. Promotion costs mainly relate to registration fee discounts. Advertising costs include national and local direct mail, television F-7 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) and print advertisements. Advertising costs are generally expensed in the year in which the advertising first takes place. INCOME TAXES: Domestic affiliates of the Company join with Heinz in the filing of a consolidated U.S. income tax return and certain state income tax returns. Tax expense for all years includes the effect of certain tax sharing agreements the Company has with Heinz regarding these consolidated filings. Specifically, Heinz charges (refunds) the Company at the U.S. statutory rate for its actual domestic taxable income (loss), less any foreign tax credits it generates. In addition, Heinz charges the Company for its share of consolidated state tax expense based on the Company's share of the state allocation factors. In foreign jurisdictions, subsidiaries file separate tax returns in their respective country. Deferred income taxes result primarily from temporary differences between financial and tax reporting. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company has not provided for possible U.S. taxes on the undistributed earnings of foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the unrecognized deferred tax liability for temporary differences related to these earnings is not practicable. FOREIGN CURRENCY CONTRACTS: The Company enters into forward and swap contracts to hedge transactions denominated in foreign currencies in order to reduce the currency risk associated with fluctuating exchange rates. Such contracts are used primarily to hedge certain intercompany cash flows and for payments arising from certain foreign currency denominated obligations. Realized and unrealized gains and losses from instruments qualifying as hedges are deferred as part of the cost basis of the underlying transaction. COMPREHENSIVE INCOME: The Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting comprehensive income in the financial statements. Comprehensive income includes all changes in parent company's investment during a period except those resulting from investments by or distribution to shareholders. For the Company, comprehensive income for all periods presented consisted of net income (loss) and foreign currency translation adjustments. BUSINESS SEGMENT INFORMATION: The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes new standards for reporting and disclosures relating to segments and geographic areas. RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments. F-8 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of Statement 133," which postponed the adoption date of SFAS No. 133. As such, the Company is not required to adopt the statement until fiscal 2002. The Company does not believe this standard will have a material impact on its financial statements. In April 1998, the American Institute of CPAS issued a Statement of Position (SOP) entitled "Reporting on the Costs of Start-Up Activities." This SOP requires that costs incurred to open a new facility, introduce a new product, commence a new operation or other similar activities be expensed as incurred. The Company will adopt this SOP in fiscal 2000 and does not believe it will have a material impact on its financial statements. 3. ACQUISITIONS: The Company has acquired, from time to time, franchise territorial rights previously owned by franchisees. In addition, in January 1998, Heinz Watties acquired a 75% interest in the Weight Watchers operation in New Zealand which is included in the combined financial statements of the Company. The excess of the purchase price over the fair value of the net tangible assets acquired has been recorded as goodwill by the Company. 4. RESTRUCTURING CHARGES: During the fourth quarter of fiscal 1997, the Company announced a reorganization and restructuring program. The reorganization plan was designed to strengthen the Company's classroom business and improve profitability and global growth. Charges related to the restructuring, were recognized to reflect the exit from the Personal Cuisine Food Option in United States Company-owned locations, the relocation of classes from certain fixed retail outlets to traveling locations, and other initiatives involving the exit of certain under-performing businesses and product lines. Restructuring and related costs recorded in fiscal 1997 totaled $51,694 pretax. Pretax charges of $49,694 were classified as classroom operating expenses and $2,000 as selling, general and F-9 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 4. RESTRUCTURING CHARGES: (CONTINUED) administrative expenses. The major components of the fiscal 1997 charges and the remaining accrual balances as of April 26, 1997, April 25, 1998, and April 24, 1999 were as follows:
EMPLOYEE EXIT COSTS TERMINATION ------------------------- NON-CASH AND ACCRUED ASSET SEVERANCE EXIT IMPLEMENTATION WRITE-DOWNS COSTS COSTS COSTS TOTAL ----------- ----------- -------- -------------- -------- Initial charge--1997.................. $ 27,402 $ 4,723 $19,569 -- $ 51,694 Amounts utilized--1997................ (27,402) (339) (46) -- (27,787) -------- ------- ------- ----- -------- Accrued restructuring costs--April 26, 1997................................ -- 4,384 19,523 -- 23,907 Implementation costs--1998............ -- -- -- $ 999 999 Amounts utilized--1998................ -- (3,709) (8,553) (999) (13,261) -------- ------- ------- ----- -------- Accrued restructuring costs--April 25, 1998................................ -- 675 10,970 -- 11,645 Implementation costs--1999............ -- -- -- 32 32 Amounts utilized--1999................ -- (186) (3,769) (32) (3,987) -------- ------- ------- ----- -------- Accrued restructuring costs--April 24, 1999................................ -- $ 489 $ 7,201 -- $ 7,690 ======== ======= ======= ===== ========
Asset write-downs consisted primarily of fixed assets and other long-term asset impairments that were recorded as a direct result of the Company's decision to exit businesses or facilities ($16,931). Such assets were written down based on management's estimate of fair value. Write-downs were also recognized for estimated losses from disposals of classroom inventories, packaging materials and other assets related to product line rationalizations and process changes as a direct result of the Company's decision to exit businesses or facilities ($10,471). Severance costs include charges related to both voluntary terminations and involuntary terminations. As part of the voluntary termination agreements, enhanced retirement benefits were offered to the affected employees. These amounts were included in the Employee Termination and Severance Costs component of the restructuring charge. Exit costs consist primarily of contract and lease termination costs associated with the Company's decision to exit the activities described above. The remaining accrued exit costs will be utilized through fiscal year 2002. The results for fiscal 1998 included costs related to the implementation of the restructuring program of $999 pretax, which were classified as selling, general and administrative expenses. These costs consist primarily of center relocation and training. The results for fiscal 1999 included costs related to the implementation of the restructuring program of $32 pretax, which was classified as selling, general and administrative expenses. These costs consist primarily of relocation and training costs. F-10 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 5. PROPERTY AND EQUIPMENT: The classification of property and equipment at April 25, 1998 and April 24, 1999 was:
1998 1999 -------- -------- Leasehold improvements.................................... $21,059 $18,343 Equipment................................................. 38,966 36,559 ------- ------- 60,025 54,902 Less: accumulated depreciation and amortization........... 50,210 46,428 ------- ------- 9,815 8,474 Construction in progress.................................. 191 251 ------- ------- $10,006 $ 8,725 ======= =======
6. RELATED PARTY TRANSACTIONS: Certain of Heinz' general and administrative expenses are allocated to the Company. Total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. Total costs charged to the Company for these services were $1,757, $1,769 and $2,156 for fiscal years 1997, 1998 and 1999, respectively, based on a percent of revenue which Heinz believes represents a reasonable allocation of Heinz's corporate overhead. These costs are recorded in other expense, net in the accompanying combined statement of income. Heinz charges the Company for its share of group health insurance costs for eligible company employees based upon location specific costs, overall insurance costs and loss experience incurred during a calendar year. In addition, various other insurance coverages are also provided to the Company through Heinz' consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on the Company's loss experience. Amounts charged to the Company for insurance costs were $4,976, $4,154 and $4,339 for fiscal years 1997, 1998 and 1999, respectively, and are recorded in selling, general and administrative expenses in the accompanying combined statement of income. Total costs charged to the Company by Heinz for other miscellaneous services were $956, $579 and $520 for fiscal years 1997, 1998 and 1999, respectively, and are recorded in selling, general and administrative expenses in the accompanying combined statement of income. The Company maintains a cash management arrangement with Heinz. On a daily basis, all available domestic cash is deposited and disbursements are withdrawn. Heinz charges (credits) the company interest on the average daily balance maintained in the resulting intercompany account. Net interest (income) expense related to this arrangement, included in the combined statement of income was $758, ($965) and $(3,081) in fiscal years 1997, 1998 and 1999, respectively. The interest rate charged to or received by the Company was 7.5% in fiscal 1997 and 6.25% in fiscal year 1998 and 1999. Substantially all of the due from related parties of $137,478 and $133,783 at April 25, 1998 and April 24, 1999, respectively, represents a note receivable from an affiliate of Heinz which was repaid in June 1999. Interest income reflected in the combined statement of income related to this note F-11 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 6. RELATED PARTY TRANSACTIONS: (CONTINUED) receivable was $8,215, $9,637 and $10,062, in 1997, 1998 and 1999, respectively. The interest rate charged by the Company was LIBOR plus 25 basis points in all three years. Short-term borrowings due to an affiliate of Heinz of $16,250 at April 25, 1998 and April 24, 1999 represent a note payable due April 28, 1999. Interest expense of $1,306, $1,016 and $1,013 is recorded in the combined statement of income related to the note payable in fiscal years 1997, 1998 and 1999, respectively. The interest rate on the note payable was 7.5% in 1997 and 6.25% in 1998 and 1999. Long-term borrowings of $52,500 due to a related party were converted to capital during fiscal year 1998. Interest expense of $5,487 and $961 is recorded in the combined statement of income in fiscal years 1997 and 1998, respectively related to these long-term borrowings. The interest rate on the long-term borrowings was 10.5%. Pension costs and postretirement costs are also charged to the Company based upon eligible employees participating in the Plans. See note 14. 7. LONG-TERM STOCK INCENTIVE PLAN: Certain qualifying employees of the Company are granted options to purchase Heinz common stock under Heinz's stock option plans (the Plan). Options under the Plan have been granted at not less than market prices on the date of grant. Stock options granted have a maximum term of ten years. Vesting occurs from one to three years after the date of grant. Beginning in fiscal 1998, in order to place greater emphasis on creation of shareholder value, performance--accelerated stock options were granted to certain key executives. These options vest eight years after the grant date, subject to acceleration if predetermined share price goals are achieved. Heinz accounts for stock based compensation arrangements under the provisions of APB opinion No. 25, and is not required to recognize compensation expense. Accordingly, the Company does not recognize compensation expense. If compensation expense had been recognized by Heinz for options granted in 1999, 1998 and 1997 under the provisions of Statement of Financial Accounting Standards No. 123, the Company's net income would have been reduced by their allocable portion of such expense resulting in the pro forma amounts shown below.
1997 1998 1999 -------- -------- -------- Net Income: As reported................................... $(24,089) $23,771 $47,982 Pro forma..................................... (24,152) 23,485 47,621
F-12 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 7. LONG-TERM STOCK INCENTIVE PLAN: (CONTINUED) The weighted average fair value of options granted was $7.20 per share in 1997, $11.21 per share in 1998 and $10.98 per share in 1999. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weight-average assumptions:
1997 1998 1999 -------- -------- -------- Dividend yield............................................ 3.3% 2.5% 2.5% Volatility................................................ 17.5 20.0 22.0 Risk-free interest rate................................... 6.0 6.2 5.1 Expected term (years)..................................... 5.5 5.5 5.0
8. INCOME TAXES: The following table summarizes the provision (benefit) for U.S. federal, state and foreign taxes on income:
1997 1998 1999 -------- -------- -------- Current: U.S. federal.................................. $ (4,932) $(4,798) $11,997 State......................................... (291) 346 3,247 Foreign....................................... 5,611 8,858 11,837 -------- ------- ------- 388 4,406 27,081 -------- ------- ------- Deferred: U.S. federal.................................. (14,616) 10,493 6,368 State......................................... (1,136) 502 312 Foreign....................................... 2,367 4,568 2,599 -------- ------- ------- (13,385) 15,563 9,279 -------- ------- ------- Total tax provision (benefit)................... $(12,997) $19,969 $36,360 ======== ======= =======
The components of income (loss) before income taxes consist of the following:
1997 1998 1999 -------- -------- -------- Domestic........................................ $(59,310) $13,143 $48,199 Foreign......................................... 22,224 30,597 36,143 -------- ------- ------- $(37,086) $43,740 $84,342 ======== ======= =======
F-13 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 8. INCOME TAXES: (CONTINUED) The difference between the U.S. federal statutory tax rate and the Company's consolidated effective tax rate are as follows:
1997 1998 1999 -------- -------- -------- U.S. federal statutory tax rate........................... 35.0% 35.0% 35.0% Tax on income of foreign subsidiaries..................... (2.5) 7.3 1.6 State income taxes (net of federal benefit)............... 3.6 1.7 2.9 Goodwill amortization..................................... (2.4) 1.8 .9 Earnings repatriation..................................... (1.3) 1.6 1.7 Effect of foreign loss.................................... 2.1 (1.1) .5 Other..................................................... .5 (.6) .5 ---- ---- ---- Effective tax rate........................................ 35.0% 45.7% 43.1% ==== ==== ====
The deferred tax (assets) and deferred tax liabilities recorded on the balance sheet as of April 25, 1998 and April 24, 1999 are as follows:
1998 1999 -------- -------- Depreciation/amortization............................... $ 8,258 $ 9,620 Deferred income......................................... 969 3,767 Other................................................... 2,720 2,063 -------- -------- 11,947 15,450 -------- -------- Provision for estimated expenses........................ (5,649) (3,288) Operating loss carryforwards............................ (7,473) (4,430) Benefit plans........................................... (5,416) (5,878) Other................................................... (1,371) (1,998) -------- -------- (19,909) (15,594) -------- -------- Valuation allowance..................................... 343 630 -------- -------- Net deferred tax liabilities (assets)................... $ (7,619) $ 486 ======== ========
At the end of 1999, net operating loss carryforwards totaled $9.2 million. Of that amount, $1.6 million expire through 2004; the other $7.6 million do not expire. The U.S. income tax returns of Heinz have been audited by the Internal Revenue Service for all years through 1994. Undistributed earnings of foreign subsidiaries considered to be reinvested permanently amounted to $22.2 million at April 24, 1999. The 1999 net change in valuation allowance for deferred tax assets is due to additional net operating losses in certain foreign entities. F-14 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 9. CASH FLOW INFORMATION: Net cash paid during the year for:
1997 1998 1999 -------- -------- -------- Interest expense................................. $3,572 $ 5,818 $2,748 ====== ======= ====== Income taxes..................................... $2,033 $ 4,706 $5,380 ====== ======= ====== Noncash investing and financing activities: Conversion of related party debt to capital........ -- $52,500 -- ====== ======= ======
10. THIRD PARTY DEBT:
1998 1999 -------- -------- Lines of credit............................................. $7,097 $6,690 ====== ======
The weighted-average interest rate on short-term debt during 1998 and at April 25, 1998 was 5.2% and 4.9%, respectively. Total lines of credit had a weighted-average interest rate during 1999 and at April 24, 1999 of 5.3% and 4.7%, respectively. The Company has available for borrowing, under various lines of credit, amounts approximating $5,000 and $7,300 at April 25, 1998 and April 24, 1999, respectively.
MATURITY RANGE OF (FISCAL INTEREST YEAR) 1998 1999 -------- --------- -------- -------- Long-term: Promissory notes.................................... 7-10% 2001-2005 $17,745 $16,664 Less portion due within one year...................... (1,081) (1,164) ------- ------- $16,664 $15,500 ======= =======
The Promissory notes represent amounts due various former franchisees as a result of the Company acquiring certain Weight Watchers franchised operations. The amount of long-term debt that matures in each of the four years succeeding 2000 is: $6,603 in 2001, $6,094 in 2002, $1,206 in 2003, and $266 in 2004. The Company has guaranteed Term Loans and Letters of Credit of franchisees that originated as part of a franchisees' acquisition of certain Weight Watchers franchised areas. The balance of the guaranteed indebtedness totals $8,413 at April 25, 1998 and $24,463 at April 24, 1999. 11. MANAGEMENT INCENTIVE PLANS: The Company's management incentive plan covers officers and other key employees. Participants may elect to be paid on a current or deferred basis. The aggregate amount of all awards may not exceed certain limits in any year. Compensation under the management incentive plan was F-15 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 11. MANAGEMENT INCENTIVE PLANS: (CONTINUED) approximately $615 in 1997, $3,127 in 1998 and $3,387 in 1999. In addition, the Company maintains various other bonus plans that cover other employees of the Company. 12. COMMITMENTS AND CONTINGENCIES: Because of the nature of its activities, the Company is, at times, subject to pending and threatened legal actions which arise out of the normal course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of all such matters will not have a material effect on the combined financial statements. LEASE COMMITMENTS: Operating lease rentals for office and classroom facilities amounted to $19,603 in 1997, $12,275 in 1998, and $11,001 in 1999. At April 24, 1999, future lease commitments under noncancelable operating leases, were as follows: 2000-$14,621, 2001--$11,339, 2002--$7,117, 2003--$3,182, 2004--$2,151 and thereafter--$4,916. REPURCHASE AGREEMENTS: The Company is a party to repurchase agreements related to the 10% minority interests in the classroom operations in Finland and Sweden. Pursuant to the agreements, the Company may elect or be required to repurchase the minority shareholders' interests in these operations. If the Company repurchases the minority interests within five years of the original sale, the repurchase price is based on the original sales price times the increase in the consumer price index since the date of the sale. If the Company repurchases the minority interest after five years from the original sale, the repurchase price is based on a multiple of the average operating income during the last three years. 13. FRANCHISE PROFIT SHARING FUND: The Company's franchise agreement with its North American franchisees provides for an annual franchise profit sharing distribution based upon specified formulas. The formulas include revenue from Canadian food royalties, Weight Watchers Gourmet Food royalties and book royalties. Profit sharing expense under this arrangement for the years ended April 26, 1997, April 25, 1998 and April 24, 1999 was $878, $683 and $757, respectively. Unpaid amounts are included in accrued liabilities as of such dates. 14. EMPLOYEE RETIREMENT BENEFITS: Domestic employees participate in certain defined benefit pension plans, a defined contribution 401(k) savings plan and, for employees affected by certain IRS limits, a section 415 Excess Plan, all of which are sponsored by Heinz. The Company also provides post-retirement health care and life insurance benefits for employees who meet the eligibility requirements of the Heinz plans. Retirees share in the cost of these benefits based on age and years of service. Heinz allocates costs for the defined benefit plans to the Company as determined by actuarial valuations. Company contributions to the savings plan amount to a qualified age-related contribution and a matching of employee's contributions up to a specified amount. F-16 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 14. EMPLOYEE RETIREMENT BENEFITS: (CONTINUED) The following amounts were included in the Company's result of operations:
1997 1998 1999 -------- -------- -------- Defined Benefit Pension Plans....................... $ 553 $ 726 $1,456 Defined Benefit Postretirement Medical.............. $ 468 $ 261 $ 577 Savings Plan........................................ $1,836 $1,668 $2,170
In addition, foreign employees participate in certain Company sponsored pension plans and such charges, which are included in the results of operations, are not material. 15. SEGMENT AND GEOGRAPHIC DATA: The Company is engaged principally in one line of business--weight control--which represents more than 90% of consolidated sales. The following table presents information about the Company by geographic area. There were no material amounts of sales or transfers among geographic areas and no material amounts of United States export sales.
EXTERNAL SALES LONG-LIVED ASSETS ------------------------------ ------------------------------ 1997 1998 1999 1997 1998 1999 -------- -------- -------- -------- -------- -------- United States.......................... $179,149 $163,255 $212,399 $160,454 $155,360 $149,054 United Kingdom......................... 71,233 85,218 87,471 1,130 1,272 1,198 Continental Europe..................... 60,171 60,356 70,992 2,027 2,463 2,422 Australia and New Zealand.............. 22,186 25,484 33,980 8,270 8,208 7,878 -------- -------- -------- -------- -------- -------- $332,739 $334,313 $404,842 $171,881 $167,303 $160,552 ======== ======== ======== ======== ======== ========
16. FINANCIAL INSTRUMENTS: FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's significant financial instruments include cash and cash equivalents, short-and-long-term debt, current and noncurrent notes receivable, currency exchange agreements and guarantees. In evaluating the fair value of significant financial instruments, the Company generally uses quoted market prices of the same or similar instruments or calculates an estimated fair value on a discounted cash flow basis using the rates available for instruments with the same remaining maturities. As of April 25, 1998 and April 24, 1999, the fair value of financial instruments held by the Company approximated the recorded value. FOREIGN CURRENCY CONTRACTS: As of April 25, 1998, the Company held currency swap contracts to purchase certain foreign currencies totaling $98,525. The Company also held separate swap contracts to sell foreign currencies of $133,520. As of April 24, 1999, the Company held contracts to purchase certain foreign currencies totaling approximately $127,246. The Company also held separate contracts to sell foreign currencies of F-17 WEIGHT WATCHERS CLASSROOM BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 16. FINANCIAL INSTRUMENTS: (CONTINUED) approximately $134,415. These contracts were settled in June 1999. Net unrealized gains and losses associated with the Company's foreign currency contracts as of April 25, 1998 and April 24, 1999 were not material. 17. GUARANTOR SUBSIDIARIES The Company's payment obligations under the Senior Subordinated Notes will be fully and unconditionally guaranteed on a joint and several basis by the following wholly-owned subsidiaries: 58 WW Food Corp.; Waist Watchers, Inc.; Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.; Weight Watchers UK Holdings Ltd.; Weight Watchers International Holdings Ltd.; Weight Watchers (U.K.) Limited; Weight Watchers (Exercise) Ltd.; Weight Watchers (Accessories & Publications) Ltd.; Weight Watchers (Food Products) Limited; Weight Watchers New Zealand Limited; Weight Watchers International Pty Limited; Fortuity Pty Ltd; and Gutbusters Pty Ltd. (collectively, the "Guarantor Subsidiaries"). The obligations of each Guarantor Subsidiary under its guarantee of the Notes are subordinated to such subsidiary's obligations under its guarantee of the new senior credit facility. Presented below is condensed consolidating financial information for Weight Watchers International, Inc. ("Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries (primarily companies incorporated in European countries other than The United Kingdom). In the Company's opinion, separate financial statements and other disclosures concerning each of the Guarantor Subsidiaries would not provide additional information that is material to investors. Therefore, the Guarantor Subsidiaries are combined in the presentation below. Investments in subsidiaries are accounted for by the Parent Company on the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Parent Company's investments in subsidiaries' accounts. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. F-18 SUPPLEMENTAL COMBINING BALANCE SHEET AS OF APRIL 25, 1998 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ ---------- ASSETS Current assets: Cash and cash equivalents................ $ (104) $ 5,800 $ 6,133 $ 11,829 Receivables.............................. 5,249 5,697 701 11,647 Notes receivable, current................ 2,246 2,246 Inventories.............................. 5,825 1,827 7,652 Prepaid expenses and other current assets................................. 836 3,442 1,861 6,139 Deferred income taxes.................... 1,013 (2,402) 7,130 5,741 Due from related parties................. 857 325 136,296 137,478 Intercompany receivables (payables) 142,082 (142,847) 765 -- -- -------- -------- -------- -------- Total current assets................. 152,179 (124,160) 154,713 182,732 Investment in subsidiaries................. 98,723 $ (98,723) -- Property and equipment, net................ 2,247 6,214 1,545 10,006 Notes and other receivables, noncurrent.... 3,897 8,870 12,767 Goodwill................................... 28,675 119,367 900 148,942 Trademarks and other intangible assets..... 2,436 5,906 13 8,355 Deferred income taxes...................... 2 7,128 7,130 Other noncurrent assets.................... 199 487 181 867 -------- -------- -------- --------- -------- Total assets......................... $288,358 $ 14,942 $166,222 $ (98,723) $370,799 ======== ======== ======== ========= ======== LIABILITIES AND PARENT COMPANY'S INVESTMENT Current liabilities: Short-term borrowings and line of credit................................. $ 1 $ 7,096 $ 7,097 Short-term borrowings due to related party.................................. $ 16,402 (152) 16,250 Portion of long-term debt due within one year................................... 1,081 1,081 Accounts payable......................... 919 4,242 3,214 8,375 Salaries and wages....................... 3,008 5,564 (3) 8,569 Accrued restructuring costs.............. 297 11,540 (192) 11,645 Foreign currency contract payable........ 34,995 34,995 Other accrued liabilities................ 4,085 6,856 7,740 18,681 Income taxes............................. 25,225 (22,517) 409 3,117 Deferred revenue......................... 7,130 7,130 -------- -------- -------- -------- Total current liabilities............ 51,017 12,664 53,259 -- 116,940 Long term debt............................. 16,664 16,664 Deferred income taxes...................... (4,822) 9,687 387 5,252 Other...................................... 2,161 693 -- 2,854 -------- -------- -------- -------- Total long-term debt and other liabilities........................ 11,842 11,848 1,080 24,770 Parent company's investments............... 225,499 (9,570) 111,883 $ (98,723) 229,089 -------- -------- -------- --------- -------- Total liabilities and Parent company's investment............................... $288,358 $ 14,942 $166,222 $ (98,723) $370,799 ======== ======== ======== ========= ========
The accompanying notes are an integral part of the combined financial statements. F-19 SUPPLEMENTAL COMBINING BALANCE SHEET AS OF APRIL 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ ---------- ASSETS Current assets: Cash and cash equivalents.................. $ (74) $ 12,376 $ 7,213 $ 19,515 Receivables................................ 5,134 4,364 1,905 11,403 Notes receivable, current.................. 3,266 3,266 Inventories................................ 5,775 1,805 7,580 Prepaid expenses and other current assets................................... 856 4,588 2,154 7,598 Deferred income taxes...................... 1,758 (1,949) 3,800 3,609 Due from related parties................... 1,034 242 132,507 133,783 Intercompany receivables (payables)........ 103,588 (107,373) 3,785 -- -------- -------- -------- -------- Total current assets..................... 115,562 (81,977) 153,169 -- 186,754 Investment in subsidiaries................... 117,732 $(117,732) Property and equipment, net.................. 1,981 5,231 1,513 8,725 Notes and other receivables, noncurrent...... 10,295 8,870 19,165 Goodwill..................................... 27,254 115,568 892 143,714 Trademarks and other intangible assets....... 2,355 5,745 13 8,113 Deferred income taxes........................ (22) 4,155 4,133 Other noncurrent assets...................... 138 510 182 830 -------- -------- -------- --------- -------- Total assets............................. $275,295 $ 49,232 $164,639 $(117,732) $371,434 ======== ======== ======== ========= ======== LIABILITIES AND PARENT COMPANY'S INVESTMENT Current liabilities: Short-term borrowings and line of credit... $ 6,690 $ 6,690 Short-term borrowings due to related party.................................... $ 16,638 $ (388) 16,250 Portion of long-term debt due within one year..................................... 1,164 1,164 Accounts payable........................... 631 9,192 2,887 12,710 Salaries and wages......................... 4,189 7,096 11,285 Accrued restructuring costs................ 8 7,929 (247) 7,690 Foreign currency contract payable.......... 7,169 7,169 Other accrued liabilities.................. 3,959 6,659 7,602 18,220 Income taxes............................... (11,168) 17,118 2,012 7,962 Deferred revenue........................... 5,680 734 6,414 -------- -------- -------- -------- Total current liabilities................ 15,421 53,286 26,847 -- 95,554 Long-term debt............................... 15,500 15,500 Deferred income taxes........................ (2,366) 10,338 256 8,228 Other........................................ 2,659 545 3,204 -------- -------- -------- -------- Total long-term debt and other liabilities............................ 13,134 12,997 801 -- 26,932 Parent company's investment.................. 246,740 (17,051) 136,991 (117,732) 248,948 -------- -------- -------- --------- -------- Total liabilities and Parent company's investment........................... $275,295 $ 49,232 $164,639 $(117,732) $371,434 ======== ======== ======== ========= ========
The accompanying notes are in integral part of the combined financial statements. F-20 SUPPLEMENTAL COMBINING BALANCE SHEET AS OF JULY 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- ASSETS Current Assets: Cash and cash equivalents............ $ 101 $ 15,334 $ 10,599 $ 26,034 Receivables.......................... 3,559 3,061 815 7,435 Notes receivable, current............ 2,025 2,025 Inventories.......................... 6,214 1,483 7,697 Prepaid expenses and other current assets............................. 725 4,704 1,694 7,123 Deferred income taxes................ 1,603 (1,616) 3,351 3,338 Due from related parties............. 982 1 201 1,184 Intercompany receivables/(payables)............. 110,324 (111,722) 1,398 -- -------- -------- -------- -------- -------- Total current assets........... 119,319 (84,024) 19,541 -- 54,836 Investment in subsidiaries............. (5,735) $ 5,735 -- Property and equipment, net............ 1,923 4,738 1,404 8,065 Notes and other receivables, noncurrent........................... 10,250 8,917 19,167 Goodwill............................... 26,899 114,578 871 142,348 Trademarks and other intangible assets............................... 2,275 5,649 11 7,935 Deferred income taxes.................. 3,797 3,797 Other noncurrent assets................ 147 470 182 799 -------- -------- -------- -------- -------- Total Assets................... $155,078 $ 45,208 $ 30,926 $ 5,735 $236,947 ======== ======== ======== ======== ======== LIABILITIES AND PARENT COMPANY'S INVESTMENT Current liabilities: Short-term borrowings and line of credit............................. $ 387 $ 387 Short-term borrowings due to related party.............................. $ 16,385 $ (135) 16,250 Portion of long-term debt due within one year........................... 6,549 6,549 Accounts payable..................... 5,453 1,716 7,169 Salaries and wages................... 504 7,212 7,716 Accrued restructuring costs.......... 7,203 (247) 6,956 Other accrued liabilities............ 4,646 4,779 6,397 15,822 Income taxes......................... (18,345) 26,446 1,614 9,715 Deferred revenue..................... 1,451 803 2,254 -------- -------- -------- -------- -------- Total current liabilities........ 9,739 52,409 10,670 -- 72,818 Long-term debt......................... 9,651 9,651 Deferred income taxes.................. (4,786) 12,800 193 8,207 Other.................................. (2) 2,044 254 2,296 -------- -------- -------- -------- -------- Total long-term debt and other liabilities.................. 4,863 14,844 447 -- 20,154 Parent company's investment............ 140,476 (22,045) 19,809 $ 5,735 143,975 -------- -------- -------- -------- -------- Total liabilities and Parent company's investment......... $155,078 $ 45,208 $ 30,926 $ 5,735 $236,947 ======== ======== ======== ======== ========
The accompanying notes are an integral part of the combined financial statements. F-21 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED APRIL 26, 1997 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ ---------- Revenue: Fees--company operated classes: Domestic......................... $105,185 $105,185 Foreign.......................... 83,727 $ 51,047 134,774 Franchise commissions: Domestic......................... $ 10,720 10,720 Foreign.......................... 3,223 3,223 Products and aids.................. 338 21,300 8,374 30,012 Food sales......................... 33,985 751 34,736 Royalties--licensing, publications and others....................... 12,060 2,029 14,089 -------- -------- -------- -------- -------- Total revenue.................. 26,341 246,226 60,172 -- $332,739 Cost of revenues: Products and aids.................. 1,375 11,226 4,403 17,004 Food............................... 13,381 406 13,787 Classroom operating expenses....... 2,869 167,911 28,869 199,649 -------- -------- -------- -------- -------- Total costs.................... 4,244 192,518 33,678 -- 230,440 -------- -------- -------- -------- -------- Gross profit................... 22,097 53,708 26,494 102,299 Marketing expenses................... 7,832 64,032 16,979 88,843 Selling, general and administrative..................... 21,658 17,722 6,135 45,515 Interest income...................... 696 3,156 8,954 12,806 Interest expense..................... 9,964 1,973 1,912 13,849 Other expenses, net.................. 1,943 762 641 3,346 Equity in income (loss) of consolidated subsidiaries.......... (17,912) $ 17,912 -- Franchise commission (income) loss... (5,817) 4,853 964 -- -------- -------- -------- -------- -------- Income (loss) before income taxes and minority interest.................. (30,699) (32,478) 8,817 17,912 (36,448) Provision for (benefit from) income taxes.............................. (1,581) (15,042) 3,626 (12,997) -------- -------- -------- -------- -------- Income (loss) before minority interest........................... (29,118) (17,436) 5,191 17,912 (23,451) Minority interest.................... 404 234 638 -------- -------- -------- -------- -------- Net income (loss).................... $(29,118) $(17,840) $ 4,957 $ 17,912 $(24,089) ======== ======== ======== ======== ========
The accompanying notes are an integral part of the combined financial statements. F-22 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED APRIL 25, 1998 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- Revenue: Fees--company operated classes: Domestic.................................. $113,247 $113,247 Foreign................................... 97,589 $49,006 146,595 Franchise commissions: Domestic.................................. $14,403 14,403 Foreign................................... 3,521 3,521 Products and aids........................... 1,547 33,840 10,701 46,088 Food sales.................................. 815 650 1,465 Royalties--licensing, publications and other..................................... 8,994 8,994 ------- -------- ------- -------- -------- Total revenue........................... 28,465 245,491 60,357 -- 334,313 Cost of revenues: Products and aids........................... 1,389 16,851 4,849 23,089 Food........................................ 336 342 678 Classroom operating expenses................ 1,875 104,961 29,358 136,194 ------- -------- ------- -------- -------- Total costs............................. 3,264 122,148 34,549 -- 159,961 ------- -------- ------- -------- -------- Gross profit............................ 25,201 123,343 25,808 174,352 Marketing expenses............................ 7,916 65,061 13,318 86,295 Selling, general and administrative........... 21,154 16,578 6,335 44,067 Interest income............................... 831 2,297 10,641 $ (317) 13,452 Interest expense.............................. 4,033 607 4,253 (317) 8,576 Other expenses, net........................... 1,695 2,494 92 4,281 Equity in income of consolidated subsidiaries................................ 16,837 (16,837) -- Franchise commission (income) loss............ (8,038) 5,984 2,054 -- ------- -------- ------- -------- -------- Income before income taxes and minority interest.................................... 16,109 34,916 10,397 (16,837) 44,585 Provision for (benefit from) income taxes..... (1,979) 16,355 5,593 19,969 ------- -------- ------- -------- -------- Income before minority interest............... 18,088 18,561 4,804 (16,837) 24,616 Minority interest............................. 629 216 845 ------- -------- ------- -------- -------- Net income.................................... $18,088 $ 17,932 $ 4,588 $(16,837) $ 23,771 ======= ======== ======= ======== ========
The accompanying notes are an integral part of the combined financial statements. F-23 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED APRIL 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- Revenue: Fees--company operated classes: Domestic............................ $145,336 $145,336 Foreign............................. 103,532 $57,506 161,038 Franchise commissions: Domestic............................ $19,135 19,135 Foreign............................. 4,060 4,060 Products and aids..................... 1,133 42,694 12,724 56,551 Food sales............................ 762 762 Royalties--licensing, publications and other............................... 17,960 17,960 ------- -------- ------- -------- -------- Total revenue................... 42,288 291,562 70,992 -- 404,842 Cost of revenues: Products and aids..................... 1,425 19,850 5,356 26,631 Food.................................. 427 427 Classroom operating expenses.......... 2,260 115,245 34,362 151,867 ------- -------- ------- -------- -------- Total costs..................... 3,685 135,095 40,145 -- 178,925 ------- -------- ------- -------- -------- Gross profit.................... 38,603 156,467 30,847 225,917 Marketing expenses...................... 8,815 69,741 14,534 93,090 Selling, general and administrative..... 23,715 17,794 7,403 48,912 Interest income......................... 615 5,096 10,938 $ (622) 16,027 Interest expense........................ 3,537 357 5,587 (622) 8,859 Other expenses, net..................... 1,930 3,361 (43) 5,248 Equity in income of consolidated subsidiaries.......................... 37,310 (37,310) -- Franchise commission (income) loss...... (8,697) 6,072 2,625 -- ------- -------- ------- -------- -------- Income before income taxes and minority interest.............................. 47,228 64,238 11,679 (37,310) 85,835 Provision for (benefit from) income taxes................................. 7,944 22,860 5,556 36,360 ------- -------- ------- -------- -------- Income before minority interest......... 39,284 41,378 6,123 (37,310) 49,475 Minority interest....................... 1,108 385 1,493 ------- -------- ------- -------- -------- Net income.............................. $39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982 ======= ======== ======= ======== ========
The accompanying notes are an integral part of the combined financial statements. F-24 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE FISCAL QUARTER ENDED JULY 25, 1998 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- Revenue: Fees--company operated classes: Domestic............................ $34,721 $34,721 Foreign............................. 25,325 $12,846 38,171 Franchise commissions: Domestics........................... $ 4,066 4,066 Foreign............................. 927 927 Products and aids..................... 210 9,497 2,851 12,558 Food sales............................ 125 125 Royalties--housing, publications and other................................. 1,725 1,725 ------- ------- ------- -------- ------- Total revenue................... 6,928 69,543 15,822 -- 92,293 Cost of revenues: Products and aids..................... 210 4,680 1,179 6,069 Food.................................. 68 68 Classroom operating expenses.......... 760 26,570 7,649 34,979 ------- ------- ------- -------- ------- Total costs..................... 970 31,250 8,896 -- 41,116 ------- ------- ------- -------- ------- Gross profit.................... 5,958 38,293 6,926 51,177 Marketing expense....................... 1,268 12,892 2,539 16,699 Selling, general and administrative..... 5,699 4,740 1,551 11,990 Interest Income......................... 205 699 2,575 3,479 Interest expense........................ 787 32 1,196 2,015 Other expenses, net..................... 674 668 (38) 1,304 Equity in income of consolidated subsidiaries.......................... 11,466 $(11,466) -- Franchise commission (income) loss...... (1,449) 1,060 389 -- ------- ------- ------- -------- ------- Income before income taxes and minority interest.............................. 10,650 19,600 3,864 (11,466) 22,648 Provision for (benefit from) income taxes................................. (214) 7,905 1,951 9,642 ------- ------- ------- -------- ------- Income before minority interest......... 10,864 11,695 1,913 (11,466) 13,006 Minority interest....................... 206 92 298 ------- ------- ------- -------- ------- Net income.............................. $10,864 $11,489 $ 1,821 $(11,466) $12,708 ======= ======= ======= ======== =======
The accompanying notes are an integral part of the combined financial statements. F-25 SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS FOR THE FISCAL QUARTER ENDED JULY 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- Revenue: Fees--company operated classes: Domestic.................................. $32,863 $ 32,863 Foreign................................... 26,734 $13,370 40,104 Franchise commissions: Domestic.................................. $ 5,052 5,052 Foreign................................... 1,148 1,148 Products and aids........................... 150 12,257 3,053 15,460 Food sales.................................. 249 249 Royalties--licensing, publications and other..................................... 1,539 1,539 ------- ------- ------- -------- -------- Total revenue........................... 7,889 71,854 16,672 -- 96,415 Cost of revenues: Products and aids........................... 80 4,356 1,082 5,518 Food........................................ 135 135 Classroom operating expenses................ 665 28,592 7,799 37,056 ------- ------- ------- -------- -------- Total costs............................. 745 32,948 9,016 -- 42,709 ------- ------- ------- -------- -------- Gross profit............................ 7,144 38,906 7,656 53,706 Marketing expenses............................ 1,591 8,852 2,567 13,010 Selling, general and administrative........... 5,418 4,952 2,024 12,394 Interest income............................... 617 781 1,726 3,124 Interest expense.............................. 721 10 723 1,454 Other expenses, net........................... 377 730 58 1,165 Equity in income of consolidated subsidiaries................................ 13,140 $(13,140) -- Franchise commission (income) loss............ (1,554) 996 558 -- ------- ------- ------- -------- -------- Income before income taxes and minority interest.................................... 14,348 24,147 3,452 (13,140) 28,807 Provision for (benefit from) income taxes..... (308) 10,993 653 11,338 ------- ------- ------- -------- -------- Income before minority interest............... 14,656 13,154 2,799 (13,140) 17,469 Minority interest............................. 257 117 374 ------- ------- ------- -------- -------- Net income.................................... $14,656 $12,897 $ 2,682 $(13,140) $ 17,095 ======= ======= ======= ======== ========
The accompanying notes are an integral part of the combined financial statements. F-26 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED APRIL 26, 1997 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED -------- ------------ ------------ ------------ -------- Operating activities: Net income (loss).................... $(29,118) $(17,840) $ 4,957 $ 17,912 $(24,089) Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: Depreciation and amortization...... 2,951 10,556 682 14,189 Deferred tax provision (benefit)... (6,498) (8,704) 1,817 (13,385) Provision for restructuring........ 51,694 51,694 Other items, net................... 700 (1,218) 150 (368) Increase (decrease) in cash due to changes in: Receivables...................... 1,087 (953) 1,650 1,784 Inventories...................... (1,744) 454 (1,290) Prepaid expenses and other current assets................. (891) (154) 48 (997) Due from related parties......... 15,288 (10,568) (11,056) (6,336) Accounts payable................. 756 (7,402) 514 (6,132) Accrued liabilities and deferred revenue........................ 345 (7,583) 5,933 (1,305) Income taxes..................... (5,830) 809 912 (4,109) -------- -------- -------- -------- -------- Cash provided by (used for) operating activities......... (21,210) 6,893 6,061 17,912 9,656 -------- -------- -------- -------- -------- Investing activities: Capital expenditures................. (300) (1,886) (523) (2,709) Acquisitions, net of cash acquired... (681) (681) Proceeds from divestitures........... 2,700 2,700 Other items, net..................... (509) (197) (20) (726) -------- -------- -------- -------- -------- Cash used for investing activities................... (809) (64) (543) -- (1,416) -------- -------- -------- -------- -------- Financing activities: Net increase in short-term borrowings......................... 442 734 1,176 Payments on long-term debt........... (1,337) (1,337) Payment of dividends................. (3,353) (10,365) (825) 5,283 (9,260) Net parent (settlements) advances.... 27,177 5,370 (4,326) (23,154) 5,067 -------- -------- -------- -------- -------- Cash provided by (used for) financing activities......... 22,487 (4,553) (4,417) (17,871) (4,354) -------- -------- -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents................. 53 (51) 100 (41) 61 Net increase in cash and cash equivalents..................... 521 2,225 1,201 3,947 Cash and cash equivalents, beginning of year................................. (965) 3,493 4,596 7,124 -------- -------- -------- -------- -------- Cash and cash equivalents, end of year................................. $ (444) $ 5,718 $ 5,797 $ -- $ 11,071 ======== ======== ======== ======== ========
The accompanying notes are an integral part of the combined financial statements. F-27 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED APRIL 25, 1998 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS COMBINED -------- ---------- ---------- ------------ ---------- Operating activities: Net income.................................. $ 18,088 $ 17,932 $ 4,588 $(16,837) $ 23,771 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization............. 2,390 5,764 621 8,775 Deferred tax provision.................... 1,628 10,463 3,472 15,563 Other items, net.......................... (120) 139 396 415 Increase (decrease) in cash due to changes in: Receivables............................. 446 (3,278) 341 (2,491) Inventories............................. (2,507) (318) (2,825) Prepaid expenses and other current assets................................ (298) 2,091 120 1,913 Due from related parties................ (5,092) 1,546 (5,064) (8,610) Accounts payable........................ (45) (3,157) 819 (2,383) Accrued liabilities and deferred revenue............................... (1,311) (3,977) 6,746 1,458 Income taxes............................ 12,315 (10,428) (1,240) 647 -------- -------- ------- -------- -------- Cash provided by operating activities.......................... 28,001 14,588 10,481 (16,837) 36,233 Investing activities: Capital expenditures........................ (170) (2,539) (680) (3,389) Acquisitions, net of cash acquired.......... (1,007) (405) (1,412) Other items, net............................ (627) 521 (15) (121) -------- -------- ------- -------- -------- Cash used for investing activities.... (797) (3,025) (1,100) -- (4,922) -------- -------- ------- -------- -------- Financing activities: Net decrease in short-term borrowings....... (1,250) (791) (2,041) Payments on long-term debt.................. 2,382 (3,750) (1,368) Payment of dividends........................ (5,949) (8,378) (1,145) 7,002 (8,470) Net parent (settlements) advances........... (21,818) (42) (6,373) 9,603 (18,630) -------- -------- ------- -------- -------- Cash used for financing activities.... (26,635) (12,170) (8,309) 16,605 (30,509) -------- -------- ------- -------- -------- Effect of exchange rate changes on cash and cash equivalents............................ (229) 689 (736) 232 (44) Net increase in cash and cash equivalents..... 340 82 336 758 Cash and cash equivalents, beginning of year........................................ (444) 5,718 5,797 11,071 -------- -------- ------- -------- -------- Cash and cash equivalents, end of year........ $ (104) $ 5,800 $ 6,133 $ -- $ 11,829 ======== ======== ======= ======== ========
The accompanying notes are an integral part of the combined financial statements. F-28 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED APRIL 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS COMBINED -------- ---------- ---------- ------------ -------- Operating activities: Net income................................. $ 39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization.............. 2,378 6,609 599 9,586 Deferred tax provision..................... 1,735 4,345 3,199 9,279 Other items, net........................... 153 (115) 38 Increase (decrease) in cash due to changes in: Receivables.............................. (7,303) 1,348 (1,204) (7,159) Inventories.............................. 52 22 74 Prepaid expenses and other current assets................................. (20) (1,141) (293) (1,454) Due from related parties................. 38,317 (35,394) 770 3,693 Accounts payable......................... (288) 4,961 (327) 4,346 Accrued liabilities and deferred revenue................................ 1,003 (4,022) (7,773) (10,792) Income taxes............................. (36,393) 38,362 1,602 3,571 -------- -------- ------- -------- -------- Cash provided by operating activities........................... 38,713 55,543 2,218 (37,310) 59,164 -------- -------- ------- -------- -------- Investing activities: Captial expenditures....................... (271) (1,612) (591) (2,474) Other items, net........................... (278) (286) (1) (565) -------- -------- ------- -------- -------- Cash used for investing activities..... (549) (1,898) (592) -- (3,039) -------- -------- ------- -------- -------- Financing activities: Net decrease in short term borrowings...... (1) (406) (407) Payments on long-term debt................. (1,081) (1,081) Payment of dividends....................... (5,435) (14,446) (3,670) 13,183 (10,368) Net parent (settlements) advances.......... (31,483) (32,903) 3,316 23,994 (37,076) -------- -------- ------- -------- -------- Cash used for financing activities..... (37,999) (47,350) (760) 37,177 (48,932) -------- -------- ------- -------- -------- Effect of exchange rate changes on cash and cash equivalents........................... (135) 281 214 133 493 Net increase in cash and cash equivalents.... 30 6,576 1,080 7,686 Cash and cash equivalents, beginning of year....................................... (104) 5,800 6,133 11,829 -------- -------- ------- -------- -------- Cash and cash equivalents, end of year....... $ (74) $ 12,376 $ 7,213 $ -- $ 19,515 ======== ======== ======= ======== ========
The accompanying notes are an integral part of the combined financial statements. F-29 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL QUARTER ENDED JULY 25, 1998 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS COMBINED -------- ---------- ---------- ------------ -------- Operating activities: Net income............................. $ 10,864 $ 11,489 $ 1,821 $(11,466) $ 12,708 Adjustments to reconcile net income to cash provided by (used for) operating activities: Depreciation and amortization........ 501 1,668 80 2,249 Deferred tax provision............... 591 273 865 1,729 Other items, net..................... (1) (240) 111 (130) Increase (decrease) in cash due to changes in: Receivables........................ 2,570 1,487 (15) 4,042 Inventories........................ -- 395 (110) 285 Prepaid expenses and other current assets........................... (351) (1,072) 250 (1,173) Due from related parties........... (5,698) 4,903 3,751 2,956 Accounts payable................... (686) (2,500) (1,063) (4,249) Accrued liabilities and deferred revenue.......................... 988 (8,222) (36,668) (43,902) Income taxes....................... (6,870) 8,656 1,011 2,797 -------- -------- -------- -------- -------- Cash provided by (used for) operating activities........... 1,908 16,837 (29,967) (11,466) (22,688) -------- -------- -------- -------- -------- Investing activities: Capital expenditures................... (44) (195) (70) (309) Other items, net....................... 54 66 6 126 -------- -------- -------- -------- -------- Cash provided by (used for) investing activities........... 10 (129) (64) -- (183) -------- -------- -------- -------- -------- Financing activities: Net decrease in short-term borrowings........................... (430) (1) (259) (690) Payment of dividends................... (2,884) (994) 994 (2,884) Net parent (settlements) advances...... (417) (17,384) 29,928 12,387 24,514 -------- -------- -------- -------- -------- Cash provided by (used for) financing activities........... (3,731) (17,385) 28,675 13,381 20,940 -------- -------- -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents................... 1,915 (340) 2,194 (1,915) 1,854 Net increase (decrease) in cash and cash equivalents....................... 102 (1,017) 838 -- (77) Cash and cash equivalents, beginning of year................................... (104) 5,800 6,133 -- 11,829 -------- -------- -------- -------- -------- Cash and cash equivalents, end of year... $ (2) $ 4,783 $ 6,971 $ -- $ 11,752 ======== ======== ======== ======== ========
The accompanying notes are an integral part of the combined financial statements. F-30 SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL QUARTER ENDED JULY 24, 1999 (IN THOUSANDS)
NON- PARENT GUARANTOR GUARANTOR COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS COMBINED --------- ---------- ---------- ------------ --------- Operating activities: Net income................................. $ 14,656 $ 12,897 $ 2,682 $ (13,140) $ 17,095 Adjustments to reconcile net income to cash provided by (used for) operating activities: Depreciation and amortization............ 515 1,656 130 2,301 Deferred tax provision (benefit)......... (2,287) 2,283 386 382 Other items, net......................... (1) 163 (291) (129) Increase (decrease) in cash due to changes in: Receivables............................ 2,861 1,294 1,043 5,198 Inventories............................ (443) 322 (121) Prepaid expenses and other current assets............................... 131 (119) 460 472 Due from related parties............... (6,684) 4,592 134,693 132,601 Accounts payable....................... (631) (3,737) (1,171) (5,539) Accrued liabilities and deferred revenue.............................. (3,259) (6,459) 2,250 (7,468) Income taxes........................... (7,177) 9,596 (398) 2,021 --------- -------- --------- --------- --------- Cash provided by (used for) operating activities......................... (1,876) 21,723 140,106 (13,140) 146,813 --------- -------- --------- --------- --------- Investing activities: Capital expenditures....................... (57) (244) (301) Other items, net........................... 26 53 2 81 --------- -------- --------- --------- --------- Cash provided by (used for) investing activities......................... (31) (191) 2 -- (220) --------- -------- --------- --------- --------- Financing activities: Net increase (decrease) in short-term borrowings............................... (464) 1 (6,303) (6,766) Payment of dividends....................... (1,922) (2) (4,224) 4,225 (1,923) Net parent (settlements) advances.......... 4,717 (17,731) (126,000) 8,669 (130,345) --------- -------- --------- --------- --------- Cash provided by (used for) financing activities......................... 2,331 (17,732) (136,527) 12,894 (139,034) --------- -------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents........................... (249) (842) (195) 246 (1,040) Net increase in cash and cash equivalents.... 175 2,958 3,386 6,519 Cash and cash equivalents, beginning of year....................................... (74) 12,376 7,213 19,515 --------- -------- --------- --------- --------- Cash and cash equivalents, end of year....... $ 101 $ 15,334 $ 10,599 $ -- $ 26,034 ========= ======== ========= ========= =========
The accompanying notes are an integral part of the combined financial statements. F-31 18. SUBSEQUENT EVENT: On September 29, 1999, the Company and its parent, Heinz, entered into a recapitalization and stock purchase agreement (the "Agreement") with an affiliate of Artal Luxembourg S.A. Pursuant to the Agreement the Company redeemed a portion of its common stock held by Heinz with cash and redeemable preferred stock (the "Redemption"). After the Redemption, Artal purchased 94% of the Company's remaining common stock from Heinz (the "Equity Purchase"). After the completion of the Redemption and the Equity Purchase, Artal owned 94% and Heinz owned 6% of the Company's common stock. Financing for the transactions was obtained through borrowings under senior secured bank credit facilities and the issuance of senior subordinated notes. F-32 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors H.J. Heinz Company; Our audits of the combined financial statements referred to in our report dated July 23, 1999, except for Note 18, for which the date is September 29, 1999, which is included in this Registration Statement on Form S-4 also included an audit of the financial statement schedule listed in Item 21(b) of this Form S-4. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements. [LOGO] Melville, New York July 23, 1999, except for Note 18, for which the date is September 29, 1999. S-1 WEIGHT WATCHERS INTERNATIONAL, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
COLUMN B COLUMN C COLUMN D COLUMN E -------- --------- -------- -------- COLUMN A ADDITIONS -------- --------- CHARGED BALANCE AT TO COSTS BALANCE AT BEGINNING AND END OF DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD ----------- ---------- --------- ------------- ---------- YEAR ENDED APRIL 24, 1999 Allowance for doubtful accounts............... $ 876 $ 118 $ 994 Inventory reserves............................ 3,961 3,910 $(6,435) 1,436 YEAR ENDED APRIL 25, 1998 Allowance for doubtful accounts............... $ 733 $ 143 $ 876 Inventory reserves............................ 472 4,505 $(1,016) 3,961 YEAR ENDED APRIL 26, 1997 Allowance for doubtful accounts............... $ 931 $ (198) $ 733 Inventory reserves............................ 1,571 $ 760 (1,859) 472
- ------------------------ (1) Primarily represents the utilization of established reserves, net of recoveries S-2 PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 TRUSTEE, REGISTRAR, PRINCIPAL PAYING AGENT AND EXCHANGE AGENT Norwest Bank Minnesota, National Association Norwest Center 6th Street and Marquette Avenue Minneapolis, Minnesota 55479 LEGAL ADVISORS To the company as to U.S. law To the initial purchasers as to U.S. law Simpson Thacher & Bartlett Cravath, Swaine & Moore 425 Lexington Avenue 825 Eight Avenue New York, New York 10017 New York, New York 10019
To the company as to Virginia law Hunton & Williams Riverfront Plaza 951 East Byrd Street Richmond, Virginia 23219 INDEPENDENT AUDITORS FOR THE COMPANY PricewaterhouseCoopers LLP 401 Broad Hollow Road Melville, New York 11747 EURO NOTE PAYING AGENT Citibank, N.A. 5 Carmalite Street London, England EC4Y OPA LISTING AGENT, LUXEMBOURG PAYING AGENT, TRANSFER AGENT AND LUXEMBOURG EXCHANGE AGENT Banque Generale de Luxembourg S.A. 50, avenue J.F. Kennedy L-2951 Luxembourg [LOGO] $150,000,000 [EURO]100,000,000 WEIGHT WATCHERS INTERNATIONAL, INC. Offer to Exchange all Outstanding 13% Senior Subordinated Notes due 2009 for 13% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933 Until , 2000, all dealers effecting transactions in the exchange notes, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our articles of incorporation provide for the indemnification of our directors and officers in a variety of circumstances, which may include indemnification for liabilities under the Securities Act of 1933. Under sections 13.1-697 and 13.1-702 of the Virginia Stock Corporation Act, a Virginia corporation generally is authorized to indemnify its directors and officers in civil and criminal actions if they acted in good faith and believed their conduct to be in the best interests of the corporation and, in the case of criminal actions, had no reasonable cause to believe that the conduct was unlawful. Our articles of incorporation require indemnification of directors and officers with respect to certain liabilities and expenses imposed upon them by reason of having been a director or officer, except in the case of willful misconduct or a knowing violation of criminal law. Weight Watchers also carries insurance on behalf of its directors, officers, employees or agents that may cover liabilities under the Securities Act of 1933. In addition, the Virginia Stock Corporation Act and our articles of incorporation eliminate the liability for monetary damages of a director or officer in a shareholder or derivative proceeding. This elimination of liability will not apply in the event of willful misconduct or a knowing violation of criminal law or any federal or state securities law. Sections 13.1-692.1 through 704 of the Virginia Stock Corporation Act are incorporated into this paragraph by reference. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 1 -- Purchase Agreement, dated September 22, 1999, among Weight Watchers International, Inc., Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. 2 -- Recapitalization and Stock Purchase Agreement, dated July 22, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal International S.A. 3.1 -- Amended and Restated Articles of Incorporation of Weight Watchers International, Inc. 3.2 -- Amended and Restated By-laws of Weight Watchers International, Inc. 3.3 -- Certificate of Incorporation of 58 WW Food Corp. 3.4 -- By-laws of 58 WW Food Corp. 3.5 -- Certificate of Incorporation of Waist Watchers, Inc. 3.6 -- By-laws of Waist Watchers, Inc. 3.7 -- Certificate of Incorporation of Weight Watchers Camps, Inc. 3.8 -- By-laws of Weight Watchers Camps, Inc. 3.9 -- Certificate of Incorporation of W.W. Camps and Spas, Inc. 3.10 -- By-laws of W.W. Camps and Spas, Inc. 3.11 -- Certificate of Incorporation of Weight Watchers Direct, Inc. 3.12 -- By-laws of Weight Watchers Direct, Inc. 3.13 -- Certificate of Incorporation of W/W Twentyfirst Corporation 3.14 -- By-laws of W/W Twentyfirst Corporation 3.15 -- Certificate of Incorporation of W.W. Weight Reduction Services, Inc. 3.16 -- By-laws of W.W. Weight Reduction Services, Inc. 3.17 -- Certificate of Incorporation of W.W.I. European Services, Ltd. 3.18 -- By-laws of W.W.I. European Services, Ltd. 3.19 -- Certificate of Incorporation of W.W. Inventory Service Corp. 3.20 -- By-laws of W.W. Inventory Service Corp. 3.21 -- Certificate of Incorporation of Weight Watchers North America, Inc.
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EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 3.22 -- By-laws of Weight Watchers North America, Inc. 3.23 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers UK Holdings Ltd 3.24 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers International Holdings Ltd 3.25 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (U.K.) Limited 3.26 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Exercise) Ltd. 3.27 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Accessories & Publications) Ltd 3.28 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Food Products) Limited 3.29 -- Certificate of Incorporation and Constitution of Weight Watchers New Zealand Limited 3.30 -- Certificate of Registration and Memorandum and Articles of Association of Weight Watchers International Pty Limited 3.31 -- Certificate of Registration and Memorandum and Articles of Association of Fortuity Pty Ltd 3.32 -- Certificate of Registration and Memorandum and Articles of Association of Gutbusters Pty Ltd 4.1 -- Dollar Securities Indenture, dated as of September 29, 1999, between Weight Watchers International, Inc. and Norwest Bank Minnesota, National Association 4.2 -- Euro Securities Indenture, dated as of September 29, 1999, between Weight Watchers International Inc. and Norwest Bank Minnesota, National Association 4.3 -- Registration Rights Agreement, dated as of September 22, 1999, among Weight Watchers International, Inc., Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. 5 -- Opinion of Simpson Thacher & Bartlett 10.1 -- Credit Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., WW Funding Corp., Credit Suisse First Boston, BHF (USA) Capital Corporation, The Bank of Nova Scotia and various financial institutions 10.2 -- Preferred Stock Stockholders' Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company 10.3 -- Stockholders' Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company 10.4 -- License Agreement, dated as of September 29, 1999, between WW Foods, LLC and Weight Watchers International, Inc. 10.5 -- License Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and H.J. Heinz Company 10.6 -- License Agreement, dated as of September 29, 1999, between WW Foods, LLC and H.J. Heinz Company 10.7 -- LLC Agreement, dated as of September 29, 1999, between H.J. Heinz Company and Weight Watchers International, Inc. 10.8 -- Operating Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and H.J. Heinz Company. 10.9 -- Subscription Agreement, dated as of September 29, 1999, among WeightWatchers.com, Inc., Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company
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EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 10.10 -- Registration Rights Agreement, dated September 29, 1999, among WeightWatchers.com, Weight Watchers International, Inc., H.J. Heinz Company and Artal Luxembourg S.A. 10.11 -- Stockholders' Agreement, dated September 29, 1999, among WeightWatchers.com, Weight Watchers International, Inc., Artal Luxembourg S.A., H.J. Heinz Company 10.12 -- Letter Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and The Invus Group, Ltd. 10.13 -- Agreement of Lease, dated as of August 1, 1995, between Industrial & Research Associates Co. and Weight Watchers International, Inc. 10.14 -- Lease Agreement, dated as of April 1, 1997, between Junto Investments and Weight Watchers North America, Inc. 10.15 -- Lease Agreement, dated as of August 31, 1995, between 89 State Line Limited Partnership and Weight Watchers North America, Inc. 10.16 -- Employment Agreement, dated as of August 30, 1996, between Weight Watchers International, Inc. and Robert Mallow 12.1 -- Computation of Ratio of Earnings to Fixed Charges 12.2 -- Computation of Pro Forma Ratio of Earnings to Fixed Charges 21 -- Subsidiaries of Weight Watchers International, Inc. 23.1 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5) 23.2 -- Consent of PricewaterhouseCoopers LLP 24 -- Powers of Attorney (included in signature pages hereto) 25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Norwest Bank Minnesota, National Association, as trustee 27.1 -- Financial Data Schedules 27.2 -- Financial Data Schedules 27.3 -- Financial Data Schedules 99.1 -- Form of Letter of Transmittal (dollar notes) 99.2 -- Form of Letter of Transmittal (euro notes) 99.3 -- Form of Notice of Guaranteed Delivery (dollar notes) 99.4 -- Form of Notice of Guaranteed Delivery (euro notes)
(b) Financial Statement Schedule Schedule II--Valuation and Qualifying Accounts and Reserves included on pages S-1 and S-2 of this Registration Statement. ITEM 22. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price II-3 represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" Table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS INTERNATIONAL, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers International, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ RAYMOND DEBBANE -------------------------------------- Chairman of the Board of December 2, 1999 Raymond Debbane Directors /s/ JONAS M. FAJGENBAUM -------------------------------------- Director December 2, 1999 Jonas M. Fajgenbaum
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SIGNATURE TITLE DATE - --------- ----- ---- /s/ KENT Q. KREH -------------------------------------- Director December 2, 1999 Kent Q. Kreh /s/ SACHA LAINOVIC -------------------------------------- Director December 2, 1999 Sacha Lainovic /s/ RICHARD PENN -------------------------------------- Director December 2, 1999 Richard Penn /s/ CHRISTOPHER J. SOBECKI -------------------------------------- Director December 2, 1999 Christopher J. Sobecki
II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. 58 WW FOOD CORP. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of 58 WW Food Corp. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WAIST WATCHERS, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Waist Watchers, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS CAMPS, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers Camps, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. W.W. CAMPS AND SPAS, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of W.W. Camps and Spas, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS DIRECT, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers Direct, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. W/W TWENTYFIRST CORPORATION By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of W/W Twentyfirst Corporation (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. W.W. WEIGHT REDUCTION SERVICES, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of W.W. Weight Reduction Services, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. W.W.I. EUROPEAN SERVICES, LTD. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of W.W.I. European Services, Ltd. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg /s/ CLIVE A. BROTHERS -------------------------------------- Director December 2, 1999 Clive A. Brothers
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. W.W. INVENTORY SERVICE CORP. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of W.W. Inventory Service Corp. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS NORTH AMERICA, INC. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers North America, Inc. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS UK HOLDINGS LTD By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers UK Holdings Ltd (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD By: /s/ LINDA HUETT -------------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers International Holdings Ltd (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS (U.K.) LIMITED By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers (U.K.) Limited (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ JOHN DENNIS -------------------------------------- Director December 2, 1999 John Dennis
II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS (EXERCISE) LTD. By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers (Exercise) Ltd. (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ JOHN DENNIS -------------------------------------- Director December 2, 1999 John Dennis
II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS (ACCESSORIES & PUBLICATIONS) LTD By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers (Accessories & Publications) Ltd (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ JOHN DENNIS -------------------------------------- Director December 2, 1999 John Dennis
II-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS (FOOD PRODUCTS) LIMITED By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers (Food Products) Limited (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ JOHN DENNIS -------------------------------------- Director December 2, 1999 John Dennis
II-22 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS NEW ZEALAND LIMITED By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers New Zealand Limited (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ ROBERT W. HOLLWEG -------------------------------------- Director December 2, 1999 Robert W. Hollweg /s/ SCOTT PENN -------------------------------------- Director December 2, 1999 Scott Penn
II-23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. WEIGHT WATCHERS INTERNATIONAL PTY LIMITED By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Weight Watchers International Pty Limited (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ CHRISTOPHER J. SOBECKI -------------------------------------- Director December 2, 1999 Christopher J. Sobecki /s/ SACHA LAINOVIC -------------------------------------- Director December 2, 1999 Sacha Lainovic /s/ SCOTT PENN -------------------------------------- Director December 2, 1999 Scott Penn
II-24 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. FORTUITY PTY LTD By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Fortuity Pty Ltd (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ CHRISTOPHER J. SOBECKI -------------------------------------- Director December 2, 1999 Christopher J. Sobecki /s/ SACHA LAINOVIC -------------------------------------- Director December 2, 1999 Sacha Lainovic /s/ SCOTT PENN -------------------------------------- Director December 2, 1999 Scott Penn
II-25 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on December 2, 1999. GUTBUSTERS PTY LTD By: /s/ LINDA HUETT ----------------------------------------- Linda Huett PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of Gutbusters Pty Ltd (the "Company"), do hereby constitute and appoint Linda Huett and Robert Hollweg, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys or agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ LINDA HUETT -------------------------------------- President and Director (Principal December 2, 1999 Linda Huett Executive Officer) /s/ DENNIS SWEENEY -------------------------------------- Controller (Principal Financial December 2, 1999 Dennis Sweeney and Accounting Officer) /s/ CHRISTOPHER J. SOBECKI -------------------------------------- Director December 2, 1999 Christopher J. Sobecki /s/ SACHA LAINOVIC -------------------------------------- Director December 2, 1999 Sacha Lainovic /s/ SCOTT PENN -------------------------------------- Director December 2, 1999 Scott Penn
II-26 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE - --------------------- ----------- -------- 1 -- Purchase Agreement, dated September 22, 1999, among Weight Watchers International, Inc., Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. 2 -- Recapitalization and Stock Purchase Agreement, dated July 22, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal International S.A. 3.1 -- Amended and Restated Articles of Incorporation of Weight Watchers International, Inc. 3.2 -- Amended and Restated By-laws of Weight Watchers International, Inc. 3.3 -- Certificate of Incorporation of 58 WW Food Corp. 3.4 -- By-laws of 58 WW Food Corp. 3.5 -- Certificate of Incorporation of Waist Watchers, Inc. 3.6 -- By-laws of Waist Watchers, Inc. 3.7 -- Certificate of Incorporation of Weight Watchers Camps, Inc. 3.8 -- By-laws of Weight Watchers Camps, Inc. 3.9 -- Certificate of Incorporation of W.W. Camps and Spas, Inc. 3.10 -- By-laws of W.W. Camps and Spas, Inc. 3.11 -- Certificate of Incorporation of Weight Watchers Direct, Inc. 3.12 -- By-laws of Weight Watchers Direct, Inc. 3.13 -- Certificate of Incorporation of W/W Twentyfirst Corporation 3.14 -- By-laws of W/W Twentyfirst Corporation 3.15 -- Certificate of Incorporation of W.W. Weight Reduction Services, Inc. 3.16 -- By-laws of W.W. Weight Reduction Services, Inc. 3.17 -- Certificate of Incorporation of W.W.I. European Services, Ltd. 3.18 -- By-laws of W.W.I. European Services, Ltd. 3.19 -- Certificate of Incorporation of W.W. Inventory Service Corp. 3.20 -- By-laws of W.W. Inventory Service Corp. 3.21 -- Certificate of Incorporation of Weight Watchers North America, Inc. 3.22 -- By-laws of Weight Watchers North America, Inc. 3.23 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers UK Holdings Ltd 3.24 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers International Holdings Ltd 3.25 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (U.K.) Limited 3.26 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Exercise) Ltd. 3.27 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Accessories & Publications) Ltd 3.28 -- Certificate of Incorporation and Memorandum and Articles of Association of Weight Watchers (Food Products) Limited 3.29 -- Certificate of Incorporation and Constitution of Weight Watchers New Zealand Limited 3.30 -- Certificate of Registration and Memorandum and Articles of Association of Weight Watchers International Pty Limited 3.31 -- Certificate of Registration and Memorandum and Articles of Association of Fortuity Pty Ltd 3.32 -- Certificate of Registration and Memorandum and Articles of Association of Gutbusters Pty Ltd
EXHIBIT NUMBER DESCRIPTION PAGE - --------------------- ----------- -------- 4.1 -- Dollar Securities Indenture, dated as of September 29, 1999, between Weight Watchers International, Inc. and Norwest Bank Minnesota, National Association 4.2 -- Euro Securities Indenture, dated as of September 29, 1999, between Weight Watchers International Inc. and Norwest Bank Minnesota, National Association 4.3 -- Registration Rights Agreement, dated as of September 22, 1999, among Weight Watchers International, Inc., Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. 5 -- Opinion of Simpson Thacher & Bartlett 10.1 -- Credit Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., WW Funding Corp., Credit Suisse First Boston, BHF (USA) Capital Corporation, The Bank of Nova Scotia and various financial institutions 10.2 -- Preferred Stock Stockholders' Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company 10.3 -- Stockholders' Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company 10.4 -- License Agreement, dated as of September 29, 1999, between WW Foods, LLC and Weight Watchers International, Inc. 10.5 -- License Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and H.J. Heinz Company 10.6 -- License Agreement, dated as of September 29, 1999, between WW Foods, LLC and H.J. Heinz Company 10.7 -- LLC Agreement, dated as of September 29, 1999, between H.J. Heinz Company and Weight Watchers International, Inc. 10.8 -- Operating Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and H.J. Heinz Company. 10.9 -- Subscription Agreement, dated as of September 29, 1999, among WeightWatchers.com, Inc., Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company 10.10 -- Registration Rights Agreement, dated September 29, 1999, among WeightWatchers.com, Weight Watchers International, Inc., H.J. Heinz Company and Artal Luxembourg S.A. 10.11 -- Stockholders' Agreement, dated September 29, 1999, among WeightWatchers.com, Weight Watchers International, Inc., Artal Luxembourg S.A., H.J. Heinz Company 10.12 -- Letter Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and The Invus Group, Ltd. 10.13 -- Agreement of Lease, dated as of August 1, 1995, between Industrial & Research Associates Co. and Weight Watchers International, Inc. 10.14 -- Lease Agreement, dated as of April 1, 1997, between Junto Investments and Weight Watchers North America, Inc. 10.15 -- Lease Agreement, dated as of August 31, 1995, between 89 State Line Limited Partnership and Weight Watchers North America, Inc. 10.16 -- Employment Agreement, dated as of August 30, 1996, between Weight Watchers International, Inc. and Robert Mallow 12.1 -- Computation of Ratio of Earnings to Fixed Charges 12.2 -- Computation of Pro Forma Ratio of Earnings to Fixed Charges 21 -- Subsidiaries of Weight Watchers International, Inc. 23.1 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5) 23.2 -- Consent of PricewaterhouseCoopers LLP 24 -- Powers of Attorney (included in signature pages hereto) 25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Norwest Bank Minnesota, National Association, as trustee
EXHIBIT NUMBER DESCRIPTION PAGE - --------------------- ----------- -------- 27.1 -- Financial Data Schedules 27.2 -- Financial Data Schedules 27.3 -- Financial Data Schedules 99.1 -- Form of Letter of Transmittal (dollar notes) 99.2 -- Form of Letter of Transmittal (euro notes) 99.3 -- Form of Notice of Guaranteed Delivery (dollar notes) 99.4 -- Form of Notice of Guaranteed Delivery (euro notes)
EX-1 2 EXHIBIT 1 EXHIBIT 1 Weight Watchers International, Inc. $150,000,000 13% Senior Subordinated Notes due 2009 Euro 100,000,000 13% Senior Subordinated Notes due 2009 PURCHASE AGREEMENT September 22, 1999 CREDIT SUISSE FIRST BOSTON CORPORATION SCOTIA CAPITAL MARKETS (USA) INC. c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629 Dear Sirs: 1. Introductory. Weight Watchers International, Inc., a Virginia corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to Credit Suisse First Boston Corporation ("CSFBC") and Scotia Capital Markets (USA) Inc. (the "Purchasers") U.S.$150,000,000 principal amount of its 13% Senior Subordinated Notes due 2009 (the "Dollar Securities") and Euro 100,000,000 principal amount of its 13% Senior Subordinated Notes due 2009 (the "Euro Securities" and together with the Dollar Securities, the "Offered Securities") to be issued under two indentures dated as of September 29, 1999 (collectively, the "Indentures"), between the Company and Norwest Bank Minnesota, National Association, as Trustee. The United States Securities Act of 1933 is herein referred to as the "Securities Act". The following transactions (collectively, the "Transactions") will occur concurrently with the consummation of the offering of the Notes (the "Offering"): Artal Luxembourg S.A. ("Artal") and/or certain of its affiliates (collectively, the "Investors") intend to consummate a recapitalization transaction (the "Recapitalization") of the Company, whereby (i) pursuant to a recapitalization and stock purchase agreement, dated as of July 22, 1999 (the "Recapitalization Agreement"), among H.J. Heinz Company ("HJH"), the Company and Newco, (a) the Company will redeem shares of common stock of the Company, par value $1.00 per share ("Company Shares"), held by HJH (the "Redemption") for total consideration of $349,500,000, which will be paid through the issuance by the Company to HJH of redeemable preferred shares of the Company paying dividends of 6% per annum and redeemable on the eleventh anniversary of the Closing Date in an aggregate amount equal to $25,000,000 (the "Preferred Shares") and $324,500,000 of the cash proceeds from (1) the senior secured credit facilities (the "Senior Credit Facilities") to be entered into pursuant to a credit agreement (the "Credit Agreement") among the Company, certain of its subsidiaries and a syndicate of banks and other financial institutions led by the Bank of Nova Scotia, as administrative agent, and Credit Suisse First Boston, New York branch, as syndication agent (such banks and other financial institutions, the "Lenders"), in an aggregate principal amount of up to $262,000,000 (consisting of term loan facilities (the "Term Loan Facilities") in an aggregate amount of $237,000,000 and a $25,000,000 revolving credit facility (the "Revolving Facility")) and (2) the Offering, (b) immediately after the Redemption, HJH shall sell and transfer to Newco, and Newco shall purchase (the "Stock Purchase" and, together with the Redemption, the "Recapitalization") from HJH, for cash consideration of $223,700,000, Company Shares representing 94% of the outstanding Company Shares after giving effect to the Redemption, (c) the Company will refinance $147,500,000 of indebtedness incurred in connection with the acquisition of the businesses that conduct its business in Australia and New Zealand and (d) HJH will continue to own Company Shares representing 6% of the issued and outstanding Company Shares (the "Equity Rollover"); (ii) cash in an aggregate amount not to exceed $25,000,000 will be used to pay the fees and expenses incurred in connection with the Recapitalization, the Senior Credit Facilities and the Offering; and (iii) the Company will have unused commitments under the Revolving Facility of not less than $48,000,000. This Agreement, the Registration Rights Agreement (as defined herein) and the Indentures are referred to herein as the "Operative Documents". The Recapitalization Agreement, the Credit Agreement and the other documents related to the Transactions are referred to herein collectively as the "Transaction Documents". Holders (including subsequent transferees) of the Notes will be entitled to the benefit of a Registration Rights Agreement of even date herewith (the "Registration Rights Agreement"), among the Company and the Purchasers, pursuant to which the Company will be obligated to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement (the "Exchange Offer Registration Statement") under the Securities Act registering an issue of senior subordinated notes of the Company (the "Exchange Securities"), which shall be identical in all material respects to the Offered Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) to be offered in exchange for the Offered Securities (the "Registered Exchange Offer") and (ii) under certain circumstances specified in the Registration Rights Agreement, a shelf registration statement (the "Shelf Registration Statement") pursuant to Rule 415 under the Securities Act. 2 The Company hereby agrees with the several Purchasers as follows: 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Purchasers and their selling affiliates that: (a) A preliminary confidential offering circular and an offering circular relating to the Offered Securities to be offered by the Purchasers have been prepared by the Company. Such preliminary confidential offering circular (the "Preliminary Offering Circular") and offering circular (the "Offering Circular"), as supplemented as of the date of this Agreement, together with any other document approved by the Company for use in connection with the contemplated resale of the Offered Securities are hereinafter collectively referred to as the "Offering Document". On the date of this Agreement, the Offering Document does not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. (b) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Virginia, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the condition (financial or otherwise), business, properties or result of operations of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"). (c) Each Significant Subsidiary (as defined in Rule 1-02(W) of Regulation S-X) of the Company has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation or organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document; and each Significant Subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each Significant Subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each Significant Subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects except as otherwise described in the Offering Document. 3 (d) Each of the Indentures has been duly authorized by the Company; the Offered Securities have been duly authorized; and when the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date (as defined below), each of the Indentures will have been duly executed and delivered (assuming due authorization, execution and delivery by the Trustee), such Offered Securities will have been duly executed, authenticated, issued and delivered (assuming authentication by the Trustee in accordance with the provisions of the Indentures) and will conform to the description thereof contained in the Offering Document and the Indentures and such Offered Securities will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. (e) Except as disclosed in the Offering Document, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Purchaser for a brokerage commission, finder's fee or other like payment. (f) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of (i) the Transactions or (ii) the transactions contemplated by the Operative Documents in connection with the issuance and sale of the Offered Securities by the Company except as may be required under the Securities Act, the Trust Indenture Act of 1939, as amended (the "TIA") and the rules and regulations of the Commission thereunder with respect to the Registration Statement or the Shelf Registration Statement and the transactions contemplated by the Registration Rights Agreement, or any state or foreign securities laws or by the regulations of the National Association of Securities Dealers, Inc. (the "NASD"). (g) Assuming the accuracy of the representations, and the performance of the agreements of the Purchasers contained herein the execution, delivery and performance of the Operative Documents and the issuance and sale of the Offered Securities to the Purchasers in the manner contemplated herein and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject (except, where such breach, violation or default would not individually or in the aggregate have a Material Adverse Effect), or the charter or by-laws of the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. 4 (h) Each of the Transaction Documents (i) if such party is a signatory thereto, has been duly authorized by the Company, (ii) as of the Closing Date, if such party is a signatory thereto, will have been executed and delivered by the Company and (iii) conforms in all material respects to the description thereof contained in the Offering Document. Each of the Transaction Documents will, when so executed, constitute a valid and legally binding obligation of the Company and will be enforceable in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. (i) Assuming the accuracy of the representation and warranties of the other parties thereto, the execution, delivery and performance of the Transaction Documents by the Company (to the extent a party thereto) and compliance with the terms and provisions of any such Transaction Document will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject (except, where such breach, violation or default would not individually or in the aggregate have a Material Adverse Effect), or the charter or by-laws of the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (j) This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company. (k) Except as disclosed in the Offering Document, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them, except where such failure would not, individually or in the aggregate have a Material Adverse Effect. (l) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (m) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a Material Adverse Effect. 5 (n) Except as disclosed in the Offering Document, the Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (o) Except as disclosed in the Offering Document, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. (p) Except as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are, to the Company's knowledge, threatened or contemplated. (q) The historical financial statements included in the Offering Document present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; and the assumptions used in preparing the pro forma financial statements included in the Offering Document provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. 6 (r) Except as disclosed in the Offering Document, since the date of the latest audited financial statements included in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Offering Document, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (s) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"); and the Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company" as defined in the Investment Company Act. (t) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the United States Securities Exchange Act of 1934 (the "Exchange Act") or quoted in a U.S. automated inter-dealer quotation system. (u) Assuming the accuracy of the representations and the performance of the Purchasers, contained herein, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation S ("Regulation S") thereunder; and it is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (v) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S, by means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company, its affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the 7 Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Company, at a purchase price of 100% of the principal amount thereof plus accrued interest from September 29, 1999, to the Closing Date (as hereinafter defined), the respective principal amounts of Dollar Securities set forth opposite the names of the several Purchasers in Schedule A hereto and, at a purchase price of 100% of the principal amount thereof plus accrued interest from September 29, 1999, to the Closing Date, the respective principal amounts of the Euro Securities set forth opposite the names of the several Purchasers in Schedule A hereto. The Company will deliver against payment of the purchase price the Offered Securities in the form of one or more global Securities in definitive form (the "Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Document. Payment for the Offered Securities shall be made by the Purchasers in Federal (same day) funds by official check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of Weight Watchers International, Inc. at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, at 9:00 A.M. (New York time), on September 29, 1999, or at such other time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "Closing Date", against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Securities. The Global Securities will be made available for checking at the office of Simpson, Thatcher & Bartlett at least 24 hours prior to the Closing Date. 8 4. Representations by Purchasers and Their Selling Affiliates; Resale by Purchasers. (a) Each Purchaser and their sellng affiliates severally represent and warrant to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Offered Securities, and will offer and sell the Offered Securities only in accordance with Rule 903 or Rule 144A under the Securities Act ("Rule 144A"). Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities, and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S and Rule 144A. (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Company. (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (e) Each Purchaser severally represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Offered Securities will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the 9 meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 5. Certain Agreements of the Company. The Company agrees with the several Purchasers that: (a) The Company will advise CSFBC promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without CSFBC's consent, which consent shall not be unreasonably withheld or delayed. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, any event occurs as a result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company promptly will notify CSFBC of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither CSFBC's consent to, nor the Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (b) The Company will furnish to CSFBC copies of any preliminary offering circular, the Offering Document and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC reasonably requests, and the Company will furnish to CSFBC on the date hereof three copies of the Offering Document signed by a duly authorized officer of the Company, one of which will include the independent accountants' reports therein manually signed by such independent accountants. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be furnished to CSFBC(and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and distributing to the Purchasers all such documents. (c) The Company will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as CSFBC designates and will continue 10 such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation or to file a general consent to service of process in any such state or province. (d) During the period of five years hereafter, the Company will furnish to CSFBC and, upon request, to each of the other Purchasers, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to CSFBC and, upon request, to each of the other Purchasers (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request. (e) During the period of two years after the Closing Date, the Company will, upon request, furnish to CSFBC, each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (f) During the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them. (g) During the period of two years after the Closing Date, the Company will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture and the Registration Rights Agreement, including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and, as applicable, the Exchange Securities, the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture, the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities and as applicable, the Exchange Securities; (iii) the cost of qualifying the Offered Securities for trading in The PortalSM Market ("PORTAL") and any expenses incidental thereto; (iv) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities; (v) for any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Exchange Securities for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto; (vi) for any fees charged by investment rating agencies for the rating of the Securities or the Exchange Securities, and (vii) for expenses incurred in distributing preliminary offering circulars and the Offering 11 Document (including any amendments and supplements thereto) to the Purchasers. The Company will also pay or reimburse the Purchasers (to the extent incurred by them) for all reasonable travel expenses of the Purchasers and the Company's officers and employees and any other reasonable expenses of the Purchasers and the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities from the Purchasers. (i) In connection with the offering, until CSFBC shall have notified the Company and the other Purchasers of the completion of the resale of the Offered Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (j) For a period of 135 days after the date of the initial offering of the Offered Securities by the Purchasers, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any debt securities issued or guaranteed by the Company and having a maturity of more than one year from the date of issue. The Company will not at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities. (k) The Company will use its best efforts in cooperation with the Purchasers to cause the Offered Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc. (l) The Company will apply the net proceeds of the offering and the sale of the Offered Securities in the manner set forth in the Offering Document under the caption "Sources and Uses of Funds". 12 6. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers to purchase and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated the date of this Agreement, of PricewaterhouseCoopers LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder ("Rules and Regulations") and to the effect that: (i) in their opinion the financial statements examined by them and included in the Offering Document comply as to form in all material respects with the accounting requirements of the Securities Act and the related published Rules and Regulations that would be applicable if the Offering were registered under the Securities Act; (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements included in the Offering Document; (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included in the Offering Document do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations that would be applicable if the Offering were registered under the Securities Act or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in current assets 13 or total assets, as compared with amounts shown on the latest balance sheet included in the Offering Document; or (C) for the period from the closing date of the latest income statement included in the Offering Document to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in total revenue, gross profit or net income or in the ratio of earnings to fixed charges; except in all cases set forth in clauses (C) and (D) above for changes, increases or decreases which are described in such letter; (iv) they have (a) read the unaudited pro forma condensed consolidated financial statements included in the Offering Document; (b) inquired of certain officials of the Company who have responsibility for financial and accounting matters about (i) the basis for their determination of the pro forma adjustments and (ii) whether the unaudited pro forma condensed consolidated financial statements referred to in clause (a) above comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X; and (c) proved the arithmetic accuracy of the application of the pro form adjustments to the historical amounts in the unaudited pro forma condensed consolidated financial statements; and (v) on the basis of the review referred to in clause (iv) above, nothing came to their attention that caused them to believe that the unaudited pro forma condensed consolidated financial statements included in the Offering Document do not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X and that the pro form adjustments have not been properly applied to the historical amounts in the compilation of those statements; and (vi) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Document (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) a change in U.S. or 14 international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of CSFBC, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market, or (ii) (A) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its subsidiaries which, in the judgment of a majority in interest of the Purchasers including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (B) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (C) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; or (E) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including CSFBC, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities. 15 (c) The Purchasers shall have received an opinion, dated the Closing Date, of Hunton & Williams, special Virginia counsel for the Company, that: (i) the Company has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Virginia, with corporate power and authority to own its properties and conduct its business as described in the Offering Document; (ii) each of the Indentures has been duly authorized, executed and delivered by the Company; the Offered Securities have been duly authorized, executed, and issued by the Company; (iii) this Agreement and the Registration Rights Agreement have each been duly authorized, executed and delivered by the Company; and (iv) each of the Transaction Documents has been duly authorized, executed and delivered by the Company (to the extent a party thereto). (d) The Purchasers shall have received an opinion, dated the Closing Date, of Simpson Thacher & Bartlett, counsel for the Company, that: (i) each of the Indentures has been duly authorized, executed and delivered by the Company and, assuming that such Indenture is the valid and legally binding obligation of the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing; (ii) the Offered Securities have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with this Agreement, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the relevant Indenture subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in a equity or at law) and (iii) an implied covenant of good faith and fair dealing; (iii) no consent, approval, authorization order, registration or qualification of or with any Federal or New York governmental agency or to such counsel's knowledge, 16 any Federal or New York court is required for the issue and sale of the Offered Securities by the Company and the compliance by the Company with all of the provisions of this Agreement, except for such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Offered Securities by the Purchasers (except, other than as set forth in paragraph (vi) below, such counsel need give no opinion as to registration of the Offered Securities under the Securities Act, and the qualification of the Indentures under the TIA); (iv) this Agreement and the Registration Rights Agreement have each been duly authorized, executed and delivered by the Company; (v) the issue and sale of the Offered Securities by the Company and the compliance by the Company with all the provisions of this Agreement will not violate any Federal or New York statute; (vi) no registration of the Offered Securities under the Securities Act, and no qualification of the Indenture under the TIA, is required for the offer and sale of the Offered Securities by the Company to the Purchasers or the reoffer and resale of the Offered Securities by the Purchasers to the initial purchasers therefrom solely in the manner contemplated by the Offering Document, this Agreement and the Indenture; (vii) following the issuance of the Offered Securities and the application of the proceeds therefrom, the Company will not be an "investment company" within the meaning of and subject to regulation under the Investment Company Act of 1940, as amended; (viii) such counsel shall state that they have not independently verified the accuracy, completeness or fairness of the statements made or included in the final offering circular and take no responsibility therefor. Such counsel shall also state that in the course of the preparation by the Company of the final offering circular, they participated in conferences with certain officers and employees of the Company and with representatives of PricewaterhouseCoopers. Such counsel shall state that based upon their examination of the final offering circular, their investigations made in connection with the preparation of the final offering circular and their participation in the conferences referred to above, they have no reason to believe that the final offering circular contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that in each case they need to express no belief with respect to the financial statements or other financial or data contained in the final offering circular. 17 In rendering such opinion, Simpson Thacher & Bartlett may rely as to the incorporation of the Company and all other matters governed by Virginia law upon the opinion of Hunton & Williams referred to above. (e) The Purchasers shall have received an opinion, dated the Closing Date, of Robert Mallow, counsel to the Company that: (i) the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect; (ii) no consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of (A) the Transactions or (B) the transactions contemplated by the Operative Documents in connection with the issuance or sale of the Offered Securities by the Company, except as may be required under the Securities Act, the TIA and the rules and regulations of the Commission thereunder with respect to the Registration Statement or the Shelf Registration Statement and the transactions contemplated by the Registration Rights Agreement, or any state or foreign securities laws or by the regulations of the National Association of Securities Dealers, Inc. (the "NASD"); (iii) the execution, delivery and performance of the Operative Documents by the Company and the issuance and sale of the Offered Securities by the Company and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (A) to such counsel's knowledge, any statute, rule, regulation (assuming the accuracy of the Purchasers' representations in Section 4 thereof) or order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or (B) the charter or by-laws of the Company or any such subsidiary; (iv) the execution, delivery and performance of the Transaction Documents by the Company (to the extent a party thereto) and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of or constitute a default under (A) to such counsel's knowledge, any statute, rule or 18 regulation or any order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or (B) the charter or by-laws of the Company; (v) each of the Transaction Documents will, when duly executed and delivered, constitute a valid and legally binding obligation of the Company (to the extent a party thereto) and is enforceable in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing; and (vi) to such counsel's knowledge other than as set forth in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are, to such counsel's knowledge, threatened or contemplated. (f) The Purchasers shall have received from Cravath, Swaine & Moore, counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities, the Offering Circular, the exemption from registration for the offer and sale of the Offered Securities by the Company to the several Purchasers and the resales by the several Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. In rendering such opinion, Cravath, Swaine & Moore may rely as to the incorporation of the Company and all other matters governed by Virginia law upon the opinion of Hunton & Williams referred to above. (g) The Purchasers shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the date of the most recent financial statements in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of 19 operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Offering Document or as described in such certificate. (h) The Purchasers shall have received a letter, dated the Closing Date, of PricewaterhouseCoopers which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection. (i) Concurrently with or prior to the issue and sale of the Offered Securities by the Company, the Transactions shall be consummated on terms that conform in all material respects to the description thereof in the Offering Documents and the Purchasers shall have received true and correct copies of all documents pertaining thereto and evidence reasonably satisfactory to the Purchasers of the consummation thereof. (j) Concurrently with or prior to the issuance and sale of the Offered Securities by the Company, the Company and [certain subsidiaries] shall have entered into the Credit Agreement and the initial borrowings thereunder shall have occurred. The Purchasers shall have received conformed counterparts thereof and all other documents and agreements entered into and received thereunder in connection with the closing of the Credit Agreement. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the Transactions) no condition that would constitute a default (or an event that with notice or lapse of time, or both, would constitute a default) under the Credit Agreement or any other Transaction Document. The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of the Purchasers hereunder. 20 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser and their selling affiliates, directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which--the--such-- Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any breach of any of the representations and warranties of the Company contained herein or any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below; and provided, further, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary offering circular the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Purchaser that sold the Securities concerned to the person asserting any such losses, claims, damages or liabilities, to the extent that such sale was an initial resale by such Purchaser and any such loss, claim, damage or liability of such Purchaser results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the Offering Document (exclusive of any material included therein but not attached thereto) if the Company had previously furnished copies thereof to such Purchaser. (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement 21 thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of (i) the following information in the Offering Document furnished on behalf of each Purchaser: under the caption "Plan of Distribution" paragraphs seven (as to the second sentence only) and eight and (ii) the following information in the Offering Document in paragraph nine under the caption "Plan of Distribution" furnished on behalf of CSFBC or Scotia Capital Markets (USA) Inc., as indicated: the information regarding Credit Suisse First Boston, New York branch, and CSFBC, furnished by CSFBC and the information in such paragraph regarding The Bank of Nova Scotia and Scotia Capital Markets (USA) Inc. furnished on behalf of Scotia Capital Markets (USA) Inc.; provided, however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the 22 subject matter of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 23 8. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to purchase Offered Securities hereunder and the aggregate principal amount of Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Offered Securities, CSFBC may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities and arrangements satisfactory to CSFBC and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 9. As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5(h) and the respective obligations of the Company and the Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (C), (D) or (E) of Section 6(b)(ii), the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 24 10. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department - Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at Weight Watchers International, Inc., 175 Crossways Park West, Woodbury, NY 11797, Attention General Counsel; provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Purchaser. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and affiliates, and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties thereto. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 13. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 25 If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Purchasers in accordance with its terms. Very truly yours, WEIGHT WATCHERS INTERNATIONAL, INC. By /s/ Daniel D. DeBolt Name: Daniel D. DeBolt Title: Chief Financial Officer The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION SCOTIA CAPITAL MARKETS (USA) INC. Acting on behalf of themselves and as the Representatives of the several Purchasers By CREDIT SUISSE FIRST BOSTON CORPORATION By /s/ Malcom Price Name: Malcolm Price Title: Managing Director 26 SCHEDULE A Principal Amount of Dollar Manager Securities ------- ---------- Credit Suisse First Boston Corporation................. $90,000,000 Scotia Capital Markets (USA) Inc....................... 60,000,000 Total................................ $150,000,000 ============ Principal Amount of Euro Manager Securities ------- ---------- Credit Suisse First Boston Corporation................. E 60,000,000 Scotia Capital Markets (USA) Inc....................... 40,000,000 Total................................ E 100,000,000 ============= EX-2 3 EXHIBIT 2 Exhibit 2 RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC. and H. J. HEINZ COMPANY and ARTAL INTERNATIONAL S.A. July 22, 1999 TABLE OF CONTENTS Article I - Definitions......................................... 2 Article II - Reorganizations; Recapitalization; Sale and Purchase of WWI Common Stock........................ 10 2.0 Reorganizations.................................... 10 2.1 The Recapitalization................................ 10 2.2 Performance of Obligations of WWI................... 10 2.3 Closing Deferred Revenue Adjustment................. 11 2.4 Outstanding Indebtedness............................ 12 2.5 [Intentionally Left Blank].......................... 12 2.6 Closing............................................. 13 Article III - Representations and Warranties of Parent............ 14 3.1 Incorporation; Qualification........................ 14 3.2 Authority........................................... 15 3.3 Execution and Binding Effect........................ 15 3.4 No Conflict......................................... 15 3.5 Capitalization...................................... 16 3.6 Stock Ownership; Title to Shares.................... 17 3.7 Financial Statements; Undisclosed Liabilities....... 17 3.8 Title to Assets; Leased Real Property............... 18 3.9 Contracts........................................... 19 3.10 Employee Benefit Plans.............................. 20 3.11 Absence of Certain Changes.......................... 21 3.12 Litigation.......................................... 24 3.13 Compliance with Laws................................ 24 3.14 Franchise Agreements................................ 24 3.15 Intellectual Property............................... 25 3.16 Taxes............................................... 27 3.17 Environmental Matters............................... 29 3.18 Brokers and Finders................................. 29 3.19 Subsidiaries........................................ 30 3.20 Accounts Receivable................................. 30 3.21 Year 2000........................................... 30 3.22 Insurance........................................... 30 3.23 No Other Representations or Warranties.............. 31 Article IV - Representations and Warranties of Purchaser......... 31 4.1 Incorporation....................................... 31 4.2 Authority........................................... 31 4.3 Execution and Binding Effect........................ 31 4.4 No Conflict......................................... 31 4.5 Litigation.......................................... 32 4.6 Brokers and Finders................................. 32 4.7 Financing........................................... 32 4.8 Acquisition of Shares for Investment................ 33 Article V - Covenants of Parent ................................ 33 5.1 Access.............................................. 33 5.2 Confidentiality..................................... 34 5.3 Conduct of Business................................. 34 5.4 Reasonable Best Efforts; Notifications.............. 36 5.5 Consents and Approvals.............................. 37 5.6 Preservation of Records............................. 37 5.7 Signature and Bank Accounts......................... 37 5.8 Releases............................................ 38 5.9 Insurance........................................... 38 5.10 Outstanding Indebtedness............................ 38 5.11 Franchisee Guarantees............................... 38 5.12 No Solicitation..................................... 39 5.13 No Solicitation of Employees........................ 39 5.14 Additional Financial Statements..................... 40 5.15 Transition Services................................. 40 5.16 WWI Articles of Incorporation....................... 40 5.17 Heinz Australia-WWI Agreement....................... 40 Article VI - Covenants of the Purchaser and WWI.................. 40 6.1 Preservation of Records............................. 40 6.2 Reasonable Best Efforts; Notifications.............. 41 6.3 Governmental Approval Filings....................... 41 6.4 Acknowledgment of Exclusivity; Projections.......... 41 6.5 Financing........................................... 42 6.6 Guarantees.......................................... 43 6.7 Assumed Debt........................................ 43 Article VII - Employee Matters.................................... 43 7.1 Affected Employees.................................. 43 7.2 Employee Benefit Transition......................... 44 7.3 COBRA............................................... 45 7.4 Vacation............................................ 45 7.5 Pension Plans....................................... 45 7.6 Workers' Compensation............................... 45 7.7 No Third Party Beneficiaries........................ 46 7.8 Documents and Forms................................. 46 7.9 Applicability....................................... 46 7.10 Assumption of Employment Agreements; Retention of Liabilities...................................... 46 Article VIII - Excluded Assets and Liabilities..................... 47 8.1 Excluded Assets and Liabilities..................... 47 8.2 No Violation........................................ 47 Article IX - Conditions To Purchaser's Obligations............... 48 9.1 Accuracy of Representations and Warranties; Performance of Agreements; Certificates and Opinion of Counsel.................................. 48 9.2 Consents............................................ 51 9.3 Financing........................................... 51 9.4 [Intentionally Left Blank].......................... 51 9.5 No Injunction....................................... 51 9.6 Governmental Approvals.............................. 51 9.7 Closing Deliveries.................................. 51 Article X - Conditions To Parent's Obligations.................. 52 10.1 Accuracy of Representations and Warranties; Performance of Agreements; Certificates and Opinion of Counsel.................................. 52 10.2 Consents............................................ 52 10.3 No Injunction....................................... 52 10.4 Governmental Approvals.............................. 53 10.5 Closing Deliveries.................................. 53 Article XI - Indemnification..................................... 53 11.1 Survival of Representations and Warranties and Obligations......................................... 53 11.2 Indemnification by Parent........................... 53 11.3 Indemnification by Purchaser and WWI................ 54 11.4 Indemnification Procedures.......................... 55 11.5 Limits on Indemnification........................... 56 11.6 General Provisions on Indemnification............... 57 11.7 Exclusive Remedy.................................... 58 Article XII - Tax Matters......................................... 58 12.1 Section 338(h)(10) Election......................... 58 12.2 Liability for Taxes; Tax Indemnity.................. 59 12.3 Partial Period Taxes................................ 60 12.4 Federal Income Tax Returns.......................... 61 12.5 State and Local Income Tax Returns Where Books Closed.............................................. 61 12.6 State and Local Income Tax Returns for Interim Periods............................................. 62 12.7 Foreign Income Tax Returns and All Other Tax Returns............................................. 62 12.8 Tax Refunds......................................... 63 12.9 Cooperation......................................... 64 12.10 Tax Agreements and Arrangements..................... 64 12.11 Contests............................................ 64 12.12 Timing of Payments.................................. 65 12.13 Termination of Parent's Indemnity Obligations....... 65 12.14 Miscellaneous Tax Matters........................... 65 12.15 Purchase Price Adjustment........................... 66 Article XIII - Miscellaneous....................................... 67 13.1 Termination of Agreement............................ 67 13.2 Expenses............................................ 67 13.3 Waiver.............................................. 68 13.4 Consents............................................ 68 13.5 Assignment; Parties in Interest..................... 68 13.6 Further Assurances.................................. 68 13.7 Entire Agreement.................................... 69 13.8 Amendment........................................... 69 13.9 Limitations on Rights of Third Parties.............. 69 13.10 Captions............................................ 69 13.11 Counterparts........................................ 69 13.12 Notices............................................. 69 13.13 Governing Law....................................... 70 13.14 Transfer Taxes and Governmental Approvals Filing Fees................................................ 71 13.15 Public Announcements................................ 71 13.16 Schedules........................................... 71 13.17 Guaranty............................................ 71 13.18 Jurisdiction;Venue;Process.......................... 71 13.19 Time of Essence..................................... 72 13.20 Joint Promotion..................................... 72 LIST OF EXHIBITS A Intellectual Property Reorganization B Australian Reorganization C New Zealand Reorganization D Preferred Stock E Stockholders Agreement F LLC Agreement G Heinz License H Weight Watchers License I Operating Agreement J Trademark Licensing Agreement K Joint Promotional Agreement L Licensing Key Term Sheet LIST OF SCHEDULES 1.1 Food Products 2.4 Indebtedness for Borrowed Money to be Discharged 3.1 Incorporation; Qualification 3.4 No Conflict 3.5 Capitalization 3.6 Stock Ownership; Title to Shares 3.7(a) Financial Statements 3.7(b) Undisclosed Liabilities 3.8(b) Real Property Leases 3.8(c) Disclosures relating to Real Property Leases 3.9(a) Material Contracts 3.9(b) Exceptions to Validity, Force and Effect of Material Contracts; Events of Default 3.10 Employee Benefit Plans 3.11 Absence of Certain Changes 3.12 Litigation 3.13 Compliance with Laws; Permits 3.14 Franchise Agreements 3.15(a)(i) U. S. Intellectual Property Assets 3.15(a)(ii) Other Company Intellectual Property Assets 3.15(a)(iii) Patent Applications and Applications for Registration of Intellectual Property 3.15(a)(iv) U. S. Copyright Registrations 3.15(b) Food Licenses 3.15(c) Intellectual Property - Encumbrances 3.15(d) Exceptions to Intellectual Property 3.16 Taxes 3.19 Subsidiaries 3.20 Accounts Receivable 3.21 Year 2000 4.4 No Conflict (Purchaser) 5.3 Conduct of Business 5.8 Claims 6.6 Guarantees 7.1(a)(1) Parent Employees Permanently Assigned to WWI 7.1(a)(2) Parent's Severance Policies 8.1 Excluded Assets and Liabilities 9.6 Governmental Approvals RECAPITALIZATION AND STOCK PURCHASE AGREEMENT THIS AGREEMENT, dated as of July 22, 1999, among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), H. J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz" or "Parent"), ARTAL INTERNATIONAL S.A., a Luxembourg corporation ("Purchaser"), and ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("Guarantor") for purposes of Section 13.17 only. WITNESSETH: WHEREAS, Parent owns all of the issued and outstanding capital stock of WWI, consisting of 1,000 shares (the "WWI Shares") of common stock, par value $1.00 per share (the "WWI Common Stock"); and WHEREAS, at the Closing, WWI will borrow the Debt Financing Amount and will repay all or a portion of the Assumed Debt, deliver to Parent the releases referred to in Section 6.7 of this Agreement with respect to the unpaid portion of the Assumed Debt and deliver to Parent the Redemption Amount to redeem the Redemption Shares (the "Redemption"); and WHEREAS, immediately after the Redemption and on the terms and subject to the conditions set forth herein, Parent shall sell and transfer to the Purchaser, and Purchaser shall purchase from Parent, the Purchased Shares for an amount equal to the Stock Purchase Amount; and WHEREAS, as part of the transactions contemplated hereunder, WWI will initiate a restructuring whereby certain fixed locations such as classrooms and calling centers will be closed and certain corporate functions will be reorganized. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, agree as follows: 2 ARTICLE I DEFINITIONS "1999 Combined Statement of Assets and Liabilities" shall mean the audited Special Purpose Combined Statement of Assets and Liabilities of the Weight Watchers Classroom Business (as described in the Financial Statements) as of April 24, 1999. "Acquisition Proposal" shall mean any offer, proposal or indication of interest for the acquisition of (including by merger or other business combination) (i) any of the capital stock or other securities of any of the Companies or (ii) any of the assets of the Companies (other than a sale of inventory in the ordinary course of business consistent with past practice), in each case, other than in a transaction contemplated by this Agreement. "Affected Employees" shall have the meaning specified in Section 7.1(a). "Affiliate" means a Person, which directly or indirectly, alone or through one or more intermediaries, controls, or is controlled by, or is under common control with a specified Person. "Affiliated Group" means an "affiliated group" as defined in Section 1504(a) of the Code. "Agreement" shall mean this Agreement among Parent, WWI, Purchaser and Guarantor as originally executed and delivered, as the same may be amended or supplemented in accordance with the provisions hereof, together with Exhibits A, B, and C and the Schedules referred to herein. "Assumed Debt" shall mean any Indebtedness of any Company incurred to effect the Australian Reorganization and the New Zealand Reorganization as contemplated by Exhibits B and C, which Indebtedness in the aggregate will be not less than US$100,000,000 and not more than US$130,920,000 with respect to the Australian Reorganization and not more than US$16,604,000 with respect to the New Zealand Reorganization. "Australian Reorganization" shall have the meaning described in Exhibit B. "Basket" shall have the meaning specified in Section 11.5. "Business" shall mean the weight control classroom meeting business being conducted by the Companies and Parent and its Affiliates throughout the world and all other weight control services and activities and related businesses (including, without limitation, all licensing rights with respect to the Weight Watchers trademark other than as specified in clause (ii) below) being conducted by the Companies throughout the world, together with the 35% equity interest held by 3 WWI in Weight Watchers do Brasil Programas Alimentares Ltda. and the 35% equity interest held by WWI in Vigilantes do Peso Marketing Ltda., but shall exclude (i) the business being conducted as of the date hereof by Cardio-Fitness Corp. and Fitness Institute Limited, which are subsidiaries of Parent but are not subsidiaries of WWI, and (ii) the food business described on Schedule 1.1. "Closing" and "Closing Date" shall have the respective meanings specified in Section 2.6. "Closing Deferred Revenue Balance" shall mean the Deferred Revenue Balance (as defined in the Financial Statements) as of the Closing Date. "Closing Deferred Revenue Maximum Amount" shall mean $6,414,000. "Code" means the Internal Revenue Code of 1986, as amended and as in effect from time to time, and any law which shall have been a predecessor or shall be a successor thereto. "Commitment Letters" shall have the meaning specified in Section 4.7. "Companies" shall mean WWI, its Subsidiaries, Fortuity Australia and prior to the completion of the Reorganization, Fortuity NZ. "Contract" shall mean any contract, agreement, commitment, license, sublicense, or other binding arrangement (including purchase orders), whether oral or written, but excluding real property leases, Plans and Permits. "CSFB" shall have the meaning specified in Section 4.7. "Debt Financing Amount" shall mean $472,000,000 (less any amount of Assumed Debt not being repaid at the Closing) plus the amount of financing fees and financing expenses to be paid by WWI on the Closing Date. "Employees" shall have the meaning specified in Section 7.1(b). "Encumbrance" shall mean any encumbrance, lien, mortgage, charge, claim, option, pledge, license, sublicense, security interest, assignment by way of security, call, proxy or similar restriction, provided that neither the Assumed Debt nor the Debt Financing Amount shall be considered an Encumbrance. "Environmental Claim" shall mean any written notice, claim, demand, action, suit, complaint 4 or proceeding by any Person alleging liability or potential liability (including, without limitation, liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, relating to, based on or resulting from (x) the presence, discharge, emission, release or threatened release of any Hazardous Materials at any location, (y) circumstances forming the basis of any violation or alleged violation of any Environmental Laws, or (z) otherwise relating to obligations or liabilities under any Environmental Laws. "Environmental Laws" shall mean all applicable foreign, federal, state and local statutes, rules, regulations, ordinances, orders, decrees and common law relating in any manner to contamination, pollution or protection of human health or the environment. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Expert" shall mean Deloitte & Touche LLP. "Federal Income Taxes" means all Taxes imposed by the Code and other provisions of federal tax law based upon or measured by net income. "Federal Income Tax Returns" means all reports, estimates, information statements and returns relating to, or required to be filed in connection with, any Federal Income Taxes. "Final Closing Deferred Revenue Balance" shall have the meaning set forth in Section 2.3(b). "Financial Statements" shall mean the audited Special Purpose Combined Statements of Assets and Liabilities of the Weight Watchers Classroom Business (as described therein) as of April 24, 1999, April 25, 1998 and April 26, 1997, and the related Special Purpose Combined Statements of Operating Income Before Income Taxes and Special Purpose Combined Statements of Cash Flows from Operations for each of the fiscal years then ended, together with the report thereon of PricewaterhouseCoopers LLP, independent certified public accountants. "Financing" shall have the meaning specified in Section 4.7. "Financing Condition" shall mean the condition set forth in Section 9.3. "Foreign Governmental Approval Filings" shall have the meaning specified in Section 3.4. "Foreign Income Tax Returns" means all reports, estimates, information statements and returns relating to, or required to be filed in connection with, any Foreign Income Taxes. 5 "Foreign Income Taxes" means all Taxes imposed by any governmental authority other than a United States (federal, state or local) governmental authority and that are based upon or measured by net income. "Foreign Subsidiaries" means any Company formed under the laws of a jurisdiction outside the United States of America. "Fortuity Australia" shall mean Fortuity Pty., Ltd., an Australian corporation which owns and operates the Weight Watchers classroom franchise and business in Australia. "Fortuity NZ" shall mean Fortuity New Zealand Limited, a New Zealand corporation which owns and operates the Weight Watchers classroom franchise and business in New Zealand. "FTC" shall mean the Federal Trade Commission. "GAAP" shall mean generally accepted United States accounting principles as of the date hereof applied on a consistent basis during the periods involved. "Governmental Approval Filings" shall have the meaning specified in Section 5.5. "Hazardous Materials" shall mean all hazardous, dangerous or toxic substances, wastes, materials or chemicals, petroleum (including crude oil or any fraction thereof) and petroleum products, asbestos and asbestos-containing materials, pollutants, contaminants and all other materials regulated pursuant to any Environmental Laws or that could result in liability under any Environmental Laws. "Heinz Australia" shall mean H. J. Heinz Company Australia Limited, an Australian corporation and a wholly-owned indirect subsidiary of Parent. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "Indebtedness" of any Person shall mean, without duplication, all obligations of such Person (i) for borrowed money (including reimbursement obligations); (ii) evidenced by notes, bonds, debentures or similar instruments; (iii) for long-term (in excess of twelve months) payment obligations with respect to the deferred purchase price of goods or services (including the current portion of any long-term obligation); (iv) secured by assets of the Companies; (v) for capital leases (with terms in excess of twelve months) classified as indebtedness pursuant to GAAP (including 6 the current portion of any long-term capital lease obligation); (vi) pursuant to letters of credit; (vii) for Indebtedness of another Person guaranteed by such Person including, in any such case, for the avoidance of doubt, Indebtedness between Companies and (viii) for interest with respect to any of the foregoing. "Indemnitee" and "Indemnitor" shall have the respective meanings specified in Section 11.4(a). "Intellectual Property" shall have the meaning specified in Section 3.15(a). "Intellectual Property Reorganization" shall have the meaning described in Section 2.0. "IRS" shall mean the United States Internal Revenue Service. "Knowledge," "best of Knowledge" or words of similar import shall mean with respect to Parent the actual knowledge of the following persons: William C. Springer, Executive Vice President of Parent and the senior executive of Parent in charge of WWI, Mitchell A. Ring, Vice President ( Business Development for Parent, Edward J. McMenamin, Vice President ( Corporate Controller for Parent, Mark V. Matera, Director - Portfolio Development for Parent, Paul F. Renne, Executive Vice President and Chief Financial Officer of Parent, Lawrence J. McCabe, Senior Vice President, General Counsel and Secretary of Parent, Michael J. Bertasso, Senior Vice President of Parent, D. E. I. Smyth, Senior Vice President of Parent and Richard L. Penn, Managing Director of Fortuity Australia and Fortuity NZ (as to Australian and New Zealand operations) after due inquiry of all of the members of the Management Board of WWI with respect to the matters related thereto in the context of the transactions contemplated by this Agreement. The Management Board of WWI consists of Kent Q. Kreh, Carmen Dubroc, Robert Mallow, Linda Huett, Clive A. Brothers, Daniel DeBolt, Robert W. Hollweg, Stephanie Konecoff, Wayne Perra, Brian Powers and Michael Bull. If any person set forth in the prior two sentences shall cease to serve in the position set forth next to such person's name, such person's successor shall also be deemed to be included as a person for purposes of this definition. "Leased Real Property" shall mean the land, buildings and improvements covered by the Real Property Leases. "Losses" shall have the meaning specified in Section 11.4(a). "Material Adverse Effect" shall mean any material adverse effect on the business, financial condition or results of operations of the Companies (taken as a whole) or the Business (taken as a whole) except for any such adverse effect resulting from (i) changes that affect the weight control industry generally or (ii) changes in general economic conditions. 7 "Material Contracts" shall have the meaning specified in Section 3.9(a). "New Zealand Reorganization" shall have the meaning described in Exhibit C. "Notice of Claim" shall have the meaning specified in Section 11.4(b). "Other Company Intellectual Property Assets" shall have the meaning specified in Section 3.15(a). "Other Taxes" means any Taxes, other than Federal Income Taxes, State and Local Income Taxes and Foreign Income Taxes. "Other Tax Returns" means all reports, estimates, information statements and returns relating to, or required to be filed in connection with, any Other Taxes. "Parent Loss" shall have the meaning specified in Section 11.3. "Permit" shall mean any certificate of occupancy, license, certificate, exemption, permit, order or approval of any governmental authority. "Permitted Encumbrances" shall have the meaning specified in Section 3.8(b). "Person" shall mean an individual, a corporation, a limited liability company, a partnership, an association, a trust or other entity or organization. "Plans" shall have the meaning specified in Section 3.10(a). "Preferred Stock" means the $25,000,000 liquidation value of the Series A Preferred Stock of WWI having substantially the terms set forth in Exhibit D hereto. "Preliminary Closing Deferred Revenue Balance" shall have the meaning set forth in Section 2.3(a)(i). "Price Per Share" shall mean the amount calculated by dividing the sum of the Redemption Amount plus $238,000,000 by 1,000 shares (or such greater number of shares of WWI Common Stock as such shares shall have been converted into as a result of any recapitalization of WWI referred to in Section 5.16 of this Agreement). 8 "Purchased Shares" shall mean the number of shares of WWI Common Stock purchased by Purchaser from Parent and is calculated by dividing $223,720,000 by the Price Per Share. "Purchaser Loss" shall have the meaning specified in Section 11.2. "Purchaser Material Adverse Effect" shall mean any material adverse effect on the business, financial condition or results of operations of Purchaser and its Affiliates, taken as a whole. "Purchaser's Knowledge" or words of similar import shall mean with respect to Purchaser the actual knowledge of Raymond Debbane, Sacha Lainovic, Christopher J. Sobecki and Jonas M. Fajgenbaum. "Real Property Leases" shall have the meaning specified in Section 3.8(b). "Redemption Amount" shall mean $472,000,000 less the Assumed Debt plus the Preferred Stock. "Redemption Shares" shall mean the number of shares of WWI Common Stock redeemed by WWI from Parent and is calculated by dividing the Redemption Amount by the Price Per Share. "Representatives" shall mean Parent's or any of the Companies' officers, directors or employees or any investment banker, attorney, accountant or other representative or agent retained by Parent or any of the Companies. "Reorganization" shall mean the Intellectual Property Reorganization, the Australian Reorganization, and the New Zealand Reorganization. "Schedules" are the schedules furnished by Parent and WWI to Purchaser in the form attached to this Agreement. "Scotiabank" shall have the meaning specified in Section 4.7. "State and Local Income Taxes" means all Taxes, however denominated, based upon or measured by net income imposed by any State of the United States or by any political subdivision thereof. "State and Local Income Taxes Tax Returns" means all reports, estimates, information statements and returns relating to, or required to be filed in connection with, any State and Local Income Taxes. "Stock Purchase Amount" shall mean $223,720,000. 9 "Subsidiary" or "Subsidiaries" shall mean all Persons in which WWI directly or indirectly owns or has the right to acquire 50% or more of the aggregate voting power. "Tax" or "Taxes" means all taxes, however denominated, including any interest or penalties that may become payable in respect thereof, imposed by any federal, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income (including, but not limited to, Federal Income Taxes and State Income Taxes), payroll and employee withholding, unemployment insurance, social security, sales and use, excise, profits, value added, ad valorem, occupancy, disability, franchise, gross receipts, occupation, real and personal property, stamp, transfer, license, net worth, workers' compensation, and other taxes of the same or of a similar nature, whether arising before, on or after the Closing Date. "Tax Returns" means all reports, estimates, information statements and returns relating to, or required to be filed in connection with, any Taxes pursuant to the statutes, rules and regulations of any federal, state, local or foreign government taxing authority. "Third Party Claims" shall have the meaning specified in Section 11.4(c). "U.S. Subsidiaries" means any Subsidiary formed under the laws of the United States of America or under the laws of any state in the United States of America or the District of Columbia. 10 ARTICLE II REORGANIZATIONS; RECAPITALIZATION; SALE AND PURCHASE OF WWI COMMON STOCK SECTION 2.0 Reorganizations. Prior to the Closing, Parent shall effect the Australian Reorganization and the New Zealand Reorganization substantially as described in Exhibits B and C (and otherwise in form and substance reasonably satisfactory to Purchaser) so that (i) 100% of the shares of Fortuity Australia will be owned, indirectly, by WWI, and (ii) substantially all of the assets and liabilities of Fortuity NZ's Weight Watchers classroom franchise and business shall be owned by an indirect wholly-owned subsidiary of WWI. The parties agree to reasonably cooperate to create and execute such documents in order to effect the foregoing transactions. Following the execution of this Agreement and at or prior to the Closing, Parent and WWI, as appropriate, shall take such actions and undertake such transactions substantially as described in Exhibit A (and otherwise in form and substance reasonably satisfactory to Purchaser) to reorganize the ownership of certain trademark assets of WWI in accordance with the terms and conditions of this Agreement (the "Intellectual Property Reorganization"). The parties agree to reasonably cooperate to create and execute such documents in order to effect the foregoing transactions. SECTION 2.1 The Recapitalization. Upon the terms and subject to the conditions of this Agreement, at the Closing: (a) Parent shall cause WWI to borrow and Purchaser shall cause certain providers of financing to lend to WWI the Debt Financing Amount; and thereafter (b) WWI shall take the actions contemplated by Section 6.7; and thereafter (c) WWI shall redeem and Parent shall surrender for cancellation the Redemption Shares held by Parent and any and all rights of Parent or its Affiliates to acquire shares of WWI Common Stock for the Redemption Amount; and thereafter (d) Purchaser shall purchase from Parent and Parent shall sell to Purchaser the Purchased Shares (representing 94% of the fully diluted number of shares of WWI Common Stock after giving effect to the transaction set forth in Section 2.1 (c)), for an amount in aggregate equal to the Stock Purchase Amount. SECTION 2.2 Performance of Obligations of WWI. Parent shall cause WWI to discharge all of its obligations under this Agreement to be performed at or prior to the Closing, including without limitation, those under Sections 2.0 and 2.1. SECTION 2.3 Closing Deferred Revenue Adjustment. 11 (a) Promptly, and in any event within 60 days following the Closing Date, Purchaser shall prepare and deliver to Parent a statement of the actual Closing Deferred Revenue Balance of the Companies on a combined basis (the "Preliminary Closing Deferred Revenue Balance") as of the Closing Date, together with the workpapers of Purchaser used in the preparation thereof. The Preliminary Closing Deferred Revenue Balance shall be prepared on a basis consistent with the information included in the Financial Statements and by applying the same accounting principles, policies and practices utilized in preparing the Financial Statements. (b) If Parent disagrees in good faith with the amount of the Preliminary Closing Deferred Revenue Balance delivered pursuant to Section 2.3(a) hereof, Parent may, within 30 days after its receipt thereof, deliver a written notice of disagreement to Purchaser. Any such notice of disagreement shall specify the basis for such objection including identifying any alleged miscalculation, or alleged uncounted or improperly included items, and Parent shall be deemed to have agreed with all other items and amounts contained in the Preliminary Closing Deferred Revenue Balance. If a notice of disagreement shall be timely delivered pursuant to this paragraph (b) hereof, the parties shall, during the 20 days following such delivery, use their reasonable best efforts to reach agreement on the disputed items. In the absence of such agreement, the determination of such Preliminary Closing Deferred Revenue Balance may be referred by either Parent or Purchaser for determination to the Expert and the Expert shall be instructed to notify both Parent and Purchaser of its determination within 14 days of such referral. In connection therewith, the Expert shall consider only those items or amounts in the Preliminary Closing Deferred Revenue Balance as to which Parent has disagreed and those items raised for review by Purchaser in response to the items disputed by Parent. In making its determination, the Expert shall act as expert and not arbitrator and its determination shall, in the absence of manifest error, be deemed to have been accepted and approved by Parent and Purchaser and shall be deemed to constitute the Final Closing Deferred Revenue Balance for all purposes of this Agreement. The Expert shall deliver to Parent and Purchaser a report setting forth its adjustments, if any, to the Preliminary Closing Deferred Revenue Balance and the calculations supporting such adjustments. The fees and costs of the Expert shall be borne equally by Parent and Purchaser. As used herein, "Final Closing Deferred Revenue Balance" shall mean (x) if no notice of disagreement is delivered by Parent within the period provided in this Section 2.3(b), the Preliminary Closing Deferred Revenue Balance as shown in Purchaser's calculation delivered pursuant to Section 2.3(a), or (y) if such notice of disagreement is delivered by Parent, either (i) as agreed in writing by Purchaser and Parent or (ii) as shown in the Expert's calculation delivered pursuant to this Section 2.3(b). (c) If the amount of the Final Closing Deferred Revenue Balance is greater than the Closing Deferred Revenue Maximum Amount, then the Parent shall pay to the Purchaser, as an adjustment to the Purchase Price, an amount equal to the difference between the Final Closing Deferred Revenue Balance and the Closing Deferred Revenue Maximum Amount in the manner and with interest as provided in 12 Section 2.3(d). If the amount of the Final Closing Deferred Revenue Balance is less than or equal to the Closing Deferred Revenue Maximum Amount, no payment shall be required by Purchaser and no adjustment shall be made to the Purchase Price. (d) Payments made pursuant to Section 2.3(c) shall be made by wire transfer (to an account designated by Purchaser) of immediately available funds on the fifth business day following the date the Final Closing Deferred Revenue Balance is determined as provided in Section 2.3(b) above. The amount of any such payments shall bear interest for the period from and including the Closing Date to, but excluding the payment date, at an interest rate of 6%. Such interest will be payable at the same time as the payment to which it relates and shall be calculated and compounded daily on the basis of a year of 360 days and the actual number of days for which interest is due. (e) For purposes of determining and agreeing on any Final Closing Deferred Revenue Balance, Purchaser shall cause each Company to give Parent, its accountants, its other representatives and the Expert reasonable access at reasonable times to all relevant personnel, books and records of the Companies. SECTION 2.4. Outstanding Indebtedness. Immediately before the Closing, Parent will (i) repay any and all outstanding Indebtedness owed by WWI and the Companies (other than the Assumed Debt and Indebtedness covered by clause (iii) below), in a manner which will not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld), result in any increase in the Taxes or any other liability of any Company, including, without limitation, the Indebtedness set forth on Schedule 2.4, and will provide evidence of such repayment to Purchaser, (ii) cause all Indebtedness owed to any of the Companies by Parent or any Affiliate of Parent (other than the Companies) to be paid in full or otherwise canceled in a manner which will not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld), result in any increase in the Taxes or any other liability of any Company, and (iii) cause all Indebtedness owed to Parent and any Affiliate of Parent (other than the Companies) by the Companies to be paid in full or otherwise canceled in a manner which will not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld), result in any increase in the Taxes or any other liability of any Company. SECTION 2.5. [This Section intentionally left blank] 13 SECTION 2.6. Closing. (a) The Recapitalization and sale and purchase of the Purchased Shares contemplated hereby (the "Closing") shall take place at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, on the third business day following the satisfaction or waiver of all conditions set forth in Articles IX and X hereof, or at such other place or time as the parties may agree. The Closing will not be deemed to have occurred unless and until all of the steps described in this Article II have occurred, and the parties agree to reverse those steps which have occurred in the event that all such steps do not occur. The day on which the Closing actually takes place is referred to herein as the "Closing Date." The Closing shall be deemed to have occurred as of 11:59 P.M. New York time on the Closing Date; provided that any cash receipts or other revenues received by the Companies on the Closing Date shall be deemed to have been received after the Closing and shall be for the benefit of the Purchaser. (b) At the Closing, Parent shall deliver to WWI the certificates representing the Redemption Shares duly endorsed for transfer by Parent or accompanied by duly executed stock powers in blank or share transfer forms, as applicable. At the Closing, WWI shall: (i) pay to Parent the cash portion of the Redemption Amount by wire transfer of immediately available U.S. funds to an account designated in writing by Parent to WWI and Purchaser not less than two business days prior to the Closing Date; (ii) repay all or a portion of the Assumed Debt in an amount determined by Purchaser; (iii) deliver to Parent the releases referred to in Section 6.7 with respect to the unpaid amount, if any, of Assumed Debt; and (iv) deliver to Parent the Preferred Stock. At the Closing, Parent, Purchaser, and WWI will enter into the Preferred Stock Stockholders' Agreement the terms of which are contemplated by Exhibit D. Upon receipt of the Redemption Shares, WWI shall immediately cancel the certificates representing the Redemption Shares. (c) At the Closing, Parent shall deliver to Purchaser: (i) the certificates representing the Purchased Shares duly endorsed for transfer by Parent, or accompanied by duly executed stock powers in blank or share transfer forms, as applicable; and (ii) executed copies of the agreements and licenses in substantially the form attached hereto as Exhibits D through K. (d) At the Closing, Purchaser shall pay the Stock Purchase Amount to Parent by wire transfer of immediately available U.S. funds to an account designated in writing by Parent to Purchaser not less than two business days prior to the Closing Date. At the Closing, Purchaser and WWI, as applicable, 14 shall deliver to Parent executed copies of the agreements and licenses in substantially the form attached hereto as Exhibits D through K. (e) At the Closing, each of the parties hereto will deliver a copy of all of their corporate resolutions authorizing the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, accompanied by the certification of the Secretary or Assistant Secretary of such Person to the effect that such resolutions are in full force and effect and have not been amended, modified or rescinded. (f) At the Closing, Parent shall deliver to WWI the minute books, corporate seals and stock transfer records or other corporate records of each of the Companies which are in its or its Affiliates' (other than the Companies') possession. (g) On or prior to the Closing, Parent will deliver resignations of the directors and officers of the Companies who are employees or directors of the Parent or of any Affiliate of the Parent (as determined after the Closing). (h) At the Closing, Parent, WWI and Purchaser shall deliver (unless previously delivered) such other documents and certificates, duly executed, as may be required to be delivered by Parent, WWI and Purchaser pursuant to the terms of this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Parent represents and warrants to Purchaser as follows: SECTION 3.1. Incorporation; Qualification. Parent and WWI are corporations duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and the Commonwealth of Virginia, respectively. Heinz Australia and Fortuity Australia are corporations duly organized, validly existing and in good standing under the laws of Australia. Fortuity NZ is a company duly incorporated, validly existing and in good standing under the laws of New Zealand. Each of Parent, Heinz Australia, WWI, Fortuity Australia and Fortuity NZ has the corporate power and authority to carry on its business as presently conducted by it and to own, operate and lease the assets and properties that it owns, operates or leases. Each of Parent, Heinz Australia, WWI, Fortuity Australia and Fortuity NZ is duly qualified to do business and is in good standing in each jurisdiction in which its conduct of the business or its ownership or operation of its assets requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, would not be likely to have a Material Adverse Effect. Schedule 3.1 contains true and complete copies of the certificate of incorporation and by-laws of Parent, Heinz Australia, WWI, Fortuity Australia and Fortuity NZ. 15 SECTION 3.2. Authority. Parent, WWI, Heinz Australia (and any successor owner of Fortuity Australia) and Fortuity NZ have all requisite power and authority to execute, deliver and perform their respective obligations under this Agreement, the Australian Share Sale Agreement (as referred to in Exhibit B hereto) and the NZ Asset Purchase Agreement (as referred to in Exhibit C hereto), as applicable, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the consummation of the applicable transactions contemplated hereby have been duly authorized by the Board of Directors of Parent and WWI and no other corporate act or proceeding on the part of Parent or WWI is necessary to approve the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. The consummation of the applicable transactions contemplated by this Agreement have been duly authorized by the shareholders and Board of Directors of Heinz Australia and Fortuity NZ, and no other corporate act or proceeding on the part of Heinz Australia or Fortuity NZ is necessary to approve the consummation of the transactions contemplated hereby. SECTION 3.3. Execution and Binding Effect. This Agreement has been duly and validly executed and delivered by each of Parent and WWI, constitutes its legal, valid and binding obligation and will be enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization, liquidation or other laws relating to or affecting creditors' rights or by equitable principles. SECTION 3.4. No Conflict. Except as set forth in Schedule 3.4, neither the execution and delivery of this Agreement by Parent or WWI, nor the consummation or performance by Parent or WWI of the transactions contemplated hereby, will: (a) conflict with or violate any provisions of Parent's or WWI's Articles of Incorporation or By-Laws or any provision of the organizational documents of the Companies; (b) result in the creation of an Encumbrance over the WWI Common Stock or any assets of the Companies, require any consent, approval or notice under or conflict with, result in a suspension, termination, violation or breach of, give rise to any right of termination, purchase, amendment or any other right under, increase the liability of any party under, or constitute (with or without notice or lapse of time or both) a default under, or accelerate or permit the acceleration (with or without notice or lapse of time or both) of any obligation required by, any Contract, Real Property Lease, Plan or Permit to which any of the Parent or the Companies is a party or by which any of the Parent or the Companies or any of their assets are bound or subject; (c) conflict with or violate any law, statute or ordinance or any rule, regulation, order, writ, injunction, consent or decree of any court or of any public, governmental or regulatory body, agency or authority having jurisdiction over Parent or the Companies or by which any of their assets may be bound 16 or subject; or (d) require any filing, declaration or registration with, or permit, consent or approval of, or the giving of notice to, any public, governmental or regulatory body, agency or authority; excluding from the foregoing Sections 3.4(b) through (d): (i) Such conflicts, violations, terminations, breaches, defaults, accelerations, filings, declarations, registrations, permits, consents, approvals and notices, the occurrence or absence of which, either individually or in the aggregate, would not be likely to have a Material Adverse Effect; and (ii) the filings required under the HSR Act and the similar legislation in non-U.S. jurisdictions requiring registration or government approval including, without limitation, those set forth on Schedule 3.4(d) (as listed, the "Foreign Governmental Approval Filings") in connection with the proposed transactions and expiration of the applicable waiting periods under the HSR Act or such similar legislation. SECTION 3.5. Capitalization. The authorized capital stock of WWI consists solely of 1,000 shares of WWI Common Stock, of which solely 1,000 shares are issued and outstanding, and constitute the WWI Shares. Schedule 3.5 sets forth (i) the authorized and issued capital stock of each U.S. Subsidiary (other than WWI) and the Principal Foreign Subsidiaries and (ii) the registered owner(s) of all the issued share capital of each such Company. All of the outstanding equity securities of each of the Companies have been duly authorized and validly issued and are fully paid and non-assessable and were not issued in violation of any preemptive rights, and with respect to the Companies organized outside of the United States, to the extent the foregoing concepts are applicable. Except as set forth in Schedule 3.5, there are no (i) securities convertible into or exchangeable for the capital stock of any of the Companies or (ii) contracts, agreements, commitments or plans relating to the issuance, voting, sale or transfer of any securities of any of the Companies. Except as set forth in Schedule 3.5, none of the Companies owns, or has any obligation to acquire, any securities (other than the securities of the Companies) or any direct or indirect equity or ownership interest in any other Person. SECTION 3.6. Stock Ownership; Title to Shares. All of the outstanding shares of WWI Common Stock are as of the date hereof and will be on the Closing Date owned beneficially and of record by Parent, free and clear of all Encumbrances. When each of WWI and Purchaser acquires their respective WWI Shares pursuant to the provisions of this Agreement, upon payment of the Redemption Amount and Stock Purchase Amount, as applicable, they will receive their respective WWI Shares free and clear of any Encumbrances other than Encumbrances resulting from acts or omissions of or created by Purchaser. Parent has not granted any option or right, and is not party to any other agreement, and no such option, right or agreement exists, which requires, or which upon the passage of time, the payment of 17 money or the occurrence of any other event, may require Parent to transfer any of the WWI Shares to anyone other than as contemplated by this Agreement. Except as set forth in Schedule 3.6, all of the outstanding securities of each of the Subsidiaries are as of the date hereof, and all of the outstanding securities of each of the Companies (other than WWI) will be on the Closing Date, owned beneficially and of record by one or more of the Companies, free and clear of all Encumbrances. SECTION 3.7. Financial Statements; Undisclosed Liabilities. (a) Schedule 3.7(a) sets forth a true and correct copy of the Financial Statements. The Financial Statements (i) have been prepared in accordance with the basis of accounting described in Notes 1 and 2 thereto and the books, records, and accounts of the Weight Watchers Classroom Business (as described in the Financial Statements) and (ii) present fairly in all material respects, the assets, liabilities and operating income before taxes and cash flows from operations of the Weight Watchers Classroom Business (as described in the Financial Statements) at the times and for the periods covered thereby, as the case may be, in accordance with the basis described in Notes 1 and 2 to the Financial Statements. Schedule 3.7(a) includes in the case of the Statements of Operating Income Before Income Taxes, a description of all adjustments, and in the case of the Statements of Assets and Liabilities, a description of all categories of adjustments, in each case other than immaterial adjustments, necessary to conform the Financial Statements to financial statements prepared in accordance with GAAP. (b) The Companies have no liabilities (whether accrued, absolute, contingent or otherwise and whether known or unknown) that would have been required to be reflected in or reserved against on a balance sheet (or the notes thereto) for the Companies taken as a whole prepared in accordance with GAAP, other than (i) liabilities reflected or reserved against (to the extent of the reserves therefor) in the 1999 Combined Statements of Assets and Liabilities (including the notes thereto), (ii) obligations incurred or arising in the ordinary course of business consistent in all material respects with past practice since April 24, 1999 which, individually or in the aggregate, would not be likely to have a Material Adverse Effect, (iii) the liabilities set forth in Schedule 3.7(b), (iv) the Excluded Liabilities, and (v) other liabilities which, individually or in the aggregate, would not be likely to have a Material Adverse Effect. SECTION 3.8. Title to Assets; Leased Real Property. (a) The tangible assets of the Companies constitute all of the tangible assets necessary to carry on the Business as currently conducted, except where the failure to own or have the right to use such tangible assets, individually or in the aggregate, would not be likely to have a Material Adverse Effect. Except for such tangible assets which, individually or in the aggregate, are not material to the Business, each of the Companies has good and valid title to all of the tangible assets purported to be owned by it including, without limitation, those (i) reflected as owned by such Company in the 1999 Combined 18 Statement of Assets and Liabilities (except for such assets sold, leased or otherwise disposed of since April 24, 1999 in the ordinary course of business consistent with past practice), and (ii) purchased or otherwise acquired by the Companies since April 24, 1999 (except for such properties and assets sold, leased or otherwise disposed of after the acquisition thereof in the ordinary course of business consistent in all material respects with past practice), in the case of each of (i) and (ii) above, free and clear of any Encumbrances, except for any liens securing taxes, assessments, governmental charges or levies which are not yet due and payable or are being contested in good faith. (b) None of the Companies owns any real property. Schedule 3.8(b) lists all leases of real property under which any of the Companies is the lessee requiring the payment of $250,000 or more per year as base rent (the "Major Real Property Leases"). Parent has delivered to Purchaser true and complete copies of each Major Real Property Lease and all material amendments and supplements thereto. Except for the matters which, individually or in the aggregate, would not be likely to have a Material Adverse Effect, each lease of real property under which any of the Companies is the lessee requiring the payment of less than $250,000 per year as base rent (the "Minor Real Property Leases") and, to Parent's Knowledge and without qualification as to Material Adverse Effect, each Major Real Property Lease (the Major Real Property Leases and the Minor Real Property Leases are collectively referred to herein as the "Real Property Leases") is a valid and binding agreement enforceable in accordance with its terms (except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization, liquidation or other laws relating to or affecting creditor's rights or by equitable principles) and is in full force and effect and the applicable Company holds a valid leasehold or subleasehold interest subject to only (i) any and all underlying mortgages, deeds of trust, leases, grants of term or other estates in or interests affecting the landlord's or fee owner's interest in the applicable portion of such property which are superior to the interests of such Company as lessee, (ii) any Encumbrances of title to the Leased Real Property other than those granted by, authorized by or attributable to acts or omissions of any Company, (iii) all applicable building and zoning ordinances, and (iv) liens securing taxes, assessments, governmental charges or levies, or the claims of contractors, materialmen, carriers, landlords, warehousemen, workmen, repairmen, customers, employees and similar persons which are not yet due and payable or are being contested in good faith (the Encumbrances referred to in (i) through (iv) are collectively referred to herein as "Permitted Encumbrances"). (c) Except as indicated in Schedule 3.8(c) and except for matters that, individually or in the aggregate, would not be likely to have a Material Adverse Effect, (i) no default of the Companies or, to Parent's Knowledge, of any other party, exists under any Real Property Lease and there does not exist any event that, with notice or lapse of time or both, would constitute an event of default on the part of the Companies or, to Parent's Knowledge, any other party thereto, or result in a right to modify, accelerate or terminate or loss of rights under any Real Property Lease, (ii) the applicable Company has not assigned, transferred, licensed, subleased or otherwise encumbered any of its interest in any Real Property Lease, (iii) no notices have been received from any governmental authority (A) requiring the applicable Company to correct any condition with respect to the Leased Real Property by reason of a violation of any laws, codes, ordinances, rules, regulations or orders of governmental authorities that have not been corrected, 19 or (B) regarding a condemnation action with respect to the Leased Real Property, (iv) the change in ownership pursuant to this Agreement will not result in the termination of, or result in a right of termination under, any such Real Property Lease, require the consent of any party thereto or bring into operation any other provisions thereof, and (v) all real property being used by any of the Companies is being used in compliance in all respects with all zoning and other laws and regulations, deed restrictions, covenants and lease provisions applicable to it. (d) SUBJECT TO THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III AND THE PROVISIONS OF ARTICLE XI, PARENT EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND SELLS OR ASSIGNS ALL ITEMS OF PERSONAL PROPERTY, TANGIBLE ASSETS AND PHYSICAL ASSETS INCLUDING, BUT NOT LIMITED TO, MACHINERY AND EQUIPMENT, STRUCTURES, FIXTURES, IMPROVEMENTS AND OPERATING SYSTEMS IN THE CONDITION "AS IS" AND PURCHASER WAIVES ANY RIGHT TO MAKE ANY CLAIMS WITH RESPECT THERETO. SECTION 3.9. Contracts. (a) Schedule 3.9(a) discloses a complete list of the following Contracts of any of the Companies, whether written and, to the Knowledge of Parent, oral: (i) Contracts to which any Company is a party or by which it is bound and which involve the payment or receipt of in excess of $500,000 during the remaining term thereof, but excluding purchase or supply orders arising in the ordinary course of business consistent with past practice; (ii) collective bargaining agreements (other than with respect to workers' councils), (iii) agreements containing covenants limiting the freedom of any of the Companies to compete with any Person in any line of business or in any area or territory or confidentiality agreements (other than in the ordinary course of business consistent with past practice), (iv) license, sublicense, royalty or other similar agreements relating to a material use of Intellectual Property, (v) indentures, mortgages, notes and guarantees or other debt instruments evidencing indebtedness of the Companies for borrowed money, in each case exceeding $50,000, (vi) agreements or series of related agreements between any of the Companies, on the one hand, and Parent, any Affiliate of the Companies (other than any Company) or any Affiliate of Parent (other than any Company), on the other hand, in each case exceeding $50,000, (vii) agreements under which any of the Companies have advanced or loaned any amount to any of its directors or officers (other than advances in the ordinary course of business consistent with past practice), (viii) joint venture, partnership (other than in the ordinary course of business consistent with past practice), shareholder, voting trust or similar contracts and agreements relating to the Business, (ix) any material contract with any governmental entity, (x) all third party franchise agreements and (xi) any other Contract or related series of Contracts, which is material to the Companies (taken as a whole) (collectively, the "Material Contracts"). Except as otherwise indicated in Schedule 3.9(a), true and complete copies of each 20 written Material Contract and true and complete written summaries of each such oral Material Contract (together with any and all material modifications, amendments or supplements thereto) have been delivered to Purchaser prior to execution of this Agreement. (b) Except as set forth in Schedule 3.9(b) and except for such matters that would not be likely, individually or in the aggregate, to have a Material Adverse Effect, (i) all Material Contracts are valid, binding and enforceable (except as may be limited by applicable bankruptcy, moratorium, insolvency, reorganization, liquidation or other laws relating to or affecting creditor's rights or by equitable principles) and in full force and effect and (ii) no breach or default of the Companies or, to Parent's Knowledge, of any other party, exists under any Material Contract and (iii) there does not exist any event that, with notice or lapse of time or both, would constitute an event of default on the part of the Companies or, to Parent's Knowledge, any other party thereto, or result in a right to accelerate, or loss of rights under any Material Contract. None of the Companies or Parent has delivered or received written notice of termination of any Material Contract. SECTION 3.10. Employee Benefit Plans. (a) Schedule 3.10 hereto contains a complete list of each plan, contract, program and arrangement, including, but not limited to, pension, bonus, deferred compensation, incentive compensation, stock purchase, supplemental retirement, redundancy or severance payments, employment contract, stock option, hospitalization, medical, life insurance, dental, disability, salary continuation, vacation, supplemental unemployment benefits, profit-sharing, retirement and each other employee benefit plan, program, policy or arrangement, maintained or contributed to by WWI, Fortuity Australia or each material Subsidiary for the benefit of their respective employees, but excluding any government-sponsored non-U.S. employee benefit programs to which such entities are required to contribute (collectively, "Plans"). Parent has delivered to Purchaser true and complete copies of each of the Plans. (b) (i) Each Plan has been established and administered in accordance with its terms, and in compliance, in all material respects, with applicable law. (ii) All Plans for the benefit of Affected Employees which are "employee pension benefit plans" within the meaning of Section 3(2) of ERISA are intended to be qualified under Section 401(a) of the Code and have received determination letters from the IRS stating that such Plans are qualified under the Code as amended by the Tax Reform Act of 1986, and each trust created under any such Plan is exempt from tax under Section 501(a) of the Code. Each such Plan has been amended to be in compliance with current law and intends to submit such Plans to the IRS for a determination of their qualified status as amended within the remedial amendment period applicable to such Plans, and further intends to make any changes required by the IRS necessary to maintain the qualified status of such Plans. (iii) No event has occurred and no condition exists that would subject the Companies, either directly or by reason of their affiliation with any member of the "controlled group" (defined as any organization which is a member of a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code) to any tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws. 21 (c) None of the Plans for the benefit of Affected Employees is a "multiemployer plan" as defined in ERISA Section 3(37). (d) Except as set forth on Schedule 3.10(d), no Plan exists that could result in a payment to any present or former Affected Employee (as defined in Section 7.1(a)) as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code. (e) With respect to any Plan being assumed by WWI, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to Parent's Knowledge, threatened and (ii) to Parent's Knowledge, no facts or circumstances exist that could give rise to any such actions, suits or claims. SECTION 3.11. Absence of Certain Changes. Except as set forth in Schedule 3.11 and other than the transactions contemplated herein, since April 24, 1999, the Business has been conducted in all material respects in the ordinary course consistent with past practice (including, without limitation, with respect to the management of inventory, collection of accounts receivable and timing of receipts, payment of accounts payable and other disbursements of cash) and the Companies (taken as a whole) and the Business (taken as a whole) have not suffered a Material Adverse Effect, and there has not been any change, occurrence, or development which, individually or in the aggregate, would be likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, since April 24, 1999, except as otherwise disclosed in Schedule 3.11 and other than the transactions contemplated herein, neither WWI nor any Company has: (a) permitted or allowed any assets that are material to the Business to be abandoned, invalidated, mortgaged, pledged or subjected to any Encumbrance, other than Permitted Encumbrances; (b) purchased, acquired, sold, transferred, leased or otherwise disposed of, any of its property or assets other than in the ordinary course of business consistent in all material respects with past practice; (c) other than in the ordinary course of business consistent in all material respects with past practice, and other than any agreements with any senior manager of the Companies relating to compensation or benefits for which Parent is retaining liability, (i) entered into any employment, consulting or severance agreements with any member of senior management of the Business, or any director of any U.S. Subsidiary or any Foreign Subsidiaries listed on Schedule 3.11(c) (the "Principal Foreign 22 Subsidiaries"), or materially changed the terms thereof; (ii) increased benefits payable under existing severance or termination pay policies or employment agreements with respect to any member of senior management of the Business or any director of any U.S. Subsidiary or any Principal Foreign Subsidiary, or (iii) made any increase in, or commitment or plan to increase, the wages, salaries, compensation, pension or other benefits or payments to any directors, officers or employees of the Companies (except for increases in the ordinary course of business consistent in all material respects with past practice or as required under Plans); (d) adopted, entered into or agreed to enter into, or amended or agreed to amend or canceled or agreed to cancel any Plan which individually or in the aggregate are material to the Business, other than in the ordinary course of business; (e) made any change in any financial reporting or accounting policy or accounting practice, other than such changes required by law or GAAP; (f) made or repaid any loan or payment to, or entered into any other transaction with, any of its directors or officers or Parent, other than in the ordinary course of business consistent in all material respects with past practice; (g) settled or agreed to settle any legal action or arbitration, which settlements, individually or in the aggregate, would be likely to have a Material Adverse Effect; (h) declared, set aside or paid any dividend or other distribution in respect of any capital stock or repaid any intercompany debt other than in the ordinary course of business consistent in all material respects with past practice, or other than pursuant to the transactions contemplated herein; (i) waived or released any claims or rights (other than claims or rights in the nature of Indebtedness) which waivers or releases would, individually or in the aggregate, be likely to have a Material Adverse Effect; (j) merged or consolidated with, or acquired securities or any equity interest in, any Person; (k) made any material loan or advance to any Person, other than a loan or advance between one or more Companies or loans and advances to employees in the ordinary course of business consistent with past practice; (l) written down the value of any inventory or any other asset of the Business or sold any amount of its inventory except in the ordinary course of business consistent in all material respects with past practice; 23 (m) issued and sold any new debt securities or, other than in the ordinary course of business consistent in all material respects with past practice, entered into any new credit facility; (n) entered into any other transaction or agreement which requires any of the Companies to make aggregate payments in excess of $500,000 other than in the ordinary course of business consistent in all material respects with past practice; (o) executed, annulled, terminated or materially modified any Material Contract; (p) failed to pay any creditor any amount (other than any immaterial amount) owed to such creditor when due (after the expiration of any applicable grace periods), other than in the ordinary course of business consistent with past practice; (q) sold, transferred, distributed, leased or otherwise disposed of to Parent or its Affiliates (other than the Companies) any Intellectual Property or any other assets that are material to the Business other than cash or cash equivalents; or (r) agreed or committed to, whether in writing or otherwise, to take any of the actions set forth in this Section 3.11. SECTION 3.12. Litigation. Except as set forth in Schedule 3.12, there is no claim, cause of action, allegation, action, suit, proceeding, litigation, arbitration, or investigation ("Action") pending or, to Parent's Knowledge, threatened (i) by or against Parent or any of the Companies which would be likely to prevent, materially interfere with or materially delay the consummation of the transactions contemplated hereby, or individually or in the aggregate, would be likely to have a Material Adverse Effect or (ii) with respect to the transactions contemplated hereby, at law or in equity, or before or by any federal, state, municipal, foreign or other governmental department, commission, board, agency, instrumentality or authority which, if adversely determined, would be likely to prevent, materially interfere with or materially delay the consummation of the transactions contemplated hereby. Except as set forth in Schedule 3.12, there is no order, decree, injunction or judgment pending or in effect against any of the Companies which would be likely to prevent, materially interfere with or materially delay the consummation of the transactions contemplated hereby or, individually or in the aggregate, would be likely to have a Material Adverse Effect. SECTION 3.13. Compliance with Laws. Except as set forth in Schedule 3.13, each of the Companies is conducting and has conducted for the previous three years its portion of the Business in compliance with all applicable statutes, laws, rules, regulations, ordinances, decrees, settlements, judgments, writs, injunctions, and orders which are and have been in effect and has not received any 24 unresolved notice that it is in noncompliance with any such statutes, laws, rules, regulations, ordinances, decrees, judgments, writs, injunctions or orders, except in any case for instances of noncompliance where enforcement would not, individually or in the aggregate, be likely to (i) have a Material Adverse Effect or (ii) prevent or materially interfere with or materially delay the consummation of the transactions contemplated hereby. Except as set forth in Schedule 3.13, each of the Companies currently holds and is in compliance with all Permits necessary for the ownership and operation of its portion of the Business, except where the failure to hold any such Permits or comply with the terms thereof would not, individually or in the aggregate, be likely to (i) have a Material Adverse Effect or (ii) prevent or materially interfere with or materially delay the consummation of the transactions contemplated hereby. All such Permits are listed in Schedule 3.13. SECTION 3.14. Franchise Agreements. Schedule 3.14 sets forth a list of all third party franchises of the Business granted by WWI and its Affiliates (the "Franchisees"). Except as set forth in Schedule 3.14, since January 1, 1999, neither Parent nor the Companies have received written notification from any Franchisee that such Franchisee has canceled or intends to cancel its applicable agreement with the applicable Company, or, alleging that the applicable Company is in breach of such agreement, and to Parent's Knowledge, there does not exist any event that, with notice or lapse of time or both, would constitute a breach or an event of default by the applicable Company or result in a right to accelerate, or loss of rights under any such agreement. Except as set forth on Schedule 3.14, to Parent's Knowledge, none of the Franchisees is in violation or breach of any material provision of its applicable agreement with the applicable Company which would give rise to a right of termination by the applicable Company. SECTION 3.15. Intellectual Property. (a) Except for the Excluded Assets, the term "Intellectual Property" shall mean all intellectual property rights of any kind, including, without limitation, all: (i) patents, inventions, discoveries, processes, recipes, techniques, designs, developments, technology, know-how and improvements thereto; (ii) copyrights and works of authorship in any media, including computer hardware, software, systems, databases, documentation and Internet site content, marketing, advertising, promotional and instructional materials (including all textual and graphic materials); (iii) trademarks, service marks, trade names, brand names, fictitious names, corporate names, domain names, URL's, e-mail addresses, logos, slogans and trade dress; (iv) trade secrets, drawings, blueprints and all confidential or proprietary information, materials and ways of doing business; 25 (v) moral rights, publicity and privacy rights and similar rights of authors and individuals; and (vi) all registrations, applications and recordings related thereto. Schedule 3.15(a)(i) sets forth a list of all U.S. patented or registered Intellectual Property that is owned by, used by, or licensed for use by any of the Companies ("U.S. Intellectual Property Assets"). Schedule 3.15(a)(ii) sets forth a list of all non-U.S. patented or registered Intellectual Property that is owned by, used by, or licensed for use by any of the Companies ("Other Company Intellectual Property Assets"). Schedule 3.15(a)(iii) sets forth a list of all pending patent applications or other applications for registration of Intellectual Property that are owned by, used by, or licensed for use by any of the Companies. Schedule 3.15(a)(iv) sets forth a list of all U.S. based copyright registrations that are owned by, used by or licensed for use by any of the Companies. (b) Schedule 3.15(b) sets forth a list of (i) all trade names, corporate names, and Internet domain names which in each case are material; and (ii) all material food licenses ("Food Licenses") covering Intellectual Property to which any Company is a party, including as licensor or licensee. Other material licenses covering Intellectual Property are listed in Schedule 3.9(a). (c) Except as disclosed in Schedule 3.15(c) and except for Permitted Encumbrances, the applicable Company owns, or has a valid right to use (in the manner as presently used), free and clear of all Encumbrances, all Intellectual Property necessary to conduct the Business as currently conducted consistent with past practice. (d) Except as set forth in Schedule 3.15(d): (i) the U.S. Intellectual Property Assets are valid and subsisting and, to Parent's Knowledge, the Other Company Intellectual Property Assets are valid and subsisting; (ii) no action, order, judgment, decree, injunction or settlement is pending, or 26 to Parent's Knowledge, threatened, that limits or challenges the ownership, use, validity or enforceability of any Intellectual Property owned or used by the Companies; (iii) to Parent's Knowledge, no person is infringing or otherwise impairing any Intellectual Property that is material to the Business of the Companies; (iv) the Companies take all commercially reasonable steps to protect and maintain their Intellectual Property and have taken all necessary actions, made all necessary filings, and paid all necessary fees for all material Intellectual Property; (v) the Food Licenses and material Intellectual Property Contracts are valid and in full force and effect, the Companies are not in default thereunder and, to Parent's Knowledge, the other party is not in default thereunder, and no event exists that, with notice or lapse of time or both, would constitute an event of default on the part of the Companies or, to Parent's Knowledge, the other party thereto. (vi) within the past five years, no claim by any third party contesting the validity, enforceability, use or ownership of any of the Intellectual Property set forth in Schedules 3.15(a)(i), (ii) or (iii) or Schedule 3.15(b) has been made, is currently outstanding or, to Parent's Knowledge, is threatened; and (vii) within the last three years, no third party has, to Parent's Knowledge, infringed any of the U.S. Intellectual Property Assets or Other Company Intellectual Property Assets which likely would have a Material Adverse Effect. (e) The applicable Company has to Parent's Knowledge a valid right to use (in substantially the manner as presently used), free and clear of all Encumbrances, except for any Encumbrances which would not, individually or in the aggregate, be likely to have a Material Adverse Effect, the know-how which is used in the Business as of the date hereof. SECTION 3.16 Taxes. Except as set forth in Schedule 3.16: (a) All Tax Returns required to be filed on or prior to the Closing Date by or with respect to WWI or any of the Companies and any affiliated, consolidated, combined, or unitary group of which WWI or any Company is or has been a member, have been, or will be, timely filed except where the failure to file would not, individually or in the aggregate, be likely to have a Material Adverse Effect, and 27 all such Tax Returns are, or will be, correct and complete in all material respects. All Taxes required to be paid on or prior to the Closing Date by WWI or any Company, or by any affiliated, consolidated, combined or unitary group of which WWI or any Company is or has been a member, whether or not such Taxes are shown as due on such Tax Returns have been, or will be, timely paid, except where the failure to pay would not, individually or in the aggregate, be likely to have a Material Adverse Effect. (b) WWI and each Company has, or will, duly and timely withhold any and all Taxes required to be withheld on or prior to the Closing Date by such parties under any applicable law and such parties have paid, or will pay, timely over to the appropriate taxing authorities all amounts required to be so withheld and paid over to such taxing authorities for all periods ending on or prior to the Closing Date under all applicable laws. (c) Neither WWI nor any U.S. Subsidiary is required to make any adjustment pursuant to Section 481(a) of the Code (or any predecessor provision) by reason of any change in any of its accounting methods, and there is no application pending with any taxing authority requesting permission for any changes in any of its accounting methods. The IRS has not proposed any such adjustment or change in accounting method. (d) Neither WWI nor any U.S. Subsidiary is obligated to make any payments and is not a party to any agreements that would obligate it to make any payments that would not be deductible under Section 280G of the Code. (e) During all taxable periods beginning in 1986, WWI and all of the U.S. Subsidiaries have been members of the affiliated group of which Parent was a member and have been included in the consolidated federal income tax return of Parent and its subsidiaries for each such period. (f) The amounts set up as accruals for Taxes payable on the financial books and records of WWI and each of the Companies as of the Closing Date will be sufficient under GAAP to reflect the liability of each such company for all Taxes payable by, or in respect of, WWI and the Companies, whether or not disputed, for all taxable years or periods (or portions thereof) ended on or prior to the Closing Date. (g) No deficiency for the payment of Taxes by WWI or any Company with respect to the business conducted by WWI or any Company prior to the Closing has been asserted or threatened against WWI or the Companies or any affiliated, consolidated, combined or unitary group that includes, or which at any time included, WWI or any Company and for which WWI or any Company could be liable, by the Internal Revenue Service or by any other taxing authority, and which remains unsettled as of the date of this Agreement. 28 (h) WWI and the Companies will not owe any amount pursuant to any written or unwritten Tax sharing, allocation or indemnity agreement or arrangement, nor have any liability after the date hereof in respect of any written or unwritten Tax sharing, allocation, or indemnity agreement or arrangement executed or agreed prior to the date hereof. (i) There are no Tax liens on any of the assets of WWI or the Companies, other than liens for current Taxes which are not yet due or payable. (j) There are no pending or threatened actions or proceedings with respect to the business conducted by WWI or any Company prior to the Closing for the assessment or collection of any Taxes against WWI or any Company, or any affiliated, consolidated, combined or unitary group that includes WWI or any Company and for which WWI or any Company could be liable. (k) No consent under Section 341(f) of the Code has been filed with respect to WWI or any Company. (l) Fortuity Australia has not sought roll-over relief under Section 160ZZO of the Income Tax Assessment Act 1936 or Subdivision 126-B of the Income Tax Assessment Act 1997 in connection with any transfer of property to Fortuity Australia or any newly formed entity at any time prior to the Closing Date. SECTION 3.17. Environmental Matters. Except for such matters which would not be likely, individually or in the aggregate, to have a Material Adverse Effect: (i) The Companies are and have been in compliance with all Environmental Laws; (ii) None of the Companies has received any Environmental Claim, and to Parent's Knowledge, there are no Environmental Claims threatened against any of the Companies; (iii) Hazardous Materials have not been generated, transported, treated, stored, disposed of, released or threatened to be released at, on, from or under any of the properties or facilities currently or formerly owned, leased or otherwise used by any of the Companies, in violation of, or in a manner or to a location that would likely give rise to liability to any of the Companies under any Environmental Laws; and (iv) None of the Companies has contractually assumed any liabilities or obligations under any Environmental Laws. SECTION 3.18. Brokers and Finders. Neither Parent nor any Company has employed any 29 broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with the transactions contemplated by this Agreement other than Warburg Dillon Read LLC, whose fees and expenses will be paid by Parent. No Company nor Purchaser will be responsible or in any way obligated for the payment of any fees, commissions or expenses of Warburg Dillon Read LLC or any other broker, agent, finder or intermediary retained by Parent or any of the Companies in connection with the transactions contemplated hereby. SECTION 3.19. Subsidiaries. Except as set forth in Schedule 3.19, each Subsidiary is a corporation or other enterprise duly organized, validly existing and in good standing (to the extent applicable in any such foreign jurisdiction) under the laws of the jurisdiction of its incorporation or organization, has full corporate power and authority to own, lease and operate its assets, properties and businesses and is duly qualified to do business and in good standing (to the extent applicable in any such foreign jurisdiction) in each jurisdiction in which its conduct of the business or its ownership or operation of its assets requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, be likely to have a Material Adverse Effect. SECTION 3.20. Accounts Receivable. Except as set forth in Schedule 3.20, all outstanding accounts receivable of the Companies reflected on the 1999 Combined Statement of Assets and Liabilities, were, as of such date, bona fide claims for sales made, services rendered, royalties, and franchise commissions in the ordinary course of business. SECTION 3.21. Year 2000. Except as set forth in Schedule 3.21, all computer hardware, software, databases, automated systems and other computer and telecommunications equipment owned, licensed, or used by the Companies and essential for its ongoing operations ("Systems") can be used prior to, during and after the calendar year 2000 A.D., and will operate during each such time period (provided that any interdependent third-party Systems and related electrical, communication and other third-party suppliers are also Year 2000 Compliant) without error relating to the processing, calculating, comparing, sequencing or other use of date-related data (the foregoing ability, "Year 2000 Compliant"). Except as set forth on Schedule 3.21, to Parent's Knowledge, all major, essential interdependent third-party Systems have been contacted and have supplied reasonable assurances that the work toward making their systems Year 2000 Compliant is underway. With regard to any systems that are not Year 2000 Compliant, Parent has adequate plans in place to timely correct such non-compliance or take other action so as to avoid a disruption, interruption, liability, or expense to the Companies which, individually or in the aggregate, would be likely to have a Material Adverse Effect. SECTION 3.22. Insurance. The Companies have (i) valid and currently effective insurance policies issued in favor of Parent and/or the Companies or (ii) self-insurance provided by Parent. Through Parent for the benefit of WWI and the Companies, WWI and the Companies have maintained a reasonable 30 and customary program of insurance with respect to the Business. All such policies are in full force and effect, all premiums due thereon have been paid and Parent and the Companies have complied (except for failures to be in full force and effect, to pay premiums and to comply which, individually or in the aggregate, would not be likely to have a Material Adverse Effect) with the provisions of such policies. SECTION 3.23. No Other Representations or Warranties. Except for the representations and warranties contained in this Article III, neither Parent, the Companies nor any other Person makes any other express or implied representation or warranty on behalf of the Parent, the Companies or their Affiliates with respect to the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or the business or assets of the Companies. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Parent as follows: SECTION 4.1. Incorporation. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Grand Duchy of Luxembourg and is a "corporation" as that term is defined in U.S. Treasury Regulation Section 301.7701-2(b). SECTION 4.2. Authority. Purchaser has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by and on behalf of Purchaser by all requisite corporate action, and no other corporate act or proceeding on the part of Purchaser is necessary to approve the execution and delivery of this Agreement or the consummation by Purchaser of the transactions contemplated hereby. SECTION 4.3 Execution and Binding Effect. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser and will be enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization, liquidation or other laws relating to or affecting creditors' rights or by equitable principles. SECTION 4.4. No Conflict. Except as set forth in Schedule 4.4 and the filing required under the HSR Act and under any non-U. S. jurisdiction requiring registration or governmental approval in connection with the proposed transaction and expiration of the applicable waiting period under the HSR Act or similar foreign legislation, neither the execution and delivery of this Agreement by Purchaser nor the consummation or performance by Purchaser of the transactions contemplated hereby, will: 31 (a) conflict with or violate any provisions of Purchaser's charter documents; (b) require any consent, approval or notice under or conflict with, result in a termination or breach of, or constitute (with or without notice or lapse of time or both) a default under, or accelerate or permit the acceleration of any performance required by, any note, bond, mortgage, indenture, license, franchise, permit, contract, lease or other instrument or obligation to which Purchaser is a party or by which Purchaser or any of its assets or properties is bound or subject; (c) violate any law, statute or ordinance or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority having jurisdiction over Purchaser or by which any of its assets or properties may be bound or subject, which in each case are in effect as of the date hereof; or (d) require any filing, declaration or registration with, or permit, consent or approval of, or the giving of notice to, any public, governmental or regulatory body, agency or authority; excluding from the foregoing Sections 4.4(b) through (d) such conflicts, violations, terminations, breaches, defaults, accelerations, filings, declarations, registrations, permits, consents, approvals and notices, the occurrence or absence of which would not be likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect or materially adversely affect the consummation or performance by Purchaser of the transactions contemplated hereby. SECTION 4.5. Litigation. There is no claim, action, suit, proceeding or investigation pending or, to Purchaser's Knowledge, threatened by or against Purchaser with respect to the transactions contemplated hereby, at law or in equity, before or by any federal, state, municipal, foreign or other governmental department, commission, board, agency, instrumentality or authority which if adversely determined would prevent, materially interfere with or materially delay the consummation of the transactions contemplated hereby. There is no order, decree, injunction or judgment pending or in effect against Purchaser with respect to the transactions contemplated hereby. SECTION 4.6. Brokers and Finders. Purchaser has not employed any broker or finder or incurred any liability for any brokerage fees or commissions or finders' fees in connection with the transactions contemplated by this Agreement. SECTION 4.7. Financing. Purchaser has received commitment letters (true and correct copies of which have been furnished to Parent) from The Bank of Nova Scotia and certain of its affiliates (collectively, "Scotiabank") and Credit Suisse First Boston ("CSFB"), dated July 20, 1999 (such letters, together with the related term sheets, the "Commitment Letters") pursuant to which Scotiabank and CSFB 32 have committed, subject to the terms and conditions thereof, to provide financing pursuant to a senior credit facility and subordinated bridge facility (the financing provided thereunder, including if relevant any senior subordinated notes offering made in the capital markets in complete or partial substitution for the bridge facility (the "Financing")) in an amount, together with the other sources of funds provided by or on behalf of Purchaser or its designees, sufficient to consummate the transactions contemplated by this Agreement (including payment of all related fees and expenses). SECTION 4.8 Acquisition of Shares for Investment. Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of the Purchased Shares. Purchaser confirms that Parent has made available to Purchaser the opportunity to ask questions of the officers and management employees of WWI and the Companies and to acquire additional information about the business and financial condition of the Companies. Purchaser is acquiring the Purchased Shares solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended (the "Securities Act"). Purchaser acknowledges that the Purchased Shares are not registered under the Securities Act or any applicable state securities law, and that such Purchased Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and pursuant to state securities laws and regulations as applicable. ARTICLE V COVENANTS OF PARENT Parent, on its own behalf and, prior to the Closing, on behalf of the Companies, covenants and agrees with Purchaser as follows: SECTION 5.1. Access. From the date hereof until the Closing Date, Parent shall furnish or shall cause the Companies to furnish to Purchaser and its Representatives all information relating to the business and assets of the Companies reasonably requested by Purchaser and provide access to the properties, assets, employees, books, accountants, work papers and records (including, without limitation, any Tax-related information) of the Companies that Purchaser may reasonably request and Parent will cause the Companies to cooperate with regard to such inspections as Purchaser may reasonably require and will cause the officers of the Companies to furnish Purchaser such financial and operating data and other information (including Tax-related information) with respect to the business and properties of the Companies as Purchaser may from time to time reasonably request; provided, however, that the parties shall reasonably cooperate with respect to Purchaser's access to any information so as not to reduce the scope of or eliminate the attorney-client privilege. SECTION 5.2. Confidentiality. 33 (a) Any confidential information furnished to Purchaser or made available for visual inspection shall be subject to the terms of the Confidentiality Agreement entered into between Parent and Purchaser dated February 19, 1999. The provisions of such Confidentiality Agreement shall survive any termination of this Agreement. (b) Parent recognizes that by reason of its ownership of the Companies, it has acquired confidential information and trade secrets concerning the operation of the Companies, the use or disclosure of which could cause Purchaser, the Companies or their Affiliates substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Parent covenants and agrees with Purchaser that it will not at any time following the Closing Date prior to the third anniversary of the Closing Date, except in accordance with the agreements entered into in connection with the Intellectual Property Reorganization or in performance of its obligations to Purchaser, directly or indirectly, disclose (other than to its directors, employees, accountants, attorneys and other representatives for valid business purposes and other than to defend any claim against it or for which it may be liable) any Intellectual Property or other proprietary, non-public secret or confidential information relating to the Business that it may learn or has learned by reason of its ownership of the Companies, unless (i) such information is or becomes available to the public or becomes part of the public domain other than as a result of a disclosure by Parent, its Affiliates or by their directors, officers or employees in violation of this Section, (ii) the disclosure has been approved by the written authorization of Purchaser or, after the Closing, WWI or (iii) disclosure is required by applicable law, regulation or legal process (including any discovery request or judicial or governmental order) or any securities exchange on which Parent has listed its securities. The parties agree that the covenant contained in this Section imposes a reasonable restraint on Parent in light of the transactions contemplated hereby. SECTION 5.3. Conduct of Business. Except as set forth in Schedule 5.3, from the date hereof until the Closing Date, and except as expressly contemplated in this Agreement, Parent will and will cause the Companies to (i) operate the Business in all material respects in the ordinary course of business consistent with past practice (including, without limitation, with respect to management of inventory, collection of accounts receivable and timing of receipts, payment of accounts payable and other disbursements of cash), (ii) use their reasonable best efforts to maintain the goodwill of the Business and the continued employment of their executives and other employees who are engaged in the Business, (iii) preserve, in all material respects, their customary relationships with suppliers, franchisees and customers consistent with past practice (but shall not be required pursuant to this provision to settle franchisee litigation, claims or arbitration), and (iv) maintain in force (including necessary renewals thereof) the insurance policies referred to in Section 3.22 which are material to the Business, and to give reasonable prior notice to the Purchaser of any cancellation or expiration of any such insurance policy and to consult in good faith with the Purchaser as to any 34 replacement policy. From the date hereof until the Closing Date, without the written consent of Purchaser (which consent shall not be unreasonably withheld) and except as expressly contemplated by this Agreement, Parent shall not and shall cause the Companies not to: (a) amend the certificate of incorporation, articles, by-laws or any other organizational document of the Companies; (b) make or revoke any election with respect to Taxes (except for elections by which the entity classifications of the Australian weight control businesses will be changed from corporations to divisions for U.S. tax purposes), change any method of Tax accounting, settle or compromise any audit or other proceeding that may affect the post-Closing Tax liability of WWI or any Subsidiary or file any amended Tax Return for, or on behalf of, WWI or any Subsidiary, in each case, except as may be required under applicable law; (c) issue, sell or pledge, or authorize or propose the issuance, sale or pledge of (i) additional shares of common stock of the Companies, or other equity interest in the Companies, or securities convertible into any such shares or interests or any rights, warrants or options to acquire any such shares or interests or other convertible securities or interests of the Companies or (ii) any other securities in respect of, in lieu of, or in substitution for, the shares of capital stock of any of the Companies outstanding on the date hereof; (d) redeem, purchase or otherwise acquire any outstanding shares of any of the Companies; (e) enter into any Contract or transaction between any of the Companies, on the one hand, and Parent or any of its Affiliates (other than the Companies), on the other hand, other than operational matters in the ordinary course of business consistent in all material respects with past practice which will not result in any continuing liability or obligation of the Companies after the Closing; (f) enter into, amend or cancel any material Real Property Lease or material Permit other than in the ordinary course of business consistent in all material respects with past practice; (g) grant any increase in compensation to employees of the Companies or any increase in the rate of commission, bonus or other variable compensation or any increase in any other direct or indirect remuneration (including benefits) payable or to become payable to any such employees other than in the ordinary course of business consistent with past practice; (h) perform, agree to, or commit to or permit to exist any of the acts, transactions, events or occurrences of the type described in Section 3.11 (a) through (q); or (i) agree or commit, whether in writing or otherwise, to take any of the foregoing 35 actions. SECTION 5.4. Reasonable Best Efforts; Notifications. Parent shall use its reasonable best efforts to satisfy the conditions applicable to Purchaser's obligation to close as set forth in Article IX hereof. Prior to the Closing, Parent shall in good faith endeavor to promptly notify Purchaser in writing of the occurrence of any event as to which it obtains Knowledge that would result in the failure of a condition specified in Article IX or X hereof. Without limitation on Parent's obligations under the first sentence of this Section, Parent shall provide, and will cause the Companies and their officers, employees and independent accountants to provide all reasonably necessary cooperation in connection with the Financing with a view to facilitating, as promptly as practicable and at the Closing, the high yield financing contemplated in the Commitment Letters, including (i) assistance in preparing prospectuses, memoranda and other materials; (ii) assistance in the preparation of financial sections of such Financing documents, including appropriate pro forma and interim financial information; (iii) assistance and participation in bank meetings, road shows and other marketing activities for the Financing; and (iv) providing any other information or assistance reasonably requested by Purchaser, Scotiabank or CSFB in connection with the Financing. In addition, Parent shall cause the Companies to execute and deliver such documents that are reasonably required to be executed by the Companies prior to the Closing to facilitate the Financing, including execution and delivery of any commitment letters, pledge and security documents, other definitive financing documents, or other requested agreements, certificates or documents. Parent and WWI shall cooperate with the tax or other structural planning undertaken by Purchaser in connection with transactions contemplated hereby; provided that the result of such cooperation shall not involve any significant costs, liabilities, or other detriments to Parent or WWI (prior to Closing), is not inconsistent with Parent's tax strategy or structural planning and does not involve any significant tax risk to Parent, WWI (prior to Closing) or their Affiliates. Parent shall use its reasonable best efforts to provide Purchaser as promptly as practicable with the information requested regarding the capital structure of the Companies, including the authorized and issued capital stock of each Company (other than WWI) and the registered owners of the issued share capital of each such Company. SECTION 5.5. Consents and Approvals. (a) As promptly as is practicable after the date hereof but not later than 10 days after the execution hereof, Parent or its applicable Affiliate shall make all necessary filings applicable to it under the HSR Act and the Foreign Governmental Approval Filings (collectively with the filings under the HSR Act, the "Governmental Approval Filings") and make any amendments to such filings as may be required. In addition, Parent or its applicable Affiliate will cooperate with Purchaser in connection with the 36 Governmental Approval Filings, will comply promptly with all requests made by the governmental authority and shall furnish to Purchaser all such information in its possession as may be necessary for the completion of the filings or reports to be filed by Purchaser. Parent shall resist in good faith (including the institution or defense of legal proceedings) any assertion that the transactions contemplated hereby constitute a violation of antitrust, noncompetition or similar laws, all to the end of expediting consummation of the transactions contemplated hereby. (b) Parent shall use its reasonable best efforts to obtain as promptly as practicable all consents listed on Schedule 3.4. SECTION 5.6. Preservation of Records. Parent shall preserve and keep the records pertaining to the Business which are not delivered to WWI or Purchaser wherever located for a period of six years from the Closing Date. During regular business hours and upon reasonable notice, Parent shall make available to WWI and Purchaser and their representatives for inspection and copying all such records pertaining to the Business. Parent may redact from any such records any information relating to any other business of Parent or its Affiliates. If Purchaser determines that it does not want Parent to destroy such agreements, records, books and other documents, Purchaser shall give written notice to Parent 90 days prior to the expiration of such retention period that Purchaser desires to take possession of such agreements, records, books and other documents. Parent shall deliver (subject to any redactions) such agreements, records, books and other documents to Purchaser within 20 days after the date of Purchaser's notice thereunder. SECTION 5.7. Signature and Bank Accounts. Prior to or at the Closing, Parent shall deliver to Purchaser, to the extent applicable to WWI and the Principal Foreign Subsidiaries, copies of each of such Companies' Board of Directors' resolutions, certified by their respective Secretary, and evidence of the revocation of all prior authorizations of any employee of the Parent or of any Affiliate of the Parent (as determined after the Closing) with respect to the Companies and any related Parent guarantees and authorizing only the persons to be designated by Purchaser prior to the Closing to sign checks, to deal with the bank accounts and have access to the vaults of such Companies. Further, Parent will use reasonable best efforts to ensure that cash generated by the Companies will not be deposited in Parent's accounts on or after the Closing Date, and if so deposited, will ensure that such cash is forwarded to appropriate accounts designated by the Companies. SECTION 5.8. Releases. At or prior to the Closing, Parent shall deliver to Purchaser general releases of all claims that Parent may have against the Companies as of the date of the Closing, except any claims arising in respect of this Agreement and the claims set forth in Schedule 5.8. SECTION 5.9 Insurance. Parent shall, at WWI's post-Closing expense for reasonable out-of-pocket expenses, use its reasonable best efforts to retain the right to make claims and receive recoveries, and shall cooperate with Purchaser, WWI, and the Companies, at WWI's expense for reasonable out-of-pocket expenses, in making claims and receiving recoveries, for the benefit of WWI 37 under existing insurance policies of Parent relating to WWI or any Company for actions occurring on or prior to the Closing Date ("Insurance Proceeds") and shall promptly pay the Insurance Proceeds to WWI, net of (i) any unreimbursed out-of-pocket expenses, (ii) any deductibles or self-insured amounts and (iii) the present value of all future (including retrospective adjustments) premium increases reasonably likely to occur as a result of any such claim, and after adjusting for any Tax cost to Parent resulting from its receipt of such Insurance Proceeds. SECTION 5.10. Outstanding Indebtedness. Except for the Debt Financing Amount and the Assumed Debt, Parent hereby assumes responsibility for and releases WWI from any and all outstanding Indebtedness owed by WWI and the Companies, including, without limitation, the Indebtedness set forth on Schedule 2.4. Parent will (i) cause all Indebtedness owed to any of the Companies by Parent or any Affiliate of Parent (other than any of the Companies) to be paid in full or otherwise canceled in a manner which will not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld), result in any increase in the Taxes or any other liability of any Company, and (ii) cause all Indebtedness owed to Parent or any Affiliate of Parent (other than any of the Companies) by the Companies to be paid in full or otherwise canceled in a manner which will not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld), result in any increase in the Taxes or any other liability of any Company. SECTION 5.11. Franchisee Guarantees. Parent acknowledges that WWI has entered into the guarantees referred to in Schedule 3.9(a) with respect to the loans made by PNC Bank to Weighco of Florida and Weighco of Southwest, which are franchisees of WWI (the "Franchisee Guarantees"). Parent will use its reasonable best efforts to obtain the release of WWI from the Franchisee Guarantees prior to the Closing and will indemnify WWI against any payment which WWI must make under the Franchisee Guarantees and its reasonable costs and expenses thereunder (including without limitation reasonable legal costs and expenses). In the event that Parent obtains the release of WWI from the Franchisee Guarantees, WWI agrees that upon any default by Weighco of Florida and/or Weighco of Southwest with respect to such PNC Bank loans as provided in the applicable Franchise Agreements set forth in Schedule 3.14, WWI shall use its reasonable best efforts to the extent permitted by the applicable contractual arrangements, including the Franchisee Guarantees and the Franchise Agreements, and under applicable law to terminate such Franchise Agreement and promptly grant such franchise or franchises to Parent and, in accordance with the applicable Franchise Agreement, designate Parent as the transferee of all of the assets of such franchisee used in the business including all leases of real and personal property. For a period of one year after the granting of the franchise to Parent, WWI may, at its option, acquire such franchise or franchises and all such assets from Parent for an amount equal to (i) the amount paid by Parent to PNC Bank pursuant to the guarantees made by Parent in connection with such PNC Bank loans and (ii) Parent's reasonable costs and expenses (including, without limitation, reasonable legal costs and expenses) in connection with obtaining such franchise or franchises. 38 SECTION 5.12. No Solicitation. From and after the date of this Agreement, until the earlier of the closing or termination of this Agreement, Parent shall not, and shall not permit any of its Affiliates, or any representatives, officers, employees, agents and Affiliates of any of the foregoing (collectively, "Agents"), to, directly or indirectly (i) solicit, initiate or encourage the submission of any inquiries, indications of interest, proposals or offers from any Person, other than Purchaser (collectively, "Third Parties"), concerning any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or enter into any agreements or understandings (whether or not in writing) relating to, any of the foregoing with, or provide any information concerning the Companies to any Third Parties other than in the ordinary course of business or other than as required by applicable law or securities exchange, or (iii) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any Third Party to do or seek any of the foregoing. As soon as is practicable after this Agreement has been executed, Parent will use its reasonable best efforts to cause the destruction or return of all non-public, confidential or proprietary information concerning the Companies provided to potential purchasers of WWI and the Companies. Parent will immediately notify the Purchaser after the receipt by it or any of its Agents of any inquiry, indication of interest, proposal or offer with respect to an Acquisition Proposal by any Third Party and promptly deliver to Purchaser written documentation reflecting the material economic terms thereof. Parent agrees that it and its Agents shall immediately cease and cause to be terminated any activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. SECTION 5.13. No Solicitation of Employees. Parent shall not, and shall cause its Affiliates not to, within a period of two years after the Closing Date, directly or indirectly, solicit or hire any person who is a senior managerial employee of any of the Companies as of the date hereof or on the Closing Date (each a "Manager"); provided that the foregoing shall not prohibit Parent or any of its Affiliates from hiring any Manager whose employment has been terminated by the Companies. The foregoing restriction shall also prohibit Parent and its Affiliates from entering into any employment, consulting or similar arrangements with Richard Penn or any entity controlled by him for a period of two years after the Closing Date. SECTION 5.14. Additional Financial Statements. As soon as practicable after the date hereof but in no event later than three weeks from the date of this Agreement, Parent shall furnish to Purchaser audited combined financial statements of the Companies as at and for each of the years ended April 24, 1999, April 25, 1998 and April 26, 1997. Parent will use its reasonable best efforts to cause WWI to prepare and deliver to Purchaser as promptly as practicable the combined financial statements of the Companies as at and for the three month periods ended July 24, 1999 and July 25, 1998. Such financial statements shall (i) comply with GAAP and (ii) meet the requirements of Regulation S-X under the United States Securities Act of 1933. SECTION 5.15. Transition Services. Parent will provide transition services to the Companies (to the extent in scope and nature such services are currently being rendered by Parent to the Companies) for a period, at WWI's option, not to exceed one year after the Closing, at a cost equal to Parent's direct 39 cost of such services (without any allocated overhead) with such costs being reimbursed by WWI after the cessation of such transition services. SECTION 5.16. WWI Articles of Incorporation. At or prior to the Closing, Parent shall cause WWI to amend WWI's articles of incorporation in accordance with Purchaser's instructions as is reasonably appropriate in furtherance of the transactions contemplated by this Agreement, including, without limitation, with respect to an equity recapitalization of WWI. SECTION 5.17. Heinz Australia-WWI Agreement. On or prior to the Closing, Parent shall cause WWI and Heinz Australia to terminate the agreement by and between such parties dated August 5, 1982. ARTICLE VI COVENANTS OF THE PURCHASER AND WWI Purchaser and WWI, as applicable in each Section under this Article VI, covenant and agree with Parent as follows: SECTION 6.1. Preservation of Records. WWI shall preserve and, during regular business hours and upon reasonable notice, make available to Parent and its representatives for inspection and copying all agreements, records, books and other documents furnished to Purchaser by Parent pursuant to this Agreement pertaining to the Business wherever located for a period of six years from the Closing Date, for (i) the purposes of preparing tax returns and financial statements and responding to tax audits, (ii) the purposes of prosecuting or defending any claim, litigation, proceeding or investigation which arises out of or relates to the Business or this Agreement and (iii) any other reasonable business purpose. If Parent determines that it does not want WWI to destroy such agreements, records, books and other documents, it shall give written notice to WWI 90 days prior to the expiration of such retention period that it desires to take possession of such agreements, records, books and other documents. WWI shall deliver such agreements, records, books and other documents to Parent within 20 days after the date of Parent's notice to WWI hereunder. SECTION 6.2. Reasonable Best Efforts; Notifications. Purchaser shall use its reasonable best efforts to satisfy the conditions applicable to Parent's obligations to close as set forth in Article X. Prior to the Closing, Purchaser shall in good faith endeavor to promptly notify Parent in writing of the occurrence of any event as to which it obtains Knowledge that would result in the failure of a condition specified in Articles IX or X hereof. 40 SECTION 6.3. Governmental Approval Filings. As promptly as is practicable after the date hereof but not later than 10 days after the execution hereof, Purchaser or its applicable Affiliate shall make all necessary filings applicable to it under the Governmental Approval Filings, and make any amendments to such filings as may be required. In addition, Purchaser or its applicable Affiliate will cooperate with Parent in connection with all Governmental Approval Filings, will comply promptly with all requests made by the governmental authority and shall furnish to Parent all such information in its possession as may be necessary for the completion of the filings or reports to be filed by Parent. Purchaser shall resist in good faith (including the institution or defense of legal proceedings) any assertion that the transactions contemplated hereby constitute a violation of antitrust, noncompetition, or similar laws, all to the end of expediting consummation of the transactions contemplated under this Agreement. SECTION 6.4. Acknowledgment of Exclusivity; Projections. Purchaser acknowledges that neither Parent nor any other Person acting on behalf of Parent or its Affiliates or any Affiliate of Parent has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the Business, except as expressly set forth in this Agreement. Purchaser further agrees that, except as expressly set forth in this Agreement and in the absence of fraud, neither Parent nor any other person or any Affiliate of either will have or be subject to any liability to Purchaser or any other person resulting from the distribution to Purchaser, or Purchaser's use of, any such information, and any information, document or material made available to Purchaser in certain "data rooms," management presentations or any other form in expectation of the transactions contemplated by this Agreement. In connection with Purchaser's investigation of the Business, Purchaser may have received or may receive from or on behalf of Parent or its Affiliates certain projections, including projected statements of operating revenues and income from operations. Purchaser acknowledges that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that Purchaser is familiar with such uncertainties, that Purchaser is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections and forecasts), that Purchaser has not relied upon any estimates, projections and other forecasts and plans received from or on behalf of Parent or its Affiliates and that Purchaser, in the absence of fraud, shall have no claim against Parent or any Affiliate of Parent or any other person or entity acting on their behalf with respect thereto. Accordingly, neither Parent nor its Affiliates makes any representation or warranty with respect to such estimates, projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates, projections and other forecasts and plans). SECTION 6.5. Financing. Purchaser will use its reasonable best efforts to cause the Financing Condition to be satisfied as promptly as practicable, and to cause Scotiabank and CSFB to provide the Financing to WWI in an amount equal to the Debt Financing Amount (including, if applicable, by (i) using its best efforts to enforce its rights and remedies with respect to any breach of obligation under the Commitment Letters and (ii) agreeing to changes proposed by Scotiabank or CSFB, as the case may be, in accordance with the fifth paragraph of the Commitment Letter for the senior credit facility); provided that 41 Purchaser and WWI shall have no obligation to draw on the bridge Financing contemplated by the Commitment Letters until September 30, 1999 (or October 15, 1999, if by September 30, 1999 Purchaser is actively marketing the high yield Financing (which, without limitation, shall be deemed to be occurring if preliminary offering memoranda have been delivered or a road show in connection therewith has been commenced) and the Commitment Letters have been amended so that such letters terminate no earlier than the end of the day on October 15, 1999). If for any reason Purchaser is advised that Scotiabank, or CSFB, as the case may be, is unwilling to provide the Financing (regardless of the satisfaction or failure of any condition in the Commitment Letters), notwithstanding Purchaser's compliance with the immediately preceding sentence, Purchaser shall use its reasonable best efforts to obtain, from one or more other leading financial institutions, alternative financing in an amount equal to the Debt Financing Amount, provided that Purchaser shall not be required to obtain alternative financing on terms financially less favorable to Purchaser and WWI, in the aggregate, than those contemplated by the Financing. Promptly after receipt from Parent of the certificate referred to in Section 9.1(c) of this Agreement, Purchaser shall provide a copy of the certificate to each of Scotiabank and CSFB. SECTION 6.6. Guarantees. Purchaser acknowledges that Parent has entered into the guarantees in respect of leases of WWI, Fortuity Australia or Fortuity NZ set forth in Schedule 6.6 (the "Guarantees"). After the Closing, WWI will use its reasonable best efforts to assist Parent in obtaining the release of Parent from each Guarantee; provided WWI, Fortuity Australia, and Fortuity NZ shall not be required to modify any of the leases or provide any substitute guaranty or similar financial assistance. WWI agrees that for so long as a Guarantee remains in force, it will use its reasonable best efforts to cause, following the Closing, the applicable Companies to duly and punctually perform all of the obligations which are the subject of the Guarantee, and will indemnify Parent against any payment which Parent must make under a Guarantee and its reasonable out-of-pocket expenses thereunder. SECTION 6.7. Assumed Debt. At the Closing, WWI shall either (i) repay the Assumed Debt in full or (ii) deliver to Parent a full release of any obligations or guarantees of Parent or its Affiliates (other than the Companies) in connection with any portion of the Assumed Debt which is not repaid at the Closing. ARTICLE VII EMPLOYEE MATTERS SECTION 7.1. Affected Employees. WWI will offer employment, effective immediately following the Closing, to all active employees of Parent permanently assigned to WWI as identified on Schedule 42 7.1(a)(1). All employees of the Companies on the Closing Date together with any employees of Parent as identified on Schedule 7.1(a)(i) and who accept WWI's offer of employment are hereinafter referred to as "Affected Employees." WWI will pay severance to all Affected Employees (other than Affected Employees who are members of the Management Board of WWI as of the date hereof) who are terminated by WWI other than "for cause" during the one year period following the Closing in an amount not less than would have been payable to such employees under Parent's severance policies as set forth in Schedule 7.1(a)(2). Parent will pay all severance obligations of Parent or WWI (other than any severance obligations put in place by WWI after Closing) for the Affected Employees who are members of the Management Board of WWI as of the date hereof and who are terminated by WWI within six months of the Closing Date. If such Affected Employees who are members of the Management Board of WWI as of the date hereof are terminated by WWI after six months following the Closing, WWI's then existing severance policy covering such employees would be applicable. For 12 months after the Closing, WWI shall provide Affected Employees with the same base salary (but not including bonuses payable under Parent's incentive compensation plan or any stock options granted by Parent) received by them immediately prior to the Closing. The term "Affected Employees" shall not include any employees or former employees of the Companies who (i) prior to the Closing Date have retired or otherwise terminated employment without re-employment rights or (ii) as of the Closing Date, are on long-term disability or who are on short term disability unless they return to work within six (6) months of the Closing. SECTION 7.2. Employee Benefit Transition. (a) With respect to the Affected Employees, WWI shall waive pre-existing condition requirements, evidence of insurability provisions, waiting period requirements or any similar provisions under any employee benefit plan or compensation arrangements maintained or sponsored by or contributed to by WWI for such individuals after the Closing Date to the extent they are waived under Parent's Plans. WWI shall also apply towards any deductible requirements and out-of-pocket maximum limits under its employee welfare benefit Plans any amounts paid (or accrued) by each Affected Employee under Parent's welfare benefit Plans during the 1999 plan year. (b) With respect to the Affected Employees, Parent shall be responsible for any health, life, short term disability, long term disability, and accident claims incurred on or prior to the Closing Date, whether or not then known or payable. WWI shall assume responsibility for all health and accident claims incurred by Affected Employees after the Closing Date. For purposes of this Section 7.2(b), a claim shall be incurred when the event giving rise to the submission of a claim for benefits occurs; provided, however, that with respect to all Affected Employees not actively employed on the Closing Date, all medical, life, and disability costs relating to the event resulting in their absence from work (including any medical, life and/or disability costs incurred after the Closing Date), shall be deemed to have been incurred on the last date on which such Employee was actively employed by the Companies. (c) With respect to pension, savings, severance, vacation, health and welfare, disability benefits, executive compensation, incentive and bonus arrangements including with respect to 43 Fortuity Australia any long service leave, annual leave and holiday leave, WWI shall recognize under its Plans and compensation arrangements the service of any Affected Employee with the Companies for purposes of participation, eligibility and vesting (but not for purposes of benefit accrual or calculation). (d) With respect to Parent's severance plans, prior to Closing, Parent shall cause the plan administrator of the Parent Severance Pay Plan and the Parent Special Severance Program for Nonbargaining Hourly Employees to determine that each Affected Employee that is a participant in such plans and that has received an offer of employment not requiring relocation and commencing promptly following the Closing, shall not be eligible for severance benefits under such plans. SECTION 7.3. COBRA. Parent will be responsible for satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of the Code, to provide continuation coverage to or with respect to any Affected Employee in accordance with law with respect to any "qualifying event" occurring on or before the Closing Date. WWI will be responsible for satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of the Code, to provide continuation coverage to or with respect to any Affected Employee in accordance with law with respect to any "qualifying event" which occurs after the Closing Date. SECTION 7.4. Vacation. WWI will assume all obligations to Affected Employees for any vacation entitlement and vacation pay entitlement after the Closing Date. Parent will have no obligation to make any payment to Affected Employees after the Closing Date with respect to any vacation entitlement or vacation pay entitlement. SECTION 7.5. Pension Plans. Prior to the Closing, Affected Employees are covered under one or more employee benefit pension Plans (as defined in Section 3(2) of ERISA or otherwise) consisting of defined contribution plans for salaried and hourly employees ("Parent's Defined Contribution Plans") and defined benefit plans for salaried and hourly employees including but not limited to H. J. Heinz Australia Superannuation Scheme ("Parent's Defined Benefit Plans") (collectively with the Parent's Defined Contribution Plans, the "Pension Plans"). Parent and WWI agree to the following arrangements with respect to the Pension Plans of Parent covering any Affected Employee prior to the Closing: (a) Accounts of any Affected Employee held under Parent's Defined Contribution Plans, after being credited with all contributions due through the Closing Date and adjusted for investment experience through the Closing Date, shall become fully vested. Accounts shall be distributed to the Affected Employees to the extent permitted by applicable law. (b) Benefits accrued by any Affected Employee before the Closing under Parent's Defined Benefit Plans shall become fully vested. The Shareholders shall treat any Affected Employee as 44 having incurred a termination of employment on the Closing Date for purposes of determining the Affected Employee's eligibility for benefits under Parent's Defined Benefit Plans. Parent shall expressly retain the assets and liabilities under the Parent Defined Benefit Plans in respect of the Affected Employees. SECTION 7.6. Workers' Compensation. Parent shall be responsible for all workers' compensation benefits, occupational diseases claims and employer liability claims payable to Affected Employees with respect to claims filed through the Closing Date. WWI shall be responsible for all workers' compensation benefits, occupational diseases claims and employer liability claims payable to Affected Employees with respect to claims filed after the Closing Date. With respect to Fortuity Australia, all premiums which are due and payable under any applicable workers' compensation legislation have been paid. SECTION 7.7. No Third Party Beneficiaries. Neither Purchaser, WWI nor Parent, intends this Article VII to create any rights or interest, except as between the parties hereto and no present or future employees of either party (or any dependents of such employees) will be treated as third party beneficiaries in or under this Agreement. SECTION 7.8. Documents and Forms. Parent and WWI agree to use their reasonable efforts to execute all necessary documents, file all required forms with any governmental agencies and to undertake all actions that may be necessary or desirable to implement expeditiously any actions contemplated herein. SECTION 7.9. Applicability. The foregoing provisions in Article VII apply to the U.S. employees of the Companies and, to the extent applicable, the non-U.S. employees of the Companies. SECTION 7.10 Assumption of Employment Agreements; Retention of Liabilities. (a) Parent shall assign, and WWI shall assume, such employment agreements (other than any sale or retention bonus or similar agreements relating to any Affected Employee's continued employment through the Closing and a transition period thereafter) between any Affected Employee and Parent as Purchaser shall designate in writing to Parent prior to the Closing. Parent shall take all actions as may be necessary to effect the foregoing. (b) Parent shall retain all obligations and liabilities under the Pension Plans, Parent's supplemental retirement Plan, Parent's excess benefit Plan, and Parent's retiree medical and life insurance Plans including, but not limited to, obligations and liabilities under Parent's supplemental retirement Plan, Parent's excess benefit Plan and Parent's retiree medical and life insurance Plans with respect to retirees and any active employee who has qualified as of the Closing to receive benefits thereunder. With respect to the Deemed Retiree Eligible Employees, on or after the Closing, to the extent that WWI shall request and to the extent permitted under applicable law, Parent shall administer, and make payment of the retiree medical and life insurance benefits under, the applicable retiree medical and life insurance Plans. In the event and to the extent that WWI does so request, WWI shall pay to Parent, at its actual cost, the amounts 45 incurred in (i) administering such Plans and (ii) providing such benefits for all such Deemed Retiree Eligible Employees. In addition, with respect to the retiree life insurance benefits, Parent shall, to the extent requested by WWI and permitted under applicable law: (i) assign all rights and obligations under all life insurance policies covering the Deemed Retiree Eligible Employees under which Parent has, immediately prior to the Closing, any such rights or obligations; (ii) cooperate with WWI in respect of establishing any new retiree life insurance arrangements for Deemed Retiree Eligible Employees; and (iii) provide WWI with access to the current administrator of Parent's retiree life insurance Plan for hourly Parent employees (including WWI employees). For purposes of this provision, a "Deemed Retiree Eligible Employee" is any Affected Employee who, as of the Closing, would be within five years of becoming eligible for such benefits under such Plans if such employees had remained employed by Parent (or by any affiliate of Parent) for those five years (or such other fewer number of years remaining until they would have become eligible for such benefits under such Plans, as applicable) following the Closing, and who remains employed with WWI (or an affiliate of WWI) through the date on which they would become eligible for such benefits. ARTICLE VIII EXCLUDED ASSETS AND LIABILITIES SECTION 8.1. Excluded Assets and Liabilities. At the Closing, Parent shall cause WWI to transfer to Parent (in a manner substantially as set forth in Exhibit A) the assets listed on Schedule 8.1 (which includes without limitation the trademark "Smart Ones") (collectively, the "Excluded Assets"), and WWI shall take all steps consistent with this Agreement which Parent deems reasonably necessary to assure the tax-free, (to both Parent and the Companies) transfer of such assets. Notwithstanding the fact that WWI operates (it being understood that WWI will not continue to operate the Fitness Business (as defined below) after the Closing) the businesses conducted by Cardio-Fitness Corp. and Fitness Institute Limited, WWI does not own any equity in Cardio-Fitness Corp. and Fitness Institute Limited and the capital stock of such corporations and all the assets, liabilities and business of such corporations (the "Fitness Business") are excluded from the transactions contemplated hereunder. Prior to or simultaneously with the Closing, Parent shall assume the obligations of WWI to pay under certain promissory notes issued by WWI in connection with certain franchise repurchases and certain other liabilities, each as identified on Schedule 8.1 (the "Excluded Liabilities"). SECTION 8.2. No Violation. Notwithstanding any provision to the contrary contained in this Agreement, no disposition or transfer of the Excluded Assets will be deemed to violate any covenant, representation, condition or other provision contained herein so long as Parent assumes any such related liability for all periods until any such Excluded Assets may have been retransferred to WWI, including as contemplated by Section 8(a) of Exhibit A attached hereto (which liabilities shall be 46 deemed to constitute "Excluded Liabilities" hereunder). ARTICLE IX CONDITIONS TO PURCHASER'S OBLIGATIONS The obligation of Purchaser to effect the transactions contemplated by this Agreement is subject to the satisfaction, prior to or on the Closing Date, of each of the following conditions, any of which may be waived in whole or in part by Purchaser: SECTION 9.1. Accuracy of Representations and Warranties; Performance of Agreements; Certificates and Opinion of Counsel. (a) The representations and warranties of Parent contained herein shall be true and correct (in each case without regard to any "Material Adverse Effect" or (except for the representations contained in Sections 3.7(a), 3.9(a), 3.11 and 3.15(b), the term GAAP and all specified dollar thresholds) other materiality qualifier contained therein) in each case as of the date of this Agreement and as of 5:00 p.m. (New York time) on August 23, 1999 (except that the representations and warranties that are made as of a specific date need be true and correct only as of such date) except in each case for such failures which, individually or in the aggregate, would not be likely to have a Material Adverse Effect. Notwithstanding the foregoing, Parent shall have the right on or prior to 5:00 p.m. (New York time), on August 23, 1999 to cure any breach or breaches thereof in which event if such breach or breaches are so cured such that such representation and warranty is true and correct (without giving effect to any "Material Adverse Effect" or, to the extent set forth above, other materiality qualifiers) with respect to such matters at 5:00 p.m. (New York time) on August 23, 1999 and none of the Companies has any continuing liability or other financial detriment with respect thereto (after giving effect to any stand-alone, unconditional indemnification of Purchaser and the Companies by Parent with respect to any such financial liability or detriment which shall not be subject to any basket, cap, or other limitation), this condition shall be deemed to be satisfied solely with respect thereto as of the date of this Agreement and as of 5:00 p.m. (New York time) on August 23, 1999. Notwithstanding the foregoing, the parties acknowledge that neither (i) any claim, litigation or arbitration proceeding brought against WWI or the Companies by any Franchisee after the date of this Agreement and prior to the Closing, which shall be deemed to include item 3 of Schedule 3.12 notwithstanding its actual date of filing (collectively, the "Post Signing Franchisee Claims"), nor (ii) the trademark and related litigation brought by Linda Evans Fitness Centers, Inc. against WWI, will be taken into account for purposes of determining whether the conditions to Purchaser's obligation to close are satisfied. Notwithstanding the foregoing, this condition shall not be deemed to have been satisfied 47 and shall be a condition of the Closing, subject to the provisions of the second sentence of Section 9.1(c), if the certificate delivered by Parent referred to in Section 9.1(c) fails to identify any matter of which Parent had Knowledge which would have caused this condition not to be satisfied. (b) Parent shall have performed and complied in all material respects with all of its agreements, covenants and obligations required by this Agreement to be performed or complied with by it prior to or at the Closing Date and shall have delivered a certificate of its President, Executive or Senior Vice President or the Vice President - Business Development certifying that Parent has performed and complied in all material respects with all of its agreements, covenants, and obligations required by this Agreement to be performed or complied with by it prior to or at the Closing Date. (c) No later than 6:00 p.m. New York time on August 23, 1999, Parent shall have delivered to Purchaser a certificate of its President, Executive or Senior Vice President or the Vice President - Business Development, certifying the satisfaction of the condition set forth in Section 9.1(a) (which, if such certification cannot be made, shall set forth any exceptions to the satisfaction of such condition of which Parent has Knowledge). Parent shall have the right on or prior to the Closing to cure any breach or breaches giving rise to the failure of the condition set forth in Section 9.1(a), in which event if such breach or breaches are so cured such that such representation and warranty becomes true and correct (without giving effect to any "Material Adverse Effect" or, to the extent set forth above, other materiality qualifier) with respect to such matters as of the Closing and none of the Companies has any continuing liability or other financial detriment with respect thereto (after giving effect to any stand-alone, unconditional indemnification of Purchaser and the Companies by Parent with respect to any financial liability or detriment which shall not be subject to any basket, cap, or other limitation), such condition shall be deemed to be satisfied solely with respect thereto at all applicable dates. If Parent has so delivered the certificate pursuant to this Section 9.1(c) containing such certification (without any exceptions), then the condition set forth in Section 9.1(a) shall be conclusively deemed to have been satisfied (notwithstanding the preamble to this Article IX), subject to the last paragraph of Section 9.1(a), unless Parent receives by 11:59 p.m. New York time on August 23, 1999 written notice from Purchaser that Purchaser believes that such condition has not been satisfied specifying the basis for its conclusion; provided, that receipt of such written notice from Purchaser shall not prejudice or restrict Parent from contesting Purchaser's conclusion. (d) Parent shall have delivered to Purchaser (i) a certificate of its President, Executive or Senior Vice President or the Vice President - Business Development dated the Closing Date and certifying that all representations and warranties set forth in Article III are true and correct as of the date of this Agreement and as of the Closing (except that the representations and warranties that are made as of a specific date need be true and correct only as of such date) or if such certification cannot be made, setting forth all exceptions to the truth and correctness of such representations and warranties as of such dates of which Parent has Knowledge, and such certificate as of the Closing shall be deemed to be a 48 separate representation by Parent for purposes of Section 11.2(a), subject to the stated exceptions and (ii) an opinion of the General Counsel or an Associate General Counsel of Parent as to Pennsylvania law containing assumptions, qualifications and exceptions as are customary in transactions such as the transactions contemplated hereunder and separate opinions of a New York qualified law firm confirming the validity, binding effect and enforceability of the Agreement (including Exhibits A, B and C but not (A) any documents relating to the transactions contemplated by such Exhibits or (B) the other Exhibits to the Agreement) under the laws of the State of New York containing such assumptions, qualifications and exceptions as such law firm deems appropriate in good faith, and of a Virginia qualified law firm confirming due organization and existence of WWI and the requisite authorization and execution of the Agreement by WWI (including Exhibits A, B and C but not (A) any documents relating to the transactions contemplated by such Exhibits or (B) the other Exhibits to the Agreement) under the laws of the Commonwealth of Virginia containing such assumptions, qualifications and exceptions as such law firm deems appropriate in good faith, each dated the Closing Date. (e) (i) If any representation and warranty set forth in Article III is true and correct on the date of this Agreement and (A) Parent acknowledges in the certificate it delivers pursuant to Section 9.1(d) the failure of such representation and warranty to be true and correct as of the Closing or (B) Purchaser identifies in writing at Closing the failure of any such representation and warranty to be true and correct at Closing (each, a "Post-Signing Breach") and (ii) such Post-Signing Breach, together with all other Post-Signing Breaches, could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, then Parent may deliver to Purchaser a written notice (the "New Condition Notice") identifying such Post-Signing Breaches with reasonable specificity and acknowledging that the Companies (taken as a whole) and the Business (taken as a whole) shall have suffered a Material Adverse Effect as a result of the specified Post-Signing Breaches and irrevocably granting Purchaser the option of not being obligated to close the transactions contemplated hereby; provided if Purchaser closes the transactions contemplated hereby notwithstanding the delivery of the New Condition Notice, Parent shall have no right to indemnification under Article XI for the Specified Post-Signing Breaches. (f) Parent shall have delivered to Purchaser (i) incumbency certificates from the Secretary or an Assistant Secretary of Parent and (ii) a copy of the Board of Directors' resolutions of Parent certified by the Secretary or an Assistant Secretary, authorizing and approving the transactions contemplated herein. (g) Absent fraud, the certificate delivered pursuant to Section 9.1(c) does not constitute a representation by Parent for purposes of this Agreement and shall not in and of itself give rise to any indemnification obligation hereunder. SECTION 9.2. Consents. Any notices to, and declarations, filings and registrations with, and consents, approvals and waivers from third parties (including, without limitation, governmental and regulatory agencies) as set forth on Schedule 3.4 which are marked with an asterisk, shall have been given, made or obtained as applicable. 49 SECTION 9.3. Financing. WWI shall have received proceeds of the Financing at least equal to the Debt Financing Amount on the terms contemplated by the Commitment Letters; provided that this will not be a condition to Purchaser's obligation unless Purchaser and/or its designees are willing and able to provide the cash common equity specified in the Commitment Letters (or other equity or debt that is subordinated to the Financing). Notwithstanding the foregoing sentence, Purchaser and WWI shall not be required to draw down on the bridge Financing contemplated by the Commitment Letters until September 30, 1999 (or October 15, 1999, if by September 30, 1999, Purchaser is actively marketing the high yield Financing (which, without limitation, shall be deemed to be occurring if preliminary offering memoranda have been delivered or a road show in connection therewith has been commenced) and the Commitment Letters have been amended so that such letters terminate no earlier than the end of the day on October 15, 1999). SECTION 9.4. [This Section intentionally left blank] SECTION 9.5. No Injunction. No preliminary or permanent injunction or other order shall have been issued by any court of competent jurisdiction, or by any governmental or regulatory body, which remains in effect and invalidates any or all of the provisions of this Agreement or prohibits or enjoins the consummation of any of the transactions contemplated in this Agreement. SECTION 9.6. Governmental Approvals. Any waiting period applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated. The approvals from the governmental authorities set forth on Schedule 9.6 shall have been obtained. SECTION 9.7. Closing Deliveries. Parent shall have delivered to Purchaser all deliveries to be made to it pursuant to Sections 2.6(b), 2.6(c), 2.6(e), 2.6(f), 2.6(g), and 2.6(h). 50 ARTICLE X CONDITIONS TO PARENT'S OBLIGATIONS The obligation of Parent to effect the transactions contemplated by this Agreement is subject to the satisfaction, prior to or on the Closing Date, of each of the following conditions, all or any of which may be waived in whole or in part by Parent: SECTION 10.1. Accuracy of Representations and Warranties; Performance of Agreements; Certificates and Opinion of Counsel. (a) The representations and warranties of Purchaser contained in this Agreement shall be true and correct on the date hereof and as of the Closing in all material respects. (b) Purchaser shall have performed and complied in all material respects with all of its agreements, covenants and obligations required by this Agreement to be performed or complied with by it prior to or at the Closing Date. (c) Purchaser shall have delivered to Parent (i) a certificate of its President or any Vice President dated the Closing Date and certifying the fulfillment of the conditions set forth in this Section 10.1(a) and (b) and (ii) an opinion of Simpson Thacher & Bartlett dated the Closing Date containing opinions and other terms as are reasonable and customary in transactions such as the transactions contemplated hereunder. (d) Purchaser shall have delivered to Parent (i) an incumbency certificate from the Secretary or an Assistant Secretary of Purchaser and (ii) a copy of the resolutions of the Board of Directors of Purchaser certified by the Secretary or an Assistant Secretary, authorizing and approving the transactions contemplated herein. SECTION 10.2. Consents. Any notices to, and declarations, filings and registrations with and consents, approvals and waivers from governmental and regulatory agencies as set forth on Schedule 3.4 which are marked with an asterisk, shall have been given, made or obtained, as applicable. SECTION 10.3. No Injunction. No preliminary or permanent injunction or other order shall have been issued by any court of competent jurisdiction, or by any governmental or regulatory body, which remains in effect and invalidates any or all of the provisions of this Agreement or prohibits or enjoins the consummation of the transactions contemplated in this Agreement. SECTION 10.4. Governmental Approvals. Any waiting period applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been 51 terminated. The approvals from the governmental authorities set forth on Schedule 9.6 shall have been obtained. SECTION 10.5. Closing Deliveries. Purchaser shall have delivered to Parent all deliveries to be made to it pursuant to Sections 2.6(d), 2.6(e) and 2.6(h). ARTICLE XI INDEMNIFICATION SECTION 11.1. Survival of Representations and Warranties and Obligations. All representations, warranties, agreements, covenants and obligations made or undertaken by the parties in this Agreement or in any document or instrument executed and delivered pursuant hereto (including the exceptions to any representations or warranties) shall survive the Closing hereunder and shall not merge in the performance of any obligation by any party hereto, and will remain in full force and effect unless, in respect of any agreement or covenant, some specified period is set forth in this Agreement or in any document or instrument executed and delivered pursuant hereto, and except that all representations and warranties (other than the representations and warranties set forth in Sections 3.1 (Incorporation; Qualification), 3.2 (Authority), 3.3 (Execution and Binding Effect), 3.5 (Capitalization), 3.6 (Stock Ownership; Title to Shares), 3.16 (Taxes) and 3.19 (Subsidiaries)(or in a certificate relating to the accuracy of such representations)) made by Parent and contained herein or in any Exhibit, Schedule or certificate delivered under this Agreement shall remain in effect only until the date which is 20 months after the Closing Date. The representations and warranties set forth in (i) Sections 3.1 (Incorporation; Qualification), 3.2 (Authority), 3.3 (Execution and Binding Effect), 3.5 (Capitalization), 3.6 (Stock Ownership; Title to Shares) and 3.19 (Subsidiaries)(or in a certificate relating to the accuracy of such representations) shall have no expiration date and (ii) Section 3.16 (Taxes) (or in a certificate relating to the accuracy of such representations) shall survive until 30 business days after the expiration of the applicable statute of limitations with respect to the subject matter thereof. If written notice of a claim for breach of a representation or warranty has been given by Purchaser within the applicable survival period, then the relevant representation or warranty shall survive as to such claim until the claim has been finally resolved. SECTION 11.2. Indemnification by Parent. Except as otherwise limited by this Agreement, Purchaser and its Affiliates (including, without limitation WWI and the Companies) and their respective officers, directors and employees (as to such employees, other than lost wages or salary) shall be indemnified, defended and held harmless by Parent from, against and in respect of any and all liabilities, losses, damages, claims, costs, charges, actions, suits, proceedings, deficiencies and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) 52 (hereinafter a "Purchaser Loss"), imposed on, sustained, incurred or suffered by any such Person arising out of: (a) the breach of any representation or warranty made by Parent contained herein or in the certificate to be delivered pursuant to Section 9.1(d). (b) the breach of any covenant or agreement made by Parent contained herein; (c) the Fitness Business, Excluded Assets or Excluded Liabilities ; (d) in lieu of indemnification under Section 11.2(a) or (e), any and all Post Signing Franchisee Claims and the trademark and related litigation brought by Linda Evans Fitness Centers, Inc. against WWI, up to the first $500,000 in the aggregate, plus the excess of such Purchaser Losses over $500,000; provided, however, that Parent's indemnification obligation hereunder for such excess shall be reduced by applying the amount of any remaining Basket (after giving effect to any other reductions or applications under this Agreement) up to $5,000,000 against 50% of such excess Purchaser Loss incurred in connection therewith; provided further that any amount so applied shall reduce the Basket accordingly; (e) in lieu of indemnification under Section 11.2(a), (i) any matter identified by Parent as an exception to the truth and correctness of any representation or warranty in the certificate to be delivered by Parent at Closing pursuant to Section 9.1(d) or (ii) any matter identified by Purchaser in writing at Closing that constitutes a breach of any representation or warranty made by Parent contained in this Agreement or in the certificate to be delivered pursuant to Section 9.1(d); provided, however, that Parent's indemnification obligation hereunder shall be reduced by applying the amount of any remaining Basket (after giving effect to any other reductions or applications under this Agreement) against 50% of the Purchaser Loss incurred in connection therewith; provided further that any amount so applied shall reduce the Basket accordingly; and/or (f) the franchisee profit-sharing claims relating to royalties for food products set forth in the Demand for Arbitration which is identified as Item 4 on Schedule 3.12. SECTION 11.3. Indemnification by Purchaser and WWI. Except as otherwise limited by this Agreement, Parent and its Affiliates and their respective officers, directors and employees shall be indemnified and held harmless by Purchaser (prior to the Closing) and WWI (after the Closing) from any and all liabilities, losses, damages, claims, costs, charges, actions, suits, proceedings, deficiencies and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses), (hereinafter a "Parent Loss") imposed on, sustained, incurred, or suffered by any such Person arising out of: (a) the breach of any representation or warranty made by Purchaser contained herein; and/or 53 (b) the breach of any covenant or agreement made by Purchaser contained herein. SECTION 11.4. Indemnification Procedures. (a) For the purposes of this Section 11.4, the term "Indemnitee" shall refer to the Person indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant to the provisions of Section 11.2 or 11.3, as the case may be; the term "Indemnitor" shall refer to the Person having the obligation to indemnify pursuant to such provisions; and "Losses" shall refer to the "Parent Losses" or the "Purchaser Losses," as the case may be. (b) An Indemnitee shall give written notice (a "Notice of Claim") to the Indemnitor within 10 business days after the Indemnitee has knowledge of any claim (including a Third Party Claim, as hereinafter defined) which an Indemnitee has determined has given or could reasonably be expected to give rise to a right of indemnification under this Agreement. No failure to give such Notice of Claim within 10 business days as aforesaid shall affect the indemnification obligations of the Indemnitor hereunder, except to the extent Indemnitor can demonstrate such failure materially prejudiced such Indemnitor's ability to successfully defend the matter giving rise to the claim. The Notice of Claim shall state the nature of the claim, the amount of the Loss, if known, and the method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises. (c) The obligations and liabilities of an Indemnitor under this Article XI with respect to Losses arising from claims of any third party that are subject to the indemnification provisions provided for in this Article XI ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: The Indemnitee at the time it gives a Notice of Claim to the Indemnitor of the Third Party Claim shall advise the Indemnitor that Indemnitor shall be permitted, at its option, to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives written notice of its intention to do so to the Indemnitee within 20 days of its receipt of the Notice of Claim. In the event the Indemnitor exercises its right to undertake the defense against any such Third Party Claim as provided above, the Indemnitee shall cooperate with the Indemnitor in such defense and make available to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor, and the Indemnitee may participate by its own counsel and at its own expense in defense of such Third Party Claim; provided, however, that if the defendants in any Action shall include both the Indemnitee and the Indemnitor and such Indemnitee shall have reasonably concluded in good faith that counsel selected by the Indemnitor has a conflict of interest because of the availability of different or additional defenses to such Indemnitee, such Indemnitee shall have the right to select separate counsel to participate in the defense of such Action on its 54 behalf, at the expense of the Indemnitor; provided, further, that such Indemnitor shall not, in connection with any one such action or separate but substantially similar or related actions, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel). Notwithstanding the foregoing, the Indemnitee, during the period the Indemnitor is determining whether to elect to assume the defense of a matter covered by this Section 11.4, may take such reasonable actions as it deems necessary to preserve any and all rights with respect to the matter, without such actions being construed as a waiver of the Indemnitee's rights to defense and indemnification pursuant to this Agreement. Similarly, in the event the Indemnitee is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and make available to it all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee and the Indemnitor may participate by its own counsel and at its own expense in the defense of such Third Party Action. Except for the settlement of a Third Party Claim which involves the payment of money only, no Third Party Claim may be settled or judgment entered by consent by the Indemnitor without the written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed. No Third Party Claim may be settled or judgment entered by consent by the Indemnitee without the written consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. SECTION 11.5. Limits on Indemnification. Except for any claims for or in respect of Taxes ("Tax Claims") (which shall be governed solely by Article XII of this Agreement), no claim may be made against Parent for indemnification with respect to the matters contained in Section 11.2(a) unless and only to the extent the aggregate of all Purchaser Losses incurred under this Agreement exceeds $7,350,000 (as such amount may be reduced in accordance with Sections 11.2(d) and (e)) (the "Basket") and then only with respect to that portion of Purchaser Losses which exceed the Basket; provided further, however, that Parent shall have no liability hereunder for any individual such item where the Purchaser Loss relating to such item is less than $50,000 (and such items shall not be aggregated for purposes of determining whether Purchaser Losses exceed the Basket); provided the foregoing provisions shall not be applicable to any Purchaser Loss resulting from a breach of Sections 3.1 (Incorporation; Qualification), 3.2 (Authority), 3.3 (Execution and Binding Effect), 3.5 (Capitalization), 3.6 (Stock Ownership; Title to Shares) or 3.19 (Subsidiaries) (or in a certificate relating to the accuracy of such representations). In no event shall Parent be required to indemnify Purchaser for Purchaser Losses with respect to the matters contained in Section 11.2(a) which individually or in the aggregate exceed $183,750,000; provided the foregoing provision shall not be applicable to any Purchaser Loss resulting from a breach of Sections 3.1 (Incorporation; Qualification), 3.2 (Authority), 3.3 (Execution and Binding Effect), 3.5 (Capitalization), 3.6 (Stock Ownership; Title to Shares) or 3.19 (Subsidiaries) (or in a certificate relating to the accuracy of such representations). Except as otherwise provided in Article III and Article XI, after the Closing, neither Parent nor any officer or director of the Companies who resigns at or about the time of Closing shall have any liability to the Companies or their successors or assigns for any breach or alleged breach of any duty of care or loyalty whatsoever (exclusive of any such breach constituting an act of malfeasance, willful misconduct or acts 55 taken in bad faith or in fraud) which occurred or are alleged to have occurred on or prior to the Closing. SECTION 11.6. General Provisions on Indemnification. Whenever an Indemnitor is required to indemnify an Indemnitee against, and hold the Indemnitee harmless from, or to reimburse an Indemnitee for, any item of Loss, Indemnitor will pay the Indemnitee the amount of the Loss, including all Federal (but not state or local) corporate income or gains taxes, or similar Taxes, resulting from the receipt of the payment net of (i) the Net Proceeds of any insurance policy paid to Indemnitee with respect to such Loss prior to the indemnification payment and (ii) any Tax Benefit actually received by Indemnitee with respect to such Loss prior to the indemnification payment. For purposes of this Section 11.6, (A) "Net Proceeds" shall mean the insurance proceeds actually received, less any actual, additional, or increased premium, deductibles, co-payments, other payment obligations (including attorneys' fees and other costs of collection) or the present value of any future cost which is quantifiable with reasonable certainty, that relates to or arises from the making of the claim for indemnification and (B) "Tax Benefit" shall mean any refund of income Taxes paid or any actual reduction in the amount of income Taxes which would otherwise be paid currently, in each case computed by assuming that the Tax attribute resulting from such Loss results in a refund or in an actual reduction in income Taxes only after all the other tax attributes of Indemnitee have been utilized and no Tax Benefit shall be deemed to have occurred while a reasonable possibility exists of a challenge by any federal, state or local tax authority. If any Indemnitee receives a Tax Benefit or Net Proceeds after an indemnification payment is made which relates thereto, Indemnitee shall promptly repay to Indemnitor such amount of the indemnification payment as would not have been paid had the Tax Benefit or Net Proceeds reduced the original payment (any such repayment shall be a credit against any applicable indemnification cap set forth in this Article XI) at such time or times as and to the extent that such Tax Benefit or Net Proceeds is actually received. In no event shall an Indemnitor be liable for punitive damages sustained or claimed by an Indemnitee except to the extent such damages arise from a Third Party Claim. An Indemnitee shall take all reasonable steps to mitigate Losses upon becoming aware of any event which could reasonably be expected to give rise to such Losses. Losses shall be determined after taking into account any indemnity, contribution or other similar payment received by the Indemnitee from any third party with respect thereto. SECTION 11.7. Exclusive Remedy. Except in the case of fraudulent misrepresentation, from and after the Closing, no party hereto shall be liable or responsible in any manner whatsoever to the other parties, whether for indemnification or otherwise, except for indemnity as expressly provided in Article XII (with respect to Tax Claims) or this Article XI, which provide the exclusive remedies and causes of action of the parties hereto with respect to any matter arising out of or in connection with this Agreement or any opinion or certificate delivered in connection herewith. After the Closing, except in the case of fraudulent misrepresentation, Purchaser shall not be entitled to a recision of the sale of the Purchased Shares. ARTICLE XII 56 TAX MATTERS SECTION 12.1. Section 338(h)(10) Election. (a) Parent, Purchaser, WWI and each U.S. Subsidiary agree that, in connection with the sale contemplated hereby, the parties shall make timely elections pursuant to Sections 338(g) and 338(h)(10) of the Code (and pursuant to any comparable state and local tax provisions) (collectively, the "Section 338(h)(10) Elections") with respect to (i) Parent's sale of the WWI stock, and (ii) the resulting deemed sale of the stock of each U.S. Subsidiary of WWI. (b) For purposes of executing the Section 338(h)(10) Elections, not earlier than 90 days before the last day for filing the election, Purchaser and Parent shall mutually agree on and prepare and execute two copies (one for Purchaser and one for Parent) of IRS Form 8023 and all such forms, schedules and attachments as are necessary or required to be filed therewith pursuant to applicable U.S. Treasury Regulations and Parent (and/or the relevant U.S. Subsidiary) shall timely execute any and all forms that it is required to execute in order to make a valid Section 338(h)(10) Election and it shall perform such other acts as are necessary to make or perfect the Section 338(h)(10) Elections. The forms relating to the Section 338(h)(10) Elections for federal, state and local Tax purposes hereinafter shall be referred to as the "Section 338 Forms." Purchaser and Parent agree that the Section 338 Forms shall be filed with the appropriate tax authorities not earlier than 60 days before the last date for the filing thereof. Purchaser and Parent agree to consult and resolve in good faith as expeditiously as possible any disputes regarding the contents of the Section 338 Forms prior to their filing. (c) For purposes of making the Section 338(h)(10) Elections, Purchaser and Parent shall mutually agree on an allocation of a portion of the Purchaser's "adjusted grossed-up basis" in the shares, respectively, of WWI and each of its U.S. Subsidiaries (within the meaning of the U.S. Treasury Regulations under Section 338(h)(10) of the Code) and to the investment in Foreign Subsidiaries owned by WWI and each of its domestic U.S. Subsidiaries existing as of the Closing Date (the "Mutual Allocation"). The Purchaser shall allocate the remaining "adjusted grossed-up basis" to the other tangible and intangible assets of WWI and each of its domestic U.S. Subsidiaries existing as of the Closing Date (the "Unilateral Allocation"). Both the Mutual and Unilateral Allocations shall be binding upon Purchaser and Parent for purposes of allocating the "modified aggregate deemed sale price" (within the meaning of the U.S. Treasury Regulations) among the assets of WWI and each of its U.S. Subsidiaries. Neither party shall file any Tax Return, or take a position with any Tax authority, that is inconsistent with the Mutual and Unilateral Allocations without the written consent of the other party. Purchaser and Parent agree to cooperate in good faith in an effort to resolve any dispute concerning the appropriate Mutual Allocation. (d) Except as otherwise provided in this Section 12.1(d), Purchaser also may make an election under Section 338(g) of the Code in connection with the deemed purchase of the stock of a Company that is not a U.S. Subsidiary, provided that WWI pays to Parent, and/or agrees to indemnify Parent against, any additional Taxes that are actually imposed on Parent or any Affiliate of Parent (other than WWI or any Subsidiary) and against any loss, damage, liability or expense, including reasonable fees for attorneys and other outside consultants incurred in contesting or otherwise in connection with such Taxes as a result of Purchaser or any Affiliate of Purchaser making any such election under Section 338(g) of the Code. Notwithstanding the immediately preceding sentence, the Purchaser shall not make an 57 election under Section 338(g) of the Code with respect to Weight Watchers Australia Pty. Ltd. (or if a new company is formed to acquire the Fortuity Australia shares, such new company). SECTION 12.2. Liability for Taxes; Tax Indemnity. (a) From and after the Closing Date, Parent shall indemnify and hold harmless Purchaser, WWI, the Companies and any other Affiliate of Purchaser (each a "Purchaser Indemnified Person") against the following Taxes and, against any loss, damage, liability or expense, including, but not limited to, reasonable fees for attorneys and other outside consultants, incurred in contesting or otherwise in connection with any such Taxes: (i) Taxes imposed on any Purchaser Indemnified Person with respect to taxable years or periods ending on or before the Closing Date; (ii) with respect to taxable years or periods beginning before the Closing Date and ending after the Closing Date, Taxes imposed on WWI or any Company that are allocable, pursuant to Section 12.3 below, to the portion of such taxable year or period ending on the Closing Date (an "Interim Period") (Interim Periods and any taxable years or periods that end on or prior to the Closing Date are referred to collectively hereinafter as "Pre-Closing Periods"); (iii) Taxes imposed on any member of any affiliated, consolidated, combined or unitary group (other than WWI or any Company) with which WWI or any Company files or has filed a Tax Return on an affiliated, consolidated, combined, unitary or other similar basis for a Pre-Closing Period; (iv) Taxes required to be paid or reimbursed by Parent under Section 12.4, Section 12.5, Section 12.6, Section 12.7 and Section 13.14 of this Agreement (to the extent such Taxes have not been paid by Parent); (v) Taxes or additional Taxes imposed on a Purchaser Indemnified Person as a result of a breach of the representations and warranties set forth in Section 3.16 of this Agreement or of the covenants contained in Article V or this Article XII; (vi) Taxes or other payments required to be made after the date hereof by WWI or any Company to any person under any Tax sharing, indemnity, allocation or other similar agreement (whether or not written); or (vii) any Taxes imposed on WWI or any Company in respect of, or as a result of, executing the Reorganization. (b) WWI shall be solely responsible for all Taxes of WWI and any Company for any taxable year or period or portion thereof that begins on the day after the Closing Date. If any tax authority seeks to collect from the Parent or any Affiliate of Parent any Tax for which WWI is responsible hereunder, WWI shall indemnify and hold harmless Parent or such Affiliate from any liability for such Tax, and against any loss, damage, liability or expense, including but not limited to, reasonable fees for attorneys and other outside consultants, incurred in contesting or otherwise in connection with such taxes and incurred as a result of the failure of WWI to pay any Taxes that are its responsibility under this Section 12.2(b). SECTION 12.3. Partial Period Taxes. In order to apportion appropriately any Taxes relating to any taxable year or period that includes an Interim Period, the parties hereto shall, to the extent permitted under applicable law, elect with the relevant Tax authority to treat for all purposes, the Closing Date as the last day of the taxable year or period of WWI and each of the Companies, as the case may be, and such 58 Interim Period shall be treated as a short taxable year and a Pre-Closing Period for purposes of this Article XII. In any case where applicable law does not permit WWI or one or more of the Companies, as the case may be, to treat the Closing Date as the last day of the taxable year or period with respect to Taxes that are payable with respect to an Interim Period, the portion of any such Tax that is allocable to the portion of the Interim Period ending on the Closing Date shall be: (a) in the case of Taxes that are either (i) based upon or related to income or receipts, or (ii) imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) (other than any Taxes imposed on any sales conveyances made pursuant to this Agreement or contemplated by transactions described herein, the payment of which is governed by Section 13.14 of this Agreement), deemed equal to the amount which would have been payable had the relevant taxable year or period ended on the Closing Date (except that, solely for purposes of determining the marginal tax rate applicable to the income or receipts during such period in a jurisdiction in which such tax rate depends upon the level of income or receipts, annualized income or receipts may be taken into account, if appropriate, for an equitable sharing of such Taxes); and (b) in the case of Taxes not included in subparagraph (a) above that are imposed on a periodic basis and measured by the level of any item, deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period) multiplied by a fraction the numerator of which is the number of calendar days in the Interim Period ending on the Closing Date and the denominator of which is the number of calendar days in the entire relevant period. SECTION 12.4. Federal Income Tax Returns. For the purposes of Federal Income Taxes, WWI and any U.S. Subsidiary shall close its books as of the Closing, determined in accordance with Section 2.6(a). All items of income, deduction, or credit for the period ending as of such Closing shall be reported by Parent on its consolidated federal income tax return for its Taxable year including the Closing Date. All items of income, deduction, or credit for the period beginning on the day after the Closing Date shall be reported on the consolidated federal income tax return of the Affiliated Group that will include WWI and its U.S. Subsidiaries. Parent shall be liable for and shall pay, or cause to be paid, all Taxes shown as due and owing on such consolidated federal income tax return. SECTION 12.5. State and Local Income Tax Returns Where Books Closed. For the purposes of State and Local Income Taxes with respect to which it is required or permitted to do so, WWI and any U.S. Subsidiary shall close its books in a manner comparable to that described in Section 12.4. With regard to any such State and Local Income Tax with respect to which WWI or such U.S. Subsidiary closes its books: (a) Parent shall be responsible for the preparation of all such State and Local Income Tax returns for the period ending as of the Closing, determined in accordance with Section 2.6(a). For any separate return that must be filed by WWI or such U.S. Subsidiary (as distinguished from a combined or unitary return in which WWI or such U.S. Subsidiary is included), Parent shall furnish each such separate return to Purchaser, together with a check or checks for the payment of any Tax shown due on such return. Purchaser shall cause each such return to be executed by an officer of WWI or such U.S. 59 Subsidiary and filed, together with the check or checks furnished by Parent, in accordance with the reasonable instructions of Parent. Parent shall be liable for and shall pay, or cause to be paid, all Taxes shown as due and owing on such Tax Returns and Parent shall indemnify and hold harmless Purchaser and its Affiliates (including WWI and any Subsidiary) and their agents, officers and employees for any liability arising from the execution and filing of such State and Local Income Tax returns; and (b) Purchaser shall be responsible for the preparation and filing of all State and Local Income Tax Returns for any taxable year or period that begins after the Closing Date. SECTION 12.6. State and Local Income Tax Returns for Interim Periods. (a) With respect to a State and Local Income Tax Return of WWI or any U.S. Subsidiary for a tax period that includes but does not end on the Closing Date with respect to which WWI or such U.S. Subsidiary does not close its books as set forth in Section 12.5, not less than 30 days before the due date of such return, Purchaser shall furnish Parent a copy of the Tax Return and a statement of the amount of income tax that is Parent's responsibility. Such Tax Return shall be prepared in accordance with the tax law and regulations of the applicable jurisdiction and, subject to the foregoing, in a manner consistent with prior practice. Parent's liability for the Taxes shown as due and owing on any such Tax Return shall be determined in accordance with Section 12.3 above after crediting Parent with any estimated tax payments made by Parent, WWI or any U.S. Subsidiary on or prior to the Closing Date. If the estimated tax payments exceed Parent's responsibility for such Taxes, the excess shall be paid by WWI to Parent no later than the due date for the relevant Tax Return. If Parent does not agree with Purchaser's statement, Parent shall give to Purchaser not later than 20 days before the due date of the return (A) notice of specific reason or reasons Parent does not so agree and (B) a statement of income tax liability that in Parent's opinion is Parent's responsibility. In such case, Parent and Purchaser promptly shall confer and attempt to resolve the disagreement and, not later than five days before the due date of the return, Parent shall pay to WWI the full amount of its Tax liability shown as due and owing on the relevant Purchaser's statement at least five days before the date on which the related Tax Return is required to be filed and nothing in this Section 12.6(a) shall relieve Parent of its responsibility for such income tax because Parent has disagreed with Purchaser's statement. (b) If Parent and Purchaser are not able to resolve a disagreement described in paragraph (a) above, the matter shall be submitted as promptly as practicable for dispute resolution as described in Section 13.18 of this Agreement. If it is subsequently determined that Parent paid more than its allocable share of any Tax liability, Purchaser shall notify Parent, in writing, of such overpayment and within 10 days of such notice WWI shall refund to Parent the amount of such overpayment, together with the interest that would be due on an overpayment of Taxes (as determined in accordance with Section 6611 of the Code). SECTION 12.7. Foreign Income Tax Returns and All Other Tax Returns. Parent also shall prepare and file, or cause to be prepared and filed, all Foreign Income Tax Returns and any and all Other 60 Tax Returns required to be filed by WWI or any Company for any taxable year or period ending on or before the Closing Date or the due date of which (after giving effect to any extensions) is on or prior to the Closing Date. All such Tax Returns shall be prepared and filed in a manner that is consistent with the provisions set forth in Section 12.5 of this Agreement. Parent shall be liable for and shall timely pay (or cause to be timely paid) all Taxes shown as due and owing on all such Tax Returns. Purchaser shall prepare and file, or cause to be prepared and filed, all Foreign Income Tax Returns and any and all Other Tax Returns required to be filed by WWI or any Company for any taxable year or period that begins prior to the Closing date and ends after the Closing Date or the due date of which (after giving effect to any extensions) is after the Closing Date. All such Tax Returns shall be prepared and filed, and the liability for, and payment of, all Taxes shown as due and owing thereon shall be determined, in a manner that is consistent with the provisions set forth in Section 12.6 above. SECTION 12.8. Tax Refunds. Any refunds or credits of Taxes of, or with respect to, WWI or any Company that are attributable or allocable to a Pre-Closing Period shall be for the account of Parent. Any refunds or credits of Taxes of, or with respect to, WWI, or any Company that are attributable or allocable to any period (or portion thereof) beginning after the Closing Date (treating such date as the beginning of a short taxable year for this purpose) shall be for the account of Purchaser. Purchaser shall, if Parent so requests and at Parent's expense, cause the relevant entity (Purchaser, WWI, any Company or any other Affiliate of Purchaser, or any successor to any of these parties) to file for and obtain any refunds or credits to which Parent is entitled hereunder, including, without limitation, through the prosecution of any administrative or judicial proceeding which Parent, in its sole and absolute discretion, chooses to direct such entity to pursue. Purchaser shall permit Parent to control (at Parent's expense) the prosecution of any such refund or credit claim, and when deemed appropriate by Parent, shall cause the relevant entity to authorize by appropriate power of attorney such person as Parent shall designate to represent such entity with respect to such refund claim. Parent shall indemnify Purchaser and/or any Affiliate of Purchaser for any costs, expenses or other losses incurred by Purchaser or any Affiliate of Purchaser in connection with the prosecution of any such Tax refund or credit claim. WWI shall pay over to the Parent the amount of any such Tax refund or credit, minus the amount of any Taxes payable in respect of such amount by Purchaser or any Affiliate of Purchaser, promptly after the Tax refund is received or any such credit of Taxes is granted; provided, however, that if any such refund or credit of Taxes is subsequently disallowed or redetermined, Parent shall repay promptly to WWI the amount of such disallowed, or the amount of the reduction in such redetermined, Tax refund or credit. Notwithstanding the foregoing, the control of the prosecution of a claim for Tax refund or credit of Taxes pursuant to a deficiency assessed subsequent to the Closing Date as the result of an audit shall be governed by the provisions of Section 12.11 below. SECTION 12.9. Cooperation. The Parent and the Purchaser shall cooperate fully with each other and make available to each other in a timely fashion such Tax data and other information as may be reasonably required by the Parent or the Purchaser for the preparation of any Tax Returns required to be prepared and filed by the Parent or the Purchaser hereunder, or in connection with the preparation or filing of any election, consent or certification. The Parent and the Purchaser will provide to each other, and the Purchaser will cause WWI, and any Company to provide to the Parent, full access, at any reasonable time 61 and from time to time, at the business location at which the books and records are maintained, after the Closing Date, to such Tax data of WWI and any Company as the Parent or the Purchaser, as the case may be, may from time to time reasonably request. SECTION 12.10. Tax Agreements and Arrangements. Effective as of the Closing Date, all agreements and arrangements or Tax sharing practices pursuant to which WWI or any Company makes a payment of Tax with respect to a consolidated, combined, or unitary group that includes a corporation other than WWI and the Companies are terminated with respect to WWI and the Companies, and Parent covenants to Purchaser that neither WWI nor any Company shall have any liability under any such agreement or arrangement. SECTION 12.11. Contests. (a) Purchaser shall promptly notify Parent in writing if Purchaser or any Affiliate of Purchaser receives, after the Closing Date, any written notice of a proposed assessment or claim in an audit or administrative or judicial proceeding involving WWI, any Company or any other Affiliate of Purchaser which, if determined adversely to the relevant taxpayer, would be grounds for indemnification under Section 12.2(a) of this Agreement; provided, however, that a failure to give such notice will not affect a Purchaser Indemnified Person's right to indemnification hereunder, except to the extent, if any, that, but for such failure, Parent could have avoided the Tax liability in question. In the case of an audit or administrative or judicial proceeding that relates to any Pre-Closing Period, provided that within 60 days after Parent receives the written notice from Purchaser required under Section 12.11(a) and prior to taking any action with respect to such audit or administrative or judicial proceeding, Parent acknowledges in writing its liability under Section 12.2(a) of this Agreement to hold the relevant Purchaser Indemnified Person (or Persons) harmless against the full amount of any adjustment which may be made as a result of such audit or proceeding, Parent shall have the right at its own expense to control the conduct of such audit or proceeding; provided, however, that Parent shall not settle or otherwise compromise any issue or matter without the Purchaser's prior written consent if such issue or matter could have a material adverse effect on the Tax liability of Purchaser, WWI, any Company or any other Affiliate of Purchaser for a post-Closing taxable year or period. Purchaser also may participate in any such audit or proceeding at its own expense and, if Parent does not assume the defense of any such audit or proceeding, Purchaser may, without any effect to its or any other Purchaser Indemnified Persons' right to indemnification under Section 12.2(a) of this Agreement, defend the same in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding. In the case of an audit or administrative or judicial proceeding that relates to any period that begins before and ends after the Closing Date, Parent and Purchaser shall jointly control the conduct of such audit or proceeding, each to bear its own expenses. Except as expressly set forth in this Section 12.11(a), Purchaser shall control at its own expense the conduct of any and all audits or the proceedings related to the Taxes, or the Tax liability, of WWI and the Companies. (b) Parent and Purchaser shall cooperate, and after the Closing Purchaser shall cause 62 WWI and each Company to cooperate, to the extent that it is reasonable and helpful in any Proceeding, including making available relevant records and documents in their possession. Neither Parent, Purchaser, WWI nor any Company shall be required to disclose a consolidated, combined, or unitary Tax Return including a corporation that is not WWI or any of the Companies, but if information with respect to WWI or any Company contained in such a Tax Return is relevant to a Proceeding, such information shall be furnished as a pro forma separate return of WWI, or any Company. SECTION 12.12. Timing of Payments. Payment of any amounts due in respect of Taxes for any Interim Periods shall be made by Parent at least five days before the due date of the applicable estimated or final Tax Return required to be filed by Purchaser on which is required to be reported income for such Interim Period and for which Parent is responsible under Sections 12.6 or 12.7 of this Agreement without regard to whether the Tax Return shows overall net income or loss for such period. With respect to indemnity payments due under Section 12.2(a) or Section 12.2(b) of this Agreement, payment by Parent or WWI shall be made within five Business Days after the date that such party has been notified by the other that it has a liability for a determinable amount under this Article XII and is provided with calculations or other materials supporting such liability. SECTION 12.13. Termination of Parent's Indemnity Obligations. Notwithstanding any provision herein to the contrary, the obligations of Parent to indemnify and hold harmless any Purchaser Indemnified Person pursuant to this Article XII shall terminate at the close of business on the 30th day following the expiration of the applicable statute of limitations with respect to the Tax liabilities in question (after giving effect to any waiver, mitigation or extension thereof). SECTION 12.14. Miscellaneous Tax Matters. (a) Parent's Affiliated Group has not elected or applied for permission, and shall not elect or apply for permission, to discontinue filing consolidated Federal Income Tax Returns. (b) On or before the Closing Date, Parent shall provide Purchaser with a statement meeting the requirements of Treas. Reg. Section 1.1445-2(b)(2)(i). (c) After the Closing Date, Purchaser shall cause WWI or any Company to elect where permitted by law, to carry forward any net operating loss, net capital loss, charitable contribution, or other item arising after the Closing Date that would, absent such election, be carried back to a taxable period of WWI or such Subsidiary ending on or before the Closing Date. (d) Parent shall not file and shall cause each corporation that is an Affiliate of Parent after the Closing Date not to file, any claim for refund or credit, of Tax paid by WWI or any Company. The preceding sentence shall not restrict Parent from (i) filing a claim for refund or credit, or filing an amended return claiming a refund or credit, of income tax paid with respect to a consolidated, combined, or unitary tax return of Parent, notwithstanding the fact that WWI or such Company is included in such a return, (ii) filing a claim for refund for any Tax paid by Parent as a result of its indemnity obligations under this Article or (iii) filing with any state or local taxing authority a report required by law of federal changes. (e) To the extent that Purchaser does not make a Section 338(g) election with respect to one or more Foreign Subsidiary (a "Non-338(g) Foreign Subsidiary"), Purchaser agrees that after the 63 Closing and during the taxable year of any such Non-338(g) Foreign Subsidiary in which the deemed sale of the stock of such Non-338(g) Foreign Subsidiary occurs pursuant to an election under Section 338(h)(10) of the Code, the Purchaser will not cause such Non-338(g) Foreign Subsidiary and such Non-338(g) Foreign Subsidiary will not (i) make distributions from its current or accumulated earnings and profits; (ii) make an investment in United States property as that investment is described in Section 956 of the Code, (iii) become a party to a Code Section 304 transaction, or (iv) enter into transactions outside the ordinary course of business that would result in any such Non-338(g) Foreign Subsidiary deriving subpart F income as that term is defined in Section 952(a) of the Code. (f) In filing its Federal Income Tax Return for the period that includes the Closing Date, WWI will elect, pursuant to Section 197(f)(9)(B) of the Code and to U.S. Proposed Treasury Regulation Section 1.197-2(h)(9) (or such regulation as then shall be left in effect), by a statement filed with such Tax Return, to recognize gain on the deemed disposition of its entire shareholding in the LLC (as defined in Exhibit A attached hereto). Notwithstanding the foregoing, WWI will not be required to file such statement if Proposed Treasury Regulation Section 1.197-2(h)(9), as adopted in final form, or the preamble thereto, explicitly provides that such statement is not required. SECTION 12.15. Purchase Price Adjustment. Any indemnification payment made by WWI to Parent or by Parent to Purchaser or to WWI, or any Company on behalf of Purchaser pursuant to this Agreement shall be treated by Purchaser and Parent as an adjustment to the Purchase Price for Tax purposes. ARTICLE XIII MISCELLANEOUS SECTION 13.1. Termination of Agreement. This Agreement may be terminated at any time prior to the Closing only as follows: (a) by mutual written consent of Purchaser and Parent; or (b) by either Purchaser or Parent if the Closing shall not have occurred by the day which is five months after the date hereof, provided however, that the right to terminate this Agreement under this Section 13.1(b) shall not be available to Parent or Purchaser, as the case may be, if the failure to consummate the Closing by such date shall be due to the failure of the party seeking to terminate this Agreement to have fulfilled in a material respect any of its obligations under this Agreement; or (c) by either party upon the occurrence of any of the adverse events described in 64 Section 9.5 or Section 10.3 applicable to its obligation to close which has become a nonappealable final order, decree or judgment. In the event of termination of this Agreement by either or both of the parties pursuant to this Section 13.1, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become void and of no further force and effect, and no party hereto shall have any liability to the other party or its respective Affiliates, directors, officers or employees, except for the obligations set forth in Sections 5.2, 13.2, 13.9, 13.12, 13.13, 13.14, 13.15, 13.17 and 13.18 and this Section 13.1 hereof, which shall survive such termination; provided nothing in this Section 13.1 shall relieve any party from any liability for any breach of such party's covenants or agreements contained in this Agreement prior to such termination or, to the extent of reimbursement of the other party's expenses, for any breach of such party's representations and warranties under this Agreement. SECTION 13.2. Expenses. Unless otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors, consultants and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses; provided Parent will pay all costs incurred by the Companies (other than those caused to be incurred by Purchaser on or after the Closing) in connection with, and shall insure that there is no diminution in the value to be transferred hereunder to the Purchaser as a result of, the transactions which are the subject of this Agreement, including, without limitation, legal and accounting fees. SECTION 13.3. Waiver. The accuracy of any representation or warranty, the performance of any covenant or agreement or the fulfillment of any condition of this Agreement by Purchaser on the one hand or Parent on the other, may be expressly waived in writing by Purchaser or Parent, as appropriate. Any waiver hereunder shall be effective only in the specific instance and for the purpose for which given. No failure or delay on the part of Purchaser or Parent in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. SECTION 13.4. Consents. Whenever this Agreement requires a permit or consent by or on behalf of either party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in Section 13.3. SECTION 13.5. Assignment; Parties in Interest. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of, and be enforceable by, the parties hereto and their 65 respective successors and permitted assigns, provided, however, that neither this Agreement nor any of the rights, interests or obligations herein may be assigned, including by operation of law or otherwise, by any party hereto without the prior written consent of the other party, except that the Purchaser may assign its rights and obligations under this Agreement to a lender in connection with the financing referred to in Section 4.7 hereof and to any Affiliate of Purchaser, including a corporation which is wholly-owned by Purchaser or by Persons or entities which own all the outstanding stock of Purchaser, if Purchaser unconditionally guarantees that such Affiliate to which Purchaser's rights and obligations are assigned will perform fully all the obligations of Purchaser under this Agreement. SECTION 13.6. Further Assurances. Each of the parties hereto agrees that, from and after the Closing, upon the reasonable request of any other party hereto and without further consideration, such party will promptly execute, acknowledge and deliver to such other party such documents and further assurances and will take such other actions (without cost to such party) as such other party may reasonably request in order to carry out the purpose and intention of this Agreement. SECTION 13.7. Entire Agreement. This Agreement, the Confidentiality Agreement referred to in Section 5.2, the other Exhibits to this Agreement, and the agreements specifically referred to herein or delivered pursuant hereto or executed on the date hereof between the parties contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements with respect thereto. SECTION 13.8. Amendment. This Agreement may be amended or modified in whole or in part only by a duly authorized written agreement that refers to this Agreement and is signed by each of the parties hereto or by their duly appointed representatives or successors. SECTION 13.9. Limitations on Rights of Third Parties. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person other than the parties hereto any rights or remedies under or by reason of this Agreement or any transaction contemplated hereby. SECTION 13.10. Captions. The captions in this Agreement are inserted for convenience of reference only, do not constitute part of this Agreement and shall not affect the construction or interpretation of any provision of this Agreement. SECTION 13.11. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 66 SECTION 13.12. Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and will be deemed to have been duly given if personally delivered or telecopied or on the date of receipt indicated on the return receipt if delivered or mailed (registered or certified mail, postage prepaid, return receipt requested) as follows: (a) If to Parent: H. J. Heinz Company 600 Grant Street Pittsburgh, Pennsylvania 15219 Telecopy Number: 412-456-6102 Attention: Senior Vice President and General Counsel 67 (b) If to Purchaser and/or Guarantor: c/o Artal Luxembourg S.A. 39 Boulevard Royal Luxembourg City, Luxembourg 2449 Facsimile No.: 352-22-42-66 Attention: Managing Director with copies to: The Invus Group, Ltd. 135 East 57th Street - 30th Floor New York, NY 10022 Facsimile No.: (212) 371-1829 Attention: Raymond Debbane Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Facsimile No.: (212) 455-2502 Attention: Robert E. Spatt, Esquire or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above. (c) Purchaser and Guarantor hereby irrevocably and unconditionally designate and direct Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as their agent to receive service of any and all process and documents on their behalf in any legal action or proceeding related to this Agreement and agree that service upon such agent shall constitute valid and effective service upon Purchaser and Guarantor and that failure of such agent to give any notice of such service to Purchaser and Guarantor shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. SECTION 13.13. Governing Law. This Agreement and the rights and duties of the parties 68 hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. SECTION 13.14. Transfer Taxes and Governmental Approvals Filing Fees. Notwithstanding the provisions of Article XII, (i) all excise, sales, value added, use, registration, stamp, transfer and other similar excise or conveyance taxes, levies, charges and fees incurred in connection with this Agreement and the transactions contemplated hereby, and (ii) the fees for the Governmental Approvals Filings, shall be borne equally by Parent and Purchaser. Purchaser and Seller shall cooperate in providing each other appropriate resale exemption certificates and other appropriate tax documentation. SECTION 13.15. Public Announcements. All public announcements relating to this Agreement or the transactions contemplated hereby shall be made at such time and in such manner as the parties hereto shall mutually agree, except that nothing in this Agreement shall prevent a party hereto from making any disclosure in connection with the transactions contemplated by this Agreement to the extent required by law or to the extent required by any securities exchange on which a party has listed its securities provided that prior notice of such disclosure is given to the other party. SECTION 13.16. Schedules. Any item disclosed in the Schedules attached hereto, under any specific Schedule number hereof, shall be deemed to have been disclosed for all purposes of any other Schedule but only to the extent that the applicability of the information disclosed to such other representation and warranty or Schedule is reasonably apparent. Disclosure of any fact or item in any Schedule hereto shall not necessarily mean that such fact or item is material. SECTION 13.17. Guaranty. (a) Guarantor hereby guarantees the performance of each of the obligations (financial or otherwise) of the Purchaser and any assignee Affiliate under this Agreement including, without limitation, any obligation to indemnify Parent pursuant to Article XI hereof or otherwise, provided that (i) the aggregate liability of Guarantor under this paragraph will not exceed $25 million and (ii) the guarantee of Guarantor will terminate upon completion of the Closing. (b) Guarantor hereby represents and warrants to Parent that (i) it is a corporation duly organized and validly existing under the laws of the Grand Duchy of Luxembourg; (ii) it has all corporate power and authority necessary to authorize Purchaser to enter into this Agreement and to perform its obligations hereunder; (iii) all corporate actions necessary to authorize Purchaser to enter into this Agreement and to perform its obligations hereunder have been taken; and (iv) the agreement of Guarantor contained in this Section 13.17 is a valid and binding agreement of Guarantor, enforceable against it in accordance with its terms. SECTION 13.18. Jurisdiction; Venue. The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall 69 be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action. SECTION 13.19. Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. SECTION 13.20. Joint Promotion. Parent and Purchaser acknowledge and agree to use their reasonable best efforts to negotiate the form of a Joint Promotional Agreement with respect to cross-promotional activities between WWI after the Closing and Parent and its Affiliates and to attach the Joint Promotional Agreement to this Agreement as Exhibit K, no later than August 23, 1999 as a document to be executed and delivered at Closing; provided, however, that there shall be no requirement that the parties agree upon the Joint Promotional Agreement as a condition to the Closing of the transactions contemplated under this Agreement and the failure to so agree shall not affect or limit any party's obligation to close hereunder. (Remainder of page intentionally left blank) 70 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of Parent, WWI, Purchaser and Guarantor as of the date first above written. H. J. HEINZ COMPANY By: /s/ Mitchell A. Ring Name: Mitchell A. Ring Title: Vice President--Business Development WEIGHT WATCHERS INTERNATIONAL, INC. By: /s/ Mark V. Matera Name: Mark V. Matera Title: Vice President ARTAL INTERNATIONAL S.A. By: /s/ Darimont Bernard Name: Darimont Bernard Title: Managing Director ARTAL LUXEMBOURG S.A., only as to Section 13.17 By: /s/ Darimont Bernard Name: Darimont Bernard Title: Managing Director 71 Kerry's Version LICENSING KEY TERM SHEET All capitalized terms are defined in the Operating Agreement unless otherwise indicated.
- ------------------------------------------------------------------------------------------------------------------------------------ TRADEMARK LICENSING HEINZ LICENSE AGREEMENT WWI LICENSE AGREEMENT AGREEMENT - ------------------------------------------------------------------------------------------------------------------------------------ Parties Licensor LLC LLC WWI Licensee Heinz WWI Heinz - ------------------------------------------------------------------------------------------------------------------------------------ Licensed All food and beverage products in those All food and beverage products in All food and Products categories set forth in Schedule A to the categories other than those beverage products in Operating Agreement set forth in Schedule A to the those categories set Operating Agreement forth in Schedule A to the Operating Agreement - ------------------------------------------------------------------------------------------------------------------------------------ Licensed Rights Food Trademarks and Program Information Food Trademarks and Program Food Classes in (except Just 2 Points) Information Improvements Multiclass Trademarks, Associated Food Trademarks, Non- Recognition Food Trademarks, Non- Transferable Food Applications - ------------------------------------------------------------------------------------------------------------------------------------ Territory World, except as set forth on Schedule A World Ditto Heinz License to the Operating Agreement - ------------------------------------------------------------------------------------------------------------------------------------
2 - ------------------------------------------------------------------------------------------------------------------------------------ Grant Exclusive right to use the Licensed Rights on Exclusive right to use the Ditto Heinz License the Licensed Products. Licensed Rights on the Licensed Products. Licensee may sublicense the use of the Licensed Rights to a person located in any Licensee may sublicense the use of country in the world in which Licensee or the Licensed Rights in any country Licensee's Affiliates are manufacturing, in the world. There is no limit to marketing, distributing or selling any food the number of levels of sublicense or beverage products; provided, however, that that may be authorized by Licensee this sentence will not be interpreted as a to an Affiliate. Licensee and its limitation on the territory that any such Affiliates may grant a sublicense Sublicensee is authorized under such to a person who is not an sublicense to distribute and sell the Affiliate, but any such sublicense Licensed Products. There is no limit to the shall not include any right to number of levels of sublicense that may be sublicense to any person not an authorized by Licensee as long as such Affiliate of the first sublicensee is an Affiliate of Licensee. sublicensee. Licensee may sublicense to one level only outside of its Affiliates. Non-exclusive, irrevocable and renewable, royalty free right to use the Licensed Rights in connection with sale of food and beverage products permitted under Section 2.03(f) of the Operating Agreement. - ------------------------------------------------------------------------------------------------------------------------------------ Non-exclusive right to use the Licensed Rights in connection with food and beverage products other than the Licensed Products ("Other Products") throughout the world only in respect to and to the extent necessary to fulfill obligation pursuant to the (i) licenses by Weight Watchers to parties including Heinz or its Affiliates granting rights to manufacture, market, distribute or sell Other Products under the Food Trademarks ("Direct Food Trademark Licenses"), which have been assigned to Heinz and to which Heinz has assumed the obligations of Weight Watchers on the Effective Date and (ii) all sublicenses by Heinz or its Affiliates to third parties granting the right to manufacture, market, distribute or sell Other Products, under the Food Trademarks ("Heinz Sublicenses"). License to apply to Other Products on the same terms and conditions as if they were Licensed Products for five (5) years from the Effective Date. - ------------------------------------------------------------------------------------------------------------------------------------
3 - ------------------------------------------------------------------------------------------------------------------------------------ Consideration; Licensee will grant access and a right to Licensee will grant access and a Cross-License sublicense to Licensor's other licensee a right to sublicense to Licensor's non-exclusive right to use on its Licensed other licensee a non-exclusive Products any and all Program Information right to use on its Licensed Improvements, including a right of use on new Products the Program Information, applications and any new Program Information, including a right of use on new including calculation of Points values, applications and any new Program developed or adopted by or on behalf of Information, including calculation Licensee, Licensee's Affiliates or of Points values, developed or Sublicensees after the Effective Date. adopted by or on behalf of Licensee, Licensee's Affiliates or Sublicensees after the Effective Date. All such new information shall automatically be included in the definition of Program Information and shall be made available to Licensor. - ------------------------------------------------------------------------------------------------------------------------------------ Quality Control All products manufactured, marketed, All products manufactured, Same as Heinz Grandfathering distributed and sold prior to the Effective marketed, distributed and sold and License on its Date utilizing Food Trademarks or Program products of a quality comparable Licensed Products. Information are deemed to be approved by to those manufactured, marketed, Licensor and in compliance with the Quality distributed, and sold by Control Requirements as defined in the LLC Licensor's other licensee prior to Agreement. the Effective Date utilizing Food Trademarks are deemed to be Quality control provisions relating to the approved by Licensor and in Food Trademarks in third party manufacturing compliance with the Quality agreements existing on the Effective Date are Control Requirements as defined in deemed to be approved by the Licensor. the LLC Agreement. Quality control provisions relating to the Food Trademarks in third party manufacturing agreements entered into by Licensee and comparable to such provisions in said agreements entered into by Heinz and existing on the Effective Date are deemed to be approved by the Licensor. - ------------------------------------------------------------------------------------------------------------------------------------
4 - ------------------------------------------------------------------------------------------------------------------------------------ Quality Control All Licensed Products and uses of the Food All Licensed Products and uses of Substantively same Enforcement Trademarks shall conform to the Quality the Food Trademarks shall conform as Heinz License. Control Requirements. to the Quality Control Quality control Requirements. exercised by LLC All Licensed Products and uses of the Program with regard to Food Information Trademarks shall conform to Licensee shall submit reports Trademarks and by quality control requirements to be adopted by regarding quality control WWI with regard to the licensor of Licensor's rights therein procedures and regarding Program Information (i.e. WWI) ("Program Information Trademark compliance with the Quality Trademarks. Standards") and enforced by the LLC Control Requirements on a substantially similar to the Quality Control quarterly basis. Requirements as defined in the LLC Agreement. All sublicenses to conform to Licensee shall submit reports regarding license with respect to quality quality control procedures and regarding control provisions. Licensee to compliance with the Quality Control have primary responsibility for Requirements and Program Information policing sublicenses. Trademark Standards on a quarterly basis. Mechanisms for enforcing quality All sublicenses to conform to license with control as set forth in the LLC respect to quality control provisions. Agreement. Licensee to have primary responsibility for policing sublicenses. Mechanisms for enforcing quality control as set forth in the LLC Agreement. - ------------------------------------------------------------------------------------------------------------------------------------ Review of New Licensor may object to any proposed new Licensor may object to any Same as Heinz Products Licensed Product only on the grounds that proposed new Licensed Product only License. such proposed new Licensed Product does not on the grounds that such proposed conform to the Quality Control Requirements. new Licensed Product does not conform to the Quality Control Licensor on behalf of the Program Information Requirements. licensor (i.e. WWI) may object to the use of Program Information Trademarks only on grounds of nonconformance with Program Information Trademark Standards. WWI may object to use of Program Information terminology only on grounds of substantial inaccuracy in the presentation, application or calculation. - ------------------------------------------------------------------------------------------------------------------------------------ Quality Control On twenty-one (21) days prior written notice On twenty-one (21) days prior Ditto Audit from Licensor and not more than once per . written notice from Licensor calendar year and not more than once per calendar year. - ------------------------------------------------------------------------------------------------------------------------------------
5 - ------------------------------------------------------------------------------------------------------------------------------------ Proprietary "WEIGHT WATCHERS is the registered trademark "WEIGHT WATCHERS is the registered "[TRADEMARK] is the Rights Notice of WW Foods, LLC" on Licensed Products trademark of WW Foods, LLC" on registered trademark Licensed Products of Weight Watchers "[PROGRAM INFORMATION TRADEMARK] is the International, Inc." registered service mark [or trademark] of "[PROGRAM INFORMATION TRADEMARK] Weight Watchers International, Inc." on is the registered service mark [or "[PROGRAM INFORMATION Licensed Products trademark] of Weight Watchers TRADEMARK] is the International, Inc." on Licensed registered service Products mark [or trademark] of Weight Watchers "WEIGHT WATCHERS is the registered International, Inc." trademark of Weight Watchers on Licensed Products International, Inc." with respect to Weight Watchers Business products, other than Licensed Products. "WEIGHT WATCHERS is the registered service mark of Weight Watchers International, Inc." with respect to Weight Watchers Business services. - ------------------------------------------------------------------------------------------------------------------------------------ Confidentiality Information exchanged to be treated as Information exchanged to be Same as Heinz confidential as per Section 2.12 of Operating treated as confidential as per license. Agreement. Section 2.12 of Operating Agreement. Program Information know-how to be deemed Confidential Information. Program Information Improvements to be deemed Confidential Information. - ------------------------------------------------------------------------------------------------------------------------------------ Term An initial term of twenty-five (25) years at An initial term of twenty-five Ditto which time this Agreement will automatically (25) years at which time this renew for consecutive terms of twenty-five Agreement will automatically renew (25) years each, terminable as per Section for consecutive terms of 2.16 of Operating Agreement.. twenty-five (25) years each, terminable as per Section 2.16 of Operating Agreement. - ------------------------------------------------------------------------------------------------------------------------------------
6 - ------------------------------------------------------------------------------------------------------------------------------------ Preservation of All trademarks used by Licensee that are All trademarks used by Licensee Licensor and Trademarks derived from, identical or confusingly that are derived from, identical licensee to share similar to any Formation Trademark must be or confusingly similar to any costs of renewals and registered in the name of and contributed to Formation Trademark must be maintenance. the LLC as New Food Trademarks. registered in the name of and Licensee to bear cost contributed to the LLC as New Food of splitting Licensor to maintain registrations and to Trademarks. Multiclass file and prosecute applications for New Food Trademarks. Trademarks as per LLC Agreement. Licensor to maintain registrations Licensor to file and and to file and prosecute prosecute applications for New Food applications for new Trademarks as per LLC Agreement. Associated Food Trademarks at Licensee's request and expense. - ------------------------------------------------------------------------------------------------------------------------------------ Infringement Either party may, but shall not be obligated Either party may, but shall not be Same as Heinz to, bring or cause to be brought, at its own obligated to, bring or cause to be License. cost and expense, any proceeding for brought, at its own cost and infringement, unauthorized use, or expense, any proceeding for interference with any Food Trademark infringement, unauthorized use, or hereunder to the extent permissible under interference with any Food local law. Other party to join as may be Trademarks to the extent required by local law. WWI as Licensor's permissible under local law. Other licensor to have sole discretion regarding party to join as may be required infringement of Program Information. under local law. With respect to any infringement, With respect to any infringement, unauthorized use, interference with or unauthorized use, interference violation of the Food Trademarks by a third with or violation of the Food party which does not primarily affect Trademarks by a third party which Licensed Products, Licensee may, at its cost does not primarily affect Licensed and expense, bring or cause to be brought any Products, Licensee may, at its prosecution, lawsuit, action, or proceeding cost and expense, bring or cause for infringement, unauthorized use, or to be brought any prosecution, interference with or violation of any of the lawsuit, action, or proceeding for rights of Licensee or Licensor, provided none infringement, unauthorized use, or of Licensor's other licensees whose licensed interference with or violation of uses of the Food Trademarks are primarily any of the rights of Licensee or affected brings prompt legal action. Licensor, provided none of Licensor's other licensees whose Program Information Trademarks not to be used licensed uses of the Food as brands or sub-brands. Trademarks are primarily affected brings prompt legal action. - ------------------------------------------------------------------------------------------------------------------------------------
7 - ------------------------------------------------------------------------------------------------------------------------------------ Indemnification Licensee shall indemnify Licensor from claims Licensee shall indemnify Licensor Ditto. arising out of the use of the Food from claims arising out of the use Trademarks, and shall indemnify WWI as of the Food Trademarks and shall Licensor's licensor from claims arising out indemnify Heinz from claims of the use of the Program Information, after arising out of use of the Program the Effective Date. Information Improvements, after the Effective Date. - ------------------------------------------------------------------------------------------------------------------------------------ Insurance As per Operating Agreement. As per Operating Agreement. Ditto. - ------------------------------------------------------------------------------------------------------------------------------------ Assignment; As per Operating Agreement. As per Operating Agreement. Ditto. Transfer - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 2d DISCLOSURE SCHEDULES TO RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC. and H. J. HEINZ COMPANY and ARTAL INTERNATIONAL S.A. JULY 22, 1999 DISCLOSURE SCHEDULES Attached hereto are the Disclosure Schedules of the Parent referred to in the Recapitalization and Stock Purchase Agreement dated as of July 22, 1999 (the "Agreement"). Capitalized terms used herein have the meanings attributed to them in the Agreement unless the context indicates otherwise. The inclusion of any agreement or other matter as part of these Schedules or any attachment hereto should not be interpreted as indicating that the Parent has determined that such agreement or other matter is necessarily material to the Business or required to be disclosed under such Schedule or agreement. Any item disclosed in the Schedules attached hereto, under any specific Schedule number hereof, shall be deemed to have been disclosed for all purposes of any other Schedule but only to the extent that the applicability of the information disclosed to such other representation and warranty or Schedule is reasonably apparent. LIST OF SCHEDULES 1.1 Food Products 2.4 Indebtedness for Borrowed Money to be Discharged 3.1 Incorporation; Qualification 3.4 No Conflict 3.5 Capitalization 3.6 Stock Ownership; Title to Shares 3.7(a) Financial Statements 3.7(b) Undisclosed Liabilities 3.8(b) Real Property Leases 3.8(c) Disclosures relating to Real Property Leases 3.9(a) Material Contracts 3.9(b) Exceptions to Validity, Force and Effect of Material Contracts; Events of Default 3.10 Employee Benefit Plans 3.11 Absence of Certain Changes 3.12 Litigation 3.13 Compliance with Laws; Permits 3.14 Franchise Agreements 3.15(a)(i) U. S. Intellectual Property Assets 3.15(a)(ii) Other Company Intellectual Property Assets 3.15(a)(iii) Patent Applications and Applications for Registration of Intellectual Property 3.15(a)(iv) U. S. Copyright Registrations 3.15(b) Food Licenses 3.15(c) Intellectual Property - Encumbrances 3.15(d) Exceptions to Intellectual Property 3.16 Taxes 3.19 Subsidiaries 3.20 Accounts Receivable 3.21 Year 2000 4.4 No Conflict (Purchaser) 5.3 Conduct of Business 5.8 Claims 6.6 Guarantees 7.1(a)(1) Parent Employees Permanently Assigned to WWI 7.1(a)(2) Parent's Severance Policies 8.1 Excluded Assets and Liabilities 9.6 Governmental Approvals SCHEDULE 1.1 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Food Products See the attached list of Heinz Licensed Products as that term is defined in the Operating Agreement. SCHEDULE 2.4 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Indebtedness for Borrowed Money to be Discharged 1. Name of Entity Type of Debt Balance (as of April, 1999) --------------------------- --------------------------- WW UK Line of Credit and Overdraft 0 WW France Line of Credit 0 WW Germany Line of Credit $6,239,000 WW Switzerland Line of Credit $ 451,000 2. Set-Off Agreement - Standard Guarantee and Indemnity - Company - Interlocking between H. J. Heinz Company Australia Group and National Australia Bank Limited dated October 9, 1996 SCHEDULE 3.1 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Incorporation; Qualification True and complete copies of the certificates of incorporation and by-laws of Parent, Heinz Australia, WWI, Fortuity Australia and Fortuity NZ have been previously delivered to Purchaser. SCHEDULE 3.4 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. No Conflict (a) Subject to any amendments to WWI's Articles of Incorporation that are required pursuant to Section 5.16 of the Agreement (b) (i) Management Agreement dated March 18, 1997 between Fortuity Pty Limited, Logo Incorporated Pty Limited, Richard Lawrence Penn, H. J. Heinz Company Australia Limited and GutBusters Pty Limited and related Agreement dated April 12, 1999 (ii) The transfer of assets including employees from Fortuity New Zealand to NZ Newco terminates the employment arrangement with the Fortuity New Zealand employees. The current employment agreements require notice of termination of employment. A conditional notice of termination and letter of offer will be given to the employees prior to the Closing in connection with the New Zealand Reorganization. (c) None (d) (i) Foreign Governmental Approval Filings *Australia (Foreign Investment Review Board); provided this consent must be received prior to Closing and cannot be waived as a condition to Closing Belgium European Union Estonia *Finland *Germany Italy Latvia Netherlands *New Zealand (Overseas Investment Commission) with regard to the New Zealand Reorganization Poland *Sweden Switzerland Note: In the event that, after the execution of the Agreement, Purchaser's counsel and Parent's counsel mutually agree that any of the foregoing consents are not required, then neither party will be required to obtain such consents pursuant to Section 5.5(b) and Section 6.3, as applicable. (ii) Notice of the transaction must be given to Federal Trade Commission pursuant to In the Matter of Weight Watchers International, Inc., United States of America Before Federal Trade Commission, Docket No. 9261 SCHEDULE 3.5 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Capitalization 1. Stock Purchase Agreement and related agreements between WWI and/or Weight Watchers Sweden and L. Arvidsson dated March 31, 1995 2. Stock Purchase Agreement and related agreements between WWI and/or Weight Watchers Finland and T. Havola effective May 1, 1996 3. Share Mortgage dated May 9, 1990 between Logo Incorporated Pty Ltd and H. J. Heinz Company Australia Limited 4. Management Agreement dated March 18, 1997 between Fortuity Pty Limited, Logo Incorporated Pty Limited, Richard Lawrence Penn, H. J. Heinz Company Australia Limited and GutBusters Pty Limited and related Agreement dated April 12, 1999 5. Management Deed between Fortuity New Zealand Limited, Ultra-Six Pty Limited, Richard Lawrence Penn and Heinz-Wattie Holdings Limited dated January 16, 1998 and related Amendment dated March 18, 1999 6. Shareholder Deed between Fortuity New Zealand Limited, Ultra-Six Pty Limited, Richard Lawrence Penn and Heinz-Wattie Holdings Limited dated January 16, 1998 and related Amendment dated March 18, 1999 7. Letter Agreement between H. J. Heinz Company, Richard L. Penn, Logo Incorporated Pty Ltd and Ultra-Six Pty Ltd dated July 19, 1999 (agreement pursuant to which (i) Richard Penn agreed to sell his shares to the buyer of the Business or to Heinz or its designee in conjunction with Heinz Australia's sale of its Fortuity Pty Ltd shares and (ii) employment and/or consulting arrangements with Richard Penn, Heather Penn or companies controlled by Richard Penn will be terminated as of the Closing including the agreements listed in Items 3, 4, 5 and 6 above). 8. See the attached chart as to the capital structure of the U.S. Subsidiaries and the Principal Foreign Subsidiaries. 9. The first sentence of Section 3.5 is qualified by the amendments, if any, to WWI's Articles of Incorporation required pursuant to Section 5.16 of the Agreement. Weight Watchers International, Inc. Domestic Subsidiaries Authorized, Issued and Outstanding Stock WWI is the registered owner of all of the following issued stock: Active Subsidiaries Authorized Stock* Issued Stock Outstanding Stock W.W. Inventory Service Corp 1,000 Shares 1,000 Shares 1,000 Shares W.W. Weight Reduction Services, Inc. 200 Shares 200 Shares 200 Shares W.W.I. European Services, Ltd. 200 Shares 200 Shares 200 Shares W/W Twentyfirst Corporation 200 Shares 200 Shares 200 Shares 2 Weight Watchers Direct, Inc. 1,000 Shares 1,000 Shares 1,000 Shares Weight Watchers North America, Inc. 1,000 Shares 1,000 Shares 1,000 Shares Inactive Subsidiaries Authorized Stock* Issued Stock Outstanding Stock 58 WW Food Corp. 200 Shares 100 Shares 100 Shares Waist Watchers, Inc. 200 Shares 200 Shares 200 Shares Weight Watchers Camps, Inc. 200 Shares 200 Shares 3 W.W. Camps and Spas, Inc. 200 Shares 200 Shares 200 Shares *The "Authorized Stock" with respect to each Subsidiary consists solely of common stock. 4 Weight Watchers International, Inc. Principal Foreign Subsidiaries Authorized, Issued and Outstanding Stock Subsidiary Authorized Stock Issued Stock Outstanding Stock Weight Watchers (U.K.) Limited 100,000 Ordinary Shares; 1,900,000 Redeemable Preference Shares 50,000 Ordinary Shares 49,999 Ordinary Shares - W.W. Weight Reduction Services; 1 Ordinary Share - W/W Twentyfirst Corporation Weight Watchers France 2,500 Parts 2,500 Parts 2,000 Parts - WWI; 500 Parts W/W Twentyfirst Corporation Weight Watchers Sweden Vikt-Vaktarna Akiebolag 20,000 Aktier 5,000 Aktier 4,500 Aktier - WWI; 500 Aktier - Lena Arvidsson 5 Fortuity New Zealand Limited 2,600,000 Shares 2,600,000 Shares 1,950,000 Ordinary Shares - Heinz-Wattie Holdings Ltd.; 650,000 Non-participating Ordinary Shares - Ultra-Six Pty. Limited Fortuity Australia Pty Ltd 18,000,000 Ordinary Shares 2,000,000 "B" Class Shares 11,495,428 Ordinary Shares; 1,277,270 "B" Class Shares 11,495,428 Ordinary Shares - H. J. Heinz Company Australia Ltd.; 1,277,270 "B" Class Shares - Logo Incorporated Pty. Ltd. SCHEDULE 3.6 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Stock Ownership; Title to Shares The representations in Section 3.6 are subject to the Reorganization, the Redemption and the Recapitalization contemplated by the Agreement. SCHEDULE 3.7(a) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Financial Statements See the attached. SCHEDULE 3.7(b) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Undisclosed Liabilities None. SCHEDULE 3.8(b) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Real Property Leases 1. Agreement of Lease - 175 Crossways Park West, Woodbury, NY (WWI Headquarters) 2. Head office Lease (Maidenhead, Berkshire, U.K.) SCHEDULE 3.8(c) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Disclosures relating to Real Property Leases 1. A certain number of the Real Property Leases for the classroom meetings premises may require the consent of the landlord as a result of the change of control definitions in such leases. SCHEDULE 3.9(a) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Material Contracts 1. See the franchise agreements listed in Schedule 3.14 2. License Agreement between Warnaco, Inc. and WWI dated January 8, 1999 3. Agreement between Simon & Schuster, Inc. through its Prentice Hall General Reference Division and WWI dated December 24, 1992, and the Modification Agreement dated April 25, 1996 and the Amendment dated May 12, 1999 4. License Agreement between Healthy Living, Inc., Southern Progress Corporation and WWI dated April 25, 1996 5. See Schedule 3.15(b) as to material food licenses. 6. See the real property leases in Schedule 3.8(b). 7. Co-Pack Agreement between WWI and Nellson Nutraceutical, Inc. dated February 8, 1999 (nutritional bars) 8. Exclusive Distribution Agreement with Novartis Nutrition Export AG 9. Service Agreement between Weight Watchers North America, Inc. and Forms Distribution Corporation d/b/a Distribution 2000 dated June 1, 1998 10. Agreement between WWI and William Strickland dated September 11, 1974 (partnership agreement for Brazil) 11. Agreement between WWI and the Duchess of York dated August 27, 1998 and Letter Agreement between WWI and The Duchess of York dated August 14, 1998. 12. Letter Agreement with Howard J. Rubinstein Associates, Inc. dated November 18, 1998. 13. Letter Agreement between WWI and The Seiden Group dated January 7, 1999 14. Agreement between Weight Watchers (UK) Ltd. and PS Direct Communications Limited (Payne Stracey) 15. Research Agreements (collectively) a. Research Agreement among WWI, Frank Greenway and Pennington Biomedical Research Center dated December 27, 1997 b. Research Agreement among WWI, Xavier Pi-Sunyer, M.D. and St. Luke's/Roosevelt Hospital Center, The Obesity Research Center dated January 9, 1998 c. Research Coordination Agreement between WWI and St. Luke's/Roosevelt Hospital Center, The Obesity Research Center dated January 12, 1998 d. Research Agreement among WWI, James Hill and University of Colorado Health Sciences Center, Center for Human Nutrition dated January 26, 1998 e. Research Agreement among WWI, James W. Anderson, M.D. and University of Kentucky Research Foundation dated January 26, 1998 f. Research Agreement among WWI, Richard Atkinson and Beers-Murphy Clinical Nutrition Center, University of Wisconsin/Madison Medical School dated March 20, 1998 g. Research Agreement among WWI, Stephen Phinney and the University of California at Davis dated March 5, 1998 16. See the list of promissory notes issued by WWI in connection with certain franchise repurchases set forth in Schedule 8.1. 17. WWI has guaranteed the following loans made by PNC Bank to a Weight Watchers franchisee in connection with such franchisee's purchases of various third party Weight Watchers franchises: Debtor Principal Amount Maturity ------ Outstanding as of Date April 28, 1999 ---- -------------- 1. Weighco of Florida $ 0 3/31/00 2. Weighco of Florida $ 2,488,000 3/31/00 3. Weighco of Florida $ 725,000 9/30/01 4. Weighco of Florida $ 2,100,000 3/31/04 5. Weighco of Florida $ 2,000,000 3/31/04 6. Weighco of Southwest $12,691,000 10/31/05 7. Weighco of Southwest $ 2,209,000 10/31/O5 8. Weighco of Southwest $ 2,350,000 10/31/05 With respect to each borrowing, Heinz has agreed with PNC Bank to cause WWI to perform all of the terms and conditions and meet all of its obligations under the respective agreements between WWI and PNC Bank regarding the borrower's repayment of the loans. Note: The foregoing guarantees of WWI are the guarantees referred to in Section 5.11, "Franchisee Guarantees" in the Agreement. 18. See the guarantees listed in Schedule 6.6. 19. See the agreements set forth in Schedule 3.5, Capitalization. 20. Gutbusters Pty Ltd. has granted several franchise agreements covering the Gutbusters program. The Management of Gutbusters advises that the terms contained in the Agreements are not followed in practice. Instead, the practice has been for agents of Gutbusters to pay Gutbusters Pty Ltd upfront for Gutbusters kits and make their margin when they onsell the kits to clients. 21. See the items listed in Schedule 2.4. 22. a) See the attached "Related Parties and Related Party Transactions" with respect to transactions involving Fortuity Australia, Fortuity New Zealand and Affiliates of Parent. b) Parent provides certain legal, accounting, tax, insurance and employee benefits services for WWI. H. J. Heinz Australia and Heinz Watties provide similar services to Fortuity Australia and Fortuity New Zealand. 23. Agreement between MBS/Multimode, Inc. and WWI dated as of July 24, 1998 (database management). SCHEDULE 3.9(b) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Exceptions to Validity, Force and Effect of Material Contracts; Events of Default None. SCHEDULE 3.10 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Employee Benefit Plans (a) List of Plans A. Weight Watchers International 1. H. J. Heinz Company Employees' Retirement System -- Plan A for Salaried Employees 2. H. J. Heinz Company Employees Retirement and Savings Plan 3. H. J. Heinz Company SAVER Plan 4. Heinz Common Stock Investment Program 5. Heinz Premier Life Plan 6. Executive Split Dollar Life Insurance Program 7. Heinz Managed Care Benefits Program 8. Heinz Universal Benefits Plan 9. Heinz Budget Accounts (flexible spending accounts) 10. H. J. Heinz Company Voluntary Employees' Beneficiary Association Long Term Disability Plan 11. WWI Group Long Term Disability Insurance Policy Non-Participating with UNUM Life Insurance Company 12. H. J. Heinz Company Severance Pay Plan 13. H. J. Heinz Company Special Severance Program for Nonbargaining Hourly Employees 14. The H. J. Heinz Group Long Term Care Insurance Plan (John Hancock) 15. Tuition Assistance Plan 16. WWI Policy regarding fitness benefit 17. Summary of post-retirement benefits 18. WWI Vacation Policy 19. H. J. Heinz Company Incentive Compensation Plan 20. Letter Agreement with Carmen DuBroc dated July 8, 1997 21. Letter Agreement with Jim Getty dated November 11, 1996 22. Letter Agreement with Robert Mallow dated August 30, 1996 23. Letter Agreement with Eliot Glazer dated November 6, 1998 24. WWNA, Inc. Human Resources - Policies and Procedures for Service Providers - Revised April, 1999 25. WWNA, Inc. Human Resources -- Policies and Procedures for Field Employees - dated April 26, 1999 26. Summary of benefits payable to Service Providers (benefit eligible) and full-time Salaried Employees 27. Employee handbook - WWI headquarters 28. H. J. Heinz Company Stock Option Plans 29. H. J. Heinz Company Supplemental Executive Retirement Plan 30. H. J. Heinz Company Deferred Compensation Plan 31. 1986 Deferred Compensation Plan 32. WWI Regional Director Compensation Plan effective May 1, 1998 33. Weight Watchers NACO Diet Season Bonus Plan (field management) - FY99 34. WW NACO (Central Region) FY 98 Winter Diet Season Bonus 35. WWI At Work & Community - Sales Commission Plan dated May 31, 1994 36. Description of "Meeting Pay for Leaders" 37. New Hire Package - Administrative 38. New Hire Package - Field B. Weight Watchers U.K. 1. Retirement and Death Benefits Plan (Standard Life) 2. American Life Insurance Company Group Policy 3. American Life Insurance Company Group Permanent Health Insurance 4. Weight Watchers Healthcare Plan 5. FY 98 Bonuses 6. Statement of Principal Terms and Conditions of Employment for Full-time Employees (head office line manager; head office staff; administrative assistant; area service manager) 7. Form of Memorandum of Agreement for Student Leader 8. Conditions Relating to Weight Watchers Lecturers C. Weight Watchers France 1. Employee Manual 2. 1999 Bonus for Executive Managers 3. Form of employment contract for office employees and area managers 4. Form of employment agreement for leaders 5. Form of employment agreement for receptionists and weighers 6. Agreement with Main Works Council to equalize social payments for salaried employees and field employees D. Weight Watchers Sweden 1. Form of Employment Contracts with office staff, warehouse personnel, field staff 2. Sample employment contract with individual senior managers 3. Salary agreement for leaders, clerks and weighers 4. Leaders' Manual 5. Receptionists' Manual 6. At Work Manual 7. Bonus Plan for FY 99 for Senior Management (General, Finance and Marketing Managers), Area Managers and Class Operating Manager 8. Collective Agreements with office staff, warehouse personnel and cleaning personnel E. Fortuity Pty Ltd (Australia) 1. H. J. Heinz Superannuation Fund 2. The Australian Retirement Fund 3. Weight Watchers Australia Bonus Scheme for FY 99 4. Heinz Wattie's Australasia/Druids Health Cover for Managers 5. Heinz Wattie's Australasia Human Resources Policy Manual 6. Leaders' Reference Manual 7. A-Z Procedures Manual 8. Employment Contract with Scott Penn effective July 1, 1998 9. Employment Contract with Mark Penn effective July 1, 1998 10. Employment Contracts with four administrative personnel 11. Consulting Agreement with Rosemary Stanton dated November 29, 1984 12. Management Deed between Fortuity Pty Ltd., Centre for Health Promotion and Research Pty Limited and Garry James Egger dated May 27, 1994 (A letter from Fortuity Australian management to Garry Egger has been sent expressing intention to renew the Agreement.) 13. Management Deed between Fortuity Pty Ltd. and Allan Bolton dated July 27, 1994 14. Weight Watchers Foods - Leader Information Manual 15. Arrangements with Head Office and other office staff 16. Arrangements with Recorders and Weighers 17. Arrangements with leaders (lecturers) F. Fortuity New Zealand 1. Employment Contract with Jeanette Clark (General Manger) 2. Employment Contract with Karen Church (Business Development Manager) 3. Standard employment contracts with managers and office staff 4. Consulting agreement with John Birkbeck 5. Consulting agreement with Jude Buckley 6. Bonus Scheme for FY 99 7. Heinz Wattie's Australasia Human Resources Policy Manual 8. Leaders Individual Employment Contracts 9. Individual Employment Contracts for Meeting Room Recorders, Weighers and Assistants. G. Other 1. Bonus Schemes for Weight Watchers Continental Europe Country Managers 2. The Continental European Companies are subject to agreements with local workers' councils and similar employee representatives. (b) None. SCHEDULE 3.11 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Absence of Certain Changes See the litigation listed under Schedule 3.12-A. (a) None (b) None (c) (i) Parent and/or WWI has entered into agreements with certain senior managers of the Business granting them incentives to stay through the closing of the sale of the Business and for a period thereafter for which Parent is retaining all liability with respect to these incentives. (ii) The Principal Foreign Subsidiaries are: Weight Watchers U.K. Ltd., Weight Watchers France SARL, Weight Watchers Sweden AB Vikt-Vaktarna, Fortuity Pty Ltd and Fortuity New Zealand Ltd. (d) None (e) None (f) None, other than the transactions described in Section 2.4 of the Agreement. (g) None (h) The Weight Watchers Germany borrowing was repaid in June, 1999. (i) None (j) None (k) None (l) None (m) None (n) None (o) None (p) None (r) None The reference in the first and second sentences of Section 3.11 of the Agreement to "the transactions contemplated herein" includes without limitation the consummation of the transactions contemplated by the Agreement including Purchaser's access as described in Section 5.1 of the Agreement; the Reorganization and the Recapitalization of WWI and the Companies; and Purchaser's and WWI's activities contemplated in Section 5.4 of the Agreement relating to the Financing including, without limitation, the high yield Financing. SCHEDULE 3.12 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Litigation A. PENDING LITIGATION OR CLAIMS 1. Weight Watchers of Palm Beach County Inc., et al v. Weight Watchers International, Inc., American Arbitration Association dated March 23, 1999 (alleged breach of contract regarding membership mailing list) 2. Weight Watchers of Palm Beach County Inc., et al v. Weight Watchers International, Inc., dated May 18, 1999 (alleged breach of contract and legality of WWI charging interest on past-due royalties and payments for purchases) 3. Weight Watchers of Palm Beach County Inc., et al v. Weight Watchers International, Inc., dated June 26, 1999 (alleged breach of contract regarding amounts spent for national advertising, costs charged for advertising materials and for materials to produce classroom materials and other costs) 4. Independent Weight Watchers Franchisees Demand for Arbitration dated July 14, 1999, American Arbitration Association (alleged breach of contract regarding franchisee profit sharing fund, sources of income and computations; rights to conduct At Home pursuant to existing franchise agreements and impact of Personal Connection) 5. Weight Watchers International, Inc. v. Weight Watchers of Philadelphia, Inc. et al, U.S. District Court, Eastern District of New York, Case No. 96 Civ. 5753 (NG) (JMA) (suit against several franchisees alleging trademark infringement and breach of contract arising out of franchisee's establishment of Internet web sites). This claim is also the subject of demands for arbitration filed by WWI against certain of these franchises. On July 14, 1999, franchisees sent notice terminating standstill stipulation entered into in December, 1996 in view of the settlement discussions. 6. Linda Evans Fitness Center, Inc. v. Weight Watchers International, Inc. United States District Court, Northern District of California, C-99-2497, May 27, 1999. (action for trademark infringement and unfair competition arising out of the plaintiff's asserted rights to the registered trademark "A New You"; plaintiff is seeking injunctive relief as well as damages). 7. Refrigerated Construction Services, Inc. v. Weight Watchers International, Inc. and Mike Webb, Circuit Court of Jefferson County, Alabama, September 1998 (alleged breach of agreement and fraud by WWI; Refrigerated alleges that it was to retrieve approximately 240 freezers owned by WWI at various locations in the U.S. Approximately 100 freezers were released by WWI and Refrigerated alleges that it suffered unspecified compensatory damages as a result of not being able to retrieve the balance of the units and included a claim for unspecified punitive damages. Note: Prior to the Closing, Parent will and will cause WWI to use their reasonable best efforts, and take such actions as may be reasonably requested by Purchaser, to protect WWI's rights in each of the foregoing matters. B. THREATENED OR POSSIBLE LITIGATION OR CLAIMS None. C. ORDER, DECREE OR JUDGMENT IN EFFECT 1. In the Matter of Weight Watchers International, Inc., United States of America Before Federal Trade Commission, Docket No. 9261 (Decision and Order, Compliance Report and Correspondence, Notification Letters) SCHEDULE 3.13 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Compliance with Laws; Permits A. EXCEPTIONS None. B. LIST OF PERMITS None. SCHEDULE 3.14 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Franchise Agreements 1. See the attached list of domestic third party franchise agreements. 2. See the attached list of foreign third party franchise agreements. 3. The franchisees for Hawaii and West Virginia are in arrears with respect to their franchise fees and WWI has established a reserve in the Financial Statements. There is a dispute regarding franchise fees with regard to Italy and Greece for which WWI has established a reserve in the Financial Statements. 4. See also the franchisee litigation set forth in Schedule 3.12. 3.14 Domestic Third Party Franchise Agreement
- ------------------------------------------------------------------------------------------------------------------------------------ Amendment Fran # Area Owner Address Date of Agmt. Date - ------------------------------------------------------------------------------------------------------------------------------------ 1/9/79(4); 1 11 Massachusetts/RI Mark/WWWGroup PO Box 9072, Farmington Hills, MI 48333-9072 1/9/79 12/31/88; 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 2 12 Philadelphia Blmhak PO Box 2300, 245 New York Drive, Ft 4/14/72 12/31/88; Washington, PA 19034 6/15/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 3/28/72(3); 3 13 Suffolk Rubin 80 Burt Drive, Deer Park, NY 11729 10/16/69 12/31/88; 7/16/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 4/10/73(2); 4 15 Washington DC/VA Friedland/Wolfson 11119 Rockville Pike, Rockville, MD 20852 4/10/73 12/31/88; 6/22/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 11/29/72; 5 18 E. Penn. Brooks/Schwager 433 W. Emmaus Avenue, Allentown, PA 18103 11/29/72 9/20/84; 12/31/88; 7/6/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1/9/79(3); 6 20 Michigan Mark/WWWGroup PO Box 9072, Farmington Hills, MI 48333-9072 10/4/72 12/31/88; 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 9/30/83; Greenfield- 7/18/88; 7 22 Miami Braunstein 9580 Bird Road, Miami, FL 33165 9/29/69 12/31/88; 6/18/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1/25/73(2); 12/31/88; 8 23 Illinois/Missouri Mark/WWWGroup PO Box 9072, Farmington Hills, MI 48333-9072 1/25/73 6/15/92(2); 8/29/96 - ------------------------------------------------------------------------------------------------------------------------------------ WW Professional Centre, 2459 Congress Avenue 4/26/76; 9 24 Palm Beach County Gorman-Gordley So., Suite 201, W. Palm Beach, FL 33406-7644 4/26/73 12/31/1988; 6/19/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 2/8/72; 5006 S. Maryland Parkway, Suite 6, Las Vegas, 3/18/72(2); 10 28 Las Vegas/Utah Schwartz-Stockman NV 89119 8/28/70 12/31/88; 7/10/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ North Florida and 11 30 South Georgia Peacock 6111 Beach Boulevard, Jacksonville, FL 32216 Restated 1/15//97 1/15/97 - ------------------------------------------------------------------------------------------------------------------------------------ 185 So. Livingston Avenue, Livingston, NJ 12/31/88; 12 31 N. Jersey Fein 07039-4090 10/26/73 6/22/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 7/31/75; Westchester Place, 8400 Westchester, Dallas, 6/13/80; 13 33 Dallas Silberman/Siegel TX 75225 6/20/73 12/31/88; 7/15/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ Santa Barbara/S. 3/20/98; 14 37/86 TX/Oklahoma Lipman 7045 Southwest Freeway, Houston, TX 77074 Restated 11/19/98 11/19/1998 - ------------------------------------------------------------------------------------------------------------------------------------ Adirondacks/ 12/31/88; 15 38 Vermont Rothstein 376 Broadway, Saratoga Springs, NY 12866 10/8/73 6/23/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 12/21/1992; 16 39 Ohio Mark/WWWGroup PO Box 9072, Farmington Hills, MI 48333-9072 Restated 12/21/92 04/24/92 - ------------------------------------------------------------------------------------------------------------------------------------ 2/24/73(2); 3/1/76; 17 40 Indiana/Kentucky Mark/WWWGroup PO Box 9072, Farmington Hills, MI 48333-9072 2/24/73 5/24/77; 12/31/88; 8/30/92(2) 4/7/98 - ------------------------------------------------------------------------------------------------------------------------------------
1 Domestic Third Party Franchise Agreement - ------------------------------------------------------------------------------------------------------------------------------------ 7/20/70; 5/1/79(3); 18 44 Western Michigan Branoff 9430 Malby Road, Brighton, MI 48116 9/11/69 4/23/84(3); 12/31/88; 6/30/92(2) 7/27/93 - ------------------------------------------------------------------------------------------------------------------------------------ Vaxa Capital Management, Overlook Executive Central Fl./N. Park, 109 Laurens Road, Suite 1D, Greenville, 19 47/105 Alabama Peacock SC 29607 Restated 4/15/97 4/15/97 - ------------------------------------------------------------------------------------------------------------------------------------ 3/29/77(4); 20 50 Pureto Rico Visco PO Box 912, Bayamon Puerto Rico, 00960-0912 3/29/77 12/31/88; 6/26/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 8/14/73(2); 21 54 Mid/East Tenn. Kalil 601 Thompson Lane, Nashville, TN 37024 8/14/73 12/31/88; 7/14/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ Vaxa Capital Management, Overlook Executive Park, 109 Laurens Road, Suite 1D, Greenville, 22 55 Greater Atlanta Peacock SC 29607 Restated 6/2/97 3/2/88 - ------------------------------------------------------------------------------------------------------------------------------------ 5/17/77; 23 56 Oneida County Tamm 109 Patricia Lane, Utica, NY 13501 7/25/69 12/31/88; 6/30/92 - ------------------------------------------------------------------------------------------------------------------------------------ 2/27/73(2); 24 58 Washington State Bode 9700 Lake City Way NE, Seattle WA, 98115 2/2/73 3/31/74; 2/2/96(2) - ------------------------------------------------------------------------------------------------------------------------------------ 3/15/74; 12/31/88; 25 60 NY/NH Smith 128 South River Road, Bedford, NH 03110 3/15/74 7/10/92(2); 7/23/97 - ------------------------------------------------------------------------------------------------------------------------------------ 2/23/73(4); 2/27/76; 26 61 Arizona Appell 1608 East Earll Drive, Phoenix, AZ 85016 2/23/73 12/31/88; 6/19/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ Vaxa Capital Management, Overlook Executive Park, 109 Laurens Road, Suite 1D, Greenville, 27 62 Southwest Florida Peacock SC 29607 Restated 1/3/97 1/3/97 - ------------------------------------------------------------------------------------------------------------------------------------ 9/30/70(2); 11/30/70; 4/21/71; PO Box 20401, 4500 Mobile Drive, Columbus, 3/31/74; 28 63 Central Ohio Adams Ohio 43220 12/29/69 2/3/84; 12/31/88; 6/16/92(2); 4/30/98 - ------------------------------------------------------------------------------------------------------------------------------------ 29 64 Central Penn. Mark PO Box 9072, Farmington Hills, MI 48333-9072 Restated 12/31/92 12/31/92; 4/7/98 - ------------------------------------------------------------------------------------------------------------------------------------ Vaxa Capital Management, Overlook Executive 4/24/92; Park, 109 Laurens Road, Suite 1D, Greenville, Restated 1/26/88 7/13/92(2); 30 66 Southeast /FLA Peacock SC 29607 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 5/24/77; 31 70 Michigan Mark/WWWGroup PO Box, Farmington Hills, MI 48333-9072 10/4/72 6/30/92(2); 4/7/98 - ------------------------------------------------------------------------------------------------------------------------------------ Pennsylvania/ 3/16/88; 32 73 WVirg. Mark PO Box, Farmington Hills, MI 48333-9072 Restated 3/16/88 4/7/98 - ------------------------------------------------------------------------------------------------------------------------------------
2 Domestic Third Party Franchise Agreement - ------------------------------------------------------------------------------------------------------------------------------------ 9/18/70; 33 75 Syracuse/Penn Goldberg/Shanks 6716 Joy Road, E. Syracuse, NY 13057 4/15/69 6/28/88; 12/31/88; 6/25/92(2); - ------------------------------------------------------------------------------------------------------------------------------------ 5/20//75; 12/31/88; 34 77 New Hampshire Smith 128 South River Road, Bedford, NH 03110 5/20/75 7/10/92(2); 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 1/8/92; North Carolina/ 4/24/92(2); 35 78/110 S. Carolina Peacock 8700-D Red Oak Blvd., Charlotte, NC 28217 Restated 12/30/91 6/30/92(2) 7/13/93; 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ Falmouth Shopping Center, 251 US Route 1, 5/29/72 (2); 36 79 Maine Ludwick Falmouth, ME 04195 11/29/69 12/31/88 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 12/14/89; 37 80 Hawaii Chicoral 98-025 Hakaha, Suite 203A, Alea, HI 96701 Restated 12/14/89 7/17/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 9502 Angola Court, Suite 4, Indianapolis, IN 1/17/74; 38 81 Central Indiana Sachs 46268 1/17/74 12/31/88; 6/24/92 - ------------------------------------------------------------------------------------------------------------------------------------ 12/31/88; 39 82 Michigan Mark/WWWGroup PO Box, Farmington Hills, MI 48333-9072 Restated 6/25/84 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 40 83 Oregon Cowies 9200 S. W. Barnes Road, Portland OR 97225-6693 2/27/73 2/27/73 - ------------------------------------------------------------------------------------------------------------------------------------ 41 85 Southern Tier/NY Goldberg/Shanks 6716 Joy Road, E. Syracuse, NY 13057 11/30/86 6/25/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 42 90 South Carolina Smith/At Goal 128 South River Road, Bedford, NY 03110 10/29/96 10/29/96(3) - ------------------------------------------------------------------------------------------------------------------------------------ 6/20/73; 7/31/75; 43 92 Forth Worth Oppenheimer 404 North Collins, Arlington, TX 76011 6/20/73 12/31/88; 6/26/92 - ------------------------------------------------------------------------------------------------------------------------------------ S. Alabama/ 4/26/73; 44 94 Panhandle Jacobs PO Box 16483, Jackson, MS 39236-6463 4/26/73 6/19/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 6/27/73(2); 10220 West Markham, Suite 215, Little Rock, 6/23/75; 45 95 Greater Arkansas Taxer AR 72205 6/27/73 6/24/88; 12/31/88; 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1/2/74; West Virginia/ 9/2/81; 46 97 Ohio Snyder PO Box 6400, Charleston WV, 25362-0400 1/2/74 12/31/88; 7/15/92(2); 6/29/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 5/15/74(2); Salt Lake 6/12/85(2); 47 98 City/Utah Trentman 750 E. 3300 South, Salt Lake City, UT 84106 5/15/74 12/31/88; 6/30/92(2); 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 2/21/73(2); 48 99 El Paso/NM Wilmot 10618 Montwood Drive, El Paso, TX 79935 2/21/73 4/30/73; 12/31/88; 7/14/92(2) - ------------------------------------------------------------------------------------------------------------------------------------
3 Domestic Third party Franchise Agreement - ------------------------------------------------------------------------------------------------------------------------------------ 11/17/70; 3/24/72(2); 9/30/75; 49 100 Mid South Abraham 6207 Summer Avenue, Memphis TN 38134 8/30/69 11/1/75; 4/29/83; 12/31/88; 7/13/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ St. Lawrence 4th Floor, The Sterling Buliding, 283 Portage 50 101 County Reich Avenue, Winnipeg, Manitoba R38 2B7 8/8/69 None - ------------------------------------------------------------------------------------------------------------------------------------ Albuquerque, 5/17/73; 51 102 NM/Okl. White 1717 San Mateo NE, Albuquerque, NM 87110 5/17/73 12/31/88; 7/15/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ Greater PO Box 362, 1933 West Maple, Wichita KS 3/1/73(4) 52 109 Wichita/Okl. Harton 67201-0362 3/1/73 5/16/73; 11/26/73 - ------------------------------------------------------------------------------------------------------------------------------------ 8/18/75(4); 53 112 Raleigh-Durham Reddish/Azis 4106 Wake Forest Road, Raleight NC 27609 8/18/75 12/31/88; 6/22/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 9/30/74(2); Greater 11/1/75; 54 113 Mississippi Jacobs PO Box 16483, Jackson, MS 39236-6463 9/30/74 12/1/88; 7/10/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 5/15/74(2); 55 116 Southern Idaho Trentman 750 e. 3300 South, Salt Lake City, UT 84106 5/15/74 6/12/85(2); 12/31/88; 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 56 121 Alaska Bode 9700 Lake City Way NE, Seattle WA, 98115 2/27/73 2/27/73 (2) - ------------------------------------------------------------------------------------------------------------------------------------ Southwest 7/17/75(3); 57 122 Counties/ORE Wein PO Box 7188, Eugene OR 97401 7/17/75 7/17/81; 10/6/87 - ------------------------------------------------------------------------------------------------------------------------------------ 5/9/80(4); 12/31/88; 58 124 Northern Nevada Adams PO Box 7043, Reno, NV 89510 7/17/75 6/16/92(2); 4/30/98 - ------------------------------------------------------------------------------------------------------------------------------------ 59 132 Michigan Mark/WWWGroup PO Box, Farmington Hills, MI 48333-9072 6/1/84 4/7/98 - ------------------------------------------------------------------------------------------------------------------------------------ 4/27/67; 5/4/68; 3/9/73; 3/8/76; 2/19/79; 5/20/81; San Diego/Inland 3/22/82; 60 443 Empire Cutler PO Box 9045, Carlsbad, CA 92018-9684 4/2/67 9/30/83; 1/29/85; 1/20/88; 12/31/88; 12/2/89; 12/18/89; - ------------------------------------------------------------------------------------------------------------------------------------ 1/8/90; 1/11/90; 7/14/92(2) - ------------------------------------------------------------------------------------------------------------------------------------
4 Foreign Third Party Franchise Agreements
- ------------------------------------------------------------------------------------------------------------------------------------ Amendment Fran # Area Owner Address Date of Agmt. Date - ------------------------------------------------------------------------------------------------------------------------------------ 10/30/86; 1 49 Alberta Osten/Victor 10177 104th St., Edmonton, Alberta T5J 0Z9 1/19/71 12/31/86; 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 2 53 Quebec Walmar/Ludwick 5160 Decarie Blvd. Suite 520 Montreal 8/29/86 12/31/86; Quebec, H3X 2HB 6/30/92(2); 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 4/24/92; Vaxa Capital Management, Overlook 12/25/93; 3 65 British Columbia Peacock/Bode Executive Park, 109 Laurens Road 4/24/1992 8/3/94; Suite 109, Greenville, SC 29607 (Restated) 11/4/94; 4/24/95; 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 12/31/88; 4 87 Mark/WW Group PO Box 9072, Farmington Hills, MI 48333-9072 8/25/84 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 4th Floor, The Sterling Building, 283 5 91 Manitoba Reich Portage Avenue, Winnipeg, Manitoba 7/23/89 R3B 287 - ------------------------------------------------------------------------------------------------------------------------------------ 10/30/88; 6 103 Saskatchewan Osten/Victor 10177 104th St., Edmonton, Alberta T5J 0Z9 1/19/71 12/31/86; 6/30/92(2) - ------------------------------------------------------------------------------------------------------------------------------------ 8/23/72; 12/22/72; Nova Scotia, 3/31/75; 7 111/ Ontario, 8/23/72 6/15/76; 118/ Newfoundland, Walmar/Ludwick 11 Morris Drive Suite 205, Dartmouth, 8/18/76; 128 Nova Scotia, Nova Scotia B3B 1M2 12/15/80; New Brunswick 12/31/88; 6/30/92(2); 7/25/97 - ------------------------------------------------------------------------------------------------------------------------------------ 6/27/72; Ottowa and 329 Churchill Avenue North, Ottawa 12/31/88; 8 114 Eastern Ontario Slangora/Allen Ontario, K1Z 5B8 7/26/71 6/26/92(2); 7/27/97 - ------------------------------------------------------------------------------------------------------------------------------------
1 Foreign Third Party Franchise Agreements - ------------------------------------------------------------------------------------------------------------------------------------ 9 28 Israel Silverman/Romem 99 Medinal Hayebudim Street, PO 2/3/75 12441, Hertzilz 48766, Israel - ------------------------------------------------------------------------------------------------------------------------------------ 10 54 Austraila WW of Australia (Rick 98 Arthur Street, 10th Floor, North 10/1/78 10/29/85; Penn)/ HJ Heinz Sydney, NSW, 2060 Australia 3/3/89(2) - ------------------------------------------------------------------------------------------------------------------------------------ 11 93 Bahamas Lydia Ferguson 8th Terrace, Centraville, PO Box EE Restated 17750, Nassau, Bahamas 4/26/90 - ------------------------------------------------------------------------------------------------------------------------------------ 1) Denross LTD, Constitution House, 1 Philosturo Rd., Dublin 7, Ireland 3/10/89; 3/10/89; 12 136 Ireland 2) Javil Limited Weight Watchers 3/10/89 12/4/95 Northern Ireland, 15/17 Edward St. Portadown, Co. Armagh - ------------------------------------------------------------------------------------------------------------------------------------ First Floor, Athena Tower, 2-4 10/21/77; 13 144 Greece Branoff Mossoghion Street, Building A, 115-27 12/30/76 4/23/84; Athens, Greece 7/27/93 - ------------------------------------------------------------------------------------------------------------------------------------ 12/29/72; 14 184 New Zealand Rick Penn/Heinz 24-26 Pollen Street, Gray Lynn, 12/29/72 3/3/75; Auckland, New Zealand 10/23/76(2); 8/31/77 - ------------------------------------------------------------------------------------------------------------------------------------ 15 210 Austria Evaline Hejick Dr. Kurt Lueger - Ring 6, A-1010 Restated Vienna, Austria 8/24/93 - ------------------------------------------------------------------------------------------------------------------------------------ 16 251 Hong Kong Rinan Services 4D Caperidge Drive, Discovery Bay, 10/1/76 4/23/79; Lantau Island, Hong Kong 6/28/91 - ------------------------------------------------------------------------------------------------------------------------------------ Amended 17 300 Cayman Islands Brijo/Aufscher PO Box 1234, Georgetown, Grand Restated Cayman, Cayman Islands 12/1/1995 - ------------------------------------------------------------------------------------------------------------------------------------ 10/9/74; 1/3/76; 5/30/75; 18 301 Mexico Florine Mark (Cuida Kloa) Barranca del Muerto, 210 P.B., Co. 10/4/72 10/17/75(2); Guadalupe Inn, Mexico, DF 01020 6/10/77; 6/23/77; 6/15/79(2) - ------------------------------------------------------------------------------------------------------------------------------------ Mr. Rick Srickland, Av. Alsulfo de 19 350 Brazil Rick Srickland Palva, 135/502, Rio de Janeiro, RJ, 9/11/74 Brazil 22440-030 - ------------------------------------------------------------------------------------------------------------------------------------ Braamfontein Centre, 11th Floor, Cnr. 10/11/95; 20 378 South Africa Lippert/RAFK/Kerafeal Jorissen & Bertha St., Braamfontein, 10/11/95 12/11/96; 2001, South Africa 6/98; 8/30/98 - ------------------------------------------------------------------------------------------------------------------------------------ 21 444 Italy Branoff Via Trivuixio 1, 20148 Milano, Italy 3/1/84 - ------------------------------------------------------------------------------------------------------------------------------------ 22 800 Central America Lippert/Juan Cueva PO Box 3731, Tegucigalpa, M.D.C., 6/23/97 Honduras, Central America - ------------------------------------------------------------------------------------------------------------------------------------
2 SCHEDULE 3.15(a)(i) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. U. S. Intellectual Property Assets 1. See the attached. 2. Internet Domain Names a. weight-watchers.com b. weightwatchers.com c. In addition to the foregoing, the Companies have registered certain other Internet Domain names in the United States. 3. Tradenames a. Weight Watchers b. Waist Watchers SCHEDULE 3.15(a)(ii) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Other Company Intellectual Property Assets 1. See the attached. 2. Internet Domain Names a. weight-watchers.co.UK b. weight-watchers.co.AU c. Vikt-Vaktarna.com.SE d. Painonvartijat.fi 3. Trade names a. Weight Watchers b. Vikt-Vaktarna c. Painonvartijat d. Vigilantes do Peso e. Gutbusters f. Estonia - BECOHAGADAATEAN Kaalujalgijad g. Poland - Straznicy Wagi h. Latvia - SVARA VEROTAJI SCHEDULE 3.15(a)(iii) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Patent Applications and Applications for Registration of Intellectual Property See the attached. SCHEDULE 3.15(b) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Food Licenses 1. See the attached list of the Food Licenses. Direct Food Trademark Licenses AUSTRALIA PARTIES DATE OF AGREEMENT - ------- ----------------- Epicurean Foods and Beverages Pty. Ltd, (now H.J. Heinz Company Australia Ltd.) and Weight Watchers International, Inc. (and amendments thereof) 1/28/90 Ardmona Foods Limited and Weight Watchers 2/1/89 International, Inc. Ardmona Fruit Products Co-Operative Co Limited 2/13/93 and Weight Watchers International, Inc. - Letter dated 6/7/94 from Ardmona Foods Limited to Weight Watchers International, Inc. - Letter dated 6/17/94 from Weight Watchers International Inc. to Ardmona Foods Limited - Letter dated 6/26/95 from Ardmona Foods Limited to Weight Watchers International - Letter dated 8/2/95 from Weight Watchers International, Inc. to Ardmona Foods November 23, 1999 Australia Cooperative Foods Limited and Weight 12/18/98 Watchers International, Inc. Meadow Lea Foods Ltd (formerly Goodman Fielder 3/6/90 Foods Ltd) and Weight Watchers International, Inc. - Letter of Renewal 11/11/92 Meadow Lea Foods Ltd (formerly Goodman Fielder -- of -- 1997 Foods Ltd) and Weight Watchers International, Inc. November 23, 1999 AUSTRALIA (Continued) PARTIES DATE OF AGREEMENT - ------- ----------------- Searle Australia Pty Ltd and Weight Watchers 3/1/91 International, Inc. Mainland Dairies (A Division of Dairy Enterprises 1/1/93 Pty Ltd) and Weight Watchers International, Inc. -- Renewal letter from Mainland to Dairies to WWI 7/31/95 -- Reply letter from WWI to Mainland 8/8/95 Mainland Dairies (A Division of Dairy Enterprises -- of -- 1997 Pty Ltd) and Weight Watchers International, Inc. Lowans Whole Food Pty Ltd. and Weight Watchers 7/24/95 International, Inc. -- Renewal letter from Lowans to Weight Watchers Food Division SPC Limited and Weight Watchers International, Inc. -- of -- 1997 SPC Limited and Weight Watchers International, Inc. 2/13/99 Sunburst Foods Ltd and Weight Watchers 11/1/96 International, Inc. Pacific Beverages Australia Pty Ltd and Weight 10/1/98 November 23, 1999 Watchers International, Inc. Weight Watchers International, Inc. and Fortuity Pty Ltd and Nestle Echuca Pty Ltd 1999 Weight Watchers International, Inc., National Foods 5/21/98 Juice Limited, and Henry Jones Foods Pty Limited - Deed of Assignment Weight Watchers International, Inc. and Dairy Farmers 8/31/79 Cooperative Limited Weight Watchers International, Inc. and Dairy Farmers 12/18/79 Cooperative Limited Weight Watchers International, Inc. and Dairy Farmers 9/29/82 Cooperative Limited AUSTRIA, HUNGARY, CZECH REPUBLIC and SLOVAKIA PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers International, Inc., Weight Watchers 8/24/93 GmbH, Eveline Hejlek and Eva-Marie Hejlek November 23, 1999 CANADA PARTIES DATE OF AGREEMENT - ------- ----------------- George Weston Ltd. (now H.J. Heinz Company Canada Ltd.) and Weight Watchers International, Inc. (and amendments thereof) 4/6/76 CENTRAL EUROPE PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers Foods Central Europe, BV and 5/1/87 Weight Watchers International, Inc. ITALY PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers International, Inc. and Plada, S.p.A. 1/24/80 as amended 6/1/85 and 9/1/85 Weight Watchers International, Inc. and Plada, S.p.A. 1/24/80 Fattoria Scaldasole S.p.A. and Weight Watchers 12/3/96 International, Inc. Societa Di Esportazione Polenghi Lombardo 10/1/87 S.p.A. and Weight Watchers International, Inc. November 23, 1999 NETHERLANDS PARTIES DATE OF AGREEMENT - ------- ----------------- H. J. Heinz B.V. and Weight Watchers International, Inc. 1/1/82 November 23, 1999 NEW ZEALAND PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers International, Inc. and Hansells (N.Z.) 9/89 Ltd. and Tip Top Ice Cream Company Limited Weight Watchers International, Inc. and Tip Top Ice 1/13/97 Cream Company, Inc. and Heinz-Wattie Limited (Novation Agreement) Letter from Tip Top Ice Cream Company, Inc. to Weight 4/16/97 Watchers International, Inc. Weight Watchers International, Inc. and Hansells (N.Z.) 9/89 Ltd. and Capital Dairy Products Ltd. Weight Watchers International, Inc. and Hansells (N.Z.) 9/89 Ltd. and Canterbury Dairy Farmers Ltd. Weight Watchers International, Inc. and Hansells (N.Z.) 8/29/89 Ltd. Weight Watchers International, Inc. and Hansells (N.Z.) 8/20/90 Ltd. and Tui Sales & Marketing Ltd. Weight Watchers International, Inc. and Hansells (N.Z.) 6/3/92 Ltd. and Tasti Products Limited UNITED KINGDOM PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers International, Inc. and H. J. Heinz 9/1/85 Company, Ltd. November 23, 1999 Weight Watchers International, Inc. and H. J. Heinz 8/7/95 Company, Ltd. November 23, 1999 UNITED STATES PARTIES DATE OF AGREEMENT - ------- ----------------- Camargo Foods, Inc. and The Drackett Company 7/3/69 (now Heinz Frozen Food Company) and Weight Watchers International, Inc. Foodways National, Inc. and Foodways New York, 5/9/78 Inc. (now Heinz Frozen Food Company) and Weight Watchers International, Inc. November 23, 1999 Operating Agreement Schedule E Heinz Sublicenses CANADA PARTIES DATE OF AGREEMENT - ------- ----------------- H. J. Heinz Company of Canada Ltd. and 9/3/91 and Weston Bakeries Limited H. J. Heinz Company of Canada Ltd. and Ault 11/1/93 Foods Ltd. H. J. Heinz Company of Canada Ltd. and River 1/15/98 Ranch Fresh Foods, Inc. H. J. Heinz Company of Canada Ltd. and Piller 7/18/97 Sausages & Delicatessens Limited H. J. Heinz Company of Canada Ltd. and Mirage 11/1/96 Margarine Ltd. and Margarine Golden Gate-Micha Inc. CENTRAL EUROPE PARTIES DATE OF AGREEMENT - ------- ----------------- Weight Watchers Foods Central Europe B.V. and 7/11/96 November 23, 1999 Fleury Michon Weight Watchers Foods Central Europe B.V. and 5/1/87 Societe Senoble S.A. Weight Watchers Foods Sweden and 4/18/97 Skanemejerier Ek. for November 23, 1999 UNITED KINGDOM PARTIES DATE OF AGREEMENT - ------- ----------------- HJ Heinz Company, Ltd. and Yoplait, S.A. and Weight 8/8/95 Watchers International, Inc. -- Letter HJH to Yoplait Dairy Crest Ltd. 9/6/95 -- Letter from Yoplait Dairy to HJH dated 9/6/95 HJ Heinz Company, Ltd. and Sodiaal International, 5/12/98 Societe de Diffusion Internationale Agro Alimentaire (Yoplait) and Weight Watchers International, Inc. (Supplemental Agreement to above) Sodiaal International Societe de Diffusion International, 5/12/98 Agro Alimentaire S.A., Avonmore Waterford Group PLC and H. J. Heinz Company, Ltd. (Sublicense agreement) H. J. Heinz Company, Ltd. and Warburtons Limited 8/10/87 H. J. Heinz Company, Ltd. and Golden Vale PLC 11/15/93 H. J. Heinz Company, Ltd. and Dairy Crest Limited 1/29/97 H. J. Heinz Company, Ltd., H. J. Heinz Company 11/27/96 November 23, 1999 (Ireland) Limited and Joseph Brennan Bakeries Ltd. H. J. Heinz Company, Ltd. and Chivers Hartley Limited 2/17/94 H. J. Heinz Company, Ltd. and Smedley's Foods Limited 7/24/96 H. J. Heinz Company, Ltd. and Manor Bakeries Ltd. 9/6/95 H. J. Heinz Company, Ltd. and K Foods PLC 11/1/96 H. J. Heinz Company, Ltd. and Hot Bread Kitchens Ltd. 5/17/99 November 23, 1999 UNITED STATES PARTIES DATE OF AGREEMENT - ------- ----------------- Heinz USA (now Heinz Frozen Food Company) 12/20/89 (Licensor) and Roman Meal Company (Licensor) Amended: December 29, 1989 (not included) June 25, 1991 June 26, 1992 Heinz USA (now Heinz Frozen Food Company) 4/30/90 (Licensor), Creative Products and Creative Home Products, Inc. (Licensee) Amended June 29, 1992 Weight Watchers Gourmet Food 10/31/96 Company (now Heinz Frozen Food Company) (Licensor) and River Ranch Fresh Foods, Inc. (Licensee) Weight Watchers Food Company (now 1/95 Heinz Frozen Food Company) (Licensor) and Eskimo, Inc. (Licensee) Amendment: January 20, 1995 February 19, 1998 Sublicenses (not included): 1. Jackson Ice Cream (Denver, CO) 2. Shamrock Foods Ltd. (Phoenix, AR) 3. H.P. Hood (MA) 4. Kemp Dairy (Lancaster, PA) 5. Barbers Ice Cream (subsidiary of Dean Foods) (Birmingham, AL) Camargo Foods, Inc. (now Heinz Frozen Food 9/1/73 Company) (Licensor) and Glidden-Durkee (Licensee) (Licensee now Burns Philip Food, Inc.) November 23, 1999 Weight Watchers Gourmet Food 3/31/97 Company (now Heinz Frozen Food Company) (Licensor) and Hain Food Group (Licensee) November 23, 1999 SCHEDULE 3.15(a)(iv) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. U. S. Copyright Registrations See the attached. SCHEDULE 3.15(c) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Intellectual Property - Encumbrances None. SCHEDULE 3.15(d) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Exceptions to Intellectual Property 1. In Jamaica, a third party has applied to register the Weight Watchers trademark on certain food products. 2. In the U.S., a data base vendor retained by some of the WWI franchisees is offering third party consumer product companies access to WWI members via a joint promotional mailing to members without WWI authorization and indicating that the promotion carries with it an endorsement of the third parties' products by WWI. Prior to the Closing, Parent will and will cause WWI to use their reasonable best efforts, and take such actions as may be reasonably requested by Purchaser, to protect WWI's rights in this matter. SCHEDULE 3.16 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Taxes (g) Asserted or Threatened Tax Deficiencies 1. WW North America - FY 97 federal income tax audit concerning inventory contribution. Year of deduction and amount of deduction could be challenged. Major concern is amount of deduction. The issue concerns the determination of fair market value. Reserve in the amount of $950,000 has been established to cover this issue. 2. WW Germany - Issue relating to utilization of NOL's. A proposal is currently being discussed with German tax authorities. A reserve of DM 1,200,000 (US$ 680,000) has been established. 3. WW France - Debt forgiven and subsidy insure that NOL's do not expire. Tax authority could challenge this position. VAT may be due on subsidy and debt forgiven. Disallow a portion of book royalties paid to Macmillan. Payroll taxes due on FY 95 "Social Security" settlement. Reserve in the amount of FF 3,116,000 (US$ 525,000) has been established to cover these issues. 4. Weight Watchers UK - Inland Revenue reviewing (a) current franchise commission rate and (b) VAT refund received and booked in FY 96. Regarding the franchise fee, the Inland Revenue believes the rate is too high and that the taxpayer has deducted fees that should be disallowed. Potential assessment is estimated to be (pound)503,000 (US$ 815,000). Regarding the second issue, Parent has not created a reserve. 5. WW Switzerland -- VAT -- Beginning 1/1/95, Switzerland instituted VAT. WW Switzerland ("WWS") never paid VAT on the belief that their revenues are zero rated for VAT purposes. Swiss tax authority contacted WWS on or about April 22, 1999 notifying them that they believe that VAT applies. No reserve has been recorded. 6. WW North America - There are sales & use tax audits scheduled in Colorado, California, Illinois and Louisiana; property tax audits scheduled in California and Connecticut. The potential assessments are not considered to be material. 7. WW North America -- There is a pending New York State income tax audit for FY 95- 98. (j) - Pending or Threatened Tax Proceedings 1. WW North America - In Illinois, Parent has protested two issues. Parent expects that the total liability potential will be less than $50,000. SCHEDULE 3.19 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Subsidiaries See the attached chart. The two Brazilian entities listed in which WWI owns a 35% equity interest should be excluded for purposes of the representation.
- ------------------------------------------------------------------------------------------------------------------------------------ H.J. HEINZ COMPANY - ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------- WEIGHT WATCHERS INTERNATIONAL, INC. VIRGINIA CORPORATION - 100% HJH ------------------------------------- - ------------------------------- ------------------------------------------------ ------------------------------------------------- Weight Watchers U.K. Ltd. ACTIVE AFFILIATES INACTIVE AFFILIATES Great Britain Corp. 99.9995% WWWRS W.W. Weight Reduction Services, Inc. - DE 58 WW Food Corp. - NY .0005% WW21st Weight Watchers Direct, Inc. - DE Waist Watchers, Inc. - DE - ------------------------------- Weight Watchers North America, Inc. - DE Weight Watchers Camps, Inc. - NY W.W.I. European Services, Ltd. - NY Weight Watchers Camps and Spas, Inc. - DE - ------------------------------- W/W Twentyfirst Corporation - NY Weight Watchers (Exercise) Ltd. W.W. Inventory Service Corp. - DE Watch Your Weight Club (Pty.) Ltd. - South Africa Great Britain Corp. The Weight Watchers Foundation, Inc. - NY Weight Watchers Australia Pty. Ltd. - Australia 100% WWUK Weight Watchers International (Pty.) Ltd. - - ------------------------------- 78459 B.C. Ltd. - Canada Australia (50% WWNA, 50% WWI) Il Salvalinea, S.R.L. - Italy Weight Watchers Botswana (Proprietary) Ltd. - - ------------------------------- Weight Watchers Belgium - Belgium Botswana Weight Watchers (Accessories Weight Watchers (Deutschland) G.m.b.H. - Germany Weight Watchers Classes Limited - Ireland and Publication) Ltd. Weight Watchers Estonia - Estonia Weight Watchers de Colombia Ltd. - Columbia Great Britain Corp. Weight Watchers France SARL - France Weight Watchers Espana S.A. - Spain 100% WWUK Weight Watchers Suomi Oy - Finland (90% WWI) Weight Watchers Italiana S.p.A. - Italy (98% WWI, - ------------------------------- Weight Watchers Sweden AB Vikt-Vaktarna - Sweden 2% WW Twentyfirst) (90% WWI) Weight Watchers (Lesotho)(Proprietary) Ltd. - - ------------------------------- Weight Watchers (Switzerland) SA - Switzerland South Africa Weight Watchers Weight Watchers do Brasil Programas Alimentares Weight Watchers (Swaziland) Prop. Ltd. - South (Food Products) Ltd. Ltda. - Brazil (35% WWI) Africa Great Britain Corp. Vigilantes do Peso Marketing Ltda. - Brazil (35% Weight Watchers Limited - New Zealand 100% WWUK WWI) Weight Watchers (Vigilantes De Pesa) De Mexico - ------------------------------- Weight Watchers Polska Sp. z.o.o. - Poland S.A. de C.V. - Mexico (98% WWI, .4% WW Weight Watchers Latvia - Latvia Twentyfirst, .4% WW Travel & Tours Corp., .4% Weight Watchers Nederlands B.V. - Netherlands WW Camps) - ------------------------------------------------------------------------------------------------------------------------------------ Unless otherwise noted, all affiliates are owned 100% by Weight Watchers International, Inc. - ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE 3.20 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Accounts Receivable None. SCHEDULE 3.21 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Year 2000 See the attached. The Companies are pursuing their Y2K plans. Y2K Compliance will require that work continue on such plans following Closing. SCHEDULE 4.4 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. No Conflict (Purchaser) None SCHEDULE 5.3 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Conduct of Business The reference in the first and second sentences of Section 5.3 of the Agreement to "as expressly contemplated in this Agreement" includes without limitation the consummation of the transactions contemplated by the Agreement including Purchaser's access as described in Section 5.1 of the Agreement; the Reorganization and the Recapitalization of WWI and the Companies; and Purchaser's and WWI's activities contemplated in Section 5.4 of the Agreement relating to the Financing including without limitation the high yield Financing. SCHEDULE 5.8 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Claims None SCHEDULE 6.6 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Guarantees 1. Classroom lease with 114 Liberty Associates located in New York City which is guaranteed by H. J. Heinz Company 2. Office lease with the Queensland Local Government Superannuation Board located in Brisbane, Australia which is guaranteed by H. J. Heinz Company Australia Limited 3. Office lease with Grosvenor Royale Pty Ltd located in Melbourne, Australia which is guaranteed by H. J. Heinz Company Australia Limited 4. Classroom lease with Olympia & York located in New York City (86th Street) which is guaranteed by H. J. Heinz Company 5. Classroom lease for Fortuity New Zealand's operations which is guaranteed by Heinz-Wattie Holdings Ltd. SCHEDULE 7.1(a)(1) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Parent Employees Permanently Assigned to WWI The following employees of Parent have been permanently assigned to WWI: 1. Robert Hollweg 2. Jed Stricker Purchaser agrees that it will offer employment, effective immediately following the Closing, to such employees who, if they accept Purchaser's offer of employment, will become employees of Purchaser. Purchaser will be responsible for the portion of Carmen DuBroc's compensation and benefits paid by Parent in addition to the portion of her compensation and benefits paid by WWI. The Letter Agreement with her dated July 8, 1997 describes her total compensation and benefits as of that date. SCHEDULE 7.1(a)(2) TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC., H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Parent's Severance Policies See the attached documents. Appendix D, "The Operation Excel Enhanced Severance Program", to H. J. Heinz Company Severance Pay Plan provides the applicable formula for determining severance payments to eligible salaried employees. In addition to the attached severance plans, certain employees are entitled to additional severance pursuant to individual employment arrangements and/or statutory requirements if such amounts are greater than the amounts which would be payable under such severance plans. H. J. HEINZ COMPANY SEVERANCE PAY PLAN Article I Introduction 1.01. Name - This Plan shall be known as the H. J. Heinz Company Severance Pay Plan. 1.02. Status under ERISA - For purposes of ERISA, this Plan constitutes a portion of the Company's Group Benefits Program for Nonbargaining Employees, a welfare benefit plan as defined in ERISA. 1.03. Effective Date - The Plan was originally effective June 1, 1997 and is amended and restated as set forth herein effective December 1, 1998. Article II Definitions 2.01. Defined Terms - Unless otherwise required by the context, capitalized terms used herein shall have the meanings set forth in this Section 2.01. Any capitalized term not specifically defined herein shall have the meaning set forth in the RSP. "Affiliate" has the same meaning as that set forth in the RSP. "Company" means H. J. Heinz Company, a Pennsylvania corporation. "Continuous Service" means all Service rendered since the Employee's most recent date of hire by the Employer or an Affiliate. Periods of Salary Continuation are disregarded for this purpose. 2 "Earnings" means an Employee's regular weekly base salary, excluding all bonuses, fringe benefits, or other forms of supplemental or incentive compensation. "Employee" means any person employed by the Employer to render personal services to the Employer for a regular stated compensation other than a pension, retainer, fee under contract, or hourly wage. The term "Employee" does not include any worker who is designated as a contract worker rather than an employee for purposes of the Employer's pay practices whether or not such worker is a "leased employee" as that term is defined in Section 414(n) of the Internal Revenue Code. "Employer" means H. J. Heinz Company or any of its Affiliates, excluding any Affiliate the employees of which are excluded from this Plan, as set forth in Schedule A. "Employment" means the period or periods during which an individual is an Employee, which includes any period of Salary Continuation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Plan Administrator" means the plan administrator designated under the Program. "Plan" means the H. J. Heinz Company Severance Pay Plan, as set forth in this document and as amended from time to time. "Program" means the Company's Group Benefits Program for Nonbargaining Employees, of which this Plan is a part. "Release" means a signed general release of all claims against the Employer arising prior to execution thereof which is designed to ensure that both the Employee and the Company have their rights and obligations established with certainty and finality, including, in the case of an Employee who is 40 years of age or older, a release of age discrimination claims under the federal Age Discrimination in Employment Act in compliance with the Older Workers Benefit Protection Act. 3 "RSP" means the H. J. Heinz Company Employees Retirement and Savings Plan, as amended from time to time. "Salary Continuation" means payment of regular compensation to an individual who is not actively at work but who continues to be carried as an Employee on the Employer's payroll. "Service" has the same meaning as that set forth in the RSP. "Severance Pay" means severance benefits provided by the Employer for terminated former Employees as described in this Plan. "Successor Employer" means any person or entity that assumes operations or functions normally carried out by the Employer (such as the buyer or other transferee of a facility, business unit or portion thereof disposed of by the Employer or an entity to which an operation or function is outsourced), any Affiliate, or any entity making employment available to former Employees at the request of the Employer (such as a joint venture of which the Employer is a member). "Termination Date" means the date on which the Participant ceases to be carried as an Employee on the payroll system of the Employer. 2.02. Construction. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, unless the context clearly indicates to the contrary. Titles of Sections are inserted for convenience and shall not affect the meaning or construction of the Plan. Article III Eligibility 3.01. Eligible Employees. An Employee is eligible for benefits under this Plan as of his or her Termination Date provided termination of Employment is involuntary on the part of the Employee and is instigated by the Company for reasons beyond the control of the Employee including elimination of job, plant or location closing with no offer of transfer, or reduction in force (layoff), and such 4 termination of Employment does not fall within a an ineligible category set forth in Section 3.02 below. 3.02. Ineligible Employees. Unless specifically provided under a temporary program authorized pursuant to Section 4.03 below, an Employee is not eligible for benefits under this Plan if termination of Employment falls into one or more of the following categories, as determined by the Plan Administrator: a. Voluntary Termination or Retirement. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that termination of Employment was by reason of resignation or retirement, even if the Employee had good reasons for feeling compelled to resign or retire. b. Discharge for Cause. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the Employee was discharged for cause. Cause includes, but not by way of limitation, dishonesty, being at work under the influence of drugs or alcohol, acts or threats of violence, violation of Company policy or Company rules and regulations including federal and state statutes, insubordination, or unsatisfactory work performance. c. Death. A former Employee is not eligible for benefits under this Plan if termination of Employment resulted from the Employee's death. d. Leave of Absence. An authorized leave of absence is not a termination of Employment for purposes of this Plan. e. Disability. Severance Pay is not payable to an Employee who is eligible for benefits under the H. J. Heinz Company Long-Term Disability Plan. f. Change of Ownership. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the former Employee has received from a Successor Employer an offer of employment not requiring relocation and commencing promptly following termination of Employment, whether or not the former Employee has accepted such position. 5 3.03. Changed Decisions. The Employer has the right to cancel or reschedule a previously announced or scheduled layoff or other involuntary termination of Employment. An Employee is not eligible for Severance Pay under this Plan if an announced or scheduled termination of Employment is canceled before termination actually occurs. 3.04. Transition Assistance. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the Employee failed to satisfy to the Employer's satisfaction all transition assistance requests, such as aiding in the location of files or records, preparing final reports, and similar transitional functions. Article IV Amount of Severance Benefits 4.01. Basic Severance Pay. An eligible Employee shall be entitled to Severance Pay consisting of one week of Earnings for each year of Continuous Service. Pro-rated benefits will be paid for any fractional year of service. 4.02. Optional Separation Pay. In addition to the basic Severance Pay, an eligible Employee may be eligible for an additional optional separation allowance as consideration for executing a Release if the Company so requests. As consideration for the execution of a requested Release, the Employee shall be entitled to an additional separation allowance equal to one week of Earnings for each year of Continuous Service. Pro-rated benefits will be paid for any fractional year of service. 4.03. Special Separation Pay. The Employer may from time to time offer special Severance Pay for Employees terminating Employment during a limited period or in connection with a specific event, such as an exit incentive under a reduction in force program or in the context of a facility closing or other business development resulting in reduced employment needs. Any such temporary severance arrangement which may be offered from time to time shall be set forth in an Appendix to this Plan and shall be in lieu of, and not in addition to, benefits otherwise payable under this Plan. 6 4.04. Limitation on Amount. Notwithstanding the foregoing provisions of this Article IV, the aggregate amount of Severance Pay to or on behalf of any former Employee pursuant to this Plan (including any Appendix thereto) shall not exceed the equivalent of twice the Employee's total annual compensation during the year immediately preceding the termination of his service. No benefits that would constitute "excess parachute payments" within the meaning of Internal Revenue Code section 280G, or cause any other amounts to be "excess parachute payments", will be payable under this Plan. Article V Payment of Severance Benefits 5.01. Form of Payment. Payment of Severance Pay to an Employee shall be the responsibility of the Employer entity (Company or Affiliate) which had payroll responsibility with respect to the Employee. Basic and/or optional Severance Pay will be paid in a cash lump sum or, if the Employer so determines, as periodic payments (without interest). In the event of the death of a former Employee entitled to Severance Pay before receipt of the full amount thereof, the balance shall be payable in a single cash lump sum to the personal representative of the estate of the former Employee. 5.02. Time of Payment. Severance Pay to which a former Employee is entitled will be paid (or commence) as soon as administratively feasible after termination of Employment, provided that optional Severance Pay will not be paid (or commence) until the former Employee's executed release has become irrevocable. Notwithstanding the preceding sentence, in individual cases the Employer, in its sole discretion, may postpone the payment (or commencement) of all or part of a former Employee's Severance Pay until January of the calendar year following the date of termination of Employment. 5.03. Limitation on Duration. Notwithstanding foregoing provisions of this Article V, the duration of payments of Severance Pay pursuant to this Plan (including any Appendix thereto) shall not extend beyond 24 months after termination of Employment. 7 5.04. Tax Withholding. Taxes will be withheld from Severance Pay to the extent required by law. 5.05. Employees Rehired After Separation. In the event that an Employee who was involuntarily terminated from Employment with entitlement to benefits under this Plan is reemployed by the Employer, any Severance Pay not yet received by the Employee at the time of such rehire will not be paid. If such reemployment occurs within one year after such termination of Employment, the Employee will be required, as a condition of such reemployment, to refund to the Employer that portion of any Severance Pay that was previously paid with respect to such termination which exceeds the Employee's Earnings at the time of such termination multiplied by the number of weeks between such termination and such reemployment. Article VI 6.01. Integration with Other Payments. Benefits under this Plan are not intended to be in addition to pay-in-lieu-of-notice or similar benefits provided pursuant to other plans, programs, contracts or applicable laws such as the WARN Act. Should such other benefits be payable, benefits under this Plan will be reduced accordingly unless benefits paid under this Plan will be treated as satisfying such other obligations. 6.02. Relation to Other Benefit Arrangements. Benefits under this Plan are not counted as compensation for purposes of determining benefits under any other plan or arrangement of the Employer. 6.03. Operation and Administration. This Plan is a part of the Program, the provisions of which govern with respect to all matters not specifically covered herein, including without limitation matters governing administration, interpretation, amendment, and claims procedures. Schedule A Nonparticipating Employees Employees of the following Affiliates are not covered by this Plan: Any affiliate which is not based in the United States or its territories or possessions. Appendix B The Millennia Enhanced Severance Program (MESP) Pursuant to Section 4.03 of this Plan, special Severance Pay in the amount specified in (b) below will be extended on a temporary basis, in lieu of Severance Pay that might otherwise be payable pursuant to Section 4.01 or Section 4.02 of this Plan, to any MESP eligible Employee described in (a) below: (a) A MESP eligible Employee is any Employee whose Employment is involuntarily terminated as a result of the closing of a facility or related personnel reduction pursuant to Project Millennia, other than an Employee entitled to benefits under Appendix A who has not waived such benefits. (b) The amount of the special Severance Pay is three (3) weeks of Earnings (as of the time when termination of Employment occurs) for each year of Continuous Service, pro rated for partial years of Continuous Service, subject to the maximum set forth in Section 4.04 of this Plan. Appendix C The 1999 Enhanced Severance Program (ESP '99) Pursuant to Section 4.03 of this Plan, special Severance Pay in the amount specified in (b) below will be extended on a temporary basis, in lieu of Severance Pay that might otherwise be payable pursuant to Section 4.01 or Section 4.02 of this Plan, to any ESP '99 eligible Employee described in (a) below: (a) A ESP '99 eligible Employee is any Employee whose Employment is involuntarily terminated on or after December 1, 1998 and before December 1, 1999 as a result of the closing of a facility or related personnel reduction pursuant to a 1999 restructuring initiative, including the Frozen Food Company consolidation, the consolidation of Nature's Recipe into Heinz Pet Products, or the Heinz USA general and administrative personnel reduction, or any Heinz USA retail sales manager who elects to retire under the Heinz USA Retail Sales Management Voluntary Retirement Program or who is involuntarily terminated before December 1, 1999. (b) The amount of the special Severance Pay is: (i) in the case of an ESP'99 eligible Employee who is eligible for an enhanced retirement allowance under the Employees' Retirement System of H. J. Heinz Company Plan "A" - For Salaried Employees, and who has not waived such enhanced benefit, two (2) weeks of Earnings (as of the time when termination of Employment occurs) for each year of Continuous Service, pro rated for partial years of Continuous Service; (ii) in the case of any other ESP'99 eligible Employee, three (3) weeks of Earnings (as of the time when termination of Employment occurs) for each year of Continuous Service, pro rated for partial years of Continuous Service, subject to the maximum set forth in Section 4.04 of this Plan. Appendix D The Operation Excel Enhanced Severance Program (OEESP) Pursuant to Section 4.03 of this Plan, special Severance Pay in the amount specified in (b) below will be extended on a temporary basis, in lieu of Severance Pay that might otherwise be payable pursuant to Section 4.01 or Section 4.02 of this Plan, to any OEESP eligible Employee described in (a) below: (a) A OEESP eligible Employee is any Employee whose Employment is involuntarily terminated as a result of the closing of a facility or related personnel reduction pursuant to Operation Excel or who elected to retire under a temporary pension enhancement window established pursuant to Operation Excel. (b) The amount of the special Severance Pay is: (i) in the case of an OEESP eligible Employee who, by reason of an Operation Excel intiative, is eligible for an enhanced retirement allowance under the Employees' Retirement System of H. J. Heinz Company Plan "A" - For Salaried Employees, and who has not waived such enhanced benefit, two (2) weeks of Earnings (as of the time when termination of Employment occurs) for each year of Continuous Service, pro rated for partial years of Continuous Service; (ii) in the case of any other OEESP eligible Employee, three (3) weeks of Earnings (as of the time when termination of Employment occurs) for each year of Continuous Service, pro rated for partial years of Continuous Service, subject to the maximum set forth in Section 4.04 of this Plan. H. J. HEINZ COMPANY SPECIAL SEVERANCE PROGRAM FOR NONBARGAINING HOURLY EMPLOYEES Article I Introduction 1.01. Name - This Plan shall be known as the H. J. Heinz Company Special Severance Program for Nonbargaining Hourly Employees. 1.02. Status under ERISA - For purposes of ERISA, this Plan constitutes a portion of the Company's Group Benefits Program for Nonbargaining Employees, a welfare benefit plan as defined in ERISA. 1.03. Effective Date - The Plan was originally adopted effective June 1, 1997 as the "H. J. Heinz Company Millennia Enhanced Severance Program for Nonbargaining Hourly Employees" and is renamed and restated herein effective October 1, 1998. Article II Definitions 2.01. Defined Terms - Unless otherwise required by the context, capitalized terms used herein shall have the meanings set forth in this Section 2.01. Any capitalized term not specifically defined herein shall have the meaning set forth in the SAVER Plan. "Affiliate" has the same meaning as that set forth in the SAVER Plan. "Company" means H. J. Heinz Company, a Pennsylvania corporation. 2 "Continuous Service" means all Service rendered since the Employee's most recent date of hire by the Employer or an Affiliate. "Earnings" means an Employee's regular weekly base pay, excluding all overtime pay, fringe benefits, or other forms of supplemental or incentive compensation. "Employee" means any person employed by the Employer to render personal services to the Employer for an hourly wage who is not represented by a collective bargaining agreement. The term "Employee" does not include any worker who is designated as a contract worker rather than an employee for purposes of the Employer pay practices whether or not such worker is a "leased employee" as that term is defined in Section 414(n) of the Internal Revenue Code. "Employer" means H. J. Heinz Company or any of its Affiliates based in the United States. "Employment" means the period or periods during which an individual is an Employee. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Health Care Coverage" means the health care coverage under an Employer-sponsored plan or program in effect at an Employee's Termination Date for the benefit of the Employee and, if applicable, the Employee's spouse and/or dependants. "Plan Administrator" means the plan administrator designated under the Program. "Plan" means the H. J. Heinz Company Special Severance Program for Nonbargaining Hourly Employees, as set forth in this document and as amended from time to time. "Program" means the Company's Group Benefits Program for Nonbargaining Employees, of which this Plan is a part. 3 "SAVER Plan" means the H. J. Heinz Company SAVER Plan, as amended from time to time. "Service" has the same meaning as that set forth in the SAVER Plan. "Severance Pay" means severance benefits provided by the Employer for terminated former Employees as described in this Plan. "Successor Employer" means any person or entity that assumes operations or functions normally carried out by the Employer (such as the buyer or other transferee of a facility, business unit or portion thereof disposed of by the Employer or an entity to which an operation or function is outsourced), any Affiliate, or any entity making employment available to former Employees at the request of the Employer (such as a joint venture of which the Employer is a member). "Termination Date" means the date on which the Participant ceases to be carried as an Employee on the payroll system of the Employer. 2.02. Construction. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, unless the context clearly indicates to the contrary. Titles of Sections are inserted for convenience and shall not affect the meaning or construction of the Plan. Article III Eligibility 3.01. Eligible Employees. An Employee is eligible for benefits under this Plan as of his or her Termination Date provided termination of Employment was a result of the closing of a facility or related personnel reduction pursuant to Project Millennia or Operation Excel and such termination of Employment does not fall within a an ineligible category set forth in Section 3.02 below. 3.02. Ineligible Employees. An Employee is not eligible for benefits under this Plan if termination of Employment falls into one or more of the following categories, as determined by the Plan Administrator: 4 a. Voluntary Termination or Retirement. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that termination of Employment was by reason of resignation or retirement, even if the Employee had good reasons for feeling compelled to resign or retire. b. Discharge for Cause. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the Employee was discharged for cause. Cause includes, but not by way of limitation, dishonesty, being at work under the influence of drugs or alcohol, acts or threats of violence, violation of Company policy or Company rules and regulations including federal and state statutes, insubordination, or unsatisfactory work performance. c. Death. A former Employee is not eligible for benefits under this Plan if termination of Employment resulted from the Employee's death. d. Change of Ownership. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the former Employee has received from a Successor Employer an offer of employment not requiring relocation and commencing promptly following termination of Employment, whether or not the former Employee has accepted such position. 3.03. Changed Decisions. The Employer has the right to cancel or reschedule a previously announced or scheduled layoff or other involuntary termination of Employment. An Employee is not eligible for Severance Pay under this Plan if an announced or scheduled termination of Employment is canceled before termination actually occurs. 3.04. Transition Assistance. A former Employee is not eligible for benefits under this Plan if the Plan Administrator determines in its sole and exclusive judgment that the Employee failed to satisfy to the Employer's satisfaction all transition assistance requests, such as aiding in the location of files or records, preparing final reports, and similar transitional functions. 5 Article IV Amount of Severance Benefits 4.01. Severance Pay. The Severance Pay receivable by or on behalf of an eligible Employee under this Plan shall be the amount determined under a. or b. below, whichever is applicable, applied in each case by calculating a pro-rated amount for any fractional year of service: a. Up to Ten Years of Continuous Service. An eligible Employee who has not more than 10 full years of Continuous Service shall be entitled to Severance Pay consisting of one week of Earnings for each year of Continuous Service. b. Over Ten Years of Continuous Service. An eligible Employee who has more than 10 years of Continuous Service shall be entitled to Severance Pay consisting of one week of Earnings for each year of Continuous Service not in excess of 10 full years and one and one-half weeks of Earnings for each year of Continuous Service in excess of 10 full years. Pro-rated benefits will be paid for any fractional year of service. Notwithstanding the provisions of the foregoing paragraphs of this Section 4.01, the aggregate amount of Severance Pay to or on behalf of any former Employee pursuant to this Plan shall not exceed the equivalent of twice the Employee's total annual compensation during the year immediately preceding the termination of his service. 4.02. Health Care Continuation. Each eligible Employee who is entitled to Severance Pay under Section 4.01 shall also be entitled to continuation of Health Care Coverage, at the Employer's expense, for a period of six months following the Employee's Termination Date (unless a difference period is specified in an applicable Appendix). 6 Article V Payment of Severance Benefits 5.01. Form of Payment. Payment of Severance Pay to an Employee shall be the responsibility of the Employer entity (Company or Affiliate) which had payroll responsibility with respect to the Employee. Severance Pay will be paid in a cash lump sum. In the event of the death of a former Employee entitled to Severance Pay before receipt of the full amount thereof, the balance shall be payable in a single cash lump sum to the personal representative of the estate of the former Employee. 5.02. Time of Payment. Severance Pay to which a former Employee is entitled will be paid (or commence) as soon as administratively feasible after termination of Employment. Notwithstanding the preceding sentence, in individual cases the Employer, in its sole discretion, may postpone the payment (or commencement) of all or part of a former Employee's Severance Pay until January of the calendar year following the date of termination of Employment. 5.03. Tax Withholding. Taxes will be withheld from Severance Pay to the extent required by law. 5.04. Employees Rehired After Separation. In the event that an Employee who was terminated from Employment with entitlement to benefits under this Plan is reemployed by the Employer, any Severance Pay not yet received by the Employee at the time of such rehire will not be paid. Article VI Miscellaneous 6.01. Integration with Other Payments. Benefits under this Plan are not intended to be in addition to pay-in-lieu-of-notice or similar benefits provided pursuant to other plans, programs, contracts or applicable laws such as the WARN Act. Should such other benefits be payable, benefits under this Plan will be reduced accordingly unless benefits paid under this Plan will be treated as satisfying such other obligations. 7 6.02. Relation to Other Benefit Arrangements. Benefits under this Plan are not counted as compensation for purposes of determining benefits under any other plan or arrangement of the Employer. 6.03. Operation and Administration. This Plan is a part of the Program, the provisions of which govern with respect to all matters not specifically covered herein, including without limitation matters governing administration, interpretation, amendment, and claims procedures. SCHEDULE 8.1 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC. H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Excluded Assets and Liabilities 1. See the attached list of Parent Retained Trademarks which will be transferred to Parent as part of the Intellectual Property Reorganization outlined on Exhibit A to the Agreement. The foregoing is subject to certain geographical restrictions when used in conjunction with "Weight Watchers" and similar trademarks as set forth in the Operating Agreement. 2. The trademarks being distributed to Parent (other than those identified in Item 1 above) pursuant to the Intellectual Property Reorganization as outlined on Exhibit A to the Agreement. 3. The following is a list of promissory notes issued by WWI in connection with certain franchise repurchases: Principal Balance Debtor Creditor as of 4/30/99 Maturity Date ------ -------- ------------- ------------- 1. WW Southeast Weight Watchers $3,450,000 3/30/03 of Baltimore 2. WW Subsidiary Weight Watchers $6,650,000 6/9/00 of Louisiana 3. Weight Watchers Ralph Chicor $2,737,500 5/19/04 International 4. Weight Watchers Phyllis Chicorel $2,737,500 5/19/04 International 5. WW West Coast Rifken Family Trust $102,413 1/1/01 6. WW West Coast Fredric Rifken $97,587 1/1/01 7. Weight Watchers Weight Watchers $5,000,000 5/16/01 of Southern of Orange County California 4. The food sublicenses and direct food licenses referred to in Sections 8(a) and 8(b) of Exhibit A to the Agreement 5. Liabilities relating to (i) the H. J. Heinz Company Incentive Compensation Plan (the Shareholder Success Plan) and management bonus plans which relate to periods prior to the Closing and (ii) any stay bonuses owed or incentive or retention arrangements made by Parent and/or WWI to employees of the Companies in order to incentivize them to stay through the closing of the sale of the Business and for a period thereafter 6. Book overdrafts and interest bearing debt 7. Notes receivable as described in Note 2, "Adjustments", to the 1999 Combined Statements of Assets and Liabilities 8. Income taxes and related deferred income tax accounts 9. The Receivable relating to the "Non Returnable Payment" (as that term is defined in the agreement with Simon & Schuster) in connection with the sale of exclusive publishing rights to Simon & Schuster in 1992 which is due to be paid on December 21, 1999 is an Excluded Asset. The royalties to be received under the exclusive rights agreement following the Closing Date that are paid by Simon & Schuster on publications sold, however, are not Excluded Assets. 10. Indemnity Agreement dated October 1, 1995 between WWI and Gairspar Investments Limited with respect to premises in the City of Mississauga, Ontario, Canada leased to The Fitness Institute as part of the Fitness Business. 11. The Canadian entity 78459 B.C. Ltd. 12. Cash and cash equivalents. 13. All books and records relating solely to the Excluded Assets. PARENT RETAINED TRADEMARKS
TRADEMARKS REPORT DATE 06/18/1999 PG: 1 ============================================================================================================================ MATTER # COUNTRY FILED APPL# REGISTERED REG# STATUS ============================================================================================================================ ============================================================================================================================ HEALTHY GOURMET ============================================================================================================================ 9500011 CANADA 01/27/1995 774,083 07/15/1997 478,521 REGISTERED GOODS: 29-FOOD PRODUCTS NAMELY, FROZEN ENTREES, MARGARINE AND CHEESE. ============================================================================================================================ HEALTHY RECIPES ============================================================================================================================ 9500010 CANADA 01/27/1995 774,083 PENDING GOODS: 29-All goods in class. ============================================================================================================================ SMART ONES ============================================================================================================================ 9200009 UNITED STATES 12/10/1991 74/229,521 01/03/1995 1,871,763 REGISTERED GOODS: 29-Frozen food entrees and/or side dishes consisting primarily of meat, fish, poultry and/or vegetables, with such entrees or side dishes also including rice, bread and/or pasta. 30- Frozen food entrees and/or side dishes consisting primarily of pasta and rice; and pizza. 9300027 CANADA 12/09/1992 718,590 03/22/1996 455,672 REGISTERED GOODS: 29-FROZEN FOOD ENTREES AND/OR SIDE DISHES CONSISTING PRIMARILY OF MEAT, FISH, POULTRY AND/OR VEGETABLES, WITH SUCH ENTREES OR SIDE DISHES ALSO INCLUDING RICE, BREAD AND/OR PASTA; AND PRIMARILY CONSISTING OF PASTA AND RICE; PIZZA 30-All goods in class. 9400018 UNITED STATES 05/20/1994 74/528,148 08/15/1995 1,911,590 REGISTERED GOODS: 29-FROZEN ENTREES CONSISTING OF CHICKEN, BEEF, FISH AND/OR VEGETABLES. 30-FROZEN ENTREES CONSISTING OF PASTA AND/OR RICE ALONE OR IN COMBINATION WITH OTHER FOODS. 9400078 CANADA 03/21/1994 750,409 08/30/1996 462,292 REGISTERED GOODS: 1-SALAD DRESSINGS, MAYONNAISE AND PASTA SAUCES. 9500026 CANADA 12/22/1994 771,701 08/30/1996 462,504 REGISTERED GOODS: 29-MUFFINS, BREADS. T00206BX0 BENELUX 10/12/1998 924662 PENDING GOODS: 29-FROZEN ENTREES AND/OR SIDE DISHES CONSISTING PRIMARILY OF MEAT, FISH, POULTRY AND/OR VEGETABLES, WITH SUCH ENTREES OR SIDE DISHES ALSO INCLUDING RICE, BREAD-AND/OR PASTA. CHEESE; MARGARINE AND MAYONNAISE. 30-FROZEN ENTREES AND/OR SIDE DISHES CONSISTING PRIMARILY OF PASTA AND/OR RICE ALONE OR IN COMBINATION WITH OTHER FOODS; AND PIZZA. FROZEN DESSERTS CONSISTING OF MILK BASED OR MILK SUBSTITUTE BASED DESSERTS, CAKES, PIES AND MOUSSES. T00206EU0 EUROPEAN UNION (CTM) 10/13/1998 952721 PENDING GOODS: 29-FROZEN ENTREES AND/OR SIDE DISHES CONSISTING PRIMARILY OF MEAT, FISH, POULTRY AND/OR VEGETABLES, WITH SUCH ENTREES OR SIDE DISHES ALSO INCLUDING RICE, BREAD AND/OR PASTA. CHEESE; MARGINE AND MAYONNAISE. 30-FROZEN ENTREES AND/OR SIDE DISHES CONSISTING PRIMARILY OF PASTA AND/OR RICE ALONE OR IN COMBINATION WITH OTHER FOODS; AND PIZZA. FROZEN DESSERTS CONSISTING OF MILK BASED OR MILK SUBSTITUTE BASED DESSERTS, CAKES, PIES AND MOUSSES. - -------------------------------------------------------------------------------------------------- TRADEMARKS REPORT DATE 06/18/1999 PG:2 MATTER # COUNTRY FILED APPL # REGISTERED REG # STATUS - -------------------------------------------------------------------------------------------------- T00206US2 UNITED STATES 01/08/1998 75/415,119 11/17/1998 2,204,080 REGISTERED GOODS: 30 - FROZEN DESSERTS CONSISTING OF MILK BASED OR MILK SUBSTITUTE BASED DESSERTS, CAKES, PIES AND MOUSSES. T00206ZA0 SOUTH AFRICA 01/25/1999 99/00969-70 PENDING GOODS: 29 - 30 - T00439CA0 CANADA 01/26/1996 802,847 04/01/1997 474,010 REGISTERED GOODS: 1 - PREPARED SOUPS, CHEESE PRODUCTS, PIZZA AND COOKIES. - -------------------------------------------------------------------------------------------------- SMART OPTIONS - -------------------------------------------------------------------------------------------------- 9300001 UNITED STATES 04/09/1993 74/378,546 05/09/1995 1,893,490 REGISTERED GOODS: 29 - FROZEN PREPARED MEALS CONSISTING OF MEAT, FISH, POULTRY AND VEGETABLES 30 - FROZEN PREPARED MEALS CONSISTING OF PASTA; FROZEN MILK BASED OR MILK SUBSTITUTE BASED DESSERTS, CAKES AND MOUSSES 9500032 UNITED STATES 06/02/1995 74/683,887 12/31/1996 2,026,467 REGISTERED GOODS: 29 - FLAVORED SOUP BROTHS. 30 - SPAGHETTI SAUCE; NATURAL SWEETENER, FLAVORED SHAKE MIX. 01 - ARTIFICIAL SWEETENER
SCHEDULE 9.6 TO THE RECAPITALIZATION AND STOCK PURCHASE AGREEMENT AMONG WEIGHT WATCHERS INTERNATIONAL, INC. H. J. HEINZ COMPANY, and ARTAL INTERNATIONAL S.A. Governmental Approvals The following list of governmental authorities is qualified to the extent that such governmental authorities' approval is required in order to consummate the transactions contemplated by the Agreement: 1. Australia (Foreign Investment Review Board); provided this consent must be received prior to Closing and cannot be waived as a condition to Closing 2. Sweden 3. New Zealand 4. Finland 5. Germany EX-3.1 4 EXHIBIT 3.1 EXHIBIT 3.1 - -------------------------------------------------------------------------------- AMENDED AND RESTATED ARTICLES OF INCORPORATION of WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- AMENDED AND RESTATED ARTICLES OF INCORPORATION of WEIGHT WATCHERS INTERNATIONAL, INC. ARTICLE I The name of the Corporation shall be Weight Watchers International, Inc. ARTICLE II The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act, as amended from time to time, and any legislation succeeding thereto (the "VSCA"). All references herein to "Articles of Incorporation" shall mean these Amended and Restated Articles of Incorporation, as subsequently amended or restated in accordance herewith and with the VSCA. ARTICLE III The aggregate number of shares that the Corporation shall have authority to issue shall be 10,000,000 shares of Preferred Stock, no par value per share (hereinafter called "Preferred Stock"), and 100,000,000 shares of Common Stock, no par value per share (hereinafter called "Common Stock"). The following is a description of each of such classes of stock, and a statement of the preferences, limitations, voting rights and relative rights in respect of the shares of each such class: A. Preferred Stock 1. Authority to Fix Rights of Preferred Stock. The Board of Directors shall have authority, by resolution or resolutions, at any time and from time to time to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series, and, without limiting the generality of the foregoing, to fix and determine the designation of each such series, the number of shares that shall constitute such series and the following relative rights and preferences of the shares of each series so established: (a) The annual or other periodic dividend, if any, payable on shares of such series, the time of payment thereof, whether any such dividends shall be cumulative or non-cumulative, and the date or dates from which any cumulative dividends shall commence to accrue; (b) the price or prices at which and the terms and conditions, if any, on which shares of such series may be redeemed; (c) the amounts payable upon shares of such series in the event of the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation; (d) the sinking fund provisions, if any, for the redemption or purchase of shares of such series; (e) the extent of the voting powers, if any, of the shares of such series; (f) the terms and conditions, if any, on which shares of such series may be converted into shares of stock of the Corporation of any other class or classes or into shares of any other series of the same or any other class or classes; (g) whether, and if so the extent to which, shares of such series may participate with the Common Stock in any dividends in excess of the preferential dividend fixed for shares of such series or in any distribution of the assets of the Corporation, upon a liquidation, dissolution or winding-up thereof, in excess of the preferential amount fixed for shares of such series; and (h) any other preferences and relative, optional or other special rights, and qualifications, limitations or restrictions of such preferences or rights, of shares of such series not fixed and determined by law or in this Article III. 2. Distinctive Designations of Series. Each series of Preferred Stock shall be so designated as to distinguish the shares thereof from the shares of all other series. Different series of Preferred Stock shall not be considered to constitute different voting groups of shares for the purpose of voting by voting groups except as required by the VSCA or as otherwise specified by the Board of Directors, as reflected in articles of amendment to the Articles of Incorporation, with respect to any series at the time of the creation thereof. 3. Restrictions on Certain Distributions. So long as any shares of Preferred Stock are outstanding, the Corporation shall not declare and pay or set apart for payment any dividends (other than dividends payable in Common Stock or other stock of the Corporation ranking junior to the Preferred Stock as to dividends) or make any other distribution on such junior stock if, at the time of making such declaration, payment or 2 distribution, the Corporation shall be in default with respect to any dividend payable on, or any obligation to redeem, any shares of Preferred Stock. B. Common Stock 1. Voting Rights. Subject to the provisions of the VSCA or of the Bylaws of the Corporation as from time to time in effect with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, and except as otherwise provided by the VSCA or in articles of amendment to the Articles of Incorporation establishing any series of Preferred Stock pursuant to the provisions of Paragraph 1 of Part A of this Article III, the holders of outstanding shares of Common Stock of the Corporation shall possess exclusive voting power for the election of directors and for all other purposes, with each holder of record of shares of Common Stock of the Corporation being entitled to one vote for each share of such stock standing in his name on the books of the Corporation. 2. Rights Upon Dissolution. Except as required by the VSCA or the Articles of Incorporation with respect to any rights upon dissolution of the Preferred Stock or any one or more series thereof, the holders of the Common Stock shall have the exclusive right to receive, pro rata according to the number of shares of Common Stock owned of record by each of them, the net assets of the Corporation upon dissolution and the full amount of any dividends or other distributions paid by the Corporation. C. General Provisions 1. Redeemed or Reacquired Shares. Shares of any series of Preferred Stock that have been redeemed or otherwise reacquired by the Corporation (whether through the operation of a sinking fund, upon conversion or otherwise) shall have the status of authorized and unissued shares of Preferred Stock and may be redesignated and reissued as a part of such series (except as otherwise provided in Part D of this Article III with respect to the Series A Preferred Stock or unless prohibited by the articles of amendment creating any other series) or of any other series of Preferred Stock. Shares of Common Stock that have been reacquired by the Corporation shall have the status of authorized and unissued shares of Common Stock and may be reissued. 2. No Preemptive Rights. No holder of shares of stock of any class of the Corporation shall, as such holder, have any right to subscribe for or purchase (a) any shares of stock of any class of the Corporation, or any warrants, options or other instruments that shall confer upon the holder thereof the right to subscribe for or purchase or receive from the Corporation any shares of stock of any class, whether or not such shares of stock, warrants, options or other instruments are issued for cash or services or property or by way of dividend or otherwise, or (b) any other security of the Corporation that shall be convertible into, or exchangeable for, any shares of stock of the Corporation of any class or classes, or to which shall be attached or appurtenant any warrant, option or other instrument that shall confer upon the holder of such security the right to subscribe 3 for or purchase or receive from the Corporation any shares of its stock of any class or classes, whether or not such securities are issued for cash or services or property or by way of dividend or otherwise, other than such right, if any, as the Board of Directors, in its sole discretion, may from time to time determine. If the Board of Directors shall offer to the holders of shares of stock of any class of the Corporation, or any of them, any such shares of stock, options, warrants, instruments or other securities of the Corporation, such offer shall not, in any way, constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other securities of the Corporation without offering the same to such holders. 3. Control Share Acquisition Statute. The provisions of Article 14.1 of the VSCA shall not apply to acquisitions of shares of any class of capital stock of the Corporation. D. Series A Preferred Stock. There is hereby established a series of the Corporation's authorized Preferred Stock, to be designated as the "Series A Preferred Stock, no par value per share." The designation and number, and relative rights, preferences and limitations of the Series A Preferred Stock, insofar as not already fixed by any other provision of these Articles of Incorporation, shall be as follows: 1. Designation and Amount. The number of shares constituting the Series A Preferred Stock shall be 1,000,000, and the liquidation preference of the Series A Preferred Stock shall be $25.00 per share (the "Liquidation Value"). 2. Rank. The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (i) senior to the Corporation's Common Stock and to all other classes and series of stock of the Corporation now or hereafter authorized, issued or outstanding which by their terms expressly provide that they are junior to the Series A Preferred Stock with respect to such matters (collectively with the Common Stock, the "Junior Securities"); (ii) on a parity with each other class of capital stock or series of preferred stock issued by the Corporation after the date hereof the terms of which specifically provide that such class or series will rank on a parity with the Series A Preferred Stock with respect to such matters or which do not specify their rank (collectively referred to as "Parity Securities"); and (iii) junior to each other class of capital stock or other series of Preferred Stock issued by the Corporation after the date hereof which specifically provides that such class or series will rank senior to the Series A Preferred Stock with respect to such matters (collectively referred to as "Senior Securities"). 3. Dividends. (a) The holders of shares of the Series A Preferred Stock shall be entitled to receive, as and when declared and out of funds legally available therefor, dividends in cash on each share of Series A Preferred Stock at an annual rate equal to 6% of the 4 Liquidation Value. Such dividends shall be cumulative and shall accrue and be payable annually on July 31 of each year (each such date being a "Dividend Payment Date"), to holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared (the "Record Date"), in preference to dividends on the Junior Securities, commencing on the Dividend Payment Date next succeeding the Issue Date. Any such Record Date shall be 15 days prior to the relevant Dividend Payment Date. With respect to any dividend that has been declared, if on the applicable Dividend Payment Date the Corporation is in default under its Senior Credit Agreement or any of its other Debt Agreements or if the payment of such dividend in cash would result in such a default, the payment of such declared dividend with respect to shares of Series A Preferred Stock on such date shall be deferred to the next Dividend Payment Date or other payment date provided pursuant to Section 3(d) below on which no default exists or would occur. Such unpaid dividends shall accrue interest at a rate of 6% per annum until paid in full. All dividends paid with respect to shares of Series A Preferred Stock pursuant to this Section 3 shall be paid pro rata to the holders entitled thereto. (b) In the case of dividend payments made on the first Dividend Payment Date with respect to shares of Series A Preferred Stock issued on the Issue Date, dividends shall accrue and be cumulative from the Issue Date. (c) Each fractional share of Series A Preferred Stock outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of Series A Preferred Stock pursuant to subparagraph (a) of this Section 3, and all such dividends with respect to such outstanding fractional shares shall be cumulative and shall accrue (whether or not declared), and shall be payable in the same manner and at such times as provided for in subparagraph (a) of this Section 3 with respect to dividends on each outstanding share of Series A Preferred Stock. Each fractional share of Series A Preferred Stock outstanding shall also be entitled to a ratably proportionate amount of any other distributions made with respect to each outstanding share of Series A Preferred Stock, and all such distributions shall be payable in the same manner and at the same time as distributions on each outstanding share of Series A Preferred Stock. (d) Accrued but unpaid dividends for any past dividend periods may be declared by the Board of Directors and paid on any date fixed by the Board of Directors, whether or not a regular Dividend Payment Date, to holders of record on the books of the Corporation on such record date as may be fixed by the Board of Directors, which record date shall be not less than 10 days and not more than 30 days prior to the payment date thereof. Holders of Series A Preferred Stock will not be entitled to any dividends, whether payable in cash, property or stock, in excess of the full cumulative dividends provided for herein. (e) (i) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not make any payment on account of, or set apart for payment money 5 for a sinking or other similar fund for, the purchase, redemption or retirement of, any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities, whether directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than dividends or distributions payable in additional shares of Junior Securities to holders of Junior Securities), and shall not permit any Person directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities. Notwithstanding the foregoing, the Corporation may purchase, redeem or otherwise acquire, cancel or retire for value Junior Securities or options, warrants, equity appreciation rights or other rights to purchase or acquire Junior Securities (A) held by any existing or former employees or management of the Corporation or any Subsidiary of the Corporation or their assigns, estates or heirs, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees or (B) issued in connection with the incurrence of debt under a Debt Agreement or the issuance of Senior Securities (other than securities issued to any Permitted Holder). (ii) No full dividends shall be declared by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative dividends have been or contemporaneously are declared and paid (in cash) or declared and a sum set apart sufficient for such payment (in cash) on the Series A Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full dividends on such Parity Securities. If any dividends are not paid in full, as aforesaid, upon the shares of Series A Preferred Stock and any other Parity Securities, all dividends declared upon shares of Series A Preferred Stock and any other Parity Securities shall be declared pro rata so that the amount of dividends declared per share of the Series A Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Series A Preferred Stock and such Parity Securities bear to each other. 4. Liquidation Preference. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders an amount in cash equal to 100% of the Liquidation Value for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series A Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Series A 6 Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. (b) For the purposes of this Section 4, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with any one or more other Person shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the Corporation. 5. Redemption. (a) Optional Redemption. The Corporation may redeem, in whole or in part, the Series A Preferred Stock, at any time or from time to time, in the manner provided in Section 6(a) of this Part D (an "Optional Redemption"). Any Optional Redemption shall be at a price per share equal to 100% of the Liquidation Value thereof plus 100% of the sum of accrued and unpaid dividends thereon (including an amount equal to a prorated dividend from the last Dividend Payment Date immediately prior to the redemption date). (b) Redemption Upon Change in Control or a Permitted Holder Public Sale. Upon the occurrence of a Change in Control or a Permitted Holder Public Sale (each a "Trigger Event"), the Series A Preferred Stock shall be redeemable at the option of the holders thereof, in whole or in part and in the manner provided in Section 6(b) of this Part D, at a redemption price per share payable in cash equal to 100% of the Liquidation Value plus accrued and unpaid dividends to the date of redemption (including an amount equal to a prorated dividend from the last Dividend Payment Date immediately prior to the redemption date). After the occurrence of the Trigger Event, the Corporation shall redeem the number of shares specified in the holders' notices of election to redeem pursuant to Section 6(b) of this Part D on the date fixed for redemption. The Corporation's obligations pursuant to Section 5(b) of this Part D shall be suspended during any period when such redemption would be prohibited by the Corporation's Senior Credit Agreement or any of its other Debt Agreements. 6. Procedure for Redemption. (a) If the Corporation elects to redeem Series A Preferred Stock pursuant to Section 5(a) of this Part D, the Corporation shall give written notice (an "Optional Redemption Notice") thereof by overnight courier or by facsimile transmission to each holder of Series A Preferred Stock at its address or facsimile number, as the case may be, as it appears in the records of the Corporation. Such notice shall set forth: (i) the redemption price; (ii) the redemption date (which date shall be no earlier than five days and no later than 60 days from the date the Optional Redemption Notice is sent); (iii) the procedures to be followed by such holder, including the place or places where certificates for such shares are to be surrendered for payment of the redemption price and (iv) that 7 dividends on the shares to be redeemed will cease to accrue on the redemption date. If less than all shares of Series A Preferred Stock are to be redeemed at any time, selection of such shares for redemption shall be made on a pro rata basis. (b) At any time prior to and in any event no later than five days after the occurrence of a Change in Control and no later than 25 days prior to the occurrence of a Permitted Holder Public Sale, the Corporation shall give written notice of such Trigger Event by overnight courier or by facsimile transmission to each holder of Series A Preferred Stock at its address or facsimile number, as the case may be, as it appears in the records of the Corporation, which notice shall describe such Trigger Event. Such notice shall also set forth: (i) each holder's right to require the Corporation to redeem shares of Series A Preferred Stock held by such holder as a result of such Trigger Event; (ii) the redemption price; (iii) the redemption date (which date shall be no later than 45 days from the date of the occurrence of such Trigger Event); (iv) the procedures to be followed by such holder in exercising its right of redemption, including the place or places where certificates for such shares are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. In the event a holder of shares of Series A Preferred Stock shall elect to require the Corporation to redeem any or all of such shares of Series A Preferred Stock, such holder shall deliver, within 15 days of the sending to it of the Corporation's notice described in this Section 6(b), a written notice (the "Holder's Election Notice') stating such holder's election and specifying the number of shares to be redeemed pursuant to Section 5(b) of this Part D. (c) If an Optional Redemption Notice has been sent by the Corporation as provided in Section 6(a) of this Part D, or notice of election has been delivered by the holders as provided in Section 6(b) of this Part D, and provided that on or before the applicable redemption date funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares entitled to redemption, so as to be and to continue to be available therefor, then, from and after the redemption date (unless the Corporation defaults in the payment of the redemption price, in which case such rights shall continue until the redemption price is paid), dividends on the shares of Series A Preferred Stock so called for or entitled to redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding and shall not have the status of shares of Series A Preferred Stock, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive the applicable redemption price and any accrued and unpaid dividends from the Corporation to the date of redemption) shall cease. Upon surrender of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and a notice by the Corporation shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price as aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares without cost to the holder thereof. 8 7. Reacquired Shares. Shares of Series A Preferred Stock that have been issued and reacquired in any manner shall (upon compliance with any applicable provisions of the laws of the Commonwealth of Virginia) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock other than the Series A Preferred Stock. 8. Voting Rights. Except as required by law or set forth below, the holders of the Series A Preferred Stock will have no voting rights with respect to their shares of Series A Preferred Stock. The approval of holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a class, shall be required to amend, repeal or change any of the provisions of the Articles of Incorporation of the Corporation in any manner that would alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely; provided that without the consent of each holder of Series A Preferred Stock, no amendment may reduce the dividend payable on or the Liquidation Value of the Series A Preferred Stock. 9. Certain Covenants. Any holder of Series A Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Part D or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 10. Definitions. For the purposes of this Part D, the following terms shall have the meanings indicated: "affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act or any successor provision. The terms "affiliated" and "non-affiliated" shall have meanings correlative to the foregoing. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Change in Control" shall mean (a) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Corporation (unless the Permitted Holders shall hold a higher percentage thereof or have the ability to elect or designate for election a majority of the Board of Directors of the Corporation); or (b) the adoption by the shareholders of the Corporation of a plan or proposal for the liquidation or dissolution of the Corporation; or 9 (c) the merger or consolidation of the Corporation with another Person that is not an affiliate of the Corporation prior thereto or the sale or other disposition of all or substantially all the assets or property of the Corporation in one transaction or series of related transactions to a Person who is not an affiliate of the Corporation prior thereto. "Debt Agreement" shall mean any instrument or agreement governing indebtedness (whether now outstanding or hereinafter incurred) of the Corporation. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Issue Date" shall mean the first date on which shares of Series A Preferred Stock are issued. "Junior Securities" shall have the meaning set forth in Section 2 of this Part D. "Parity Securities" shall have the meaning set forth in Section 2 of this Part D. "Permitted Holder" shall mean Artal Luxembourg S.A. and any of its affiliates, but in the case of any affiliate, only for so long as it continues to be an affiliate of Artal Luxembourg S.A. "Permitted Holder Public Sale" shall mean a sale for cash by a Permitted Holder of all or part of the Common Stock in a registered, secondary public offering. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, limited liability company or other entity. "Senior Credit Agreement" shall mean the Senior Credit Agreement, dated as of September 29, 1999, among the Corporation, WW Funding Corp., various financial institutions, The Bank of Nova Scotia, as Administrative Agent, BHF (USA) Capital Corporation, as Documentation Agent, and Credit Suisse First Boston, as Syndication Agent, and the term Senior Credit Agreement shall also include any amendments, extensions, renewals, restatements or refundings thereof and any credit facilities that replace, refund or refinance any part of the loans or commitments thereunder, including any such replacement, refunding or refinancing facility that increases the amount borrowable thereunder. "Senior Securities" shall have the meaning set forth in Section 2 of this Part D. "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Trigger Event" shall have the meaning set forth in Section 5(b) of this Part D. 10 "Voting Stock" of a corporation means all classes of capital stock of such corporation then outstanding and normally entitled to vote in the election of directors. ARTICLE IV 1. The number of directors shall be as specified in the Bylaws of the Corporation but such number may be increased or decreased from time to time in such manner as may be prescribed in the Bylaws. 2. Subject to the rights of the holders of any Preferred Stock then outstanding, directors may be removed with or without cause by the affirmative vote of a majority of the votes entitled to be cast by each voting group that is entitled to vote generally in the election of directors. 3. Subject to the rights of the holders of any Preferred Stock then outstanding and to any limitations set forth in the VSCA, newly-created directorships resulting from any increase in the number of directors and any vacancies in the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely (i) by the Board of Directors or (ii) at a meeting of shareholders by the shareholders entitled to vote on the election of directors. If the directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of the directors remaining in office. 4. No provision of any agreement, plan or related document contemplated by Section 13.1-646 of the VSCA and approved by the Board of Directors shall be considered to be a limitation on the authority or power of the Board of Directors but, if so considered, is hereby authorized by these Articles of Incorporation. ARTICLE V Except as expressly otherwise required in the Articles of Incorporation, to be approved, action on a matter involving (i) an amendment or restatement of the Articles of Incorporation for which the VSCA requires shareholder approval, (ii) a plan of merger or share exchange for which the VSCA requires shareholder approval, (iii) a sale of assets other than in regular course of business or (iv) the dissolution of the Corporation shall be approved by a majority of the votes entitled to be cast by each voting group that is entitled to vote on the matter, unless in submitting any such matter to the shareholders the Board of Directors shall require a greater vote. ARTICLE VI 1. Every person who is or was a director, officer or employee of the Corporation, or who, at the request of the Corporation, serves or has served in any such capacity with another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise shall be indemnified by the Corporation against any and all liability 11 and reasonable expense that may be incurred by him in connection with or resulting from any claim, action or proceeding (whether brought in the right of the Corporation or any such other corporation, entity, plan or otherwise), in which he may become involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Corporation, or such other corporation, entity or plan while serving at the request of the Corporation, whether or not he continues to be such at the time such liability or expense is incurred, unless such person engaged in willful misconduct or a knowing violation of the criminal law. As used in this Article VI: (a) the terms "liability" and "expense" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by, a director, officer or employee; (b) the terms "director," "officer" and employee," unless the context otherwise requires, include the estate or personal representative of any such person; (c) a person is considered to be serving an employee benefit plan as a director, officer or employee of the plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or, in connection with the plan, to participants in or beneficiaries of the plan; (d) the term "occurrence" means any act or failure to act, actual or alleged, giving rise to a claim, action or proceeding; and (e) service as a trustee or as a member of a management or similar committee of a partnership, joint venture or limited liability company shall be considered service as a director, officer or employee of the trust, partnership, joint venture or limited liability company. The termination of any claim, action or proceeding, civil or criminal, by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the standards of conduct set forth in this Paragraph 1. The burden of proof shall be on the Corporation to establish, by a preponderance of the evidence, that the relevant standards of conduct set forth in this Paragraph 1 have not been met. 2. Any indemnification under Paragraph 1 of this Article VI shall be made unless (a) the Board, acting by a majority vote of those directors who were directors at the time of the occurrence giving rise to the claim, action or proceeding involved and who are not at the time parties to such claim, action or proceeding (provided there are at least two such directors), finds that the director, officer or employee has not met the relevant standards of conduct set forth in such Paragraph 1, or (b) if there are not at least two such directors, the Corporation's principal Virginia legal counsel, as last designated by the Board as such prior to the time of the occurrence giving rise to the claim, action or proceeding involved, or in the event for any reason such Virginia counsel is unwilling to so serve, then Virginia legal counsel mutually acceptable to the Corporation and the person seeking indemnification, deliver to the Corporation their written advice that, in their opinion, such standards have not been met. 12 3. Expenses incurred with respect to any claim, action or proceeding of the character described in Paragraph 1 of this Article VI shall, except as otherwise set forth in this Paragraph 3, be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article VI. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's final ability to make repayment. Notwithstanding the foregoing, the Corporation may refrain from, or suspend, payment of expenses in advance if at any time before delivery of the final finding described in Paragraph 2 of this Article VI, the Board or Virginia legal counsel, as the case may be, acting in accordance with the procedures set forth in Paragraph 2 of this Article VI, finds by a preponderance of the evidence then available that the officer, director or employee has not met the relevant standards of conduct set forth in Paragraph 1 of this Article VI. 4. No amendment or repeal of this Article VI shall adversely affect or deny to any director, officer or employee the rights of indemnification provided in this Article VI with respect to any liability or expense arising out of a claim, action or proceeding based in whole or substantial part on an occurrence the inception of which takes place before or while this Article VI, as set forth in these Articles of Incorporation, is in effect. The provisions of this Paragraph 4 shall apply to any such claim, action or proceeding whenever commenced, including any such claim, action or proceeding commenced after any amendment or repeal of this Article VI. 5. The rights of indemnification provided in this Article VI shall be in addition to any rights to which any such director, officer or employee may otherwise be entitled by contract or as a matter of law. 6. In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article VI, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. ARTICLE VII 1. A special meeting of the shareholders of the Corporation for any purpose or purposes may be held at any time upon the call of (a) the Chairman of the Board or the President of the Corporation or (b) the holders of a majority of the votes entitled to be cast on any issue proposed to be considered at such special meeting, provided, that all of such shareholders must sign, date and deliver to the Corporation's secretary one or more demands for such meeting describing the purpose or purposes for which it is to be held. 13 2. For such periods as the Corporation shall have fewer than 300 shareholders, any action required or permitted by the VSCA to be taken at a shareholders' meeting may be taken without a meeting and without prior notice, if the action is taken by the written consent of shareholders who would be entitled to vote at a meeting of holders of outstanding shares and who have voting power to cast not less than the minimum number (or the applicable minimum numbers, in the case of voting by groups) of votes that would be necessary to authorize or take the action at a meeting at which all shareholders entitled to vote thereon were present and voted. 14 EX-3.2 5 EXHIBIT 3.2 EXHIBIT 3.2 - -------------------------------------------------------------------------------- AMENDED AND RESTATED BYLAWS OF WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- AMENDED AND RESTATED BYLAWS of WEIGHT WATCHERS INTERNATIONAL, INC. -------------------------------- ARTICLE I MEETINGS OF SHAREHOLDERS Section 1.1. Place of Meetings. All meetings of the shareholders of Weight Watchers International, Inc. (hereinafter called the "Corporation") shall be held at such place, either within or without the Commonwealth of Virginia, as may from time to time be fixed by the Board of Directors of the Corporation (hereinafter called the "Board"). Section 1.2. Annual Meetings. The annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the second Wednesday in February of each year (or, if that day shall be a legal holiday, then on the next succeeding business day), or on such other day and/or in such other month as may be fixed by the Board, at such hour as may be specified in the notice thereof. Section 1.3. Special Meetings. A special meeting of the shareholders for any purpose or purposes, unless otherwise provided by law, may be held at any time upon the call of any of the persons authorized in the Articles of Incorporation of the Corporation, as from time to time amended (hereinafter called the "Articles"), to call a special meeting of the shareholders. Except as provided in the Articles, no other person shall be authorized or entitled to call a special meeting of the shareholders. Section 1.4. Notice of Meetings. Except as otherwise provided by law or the Articles, not less than ten nor more than sixty days' notice in writing of the place, day, hour and purpose or purposes of each meeting of the shareholders, whether annual or special, shall be given to each shareholder of record of the Corporation entitled to vote at such meeting, either by the delivery thereof to such shareholder personally or by the mailing thereof to such shareholder in a postage prepaid envelope addressed to such shareholder at his address as it appears on the stock transfer books of the Corporation. Notice of any meeting of shareholders shall not be required to be given to any shareholder who shall attend the meeting in person or by proxy, unless attendance is for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened, or who shall waive notice thereof in a writing signed by the shareholder before, at or after such meeting. Notice of any adjourned meeting need not be given, except when expressly required by law. Section 1.5. Quorum. Shares representing a majority of the votes entitled to be cast on a matter by all classes or series that are entitled to vote thereon and be counted together collectively, represented in person or by proxy at any meeting of the shareholders, shall constitute a quorum for the transaction of business thereat with respect to such matter, unless otherwise provided by law or the Articles. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, the chairman of such meeting or the holder of shares representing a majority of the votes cast on the matter of adjournment, either in person or by proxy, may adjourn such meeting from time to time until a quorum is obtained. At any such adjourned meeting at which a quorum has been obtained, any business may be transacted that might have been transacted at the meeting as originally called. Section 1.6. Voting. Unless otherwise provided by law or the Articles, at each meeting of the shareholders each shareholder entitled to vote at such meeting shall be entitled to one vote for each share of stock standing in his name on the books of the Corporation upon any date fixed as hereinafter provided, and may vote either in person or by proxy in writing. Unless demanded by a shareholder present in person or represented by proxy at any meeting of the shareholders and entitled to vote thereon or so directed by the chairman of the meeting, the vote on any matter need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting or his proxy, and it shall show the number of shares voted. Section 1.7.Judges. One or more judges or inspectors of election for any meeting of shareholders may be appointed by the chairman of such meeting, for the purpose of receiving and taking charge of proxies and ballots and deciding all questions as to the qualification of voters, the validity of proxies and ballots and the number of votes properly cast. Section 1.8.Conduct of Meeting. The chairman of the meeting at each meeting of shareholders shall have all the powers and authority vested in presiding officers by law or practice, without restriction, as well as the authority to conduct an orderly meeting and to impose reasonable limits on the amount of time taken up in remarks by any one shareholder. 2 ARTICLE II BOARD OF DIRECTORS Section 2.1. Number, Term, Election. The property, business and affairs of the Corporation shall be managed under the direction of the Board as from time to time constituted. The Board shall consist of seven directors, but the number of directors may be increased to any number, not to exceed eleven directors, or decreased to any number, not less than one director, by resolution of the Board or the shareholders, provided that no decrease in the number of directors shall shorten or terminate the term of any incumbent director. Each director shall be elected to hold office until the next succeeding annual meeting of shareholders and shall hold office until such director's successor shall have been elected and qualifies, or until such earlier time as such director shall resign, die or be removed. No director need be a shareholder. Section 2.2. Compensation. Each director, in consideration of such director's serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at Board and Committee meetings, or both, in cash or other property, including securities of the Corporation, as the Board shall from time to time determine, together with reimbursements for the reasonable expenses incurred by such director in connection with the performance of such director's duties. Nothing contained herein shall preclude any director from serving the Corporation, or any subsidiary or affiliated corporation, in any other capacity and receiving proper compensation therefor. If the Board adopts a resolution to that effect, any director may elect to defer all or any part of the annual and other fees hereinabove referred to for such period and on such terms and conditions as shall be permitted by such resolution. Section 2.3. Place of Meetings. The Board may hold its meetings at such place or places within or without the Commonwealth of Virginia as it may from time to time by resolution determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. Section 2.4. Organizational Meeting. As soon as practicable after each annual election of directors, the newly constituted Board shall meet for the purposes of organization. At such organizational meeting, the newly constituted Board shall elect officers of the Corporation and transact such other business as shall come before the meeting. Any organizational meeting may be held at any time or place designated by the Board from time to time. 3 Section 2.5. Regular Meetings. Regular meetings of the Board may be held at such time and place as may from time to time be specified in a resolution adopted by the Board then in effect, and, unless otherwise required by such resolution, or by law, notice of any such regular meeting need not be given. Section 2.6. Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board of Directors, by the President or by the Secretary at the request of a majority of the directors then in office. Notice of a special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, not later than the third day before the day on which such meeting is to be held, or shall be sent addressed to him at such place by facsimile, telegraph, cable or wireless, or be delivered personally or by telephone, not later than the day before the day on which such meeting is to be held. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of such meeting, unless required by the Articles. Section 2.7. Quorum. At each meeting of the Board the presence of a majority of the number of directors fixed by these Bylaws shall be necessary to constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum shall be present shall be the act of the Board, except as may be otherwise provided by law or by these Bylaws. Any meeting of the Board may be adjourned by a majority vote of the directors present at such meeting. Notice of any adjourned meeting need not be given. Section 2.8. Waivers of Notice of Meetings. Notwithstanding anything in these Bylaws or in any resolution adopted by the Board to the contrary, notice of any meeting of the Board need not be given to any director if such notice shall be waived in writing signed by such director before, at or after the meeting, or if such director shall be present at the meeting. Any meeting of the Board shall be a legal meeting without any notice having been given or regardless of the giving of any notice or the adoption of any resolution in reference thereto, if every member of the Board shall be present thereat. Except as otherwise provided by law or these Bylaws, waivers of notice of any meeting of the Board need not contain any statement of the purpose of the meeting. Section 2.9. Telephone Meetings. Members of the Board or any committee may participate in a meeting of the Board or such committee by means of a conference telephone or other means of communication whereby all directors participating may simultaneously hear each other during the meeting, and participation by such means shall constitute presence in person at such meeting. 4 Section 2.10. Actions Without Meetings. Any action that may be taken at a meeting of the Board or of a committee may be taken without a meeting if a consent in writing, setting forth the action, shall be signed, either before or after such action, by all of the directors or all of the members of the committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote. ARTICLE III COMMITTEES Section 3.1. Creation of Committees. To the extent permitted by law, the Board may from time to time by resolution adopted by a majority of the number of directors then in office create such committees of directors as the Board shall deem advisable and with such limited authority, functions and duties as the Board shall by resolution prescribe. The Board shall have the power to change the members of any such committee at any time, to fill vacancies, and to discharge any such committee, either with or without cause, at any time. ARTICLE IV OFFICERS Section 4.1. Number, Term, Election. The officers of the Corporation shall be a Chairman of the Board of Directors, a President, a Secretary and a Treasurer. The Board may appoint such other officers and such assistant officers and agents with such powers and duties as the Board may find necessary or convenient to carry on the business of the Corporation. Such officers and assistant officers shall serve until their successors shall be elected and qualify, or as otherwise provided in these Bylaws. Any two or more offices may be held by the same person. Section 4.2. Chairman of the Board of Directors. The Chairman of the Board of Directors shall, subject to the control of the Board, have full authority and responsibility for directing the conduct of the business, affairs and operations of the Corporation and shall preside at all meetings of the Board and of the shareholders. The Chairman of the Board of Directors shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board. Section 4.3. President. The President shall be the chief operating officer of the Corporation and shall have such powers and perform such duties as may from time to time be prescribed by the Board or by the Chairman of the Board of Directors. The President may sign and execute in the name of the Corporation deeds, contracts and other instruments, except in cases where the signing and the 5 execution thereof shall be expressly delegated by the Board or by these Bylaws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. Section 4.4. Vice Presidents. Each Vice President, if any, shall have such powers and perform such duties as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. Any Vice President of the Corporation may sign and execute in the name of the Corporation deeds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by these Bylaws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. Section 4.5. Treasurer. The Treasurer shall have such powers and perform such duties as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. If the Board shall so determine, the Treasurer shall give a bond for the faithful performance of the duties of the office of the Treasurer, in such sum as the Board may determine to be proper, the expense of which shall be borne by the Corporation. To such extent as the Board shall deem proper, the duties of the Treasurer may be performed by one or more assistants, to be appointed by the Board. Section 4.6. Secretary. The Secretary shall keep the minutes of meetings of shareholders, of the Board, and, when requested, of committees of the Board, and shall attend to the giving and serving of notices of all meetings thereof. The Secretary shall keep or cause to be kept such stock transfer and other books, showing the names of the shareholders of the Corporation, and all other particulars regarding them, as may be required by law. The Secretary shall also perform such other duties and exercise such other powers as may from time to time be prescribed by the Board, the Chairman of the Board of Directors, the President or any officer to whom the Chairman of the Board of Directors or the President may have delegated such authority. To such extent as the Board shall deem proper, the duties of the Secretary may be performed by one or more assistants, to be appointed by the Board. 6 ARTICLE V REMOVALS AND RESIGNATIONS Section 5.1. Removal of Officers. Any officer, assistant officer or agent of the Corporation may be removed at any time, either with or without cause, by the Board in its absolute discretion. Any officer or agent appointed otherwise than by the Board of Directors may be removed at any time, either with or without cause, by any officer having authority to appoint such an officer or agent, except as may be otherwise provided in these Bylaws. Any such removal shall be without prejudice to the recovery of damages for breach of the contract rights, if any, of the officer, assistant officer or agent removed. Election or appointment of an officer, assistant officer or agent shall not of itself create contract rights. Section 5.2. Resignation. Any director, officer or assistant officer of the Corporation may resign as such at any time by giving written notice of his resignation to the Board, the Chairman of the Board of Directors or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if no time is specified therein, at the time of delivery thereof, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5.3. Vacancies. Any vacancy in the office of any officer or assistant officer caused by death, resignation, removal or any other cause, may be filled by the Board for the unexpired portion of the term. ARTICLE VI CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC. Section 6.1. Execution of Contracts. Except as otherwise provided by law or by these Bylaws, the Board (i) may authorize any officer, employee or agent of the Corporation to execute and deliver any contract, agreement or other instrument in writing in the name and on behalf of the Corporation, and (ii) may authorize any officer, employee or agent of the Corporation so authorized by the Board to delegate such authority by written instrument to other officers, employees or agents of the Corporation. Any such authorization by the Board may be general or specific and shall be subject to such limitations and restrictions as may be imposed by the Board. Any such delegation of authority by an officer, employee or agent may be general or specific, may authorize re-delegation, and shall be subject to such limitations and restrictions as may be imposed in the written instrument of delegation by the person making such delegation. 7 Section 6.2. Loans. No loans shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name unless authorized by the Board. When authorized by the Board, any officer, employee or agent of the Corporation may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation and when so authorized may pledge, hypothecate or transfer any securities or other property of the Corporation as security for any such loans or advances. Such authority may be general or confined to specific instances. Section 6.3. Checks, Drafts, etc.. All checks, drafts and other orders for the payment of money out of the funds of the Corporation and all notes or other evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by the Board. Section 6.4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select or as may be selected by the Treasurer or any other officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board. Section 6.5. Voting of Securities. Unless otherwise provided by the Board, the President may from time to time appoint an attorney or attorneys, or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes that the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as such officer may deem necessary or proper in the premises. 8 ARTICLE VII CAPITAL STOCK Section 7.1. Shares. Shares of the Corporation may but need not be represented by certificates. When shares are represented by certificates, the Corporation shall issue such certificates in such form as shall be required by the Virginia Stock Corporation Act (the "VSCA") and as determined by the Board, to every shareholder for the fully paid shares owned by such shareholder. Each certificate shall be signed by, or shall bear the facsimile signature of, the Chairman of the Board of Directors or the President and the Secretary or an Assistant Secretary of the Corporation and may bear the corporate seal of the Corporation or its facsimile. All certificates for the Corporation's shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom shares (whether or not represented by a certificate) are issued, with the number of shares and date of issue, shall be entered on the share transfer books of the Corporation. Such information may be stored or retained on discs, tapes, cards or any other approved storage device relating to data processing equipment; provided that such device is capable of reproducing all information contained therein in legible and understandable form, for inspection by shareholders or for any other corporate purpose. When shares are not represented by certificates, then within a reasonable time after the issuance or transfer of such shares, the Corporation shall send the shareholder to whom such shares have been issued or transferred a written statement of the information required by the VSCA to be included on certificates. Section 7.2. Stock Transfer Books and Transfer of Shares. The Corporation, or its designated transfer agent or other agent, shall keep a book or set of books to be known as the stock transfer books of the Corporation, containing the name of each shareholder of record, together with such shareholder's address and the number and class or series of shares held by such shareholder. Shares of stock of the Corporation shall be transferable on the stock books of the Corporation by the holder in person or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or the transfer agent, but, except as hereinafter provided in the case of loss, destruction or mutilation of certificates, no transfer of stock shall be entered until the previous certificate, if any, given for the same shall have been surrendered and canceled. Transfer of shares of the Corporation represented by certificates shall be made on the stock transfer books of the Corporation only upon surrender of the certificates for the shares sought to be transferred by the holder of record thereof or by such holder's duly authorized agent, transferee or legal representative, who shall furnish proper evidence of authority to transfer with the Secretary of the Corporation or its designated transfer agent or other agent. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued. Except as otherwise provided by law, no transfer of shares shall be valid as against the Corporation, its shareholders 9 or creditors, for any purpose, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Section 7.3. Holder of Record. Except as otherwise required by the VSCA, the Corporation may treat the person in whose name shares of stock of the Corporation (whether or not represented by a certificate) stand of record on its books or the books of any transfer agent or other agent designated by the Board as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote, and to otherwise exercise the rights, powers and privileges of ownership of such shares. Section 7.4. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the Board fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Section 7.5. Lost, Destroyed or Mutilated Certificates. In case of loss, destruction or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, destruction or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do. Section 7.6. Transfer Agent and Registrar; Regulations. The Corporation may, if and whenever the Board so determines, maintain in the Commonwealth of Virginia or any other state of the United States, one or more transfer offices or agencies and also one or more registry offices which offices and agencies may establish rules and regulations for the issue, transfer and registration of certificates. No certificates for shares of stock of the Corporation in respect of which a transfer agent and registrar shall have been designated shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of shares represented by certificates and shares without certificates. 10 ARTICLE VIII SEAL The seal of the Corporation shall be a flat-face circular die, of which there may be any number of counterparts of facsimiles, in such form as the Board of Directors shall from time to time adopt as the corporate seal of the Corporation. 11 EMERGENCY BYLAWS Section 1. Definitions. As used in these Emergency Bylaws, (a) the term "period of emergency" shall mean any period during which a quorum of the Board cannot readily be assembled because of some catastrophic event. (b) the term "incapacitated" shall mean that the individual to whom such term is applied shall not have been determined to be dead but shall be missing or unable to discharge the responsibilities of his office; and (c) the term "senior officer" shall mean the Chairman of the Board of Directors, the President, any Vice President, the Treasurer and the Secretary, and any other person who may have been so designated by the Board before the emergency. Section 2. Applicability. These Emergency Bylaws, as from time to time amended, shall be operative only during any period of emergency. To the extent not inconsistent with these Emergency Bylaws, all provisions of the regular Bylaws of the Corporation shall remain in effect during any period of emergency. No officer, director or employee shall be liable for actions taken in good faith in accordance with these Emergency Bylaws. Section 3. Board of Directors. (a) A meeting of the Board may be called by any director or senior officer of the Corporation. Notice of any meeting of the Board need be given only to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio, and at a time less than twenty-four hours before the meeting if deemed necessary by the person giving notice. (b) At any meeting of the Board, three directors in attendance shall constitute a quorum. Any act of a majority of the directors present at a meeting at which a quorum shall be present shall be the act of the Board. If less than three directors should be present at a meeting of the Board, any senior officer of the Corporation in attendance at such meeting shall serve as a director for such meeting, selected in order of rank and within the same rank in order of seniority. (c) In addition to the Board's powers under the regular Bylaws of the Corporation to fill vacancies on the Board, the Board may elect any individual as a director to replace any director who may be incapacitated to serve until the latter ceases to be incapacitated or until the termination of the period of emergency, whichever first occurs. In considering officers of the 12 Corporation for election to the Board, the rank and seniority of individual officers shall not be pertinent. (d) The Board, during as well as before any such emergency, may change the principal office or designate several alternative offices or authorize the officers to do so. Section 4. Appointment of Officers. In addition to the Board's powers under the regular Bylaws of the Corporation with respect to the election of officers, the Board may elect any individual as an officer to replace any officer who may be incapacitated to serve until the latter ceases to be incapacitated. Section 5. Amendments. These Emergency Bylaws shall be subject to repeal or change by further action of the Board or by action of the shareholders, except that no such repeal or change shall modify the provisions of the second paragraph of Section with regard to action or inaction prior to the time of such repeal or change. Any such amendment of these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. 13 EX-3.3 6 EXHIBIT 3.3 EXHIBIT 3.3 CERTIFICATE OF INCORPORATION 58 WW FOOD CORP. Under Section 402 of the Business Corporation Law. The undersigned, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law of the State of New York does hereby certify and set forth: FIRST: The name of the corporation is 58 WW FOOD CORP. SECOND: The purposes for which the corporation is formed, are: To manufacture, produce, treat, purchase, and otherwise acquire, cook, bake, and otherwise prepare, package, and to exchange, distribute, sell and otherwise dispose of, handle, market, store, import, export, deal and trade in food and food products of every kind, and confections, extracts, syrups, coffee, tea, cocoa, wines, liquors, ale, beer, sodas and other drinks and beverages of every kind and description, ice cubes, crushed and block ice, cigars, cigarettes, tobacco and smoking supplies. To conduct the business of restauranteurs, caterers, inn keepers, tobacconists, bakers, butchers, cooks, concessionaires, and purveyors, suppliers, preparers, servers, and dispensers of food and drink; and to engage in all activities, render all services, and to buy, sell, use, handle, and deal in all fixtures, machinery, apparatus, equipment, accessories, tools, materials, products and merchandise incidental or related thereto, or of use therein. To erect, construct, establish, purchase, lease and otherwise acquire, and to hold, use, equip, outfit, franchise the operation of, supply, service, maintain, operate, sell and otherwise dispose of restaurants, inns, taverns, cafeterias, grills, automats, buffets, diners, delicatessens, lunch rooms, coffee shops, luncheonettes, ice cream parlors, milk bars, candy stores, soda fountains, bakeries, kitchens, bars, cocktail lounges, banquet halls, catering establishments, concessions and other eating and drinking places and establishments of every kind and description. To acquire by purchase, subscription underwriting or otherwise, and to own, hold for investment, or otherwise, and to use, sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose of real and personal property of every sort and description and wheresoever situated, including shares of stock, bonds, debentures, notes, scrip, securities, evidences of 2 indebtedness, contracts or obligations of any corporation or association, whether domestic or foreign, or of any firm or individual or of the United States or any state, territory or dependency of the United States or any foreign country, or any municipality or local authority within or without the United States, and also to issue in exchange therefor, stocks, bonds or other securities or evidences of indebtedness of this corporation and, while the owner or holder of any such property to receive, collect and dispose of the interest, dividends and income on or from such property and to possess and exercise in respect thereto all of the rights, powers and privileges of ownership, including all voting powers thereon. To construct, build, purchase, lease or otherwise acquire, equip, hold, own, improve, develop, manage, maintain, control, operate, lease, mortgage, create liens upon, sell, convey or otherwise dispose of and turn to account, any and all plants, machinery, works, implements and things or property, real and personal, of every kind and description, incidental to, connected with, or suitable, necessary or convenient for any of the purposes enumerated herein, including all or any part of parts of the properties, assets, business and good will of any persons, firms, associations or corporations. The powers, rights and privileges provided in this certificate are not to be deemed to be in limitation of similar, other or additional powers, rights and privileges granted or permitted to a corporation by Business Corporation Law, it being intended that this corporation shall have all the rights, powers and privileges granted or permitted to corporation by such statute. THIRD: The office of the corporation is to be located in the City of New York, County of New York, State of New York. FOURTH: The aggregate number of share which the corporation shall have the authority to issue is Two Hundred (200), all of which shall be without par value. FIFTH: The Secretary of State is designated as agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: Michael P. Cozzoli Hoffstat Lane Sands Point Port Washington, New York 11050 SIXTH: The fiscal year of this corporation shall terminate on March 31. 3 IN WITNESS WHEREOF, this certificate has been subscribed to this 7th day of April, 1977 by the undersigned, who affirms that the statements made herein are true under the penalties of perjury. /s/ Gerald Weinberg GERALD WEINBERG 90 State Street Albany, New York EX-3.4 7 EXHIBIT 3.4 EXHIBIT 3.4 BY-LAWS OF 58 WW FOOD CORP. ARTICLE I. SHAREHOLDERS' MEETING Section 1. - Annual Meeting. The annual meeting of the shareholders shall be held on the 11th day of April of each year, at 2:00 o'clock in the afternoon, at the principal office of the corporation, or such place as the Board of Directors shall authorize. The meeting shall be for the purpose of electing directors and for the transaction of such business as may be brought before it. If such date should be a legal holiday, the meeting shall be held on the next business day following, at the same hour. Notice of such meeting shall be given by the Secretary as required by law; by serving personally or mailing not less than ten days and not more than fifty days previous to such meeting, postage prepaid, a copy of such notice, addressed to each shareholder entitled to vote at such meeting. Any and all notices of such meeting may be waived by any shareholder by written waiver or by attendance thereat, whether in person or by proxy. Section 2. - Special Meetings. Special meetings of shareholders may be called by the Board of Directors or by the President, and must be called by the President at the request in writing by shareholders owning a majority of the shares issued and outstanding. Notice of such special meetings shall be given by the President or the Secretary, and shall be served personally or by mail addressed to each shareholder of record at his last known address no less than ten days prior to the date of such meeting. BL1 The notice of such meeting shall contain a statement of the business to be transacted thereat. No business other than that specified in the notice of the meeting shall be transacted at any such special meeting. Notice of special meeting may be waived by any shareholder by written waiver or by attendance thereat, in person or by proxy. Section 3. - Voting. Shareholders entitled to vote at meetings may do so in person or by proxy appointed by an instrument in writing subscribed by the shareholder or by his duly authorized attorney. Each shareholder shall be entitled to one vote for each share registered in his name on the books of the Corporation, unless otherwise provided in the Certificate of Incorporation. Section 4. - Quorum. At any meeting of the shareholders, except as otherwise provided by the statute, or by the Certificate of Incorporation, or by these By-Laws, the holders of a majority of the shares entitled to vote thereat shall constitute a quorum. However, a lesser number when not constituting a quorum may adjourn the meeting from time to time until a quorum shall be present or represented. Section 5. - Voting at Shareholders' Meetings. At any meeting of the shareholders, except as otherwise provided by statute, or by the Certificate of Incorporation, or by these By-Laws, the vote of the holders of a majority of the shares present in person or by proxy shall decide any question brought before such meeting. Section 6. - Special Voting Requirement. A unanimous vote of the stockholders shall be required as to any of the following matters: BL2 (1) Issuance of the Corporation's capital stock, either preferred or common. (2) Amendment of the By-Laws. (3) Merger, consolidation, reorganization, liquidation or dissolution of the Corporation. (4) Approval of the amount and terms of any corporate borrowings extending beyond the term of one year. ARTICLE II. DIRECTORS Section 1. - Number. The affairs and the business of the Corporation, except as otherwise provided in the Certificate of Incorporation, shall be managed by a Board of three Directors. Section 2. - How Elected. At the annual meeting of shareholders, the persons duly elected by the votes cast at the election held thereat, shall become the directors for the ensuing year. Section 3. - Term of Office. The term of office of each of the directors shall be until the next annual meeting of shareholders and thereafter until a successor has been elected and qualified. Section 4. - Duties of Directors. The Board of Directors shall have the control and general management of the affairs and business of the Corporation unless otherwise provided in the Certificate of Incorporation. Such directors shall in all cases act as a Board regularly convened by a majority, and they may adopt such rules and regulations for the conduct of their meetings, and the management and business of the BL3 Corporation as they may deem proper, not inconsistent with these By-Laws and the Laws of the State of New York. Section 5. - Directors' Meetings. Regular meetings of the Board of Directors shall be held immediately following the annual meetings of the shareholders, and at such other times as the Board of Directors may determine. Special meetings of the Board of Directors may be called by the President at any time and must be called by the President or the Secretary upon the written request of two Directors. Section 6. - Notice of Special Meetings. Notice of special meetings of the Board of Directors shall be served personally or by mail addressed to each Director at his last known address no less than five days prior to the date of such meeting. The notice of such meeting shall contain a statement of the business to be transacted thereat. No business other than that specified in the call for the meeting shall be transacted at any such special meeting. Notice of special meeting may be waived by any Director by written waiver or by personal attendance thereat without protest of lack of notice to him. Section 7. - Quorum. At any meeting of the Board of Directors, except as otherwise provided by the Certificate of Incorporation, or by these By-Laws, a majority of the Board of Directors shall constitute a quorum. However, a lesser number when not constituting a quorum may adjourn the meeting from time to time until a quorum shall be present or represented. BL4 Section 8. - Voting. Except as otherwise provided by the statute, or by the Certificate of Incorporation, or by these By-Laws, the affirmative vote of a majority of the Directors present at any meeting of the Board of Directors at which a quorum is present shall be necessary for the transaction of any item of business thereat. Section 9. - Vacancies. Unless otherwise provided in the Certificate of Incorporation, vacancies in the Board of Directors occurring between annual meetings of the shareholders shall be filled for the unexpired portion of the term by a majority vote of the remaining Directors, even though less than a quorum exists. Section 10. - Removal of Directors. Any or all of the directors may be removed, either with or without cause at any time by a vote of the shareholders at any meeting called for such purpose. ARTICLE III. OFFICERS Section 1. - Number of Officers. The officers of the Corporation shall be a President, a Vice-President, a Treasurer and Secretary, and any officer may hold more than one office, except the same person may not hold the offices of President and Secretary. The Board of Directors may appoint such other officers, agents and employees as in their sole discretion they shall deem advisable, who shall be subject to recall at all times by a majority vote of the Board of Directors. BL5 Section 2. - Election of Officers. Officers of the Corporation shall be elected at the first meeting of the Board of Directors. Thereafter, and unless otherwise provided in the Certificate of Incorporation, the officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of shareholders and shall hold office for one year and until their successors have been duly elected and qualified. Section 3. - Removal of Officers. Any officer elected by the Board of Directors may be removed, with or without cause, and a successor elected, by vote of the Board of Directors, regularly convened at a regular or special meeting. Any officer elected by the shareholders may be removed, with or without cause, and a successor elected, by vote of the shareholders, regularly convened at an annual or special meeting. Section 4. - President. The President shall be the chief executive officer of the Corporation and shall have general charge of the business, affairs and property thereof, subject to direction of the Board of Directors, and shall have general supervision over its officers and agents. He shall; if present, preside at all meetings of the Board of Directors in the absence of a Chairman of the Board and at all meetings of shareholders. He may do and perform all acts incident to the office of President. Section 5. - Vice President. BL6 In the absence of or inability of the President to act, the Vice-President shall perform the duties and exercise the powers of the President and shall perform such other functions as the Board of Directors may from time to time prescribe. Section 6. - Secretary. The Secretary shall: a) Keep the minutes of the meetings of the Board of Directors and of the shareholders in appropriate books. b) Give and serve all notice of all meetings of the Corporation. c) Be custodian of the records and of the seal of the Corporation and affix the latter to such instruments or documents as may be authorized by the Board of Directors. d) Keep the shareholder records in such a manner as to show at any time the amount of shares, the manner and the time the same was paid for, the names of the owners thereof alphabetically arranged and their respective places of residence, or their Post Office addresses, the number of shares owned by each of them and the time at which each person became owner, and keep such shareholder records available daily during the usual business hours at the office of the Corporation subject to the inspection of any person duly authorized, as prescribed by law. e) Do and perform all other duties incident to the office of Secretary. Section 7. - Treasurer. The Treasurer shall: BL7 a) Have the care and custody of and be responsible for all of the funds and securities of the Corporation and deposit of such funds in the name and to the credit of the Corporation in such a bank and safe deposit vaults as the Directors may designate. b) Exhibit at all reasonable times his books and accounts to any Director or shareholder of the Corporation upon application at the office of the Corporation during business hours. c) Render a statement of the condition of the finances of the Corporation at each stated meeting of the Board of Directors if called upon to do so, and a full financial report at the annual meeting of shareholders. He shall keep at the office of the Corporation correct books of account of all of its business and transactions and such books of account as the Board of Directors may require. He shall do and perform all other duties incident to the office of Treasurer. Section 8. - Duties of Officers May Be Delegated. In the case of the absence of any officer of the Corporation, or for any reason the Board may deem sufficient, the Board may, except as otherwise provided in these By-Laws, delegate the powers or duties of such officers to any other or any Director for the time being, provided a majority of the entire Board concur therein. Section 9. - Vacancies - How Filled. Should any vacancy in any office occur by death, resignation or otherwise, the same shall be filled, without undue delay, by the Board of Directors at its next regular meeting or at a special meeting called for that purpose, except as otherwise provided in the Certificate of Incorporation. Section 10. - Compensation of Officers. BL8 The officers shall receive such salary or compensation as may be fixed and determined by the Board of Directors, except as otherwise provided in the Certificate of Incorporation. BL9 ARTICLE IV. CERTIFICATES REPRESENTING SHARES Section 1. - Issue of Certificates Representing Shares. The President shall cause to be issued to each shareholder one or more certificates, under the seal of the Corporation, signed by the President (or Vice-President) or Chairman or Vice-Chairman of the Board and the Treasurer (or Secretary) certifying the number of shares owned by him in the Corporation. Section 2. - Transfer of Shares. The shares of the Corporation shall be transferable only upon its books by the registered holders thereof in person or by their duly authorized attorneys or legal representatives. The former certificates must be surrendered to the Secretary, or to such other person as the Directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. No transfer of shares shall be made within ten days next preceding the annual meeting of shareholders. Section 3. - Lost Certificates. If the holder of any shares shall lose the certificates thereof, he shall immediately notify the Corporation of such fact and the Board of Directors may then cause a new certificate to be issued to him subject to the deposit of a bond or other indemnity in such form and with such sureties if any as the Board may require. ARTICLE V. SEAL The seal of the corporation shall be as follows: BL10 ARTICLE VI. DIVIDENDS OR OTHER DISTRIBUTIONS The Corporation, by vote of the Board of Directors, may declare and pay dividends or make other distributions in cash or its bonds or its property on its outstanding shares to the extent as provided and permitted by law, unless contrary to any restriction contained in the Certificate of Incorporation. ARTICLE VII. NEGOTIABLE INSTRUMENTS All checks, notes or other negotiable instruments shall be signed on behalf of this Corporation by such of the officers, agents and employees as the Board of Directors may from time to time designate, except as otherwise provided in the Certificate of Incorporation. ARTICLE VIII. FISCAL YEAR The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. ARTICLE IX. OFFICES The principal office of the Corporation shall be located in the City of New York, County of New York, State of New York. The Board of Directors may from time to time designate such other offices within or without the State of New York as the business of the Corporation may require. ARTICLE X. AMENDMENTS BL11 By-laws may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any Directors, and may be amended, repealed or adopted as otherwise provided by law. ARTICLE XI - REIMBURSED EXPENSES Any payments made to an officer of the Corporation such as a salary, commission, bonus, interest, or rent, or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the Corporation to the full extent of such disallowance. It shall be the duty of the Directors, as a Board, to enforce payment of such amount disallowed. In lieu of payment by the officer, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered. ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS The directors and officers of the Corporation shall be indemnified for any claim, payment or expense incurred while performing in good faith any act or duty which he reasonably believes to be in the best interests of the Corporation, or from any liability so incurred by an officer or director in behalf of any company to which the Corporation is a successor in interest as a result of merger, consolidation or acquisition. Such indemnification is to be unlimited except that statutory restrictions applicable to business corporations shall be compiled with if inconsistent with this section of the By-Laws. BL12 EX-3.5 8 EXHIBIT 3.5 EXHIBIT 3.5 CERTIFICATE OF INCORPORATION OF WAIST WATCHERS, INC. ------------------ The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST:The name of the corporation (hereinafter called the "corporation") is WAIST WATCHERS, INC. SECOND: The address, including street, number, city, and county, of the registered office of the corporation in the State of Delaware is 229 South State Street, City of Dover, corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is Two Hundred (200), all of which are without par value. All such shares are of one class and are Common stock. FIFTH: The name and the mailing address of the incorporator are as follows: NAME MAILING ADDRESS ---- --------------- R. G. Dickerson 229 South State Street, Dover, Delaware SIXTH: The corporation is to have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary may of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 2 291 of Title ____ the Delaware Code or on the application of trustees in _____solution or of any receiver or receivers appointed for _____ corporation under the provisions of section 279 of Title ____ of the Delaware Code order a vesting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHTH: For the management of the business and for conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation and of is directors and of its stockholder or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the By-Laws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 2. After the original or other By-Laws of the corporation have been adopted, amended, or appealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the By-Laws of the corporation may be exercised by the Board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial By-Law or in a By-Law adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be set forth in this certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the certificate of incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (c)(2) of section 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle 3 the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be director, officer, employee or agent and shall inure to the benefit of the heirs, creditors and administrators of such person. TENTH: From time to time any of the provisions of this certificate of incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article TENTH. Signed on October 29, 1962 /s/ R.G. Dickerson_ R.G. Dickerson Incorporator EX-3.6 9 EXHIBIT 3.6 EXHIBIT 3.6 BY LAWS OF WAIST WATCHERS, INC. (a Delaware corporation) ------------------- ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation certifying the number of shares owned by him in the corporation. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock has partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares. The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of any lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate. 2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a 2 fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which script or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any 3 outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate or incorporation; except as any provision of law may otherwise require. 6. STOCKHOLDER MEETINGS. TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall, (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meetings is called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at 4 the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. PROXY REPRESENTATION. Every stockholders may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or 5 inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determining by him or them and execute a certificate of any fact found by him or them. QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. VOTING. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificates of incorporation and these By-Laws. In the election of directors, and for any other action, voting need not be by ballot. 7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 6 ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITIONS. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of three persons. Thereafter the number of directors constituting the whole board shall be at least one. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be three. The number of directors may be increased or decreased by action of the stockholders or of the directors. 3. ELECTION AND TERM. The first Board of Directors unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. 4. MEETINGS. TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. 7 CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these By-Laws which govern a meeting of directors held to fill vacancies and newly directorships in the Board or Action of disinterested directors. Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-President of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 6. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or 8 more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of officers may be held by the same person, as the directors may determine. Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties 9 as the Board shall assign to him. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. ARTICLE IV CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE V FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VI CONTROL OVER BY-LAWS Subject to the provisions of the certificate of incorporation and the provisions of the General Corporation Law, the power to amend, alter or repeal these By-Laws and to adopt new By-Laws may be exercised by the Board of Directors or by the stockholders. I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the ByLaws of WAIST WATCHERS, INC., a Delaware corporation, as in effect on the date hereof. WITNESS my hand and the seal of the corporation. Dated: ----------------------------------------- Secretary of WAIST WATCHERS, INC. (SEAL) EX-3.7 10 EXHIBIT 3.7 EXHIBIT 3.7 CERTIFICATE OF INCORPORATION of WEIGHT WATCHERS CAMPS, INC. Under Section 402 of the Business Corporation Law --------------- The undersigned, a natural person of the age of 21 years of age and acting as the incorporator of the corporation hereby being formed under the Business Corporation Law, certifies that: FIRST: The name of the corporation is WEIGHT WATCHERS CAMPS, INC. SECOND: The corporation formed for the following purpose or purposes: To take, lease, purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease, mortgage, clear, improve, develop, divide, and otherwise handle, manage, operate, maintain, control, license the use of, publicize, advertise, promote, and generally deal in and with, whether as principal, agent, broker, franchiser, franchisee, consultant, advisor, co-ordinator, and in any other lawful capacity, improved and unimproved real and personal property of all kinds, and, without limiting the generality of the foregoing, camps, hotels, motels, inns, resorts, tourist courts, cabins, boarding and lodging houses, apartment houses, gymnasia, diet-control, weight-reduction, weight-control, and physical fitness facilities of all kinds, tourist and travel agencies, retail shops and departments, restaurants, coffee shops, cafes, taverns, refreshment rooms, catering establishments, concessions of any and all kinds, bathing houses, swimming pools, water craft, aquatic, fishing, tennis, golf, hiking, and equestrian facilities, beaches and pavilions, hunting and bridle areas, trails, and facilities, skiing, tobogganing, sledding, skating, and other seasonal sport facilities, amusement, entertainment, community, shopping, and recreational centers, facilities, and establishments of any and all kinds, and development, planning, operating, sales, brokerage, agency, management, counsellors, advisory, promotional, and publicity business and a motel, hotel, resort, diet-control and physical-fitness, amusement, and entertainment business in all its branches. 2 To conduct in all its branches, at wholesale and retail, as the case may be, and as principal, sales, business, special, or general agent, broker, factor, buyer, seller, mortgagor, mortgagee, promoter, finder, franchiser, franchisee, licensor, licensee, coordinator, consultant, advisor, jobber and distributor, as the case may be, and in any other lawful capacity, the business of acquiring, owning, erecting, constructing, developing, renovating, operating, managing, supervising, and generally dealing in and with restaurants, refreshment stands and booths, cafeterias, tea rooms, snack bars, coffee shops, dining facilities, drive-ins, taverns, night clubs, catering establishments, automatic vending devices, and related facilities for dispensing and furnishing food, confections, alcoholic and non-alcoholic beverages and related and unrelated products, retail shops, departments and concessions for the sale of merchandise and services of all kinds, and camps, camping facilities, parking areas, hotels, motels, inns, tourist courts, service stations, and recreational and entertainment facilities of all kinds, and the business of creating, developing, producing, preparing, packaging, marketing, dispensing, and distributing food, confections, alcoholic and non-alcoholic beverages and related and unrelated products, and supplies, equipment, and furnishings of all kinds. To disseminate advice regarding weight reduction and control, and to arrange lectures and other forum and symposia in relation thereto and other aids to self-help in dieting, posture, eating habits, and preparation of foods. To promote, organize, plan and conduct trips, tours, and excursions by railroad, steamship, motor vehicle, or aircraft, or by any other means, for individuals or groups of individuals, in and to any part of the world. To arrange for the transportation of individuals or groups of individuals by railroads, steamship, motor vehicle, aircraft, or otherwise, in connection with the conduct of a general travel and tourist agency, and to provide or procure, and to cause to be provided or procured, hotel and other accommodations for the comfort, convenience, and entertainment of individuals or groups of individuals who are members of any trip or tour conducted by the corporation. To furnish travel directors, guides, couriers, assistants, and interpreters; to procure and sell, and cause to be procured and sold, transportation tickets on railroads, steamships, motor vehicle, and aircraft; to act as representative of steamship, railroad, airline, motor vehicle, and other companies devoted to the transportation and carriage of passengers and freight, in the sale of tickets on all vehicles, ships, railroads, railways, airlines, and other facilities; to conduct information bureau, for travelers; and in general, to do all other things that are necessary or pertinent to the conduct of a travel and tourist agency. To carry on a general mercantile, industrial, investing, and trading business in all its branches; to devise, invent, manufacture, fabricate, assemble, install, service, maintain, alter, buy, sell, import, export, license as licensor or licensee, lease as lessor or lessee, distribute, job, enter into, negotiate, execute, acquire, and assign contracts in respect of, acquire, receive, 3 grant, and assign licensing arrangements, options, franchises, and other rights in respect of, and generally deal in and with, at wholesale and retail, as principal, and as sales, business, special, or general agent, representative, broker, factor, merchant, distributor, jobber, advisor, and in any other lawful capacity, goods, wares, merchandise, commodities, and unimproved, improved, finished, processed, and other real, personal, and mixed property of any and all kinds, together with the components, consultants, and by-products thereof; to acquire by purchase or otherwise own, hold, lease, mortgage, sell, or otherwise dispose of, erect, construct, make, alter, enlarge, improve, and to aid or subscribe toward the construction, acquisition or improvement of any factories, shops, storehouses, buildings, and commercial and retail establishments of every character, including all equipment, fixtures, machinery, implements and supplies necessary or incidental to, or connected with, any of the purposes or business of the corporation; and generally to perform any and all acts connected therewith or arising therefrom or incidental thereto, and all acts proper or necessary for the purpose of the business. To engage generally in the real estate business as principal, agent, broker, and in any lawful capacity, and generally to take, lease, purchase, or otherwise acquire, and to own, use hold, sell, convey, exchange, lease, mortgage, work, clear, improve, develop, divide, and otherwise handle, manage, operate, deal in and dispose of real estate, real property, lands, multiple-dwelling structures, houses, buildings and other works and any interest or right therein; to take, lease, purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange, hire, lease, pledge, mortgage, and otherwise handle, and deal in and dispose of, as principal, agent, broker, and in any lawful capacity, such personal property, chattels, chattels real, rights, easements, privileges, chooses in action, notes, bonds, mortgages, and securities as may lawfully be acquired, held, or disposed of; and to acquire, purchase, sell, assign, transfer, dispose of, and generally deal in and with, as principal, agent, broker, and in any lawful capacity, mortgages and other interests in real, personal, and mixed properties; to carry on a general construction, contracting, building, and realty management business as principal, agent, representative, contractor, subcontractor, and in any other lawful capacity. To apply for, register, obtain, purchase, lease, take licenses in respect of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to account, grant licenses and immunities in respect of, manufacture under and to introduce, sell, assign, mortgage, pledge or otherwise dispose of, and, in any manner deal with and contract with reference to: (a) inventions, devices, formulae, processes and any improvements and modifications thereof; (b) letters patent, patent rights, patented processes, copyrights, assigns, and similar rights, trade-marks, trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States of America or of any state or subdivision thereof, or of any foreign country or subdivision thereof, and all rights connected therewith or appertaining thereunto; 4 (c) franchise, licenses, grants and concessions. To have, in furtherance of the corporate purposes, all of the powers conferred upon corporations organized under the Business Corporation Law subject to any limitations thereof contained in this certificate of incorporation or in the laws of the State of New York. THIRD: The office of the corporation is to be located in the incorporated Village of Great Neck, County of Nassau, State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is two hundred, all of which are without par value, and all of which are of the same class. FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against the corporation may be served. The post office address within the State of New York to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: c/o Davis, Gilbert, Levine & Schwartz, Esqs., 500 Fifth Avenue, New York, New York 10036. SIXTH: The duration of the corporation is to be perpetual. SEVENTH: No holder of any of the shares of any class of the corporation shall be entitled as of right to subscribe for, purchase, or otherwise acquire any shares of any class of the corporation which the corporation proposes to issue or any rights or options which the corporation proposes to grant for the purchase of shares of any class of the corporation or for the purchase of any shares, bonds, securities, or obligations of the corporation which are convertible into, or exchangeable for, or which carry any rights, to subscribe for, purchase, or otherwise acquire shares or any class of the corporation and any and all of such shares, bonds, securities or obligations of the corporation, whether now or hereafter authorized or created, may be issued, or may be reissued or transferred if the same have been reacquired and have treasury status, and any and all of such rights and options may be granted by the Board of Directors to such persons, firms, corporations and associates, and for such lawful consideration, and on such terms, as the Board of Directors in its discretion may determine, without first offering the same, or any thereof, to any said holder. Without limiting the generality of the foregoing stated denial of any and all preemptive rights, no holder of shares of any class of the corporation shall any preemptive rights in respect of the matters, proceedings, or transactions specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of Section 622 of the Business Corporation Law. EIGHTH: Except as may otherwise be specifically provided in this certificate of incorporation, no provision of this certificate of incorporation is intended by the corporation to be construed as limiting, prohibiting, denying or abrogating any of the general or specific powers or rights, 5 conferred under the Business Corporation Law upon the corporation, upon its shareholders, bondholders, and security holders, and upon its directors, officers, and other corporate personnel, including, in particular, the power of the corporation to furnish indemnification to directors and officers in the capacities defined and prescribed by the Business Corporation Law and the defined and prescribed rights of said persons to indemnification as the same are conferred by the Business Corporation Law. Subscribed and affirmed by me as true, under the penalties of perjury on December 30, 1968. /s/ Frances A. Wrigley -------------------------------- Frances A. Wrigley, Incorporator 90 Broad Street New York, New York 10004 EX-3.8 11 EXHIBIT 3.8 EXHIBIT 3.8 BY-LAWS OF WEIGHT WATCHERS CAMPS, INC. (a New York Corporation) ARTICLE I SHAREHOLDERS 1. CERTIFICATES REPRESENTING SHARES. Certificates representing shares shall set forth thereon the statements prescribed by the Business Corporation Law and by any other applicable provision of law and shall be signed by the Chairman or a Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. A certificate representing shares shall not be issued until the full amount of consideration therefor has been paid except as Section 504 of the Business Corporation Law may otherwise permit. The corporation may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board of Directors may require the owner of any lost or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate. 2. FRACTIONAL SHARE INTERESTS. The corporation may issue certificates for fractions of a share where necessary to effect transactions authorized by the Business Corporation Law which shall entitle the holder, in proportion to his fractional holdings, to exercise voting rights, receive dividends and participate in liquidating distributions; or it may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided. 2 3. SHARE TRANSFERS. Upon compliance with provisions restricting the transferability of shares, if any, transfers of shares of the corporation shall be made only on the share record of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes due thereon. 4. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty days nor less than ten days before the date of such meeting, nor more than fifty days prior to any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is given, the day on which the meeting is held; the record date for determining shareholders for any purpose other than that specified in the preceding clause shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this paragraph, such determination shall apply to any adjournment thereof, unless the directors fix a new record date under this paragraph for the adjourned meeting. 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "shareholder" or "shareholders" refers to an outstanding share or shares or to a holder or holders of record of outstanding shares when the corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares or upon which or upon whom the Business Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder. 6. STOCKHOLDER MEETINGS. - TIME. The annual meeting shall be held on the date fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the formation of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date fixed 3 by the directors except when the Business Corporation Law confers the right to fix the date upon shareholders. - PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of New York, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, or whenever shareholders entitled to call a special meeting shall call the same, the meeting shall be held at the office of the corporation in the State of New York. - CALL. Annual meetings may be called by the directors or by any officer instructed by the directors to call the meeting. Special meetings may be called in like manner except when the directors are required by the Business Corporation Law to call a meeting, or except when the shareholders are entitled by said Law to demand the call of a meeting. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting, and, unless it is an annual meeting, indicating that it is being issued by or at the direction of the person or person calling the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called; and, at any such meeting, only such business may be transacted which is related to the purpose or purposes set forth in the notice. If the directors shall adopt, amend, or repeal a by-law regulating an impending election of directors, the notice of the next meeting for election of directors shall contain the statements prescribed by Section 601(b) of the Business Corporation Law. If any action is proposed to be taken which would, if taken, entitle shareholders to receive payment for their shares, the notice shall include a statement of that purpose and to that effect. A copy of the notice of any meeting shall be given, personally or by first class mail, not less than ten days nor more than fifty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, to each shareholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in a post office or official depository under the exclusive care and custody of the United States post office department. If a meeting is adjourned to another time or place, and, if any announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice before or after the meeting. The attendance of a shareholder at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice by him. - STOCKHOLDER LIST AND CHALLENGE. A list of shareholders as of the record date, certified by the Secretary or other officer responsible for its preparation or by the transfer agent, if any, shall be produced at any meeting of shareholders upon the request thereat or prior thereto 4 of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, if any, or the person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. - CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by one of the following officers in the order of seniority and if present - - - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present, by a chairman to be chosen by the shareholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a Secretary of the meeting. - PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the shareholder or by his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by the Business Corporation Law. - INSPECTORS - APPOINTMENT. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. - QUORUM. Except for a special election of directors pursuant to Section 603(b) of the Business Corporation Law, and except as herein otherwise provided, the holders of a majority of the outstanding shares shall constitute a quorum at a meeting of shareholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent 5 withdrawal of any shareholders. The shareholders present may adjourn the meeting despite the absence of a quorum. - VOTING. Each share shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the Business Corporation Law prescribes a different proportion of votes. - SHAREHOLDER ACTION WITHOUT MEETINGS. Whenever a shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken signed by the holders of all shares. ARTICLE II GOVERNING BOARD 1. FUNCTIONS AND DEFINITION. The business of the corporation shall be managed by a governing board, which is herein referred to as the "Board of Directors" or "directors" notwithstanding that the members thereof may otherwise bear the titles of trustees, managers, or governors or any other designated title, and notwithstanding that only one director legally constitutes the Board the word "director" or "directors" likewise herein refers to a member or to members of the governing board notwithstanding the designation of a different official title or titles. The use of the phrase "entire board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. Each director shall be at least twenty-one years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of three persons. Thereafter the number of directors constituting the whole board shall be at least three, except that, where all the shares are owned beneficially and of record by less than three shareholders, the number of directors may be less than three but not less than the number of such shareholders. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be three. The number of directors may be increased or decreased by action of the stockholders or of the directors, provided that any action of the directors to effect such increase or decrease shall require the vote of a majority of the entire Board. No decrease shall shorten the term of any incumbent director. 3. ELECTION AND TERM. The first Board of Directors shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of shareholders and until their successors have been elected and qualified. Thereafter, directors who are elected at an annual meeting of shareholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. In the interim between annual meetings of shareholders or of special 6 meetings of shareholders called for the election of directors, newly created directorships and any vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of the remaining directors then in office, although less than a quorum exists. 4. MEETINGS - TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings shall be held at such place within or without the State of New York as shall be fixed by the Board. - CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, of the President, or of a majority of the directors in office. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any meeting need not specify the purpose of the meeting. Any requirement of furnishing a notice shall be waived by any director who signs a waiver of notice before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. - QUORUM AND ACTION. A majority of the entire Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least one-third of the entire Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, the act of the Board shall be the act, at a meeting duly assembled, by vote of a majority of the directors present at the time of the vote, a quorum being present at such time. - CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present, shall preside at all meetings. Otherwise, the President, if present, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or without cause by the shareholders. One or more of the directors may be removed for cause by the Board of Directors. 7 6. COMMITTEES. Whenever the Board of Directors shall consist of more than three members, the Board of Directors, by resolution adopted by a majority of the entire board of Directors, may designate from their number three or more directors to constitute an Executive Committee and other committees, each of which, to the extent provided in the resolution designating it, shall have the authority of the Board of Directors with the exception of any authority the delegation of which is prohibited by Section 712 of the Business Corporation Law. ARTICLE III OFFICERS The directors may elect or appoint a Chairman of the Board of Directors, a President, one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers as they may determine. The President may but need not be a director. Any two or more offices may be held by the same person except the offices of President and Secretary. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor has been elected and qualified. Officers shall have the powers and duties defined in the resolutions appointing them. The Board of Directors may remove any officer for cause or without cause. ARTICLE IV STATUTORY NOTICES TO SHAREHOLDERS The directors may appoint the Treasurer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to shareholders entitled thereto any special financial notice and/or any financial statement, as the case may be, which may be required by any provision of law, and which, more specifically, may be required by Sections 510, 511, 515, 516, 517, 519, and 520 of the Business Corporation Law. ARTICLE V BOOKS AND RECORDS The corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of the shareholders, of the Board of Directors, and/or any committee which the directors may appoint, and shall keep at the office of the corporation in the State 8 of New York or at the office of the transfer agent or registrar, if any, in said state, a record containing the names and addresses of all shareholders, the number and class of shares held by each, and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes, or records may be in written form or in any other form capable of being converted into written form within a reasonable time. ARTICLE VI CORPORATE SEAL The corporate seal, if any, shall be in such form as the Board of Directors shall prescribe. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VIII CONTROL OVER BY-LAWS The shareholders entitled to vote in the election of directors or the directors upon compliance with any statutory requisite may amend or repeal the By-Laws and may adopt new By-Laws, except that the directors may not amend or repeal any By-Law or adopt any new ByLaw, the statutory control over which is vested exclusively in the said shareholders or in the incorporators. By-Laws adopted by the incorporators or directors may be amended or repealed by the said shareholders. * * * * * * * The undersigned incorporator certifies that she has examined the foregoing ByLaws and has adopted the same as the first By-Laws of the corporation; that said By-Laws contain specific 9 and general provisions, which, in order to be operative, must be adopted by the incorporator or incorporators or the shareholders entitled to vote in the election of directors; and that she has adopted each of said specific and general provisions in accordance with the requirements of the Business Corporation Law. Dated: January 27, 1969 /s/ Frances A. Wrigley -------------------------------- Frances A. Wrigley, Incorporator Of WEIGHT WATCHERS CAMPS, INC. I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the ByLaws of WEIGHT WATCHERS CAMPS, INC., a New York corporation, as in effect on the date hereof. WITNESS my hand and the seal of the corporation. Dated: --------------------------------- Secretary of WEIGHT WATCHERS CAMPS, INC. (SEAL) EX-3.9 12 EXHIBIT 3.9 EXHIBIT 3.9 CERTIFICATE OF INCORPORATION OF W. W. CAMPS AND SPAS, INC. ------------- The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "corporation") is W. W. CAMPS AND SPAS, INC. SECOND: The address, including street, number, city, and county, of the registered office of the corporation in the State of Delaware is 229 South State Street, City of Dover, County of Kent; and the name of the registered agent of the corporation in the state of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the state of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is Two Hundred (200), all of which are without par value. All such shares are of one class and are Common Stock. No holder of any of the shares of the stock of the corporation, whether now or hereafter authorized and issued, shall be entitled as of right to purchase or subscribe for (1) any unissued stock of any class, or (2) any additional shares of any class to be issued by reason of any increase of the authorized capital stock of the corporation of any class, or (3) bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation, or carrying any right to purchase stock of any class, but any such unissued stock or such additional authorized issue of any stock or of other securities convertible into stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such person, firms, corporations or associations and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion. FIFTH: The name and the mailing address of the incorporator are as follows: 2 NAME MAILING ADDRESS ---- --------------- N.S. Truax 229 South State Street, Dover, Delaware 19901 SIXTH: The corporation is to have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHTH: For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the By-Laws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 2. After the original or other By-Laws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the By-Laws of the corporation may be exercised by the Board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be 3 set forth in an initial By-Law or in a By-Law adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be set forth in this certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the certificate of incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (2) of subsection (b) of Section 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. TENTH: The corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify, under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ELEVENTH: From time to time any of the provisions of this certificate of incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article ELEVENTH. Signed on July 14, 1987. /s/ N.S. Truax -------------- N. S. Truax Incorporator EX-3.10 13 EXHIBIT 3.10 EXHIBIT 3.10 BY-LAWS OF W. W. CAMPS AND SPAS, INC. (a Delaware corporation) ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on any such certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificates representing such shares. The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of the lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate or uncertificated shares. 2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General Corporation Law, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares. Within a reasonable time after the issuance or transfer of any uncertificated shares, the corporation shall send to the registered owner thereof any written notice prescribed by the General Corporation Law. 2 3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 4. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfer or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 5. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 3 6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, except as any provision of law may otherwise require. 7. STOCKHOLDER MEETINGS. - TIME. The annual meeting shall be held on the date and the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. - PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. - CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. - NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by 4 mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. - STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. - CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a Secretary of the meeting. - PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy 5 may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. - INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. - QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. - VOTING. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these By-Laws. In the election of directors, and for any other action, voting need not be by ballot. - STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 6 ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of three persons. Thereafter the number of directors constituting the whole board shall be at least one. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be three. The number of directors may be increased or decreased by action of the stockholders or of the directors. 3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Except as the General Corporation Law may otherwise require, in the interim between manual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. 4. MEETINGS - TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. 7 - CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. - QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these By-Laws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors. Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. - CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire board of Directors may be removed, with or without cause, by the holders of a majority of the shares than entitled to vote at an election of directors. 6. COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of 8 any committee, who may replace any absent or disqualified member of any meeting of the committee. In the absence or disqualification of any member at any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of offices may be held by the same person, as the directors may determine. Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to him. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. ARTICLE IV 9 CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE V FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VI CONTROL OVER BY-LAWS Subject to the provisions of the certificate of incorporation and the provisions of the General Corporation Law, the power to amend, alter, or repeal these By-Laws and to adopt new By-Laws may be exercised by the Board of Directors. I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the ByLaws of W. W. CAMPS AND SPAS, INC., a Delaware corporation, as in effect on the date hereof. IN WITNESS my hand and the seal of the corporation. Dated: --------------------------------- Secretary of W. W. CAMPS AND SPAS, INC. (SEAL) EX-3.11 14 EXHIBIT 3.11 EXHIBIT 3.11 CERTIFICATE OF INCORPORATION OF WEIGHT WATCHERS DIRECT, INC. ---------- The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified, and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "corporation") is WEIGHT WATCHERS DIRECT, INC. SECOND: The address, including street, number, city, and county, of the registered office of the corporation is the State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover 19901, County of Kent; and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is one thousand. The par value of each of such shares is one dollar. All such shares are of one class and are shares of Common Stock. FIFTH: The name and the mailing address of the incorporation are as follows: NAME MAILING ADDRESS ---- --------------- Athena Amaxes 15 Columbus Circle New York, N.Y. 10023-7773 SIXTH: The corporation is to have perpetual existence. 2 SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of ss. 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of ss. 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHT: For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation, and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 3 2. After the original or other Bylaws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of ss. 109 of the General Corporation Law the State of Delaware, and, after the corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the Bylaws of the corporation may be exercised by the board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provisions of subsection (d) of ss. 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be set forth in this certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the certificate of incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (2) of subsection (b) of ss. 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provisions of paragraph (7) of subsection (b) of ss. 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. TENTH: The corporation shall, to te fullest extent permitted by the provisions of ss. 145 of the General Corporation Law of the State of Delaware, as the same may be 4 amended and supplemented, indemnify any and al persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall limit to the benefit of the heirs, executors, and administrators of such person. ELEVENTH: From time to time any of the provisions of this certificate of incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article ELEVENTH. Signed on August 10, 1993. ------------------------ Incorporator EX-3.12 15 EXHIBIT 3.12 EXHIBIT 3.12 BY LAWS OF WEIGHT WATCHERS DIRECT, INC. (a Delaware corporation) ------------------- ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on any such certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificates representing such shares. The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of the lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate or uncertificated shares. 2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General Corporation Law, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares. Within a reasonable time after the issuance or transfer of any uncertificated 2 shares, the corporation shall send to the registered owner thereof any written notice prescribed by the General Corporation Law. 3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 4. STOCK TRANSFER. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of 3 Directors, the record date for determining the stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder, provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificates of incorporation, except as any provision of law may otherwise require. 7. STOCKHOLDER MEETINGS. TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a 4 date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list 5 shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. CONDUCT OF MEETING. Meeting of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by him or them and execute a certificate of any fact found by him or them. Except as otherwise required by subsection (e) of Section 231 of the General Corporation Law, the provisions of that Section shall not apply to the corporation. 6 QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. VOTING. Each share of stock shall entitle the holder thereof to one vote. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these Bylaws. In the election of directors, and for any other action, voting need not be by ballot. 8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Action taken pursuant to this paragraph shall be subject to the provisions of Section 228 of the General Corporation Law. ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of three persons. Thereafter the number of directors constituting the whole board shall be at least one. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be three. The number of directors may be increased or decreased by action of the stockholders or of the directors. 7 3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Except as the General Corporation Law may otherwise require, in the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. 4. MEETINGS. TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected board shall be held as soon after its election as the directors may conveniently assemble. PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a 8 meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Bylaws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors. Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 6. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternative members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 9 ARTICLE III OFFICERS The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of officers may be held by the same person, as the directors may determine. Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolution of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary of an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to him. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. ARTICLE IV CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE V FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. 10 ARTICLE VI CONTROL OVER BYLAWS Subject to the provisions of the certificate of incorporation and the provisions of the General Corporation Law, the power to amend, alter, or repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors or by the stockholders. I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the Bylaws of WEIGHT WATCHERS DIRECT, INC., a Delaware corporation, as in effect on the date hereof. Dated: ----------------------------------------- Secretary of WEIGHT WATCHERS DIRECT, INC. (SEAL) EX-3.13 16 EXHIBIT 3.13 EXHIBIT 3.13 CERTIFICATE OF INCORPORATION of W/W TWENTYFIRST CORPORATION (Under Section 402 of the Business Corporation Law) --------------- The undersigned, a natural person of the age of twenty-one years or over, desiring to for a corporation pursuant to the provisions of the Business Corporation Law of the State of New York, hereby certifies as follows: FIRST: The name of the corporation is W/W TWENTYFIRST CORPORATION, hereinafter sometimes called "the corporation." SECOND: The purposes for which it is formed are as follows: To conduct the general business of publishers and printers, and to publish, print, bind, buy, sell and deal in, both in the United States and in all countries or territories foreign thereto, magazines, books, pamphlets and other publications of every kind, nature and description. To design, create, prepare, make, edit, sell, license, the use of, market, syndicate, furnish, grant options in respect of, negotiate for, copyright, and generally deal in and with, as principal, agent, factor, representative, broker or otherwise, advertising matter, news, articles, features, stories, columns, pages, fashion designs, drawings, cartoons, sketches, paintings, and other items of interest to the public generally for publication, reproduction, and distribution in newspapers, magazines, brochures, pamphlets, posters, or any other form of media, including broadcasting and transmission by radio and television and to do everything necessary, useful, and convenient in furtherance thereof. In addition to the foregoing specific purposes, the corporation shall have the following purposes: To adopt, apply for, obtain, register, purchase, lease or otherwise acquire and to maintain, protect, hold, use, own, exercise, develop, manufacture under, operate and introduce, and to sell and grant licenses or other rights in respect of, assign or otherwise dispose of, turn to account or in any manner deal with and contract with reference to, any trade-marks, trade 2 names, patents, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto, and inventions, devices, improvements, processes, recipes, formulae and the like, including such thereof as may be covered by, used in connection with, or secured or received under, Letters patent of the United States of America or elsewhere or otherwise, and any licenses in respect thereof and any or all rights connected therewith or appertaining thereto. To acquire by purchase, exchange or otherwise, all, or any part of, or any interest in, the properties, assets, business and good will of any one or more corporations, associations, partnerships, firms, syndicates or individuals and to pay for the same in cash, property or its own or other securities; to hold, operate, reorganize, liquidate, mortgage, pledge, sell, exchange, or in any manner dispose of the whole or any part thereof; and, in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of corporations, associations, partnerships, firms, syndicates, or individuals, and to conduct in any lawful manner the whole or any part of any similar business thus acquired. To borrow money for its corporate purposes, and to make, accept, endorse, execute and issue promissory notes, bills of exchange, bonds, debentures or other obligations from time to time, for the purchase of property, or for the any purpose relating to the business of the company, and if deemed property, to secure the payment of any such obligations by mortgage, pledge, guarantee, deed of trust or otherwise. In furtherance of its corporate business and subject to the limitations prescribed by statute, to be a promoter, partner, member, associate or manager of other business enterprises or ventures, or to the extent permitted in any other jurisdiction to be an incorporator of other corporations of any type or kind and to organize, or in any way participate in the organization, reorganization, merger or liquidation of any corporation, association or venture and the management thereof. To conduct its business in all or any of its branches, so far as permitted by law, in the State of New York, and in all other states of the United States of America, in the territories and the District of Columbia and in any or all dependencies or possessions of the United States of America, and in foreign countries; and to hold, possess, purchase, lease, mortgage and convey real and personal property and to maintain offices and agencies either within or outside the State of New York. To carry out all or any part of the foregoing purposes as principal, factor, agent, broker, contractor or otherwise, either alone or in conjunction with any persons, firms, associations, corporations or others in any part of the world; and in carrying on its business and for the purpose of attaining or furthering any of its purposes, to make and perform contracts of any kind and description, and to do anything and everything necessary, suitable, convenient or proper for the accomplishment of any of the purposes herein enumerated. 3 For the accomplishment of the aforesaid purposes, and in furtherance thereof, the corporation shall have and may exercise all of the powers conferred by the Business Corporation Law upon corporations formed thereunder, subject to any limitations contained in Article 2 of said law or in accordance with the provisions of any other statute of the State of New York. THIRD: The office of the corporation in the State of New York is to be located in the City, County and State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is 200, each of which is to have a par value of One Dollar ($1.00) and all of which are to be of the same class and are to be Common Stock FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against the corporation may be served, and the address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: c/o Lauterstein & Lauterstein, 30 East 42nd Street, New York, N.Y. 10017. IN WITNESS WHEREOF, I have signed and acknowledged this certificate this 2nd day of August, 1967. Name Address ---- ------- /s/ Paul C. Guth 30 East 42nd Street - ---------------- New York, N. Y. 10017 Paul C. Guth 4 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this 2nd day of August, 1967, before me personally came PAUL C. GUTH, to me known and known to be the individual named in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Mary P. Dillon ------------------ Notary Public EX-3.14 17 EXHIBIT 3.14 EXHIBIT 3.14 BY-LAWS of W/W TWENTY-FIRST CORPORATION ARTICLE I - OFFICES The principal office of the corporation shall be in the City of New York, County of New York, State of New York. The corporation may also have offices at such other places within or without the State of New York as the board may from time to time determine or the business of the corporation may require. ARTICLE II - SHAREHOLDERS 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at the principal office of the corporation or at such place within or without the State of New York as the board shall authorize. 2. ANNUAL MEETING. The annual meeting of the shareholders shall be held on the 1st day of August at 4:00 P.M. in each year if not a legal holiday, and, if a legal holiday, then on the next business day following at the same hour, when the shareholders shall elect a board and transact such other business as may properly come before the meeting. 3. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the board chairman or by the president and shall be called by the chairman or the secretary at the request in writing of a majority of the board or at the request in writing by shareholders owning a majority in amount of the shares issued and outstanding. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at a special meeting shall be confined to the purposes stated in the notice. 4. FIXING RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the board shall fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of such meeting, nor more than fifty days prior to By-Laws A any other action. If no record date is fixed it shall be determined in accordance with the provisions of law. 5. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of each meeting of shareholders shall state the purpose or purposes for which the meeting is called, the place, date and hour of the meeting and unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice shall be given either personally or by mail to each shareholder entitled to vote at such meeting, not less than ten nor more than fifty days before the date of the meeting. If action is proposed to be taken that might entitle shareholders to payment for their shares, the notice shall include a statement of that purpose and to that effect. If mailed, the notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. 6. WAIVERS. Notice of meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. 7. QUORUM OF SHAREHOLDERS. The proportion of shares the holders of which shall be present in person or represented by proxy at any meeting of the shareholders in order to constitute a quorum for the transaction of any business thereat, shall be the proportion required by any agreement as the same may be in force from time to time between all of the corporate shareholders to which the corporation may hereafter become a party or which the corporation may hereafter ratify, or if there shall be no such agreement or if the matter to be determined by the shareholders shall not be covered by any such agreement, then by a simple majority, unless otherwise required by the certificate of incorporation. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. The shareholders present may adjourn the meeting despite the absence of a quorum. 8. PROXIES. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. By-Laws B Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law. 9. QUALIFICATION OF VOTERS. Every shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders, unless otherwise provided in the certificate of incorporation. 10. VOTE OF SHAREHOLDERS. The proportion of votes or consents of the holders of shares which shall be necessary for the transaction of any business at ____ any meeting of the shareholders, including amendments to the certificate of incorporation or the giving of any consent shall be the proportion required by any agreement as the same may be in force from time to time between all of its shareholders to which the corporation may hereafter become a party or which the corporation may hereafter ratify, or if there shall be no such agreement, or if the matter to be determined by the shareholders shall not be covered by any such agreement, then a simple majority, unless otherwise required by the certificate of incorporation. 11. WRITTEN CONSENT OF SHAREHOLDERS. Any action that may be taken by vote may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all the outstanding shares entitled to vote thereon or signed by such lesser number of holders as may be provided for in the certificate of incorporation. ARTICLE III - DIRECTORS 1. BOARD OF DIRECTORS. Subject to any provision in the certificate of incorporation the business of the corporation shall be managed by its board of directors, each of whom shall be at least 21 years of age and who need not be shareholders. 2. NUMBER OF DIRECTORS. The number of directors hall be six. 3. ELECTION AND TERM OF DIRECTORS. By-Laws C At each annual meeting of shareholders, the shareholders shall elect directors to hold office until the next annual meeting. Each director shall hold office until the expiration of the term for which he is elected and until his successor has been elected and qualified, or until his prior resignation or removal. 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the board for any reason except the removal of directors without cause may be filled by a vote of a majority of the directors then if office, although less than a quorum exists, unless otherwise provided in the certificate of incorporation. Vacancies occurring by reason of the removal of directors without cause shall be filled by vote of the shareholders unless otherwise provided in the certificate of incorporation. A director elected to fill a vacancy caused by resignation, death or removal shall be elected to hold office for the unexpired term of his predecessor. 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause by vote of the shareholders or by action of the board. Directors may be removed without cause only by vote of the shareholders. 6. RESIGNATION. A director may resign at any time by giving written notice to the board, the president or the secretary of the corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the board or such officer, and the acceptance of the resignation shall not be necessary to make it effective. 7. QUORUM OF DIRECTORS. A majority of directors in office at the time of any particular meeting shall constitute a quorum of the board of directors, unless otherwise required by the certificate of incorporation. 8. ACTION OF THE BOARD. Any action of the board and the majority required of the same shall be taken in the manner provided or required by any agreement as the same may be in force from time to time between all of its shareholders to which the corporation may hereafter become a party or which the corporation may hereinafter ratify or if there shall be no such agreement or if the matter to be determined by the board of directors shall not be covered by any such agreement, then a simple majority of the directors present at any meeting and constituting a quorum of the board of directors shall be qualified to take any corporate action properly before the board. 9. PLACE AND TIME OF BOARD MEETINGS. By-Laws D The Board may hold its meetings at the office of the corporation or at such other places, either within or without the State of New York, as it may from time to time determine. 10. REGULAR ANNUAL MEETING. A regular annual meeting of the board shall be held immediately following the annual meeting of shareholders at the place of such annual meeting of shareholders. 11. NOTICE OF MEETING OF THE BOARD, ADJOURNMENT. (a) Regular meetings of the board may be held without notice at such time and place as it shall from time to time determine. Special meetings of the board shall be held upon notice to the directors and may be called by the chairman of the board, secretary or assistant secretary upon two days notice to each director either personally or by mail or by wire; special meetings shall be called by the president, by the secretary or the assistant secretary in a like manner on written request of two directors. Notice of a meeting need not be given to any director who submits a waiver of notice whether before or after the meeting or who attends the meeting without protesting prior thereto or at its commencement, the lack of notice to him. (b) A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. Notice of the adjournment shall be given all directors who were absent at the time of the adjournment and, unless such time and place are announced at the meeting, to the other directors. 12. CHAIRMAN. At all meetings of the board the chairman of the board, or in his absence, the president shall preside. 13. EXECUTIVE AND OTHER COMMITTEES. The board, by resolution adopted by a majority of the entire board, may designate from among its members an executive committee and other committees, each consisting of three or more directors. Each such committee shall serve at the pleasure of the board. 14. COMPENSATION. No compensation shall be paid to directors, as such, for their services, but by resolution of the board a fixed sum and expenses for actual attendance, at each regular or special meeting of the board may be authorized. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore. By-Laws E ARTICLE IV - OFFICERS 1. OFFICES, ELECTION, TERM. (a) Unless otherwise provided for in the certificate of incorporation, the board may elect or appoint a chairman of the board of directors (herein sometimes referred to as the "chairman" or "chairman of the board") a president, one or more vice-presidents, a secretary, an assistant secretary and a treasurer, and such other officers as it may determine, who shall have such duties, powers and functions as hereinafter provided. (b) All officers shall be elected or appointed to hold office until the meeting of the board following the annual meeting of shareholders. (c) Each officer shall hold office for the term for which he is elected or appointed and until his successor has been elected or appointed and qualified. 2. REMOVAL, RESIGNATION, SALARY, ETC. (a) any officer elected or appointed by the board may be removed by the board with or without cause. (b) In the event of the death, resignation or removal of an officer, the board in its discretion may elect or appoint a successor to fill the unexpired term. (c) Any two or more offices may be held by the same person, except the offices of president and secretary. (d) The salaries of all officers shall be fixed by the board. (e) The directors may require any officer to give security for the faithful performance of his duties. 3. CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT. (a) The chairman of the board of directors shall be the chief executive officer of the corporation; he shall preside at all meetings of the shareholders and of the board; he shall have the management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect. (b) The president shall be the chief administrative officer of the corporation and subject to the instructions of the chairman of the board shall have the management of the corporate business. In the absence of the chairman, the president shall be the chief executive officer of the corporation. By-Laws F 4. VICE PRESIDENT. Any vice-president shall perform such duties as may be assigned to him by the chairman or in the absence or disability of the chairman or with his permission by the president. 5. SECRETARY. The secretary shall: (a) attend all meetings of the board and of the shareholders; (b) record all votes and minutes of all proceedings in a book to be kept for that purpose; (c) give or cause to be given notice of all meetings of shareholders and of special meetings of the board; (d) keep in safe custody the seal of the corporation and affix it to any instrument when authorized by the board; (e) when required, prepare or cause to be prepared and available at each meeting of shareholders a certified list in alphabetical order of the names of shareholders entitled to vote thereat, indicating the number of shares of each respective class held by each; (f) keep all the documents and records of the corporation as required by law or otherwise in a proper and safe manner; (g) perform such other duties as may be prescribed by the board. 6. ASSISTANT - SECRETARIES. There shall be at least one assistant secretary. During the absence or disability of the secretary, or when so directed by the chairman (or in his absence or during his disability by the president), the assistant-secretary-secretary, or if there are more than one, the one so designated by the secretary or by the board, shall have all the powers and functions of the secretary. 7. TREASURER. The treasurer shall: (a) have the custody of the corporate funds and securities; By-Laws G (b) keep full and accurate accounts of receipts and disbursements in the corporate books; (c) deposit all money and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the board; (d) disburse the funds of the corporation as may be ordered or authorized by the board and preserve proper vouchers for such disbursements; (e) render to the president and board at the regular meetings of the board, or whenever they require it, an account of all his transactions as treasurer and of the financial condition of the corporation; (f) render a full financial report at the annual meeting of the shareholders if so requested; (g) be furnished by all corporate officers and agents at his request, with such reports and statements as he may require as to all financial transactions of the corporation; (h) perform such other duties as are given to him by these by-laws or as from time to time are assigned to him by the board or the president. 8. ASSISTANT-TREASURER. During the absence of disability of the treasurer, the assistant-treasurer, or if there are more than one, the one so designated by the secretary or by the board, shall have all the powers and functions of the treasurer. 9. SURETIES AND BONDS - POWER, AUTHORITY AND LIMITATIONS OF OFFICERS. (a) In case the board shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sum and with such surety or sureties as the board may direct, conditioned upon the faithful performance of his duties to the corporation and including responsibility for negligence and for the accounting for all property, funds or securities of the corporation which may come into his hands. (b) Each certificate representing any share or shares of stock of the corporation shall bear such inscription or legend, whether printed, stamped or typed as may be required in any agreement as the same may be in force from time to time between all corporate shareholders to which the corporation may hereafter become a party or which the corporation may hereafter ratify. (c) require the owner of such lost or destroyed ________________ his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a By-Laws H bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. 10. TRANSFER OF SHARES. (a) Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered o the transfer book of the corporation which shall be kept at its principal office. No transfer shall be made within ten days next preceding the annual meeting of shareholders. (b) The corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the transfer books or the corporation for a period of not more than ten days during the thirty day period immediately preceding (1) any shareholders' meeting, or (2) any date upon which shareholders shall be called upon to or have a right to take action without a meeting, or (3) any date fixed for the payment of a dividend or any other form of distribution, and only those shareholders of record at the time the transfer books are closed, shall be recognized as such for the purpose of (1) receiving notice of or voting at such meeting, or (2) allowing them to take appropriate action, or (3) entitling them to receive any dividend or other form of distribution. (c) The corporate obligations hereunder shall be subject to compliance by shareholders to any additional requirements in any agreement as the same may be in force from time to time between all corporate shareholders to which the corporation may hereafter become a party or which it may hereafter ratify. ARTICLE VI - DIVIDENDS Subject to the provisions of the certificate of incorporation and to applicable law, dividends on the outstanding shares of the corporation may be declared in such amounts and at such time or times as the board may determine. Before payment of any dividend, there may be set aside out of the net profits of the corporation available for dividends such sum or sums as the board from time to time in its absolute discretion deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the board shall think conducive to the interests of the corporation, and the board may modify or abolish any such reserve. ARTICLE VII -- CORPORATE SEAL By-Laws I The seal of the corporation shall be circular in form and bear the name of the corporation, the year of its organization and the words "Corporate Seal, New York." The seal may be used by causing it to be impressed directly on the instrument or writing to be sealed, or upon adhesive substance affixed thereto. The seal on the certificates for shares or any corporate obligation for the payment of money may be a facsimile, engraved or printed. ARTICLE VIII - EXECUTION OF INSTRUMENTS All corporate instruments and documents shall be signed or countersigned, executed, verified or acknowledged by such officer or officers or other person or persons as the board may from time to time designate. ARTICLE IX - FISCAL YEAR The fiscal year shall begin the first day of any month starting on or prior to the first day of August as may be specified by the treasurer of the corporation provided that such specification may be changed or amended by a vote of the board. ARTICLE X - REFERENCES TO CERTIFICATE OF INCORPORATION Reference to the certificate of incorporation in these by-laws shall include all amendments thereto or changes thereof unless specifically excepted. ARTICLE XI - BY-LAW CHANGES 1. AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS. (a) Except as otherwise provided in the certificate of incorporation the by-laws may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any directors. By-laws may also be amended, repealed or adopted by the board but any by-law adopted by the board may be amended by the shareholders entitled to vote thereon as herein above provided. (b) If any by-law regulating an impending election of directors is adopted, amended or repealed by the board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with a concise statement of changes made. (c) The foregoing provisions of this Article XI shall be subject to any contrary or limiting provision in any agreement as the same may be in force from time to time between all corporate shareholders to which the corporation may hereafter become a party or which the corporation may hereafter ratify. By-Laws J EX-3.15 18 EXHIBIT 3.15 EXHIBIT 3.15 CERTIFICATE OF INCORPORATION OF W.W. WEIGHT REDUCTION SERVICES, INC. --------------- Under Section 402 of the Business Corporation Law The undersigned, being a natural person of a least 21 years of age and acting as the incorporator of the corporation hereby being formed under the Business Corporation Law, certifies that: FIRST: The name of the corporation is W.W. WEIGHT REDUCTION SERVICES, INC. SECOND: The corporation is formed for the following purpose or purposes: To disseminate advice regarding weight reduction and control, and to arrange lectures and other forums and symposia in relation thereto and other aids to self-help in dieting, posture, eating habits, and preparation of foods. To buy, sell, import, export, produce and cause to be produced, prepare for market, process, manufacture, freeze and quick-freeze, desiccate, dehydrate, preserve, package, wrap, can devise formulae and recipes for, and receive, acquire, transfer and assign options, rights, franchises, and licenses in respect thereof, store, distribute, and generally deal in and with, at wholesale and retail, and as principal, agent, broker, commission merchant, or in any other lawful capacity, unprocessed and processed foods and food products, edibles, and beverages, and commodities of any and all kinds, and, to do any and all things necessary, useful and convenient in furtherance of these purposes. To do a general brokerage, trading, commission merchants', and selling agents' business; to make and enter into all manner and kinds of contracts, agreements, and obligations by or with any person or persons or any incorporated or unincorporated firm or firms, for purchasing acquiring, manufacturing, distributing, selling, and dealing in and with, goods, wares, merchandise, and commodities, and any articles of personal property of any kind or nature whatsoever, and generally with full power to perform any and all acts connected therewith or arising therefrom or incidental thereto, and all acts proper or necessary for the purpose of the business. To devise, invent, develop, promote, manufacture, fabricate, assemble, install, operate, service, maintain, repair, alter, buy, sell, import, export, license as licensor or licensee, lease as lessor or lessee, distribute, job, enter into, negotiate, execute, acquire, receive, obtain, hold, grant, assign, and transfer contracts, selling rights, licensing arrangements, options, franchises, and other rights in respect of, and generally deal in and with, at wholesale and retail, as principal, and as sales, business, special, or general agent, representative, broker, factor, merchant, distributor, jobber, advisor, and in any other lawful capacity, any and all kinds of manual and automatic machinery, machines, machine tools and dies, mechanical and other devices, contrivances, appliances, equipment, accessories, supplies, techniques, and facilities for producing, preparing, processing, blending, preserving, storing, packaging, marketing, displaying, dispensing, and dealing in and with food, food products, and products and articles of any and all kinds, together with the components, resultants, and by-products thereof; and to acquire by purchase or otherwise own, hold, lease, mortgage, sell or otherwise dispose of, erect, construct, make, alter, enlarge, improve, and to aid or subscribe toward the construction, acquisition or improvement of any laboratories, research, and experimental centers and facilities, foundries, metal and machine shops, factories, shops, storehouses, buildings and commercial and retail establishments of every character, including all equipment, fixtures, machinery, implements and supplies necessary, or incidental to, or connected with, any of the purposes or business of the corporation; and generally to perform any and all acts connected therewith or arising therefrom or incidental thereto, and all acts proper or necessary for the purpose of the business. To assemble, manufacture, acquire, buy, sell, import, export, maintain, operate, install, construct, repair, service, experiment with, distribute, trade in, lease, rent, license, utilize, exploit, and otherwise generally trade and deal in and with, at wholesale and retail, and as principal, agent, factor, distributor, jobber, or in any other lawful capacity, any and all kinds of devices, appliances, equipment, and furnishings, and any and all kinds of goods, wares, and merchandise. To own, lease, manage, operate, conduct and otherwise generally deal in and with, whether as principal, agent, broker, and in any other lawful capacity, any and all kinds or restaurants, cafes, cafeterias, tearooms, coffee shops, refreshment stands, refreshment rooms, catering establishments, retail shops and departments, entertainment and recreational facilities, concessions, and other similar places for the purpose of selling, serving, dispensing, distributing, and dealing in and with, at wholesale and retail, prepared and unprepared foods, edibles, refreshments, and nonalcoholic beverages of any and all kinds, and, in connection therewith and independent thereof, to buy, acquire, manufacture, process, prepare for market, sell, dispense, serve, deal in and with, import and export food and food products, edibles, refreshments, and nonalcoholic beverages of every class and description, and to furnish entertainment, amusements, and diversions of all lawful kinds. - 2 - To take, lease, purchase, or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease, mortgage, clear, improve, develop, divide and otherwise handle, manage, operate, maintain, control, publicize, advertise, promote, and generally deal in and with, whether as principal, sales, business, special, or general agent, broker, factor, buyer, seller, mortgagor, mortgagee, promoter, finder, franchisor, franchisee, licensor, licensee, coordinator, consultant, advisor, and in any other lawful capacity, improved and unimproved real and personal property of all kinds, and, without limiting the generality of the foregoing, hotels, motels, inns, resorts, tourist courts, cabins, boarding and lodging houses, apartment houses, tourist and travel agencies, retail shops and departments, restaurants, cafeterias, tearooms, coffee shops, cabarets, dining facilities, drive-ins, night clubs, catering establishments, and related facilities for dispensing and furnishing food, refreshments, nonalcoholic beverages, and related and unrelated products, concessions of any and all kinds, bathing houses, swimming pools, water craft, marine and fishing facilities, beaches and pavilions, hunting and bridle areas, trails, and facilities, skiing, tobogganing, sledding, skating, and other winter sport facilities, amusement, entertainment, community, shopping and recreational centers, facilities, and establishments of any and all kinds, and to conduct a general real estate development, planing, operating, sales, brokerage, agency, management, counsellors, advisory, promotional, and publicity business and a hotel, motel, resort, amusement, and entertainment business in all its branches. To own, operate, conduct, staff and maintain a camp or camps for recreational purposes, to acquire all real estate and equipment necessary therefor by purchase, lease, or otherwise, and to equip and fit out and adapt the same for such purposes; to construct, build, operate, and maintain, lease, hire or otherwise acquire, cabins, lodges, tents, recreational halls, living quarters, gymnasia, stables, barns, garages, hangars, ranges, bridle paths, country club facilities, and accommodations of any and all kinds, horses, athletic and sporting equipment, accessories, appliances, sites, and establishments, motorboats, canoes, skiffs, and boats of any and all descriptions, boat houses, bath houses, bathing beaches, tennis courts, golf courses, baseball fields, and all facilities for sports and recreations of all kinds. To buy and prepare food, to serve meals, refreshments of all kinds, and such other articles and things as may be necessary for the physical comfort and well-being of those adjourning at the camp and club, and of their guests, friends and relatives. To promote, organize, plan and conduct trips, tours, and excursions by railroad, steamship, motor vehicle, or aircraft, or by any other means, for individuals or groups of individuals, in and to any part of the world. To arrange for the transportation of individuals or groups of individuals by railroad, steamship, motor vehicle, aircraft, or otherwise, in connection with the conduct of a general travel and tourist agency, and to provide or procure, and to cause to be provided or procured, - 3 - hotel and other accommodations for the comfort, convenience, and entertainment of individuals or groups of individuals who are members of any trip or tour conducted by the Corporation. To furnish travel directors, guides, couriers, assistants, and interpreters; to procure and sell, and cause to be procured and sold, transportation tickets on railroads, steamships, motor vehicles, and aircraft; to act as representative of steamship, railroad, airline, motor vehicle, and other companies devoted to the transportation and carriage of passengers and freight, in the sale of tickets on all vehicles, ships, railroads, railways, airlines, and other facilities; to conduct information bureaus for travelers; and in general, to do all other things that are necessary or pertinent to the conduct of a travel and tourist agency. To make and produce pictures, portraits, likenesses and representations of person, landscapes, scenes and things of all kinds, either by the use of cameras and other mechanical and chemical aid and devices or otherwise; to conduct a general art studio and atelier; to employ and furnish the services of persons skilled in all branches and departments of the pictorial arts; to deal in photographic and artists' materials and supplies and in pictures and works of art of all kinds; to develop, print, tone, finish, mount and frame films, plates and pictures for others; to do motion picture studio, interior and out-door work of all kinds. To apply for, purchase, register, or in any manner to acquire, and to hold, own, use, operate and introduce, and to sell, lease, assign, pledge, or in any manner dispose of, and in any manner deal with patents, patent rights, licenses, copyrights, trademarks, trade names, and certification marks, and to acquire, own, use, or in any manner dispose of any and all inventions, improvements, and processes, labels, designs, brands, or other rights, and to work, operate, or develop the same, and to carry on any business, manufacturing or otherwise, which may directly or indirectly effectuate these objects or any of them. To export from and import into the United States of America and its territories and possessions, and any and all foreign countries, as principal or agent, merchandise of every kind and nature, and to purchase, sell, and deal in and with, at wholesale and retail, merchandise of every kind and nature for exportation from, and importation into the United States, and to and from all countries foreign thereto, and for exportation from, and importation into, any foreign country, to and from any other country foreign thereto, and to purchase and sell domestic and foreign merchandise in foreign markets, and to do a general foreign and domestic exporting and importing business. To conduct and carry on the general business of printers and publishers, and to deal in all supplies, devices, machinery, apparatus, and implements used in, or connected with, such business, and to print, bind, buy, sell, publish and deal in, both in the United States and throughout the world, magazines, books, pamphlets, brochures, and other publications of every kind, nature and description. - 4 - To issue licenses and franchises for the exploitation of the purposes of the Corporation and to do all things necessary, advisable and useful for the fulfillment and promotion of the above purposes. To have, in furtherance of the corporate purposes, all of the powers conferred upon corporations organized under the Business Corporation Law subject to any limitations thereof contained in this certificate of incorporation or in the laws of the State of New York. THIRD: The office of the corporation is to be located in the Town of North Hempstead, County of Nassau, State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is two hundred, all of which are without par value, and all of which are of the same class. FIFTH: the Secretary of State is designated as the agent of the corporation upon whom process against the corporation may be served. The post office address within the State of New York to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: Hayden E. Davis, Esq., 800 Community Drive, Manhasset, New York 11030. SIXTH: The duration of the corporation is to be perpetual. SEVENTH: No holder of any of the shares of any class of the corporation shall be entitled as of right to subscribe for, purchase, or otherwise acquire any shares of any class of the corporation which the corporation proposes to issue or any rights or options which the corporation proposes to grant for the purchase of shares of any class of the corporation or for the purchase of any shares, bonds, securities, or obligations of the corporation which are convertible into or exchangeable for, or which carry any rights, to subscribe for, purchase, or otherwise acquire shares of any class of the corporation; and any and all of such shares, bonds, securities or obligations of the corporation, whether now or hereafter authorized or created, may be issued, or may be reissued or transferred if the same have been reacquired and have treasury status, and any and all of such rights and options may be granted by the Board of Directors to such person, firms, corporations and associations, and for such lawful consideration, and on such terms, as the Board of Directors in its discretion may determine, without first offering the same, or any thereof, to any said holder. Without limiting the generality of the foregoing stated denial of any and all preemptive rights, no holder of shares of any class of the corporation shall have any preemptive rights in respect of the matters, proceedings, or transactions specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of Section 622 of the Business Corporation Law. EIGHTH: Except as may otherwise be specifically provided in this certificate of incorporation, no provision of this certificate of incorporation is intended by the corporation to be construed as limiting, prohibiting, denying, or abrogating any of the general or specific powers or rights - 5 - conferred under the Business Corporation Law upon the corporation, upon its shareholders, bondholders, and security holders, and upon its directors, officers, and other corporate personnel; including, in particular, the power of the corporation to furnish indemnification to directors and officers in the capacities defined and prescribed by the Business Corporation Law and the defined and prescribed rights of said persons to indemnification as the same are conferred by the Business Corporation Law. NINTH: The accounting period which the corporation intends to use as its first calendar or fiscal year is the period ending September 30. Subscribed and affirmed by me as true under the penalties of perjury on February 5, 1976. /s/ Robert W. Hollweg --------------------- Robert W. Hollweg, Incorporator 800 Community Drive Manhasset, New York 11030 - 6 - EX-3.16 19 EXHIBIT 3.16 EXHIBIT 3.16 BY - LAWS OF W.W. WEIGHT REDUCTION SERVICES, INC. (A New York Corporation) --------------- ARTICLE I SHAREHOLDERS 1. CERTIFICATES REPRESENTING SHARES. Certificates representing shares shall set forth thereon the statements prescribed by Section 508, and, where applicable, by Section 505, 616, 620, 709 and 1002, of the Business Corporation Law and by any other applicable provision of law and shall be signed by the Chairman or a Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. A certificate representing shares shall not be issued until the full amount of consideration therefor has been paid except as Section 504 of the Business Corporation Law may otherwise permit. The corporation may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board of Directors may require the owner of any lost or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate. 2 2. FRACTIONAL SHARE INTERESTS. The corporation may issue certificates for fractions of a share where necessary to effect transactions authorized by the Business Corporation Law which shall entitle the holder, in proportion to his fractional holdings, to exercise voting rights, receive dividends and participate in liquidating distributions; or it may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided. 3. SHARE TRANSFERS. Upon compliance with provisions restricting the transferability of shares, if any, transfers of shares of the corporation shall be made only on the share record of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes due thereon. 4. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty days nor less than ten days before the date of such meeting, nor more than fifty days prior to any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of the business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any purpose other than that specified in the preceding clause shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of 3 shareholders has been made as provided in this paragraph, such determination shall apply to any adjournment thereof, unless the directors fix a new record date under this paragraph for the adjourned meeting. 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "shareholder" or "shareholders" refers to an outstanding share or shares and to a holder or holders of a record of outstanding shares when the corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares or upon which or upon whom the Business Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder. 6. SHAREHOLDER MEETINGS. - TIME. The annual meeting shall be held on the date fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the formation of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date fixed by the directors except when the Business Corporation Law confers the right to fix the date upon shareholders. - PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of New York, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, or, whenever shareholders entitled to call a special meeting shall call the same, the meeting shall be held at the office of the corporation in the State of New York. - CALL. Annual meetings may be called by the directors or by any officer instructed by the directors to call the meeting. Special meetings may be called in like manner except when the directors are required by the Business 4 Corporation Law to call a meeting, or except when the shareholders are entitled by said Law to demand the call of a meeting. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting, and, unless it is an annual meeting, indicating that it is being issued by or at the direction of the person or persons calling the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall, (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of special meeting shall in all instances state the purpose or purposes for which the meeting is called; and, at any such meeting, only such business may be transacted which is related to the purpose or purposes set forth in the notice. If the directors shall adopt, amend, or repeal a by-law regulating an impending election of directors, the notice of the next meeting for election of directors shall contain the statements prescribed by Section 601 (b) of the Business Corporation Law. If any action is proposed to be take which would, if taken entitle shareholders to receive payment for their shares, the notice shall include a statement of that purpose and to that effect. A copy of the notice of any meeting shall be given, personally or by first class mail, not less than ten days nor more than fifty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, to each shareholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in a post office of official depository under the exclusive care and custody of the United States post office department. If a meeting is adjourned to another time or place, and, if any announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice before or after the meeting. The attendance of a shareholder at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice by him. 5 - SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of the record date, certified by the Secretary or other officer responsible for its preparation or by the transfer agent, if any, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, if any, or the person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. - CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the shareholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. - PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by the Business Corporation Law. - INSPECTORS - APPOINTMENT. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. in case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his 6 duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. - QUORUM. Except for a special election of directors pursuant to Section 603 (b) of the Business Corporation law, and except as herein otherwise provided, the holders of a majority of the outstanding shares shall constitute a quorum at a meeting of shareholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. The shareholders present may adjourn the meeting despite the absence of a quorum. - VOTING. Each share shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the Business Corporation Law prescribes a different proportion of votes. 7. SHAREHOLDER ACTION WITHOUT MEETINGS. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all shares. ARTICLE II GOVERNING BOARD 1. FUNCTIONS AND DEFINITIONS. The business of the corporation shall be managed by a governing board, which is herein referred to as the "Board of Directors" or "directors" 7 notwithstanding that the members thereof may otherwise bear the titles of trustees, managers, or governors or any other designated title, and notwithstanding that only one director legally constitutes the Board. The word "director" or "directors" likewise herein refers to a member or to members of the governing board notwithstanding the designation of a different official title or titles. The use of the phrase "entire board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. Each director shall be at least twenty-one years of age. a director need not be a shareholder, a citizen of the United States, or a resident of the State of New York. The initial Board of Directors shall consist of two persons. Thereafter the number of directors constituting the entire board shall be at least three, except that, where all the shares are owned beneficially and of record by less than three shareholders, the number of directors may be less than three but not less than the number of such shareholders. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the shareholders or of the directors, or, if the number is not so fixed, the number shall be three. The number of directors may be increased or decreased by action of shareholders or of the directors, provided that any action of the directors to effect such increase of decrease shall require the vote of a majority of the entire Board. No increase shall shorten the term of any incumbent director. 3. ELECTION AND TERM. The first Board of Directors shall be elected by the incorporator or incorporators and shall hold office until the first annual meeing of shareholders and until their successors have been elected and qualified. Thereafter, directors who are elected at an annual meeting of shareholders, and directors who are elected in the interim by the shareholders to fill vacancies and newly created directorships, shall hold office until the next annual meeting of shareholders and until their successors have been elected and qualified; and directors who are elected in the interim by the directors to fill vacancies and newly created directorships shall hold office until the next meeting of shareholders at which the election of directors is in the regular order of business and until their successors have been elected and qualified. In the interim between annual meetings of shareholders or of special meetings of shareholders called for the election of directors, newly created directorships and 8 any vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of the remaining directors then if office, although less than a quorum exists. 4. MEETINGS. - TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings shall be held at such place within or without the State of New York as shall be fixed by the Board. - CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, of the President, or of a majority of the directors in office. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any meeting need not specify the purpose of the meeting. Any requirement of furnishing a notice shall be waived by any director who signs a waiver of notice before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. - QUORUM AND ACTION. A majority of the entire Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least one-third of the entire board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, the act of the Board shall be the act, at a meeting duly assembled, by vote of a majority of the directors present at the time of the vote, a quorum being present at such time. 9 - CHAIRMAN OF THE MEETING. The chairman of the Board, if any and if present and acting, shall preside at all meetings. otherwise, the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or without cause by the shareholders. One or more of the directors may be removed for cause by the Board of Directors. 6. COMMITTEES. Whenever the Board of Directors shall consist of more than three members, the Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may designate from their number three or more directors to constitute an Executive Committee and other committees, each of which, to the extent provided in the resolution designating it, shall have the authority of the Board of Directors with the exception of any authority the delegation of which is prohibited by Section 712 of the Business Corporation Law. ARTICLE III OFFICERS The directors may elect or appoint a Chairman of the Board of Directors, a President, one or more vice-Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers as they may determine. The President may but need not be a director. Any two or more officers may be held by the same person except the offices of President and Secretary; or, when all of the issued and outstanding shares of the corporation are owned by one person, such person may hold all or any combination of offices. Unless otherwise provided in the revolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected and qualified. Officers shall have the powers and duties defined in the resolutions appointing them. The Board of Directors may remove any officer for cause or without cause. 10 ARTICLE IV STATUTORY NOTICES TO SHAREHOLDERS The directors may appoint the Treasurer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to shareholders entitled thereto any special financial notice and/or any financial statement, as the case may be, which may be required by any provision of law, and which, more specifically, may be required by Sections 510, 511, 515, 516, 517, 519, and 520 of the Business Corporation Law. ARTICLE V BOOKS AND RECORDS The corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of the shareholders, of the Board of directors, and/or any committee which the directors may appoint, and shall keep at the office of the corporation in the State of New York or at the office of the transfer agent or registrar, if any, in said state, a record containing the names and addresses of all shareholders, the number and class of shares held by each, and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. ARTICLE VI CORPORATE SEAL The corporate seal, if any, shall be in such form as the Board of Directors shall prescribe. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VIII 11 CONTROL OVER BY-LAWS The shareholders entitled to vote in the election of directors or the directors upon compliance with any statutory requisite may amend or repeal the By-Laws and may adopt new By-Laws, except that the directors may not amend or repeal any By-Law or adopt any new By-Law, the statutory control over which is vested exclusively in the said shareholders or in the incorporators. By-Laws adopted by the incorporators or directors may be amended or repealed by the said shareholders. * * * * * * * The undersigned incorporator certifies that he has examined the foregoing By-Laws and has adopted the same as the first By-Laws of the corporation; that said By-Laws contain specific and general provisions, which, in order to be operative, must be adopted by the incorporator or incorporators or the shareholders entitled to vote in the election of directors; and that he has adopted each of said specific and general provisions in accordance with the requirements of the Business Corporation Law. Dated: March 5, 1976 /s/ Robert W. Hollweg --------------------- Robert W. Hollweg, Incorporator W.W. WEIGHT REDUCTION SERVICES, INC. CERTIFICATE OF INCORPORATION OF W.W. WEIGHT REDUCTION SERVICES, INC. Under Section 402 of the Business Corporation Law ROBERT W. HOLLWEG, Attorney 800 Community Drive Manhasset, New York 11030 EX-3.17 20 EXHIBIT 3.17 EXHIBIT 3.17 CERTIFICATE OF INCORPORATION OF W.W.I. EUROPEAN SERVICES, LTD. Under Section 402 of the Business Corporation Law The undersigned, natural persons of the age of eighteen years or over, desiring to for a corporation pursuant to the provisions of the Business Corporation Law of the State of New York, hereby certify as follows: FIRST: The name of the corporation is W.W.I. EUROPEAN SERVICES, LTD. SECOND: The purposes for which it is formed are as follows: To provide management and consultant services in Europe in the field of weight reduction and control. To disseminate advice regarding weight reduction and control, and to arrange lectures and other forums and symposia in relation thereto and other aids to self-help in dieting, posture, eating habits, and preparation of foods. To buy, sell, import, export, produce and cause to be produced, prepare for market, process, manufacture, freeze and quick-freeze, desiccate, dehydrate, preserve, package, wrap, can, devise formulae and recipes for, and receive, acquire, transfer and assign options, rights, franchises, and licenses in respect thereof, store, distribute, and generally deal in and with, at wholesale and retail, and as principal, agent, broker, commission merchant, or in any other lawful capacity, unprocessed and precessed foods and food products, edibles, and beverages, and commodities of any and all kinds, and, to do any and all things necessary, useful and convenient in furtherance of these purposes. To do a general brokerage, trading, commission merchants', and selling agents' business; to make and enter into all manner and kinds of contracts, agreements, and obligations by or with any person or persons or any incorporated or unincorporated firm or firms, for purchasing, acquiring, manufacturing, distributing, selling, and dealing in and with, goods, wares, merchandise, and commodities, and any articles of personal property of any kind or nature whatsoever, and generally with full power to perform any and all acts connected therewith or arising therefrom or incidental thereto, and all acts proper or necessary for the purpose of the business. To devise, invent, develop, promote, manufacture, fabricate, assemble, install, operate, service, maintain, repair, alter, buy, sell, import, export, license as licensor or licensee, lease as lessor or lessee, distribute, job, enter into, negotiate, execute, acquire, receive, obtain, hold, grant, assign, and transfer contracts, selling rights, licensing arrangements, options, franchises, and other rights in respect of, and generally deal in and with, at wholesale and retail, as principal, and as sales, business, special, or general agent, representative, broker, factor, merchant, distributor, jobber, advisor, and in any other lawful capacity, any and all kinds of manual and automatic machinery, machines, machine tools and dies, mechanical and other devices, contrivances, appliances, equipment, accessories, supplies, techniques, and facilities for producing, preparing, processing, blending, preserving, storing, packaging, marketing, displaying, dispensing, and dealing in and with food, food products, and products and articles of any and all kinds, together with the components, resultants, and by-products thereof; and to acquire by purchase or otherwise own, hold, lease, mortgage, sell or otherwise dispose of, erect, construct, make, alter, enlarge, improve, and to aid or subscribe toward the construction, acquisition or improvement of any laboratories, research, and experimental centers and facilities, foundries, metal and machine shops, factories, shops, storehouses, buildings and commercial and retail establishments of every character, including all equipment, fixtures, machinery, implements and supplies necessary, or incidental to, or connected with any of the purposes or business of the corporation; and generally to perform any and all acts connected therewith or arising therefrom or incidental thereto, and all acts proper or necessary for the purpose of the business. To assemble, manufacture, acquire, buy, sell, import, export, maintain, operate, install, construct, repair, service, experiment with, distribute, trade in, lease, rent, license, utilize, exploit, and otherwise generally trade and deal in and with, at wholesale and retail, and as principal, agent, factor, distributor, jobber, or in any other lawful capacity, any and all kinds of devices, appliances, equipment, and furnishings, and any and all kinds of goods, wares, and merchandise. To own, lease, manage, operate, conduct and otherwise generally deal in and with, whether as principal, agent, broker, and in any other lawful capacity, any and all kinds of restaurants, cafes, cafeterias, tearooms, coffee shops, refreshment stands, refreshment rooms, catering establishments, retail shops and departments, entertainment and recreational facilities, concessions, and other similar places for the purpose of selling, serving, dispensing, distributing, and dealing in and with at wholesale and retail, prepared and unprepared foods, edibles, refreshments, and nonalcoholic beverages of any and all kinds, and, in connection therewith and independent thereof, to buy, acquire, manufacture, process, prepare for market, sell, dispense, serve, deal in 2 and with, import and export food and food products, edibles, refreshments, and no alcoholic beverages of every class and description, and to furnish entertainment, amusements, and diversions of all lawful kinds. To take, lease, purchase, or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease, mortgage, clear, improve, develop, divide and otherwise handle, manage, operate, maintain, control, publicize, advertise, promote, and generally deal in and with, whether as principal, sales, business, special, or general agent, broker, factor, buyer, seller, mortgagor, mortgagee, promoter, finder, franchisor, franchisee, licensor, licensee, coordinator, consultant, advisor, and in any other lawful capacity, improved and unimproved real and personal property of all kinds, and, without limiting the generality of the foregoing, hotels, motels, inns, resorts, tourist courts, cabins, boarding and lodging houses, apartment houses, tourist and travel agencies, retail shops and departments, restaurants, cafeterias, tearooms, coffee shops, cabarets, dining facilities, drive-ins, night clubs, catering establishments, and related facilities for dispensing and furnishing food, refreshments, nonalcoholic beverages, and related and unrelated products, concessions of any and all kinds, bathing houses, swimming pools, water craft, marine and fishing facilities, beaches and pavilions, hunting and bridle areas, trails, and facilities, skiing, tobogganing, sledding, skating, and other winter sport facilities, amusement, entertainment, community, shopping and recreational centers, facilities, and establishments of any and all kinds, and to conduct a general real estate development, planning, operating, sales, brokerage, agency, management, counsellors, advisory, promotional, and publicity business and a hotel, motel, resort, amusement, and entertainment business in all its branches. To own, operate, conduct, staff and maintain a camp or camps for recreational purposes, to acquire all real estate and equipment necessary therefor by purchase, lease, or otherwise, and to equip and fit out and adapt the same for such purposes; to construct, build, operate, and maintain, lease, hire or otherwise acquire, cabins, lodges, tents, recreational halls, living quarters, gymnasia, stables, barns, garages, hangars, ranges, bridle paths, country club facilities, and accommodations of any and all kinds, horses, athletic and sporting equipment, accessories, appliances, sites, and establishments, motorboats, canoes, skiffs, and boats of any and all descriptions, boat houses, bath houses, bathing beaches, tennis courts, golf courses, baseball fields, and all facilities for sports and recreations of all kinds. To buy and prepare food, to serve meals, refreshments of all kinds, and such other articles and things as may be necessary for the physical comfort and well-being of those adjourning at the camp and club, and of their guests, friends and relatives. 3 To promote, organize, plan and conduct trips, tours, and excursions by railroad, steamship, motor vehicle, or aircraft, or by any other means, for individuals or groups of individuals, in and to any part of the world. To arrange for the transportation of individuals or groups of individuals by railroad, steamship, motor vehicle, aircraft, or otherwise, in connection with the conduct of a general travel and tourist agency, and to provide or procured, and to cause to be provided or procured, hotel and other accommodations for the comfort, convenience, and entertainment of individuals or groups of individuals who are members of any trip or tour conducted by the corporation. To furnish travel directors, guides, couriers, assistants, and interpreters; to procure and sell, and cause to be procure and sold, transportation tickets or railroads, steamships, motor vehicles, and aircraft; to act as representative of steamship, railroad, airline, motor vehicle, other companies devoted to the transportation and carriage of passengers and freight, in the sale of tickets on all vehicles, ships, railroads, railways, airlines, and other facilities; to conduct information bureaus for travelers; and in general, to do all other things that are necessary or pertinent to the conduct of a travel and tourist agency. To make and produce pictures, portraits, likenesses and representations of persons, landscapes, scenes and things of all kinds, either by the use of cameras and other mechanical and chemical aid and devices or otherwise; to conduct a general art studio and atelier; to employ and furnish the services of persons skilled in all branches and departments of the pictorial arts; to deal in photographic and artists' materials and supplies and in pictures and works of art of all kinds; to develop, print, tone, finish, mount and frame films, plates and pictures for others; to do motion picture studio, interior and out-door work of all kinds. To apply for, purchase, register, or in any manner to acquire, and to hold, own, use, operate and introduce, and to sell, lease, assign, pledge, or in any manner dispose of, and in any manner deal with patents, patent rights, licenses, copyrights, trademarks, trade names, and certification marks, and to acquire, own, use, or in any manner dispose of any and all inventions, improvements, and processes, labels, designs, brands, or other rights, and to work, operate, or develop the same, and to carry on any business, manufacturing or otherwise, which may directly or indirectly effectuate these objects or any of them. To export from and import into the United States of America and its territories and possessions, and any and all foreign countries, as principal or agent, merchandise of every kind and nature, and to purchase, sell, and deal in and with, at wholesale and retail, merchandise of every kind and nature for exportation from, and importation in the United States, and to and from all countries foreign thereto, and for 4 exportation from, and importation into, any foreign country, to and from any other country foreign thereto, and to purchase and sell domestic and foreign merchandise in domestic markets and domestic and foreign merchandise in foreign markets, and to do a general foreign and domestic exporting and importing business. To conduct and carry on the general business of printers and publishers, and to deal in all supplies, devices, machinery, apparatus, and implements used in, or connected with, such business, and to print, bind, buy, sell, publish and deal in, both in the United States and throughout the world, magazines, books, pamphlets, brochures, and other publications of every kind, nature and description. To issue licenses and franchises for the exploitation of the purposes of this corporation and to do all things necessary, advisable and useful for the fulfillment and promotion of the above purposes. To have, in furtherance of the corporate purposes, all of the powers conferred upon corporations organized under the Business Corporation Law subject to any limitations thereof contained in this certificate of incorporation or in the laws of the State of New York. THIRD: The office of the corporation in the State of New York shall be located in the Town of North Hempstead, County of Nassau, State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is two hundred (200) shares all of which are without par value. FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against the corporation may be served, and the address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is c/o Heyden E. Davis, 800 Community Drive, Manhasset, New York 11030. SIXTH: The shareholders, or the Board of Directors of the corporation without the assent or vote of the shareholders, shall have the power to adopt, alter, amend or repeal the By-Laws of the corporation. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalties of perjury; this 4th day of June, 1979. 5 Name Address - ---- ------- /s/ Palmeria Kelley 9 East 40th Street - ------------------- New York, New York 10016 Palmeria Kelley - Incorporator /s/ Maria Silvestri 9 East 40th Street - ------------------- New York, New York 10016 Maria Silvestri - Incorporator 6 CERTIFICATE OF INCORPORATION OF W.W.I. EUROPEAN SERVICES, LTD. Under Section 402 of the Business Corporation Law STATE OF NEW YORK DEPARTMENT OF STATE FILED JUNE 11, 1979 AMT OF CHECK $60 FILING FEE $50 TAX $___________________________________ COPY $__________________________________ CERT $__________________________________ REFUND $________________________________ BY:_____________________________________ Mildred J. Zilko, Esq. 800 Community Drive Manhasset, New York 11030 EX-3.18 21 EXHIBIT 3.18 EXHIBIT 3.18 BY-LAWS OF W.W.I. EUROPEAN SERVICES, LTD. ARTICLE I. SHAREHOLDERS' MEETING Section 1. - Annual Meeting. The annual meeting of the shareholders shall be held on the date and at the time fixed, from time to time, by the directors at the principal office of the corporation, or such place as the Board of Directors shall authorize. The meeting shall be for the purpose of electing directors and for the transaction of such business as may be brought before it. Notice of such meeting shall be given by the Secretary as required by law; by serving personally or mailing not less than ten days and not more that fifty days previous to such meeting, postage prepaid, a copy of such notice, addressed to each shareholder entitled to vote at such meeting. Any and all notices of such meeting may be waived by any shareholder by written waiver or by attendance thereat, whether in person or by proxy. Section 2. - Special Meetings. Special meetings of shareholders may be called by the Board of Directors or by the President, and must be called by the President at the request in writing by shareholders owning a majority of the shares issued and outstanding. Notice of such special meetings shall be given by the President or the Secretary, and shall be served personally or by mail addressed each shareholder of record at his last known address no less than ten days prior to the date of such meeting. The notice of such meetings shall contain a statement of the business to be transacted thereat. No business other than that specified in the notice of the meeting shall be transacted at any such special meeting. Notice of special meeting may be waived by any shareholder by written waiver or by attendance thereat, in person or by proxy. Section 3. - Voting. Shareholders entitled to vote at meetings may do so in person or by proxy appointed by an instrument in writing subscribed by the shareholder or by his duly authorized attorney. Each shareholder shall be entitled to one vote for each share registered in his name on the books of the Corporation, unless otherwise provided in the Certificate of Incorporation. Section 4. - Quorum. At any meeting of the shareholders, except as otherwise provided by statute, or by the Certificate of Incorporation, or by these By-Laws, the holders of a majority of the shares entitled to 2 vote thereat shall constitute a quorum. However, a lesser number when not constituting a quorum may adjourn the meeting from time to time until a quorum shall be present or represented. Section 5. - Voting at Shareholders' Meetings. At any meeting of the shareholders, except as otherwise provided by statute, or by the Certificate of Incorporation, or by these By-Laws, the vote of the holders of a majority of the shares present in person or by proxy shall decide any question brought before such meeting. Section 6. - Special Voting Requirement. A unanimous vote of the stockholders shall be required as to any of the following matters: (1) Issuance of the Corporation's capital stock, either preferred or common. (2) Amendment of the By-Laws. (3) Merger, consolidation, reorganization, liquidation or dissolution of the Corporation. (4) Approval of the amount and terms of any corporate borrowings extending beyond the term of one year. ARTICLE II. DIRECTORS Section 1. - Number. The affairs and the business of the Corporation, except as otherwise provided in the Certificate of Incorporation, shall be managed by a Board of three Directors. Section 2. - How Elected. At the annual meeting of shareholders, the persons duly elected by the votes cast at the election held thereat shall become the directors for the ensuing year. Section 3. - Term of Office. The term of office of each of the directors shall be until the next annual meeting of shareholders and thereafter until a successor has been elected and qualified. 3 Section 4. - Duties of Directors. The Board of Directors shall have the control and general management of the affairs and business of the Corporation unless otherwise provided in the certificate of Incorporation. Such directors shall in all cases act as a Board regularly convened by a majority, and they may adopt such rules and regulations for the conduct of their meetings, and the management and business of the Corporation as they may deem proper, not inconsistent with these By-Laws and the Laws of the State of New York. Section 5. - Directors' Meetings. Regular meetings of the Board of Directors shall be held immediately following the annual meetings of the shareholders, and at such other times as the Board of Directors may determine. Special meetings of the Board of Director may be called by the president at any time and must be called by the President or the Secretary upon the written request of two Directors. Section 6. - Notice of Special Meetings. Notice of special meetings of the Board of Directors shall be served personally or by mail addressed to each Director at his last known address no less than five days prior to the date of such meeting. The notice of such meeting shall contain a statement of the business to be transacted thereat. Not business other than that specified in the call for the meeting shall be transacted at any such special meeting. Notice of special meeting may be waived by any Director by written waiver or by personal attendance thereat without protest of lack of notice to him. Section 7. - Quorum. At any meeting of the Board of Directors, except as otherwise provided by the Certificate of Incorporation, or by these By-Laws, a majority of the Board of Directors shall constitute a quorum. However, a lesser number when not constituting a quorum may adjourn the meeting from time to time until a quorum shall be present or represented. Section 8. - Voting. Except as otherwise provided by statute, or by the Certificate of Incorporation, or by these By-Laws, the affirmative vote of a majority of the Directors present at any meeting of the Board of Directors at which a quorum is present shall be necessary for the transaction of any item of business thereat. Section 9. - Vacancies. 4 Unless otherwise provided in the Certificate of Incorporation, vacancies in the Board of Directors occurring between annual meetings of the shareholders shall be filled for the unexpired portion of the term by a majority vote of the remaining Directors, even though less than a quorum exists. Section 10. - Removal of Directors. Any or all of the directors may be removed, either with or without a cause at any time by a vote of the shareholders at any meeting called for such purpose. ARTICLE III. OFFICERS Section 1. - Number of Officers. The officers of the Corporation shall be a President, a Vice President, a Treasurer and Secretary, and any officer may hold more than one office, except the same person may not hold the offices of President and Secretary. The Board of Directors may appoint such other officers, agents and employees as in their sole discretion they shall deem advisable, who shall be subject to recall at all times by a majority vote of the Board of Directors. Section 2. - Election of Officers. Officers of the Corporation shall be elected at the first meeting of the Board of Directors. Thereafter, and unless otherwise provided in the Certificate of Incorporation, the officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of shareholders and shall hold office for one year and until their successors have been duly elected and qualified. Section 3. - Removal of Officers. Any officer elected by the Board of Directors may be removed, with or without cause, and an successor elected, by vote of the Board of Directors, regularly convened at a regular or special meeting. Any officer elected by the shareholders may be removed, with or without cause, and a successor elected, by vote of the shareholders, regularly convened at an annual or special meeting. Section 4. - President. The President shall be the chief executive officer of the Corporation and shall have general charge of the business, affairs and property thereof, subject to direction of the Board of Directors, and shall have general supervision over its officers and agents. He shall; if present, preside at all meetings of the Board of Directors in the absence of a Chairman of the Board and at all meetings of shareholders. He may do and perform all acts incident to the office of President. 5 Section 5. - Vice President. In the absence of or inability of the President to act, the Vice President shall perform the duties and exercise the powers of the President and shall perform such other functions as the Board of Directors may from time to time prescribe. Section 6. - Secretary. The Secretary shall: a) Keep the minutes of the meetings of the Board of Directors and of the shareholders in appropriate books. b) Give and serve all notice of all meetings of the Corporation. c) Be custodian of the records and of the seal of the Corporation and affix the latter to such instruments or documents as may be authorized by the Board of Directors. d) Keep the shareholder records in such a manner as to show at any time the amount of shares, the manner and the time the same was paid for, the names of the owners thereof alphabetically arranged and their respective places of residence, or their Post Office addresses, the number of shares owned by each of them and the time at which each person became owner, and keep such shareholder records available daily during the usual business hours at the office of the Corporation subject to the inspection of any person duly authorized, as prescribed by law. e) Do and perform all other duties incident to the office of Secretary. Section 7.- Treasurer. The Treasurer shall: a) Have the care and custody of and be responsible for all of the funds and securities of the Corporation and deposit of such funds in the name and to the credit of the Corporation in such a bank and safe deposit vaults as the Directors may designate. b) Exhibit at all reasonable times his books and accounts to any Director or shareholder of the Corporation upon application at the office of the Corporation during business hours. c) Render a statement of the condition of the finances of the Corporation at each stated meeting of the Board of Directors if called upon to do so, and a full financial report at the annual meeting of shareholders. He shall keep at the office of the Corporation correct books of account of all 6 of its business and transactions and such books of account as the Board of Directors may require. He shall do and perform all other duties incident to the office of Treasurer. Section 8. - Duties of Officers May be Delegated. In the case of the absence of any officer of the Corporation, or for any reason the Board may deem sufficient, the Board may, except as otherwise provided in these By-Laws, delegate the powers or duties of such officers to any other officer or any Director for the time being, provided a majority of the entire Board concur therein. Section 9. - Vacancies - How Filled. Should any vacancy in any office occur by death, resignation or otherwise, the same shall be filled, without undue delay, by the Board of Directors at its next regular meeting or at a special meeting called for that purpose, except as otherwise provided in the Certificate of Incorporation. Section 10. - Compensation of Officers. The officers shall receive such salary or compensation as may be fixed and determined by the Board of Directors, except as otherwise provided in the Certificate of Incorporation. ARTICLE IV. CERTIFICATES REPRESENTING SHARES Section 1.- Issue of Certificates Representing Shares. The President shall cause to be issued to each shareholder one or more certificates, under the seal of the Corporation, signed by the President (or Vice President) or Chairman (or Vice Chairman) of the Board and the Treasurer (or Secretary) certifying the number of shares owned by him in the Corporation. Section 2. - Transfer of Shares. The shares of the Corporation shall be transferable only upon its books by the registered holders thereof in person or by their duly authorized attorneys or legal representatives. The former certificates must be surrendered to the Secretary, or to such other person as the Directors may designate, by whom they shall be canceled unsealed, and new certificates shall thereupon be issued. No transfer of shares shall be made within ten days next preceding the annual meeting of shareholders. Section 3. - Lost Certificates. If the holder of any shares shall lose the certificate thereof, he shall immediately notify the Corporation of such fact and the Board of Directors may then cause a new certificate to be issued to 7 him subject to the deposit of a bond or other indemnity in such form and with such sureties if any as the Board may require. ARTICLE V. SEAL The seal of the Corporation shall be as follows: ARTICLE VI. DIVIDENDS OR OTHER DISTRIBUTIONS The Corporation, by vote of the Board of Directors, may declare and pay dividends or make other distributions in cash or its bonds or its property on its outstanding shares to the extent as provided and permitted by law, unless contrary to any restriction contained in the Certificate of Incorporation. ARTICLE VII. NEGOTIABLE INSTRUMENTS All checks, notes or other negotiable instruments shall be signed on behalf of this Corporation by such of the officers, agents and employees as the Board of Directors may from time to time designate, except as otherwise provided in the Certificate of Incorporation. ARTICLE VIII. FISCAL YEAR The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. ARTICLE IX. OFFICES The principal office of the Corporation shall be located in the Town of North Hempstead, County of Nassau, State of New York. The Board of Directors may from time to time designate such other offices within or without the State of New York as the business of Corporation may require. ARTICLE X. AMENDMENTS By-Laws may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any Directors, and may be amended, repealed or adopted as otherwise by law. 8 ARTICLE XI. REIMBURSED EXPENSES Any payments made to an officer of the Corporation such as salary, commission, bonus, interest, or rent, or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the Corporation to the full extent of such disallowance, it shall be the duty of the Directors, as a Board, to enforce payment of each such amount disallowed. In lieu of payment by the officer, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered. ARTICLE XII. INDEMNIFICATION OF DIRECTORS AND OFFICERS The directors and officers of the Corporation shall be indemnified for any claim, payment or expense incurred while performing in good faith any act or duty which he reasonably believes to be in the best interests of the Corporation, or from any liability so incurred by an officer or director in behalf of any company to which the Corporation is a successor in interest as a result of merger, consolidation or acquisition. Such indemnification is to be unlimited except that statutory restrictions applicable to business corporations shall be complied with if inconsistent with this section of the By-Laws. EX-3.19 22 EXHIBIT 3.19 EXHIBIT 3.19 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 08/07/1990 750219077 - 2238135 CERTIFICATE OF INCORPORATION OF W. W. INVENTORY SERVICE CORP. _______________ The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "corporation") is W. W. INVENTORY SERVICE CORP. SECOND: The address, including street, number, city, and county, of the registered office of the corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent; and the name of the registered agent of the corporation in the State of Delaware is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and of the purposes to be conducted and promoted by the corporation, which shall be in addition to the authority of the corporation to conduct any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, is as follows: To purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of its property and assets, or any interest therein, wherever situated. To engage generally in the real estate business as principal, agent, broker, and in any lawful capacity, and generally to take, lease, purchase, or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease, mortgage, work, clear, improve, develop, divide, and otherwise handle, manage, operate, deal in and dispose of real estate, real property, lands, multiple-dwelling structures, houses, buildings and other works and any interest or right therein; to take, lease, purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange, hire, lease, pledge, mortgage, and otherwise handle, and deal in and dispose of, as principal, agent, broker, and in any lawful capacity such personal property, chattels, chattels real, rights, easements, privileges, choses in action, notes, bonds, mortgages, and securities as may lawfully be acquired, held, or disposed of; and to acquire, purchase, sell, assign, transfer, dispose of, and generally deal in and with as principal, agent, broker, and in any lawful capacity, mortgages and other interests in real, personal, and mixed properties; to carry on a general construction, contracting, building, and realty management business as principal agent, representative, contractor, subcontractor, and in any other lawful capacity. To carry on a general mercantile, industrial, investing, and trading business in all its branches; to devise, invent, manufacture, fabricate, assemble, install, service, maintain, alter, buy, sell, import, export, license as licensor or licensee, lease as lessor or lessee, distribute, job enter into, negotiate, execute, acquire, and assign contracts in respect of, acquire, receive grant, and assign licensing arrangements, options, franchises, and other rights in respect of, and generally deal in and with, at wholesale and retail, as principal, and as sales, business, special, or general agent, representative, broker, factor, merchant, distributor, jobber, advisor, and in any other lawful capacity, goods, wares, merchandise, commodities, and unimproved, improved, finished, processed, and other real, personal, and mixed property of any and all kinds, together with the components, resultants, and by-products thereof. To apply for, register, obtain, purchase, lease, take licenses in respect of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to account, grant licenses and immunities in respect of, manufacture under and to introduce, sell, assign, mortgage, pledge or otherwise dispose of, and, in any manner deal with and contract with reference to: (a) inventions, devices, formulae, processes and any improvements and modifications thereof; (b) letters patent, patent rights, patented processes, copyrights, designs and similar rights, trade-marks, trade names, trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States of America, the District of Columbia, any state or subdivision thereof, and any commonwealth, territory, possession, dependency, colony, possession, agency or instrumentality of the United States of America and of any foreign country, and all rights connected therewith or appertaining thereunto; (c) franchises, licenses, grants and concessions. To guarantee, purchase, take, receive, subscribe for, and otherwise acquire, own, hold, use, and otherwise employ, sell, lease, exchange, transfer, and otherwise dispose of, mortgage, lend, pledge, and otherwise deal in and with, securities (which term for the purpose of this - 2 - Article THIRD, includes without limitation of the generality thereof, and shares of stock, bonds, debentures, notes, mortgages, other obligations, and any certificates, receipts or other instruments representing rights to receive, purchase or subscribe for the same, or representing any other rights or interests therein or in any property or assets) of any persons, domestic and foreign firms, associations, and corporations, and by any government or agency or instrumentality thereof; to make payment therefor in any lawful manner; and, while owner of any such securities, to exercise any and all rights, powers and privileges in respect thereof, including the right to vote. To make, enter into, perform and carry out contracts of every kind and description with any person, firm, association, corporation or government or agency or instrumentality thereof. To acquire by purchase, exchange or otherwise, all, or any part of, or any interest in, the properties, assets, business and good will of any one or more persons, firms, associations or corporations heretofore or hereafter engaged in any business for which a corporation may now or hereafter be organized under the laws of the State of Delaware; to pay for the same in cash, property or its own or other securities; to hold, operate, reorganize, liquidate, sell or in any manner dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of such persons, firms, associations or corporations, and to conduct the whole or any part of any business thus acquired. To lend money in furtherance of its corporate purposes and to invest and reinvest its funds from time to time to such extent, to such persons, firms, associations, corporations, governments or agencies or instrumentalities thereof, and on such terms and on such security, if any, as the Board of Directors of the corporation may determine. To make contracts of guaranty and suretyship of all kinds and endorse or guarantee the payment of principal, interest, or dividends upon, and to guarantee the performance of sinking fund or other obligations of, any securities, and to guarantee in any way permitted by law the performance of any of the contracts or other undertakings in which the corporation may otherwise be or become interested, of any persons, firm, association, corporation, government or agency or instrumentality thereof, or of any other combination, organization or entity whatsoever. To borrow money without limit as to amount and at such rates of interest as it may determine; from time to time to issue and sell its own securities, including its shares of stock, notes, bonds, debentures, and other obligations, in such amounts, on such terms and conditions, for such purposes and for such prices, now or hereafter permitted by the laws of the State of Delaware and by this certificate of incorporation, as the Board of Directors of the corporation may determine; and to secure any of its obligations by mortgage, pledge or other encumbrance of all or any of its property, franchises and income. - 3 - To be a promoter or manager of other corporations of any type or kind; and to participate with others in any corporation, partnership, limited partnership, joint venture, or other association of any kind, or in any transaction, undertaking or arrangement which the corporation would have power to conduct by itself, whether or not such participation involves sharing or delegation of control with or to others. To draw, make, accept, endorse, discount, execute, and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments and evidences or indebtedness whether secured by mortgage or otherwise, as well as to secure the same by mortgage or otherwise, so far as may be permitted by the laws of the State of Delaware. To purchase, receive, take, reacquire or otherwise acquire, own and hold, sell, lend, exchange, reissue, transfer or otherwise dispose of, pledge, use, cancel, and otherwise deal in and with its own shares and its other securities from time to time to such an extent and in such manner and upon such terms as the Board of Directors of the corporation shall determine; provided that the corporation shall not use its funds or property for the purchase of its own shares of capital stock when its capital is impaired or when such use would cause any impairment of its capital, except to the extent permitted by law. To organize, as an incorporator, or cause to be organized under the laws of the State of Delaware, or of any other State of the United States of America, or of the District of Columbia, or of any commonwealth, territory, dependency, colony, possession, agency, or instrumentality of the United States of America, or of any foreign country, a corporation or corporations for the purpose of conducting and promoting any business or purpose for which corporations may be organized, and to dissolve, wind up, liquidate, merge, or consolidate any such corporation or corporations or to cause the same to be dissolved, wound up, liquidated, merged or consolidated. To conduct its business, promote its purposes, and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all States of the United States of America, in the District of Columbia, and in any or all commonwealths, territories, dependencies, colonies, possessions, agencies, or instrumentalities of the United States of America and of foreign governments. To promote and exercise all or any part of the foregoing purposes and powers in any and all parts of the world, and to conduct its business in all or any of its branches as principal, agent, broker, factor, contractor, and in any other lawful capacity, either alone or through or in conjunction with any corporations, associations, partnerships, firms, trustees, syndicates, individuals, organizations, and other entities in any part of the world, and, in conducting its business and promoting any of its purposes, to maintain offices, branches and agencies in any part of the world, to make and perform any contracts and to do any acts and things, and to carry on any business, and to exercise any powers and privileges suitable, convenient, or - 4 - proper for the conduct, promotion, and attainment of any of the business and purposes herein specified or which at any time may be incidental thereto or may appear conducive to or expedient for the accomplishment of any of such business and purposes and which might be engaged in or carried on by a corporation incorporated or organized under the General Corporation Law of the State of Delaware, and to have and exercise all of the powers conferred by the laws of the State of Delaware upon corporations incorporated or organized under the General Corporation Law of the State of Delaware. The foregoing provisions of this Article THIRD shall be construed both as purposes and powers and each as an independent purpose and power. The foregoing enumeration of specific purposes and powers shall not be held to limit or restrict in any manner the purposes and powers of the corporation, and the purposes and powers herein specified shall, except when otherwise provided in this Article THIRD, be in no wise limited or restricted by reference to, or inference from, the terms of any provision of this or any other Article of this certificate of incorporation; provided, that the corporation shall not conduct any business, promote any purpose, or exercise any power or privilege within or without the State of Delaware which, under the laws thereof, the corporation may not lawfully conduct, promote or exercise. FOURTH: The total number of shares of stock which the corporation shall have authority to issue os One Thousand (1,000). The par value of each of such shares is One Dollar ($1.00). All such shares are of one class and are shares of Common Stock. FIFTH: The name and the mailing address of the incorporator are as follows: NAME MAILING ADDRESS ---- --------------- T. M. Bonovich 32 Loockerman Square, Suite L-100 Dover, Delaware 19901 SIXTH: The corporation is to have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, - 5 - be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of, this corporation, as the case may be, and also on this corporation. EIGHTH: For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the By-Laws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 2. After the original or other By-Laws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the By-Laws of the corporation may be exercised by the Board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial By-Law or in a By-Law adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be set forth in this certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the certificate of incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (2) of subsection (b) of section 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. TENTH: The corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and - 6 - against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ELEVENTH: From time to time any of the provisions of this certificate of incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article ELEVENTH. Signed on August 7, 1990. /s/ T.M. Bonovich ----------------- T. M. Bonovich Incorporator - 7 - EX-3.20 23 EXHIBIT 3.20 EXHIBIT 3.20 BYLAWS OF W. W. INVENTORY SERVICE CORP. (a Delaware corporation) ---------- ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on any such certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares. The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of the lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate or uncertificated shares. 2. UNRESTRICTED SHARES. Subject to any conditions imposed by the General Corporation Law, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares. Within a reasonable time after the issuance or transfer of any uncertificated shares, the corporation shall send to the registered owner thereof any written notice prescribed by the General Corporation Law. 3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip of warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 4. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining the stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, except as any provision of law may otherwise require. 7. STOCKHOLDER MEETINGS. - TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. - PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. - CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. - NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. - STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholders and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality of community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. - CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. - PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. - INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by him or them and execute a certificate of any fact found by him or them. - QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. - VOTING. Each share of stock shall entitle the holders thereof to one vote. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a difference exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these Bylaws. In the election of directors, and for any other action, voting need not be by ballot. 8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Action taken pursuant to this paragraph shall be subject to the provisions of Section 228 of the General Corporation Law. ARTICLE II 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of three persons. Thereafter the number of directors constituting the whole board shall be at least one. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be three. The number of directors may be increased or decreased by action of the stockholders or of the directors. 3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Except as the General Corporation Law may otherwise require, in the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. 4. MEETINGS. - TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. - CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. - QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Bylaws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors. Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. - CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 6. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of offices may be held by the same person, as the directors may determine. Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to him. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. ARTICLE IV CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE V FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. City of Dover County of Kent August 7, 1990 ORGANIZATION ACTION IN WRITING OF INCORPORATOR OF W. W. INVENTORY SERVICE CORP. ---------- (Organized August 7, 1990) The following action is taken this day through this instrument by the incorporator of the above corporation: 1. The adoption of the initial By-Laws of the corporation. 2. The election of the following persons to serve as the directors of the corporation until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal: Charles M. Berger Richard A. Samber Hayden E. Davis /s/ T.M. Bonovich ----------------- T. M. Bonovich Incorporator EX-3.21 24 EXHIBIT 3.21 EXHIBIT 3.21 CERTIFICATE OF INCORPORATION OF THE HEINZ VENTURE GROUP, LTD. * * * * * 1. The name of the corporation is The Heinz Venture Group, Ltd. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is One Thousand (1,000) and the par value of each of such shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars ($1,000,00). 5. The name and mailing address of each incorporation is as follows: 2 NAME MAILING ADDRESS ---- --------------- S. J. Queppet The Corporation Trust Company 1209 Orange Street Wilmington, DE 19801 L. J. Vitalo The Corporation Trust Company 1209 Orange Street Wilmington, DE 19801 E. A. Jensen The Corporation Trust Company 1209 Orange Street Wilmington, DE 19801 6. The corporation is to have perpetual existence. 7. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter or repeal the by-laws of the corporation. 8. Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. 9. A director of the corporation shall not be personally liable to the corporation or its stockholders for 3 monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is our act and deed and the facts herein stated are true, and accordingly have hereunto set our hands this 25th day of October, 1989. /s/ S.J. Queppet ---------------- S. J. Queppet /s/ L.J. Vitalo --------------- L. J. Vitalo /s/ E.A. Jensen --------------- E. A. Jensen CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE HEINZ VENTURE GROUP, LED. IT IS HEREBY CERTIFIED THAT: 1. THE NAME OF THE CORPORATION (HEREINAFTER CALLED THE "CORPORATION") IS THE HEINZ VENTURE GROUP, LTD. 2. THE CERTIFICATE OF INCORPORATION OF THE CORPORATION IS HEREBY AMENDED BY STRIKING OUT ARTICLE FIRST THEREOF AND BY SUBSTITUTING IN LIEU OF SAID ARTICLE THE FOLLOWING NEW ARTICLE: FIRST: THE NAME OF THE CORPORATION (HEREINAFTER CALLED THE "CORPORATION") IS WEIGHT WATCHERS NORTH AMERICA, INC. 3. THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION HEREIN CERTIFIED HAS BEEN DULY ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 228 AND 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE. SIGNED AND ATTESTED TO ON APRIL 6, 1992. /s/ Lelio Parducci ------------------ Lelio Parducci, PRESIDENT ATTEST: /s/ Hayden Davis - ---------------- Hayden Davis, SECRETARY EX-3.22 25 EXHIBIT 3.22 EXHIBIT 3.22 THE HEINZ VENTURE GROUP, LTD. BY LAWS ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Time and Place of Meetings. All meetings of stockholders for the election of directors shall be held in the City of Wilmington, State of Delaware, at such place as the board of directors may fix from time to time, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice. Section 2. Annual Meetings. Annual meetings of stockholders, commencing with the year 1990, shall beheld on the first Wednesday of September in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day, at 2:00 p.m., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the annual meeting, at which they shall by a plurality vote elect a board of directors. The stockholders may transact any other proper business at the annual meeting. Section 3. Notice of Annual Meeting. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more sixty days before the date of the meeting. Section 4. Stock Ledger. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, 2 during ordinary business hours, for a period of at least ten days prior to the meting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting and may be inspected by any stockholder who is present. Section 5. Special Stockholder Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose of the proposed meeting. Section 6. Notice of Special Meetings. Written notice of a special meeting stating the place, date, and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten or more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholder, the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, the stockholders may transact any business that they might have transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Majority Vote. When a quorum is present at any meeting of the stockholders of the corporation, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the applicable statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. 3 Section 10. Stockholder Action by Consent. Unless otherwise provided in the certificate of incorporation, the stockholders may, without a meeting, without prior notice and without a vote, take any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that the stockholders may take at any annual or special meeting of such stockholders, if the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted sign a consent in writing, setting forth the action so taken. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. Number of Directors. The number of directors that shall constitute the whole board shall be not less than 3 nor more than 11. The first board shall consist of one director. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. Section 2. Vacancies. A majority of the directors then in office, although less than a quorum, or a sole remaining director may fill vacancies and newly created directorships resulting from any increase in the authorized number of directors. The directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately before any such increase), the Court of Chancey may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. Powers. The board of directors shall manage the business of the corporation and may exercise all such powers of the corporation and to all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 4. Meetings of the Board of Directors. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. First Meeting of Newly Elected Board of Directors. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting. No notice of such meeting shall be necessary to the 4 newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided in these by-laws for special meetings of the board of directors, or as shall be specified in a written waiver that all of the directors sign. Section 6. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and at such place as the board shall from time to time determine. Section 7. Special Meetings. The president may call special meetings of the board on three days' notice to each director, either personally or by mail or by telegram; the president or secretary shall call special meetings in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sale director. Section 8. Quorum. At all meetings of the board not less than one-third of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as any statute or the certificate of incorporation may otherwise specifically provide. If a quorum shall not be present at any meeting of the board of directors, the directors present at the meeting may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum shall be present. Section 9. Director Action By Consent. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors or any committee of the board may, without a meeting, take any action required or permitted to be taken at any meeting of the board or the committee, if all members of the board or committee, as the case may be, consent to the action in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Participation by Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 11. Committees of Directors. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any 5 meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as the board of directors may determine from time to time by resolution. Section 12. Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 13. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix the compensation of directors. The corporation may pay the directors their expenses, if any, of attendance at each meeting of the board of directors and a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation for such service. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 14. Removal of Directors. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV Section 1. Notices. Whenever any provision of the applicable statutes or of the certificate of incorporation or of these by-laws require notice to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage prepaid. Such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Waiver of Notice. Whenever any provision of the applicable statutes or of the certificate of incorporation or of these by-laws requires notice to be given, a written waiver of 6 notice, signed by the person or persons entitled to notice, whether before or after the time stated in the waiver, shall be deemed equivalent to notice. ARTICLE V Section 1. Officers. The officers of the corporation shall be elected by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The secretary and treasurer of the Company may be appointed after the formation of the Company when reasonable and necessary. The board of directors may also elect additional vice-presidents, and one or more assistant secretaries and assistant treasurers. One person may hold any number of offices, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. Election of Officers. The board of directors at its first meeting after each annual meeting of stockholders shall elect a president, one or more vice-presidents, a secretary and a treasurer. Section 3. Additional Officers. The board of directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as the board shall determine from time to time. Section 4. Compensation of Officers. The board of directors shall fix the salaries of all officers and agents of the corporation. Section 5. Term of Office, Removal and Vacancy. The officers of the corporation shall hold office until their successors are chosen and qualify. The board of directors may be the affirmative vote of a majority of its members remove at any time any officer elected or appointed by the board of directors. The board of directors may fill any vacancy occurring in any office of the corporation. Section 6. The President. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the board of directors shall expressly delegate the signing and execution thereof to some other officer or agent of the corporation. Section 7. The Vice-Presidents. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of 7 and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 8. The Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant's secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by is signature. Section 9. The Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 10. The Treasurer. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as the board of directors may designate. The treasurer shall disburse the funds of the corporation as the board of directors may order, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE VI Section 1. Certificates of Stock. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant 8 treasurer, or the secretary or assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. Facsimile Signatures on Certificates. Where a certificate is countersigned (1) by a transfer agent other than the corporation or its employee, or (2) by a registrar other than the corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate registrar before such certificate is issued, the corporation may issue the certificate with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertified shares, the board of directors may, in its discretion and as a condition precedent to the issuance of the new certificate or certificate, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled to the new certificate, cancel the old certificate and record the transaction upon its books. Section 5. Fixing Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment of a meeting, or to express consent to corporate action in writing without a meeting, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, that shall not be more than sixty days before any other action. A determination of stockholders of record entitled to notice of or a vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in 9 such shares or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as the laws of Delaware otherwise provide. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. The board of directors, pursuant to law, at any regular or special meeting may declare dividends upon the capital stock of the corporation subject to the provisions of the certificate of incorporation, if any. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Reserves for Contingencies. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve to meet contingencies, or for equalizing dividends, or for requiring repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation. The directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Annual Statement. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Section 4. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the corporation still end on the Wednesday nearest to April 30 of each year and begin on the following day. Section 6. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile of the seal to be impressed or affixed or reproduced or otherwise. Section 7. Indemnification of Directors, Officers and Employees. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or contemplated action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding or the defense or settlement thereof or any claim, issue or matter therein, to the fullest extent permitted by law. Expenses incurred by any 10 such person in defending any such action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding if authorized by a majority of the directors of the corporation who are not interested in such action, suit or proceeding. The proper officers of the corporation, without further authorization from the board of directors, may in their discretion purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or wasserving at the requet of the corporation as a director, officer, employee or agent for another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the laws of Delaware and under this Section 7. The indemnification provided by this Section 7 shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the type referred to above and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VIII Section 1. Amendments. The stockholders or the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, may alter, amend, or repeal these by-laws, or adopt new by-laws, at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws is contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. EX-3.23 26 EXHIBIT 3.23 EXHIBIT 3.23 CERTIFICATE OF INCORPORATION OF A PRIVATE LIMITED COMPANY Company No. 3851499 The Registrar of Companies for England and Wales hereby certifies that WEIGHT WATCHERS UK HOLDINGS LTD is this day incorporated under the Companies Act 1985 as a private company and that the company is limited. Given at Companies House, London, the 27th September 1999 /s/ N. Richards --------------- MR. N. RICHARDS For The Registrar of Companies THE COMPANIES ACTS 1985 to 1989 PRIVATE COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATION OF WEIGHT WATCHERS UK HOLDINGS LTD 1. The Company's name is "WEIGHT WATCHERS UK HOLDINGS LTD". 2. The Company's registered office is to be situated in England and Wales. 3. The Company's objects are:- 3.1.1 To carry on the business of a holding company in all its branches, and to acquire by purchase, lease, concession, grant, licence or otherwise such businesses, options, rights, privileges, lands, buildings, leases, underleases, stocks, shares, debentures, debenture stock, bonds, obligations, securities, reversionary interests, annuities, policies of assurance and other property and rights and interests in property as the Company shall deem fit and generally to hold, manage, develop, lease, sell or dispose of the same; and to vary any of the investments of the Company, to act as trustees of any deeds constituting or securing any debentures, debenture stock or other securities or obligations; to enter into, assist, or participate in financial, commercial, mercantile, industrial and other transactions, 2 undertakings and businesses of every description, and to establish, carry on, develop and extend the same or sell, dispose of or otherwise turn the same to account, and to co-ordinate the policy and administration of any companies of which this Company is a member or which are in any manner controlled by, or connected with the Company, and to carry on all or any of the businesses of capitalists, trustees, financiers, financial agents, company promoters, bill discounters, insurance brokers and agents, mortgage brokers, rent and debt collectors, stock and share brokers and dealers and commission and general agents, merchants and traders; and to manufacture, buy, sell, maintain, repair and deal in plant, machinery, tools, articles and things of all kinds capable of being used for the purposes of the above-mentioned businesses or any of them, or likely to be required by customers of or persons having dealings with the Company. 3.1.2 To carry on any other trade or business whatever which can in the opinion of the board of directors be advantageously carried on in connection with or ancillary to any of the businesses of the Company. 3.2 To purchase or by any other means acquire and take options over any property whatever, and any rights or privileges of any kind over or in respect of any property. 3.3 To apply for, register, purchase, or by other means acquire and protect, prolong and renew, whether in the United Kingdom or elsewhere, any trade marks, patents, copyrights, trade secrets, or other intellectual property rights, licences, secret processes, designs, protections and concessions and to disclaim, alter, modify, use and turn to account and to 3 manufacture under or grant licences or privileges in respect of the same, and to expend money in experimenting upon, testing and improving any patents, inventions or rights which the Company may acquire or propose to acquire. 3.4 To acquire or undertake the whole or any part of the business, goodwill, and assets of any person, firm, or company carrying on or proposing to carry on any of the businesses which the Company is authorised to carry on and as part of the consideration for such acquisition to undertake all or any of the liabilities of such person, firm or company, or to acquire an interest in, amalgamate with, or enter into partnership or into any arrangement for sharing profits, or for co-operation, or for mutual assistance with any such person, firm or company, or for subsidising or otherwise assisting any such person, firm or company, and to give or accept, by way of consideration for any of the acts or things aforesaid or property acquired, any shares, debentures, debenture stock or securities that may be agreed upon, and to hold and retain, or sell, mortgage and deal with any shares, debentures, debenture stock or securities so received. 3.5 To improve, manage, construct, repair, develop, exchange, let on lease or otherwise, mortgage, charge, sell, dispose of, turn to account, grant licences, options, rights and privileges in respect of, or otherwise deal with all or any part of the property and rights of the Company. 4 3.6 To invest and deal with the moneys of the Company not immediately required in such manner as may from time to time be determined and to hold or otherwise deal with any investments made. 3.7 To lend and advance money or give credit on any terms and with or without security to any person, firm or company (including without prejudice to the generality of the foregoing any holding company, subsidiary or fellow subsidiary of, or any other company associated in any way with, the Company), to enter into guarantees, contracts of indemnity and surety ships of all kinds, to receive money on deposit or loan upon any terms, and to secure or guarantee in any manner and upon any terms the payment of any sum of money or the performance of any obligation by any person, firm or company (including without prejudice to the generality of the foregoing any such holding company, subsidiary, fellow subsidiary or associated company as aforesaid). 3.8 To borrow and raise money in any manner and to secure the repayment of any money borrowed, raised or owing by mortgage, charge, standard security, lien or other security upon the whole or any part of the Company's property or assets (whether present or future), including its uncalled capital, and also by a similar mortgage, charge, standard security, lien or security to secure and guarantee the performance by the Company of any obligation or liability it may undertake or which may become binding on it. 3.9 To draw, make, accept, endorse, discount, negotiate, execute and issue cheques, bills of exchange, promissory notes, bills of lading, warrants, 5 debentures, and other negotiable or transferable instruments. 3.10 To apply for, promote, and obtain any Act of Parliament, order, or licence of the Department of Trade or other authority for enabling the Company to carry any of its objects into effect, or for effecting any modification of the Company's constitution, or for any other purpose which may seem calculated directly or indirectly to promote the Company's interests, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the Company's interests. 3.11 To enter into any arrangements with any government or authority (supreme, municipal, local, or otherwise) that may seem conducive to the attainment of the Company's objects or any of them, and to obtain from any such government or authority any charters, decrees, rights, privileges or concessions which the Company may think desirable and to carry out, exercise, and comply with any such charters, decrees, rights, privileges, and concessions. 3.12 To subscribe for, take, purchase, or otherwise acquire, hold, sell, deal with and dispose of, place and underwrite shares, stocks, debentures, debenture stocks, bonds, obligations or securities issued or guaranteed by any other company constituted or carrying on business in any part of the world, and debentures, debenture stocks, bonds, obligations or securities issued or guaranteed by any government or authority, municipal, local or otherwise, in any part of the world. 6 3.13 To control, manage, finance, subsidize, co-ordinate or otherwise assist any company or companies in which the Company has a direct or indirect financial interest, to provide secretarial, administrative, technical, commercial and other services and facilities of all kinds for any such company or companies and to make payments by way of subvention or otherwise and any other arrangements which may seem desirable with respect to any business or operations of or generally with respect to any such company or companies. 3.14 To promote any other company for the purpose of acquiring the whole or any part of the business or property or undertaking or any of the liabilities of the Company, or of undertaking any business or operations which may appear likely to assist or benefit the Company or to enhance the value of any property or business of the Company, and to place or guarantee the placing of, underwrite, subscribe for, or otherwise acquire all or any part of the shares or securities of any such company as aforesaid. 3.15 To sell or otherwise dispose of the whole or any part of the business or property of the Company, either together or in portions, for such consideration as the Company may think fit, and in particular for shares, debentures, or securities of any company purchasing the same. 3.16 To act as agents or brokers and as trustees for any person, firm or company, and to undertake and perform sub-contracts. 7 3.17 To remunerate any person, firm or company rendering services to the Company either by cash payment or by the allotment of shares or other securities of the Company credited as paid up in full or in part or otherwise as may be thought expedient. 3.18 To distribute among the members of the Company in kind any property of the Company of whatever nature. 3.19 To pay all or any expenses incurred in connection with the promotion, formation and incorporation of the Company, or to contract with any person, firm or company to pay the same, and to pay commissions to brokers and others for underwriting, placing, selling, or guaranteeing the subscription of any shares or other securities of the Company. 3.20 To support and subscribe to any charitable or public object and to support and subscribe to any institution, society, or club which may be for the benefit of the Company or its directors or employees, or may be connected with any town or place where the Company carries on business; to give or award pensions, annuities, gratuities, and superannuation or other allowances or benefits or charitable aid and generally to provide advantages, facilities and services for any persons who are or have been directors of, or who are or have been employed by, or who are serving or have served the Company, or any company which is a subsidiary of the Company or the holding company of the Company of a fellow subsidiary of the Company or the predecessors in business of the Company or of any such subsidiary, holding or fellow subsidiary company and to the wives, widows, children and other relatives and dependents of such persons; to make payments 8 towards insurance including insurance for any director, officer or auditor against any liability in respect of any negligence, default, breach of duty or breach of trust (so far as permitted by law); and to set up, establish, support and maintain superannuation and other funds or schemes (whether contributory or non-contributory) for the benefit of any of such persons and of their wives, widows, children and other relatives and dependents; and to set up, establish, support and maintain profit sharing or share purchase schemes for the benefit of, any of the employees of the Company or of any such subsidiary, holding or fellow subsidiary company and to lend money to any such employees or to trustees on their behalf to enable any such schemes to be established or maintained. 3.21 Subject to and in accordance with the provisions of the Act (if and so far as such provisions shall be applicable) to give, directly or indirectly, financial assistance for the acquisition of shares or other securities of the Company or of any other company or for the reduction or discharge of any liability incurred in respect of such acquisition. 3.22 To procure the Company to be registered or recognised in any part of the world. 3.23 To do all or any of the things or matters aforesaid in any part of the world and either as principals, agents, contractors or otherwise, and by or through agents, brokers, sub-contractors or otherwise and either alone or in conjunction with others. 3.24 To do all such other things as may be deemed incidental or conducive to the attainment of the Company's objects or any of them. 9 3.25 AND so that:- 3.25.1 None of the objects set forth in any sub-clause of this clause shall be restrictively construed but the widest interpretation shall be given to each such object, and none of such objects shall, except where the context expressly so requires, be in any way limited or restricted by reference to or inference from any other object or objects set forth in such sub-clause, or by reference to or inference from the terms of any other sub-clause of this clause, or by reference to or inference from the name of the Company. 3.25.2 None of the sub-clauses of this clause and none of the objects therein specified shall be deemed subsidiary or ancillary to any of the objects specified in any other such sub-clause, and the Company shall have as full a power to exercise each and every one of the objects specified in each sub-clause of this clause as though each such sub-clause contained the objects of a separate Company. 3.25.3 The word "company" in this clause, except where used in reference to the Company, shall be deemed to include any partnership or other body of persons, whether incorporated or unincorporated and whether domiciled in the United Kingdom or elsewhere. 3.25.4 In this clause the expression "the Act" means the Companies Act 1985, but so that any reference in this clause to any provision of the Act shall be deemed to include a 10 reference to any statutory modification or re-enactment of that provision for the time being in force. 4. The liability of the members is limited. 5. The Company's share capital is (pound)200,000,000 divided into 200,000,000 shares of (pound)1 each. 11 WE, the subscribers to this Memorandum of Association, wish to be formed into a Company pursuant to this Memorandum; and we agree to take the number of shares shown opposite our respective names. - -------------------------------------------------------------------------------- Number of shares taken Names and addresses of Subscribers by each Subscriber - -------------------------------------------------------------------------------- 1. For and on behalf of - One Instant Companies Limited 1 Mitchell Lane Bristol BS1 6BU 2. For and on behalf of - One Swift Incorporations Limited 1 Mitchell Lane Bristol BS1 6BU ------------------ Total shares taken - Two - -------------------------------------------------------------------------------- Dated: 27th September 1999 Witness to the above Signatures:- Glenys Copeland 1 Mitchell Lane Bristol BS1 6BU 12 Company Number: 3851499 The Companies Acts 1985 to 1989 COMPANY LIMITED BY SHARES - -------------------------------------------------------------------------------- MEMORANDUM AND ARTICLES OF ASSOCIATION WEIGHT WATCHERS UK HOLDINGS LTD Incorporated on 27th September, 1999 - -------------------------------------------------------------------------------- Jordans Limited Company Formation and Information Specialists Legal Stationers and Publishers Head Office Telephone 0117 923 0600 Fax 0117 923 0063 THE COMPANIES ACTS 1985 to 1989 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF WEIGHT WATCHERS UK HOLDINGS LTD 1. PRELIMINARY 1.1 The regulations contained in Table A in the Schedule to the Companies (Tables A to F) Regulations 1985 (SI 1985 No. 805) as amended by the Companies (Tables A to F) (Amendment) Regulations 1985 (SI 1985 No. 1052) (such Table being hereinafter called "Table A") shall apply to the Company save in so far as they are excluded or varied hereby and such regulations (save as so excluded or varied) and the Articles hereinafter contained shall be the Articles of Association of the Company. 1.2 In these Articles the expressions:- "the Act" means the Companies Act 1985, but so that any reference in these Articles to any provision of the Act shall be deemed to include a reference to any statutory modification or re-enactment of that provision for the time being in force; and "subsidiary company" means a company which is a subsidiary of another within the meaning of Section 736 of the Act except that a company shall not be regarded as a subsidiary of another by reason only of the fact that that other is a member of it and has the right to appoint or remove a majority of its board 2 of directors and the definition of "holding company" in the said Section shall be construed accordingly. 2. ALLOTMENT OF SHARES 2.1 Notwithstanding any other provisions contained in this Article 2, for so long as the Company is a subsidiary company, the directors shall not be entitled to exercise any of the powers, authorities, rights or discretions conferred on them by this Article 2 without the prior consent of the Company's holding company. Authority given to the directors for the purposes of or pursuant to section 80 of the Act shall not constitute a consent pursuant to the provisions of this Article 2.1. 2.2 Shares which are comprised in the authorised but unissued share capital of the Company shall be under the control of the directors who may (subject to section 80 of the Act and to Article 2.4 below) allot, grant options over or otherwise dispose of the same, to such persons, on such terms and in such manner as they think fit. 2.3 In accordance with section 91(1) of the Act sections 89(1) and 90(1) to (6) (inclusive) of the Act shall not apply to the Company. 2.4 The directors are generally and unconditionally authorised for the purposes of section 80 of the Act to exercise any power of the Company to allot and grant rights to subscribe for or convert securities into shares of the Company up to the amount of the authorised share capital with which the Company is incorporated at any time or times during the period of five years from the date of incorporation and the directors may, after that period, allot any shares or grant any such rights under this authority in pursuance of an offer or agreement so to do made by the Company within that period. The authority hereby given may at any time (subject to the said section 80) be renewed, revoked or varied by ordinary resolution. 3 3. SHARES 3.1 The lien conferred by regulation 8 in Table A shall attach also to fully paid-up shares, and the Company shall also have a first and paramount lien on all shares, whether fully paid or not, standing registered in the name of any person indebted or under liability to the Company, whether he shall be the sole registered holder thereof or shall be one of two or more joint holders, for all moneys presently payable by him or his estate to the Company. Regulation 8 in Table A shall be modified accordingly. 3.2 The liability of any member in default in respect of a call shall be increased by the addition at the end of the first sentence of regulation 18 in Table A of the words "and all expenses that may have been incurred by the Company by reason of such non-payment". 4. GENERAL MEETINGS AND RESOLUTIONS 4.1 Every notice convening a general meeting shall comply with the provisions of section 372(3) of the Act as to giving information to members in regard to their right to appoint proxies; and notices of and other communications relating to any general meeting which any member is entitled to receive shall be sent to the directors and to the auditors for the time being of the Company. 4.2 Regulation 37 in Table A shall be read and construed as if the last sentence were omitted therefrom. 4.3.1 No business shall be transacted at any general meeting unless a quorum is present. Subject to Article 4.3.2 below, two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. 4 4.3.2 If and for so long as the Company has only one member, that member present in person or by proxy or (if that member is a corporation) by a duly authorised representative shall be a quorum. 4.3.3 If a quorum is not present within half an hour from the time appointed for a general meeting the general meeting shall stand adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the directors may determine; and if at the adjourned general meeting a quorum is not present within half an hour from the time appointed therefor such adjourned general meeting shall be dissolved. 4.3.4 Regulations 40 and 41 in Table A shall not apply to the Company. 4.4.1 If and for so long as the Company has only one member and that member takes any decision which is required to be taken in general meeting or by means of a written resolution, that decision shall be as valid and effectual as if agreed by the Company in general meeting, subject as provided in Article 4.4.3 below. 4 4.2 Any decision taken by a sole member pursuant to Article 4.4.1 above shall be recorded in writing and delivered by that member to the Company for entry in the Company's minute book. 4.4.3 Resolutions under section 303 of the Act for the removal of a director before the expiration of his period of office and under section 391 of the Act for the removal of an auditor before the expiration of his period of office shall only be considered by the Company in general meeting. 4.5 A member present at a meeting by proxy shall be entitled to speak at the meeting and shall be entitled to one vote on a show of hands. In any case where the same person is appointed proxy for more than one member he shall on a show of hands have as many 5 votes as the number of members for whom he is proxy. Regulation 54 in Table A shall be modified accordingly. 4.6.1 Regulation 62 in Table A shall be read and construed as if the words "within the United Kingdom" were omitted therefrom. 4.6.2 Unless resolved by ordinary resolution that regulation 62 in Table A shall apply without the following modification, the instrument appointing a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may be deposited at the place specified in regulation 62 in Table A up to the commencement of the meeting or (in any case where a poll is taken otherwise than at the meeting) of the taking of the poll or may be handed to the chairman of the meeting prior to the commencement of the business of the meeting. Unless otherwise resolved by ordinary resolution the directors may at their discretion treat a faxed copy of an instrument appointing a proxy as such an instrument for the purpose of this Article 4.6.2. 4.7 Any director may at his discretion treat a faxed copy of a signed resolution in writing as an instrument or document executed or signed by the signatory for the purposes of regulation 53 or regulation 93 in Table A, as the case may be. 4.8 Any corporation which is a member of the Company may, by a document signed by a duly authorised officer of that corporation, authorise such person as it thinks fit to act as its representative at any meeting of the Company. The person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company personally present at such meeting. Any director may (but is not bound to) require such evidence as he thinks fit of the authority of the representative to act. 6 5. APPOINTMENT OF DIRECTORS 5.1.1 Regulation 64 in Table A shall not apply to the Company. 5.1.2 The maximum number and minimum number respectively of the directors may be determined from time to time by ordinary resolution. Subject to and in default of any such determination there shall be no maximum number of directors and the minimum number of directors shall be one. Whenever the minimum number of directors is one, a sole director shall have authority to exercise all the powers and discretions by Table A and by these Articles expressed to be vested in the directors generally, and regulation 89 in Table A shall be modified accordingly. 5.2 The directors shall not be required to retire by rotation and regulations 73 to 80 (inclusive) in Table A shall not apply to the Company. 5.3 No person shall be appointed a director at any general meeting unless either:- (a) he is recommended by the directors; or (b) not less than 14 nor more than 35 clear days before the date appointed for the general meeting, notice signed by a member qualified to vote at the general meeting has been given to the Company of the intention to propose that person for appointment, together with notice signed by that person of his willingness to be appointed. 5.4.1 Subject to Article 5.3 above, the Company may by ordinary resolution appoint any person who is willing to act to be a director, either to fill a vacancy or as an additional director. 5.4.2 The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the 7 number of directors to exceed any number determined in accordance with Article 5.1.2 above as the maximum number of directors and for the time being in force. 5.5 Notwithstanding any other provisions of this Article 5, for so long as the Company is a subsidiary company, its holding company may appoint any person to be a director or remove any director from office howsoever appointed. 6. CONSENT, APPOINTMENT OR REMOVAL BY HOLDING COMPANY 6.1 Every consent or any appointment or removal of a director under the powers conferred upon a holding company by these Articles shall be made by instrument in writing and signed by a director or the company secretary of such holding company and such instrument shall only take effect on the service thereof at the registered office of the Company. Every such instrument shall be annexed to the directors' minute book as soon as practicable after such service. 6.2 No person dealing with the Company shall be concerned to see or enquire as to whether the powers of the directors have been in any way restricted hereunder or as to whether any requisite consent of a holding company has been obtained and any restriction imposed by these Articles shall be subject to the provisions of the Act. 6.3 If the Company has more than one holding company then for the purpose of these Articles references to its holding company shall be read and construed as references to its immediate holding company. 7. BORROWING POWERS 7.1 The directors may exercise all the powers of the Company to borrow money without limit as to amount and upon such terms and in such manner as they think fit, and subject (in the case of any security convertible into shares) to section 80 of the Act to grant any 8 mortgage, charge or standard security over its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. 8. ALTERNATE DIRECTORS 8.1 Unless otherwise determined by the Company in general meeting by ordinary resolution an alternate director shall not be entitled as such to receive any remuneration from the Company, save that he may be paid by the Company such part (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct, and the first sentence of regulation 66 in Table A shall be modified accordingly. 8.2 A director, or any such other person as is mentioned in regulation 65 in Table A, may act as an alternate director to represent more than one director, and an alternate director shall be entitled at any meeting of the directors or of any committee of the directors to one vote for every director whom he represents in addition to his own vote (if any) as a director, but he shall count as only one for the purpose of determining whether a quorum is present. 8.3 Regulation 66 in Table A shall be read and construed as if the last sentence were omitted therefrom. 9. GRATUITIES AND PENSIONS 9.1.1 The directors may exercise the powers of the Company conferred by its Memorandum of Association in relation to the payment of pensions, gratuities and other benefits and shall be entitled to retain any benefits received by them or any of them by reason of the exercise of any such powers. 9 9.1.2 Regulation 87 in Table A shall not apply to the Company. 10. MEETINGS 10.1 In this Article "electronic" means actuated by electric, magnetic, electro-magnetic, electro-chemical or electromechanical energy and "by electronic means" means by any manner only capable of being so actuated. 10.2 A person in communication by electronic means with the chairman and with all other parties to a meeting of the directors or of a committee of the directors shall be regarded for all purposes as personally attending such a meeting provided that but only for so long as at such a meeting he has the ability to communicate interactively and simultaneously with all other parties attending the meeting including all persons attending by electronic means. 10.3 A meeting at which one or more of the directors attends by electronic means is deemed to be held at such place as the directors shall at the said meeting resolve. In the absence of a resolution as aforesaid, the meeting shall be deemed to be held at the place, if any, where a majority of the directors attending the meeting are physically present, or in default of such a majority, the place at which the chairman of the meeting is physically present. 11. PROCEEDINGS OF DIRECTORS 11.1.1 Regulation 88 in Table A shall be read and construed as if the third sentence were omitted therefrom. 11.1.2 A director may vote, at any meeting of the directors or of any committee of the directors, on any resolution, notwithstanding that it in any way concerns or relates to a matter in which he has, directly or indirectly, any kind of interest whatsoever, and if he shall 10 vote on any such resolution his vote shall be counted; and in relation to any such resolution as aforesaid he shall (whether or not he shall vote on the same) be taken into account in calculating the quorum present at the meeting. 11.1.3 Each director shall comply with his obligations to disclose his interest in contracts under section 317 of the Act. 11.1.4 Regulations 94 to 97 (inclusive) in Table A shall not apply to the Company. 12. THE SEAL 12.1 If the Company has a seal it shall only be used with the authority of the directors or of a committee of directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or second director. The obligation under regulation 6 of Table A relating to the sealing of share certificates shall apply only if the Company has a seal. Regulation 101 in Table A shall not apply to the Company. 12.2 The Company may exercise the powers conferred by section 39 of the Act with regard to having an official seal for use abroad, and such powers shall be vested in the directors. 13. NOTICES 13.1 Regulation 112 in Table A shall be read and construed as if the last sentence was omitted therefrom. 13.2 Regulation 116 in Table A shall be read and construed as if the words "within the United Kingdom" were omitted therefrom. 11 13.3 Without prejudice to regulations 112 to 116 inclusive in Table A (as amended by Articles 13.1 and 13.2 above) the Company may give notice to a member by electronic means provided that:- 13.3.1 the member has given his consent in writing to receiving notice communicated by electronic means and in such consent has set out an address to which the notice shall be sent by electronic means; and 13.3.2 the electronic means used by the Company enables the member concerned to read the text of the notice. 13.4 A notice given to a member personally or in a form permitted by Article 13.3 above shall be deemed to be given on the earlier of the day on which it is delivered personally and the day on which it was despatched by electronic means, as the case may be. 13.5 Regulation 115 in Table A shall not apply to a notice delivered personally or in a form permitted by Article 13.3 above. 13.6 In this article "electronic" means actuated by electric, magnetic, electromagnetic, electro-chemical or electro-mechanical energy and "by electronic means" means by any manner only capable of being so actuated. 14. INDEMNITY 14.1 Every director or other officer or auditor of the Company shall be indemnified out of the assets of the Company against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, including any liability incurred by him in defending any proceedings, whether civil or criminal, or in connection with any application under section 144 or section 727 of the Act in which relief is granted to him by the Court, and no director or other officer shall be liable for any loss, 12 damage or misfortune which may happen to or be incurred by the Company in the execution of the duties of his office or in relation thereto. But this Article shall only have effect in so far as its provisions are not avoided by section 310 of the Act. 14.2 The directors shall have power to purchase and maintain for any director, officer or auditor of the Company insurance against any such liability as is referred to in section 310(1) of the Act. 14.3 Regulation 118 in Table A shall not apply to the Company. 15. TRANSFER OF SHARES 15.1 The directors may, in their absolute discretion and without assigning any reason therefor, decline to register the transfer of a share, whether or not it is a fully paid share. 15.2 For so long as the Company is a subsidiary company, no transfer of a share shall be registered without the prior consent of the Company's holding company. 15.3 The first sentence of regulation 24 in Table A shall not apply to the Company. 13 - -------------------------------------------------------------------------------- Names and addresses of Subscribers - -------------------------------------------------------------------------------- 1. For and on behalf of Instant Companies Limited 1 Mitchell Lane Bristol BS1 6BU 2. For and on behalf of Swift Incorporations Limited 1 Mitchell Lane Bristol BS1 6BU - -------------------------------------------------------------------------------- Dated: 27th September 1999 Witness to the above Signatures:- Glenys Copeland 1 Mitchell Lane Bristol BS1 6BU The regulations of Table A to the Companies Act 1985 apply to the Company save in so far as they are excluded or varied by its Articles of Association. Table A as prescribed by the Companies (Tables A to F) Regulations 1985 (S.I. 1985 No. 805), amended by the Companies (Tables A to F) (Amendment) Regulations 1985 (S.I. 1985 No. 1052), is reprinted below. TABLE A THE COMPANIES ACT 1985 Regulations for Management of a Company Limited by Shares INTERPRETATION 1. In these regulations:- "the Act" means the Companies Act 1985 including any statutory modification or re-enactment thereof for the time being in force. "the articles" means the articles of the company. "clear days" in relation to the period of notice means that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect. "executed" includes any mode of execution. "office" means the registered office of the company. "the holder" in relation to shares means the member whose name is entered in the register of members as the holder of the shares. "the seal" means the common seal of the company. "secretary" means the secretary of the company or any other person appointed to perform the duties of the secretary of the company, including a joint, assistant or deputy secretary. "the United Kingdom" means Great Britain and Northern Ireland. Unless the context otherwise requires, words or expressions contained in these regulations bear the same meaning as in the Act but excluding any statutory modification thereof not in force when these regulations become binding on the company. 1 SHARE CAPITAL 2. Subject to the provisions of the Act and without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the company may by ordinary resolution determine. 3. Subject to the provisions of the Act, shares may be issued which are to be redeemed or are to be liable to be redeemed at the option of the company or the holder on such terms and in such manner as may be provided by the articles. 4. The company may exercise the powers of paying commissions conferred by the Act. Subject to the provisions of the Act, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other. 5. Except as required by law, no person shall be recognised by the company as holding any share upon any trust and (except as otherwise provided by the articles or by law) the company shall not be bound by or recognise any interest in any share except an absolute right to the entirety thereof in the holder. SHARE CERTIFICATES 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon. The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them. 7. If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the company in investigating evidence as the directors may determine but otherwise free of charge, and (in the case of defacement or wearing-out) on delivery up of the old certificate. LIEN 8. The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) payable at a fixed time or called in respect of that share. The directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company's lien on a share shall extend to any amount payable in respect of it. 9. The company may sell in such manner as the directors determine any shares on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen clear days after notice has been given to the holder of the share or to the person entitled to it in consequence of 2 the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold. 10. To give effect to a sale, the directors may authorise some person to execute an instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser. The title of the transferee to the shares shall not be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 11. The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (upon surrender to the company for cancellation of the certificate for the shares sold and subject to a like lien for any moneys not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. CALLS ON SHARES AND FORFEITURE 12. Subject to the terms of allotment, the directors may make calls upon the members in respect of any moneys unpaid on their shares (whether in respect of nominal value or premium) and each member shall (subject to receiving at least fourteen clear days' notice specifying when and where payment is to be made) pay to the company as required by the notice the amount called on his shares. A call may be required to be paid by instalments. A call may, before receipt by the company of any sum due thereunder, be revoked in whole or in part and [illegible] call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect whereof the call was made. 13. A call shall be deemed to have been made at the time when the resolution of the directors authorising the call was passed. 14. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 15. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call, or if no rate is fixed, at the appropriate rate (as defined by the Act) but the Directors may waive payment of the interest wholly or in part. 16. An amount payable in respect of a share on allotment or on any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call. 17. Subject to the terms of allotment, the directors may make arrangements on the issue of shares for a difference between the holders in the amounts and times of payment of calls on their shares. 18. If a call remains unpaid after it has become due and payable the directors may give to the person from whom it is due not less than fourteen clear days' notice requiring payment to the amount unpaid together with any interest which may have accrued. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be fortified. 3 19. If the notice is not complied with any state in respect of which it was given may, before the payment required by the notice has been made, be fortified by a resolution of the directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture shares and not paid before the forfeiture. 20. Subject to the provisions of the Act, a forfeited share may be sold, re-allotted or otherwise disposed of on such terms and in such manner as the directors determine either to the person who was before the forfeiture the holder or to any other person and at any time before sale, re-allotment or other disposition, the forfeiture may be cancelled on such terms as the directors think fit. Where for the purposes of its disposal a forfeited share is to be transferred to any person the directors may authorise some person to execute an instrument of transfer of the share to that person. 21. A person any of whose shares have been forfeited shall cease to be a member in respect of them and shall surrender to the company for cancellation the certificate for the shares forfeited but shall remain liable to the company for all moneys which at the date of forfeiture were presently payable by him to the company in respect of those shares with interest at the rate at which interest was payable on those moneys before the forfeiture or, if no interest was so payable, at the appropriate rate (as defined in the Act) from the date of forfeiture until payment but the directors may waive payment wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal. 22. A statutory declaration by a director or the secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share and the declaration shall (subject to the execution of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of the share. TRANSFER OF SHARES 23. The instrument of transfer of a share may be in any usual form or in any other form which the directors may approve and shall be executed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a _____. they may also refuse to register a transfer unless:- (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees. 4 25. If the directors refuse to register a transfer of a share, they shall within two months after the date on which the transfer was lodged with the company sent to the transferee notice of the refusal. 26. The registration of transfers of shares or of transfers of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the directors may determine. 27. No fee shall be charged for the registration of any instrument of transfer or other document, relating to or affecting the title to any share. 28. The company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given. TRANSMISSION OF SHARES 29. If a member dies the survivor or survivors where he was a joint holder and his personal representatives where he was a sole holder of the only survivor of joint holders, shall be the only persons recognised by the company as having [illegible] herein contained shall release the estate of deceased member from any liability in respect of any share which had been jointly held by him. 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred. 31. A person becoming entitled to a share in consequence of the death or bankruptcy of a member shall have the rights to which he would be entitled if he were the holder of the share, except that he shall not, before being registered as the holder of the share, be entitled in respect of it to attend or vote at any meeting of the company or at any separate meeting of the holders of any class of shares in the company. ALTERATION OF SHARE CAPITAL 32. The company may by ordinary resolution:- (a) increase its share capital by new shares of such amount as the resolution prescribes; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) subject to the provisions of the Act, sub-divide its shares, or any of them, into shares of smaller amount and the resolution may determine that, as between the shares resulting from the sub-division, any of them may have any preference or advantage as compared with the others; and 5 (d) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. 33. Whenever as a result of a consolidation of shares any members would become entitled to fractions of a share, the directors may, on behalf of those members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Act, the company) and distribute the net proceeds of sale in due proportion among those members, and the directors may authorise some person to execute an instrument of transfer of the shares to, or in accordance with the direction of, the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 34. Subject to the provisions of the Act, the company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way. PURCHASE OF OWN SHARES 35. Subject to the provisions of the Act, the company may purchase its own shares (including any redeemable shares) and, if it is a private company, make a payment in respect of the redemption or purchase of its own shares otherwise then out of distributable profits of the company or the proceeds of a fresh issue of shares. GENERAL MEETINGS 36. All general meetings other than annual general meetings shall be called extraordinary general meetings. 37. The directors may call general meetings and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene an extraordinary general meeting for a date not later than eight weeks after receipt of the requisition. If there are not within the United Kingdom sufficient directors to call a general meeting, any director or any member of the company may call a general meeting. NOTICE OF GENERAL MEETING 38. An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or a resolution appointing a person as a director shall be called by at least twenty-one clear days' notice. All other extraordinary general meetings shall be called by at least fourteen clear days' notice but a general meeting may be called by shorter notice if it is so agreed:- (a) in the case of an annual general meeting, by all the members entitled to attend and vote thereat; and 6 (b) in the case of any other meeting by a majority in number of the members having a right to attend and vote being a majority together holding not less than ninety-five percent, in nominal value of the shares giving that right. (c) The notice shall specify the time and place of the meeting and the general nature of the business to be transacted and, in the case of an annual general meeting, shall specify the meeting as such. Subject to the provisions of the articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to all persons entitled to a share in consequence of the death or bankruptcy of a member and to the directors and auditors. 39. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting. PROCEEDINGS AT GENERAL MEETINGS 40. No business shall be transacted at any meeting unless a quorum is present. Two persons entitled to vote upon the business to be transacted, each being a member of a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. 41. If such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such time and place as the directors may determine. 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman. 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the company. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place. When a [illegible] general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice. 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded:- 7 (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member. 47. Unless a poll is duly demanded a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entity to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number of proportion of the votes recorded in favour of or against the resolution. 48. The demand for a poll may, before the poll is taken, be withdrawn but only the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 50. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman shall be entitled to a casting vote in addition to any other vote he may have. 51. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or at such time and place as the chairman directs not being more than thirty days after the poll is demanded. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made. 52. No notice need be given of a poll not taken forthwith if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days' notice shall be given specifying the time and place at which the poll is to be taken. 53. A resolution in writing executed by or on behalf of each member who would have been entitled to vote upon it if it had been proposed at a general meeting at which he was present shall be as effectual as if it had been passed at a general meeting duly convened and held and may consist of several instruments in the like form each executed by or on behalf of a one or more members. VOTES OF MEMBERS 8 54. Subject to any rights or restrictions attached to any shares, on a show of hands every member who (being an individual) is present in person or (being a corporation) is present by a duly authorised representative, not being himself a member entitled to vote, shall have one vote and on a poll every member shall have one vote for every share of which he is the holder. 55. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the register of members. 56. A member in respect of whom an order has been made by any court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder may vote, whether on a show of hands or on a poll, by his receiver, curator bonis or other person authorised in that behalf appointed by that court, and any such receiver, curator bonis or other person may, or a poll, vote by proxy. Evidence to the satisfaction of the directors of the authority of the person claiming to exercise the right to vote shall be deposited at the office, or at such other place as is specified in accordance with the articles for the deposit of instruments of proxy, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised and in default the right to vote shall not be exercisable. 57. No member shall vote at any general meeting or at any separate meeting of the holders of any class of shares in the company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid. 58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive. 59. On a poll votes may be given either personally or by proxy. A member may appoint more than one proxy to attend on the same occasion. 60. An instrument appointing a proxy shall be in writing, executed by or on behalf of the appointor and shall be on the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve);- * Plc/Limited , of , being a member/members of the above-named company, hereby appoint of or failing him, of , as my/our proxy to vote in my/our name(s) and on my/our behalf at the annual/extraordinary general meeting oft the company to be held on 19 , and at any adjournment thereof. Signed on 19 * 61. Where it is desired to afford members an opportunity of instructuring the proxy how we shall act the instrument appointing a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve):- * Plc/Limited I/We, , of being a member/members of the above-named company, hereby appoint of or failing him of , as my/our proxy to vote in my/our 9 name(s) and on my/our behalf at the annual/extraordinary general meeting of the company, to be held on I/We, 19 , and at any adjournment thereof. This form is to be used in respect of the resolutions mentioned below as follows: Resolution No. 1 * for *against Resolution No. 2 *for *against *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from 62. The instrument appointing a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may:- (a) be deposited at the office or at such other place within the United Kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (b) in the case of a poll taken more than 48 hours after it is demanded, be deposited as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director; and an instrument of proxy which is not deposited or delivered in a manner so permitted shall be invalid. 63. A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the company at the office or at such other place at which the instrument of proxy was duly deposited before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll. NUMBER OF DIRECTORS 64. Unless otherwise determined by ordinary resolution, the number of directors (other than alternate directors) shall not be subject to any maximum but shall be not less than two. 10 ALTERNATE DIRECTORS 65. Any director (other than an alternate director) may appoint any other director, or any other person approved by resolution of the directors and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him. 66. An alternate director shall be entitled to receive notice of all meetings of directors and of all meetings of committees of directors of which his appointor is a member, to attend and vote at any such meeting at which the director appointing him is not personally present, and generally to perform all the functions of his appointor as a director in his absence but shall not be entitled to receive any remuneration from the company for his services as an alternate director. But it shall not be necessary to give notice of such a meeting to an alternate director who is absent from the United Kingdom. 67. An alternate director shall cease to be an alternate director if his appointor ceases to be a director; but, if a director retires by rotation or otherwise but is reappointed or deemed to have been reappointed at the meeting at which he retires, any appointment of an alternate director made by him which was in force immediately prior to his retirement shall continue after his reappointment. 68. Any appointment or removal of an alternate director shall be by notice to the company signed by the director making or revoking the appointment or in any other manner approved by the directors. 69. Save as otherwise provided in the articles, an alternate director shall be deemed for all purposes to be a director and shall alone be responsible for his own acts and defaults and he shall not be deemed to be the agent of the director appointing him. POWER OF DIRECTORS 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers. DELEGATION OF DIRECTORS' POWERS 11 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying. APPOINTMENT AND RETIREMENT OF DIRECTORS 73. At the first annual general meeting all the directors shall retire from office, and at every subsequent annual general meeting one-third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to one-third shall retire from office; but if there is only one director who is subject to retirement by rotation, he shall retire. 74. Subject to the provisions of the Act, the directors to retire by rotation shall be those who have been longest in office since their last appointment or reappointment, but as between persons who became or were last reappointed directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 75. If the company, at the meeting at which a director retires by rotation, does not fill the vacancy the retiring director shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the director is put to the meeting and lost. 76. No person other than a director retiring by rotation shall be appointed or reappointed a director at any general meeting unless:- (a) he is recommended by the directors; or (b) not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the company of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the company's register of directors together with notice executed by that person of his willingness to be appointed or reappointed. 77. Not less than seven nor more than twenty-eight clear days before the date appointed for holding a general meeting notice shall be given to all who are entitled to receive notice of the meeting of any person (other than a director retiring by rotation at the meeting) who is recommended by the directors for appointment or reappointment as a director at the meeting or in respect of [illegible] shall give the particulars of that person which would, if he were so appointed or reappointed, be required to be included in the company's register of directors. 78. Subject as aforesaid, the company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 12 79. The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors. A director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof. 80. Subject as aforesaid, a director who retires at an annual general meeting may, if willing to act, be reappointed. If he is not reappointed, he shall retain office until the meeting appoints someone in his place, or if it does not do so, until the end of the meeting. DISQUALIFICATION AND REMOVAL OF DIRECTORS 81. The office of a director shall be vacated if:- (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) he is, or may be, suffering from mental disorder and either:- (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1980; or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or (d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated. REMUNERATION OF DIRECTORS 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day. DIRECTORS' EXPENSES 13 83. The directors may be paid all traveling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of the duties. DIRECTORS' APPOINTMENTS AND INTERESTS 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the contract of service between the director and the company. A managing director and a director holding any other executive office shall not be subject to retirement by rotation. 85. Subject to the provisions of the Act, and provided that he has disclosed to the directors the nature and extent of any material interest of his, a director notwithstanding his office:- (a) may be a party to, or otherwise interested in, any transaction or arrangement with the company or in which the company is otherwise interested; (b) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the company or in which the company is otherwise interested; and (c) shall not, by reason of his office, be accountable to the company for any benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. 86. For the purposes of regulation 85:- (a) a general notice given to the directors that a director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the director has an interest in any such transaction of the nature and extent so specified; and (b) an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his. 14 DIRECTORS' GRATUITIES AND PENSIONS 87. The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit. PROCEEDINGS OF DIRECTORS 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote. 89. The quorum for the transaction of the business of the directors may be fixed by the directors and unless so fixed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum. 90. The continuing directors or a sole containing director may act 91. The directors may appoint one of their number to be the chairman of the board of directors and may at any time remove him from that office. Unless he is unwilling to do so, the director so appointed shall preside at every meeting of directors at which he is present. But if there is no director holding that office, or if the director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the directors present may appoint one of their number to be chairman of the meeting. 92. All acts done by a meeting of directors, or of a committee of directors, or by a person acting as a director shall, notwithstanding that it be afterwards discovered that there was a defect in the appointment of any director or that any of them were disqualified from holding office, or had vacated office, or were not entitled to vote, be as valid as if every such person had been duly appointed and was qualified and had continued to be a director and had been entitled to vote. 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as if it had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity. 15 94. Save as otherwise provided by the articles, a director shall not vote at a meeting of directors or of a committee of directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which conflicts or may conflict with the interests of the company unless his interest or duty arises only because the case falls within one or more of the following paragraphs:- (a) the resolution relates to the giving to him of a guarantee, security, or indemnity in respect of money lent to, or an obligation incurred by him for the benefit of, the company or any of its subsidiaries; (b) the resolution relates to the giving to a third party of a guarantee, security, or indemnity in respect of an obligation of the company or any of its subsidiaries for which the director has assumed responsibility in whole or part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; (c) his interest arises by virtue of his subscribing or agreeing to subscribe for any shares, debentures or other securities of the company or any of its subsidiaries, or by virtue of his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such shares, debentures, or other securities by the company or any of its subsidiaries for subscription, purchase or exchange; (d) the resolution relates in any way to a retirement benefits scheme which has been approved, or is conditional upon approval, by the Board of Inland Revenue for taxation purposes. For the purposes of this regulation, an interest of a person who is, for any purpose of the Act (excluding any statutory modification thereof not in force when this regulation becomes binding on the company), connected with a director shall be treated as an interest of the director and, in relatin to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. 95. A director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. 96. The company may by ordinary resolution suspend or relax to any extent, either generally or in respect of any particular matter, any provision of the articles prohibiting a director from voting at a meeting of directors or of a committee of directors. 97. Where proposals are under consideration concerning the appointment of two or more directors to offices or employments with the company or any body corporate in which the company is interested the proposals may be divided and considered in relation to each director separately and (provided he is not for another reason precluded from voting) each of the directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment. 98. If a question arises at a meeting of directors or of a committee of directors as to the right of a director to vote, the question may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation in any director other than himself shall be final and conclusive. 16 SECRETARY 99. Subject to the provisions of the Act, the secretary shall be appointed by the directors for such term, at such remuneration and upon such conditions as they may think fit; and any secretary so appointed may be removed by them. MINUTES 100. The directors shall cause minutes to be made in books kept for the purpose: (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, of the holders of any class of shares in the company, and of the directors, and of the committees of directors, including the names of the directors present at such meeting. THE SEAL 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director. DIVIDENDS 102. Subject to the provisions of the Act, the company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. 103. Subject to the provisions of the Act, the directors may pay interim dividends if it appears to them that they are justified by the profits of the company available for distribution. If the share capital is divided into different classes, the directors may pay interim dividends on shares which confer deferred or non-preferred rights with regard to dividend as well as on shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. The directors may also pay at intervals settled by them any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. Provided the directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights. 104. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms 17 providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. 105. A general meeting declaring a dividend may, upon the recommendation of the directors, direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to the distribution, the directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash shall be paid to any member upon the footing of the value so fixed in order to adjust the rights of members and may vest any assets in trustees. 106. Any dividend or other moneys payable in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the register of members or to such person and to such address as the person or persons entitled may in writing director. Every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share. 107. No dividend or other moneys payable in respect of a share shall bear interest against the company unless otherwise provided by the rights attached to the share. 108. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company. ACCOUNTS 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company. CAPITALISATION OF PROFITS 110. The directors may with the authority of an ordinary resolution of the company: (a) subject as hereinafter provided, resolve to capitalise any undivided profits of the company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the company's share premium account or capital redemption reserve; (b) appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or in paying up in full unissued shares or 18 debentures of the company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other; but the share premium account, the capital redemption reserve, and any profits which are not available for distribution may, for the purposes of this regulation, only be applied in paying up unissued shares to be allotted to members credited as fully paid; (c) make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this regulation in fractions; and (d) authorise any person to enter on behalf of all the members concerned into an agreement with the company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation, any agreement made under such authority being binding on all such members. NOTICES 111. Any notice to be given to or by any person pursuant to the articles shall be in writing except that a notice calling a meeting of the directors need not be in writing. 112. The company may given any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address. In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of members in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders. A member whose registered address is not within the United Kingdom and who gives to the company an address within the United Kingdom at which notices may be given to him shall be entitled to have notices given to him at that address, but otherwise no such member shall be entitled to receive any notice from the company. 113. A member present, either in person or by proxy, at any meeting of the company or of the holders of any class of shares in the company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which it was called. 114. Every person who becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the register of members, has been duly given to a person from whom he derives this title. 115. Proof that an envelope containing a notice was properly addressed, prepared and posted shall be conclusive evidence that the notice was given. A notice shall be deemed to be given at the expiration of 48 hours after the envelope containing it was posted. 116. A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending or delivering it, in any manner authorised by the articles for the giving of notice to a member, addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt or by any like description at the address, if any, within the United 19 Kingdom supplied for that purpose by the persons claiming to be so entitled. Until such an address has been supplied, a notice may be given in any manner in which it might have been given if the death or bankruptcy had not occurred. WINDING UP 117. If the company is wound up, the liquidator may, with the sanction of an extraordinary revolution of the company and any other sanction required by the Act, divide among the members in specie the whole or any part of the assets to the company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he with the like sanction determines, but no member shall be compelled to accept any assets upon which there is a liability. INDEMNITY 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company. 20 EX-3.24 27 EXHIBIT 3.24 Exhibit 3.24 [LOGO] CERTIFICATE OF INCORPORATION OF A PRIVATE LIMITED COMPANY Company No. 3851485 The Registrar of Companies for England and Wales hereby certifies that: WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD is this day incorporated under the Companies Act 1985 as a private company and that the company is limited. Given at Companies House, London, the 27th September 1999 /s/ N. Richards --------------- MR. N. RICHARDS For The Registrar Of Companies 2 Company Number: 3851485 The Companies Acts 1985 to 1989 COMPANY LIMITED BY SHARES - -------------------------------------------------------------------------------- MEMORANDUM AND ARTICLES OF ASSOCIATION WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD Incorporated on 27th September, 1999 3 THE COMPANIES ACTS 1985 to 1989 PRIVATE COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATION OF WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD 1. The Company's name is " WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD". 2. The Company's registered office is to be situated in England and Wales. 3. The Company's objects are: 3.1.1 To carry on the business of a holding company in all its branches, and to acquire by purchase, lease, concession, grant, licence or otherwise such businesses, options, rights, privileges, lands, buildings, leases, underleases, stocks, shares, debentures, debenture stock, bonds, obligations, securities, reversionary interests, annuities, policies of assurance and other property and rights and interests in property as the Company shall deem fit and generally to hold, manage, develop, lease, sell or dispose of the same; and to vary any of the investments of the Company, to act as trustees of any deeds constituting or securing any debentures, debenture stock or other securities or obligations; to enter into, assist, or participate in financial, commercial, mercantile, industrial and other transactions, undertakings and businesses of every description, and to establish, carry on, develop and extend the same or sell, dispose of or otherwise turn the same to account, and to co-ordinate the policy and administration of any companies of which this Company is a member or which are in any manner controlled by, or connected with the Company, and to carry on all or any of the businesses of capitalists, trustees, financiers, financial agents, company promoters, bill discounters, insurance brokers and agents, mortgage brokers, rent and debt collectors, stock and share brokers and dealers and commission and general agents, merchants and traders; and to manufacture, buy, sell, maintain, repair and deal in plant, machinery, tools, articles and things of all kinds capable of being used for the purposes of the above-mentioned businesses or any of them, or likely to be required by customers of or persons having dealings with the Company. 3.1.2 To carry on any other trade or business whatever which can in the opinion of the board of directors be advantageously carried on in connection with or ancillary to any of the businesses of the Company. 4 3.2 To purchase or by any other means acquire and take options over any property whatever, and any rights or privileges of any kind over or in respect of any property. 3.3 To apply for, register, purchase, or by other means acquire and protect, prolong and renew, whether in the United Kingdom or elsewhere, any trade marks, patents, copyrights, trade secrets, or other intellectual property rights, licences, secret processes, designs, protections and concessions and to disclaim, alter, modify, use and turn to account and to manufacture under or grant licences or privileges in respect of the same, and to expend money in experimenting upon, testing and improving any patents, inventions or rights which the Company may acquire or propose to acquire. 3.4 To acquire or undertake the whole or any part of the business, goodwill, and assets of any person, firm, or company carrying on or proposing to carry on any of the businesses which the Company is authorized to carry on and as part of the consideration for such acquisition to undertake all or any of the liabilities of such person, firm or company, or to acquire an interest in, amalgamate with, or enter into partnership or into any arrangement for sharing profits, or for cooperation, or for mutual assistance with any such person. firm or company, or for subsidizing or otherwise assisting any such person, firm or company, and to give or accept, by way of consideration for any of the acts or things aforesaid or property acquired, any shares, debentures, debenture stock or securities that may be agreed upon, and to hold and retain, or sell, mortgage and deal with any shares, debentures, debenture stock or securities so received. 3.5 To improve, manage, construct, repair, develop, exchange, let on lease or otherwise, mortgage, charge, sell, dispose of, turn to account, grant licences, options, rights and privileges in respect of, or otherwise deal with all or any part of the property and rights of the Company. 3.6 To invest and deal with the moneys of the Company not immediately required in such manner as may from time to time be determined and to hold or otherwise deal with any investments made. 3.7 To lend and advance money or give credit on any terms and with or without security to any person, firm or company (including without prejudice to the generality of the foregoing any holding company, subsidiary or fellow subsidiary of, or any other company associated in any way with, the Company), to enter into guarantees, contracts of indemnity and suretyships of all kinds, to receive money on deposit or loan upon any terms, and to secure or guarantee in any manner and upon any terms the payment of any sum of money or the performance of any obligation by any person, firm or company (including without prejudice to the generality of the foregoing any such holding company, subsidiary, fellow subsidiary or associated company as aforesaid). 5 3.8 To borrow arid raise money in any manner and to secure the repayment of any money borrowed, raised or owing by mortgage, charge, standard security, lien or other security upon the whole or any part of the Company's property or assets (whether present or future) including its uncalled capital and also by a guarantee the performance by the Company of any obligation or liability it may undertake or which may become binding on it. 3.9 To draw, make, accept, endorse, discount, negotiate, execute and issue cheques, bills of exchange, promissory notes, bills of lading, warrants, debentures, and other negotiable or transferable instruments. 3.10 To apply for, promote, and obtain any Act of Parliament, order, or licence of the Department of Trade or other authority for enabling the Company to carry any of its objects into effect, or for effecting any modification of the Company's constitution, or for any other purpose which may seem calculated directly or indirectly to promote the Company's interests, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the Company's interests. 3.11 To enter into any arrangements with any government or authority (supreme, municipal, local, or otherwise) that may seem conducive to the attainment of the Company's objects or any of them, and to obtain from any such government or authority any charters, decrees, rights, privileges or concessions which the Company may think desirable and to carry out, exercise, and comply with any such charters, decrees, rights, privileges, and concessions. 3.12 To subscribe for, take, purchase, or otherwise acquire, hold, sell, deal with and dispose of, place and underwrite shares, stocks, debentures, debenture stocks, bonds, obligations or securities issued or guaranteed by any other company constituted or carrying on business in any part of the world, and debentures, debenture stocks, bonds, obligations or securities issued or guaranteed by any government or authority, municipal, local or otherwise, in any part of the world. 3.13 To control, manage, finance, subsidise, co-ordinate or otherwise assist any company or companies in which the Company has a direct or indirect financial interest, to provide secretarial, administrative, technical, commercial and other services and facilities of all kinds for any such company or companies and to make payments by way of subvention or otherwise and any other arrangements which may seem desirable with respect to any business or operations of or generally with respect to any such company or companies. 3.14 To promote any other company for the purpose of acquiring the whole or any part of the business or property or undertaking or any of the liabilities of the Company, or of undertaking any business or operations which may appear likely to assist or benefit the Company or to enhance the value of any property or business of the Company, and to place 6 or guarantee the placing of, underwrite, subscribe for, or otherwise acquire all or any part of the shares or securities of any such company as aforesaid. 3.15 To sell or otherwise dispose of the whole or any part of the business or property of the Company, either together or in portions, for such consideration as the Company may think fit, and in particular for shares, debentures, or securities 3.16 To act as agents or brokers and as trustees for any person, firm or company, and to undertake and perform sub-contracts. 3.17 To remunerate any person, firm or company rendering services to the Company either by cash payment or by the allotment of shares or other securities of the Company credited as paid up in full or in part or otherwise as may be thought expedient. 3.18 To distribute among the members of the Company in kind any property of the Company of whatever nature. 3.19 To pay all or any expenses incurred in connection with the promotion, formation and incorporation of the Company, or to contract with any person, firm or company to pay the same, and to pay commissions to brokers and others for underwriting, placing, selling, or guaranteeing the subscription of any shares or other securities of the Company. 3.20 To support and subscribe to any charitable or public object and to support and subscribe to any institution, society, or club which may be for the benefit of the Company or its directors or employees, or may be connected with any town or place where the Company carries on business; to give or award pensions, annuities, gratuities, and superannuation or other allowances or benefits or charitable aid and generally to provide advantages, facilities and services for any persons who are or have been directors of, or who are or have been employed by, or who are serving or have served the Company, or any company which is a subsidiary of the Company or the holding company of the Company or a fellow subsidiary of the Company or the predecessors in business of the Company or of any such subsidiary, holding or fellow subsidiary company and to the wives, widows, children and other relatives and dependents of such persons; to make payments towards insurance including insurance for any director, officer or auditor against any liability in respect of any negligence, default, breach of duty or breach of trust (so far as permitted by law); and to set up, establish, support and maintain superannuation and other funds or schemes (whether contributory or non-contributory) for the benefit of any of such persons and of their wives, widows, children and other relatives and dependents; and to set up, establish, support and maintain profit sharing or share purchase schemes for the benefit of any of the employees of the Company or of any such subsidiary, holding or fellow subsidiary company and to lend money to any such employees or to trustees on their behalf to enable any such schemes to be established or maintained. 7 3.21 Subject to and in accordance with the provisions of the Act (if and so far as such provisions shall be applicable) to give, directly or indirectly, financial assistance for the acquisition of shares or other securities of the Company or of any other company or for the reduction or discharge of any liability incurred in respect of such acquisition. 3.22 To procure the Company to be registered or recognised in any part of the world. 3.23 To do all or any of the things or matters aforesaid in any part of the agents, brokers, sub-contractors or otherwise and either alone or in conjunction with others. 3.24 To do all such other things as may be deemed incidental or conducive to the attainment of the Company's objects or any of them. 3.25 AND so that: 3.25.1 None of the objects set forth in any sub-clause of this clause shall be restrictively construed but the widest interpretation shall be Driven to each such object, and none of such objects shall, except where the context expressly so requires, be in any way limited or restricted by reference to or inference from any other object or objects set forth in such sub-clause, or by reference to or inference from the terms of any other sub-clause of this clause, or by reference to or inference from the name of the Company. 3.25.2 None of the subclauses of this clause and none of the objects therein specified shall be deemed subsidiary or ancillary to any of the objects specified in any other such sub-clause, and the Company shall have as full a power to exercise each and every one of the objects specified in each sub-clause of this clause as though each such sub-clause contained the objects of a separate Company. 3.25.3 The word "company" in this clause, except where used in reference to the Company, shall be deemed to include any partnership or other body of persons, whether incorporated or unincorporated and whether domiciled in the United Kingdom or elsewhere. 3.25.4 In this clause the expression The Act" means the Companies Act 1985, but so that any reference in this clause to any provision of the Act shall be deemed to include a reference to any statutory modification or re-enactment of that provision for the time being in force. 4. The liability of the members is limited. 5. The Company's share capital is (pound)200,000,000 divided into 200,000,000 shares of (pound)1 each. 8 WE, the subscribers to this Memorandum of Association, wish to be formed into a Company pursuant to this Memorandum; and we agree to take the number of shares shown opposite our respective names. - -------------------------------------------------------------------------------- Names and addresses of Subscribers Number of shares taken by each Subscriber - -------------------------------------------------------------------------------- 1. For and on behalf of - One Instant Companies Limited 1 Mitchell Lane Bristol BS1 6BU 2. For and on behalf of - One Swift Incorporations Limited 1 Mitchell Lane Bristol BS1 6BU ------------------------- Total shares taken - Two - -------------------------------------------------------------------------------- Dated: 27th September 1999 Witness to the above Signatures:- Glenys Copeland 1 Mitchell Lane Bristol BS1 6BU 9 THE COMPANIES ACTS 1985 to 1989 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF WEIGHT WATCHERS INTERNATIONAL HOLDINGS LTD 1. PRELIMINARY 1.1 The regulations contained in Table A in the Schedule to the Companies (Tables A to F) Regulations 1985 (SI 1985 No. 805) as amended by the Companies (Tables A to F) (Amendment) Regulations 1985 (SI 1985 No. 1052) (such Table being hereinafter called "Table A") shall apply to the Company save in so far as they are excluded or varied hereby and such regulations (save as so excluded or varied) and the Articles hereinafter contained shall be the Articles of Association of the Company. 1.2 In these Articles the expressions:- "the Act" means the Companies Act 1985, but so that any reference in these Articles to any provision of the Act shall be deemed to include a reference to any statutory modification or re-enactment of that provision for the time being in force; and "subsidiary company" means a company which is a subsidiary of another within the meaning of Section 736 of the Act except that a company shall not be regarded as a subsidiary of another by reason only of the fact that that other is a member of it and has the right to appoint or remove a majority of its board of directors and the definition of "holding company" in the said Section shall be construed accordingly. 10 2. ALLOTMENT OF SHARES 2.1 Notwithstanding any other provisions contained in this Article 2, for so long as the Company is a subsidiary company, the directors shall not be entitled to exercise any of the powers, authorities, rights or discretions conferred on them by this Article 2 without the prior consent of the Company's holding company. Authority given to the directors for the purposes of or pursuant to section 80 of the Act shall not constitute a consent pursuant to the provisions of this Article 2.1. 2.2 Shares which are comprised in the authorized but unissued share capital of the Company shall be under the control of the directors who may (subject to section 80 of the Act and to Article 2.4 below) allot, grant options over or otherwise dispose of the same, to such persons, on such terms and in such manner as they think fit. 2.3 In accordance with section 91 (1) of the Act sections 89(1) and 90(1) to (6) (inclusive) of the Act shall not apply to the Company. 2.4 The directors are generally and unconditionally authorised for the purposes of section 80 of the Act to exercise any power of the Company to allot and grant rights to subscribe for or convert securities into shares of the Company up to the amount of the authorised share capital with which the Company is incorporated at any time or times during the period of five years from the date of incorporation and the directors may, after that period, allot any shares or grant any such rights under this authority in pursuance of an offer or agreement so to do made by the Company within that period. The authority hereby given may at any time (subject to the said section 80) be renewed, revoked or varied by ordinary resolution. 3. SHARES 3.1 The lien conferred by regulation 8 in Table A shall attach also to fully paid-up shares, and the Company shall also have a first and paramount lien on all shares, whether fully paid or not, standing registered in the name of any person indebted or under liability to the Company, whether he shall be the sole registered holder thereof or shall be one of two or more joint holders, for all moneys presently payable ~ him or his estate to the Company. Regulation 8 in Table A shall be modified accordingly. 3.2 The liability of any member in default in respect of a call shall be increased by the addition at the end of the first sentence of regulation 18 in Table A of the words hand all expenses that may have been incurred by the Company by reason of such non-payment". 11 4. GENERAL MEETINGS AND RESOLUTIONS 4.1 Every notice convening a general meeting shall comply with the provisions of section 372(3) of the Act as to giving information to members in regard to their right to appoint proxies; and notices of and other communications relating to any general meeting which any member is entitled to receive shall be sent to the directors and to the auditors for the time being of the Company. 4.2 Regulation 37 in Table A shall be read and construed as if the last sentence were omitted therefrom. 4.3.1 No business shall be transacted at any general meeting unless a quorum is present. Subject to Article 4.3.2 below, two persons entitled to vote upon the business to the transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. 4.3.2 If and for so long as the Company has only one member, that member present in person or by proxy or (if that member is a corporation) by a duly authorized representative shall be a quorum. 4.3.3 If a quorum is not present within half an hour from the time appointed for a general meeting the general meeting shall stand adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the directors may determine; and if at the adjourned general meeting a quorum is not present within half an hour from the time appointed therefor such adjourned general meeting shall be dissolved. 4.3.4 Regulations 40 and 41 in Table A shall not apply to the Company. 4.4.1 If and for so long as the Company has only one member and that member takes any decision which is required to be taken in general meeting or by means of a written resolution, that decision shall be as valid and effectual as if agreed by the Company in general meeting, subject as provided in Article 4.4.3 below. 4.4.2 Any decision taken by a sole member pursuant to Article 4.4.1 above shall be recorded in writing and delivered by that member to the Company for entry in the Company's minute book. 4.4.3 Resolutions under section 303 of the Act for the removal of a director before the expiration of his period of office and under section 391 of the Act for the removal of an auditor before the expiration of his period of office shall only be considered by the Company in general meeting. 12 4.5 A member present at a meeting by proxy shall be entitled to speak at the meeting and shall be entitled to one vote on a show of hands. In any case where the same person is appointed proxy for more than one member he shall on a show of hands have as many votes as the number of members for whom he is proxy. Regulation 54 in Table A shall be modified accordingly. 4.6.1 Regulation 62 in Table A shall be read and construed as if the words "within the United Kingdom" were omitted therefrom. 4.6.2 Unless resolved by ordinary resolution that regulation 62 in Table A shall apply without the following modification, the instrument appointing a proxy and notarially or in some other way approved by the directors may be deposited at the place specified in regulation 62 in Table A up to the commencement of the meeting or (in any case where a poll is taken otherwise than at the meeting) of the taking of the poll or may be handed to the chairman of the meeting prior to the commencement of the business of the meeting. Unless otherwise resolved by ordinary resolution the directors may at their discretion treat a faxed copy of an instrument appointing a proxy as such an instrument for the purpose of this Article 4.6.2. 4.7 Any director may at his discretion treat a faxed copy of a signed resolution in writing as an instrument or document executed or signed by the signatory for the purposes of regulation 53 or regulation 93 in Table A, as the case may be. 4.8 Any corporation which is a member of the Company may, by a document signed by a duly authorised officer of that corporation, authorise such person as it thinks fit to act as its representative at any meeting of the Company. The person so authorised shall be enticed to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company personally present at such meeting. Any director may (but is not bound to) require such evidence as he thinks fit of the authority of the representative to act. 5. APPOINTMENT OF DIRECTORS 5.1.1 Regulation 64 in Table A shall not apply to the Company. 5.1.2 The maximum number and minimum number respectively of the directors may be determined from time to time by ordinary resolution. Subject to and in default of any such determination there shall be no maximum number of directors and the minimum number of directors shall be one. Whenever the minimum number of directors is one, a sole director shall have authority to exercise all the powers and discretions by Table A and by these Articles expressed to be vested in the directors generally, and regulation 89 in Table shall be modified accordingly. 13 5.2 The directors shall not be required to retire by rotation and regulations 73 to 80 (inclusive) in Table A shall not apply to the Company. 5.3 No person shall be appointed a director at any general meeting unless either: (a) he is recommended by the directors; or (b) not less than 14 nor more than 35 clear days before the date appointed for the general meeting, notice signed by a member qualified to vote at the general meeting has been given to the Company of the intention to propose that person for appointment, together with notice signed by that person of his willingness to be appointed. 5.4.1 Subject to Article 5.3 above, the Company may by ordinary resolution appoint any person who is willing to act to be a director, either to fill a vacancy or as an additional director. 5.4.2 The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number determined in accordance with Article 5.1.2 above as the maximum number of directors and for the time being in force. 5.5 Notwithstanding any other provisions of this Article 5, for so long as the Company is a subsidiary company, its holding company may appoint any person to be a director or remove any director from office howsoever appointed. 6. CONSENT, APPOINTMENT OR REMOVAL BY HOLDING COMPANY 6.1 Every consent or any appointment or removal of a director under the powers conferred upon a holding company by these Articles shall be made by instrument in writing and signed by a director or the company secretary of such holding company and such instrument shall only take effect on the service thereof at the registered office of the Company. Every such instrument shall be annexed to the directors' minute book as soon as practicable after such service. 6.2 No person dealing with the Company shall be concerned to see or enquire as to whether the powers of the directors have been in any way restricted hereunder or as to whether any requisite consent of a holding company has been obtained and any restriction imposed by these Articles shall be subject to the provisions of the Act. 6.3 If the Company has more than one holding company then for the purpose of these Articles references to its holding company shall be read and construed as references to its immediate holding company. 7. BORROWING POWERS 14 7.1 The directors may exercise all the powers of the Company to borrow money without limit as to amount and upon such terms and in such manner as they think fit, and subject (in the case of any security convertible into shares) to section 80 of the Act to grant any mortgage, charge or standard security over its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. 8. ALTERNATE DIRECTORS 8.1 Unless otherwise determined by the Company in general meeting by ordinary resolution an alternate director shall not be entitled as such to receive any remuneration from the Company, save that he may be paid by the Company such part (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct, and 8.2 A director, or any such other person as is mentioned in regulation 65 in Table A, may act as an alternate director to represent more than one director, and an alternate director shall be entitled at any meeting of the directors or of any committee of the directors to one vote for every director whom he represents in addition to his own vote (if any) as a director, but he shall count as only one for the purpose of determining whether a quorum is present. 8.3 Regulation 66 in Table A shall be read and construed as if the last sentence were omitted therefrom. 9. GRATUITIES AND PENSIONS 9.1.1 The directors may exercise the powers of the Company conferred by its Memorandum of Association in relation to the payment of pensions, gratuities and other benefits and shall be entitled to retain any benefits received by them or any of them by reason of the exercise of any such powers. 9.1.2 Regulation 87 in Table A shall not apply to the Company. 10. MEETINGS 10.1 In this Article "electronic" means actuated by electric, magnetic, electro-magnetic, electro-chemical or electro-mechanical energy and by electronic means" means by any manner only capable of being so actuated. 10.2 A person in communication by electronic means with the chairman and with all other parties to a meeting of the directors or of a committee of the directors shall be regarded for all purposes as personally attending such a meeting provided that but only for so long as at 15 such a meeting he has the ability to communicate interactively and simultaneously with all other parties attending the meeting including all persons attending by electronic means. 10.3 A meeting at which one or more of the directors attends by electronic means is deemed to be held at such place as the directors shall at the said meeting resolve. In the absence of a resolution as aforesaid, the meeting shall be deemed to be held at the place, if any, where a majority of the directors attending the meeting are physically present, or in default of such a majority, the place at which the chairman of the meeting is physically present. 11. PROCEEDINGS OF DIRECTORS 11.1.1 Regulation 88 in Table A shall be read and construed as if the third sentence were omitted therefrom. 11.1.2 A director may vote, at any meeting of the directors or of any committee of the directors, on any resolution, notwithstanding that it in any way concerns or relates to a matter in which he has, directly or indirectly, any kind of interest whatsoever, and if he shall vote on any such resolution his vote shall be counted; and in relation to any such resolution as aforesaid he shall (whether or not he shall vote on the same) be taken into account in calculating the quorum present at the meeting. 11.1.3 Each director shall comply with his obligations to disclose his interest in contracts under section 317 of the Act. 11.1.4 Regulations 94 to 97 [inclusive) in Table A shall not apply to the Company. 12. THE SEAL 12.1 If the Company has a seal it shall only be used with the authority of the directors or of a committee of directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or second director. The obligation under regulation 6 of Table A relating to the sealing of share certificates shall apply only if the Company has a seal. Regulation 101 in Table A shall not apply to the Company. 12.2 The Company may exercise the powers conferred by section 39 of the Act with regard to having an official seal for use abroad, and such powers shall be vested in the directors. 13. NOTICES 13.1 Regulation 112 in Table A shall be read and construed as if the last sentence was omitted therefrom. 16 13.2 Regulation 116 in Table A shall be read and construed as if the words "within the United Kingdom" were omitted therefrom. 13.3 Without prejudice to regulations 112 to 116 inclusive in Table A (as amended by Articles 13.1 and 13.2 above) the Company may give notice to a member by electronic means provided that: 13.3.1 the member has given his consent in writing to receiving notice communicated by electronic means and in such consent has set out an address to which the notice shall be sent by electronic means; and 13.3.2 the electronic means used by the Company enables the member concerned to read the text of the notice. 13.4 A notice given to a member personally or in a form permitted by Article 13.3 above shall be deemed to be given on the earlier of the day on which it is delivered personally and the day on which it was despatched by electronic means, as the case may be. 13.5 Regulation 115 in Table A shall not apply to a notice delivered personally or in a form permitted by Article 13.3 above. 13.6 In this article "electronic" means actuated by electric, magnetic, electro-magnetic, electro-chemical or electro-mechanical energy and " by electronic means" means by any manner only capable of being so actuated. 14. INDEMNITY 14.1 Every director or other officer or auditor of the Company shall be indemnified out of the assets of the Company against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, including any liability incurred by him in defending any proceedings, whether civil or criminal, or in connection with any application under section 144 or section 727 of the Act in which relief is granted to him by the Court, and no director or other officer shall be liable for any loss, damage or misfortune which may happen to or be incurred by the Company in the execution of the duties of his office or in relation thereto. But this Article shall only have effect in so far as its provisions are not avoided by section 310 of the Act. 14.2 The directors shall have power to purchase and maintain for any director, officer or auditor of the Company insurance against any such liability as is referred to in section 310(1) of the Act. 14.3 Regulation 118 in Table A shall not apply to the Company. 17 15. TRANSFER OF SHARES 15.1 The directors may, in their absolute discretion and without assigning any reason therefor, decline to register the transfer of a share, whether or not it is a fully paid share. 15.2 For so long as the Company is a subsidiary company, no transfer of a share shall be registered without the prior consent of the Company's holding company. 15.3 The first sentence of regulation 24 in Table A shall not apply to the Company. 18 - -------------------------------------------------------------------------------- Names and addresses of Subscribers - -------------------------------------------------------------------------------- 1. For and on behalf of Instant Companies Limited 1 Mitchell Lane Bristol BS1 6BU 2. For and on behalf of Swift Incorporations Limited 1 Mitchell Lane Bristol BS1 6BU - -------------------------------------------------------------------------------- Dated: 27th September 1999 Witness to the above Signatures:- Glenys Copeland 1 Mitchell Lane 19 20 The regulations of Table A to the Companies Act 1985 apply to the Company save in so far as they are excluded or varied by its Articles of Association. Table A as prescribed by the Companies (Tables A to F) Regulations 1985 (S.L. 1985 No. 805), amended by the Companies (Tables A to F) (Amendment) Regulations 1985 (S.I. 1985 No. 1052), is reprinted below. TABLE A THE COMPANIES ACT 1985 Regulations for Management of a Company Limited by Shares INTERPRETATION 1. In these regulations- "the Act" means the Companies Act 1985 including any statutory modification or re-enactment thereof for the time being in force. "the articles" means the articles of the company. "clear days" in relation to the period of notice meats that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect. "executed" includes any mode of execution. "office" means the registered office of the company. "the holder" in relation to shares means the member whose name is entered in the register of members as the holder of the shares. "the seal" means the common seal of the company. "secretary" means the secretary of the company or any other person appointed to perform the duties of the secretary of the company, including a joint, assistant or deputy secretary. "the United Kingdom" means Great Britain and Northern Ireland. Unless the context otherwise requires, words or expressions contained in these regulations bear the same meaning as in the Act but excluding any statutory modification thereof not in force when these regulations become binding on the company. SHARE CAPITAL 2. Subject to the provisions of the Act and without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the company may by ordinary resolution determine. 21 3. Subject to the provisions of the Act, shares may be issued which are to be redeemed or are to be liable to be redeemed at the option of the company or the holder on such terms and in such manner as may be provided by the articles. 4. The company may exercise the powers of paying commissions conferred by the Act. Subject to the provisions of the Act, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shared or partly in one way and partly in the other. 5. Except as required by law, no person shall be recognised by the company as holding any share upon any trust an (except as otherwise provided by the articles or by law) the company shall not be bound by or recognise any interest in any share except an absolute right to the entirety thereof in the holder. SHARE CERTIFICATES 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificated shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon. The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one point holder shall be a sufficient delivery to all of them. 7. If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the company in investigating evidence as the directors may determine but otherwise free of charge, and (in the case of defacement or wearing-out) on delivery up of the old certificate. LIEN 8. The company shall have a first and paramount lien on every share (not being a fully paid share) for all monies (whether presently payable or not) payable at a fixed time or called in respect of that share. The directors may at any time declare any share to be wholly or in party exempt form the provisions of this regulation. The company's lien on a share shall extend to any amount payable in respect of it. 22 9. The company may sell in such manner as the directors determine any shares on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen clear days after notice has been given to the holder of the share or to the person entitled to it in consequence of the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold. 10. To give effect to a sale the directors may authorise some person to execute an instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser. The title of the transferee to the shares shall not be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 11. The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (upon surrender to the company for cancellation of the certificate for the shares sold and subject to a like lien for any moneys not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. CALLS ON SHARES AND FORFEITURE 12. ??__________________________________________ ?? call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect whereof the call was made. 13. A call shall be deemed to have been made at the time when the resolution of the directors authorising the call was passed. 14. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 15. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call, or if no rate is fixed at the appropriate rate (as defined by the Act) but the Directors may waive payment of the interest wholly or in part. 16. An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an installment of a call shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call. 23 17. Subject to the terms of allotment, the directors may make arrangements on the issue of shares for a difference between the holders in the amounts and times of payment of calls on their shares. 18. If a call remains unpaid after it has become due and payable the directors may give to the person from whom it is due not less than fourteen clear days' notice requiring payment of the amount unpaid together with any interest which may not have accrued. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited. 19. If the notice is not complied with any share in respect of which it was given may, before the payment required by the notice has been made, be forfeited by a resolution of the directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture. 20. Subject to the provisions of the Act, a forfeited share may be sold, re-allotted or otherwise disposed of on such terms and in such manner as the directors determine either to the person who was before the forfeiture the holder or to any other person and in any time before sale, re-allotment or other disposition, the forfeiture may be canceled on such terms as the directors think fit. Where for the purpose of its disposal a forfeited share is to be transferred to any person the directors may authorise some person to execute an instrument of transfer of the share to that person. 21. A person any of whose shares has been forfeited shall cease to be a member in respect of them and shall surrender to the company for cancellation the certificate for the shares forfeited but shall remain liable to the company for all moneys which at the date of forfeiture were presently payable by him to the company in respect of those shares with interest at the rate at which interest was payable on those moneys before the forfeiture or, if no interest was so payable, at the appropriate rate (as defined in the Act) from the dated of forfeiture until payment but the directors may waive payment wholly or in part or enforce payment without any allowance for the value of the shares in at the time of forfeiture of for any consideration received on their disposal. 22. A statutory declaration by a director or the secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share and the declaration shall (subject tot the execution of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of the share. 24 TRANSFER OF SHARES 23. The instrument of transfer of a share may be in any usual form or in any other form which the directors may approve and shall be executed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien. They may also refuse to register a transfer unless:- (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied bu the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer:- (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees. 25. If the directors refuse to register a transfer of a share, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal. 26. The registration of transfers of shares or of transfers of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the directors may determine. 27. No fee shall be charged for the registration of any instrument of transfer or other document, relating to or affecting the title to any share. 28. The company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given. TRANSMISSION OF SHARES 29. If a member dies the survivor or survivors where he was a joint holder and his personal representatives where he was a sole holder of the only survivor of joint holders, shall be the only persons recognised by the company as having herein maintained shall release the estate of deceased member from any liability in respect of any share which had been jointly held by him. 25 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred. 31. A person becoming entitled to a share in consequence of the death or bankruptcy of a member shall have the rights to which he would be entitled if he were the holder of the share, except that he shall not, before being registered as the holder of the share, be entitled in respect of it to attend or vote at any meeting of the company or at any separate meeting of the holders of any class of shares in the company. ALTERATION OF SHARE CAPITAL 32. The company may by ordinary resolution: (a) increase its share capital by new shares of such amount as the resolution prescribes; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) Subject to the provisions of the Act, sub-divide its shares, or any of them, into shares of smaller amount and the resolution may determine that, as between the shares resulting from the sub-division, any of them may have any preference or advantage as compared with the others; and (d) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. 33. Whenever as a result of a consolidation of shares any members would become entitled to fractions of a share, the directors may, on behalf of those members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Act, the company) and distribute the net proceeds of sale in due proportion among those members, and the directors may authorise some person to execute an instrument of transfer of the shares to, or in accordance with the direction of, the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 26 34. Subject to the provisions of the Act, the company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way. PURCHASE OF OWN SHARES 35. Subject to the provisions of the Act, the company may purchase its own shares (including any redeemable shares) and, if it is a private company, make a payment in respect of the redemption or purchase of its own shares otherwise then out of distributable profits of the company or the proceeds of a fresh issue of shares. GENERAL MEETINGS 36. All general meetings other than annual general meetings shall be called extraordinary general meetings. 37. The directors may call general meetings and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene an extraordinary general meeting for a date not later than eight weeks after receipt of the requisition. If there are not within the United Kingdom sufficient directors to call a general meeting, any director or any member of the company may call a general meeting. NOTICE OF GENERAL MEETINGS 38. An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or a resolution appointing a person as a director shall be called by at least twenty-one clear days' notice. All other extraordinary general meetings shall be called by at least fourteen clear days' notice but a general meeting may be called by shorter notice if it is so agreed: (a) in the case of an annual general meeting, by all the members entitled to attend and vote thereat; and (b) in the case of any other meeting by a majority in number of the members having a right to attend and vote being a majority together holding not less than ninety-five percent, in nominal value of the shares giving that right. The notice shall specify the time and place of the meeting and the general nature of the business to be transacted and, in the case of an annual general meeting, shall specify the meeting as such. Subject to the provisions of the articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to all persons entitled to a share in consequence of the death or bankruptcy of a member and to the directors and auditors. 27 39. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting. PROCEEDINGS AT GENERAL MEETINGS 40. No business shall be transacted at any meeting unless a quorum is present. Two persons entitled to vote upon the business to be transacted, each being a member of a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. 41. If such a quorum is not present within half an hour form the time appointed for the meeting, or if during a meeting such a quorum ceases to be the present, the meeting shall stand adjourned to the same day in the next week at the same time and place to such time and place as the directors may determine. 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if nether the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman. 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the company. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place. When a _________________ general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice. 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded: (a) by the chairman, or (b) by at least two members having the right to vote at the meeting; or 28 (c) by a member or members representing not less than one-tenth of the total votingrights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member. 47. Unless a poll is duly demanded a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number of proportion of the votes recorded in favour of or against the resolution. 48. The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 50. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman shall be entitled to a casting vote in addition to any other vote he may have. 51. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or at such time and place as the chairman directs not being more than thirty days after the poll is demanded. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made. 52. No notice need be given of a poll not taken forthwith if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days' notice shall be given specifying the time and place at which the poll is to be taken. 53. A resolution in writing executed by or on behalf of each member who would have been entitled to vote upon it if it had been proposed at a general meeting at which he was present shall be as effectual as if it had been passed at a general meeting duly convened and held 29 and may consist of several instruments in the like form each executed by or on behalf of a one or more members. VOTES OF MEMBERS 54. Subject to any rights or restrictions attached to any shares, on a show of hands every member who (being an individual) is present in person or (being a corporation) is present by a duly authorised representative, not being himself a member entitled to vote, shall have one vote and on a poll every member shall have one vote for every share of which he is the holder. 55. In the case of joint holders the vote of the senior who tenders a vote, wether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the register of members. 56. A member in respect of whom an order has been made by any court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder may vote, whether on a show of hands or on a poll, by his receiver, curator bonis or other person authorised in that behalf appointed by that court, and any such receiver, curator bonis or other person may, on a poll, vote by proxy. Evidence to the satisfaction of the directors of the authority of the person claiming to exercise the right to vote shall be deposited at the office, or at such other place as is specified in accordance with the articles for the deposit of instruments of proxy, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised and in default the right to vote shall not be exercisable. 57. No member shall vote at any general meeting or at any separate meeting of the holders of any class of shares in the company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid. 58. No objection shall be raised to the qualification of any other except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive. 59. On a poll votes may be given either personally or by proxy. A member may appoint more than one proxy to attend on the same occasion shall be final and conclusive. 60. An instrument appointing a proxy shall be in writing executed by or on behalf of the appointor and shall be in the following form (or in a form as near thereto as circumstances will allow or in any other form which is usual or which the directors may approve): 30 " Plc/Limited I/We, , of , being a member/members of the above named company, hereby appoint of or failing him, of , as my/our proxy to vote in my/our name(s) and on my/our behalf at the annual/extraordinary general meeting of the company to be held on 19 , and at any adjournment thereof. 61. Where it is desired to afford members an opportunity of instructing the proxy how he shall act the instrument appointing a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve): " Plc/Limited I/We, , of , being a member/members of the above-named company, hereby appoint of or failing him, of , as my/our proxy to vote in my/our name(s) and on my/our behalf at the annual/extraordinary general meeting of the company, to be held on 19 , and at any adjournment thereof. This form is to be used in respect of the resolutions mentioned below as follows: Resolution No. 1 * for *against Resolution No. 2 *for *against *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from 62. The instrument appointing a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may:- (a) be deposited at the office or at such other place within the United Kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument of proposes to vote; or (b) in the case of a poll taken more than 48 hours after it is demanded, be deposited as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; (c) where the poll is not taken forthwith but is taken not more than 48 hours before the time for holding the meeting at which the poll was demanded to the chairman or to the secretary or to any director; and an instrument of proxy which is not deposited or delivered in a manner so permitted shall be invalid. 31 63. A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the company at the office or at such other place at which the instrument of proxy was duly deposited before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll. NUMBER OF DIRECTORS 64. Unless otherwise determined by ordinary resolution, the number of directors (other than alternate directors) shall not be subject to any maximum but shall be not less than two. ALTERNATE DIRECTORS 65. Any director (other than an alternate director) may appoint any other director, or any other person approved by resolution of the directors and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him. 66. An alternate director shall be entitled to receive notice of all meetings of directors and of all meetings of committees of directors of which his appointor is a member, to attend and vote at any such meeting at which the director appointing him is not personally present, and generally to perform all the functions of his appointor as a director in his absence but shall not be entitled to receive any remuneration from the company for his services as an alternate director. But it shall not be necessary to give notice of such a meeting to an alternate director who is absent from the United Kingdom. 67. An alternate director shall cease to be an alternate director if his appointor ceases to be a director; but, if a director retires by rotating or otherwise but is reappointed or deemed to have been reappointed at the meeting at which he retires, any appointment of an alternate director made by him which was in force immediately prior to his retirement shall continue after his reappointment. 68. Any appointment or removal of an alternate director shall be by notice to the company signed by the director making or revoking the appointment or in any other manner approved by the directors. 69. Save as otherwise provided in the articles, an alternate director shall be deemed for all purposes to be a director and shall alone be responsible for his own acts and defaults and he shall not be deemed to be the agent of the director appointing him. 32 POWERS OF DIRECTORS 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers. DELEGATION OF DIRECTORS' POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying. APPOINTMENT AND RETIREMENT OF DIRECTORS 73. At the first annual general meeting all the directors shall retire from office, and at every subsequent annual general meeting one-third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to one-third shall retire from office; but if there is only one director who is subject to retirement by rotation, he shall retire. 74. Subject to the provisions of the Act, the directors to retire by rotation shall be those who have been longest in office since their last appointment or reappointment, but as between persons who became or were last reappointed directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 75. If the Company, at the meeting at which a director retires by rotation, does not fill the vacancy the retiring director shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the director is put to the meeting and lost. 33 76. No person other than a director retiring by rotation shall be appointed or reappointed a director at any general meeting unless: (a) he is recommended by the directors; or (b) not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the company of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the company's register of directors together with notice executed by that person of his willingness to be appointed or reappointed. 77. Not less than seven nor more than twenty-eight clear days before the date appointed for holding a general meeting notice shall be given to all who are entitled to receive notice of the meeting of any person (other than a director retiring by rotation at the meeting) who is recommended by the directors for appointment of reappointments as a director at the meeting or in respect of shall give the particulars of that person which would, if he were so appointed or reappointed be required to be included in the company's register of directors. 78. Subject as aforesaid, the company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 79. The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors. A director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof. 80. Subject as aforesaid, a director who retires at an annual general meeting may, if willing to act, be reappointed. If he is not reappointed, he shall retain office until the meeting appoints someone in his place, or if it does not do so, until the end of the meeting. DISQUALIFICATION AND REMOVAL OF DIRECTORS 81. The office of a director, shall be vacated if: (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or 34 (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) he is, or may be, suffering from mental disorder and either: (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1980; or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or (d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated. REMUNERATION OF DIRECTORS 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day. DIRECTORS' EXPENSES 83. The directors may be paid all traveling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties. DIRECTORS' APPOINTMENTS AND INTERESTS 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may by be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the 35 contract of service between the director and the company. A managing director and a director holding any other exclusive office shall not be subject to retirement by rotation. 85. Subject to the provisions of the Act, and provided that he has disclosed to the directors the nature and extent of any material interest of his, a director notwithstanding his office:- (a) may be a party to, or otherwise interested in, any transaction or arrangement with the company or in which the company is otherwise interested: (b) may be a director or other officer of, employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the company or in which the company is otherwise interested; (c) shall not, by reach of his office, be accountable to the company for any benefit which be derives from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. 86. For the purposes of regulation 85:- (a) a general notice given to the directors that a director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the director has an interest in any such transaction of the nature and extent so specified; and (b) an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his. DIRECTORS' GRATUITIES AND PENSIONS 87. The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit. PROCEEDINGS OF DIRECTORS 36 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of the appointor to a separate vote on behalf of his appointor in addition to his own vote. 89. The quorum for the transaction of the business of the directors may be faxed by the directors and unless so faxed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum. 90. The continuing directors or a sole continue director may act _____________. 91. The directors may appoint one of their number to be the chairman of the board of directors and may at any time remove him from that office. Unless he is unwilling to do so, the director so appointed shall preside at every meeting of directors at which he is present. But if there is no director holding that office, or the director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the directors present may appoint one of their number to be chairman of the meeting. 92. All acts done by a meeting of directors, or a committee of directors, or a person acting as a director shall, notwithstanding that it be afterwards discovered that there was a defect in the appointment of any director or that many of them were disqualified from holding office, or had vacated office, or were not entitled to vote, be as valid as if every such person had been duly appointed was qualified and had continued to be a director and had been entitled to vote. 93. A resolution in writing signed by all the directors entitled to receive notice a meeting of directors or of a committee of directors shall be as valid and actual as if it had been passed at a meeting of directors or (as the case may be, a committee of directors duly converted and held and may consist of several documents in the like form each signed by one or more directors; but a solution signed by an alternate director need not also be signed by his monitor and, if it is signed by a director who has appointed an alternate factor, if need not signed by the alternate director in that capacity. 94. Save as otherwise provided by the articles, a director shall not vote at a meeting of directors or of a committee of directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which conflicts or may conflict with the interests of the company unless his interest or duty arises only because the case falls within one or more of the following paragraphs:- 37 (a) the resolution relates to the giving to him of a guarantee, security, or indemnity in respect of money lent to, or an obligation incurred by him for the benefit of, the Company or any of its subsidiaries; (b) the resolution relates to the giving to a third party of a guarantee, security or indemnity in respect of an obligation of the company or any of its subsidiaries for which the director has assumed responsibility in whole or in part whether alone or jointly with others under a guarantee or indemnity or by giving the security; (c) his interest arises by virtue of his subscribing or agreeing to subscribe for any shares, debentures or other securities of the company or any of its subsidiaries, or by virtue of his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such shares, dentures, or other securities by the company or any of its subsidiaries for description, purchase or exchange; (d) the resolution relates in any way to a retirement benefits scheme which has been approved, or is conditional upon approval, by the Board of Inland Revenue for taxation purposes. For the purposes of the regulation, an interest of a person who is, for any purpose of the Act (excluding any statutory modification thereof not in force when this regulation becomes binding on the company), connected with a director shall be treated as an interest of the director and, in relation to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. 95. A director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. 96. The company may by ordinary resolution suspend or relax to any extent, either generally or in respect of any particular matter, any provision of the articles prohibiting a director from voting at a meeting of directors or of a committee of directors. 97. Where proposals are under consideration concerning the appointment of two or more directors to offices or employments with the company or any body corporate in which the company is interested the proposals may be divided and considered in relation to each director separately and (provided he is not for other reason precluded from voting) each of the directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning this own appointment. 98. If a question arises at a meeting of directors or of a committee of directors to the right of a director to vote, the question may, before the conclusion of the meeting, be referred to the 38 chairman of the meeting and his ruling in relation to any director other than himself shall be final and conclusive. SECRETARY 99. Subject to the provisions of the Act, the secretary shall be appointed by the directors for such term, at such remuneration and upon such conditions as they may think fit; and any secretary so appointed may be removed by them. MINUTES 100. The directors shall cause minutes to be made in books kept for the purpose: (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, of the holders of any class of shares in the company, and of the directors, and of the committees of directors, including the names of the directors present at such meeting. THE SEAL 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director. DIVIDENDS 102. Subject to the provisions of the Act, the company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. 103. Subject to the provisions of the Act, the directors may pay interim dividends if it appears to them that they are justified by the profits of the company available for distribution. If the share capital is divided into different classes, the directors may pay interim dividends on shares which confer deferred or non-preferred rights with regard to dividend as well as on shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. The directors may also pay at 39 intervals settled by them any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. Provided the directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights. 104. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. 105. A general meeting declaring a dividend may, upon the recommendation of the directors, direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to the distribution, the directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash shall be paid to any member upon the footing of the value so fixed in order to adjust the rights of members and may vest any assets in trustees. 106. Any dividend or other moneys payable in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the register of members or to such person and to such address as the person or persons entitled may in writing direct. Every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share. 107. No dividend or other moneys payable in respect of a share shall bear interest against the company unless otherwise provided by the rights attached to the share. 108. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company. ACCOUNTS 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company. 40 CAPITALISATION OF PROFITS 110. The directors may with the authority of an ordinary resolution of the company: (a) subject as hereinafter provided, resolve to capitalise any undivided profits of the company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the company's share premium account or capital redemption reserve; (b) appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or in paying up in full unissued shares or debentures of the company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other; but the share premium account, the capital redemption reserve, and any profits which are not available for distribution may, for the purposes of this regulation, only be applied in paying up unissued shares to be allotted to members credited as fully paid; (c) make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this regulation in fractions; and (d) authorise any person to enter on behalf of all the members concerned into an agreement with the company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation, any agreement made under such authority being binding on all such members. NOTICES 111. Any notice to be given to or by any person pursuant to the articles shall be in writing except that a notice calling a meeting of the directors need not be in writing. 112. The company may give any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address. In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of members in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders. A member whose registered address is not within the United Kingdom and who gives to the company an address within the United Kingdom at which notices may be given to him shall be 41 entitled to have notices given to him at that address, but otherwise no such member shall be entitled to receive any notice from the company. 113. A member present, either in person or by proxy, at any meeting of the company or of the holders of any class of shares in the company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which it was called. 114. Every person who becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the register of members, has been duly given to a person from whom he derives this title. 115. Proof that an envelope containing a notice was properly addressed, prepared and posted shall be conclusive evidence that the notice was given. A notice shall be deemed to be given at the expiration of 48 hours after the envelope containing it was posted. 116. A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending or delivering it, in any manner authorised by the articles for the giving of notice to a member, addressed to them by name, or by the title or representatives of the deceased, or trustee of the bankrupt or by any like description at the address, if any, within the United Kingdom supplied for that purpose by the persons claiming to be so entitled. Until such address has been supplied, a notice may be given in any manner in which it might have been given if the death or bankruptcy had not occurred. WINDING UP 117. If the company is wound up, the liquidator may, with the sanction of an extraordinary revolution of the company and any other sanction required by the Act, divide among the members in specie the whole or any part of the assets to the company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he with the like sanction determines, but no member shall be compelled to accept any assets upon which there is a liability. INDEMNITY 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is 42 granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company. 43 EX-3.25 28 EXHIBIT 3.25 EXHIBIT 3.25 CERTIFICATE OF INCORPORATION No. 1248588 I hereby certify that WEIGHT WATCHERS (U.K.) LIMITED is this day incorporated under the Companies Acts 1948 to 1967 and that the Company is limited. Given under my hand at London the 11th MARCH 1976 /s/ N. Taylor ------------- N. TAYLOR Assistant Registrar of Companies 2 MEMORANDUM & ARTICLES OF ASSOCIATION of WEIGHT WATCHERS (U.K.) LIMITED CLIFFORD-TURNER - ------------------------------------------------------------------------------ 11 OLD JEWRY LONDON EC2R 8DS Telephone 01-606-3060 3 No. 1248588 THE COMPANIES ACTS OF 1948 AND 1967 --------------------------- COMPANY LIMITED BY SHARES --------------------------- MEMORANDUM OF ASSOCIATION - of - WEIGHT WATCHERS (U.K.) LIMITED 1. The Name of the Company, is "WEIGHT WATCHERS (U.K.) LIMITED". 2. The Registered Office of the Company will be situate in England. 3. The Objects for which the Company is established are: A. To act as an investment holding company and to coordinate the business of any companies in which the Company is for the time being interested, and to acquire (whether by original subscription, tender, purchase, exchange or otherwise) the whole or any part of the stock, shares, debentures, debenture stock, bonds or other securities issued or guaranteed by any body corporate constituted or carrying on business in any part of the world or by any government, sovereign rules, commissioners, public body or authority, and to hold the same as investments, and to sell, exchange, and otherwise dispose of the same. B. To carry on the business of obesity control and to engage in any activity (including without limitation the conduct of classes) trade or business relating to or which in the opinion of the Directors assists in or is conducive to loss or control of weight or dietary control, and to manufacture, supply, deal in, buy, sell, import and export all or any goods, produce and merchandise of all kinds which may be conveniently dealt in by the Company in connection therewith or which may be required by or in the opinion of the Directors may be useful or beneficial to customers of or persons dealing with the Company, and to purchase or by any means acquire any franchise, license, or concession relating to such business, trade or activity as aforesaid. 4 C. To carry on any other trade or business whatsoever which can in the opinion of the Directors be advantageously carried on by the Company in connection with or as auxiliary to the general business of the Company. D. To buy, sell, manufacture, repair, alter, improve, manipulate, prepare for market, let on hire, and generally deal in all kinds of plant, machinery, apparatus, tools, utensils, materials, produce, substances, articles and things for the purpose of any of the businesses specified herein, or likely to be required by customers or other persons having, or about to have, dealings with the Company. E. To build, construct, maintain, alter, enlarge, pull down and remove or replace any buildings, shops, factories, offices, works, machinery, engines and to clear sites for the same or to join with any person, firm or company in doing any of things aforesaid and to work, manage and control the same or join with others in so doing. F. To enter into contracts, agreements and arrangements with any other company for the carrying out by such other company behalf of the Company of any of the objects for which the Company is formed. G. To acquire, undertake and carry on the whole or any part of the business, property and liabilities of any person or company carrying on any business which the Company is authorised to carry on or possess, or which may seem to the Company capable of being conveniently carried on or calculated directly or indirectly to enhance the value of or render profitable any of the Company's property or rights, or any property suitable for the purposes of the Company. H. To enter into any arrangements with any Government or authorities, supreme, municipal, local or otherwise, that may seem conducive to the Company's objects or any of them, and to obtain from any such Government or authority any rights, privileges, and concessions which the Company may think it desirable to obtain, and to carry out, exercise and comply with any such arrangements, rights, privileges and concessions. I. To apply for, or join in applying for, purchase or by other means acquire and protect, prolong and renew, whether in the United Kingdom or elsewhere any patents, patent rights, brevets d'invention, licences, registered designs, protections and concessions, which may appear likely to be advantageous or useful to the Company, and to use and turn to account and to manufacture under or grant licences or privileges in respect of the same, and to expend money in experimenting and testing and making researches, and in improving or seeking to improve any patents, inventions or rights which the Company may acquire or propose to acquire. J. To enter into partnership or into any arrangement for sharing profits, union of interests, co-operation, joint adventure, reciprocal concession, or otherwise with any company, or with any employees of the Company, including in such case if thought fit the conferring of a participation 5 in the management or its directorate, or with any company carrying on or engaged in any business or transaction capable of being conducted so as directly or indirectly to benefit the Company, and to give to any company special rights or privileges in connection with or control over this Company, and in particular the right to nominate one or more Directors of this Company. And to lend money to, guarantee the contracts of, or otherwise assist any such company, and to take or otherwise acquire shares or securities of any such company, and to sell, hold re-issue, with or without guarantee, or otherwise deal with the same. K. To subsidise and assist any persons or companies and to act as agents for the collection, receipt or payment of money and generally to act as agents for and render services to customers and others. L. Either with or without the Company receiving any consideration or advantage, direct or indirect, from giving any such guarantee, to guarantee by personal covenant or by mortgaging or charging all or any part of the undertaking, property and assets present and future and uncalled capital or by both such methods or by any other means whatsoever the performance of the obligations and the payment of any moneys (including but not limited to capital or principal, premiums, dividends or interest, commissions, charges, discount and any costs or expenses relating thereto whether on any stocks, shares or securities or in any other manner whatsoever) by any company, firm or person including but not limited to any company which is for the time being the Company's holding company as defined by Section 154 of the Companies Act, 1948 or a subsidiary of the Company or of the Company's holding company as so defined or any company, firm or person who is for the time being a member or otherwise has any interest in the Company or is associated with the Company in any business or venture or any other person, firm or company whatsoever. M. To promote any company for the purpose of acquiring all or any of the property and liabilities of this Company, or for any other purpose which may seem directly or indirectly calculated to benefit this Company. N. To pay out of the funds of the Company all expenses which the Company may lawfully pay of or incident to the formation, registration and advertising of or raising money for the Company, and the issue of its capital, or for contributing to or assisting any company either issuing or purchasing with a view to issue all or any part of the Company's capital in connection with the advertising or offering the same for sale or subscription, including brokerage and commissions for obtaining applications for or taking, placing or underwriting or procuring the underwriting of shares, debentures or debenture stock. O. To remunerate any person, firm or company rendering service to the Company whether by cash payment or by the allotment to him or them of shares or securities of the Company credited as fully paid up in full or in part or otherwise. 6 P. Generally to purchase, take on lease or exchange, hire, or otherwise acquire any real or personal property and any rights or privileges which the Company may think necessary or convenient for the purposes of its business. Q. To receive money on deposit upon such terms as the Company may approve. R. To invest and deal with the moneys of the Company in such manner as may from time to time be determined. S. To lend money with or without security, but not to carry on the business of a registered money lender. T. To borrow or raise or secure the payment of money in such manner as the Company shall think fit, and in particular by the issue of debentures or debenture stock, perpetual or otherwise charged upon all or any of the Company's property (both present and future), including its uncalled capital, and to purchase, redeem or pay off any such securities. U. To remunerate any company for services rendered or to be rendered, in placing, or assisting to place, or guaranteeing the placing or procuring the underwriting or any of the shares or debentures, or other securities of the Company or of any company in which this Company may be interested or propose to be interested, or in or about the conduct of the business of the Company, whether by cash payment or by the allotment of shares, or securities of the Company credited as paid up in full or in part, or otherwise. V. To subscribe for either absolutely or conditionally or otherwise acquire and hold shares, stocks, debentures, debenture stock or other obligations of any other company having objects altogether or in part similar to those of this Company. W. To draw, make, accept, endorse, discount, execute and issue promissory notes, bills of lading, warrants, debentures and other negotiable and transferable instruments. X. To sell, lease, exchange, let on hire, or dispose of any real or personal property or the undertaking of the Company, or any part or parts thereof, for such consideration as the Company may think fit, and, in particular, for shares whether fully or partly paid up, debentures or securities of any other company, whether or not having objects altogether, or in part, similar to those of the Company, and to hold and retain any shares, debentures or securities to acquired, and to improve, manage, develop, sell, exchange, lease, mortgage, dispose of or turn to account or otherwise deal with all or any part of the property or rights of the Company Y. To adopt such means of making known the products of the Company as may seem expedient, and in particular by advertising in the Press, by circulars, by purchase and exhibition of works 7 of art or interest, by publication of books and periodicals, and by granting prizes, rewards and donations. Z. To support or subscribe to any charitable or public object and any institution, society or club which may be for the benefit of the Company or its directors, officers or employees, or the directors, officers and employees of its predecessors in business, or of any subsidiary, allied or associated company, or may be connected with any town or place where the Company carries on business; to give pensions, gratuities, or charitable aid to any person (including any Directors or former Directors) who may have served the Company or its predecessors in business, or any subsidiary allied or associated company or to the wives, children or other relatives or dependents of such person; to make payments towards insurance and to form and contribute to provident and benefit funds for the benefit of any Directors or officers of or persons employed by the Company, or of or by its predecessors in business, or of or by any subsidiary, allied or associated company, and to subsidise or assist any association of employers or employees, or any trade association. AA. To obtain any Provisional Order or Act or Parliament for enabling the Company to carry any of its objects into effect or for effecting any modifications of the Company's constitution or for any other purposes which may seem expedient, and to oppose any proceedings for applications which may seem calculated directly or indirectly to prejudice the Company's interests. BB. To establish, grant and take up agencies in nay part of the world, and to do all such other things as the Company may deem conducive to the carrying on of the Company's business, either as principals, or agents, and to remunerate any persons in connection with the establishment or granting of such agencies upon such terms and conditions as the Company may think fit. CC. To do all or any of the above things in any part of the world and as principals, agents, contractors, trustees or otherwise, and by or through trustees, agents or otherwise, and either alone or in conjunction with others and to procure the Company to be registered or recognized in any foreign country or place. DD. To distribute any of the property of the Company in specie among the shareholders. EE. To amalgamate with any other company having objects altogether or in part similar to those of this Company. FF. To do all such other things as are incidental or conducive to the attainment of the above objects, or any of them. And it is hereby declared that the word "company" in this Clause shall be deemed to include any person or partnership or other body of persons whether domiciled in the United Kingdom or 8 elsewhere, and words denoting the singular number only shall include the plural number and vice versa, and so that the object specified in each paragraph of this Clause shall, except where otherwise expressed in such paragraph, be regarded as independent objects, and in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company. 4. The liability of the Members is limited. 5.* The Share Capital of the Company is (pound)100 divided into 100 Ordinary Shares of (pound)l each. - ---------------- * NOTE: By Special Resolution passed 5th May, 1976, the Share Capital of the Company was increased to (pound)2,000,000 by the creation of an additional 99,900 Ordinary Shares of (pound)1 each and the creation of 1,900,000 Redeemable Preference Shares of (pound)1 each. 9 WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company, in pursuance of this Memorandum of Association, and we respectively agree to take the number of Shares in the Capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND DESCRIPTIONS Number of Shares OF SUBSCRIBERS taken by each Subscriber - -------------------------------------------------------------------------------- M.J. Howell, 11, Old Jewry, One London EC2R 8DS Solicitor C.W.J. Cornfield. 11, Old Jewry, One London EC2R 8DS Solicitor - -------------------------------------------------------------------------------- DATED the 19th day of February, 19776 WITNESS to all the above Signatures:- E.C. Hannabuss, 11, Old Jewry, London EC2R 8DS Legal Executive 10 No. 1248588 THE COMPANIES ACTS 1948 TO 1967 --------------------------- COMPANY LIMITED BY SHARES --------------------------- ARTICLES OF ASSOCIATION - of - WEIGHT WATCHERS (U.K.) LIMITED (as amended by Special Resolution passed 5th May, 1976) PRELIMINARY 1. (A) In these Articles "Table A" means Table A in the First Schedules to the Companies Act, 1948, as amended by the Companies Act, 1967. (B) The regulations contained in Part I of Table A shall apply to the Company save in so far as they are excluded or modified hereby. The Clauses in Part I of Table A numbered 24, 53, 64, 77, 79, 87, 88(a) and (f), 89, 90, 91, 92, 93, and 107 shall not apply, but, subject as aforesaid, and in addition to the remaining Clauses in Part I of Table A the following shall be the Articles of Association of the Company. PRIVATE COMPANY. 2. The Company is a private company, and accordingly the regulations contained in Part II of Table A, except Clause 1 therein, shall apply to the Company. SHARES. 3. The share capital of the Company at the date of adoption of this Article is (pound)2,000,000 divided into 100,000 Ordinary Shares of (pound)1 each and 1,900,000 Redeemable Preference Shares of (pound)1 each. 4. (A) The Redeemable Preference Shares shall confer on the holders thereof: 11 (i) the right to receive a non-cumulative dividend to be distributed among the holders in proportion to the amount paid up thereon, of the profits of any financial year of the Company which it shall be determined to distribute and (ii) the right on a return of assets whether in a winding up or otherwise to a return of capital in priority to all other shares in the capital of the Company (iii) the right to receive notice of and to attend and vote in person or by proxy at every General Meeting of the Company. (B) The Redeemable Preference Shares shall be liable to redemption at any time at the option of the Company and, subject to the provisions of Section 58 of the Act (and of any statutory modification or re-enactment thereof for the time being in force), redemption thereof shall be effected in manner and on the terms following:- (i) The Company shall give to the holder or holders of the Redeemable Preference Shares to be redeemed not less that one month's previous notice in writing of its intention to redeem at par, specifying the date fixed for redemption and the place at which the certificates for such shares are to be presented for redemption and upon such date the holder or holders of each of the Shares concerned shall be bound to deliver to the Company at such place the certificates or such of the shares concerned as are held by him in order that the same may be cancelled. Upon such delivery the Company shall pay to such holder (or, in the case of joint holders, to the holder whose name stands first in the Register of Members in respect of such shares) the amount due to him in respect of such redemption. (ii) There shall be paid in respect of each Redeemable Preference Share redeemed the amount paid up thereon, but no premium or other moneys whatsoever. (iii) As from the date fixed for redemption of any share, dividends shall cease to accrue thereon unless upon presentation of the certificate relating thereto payment of the money due thereon is refused, in which case dividends shall continue to accrue thereon from the date fixed for redemption to the date of payment. (iv) The unissued share capital resulting from redemption pursuant to this Article shall, by virtue of this paragraph, become Ordinary Shares, each of a like nominal amount as and ranking pari passu in all respects with any Ordinary Shares forming part of the issued share capital of the Company. 5. (A) The holders of the Ordinary Shares shall not be entitled to participate in profits of the Company until all of the Redeemable Preference Shares shall have been redeemed. Upon redemption of all the said Redeemable Preference Shares, the holders of the Ordinary Shares shall become entitled to participate in such profits as the Company may thereafter determine to distribute. 12 (B) Subject to the prior right of the holders of Redeemable Preference Shares to a return of capital, the Ordinary Shares shall confer on the holders thereof the right on a return of assets whether in a winding up or otherwise to a distribution of the balance of assets of the Company available for distribution among the Members. 6. All shares for the time being created and unissued shall be under the control of the Directors, who may allot or otherwise dispose of the same to such persons (including any Directors), on such terms and conditions and at such time or times as the Directors may think fit, and with full power for the Directors to give to any person (including any Director) the call of any shares, either at par or at a premium, and for such time and for such consideration as the Directors may think fit. 7. The line conferred by Clause 11 in Part I of Table A shall attach to fully paid shares and to all shares registered in the name of any person indebted or under liability to the Company whether he be the sole registered holder thereof or one of two or more joint holders. 8. In Clause 15 of Part I of Table A the following words "except in so far as may be otherwise agreed between the Company and any Member in the case of the shares held by him" shall be inserted immediately after the words "Provided that." NOTICES. 9. Every notice calling a General Meeting shall comply with the provisions of Section 136(2) of the Act, as to giving information to Members in regard to their right to appoint proxies, and all notices and other communications relating to a General Meeting which any Member is entitled to receive shall also be sent to the Auditor for the time being of the Company. RESOLUTIONS. 10. Any such resolution in writing as is referred to in Clause 5 in Part II of Table A may consist of several documents in the like form each signed by one or more of the Members (or their duly authorised representatives) in that Clause referred to. TRANSFERS. 11. An instrument of transfer of a share (other than a partly paid share) need not be executed on behalf of the transferee and Clause 22 of Part I of Table A shall be modified accordingly. PROCEEDINGS AT GENERAL MEETINGS. 12. The following words shall be added to the end of the Clause 52 in Part I of Table A "and fixing the remuneration of Directors." 13 13. The words "the meeting shall be dissolved" shall be substituted for the words "the members present shall be a quorum" in Clause 54 in Part I of Table A. 14. It shall not be necessary to give any notice of an adjourned meeting and Clause 57 in Part I of Table A shall be construed accordingly. 15. A poll may be demanded by any Member present in person or by proxy and Clause 58 in Part I of Table A shall be modified accordingly. 16. A Member for whom a receiver, curator bonis or other person in the nature of a receiver or curator bonis has been appointed by a Court in England and Wales or Scotland having jurisdiction in that behalf on the ground that the Member is incapable by reason of mental disorder of managing and administering his property and affairs may vote, whether on a show of hands or on a poll, by the person so appointed and that person may appoint a proxy vote on a poll on behalf of the Member. DIRECTORS. 17. Unless and until otherwise determined by the Company in General Meeting the number of Directors shall be not less than two nor more than seven and Clause 75 in Part I of Table A shall be modified accordingly. 18. A Director need not hold any shares of the Company to qualify him as a Director but he shall be entitled to receive notice of and attend at all General Meetings of the Company at all separate General Meetings of the holders of any class of shares in the Capital of the Company and Clause 134 of Part I of Table A shall be modified accordingly. 19. If any Director shall be called upon to perform extra services or to make special exertions in going or residing abroad otherwise for any of the purposes of the Company, the Company may remunerate the Director so doing either by a fixed sum or by a percentage of profits or otherwise as may be determined by a resolution passed at a Board Meeting of the Directors of the Company, and such remuneration may be either in addition to or in substitution for any other remuneration to which he may be entitled as a Director. 20. The Directors may exercise all the powers of the Company to borrow or raise money and to mortgage or charge its undertaking, property and uncalled capital and to issue debentures, debenture stock and other securities as security for any debt, liability or obligation of the Company or of any third party. 21. A Director may vote as a Director in regard to any contract or arrangement in which he is interested, or upon any matter arising thereout, and if he does so vote his vote shall be counted and he shall be reckoned in estimating a quorum when any such contract or arrangement is under consideration and Clause 84 in Part I of Table A shall be modified accordingly. 14 22. A Director present at any meeting of Directors or Committees of Directors need not sign his name in a book kept for the purpose and Clause 86 in Part I of Table A shall be modified accordingly. 23. The Directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or on his death to his widow or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance. 24. Paragraph (d) of Clause 88 of Part I of Table A shall be modified by deleting the words "become of unsound mind" and substituting therefor the words "in the opinion of all his co-Directors becomes incapable by reason of mental disorder of discharging his duties as Director." 25. The office of Director shall be vacated if the Director is removed from such office by notice in writing to that effect in accordance with Article 28(b) hereof. 26. A Director shall not retire by rotation and Clauses 94, 96 and 97 in Part I of Table A shall be modified accordingly. 27. A Director appointed to fill a casual vacancy or as an addition to the Board shall not retire from office at the Annual General Meeting next following his appointment and the last sentence of Clause 95 of Part I of Table A shall be deleted. 28. Without prejudice to the provisions of Section 184 of the Act: (a) the Company may by Extraordinary Resolution remove any Director before the expiration of his term of office. The Company may by Ordinary Resolution appoint another person in place of the Director so removed; (b) the holder for the time being of a majority of the share capital of the Company ("the majority shareholder") may at any time remove from office any Director of the Company and such removal shall be effective upon a notice in writing of such removal under the hand of the majority shareholder being served upon the Company by being sent to or left at its registered office. 29. (A) Any Director may be writing under his hand appoint (1) any other Director, or (2) any other person who is approved by the Board of Directors as hereinafter provided to be his alternate; and every such alternate shall (subject to his giving to the Company an address within the United Kingdom at which notices may be served on him) be entitled to receive notices of all meetings of the Directors and, in the absence from the Board of the Director appointing him, to attend and vote at Meetings of the Directors, and to exercise all the powers, rights, duties and authorities of the Director appointing him: Provided always that no such appointment of a person other than a Director shall be 15 operative unless and until the approval of the Board of Directors by a majority consisting of two-thirds of the whole board shall have been given and entered in the Directors' Minute Book. A Director may at any time revoke the appointment of an alternate appointed by him, and subject to such approval as aforesaid appoint another person in his place, and if a Director shall die or cease to hold the office of Director the appointment of his alternate shall thereupon cease and determine, provided always that in the event of these Articles providing for the retirement of Directors by rotation, if any Director so retires but is re-elected at the meeting at which such retirement took effect, any appointment made by him pursuant to this Article which was in force immediately prior to his retirement shall continue to operate after his re-election as if he had not so retired. An alternate Director shall not be counted in reckoning the maximum number of Directors allowed by the Articles of Association for the time being. A Director acting as alternate shall have an additional vote at meetings of Directors for each Director for whom he acts as alternate but he shall count as only one for the purpose of determining whether a quorum be present. (B) Every person acting as an alternate Director shall be an officer of the Company, and shall alone be responsible to the Company for his own acts and defaults, and he shall not be deemed to be the agent of or for the Director appointing him. The remuneration of any such alternate Director shall be payable out of the remuneration payable to the Director appointing him, and shall consist of such portion of the last-mentioned remuneration as shall be agreed between the alternate and the Director appointing him. 30. Any such resolution in writing as is referred to in Clause 106 in Part I of Table A may consist of several documents in the like form each signed by one or more of the Directors for the time being entitled to receive notice of a meeting of the Directors and Clause 106 in Part I of Table A shall be modified accordingly. 31. No person shall be or become incapable of being appointed a Director by reason of his having attained the age of seventy or any other age nor shall any special notice be required in connection with the appointment or the approval of the appointment of such person, and no Director shall vacate his office at any time by reason of the fact that he has attained the age of seventy or any other age. 32. The Director may from time to time appoint one or more of their body to hold any executive office in the management of the business of the Company including the office of Chairman or Depute Chairman or Managing or Joint Managing or Deputy or Assistant Managing Director as the Directors may decide for such fixed term or without limitation as to period and on such terms as they think fit and a Director appointed to any executive office shall (without prejudice to any claim for damages for breach of any Service Contract between him and the Company) if he ceases to hold the office of Director from any cause ipso facto and immediately cease to hold such executive office. 16 33. A Director holding such executive office as aforesaid for a fixed period shall not be entitled to resign as a Director of the Company and Clause 88(e) in Part I of Table A shall be modified accordingly. 34. Every Director whether present in the United Kingdom or not shall be entitled to receive notice of every meeting of Directors, and Clause 98 in Part I of Table A shall be modified accordingly. 17 - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- M.J. Howell, 11, Old Jewry, London EC2R 8DS Solicitor C.W.J. Cornfield, 11 Old Jewry, London EC2R 8DS Solicitor - -------------------------------------------------------------------------------- DATED this 19th day of February, 1976 WITNESS to the above Signatures:- E.C. Hannabuss, 11 Old Jewry, London EC2R 8DS Legal Executive EX-3.26 29 EXHIBIT 3.26 EXHIBIT 3.26 Company No: 123290 WEIGHT WATCHERS (PUBLICATIONS) LTD At an extraordinary meeting of the above named Company held and convened at Kidwells Park House, Kidwells Park Drive, Maidenhead on the 2nd September 1993, the following special RESOLUTION was passed. SPECIAL RESOLUTION The Company name to be changed to Weight Watchers (Exercise) Ltd. - --------------------- Director CERTIFICATE OF INCORPORATION ON CHANGE OF NAME No. 1243290 I hereby certify that WEIGHT WATCHERS (PUBLICATIONS) LIMITED having by special resolution changed its name, is now incorporated under the name of WEIGHT WATCHERS (EXERCISE) LTD. Given under my hand at the Companies Registration Office, Cardiff the 14 September 1993 /s/ A.F. Fletcher ----------------- A.F. FLETCHER an authorised officer THE COMPANIES ACTS, 1948 TO 1967. ------------- COMPANY LIMITED BY SHARES ------------- MEMORANDUM AND ARTICLES OF ASSOCIATION OF WEIGHT WATCHERS (PUBLICATIONS) LIMITED Incorporated 6th February 1976 THE COMPANIES ACTS, 1948 TO 1967. ------------- COMPANY LIMITED BY SHARES ------------- MEMORANDUM OF ASSOCIATION OF WEIGHT WATCHERS (PUBLICATIONS) LIMITED 1. The name of the Company is COIIMACE LIMITED.* 2. The registered office of the Company will be situate in England. 3. The objects for which the Company is established are: (A) (1) To carry on business as general publishers and as proprietors and publishers of trade and business directories, periodicals, newspapers and journals; to rent or sell advertising space in all kinds of media including any publications, whether by the Company or not, and display sites, and generally to print and publish periodicals, journals and books. (2) To carry on business as advertising and publicity agents and specialists, press cutting agents, advertising contractors, billposters, advertising consultants, commercial artists, signwriters, designers and illustrators, display specialists and contractors, sales consultants and specialists and business advisers and organisers. (3) To purchase, take on lease, or otherwise acquire advertising and display sites for posters, and to use, let, sell, or otherwise dispose of the same as may be thought fit. (4) To carry on business as leaflet distributors and as direct mail specialists, consultant and advisers; to compile and sell mailing lists and to act as consultants and specialists on mail order trading. - ---------------- * By Special Resolution passed 5th May 1976 the name of the Company was changed to "Weight Watchers (Publications) Limited". 2 (B) To carry on any other business which in the opinion of the Directors of the Company may seem capable of being conveniently carried on in connection with or as ancillary to any of the above businesses or to be calculated directly or indirectly to enhance the value of or render profitable any of the property of the Company or to further any of its objects. (C) To purchase, take on lease, exchange, hire or otherwise acquire, any real or personal property or any interest in such property and to sell, lease, let on hire, develop such property, or otherwise turn the same to the advantage of the Company. (D) To build, construct, maintain, alter, enlarge, pull down, remove or replace any buildings, works, plant and machinery necessary or convenient for the business of the Company or to join with any person, firm or company in doing any of the things aforesaid. (E) To borrow or raise money upon such terms and on such security as may be considered expedient and in particular by the issue or deposit of debentures or debenture stock and to secure the repayment of any money borrowed, raised or owing by mortgage charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital. (F) To apply for, purchase or otherwise acquire any patents, licences and the like, conferring an exclusive or non-exclusive or limited right of user or any secret or other information as to any invention which may seem calculated directly or indirectly to benefit the Company, and to use, develop, grant licences in respect of, or otherwise turn to account any rights and information so acquired. (G) To purchase, subscribe for or otherwise acquire and hold and deal with any shares, stocks, debentures, debenture stocks, Bonds or securities of any other company or corporation carrying on business in any part of the world. (H) To issue, place, underwrite or guarantee the subscription of, or concur or assist in the issuing or placing, underwriting, or guaranteeing the subscription of shares, debentures, debenture stock, bonds, stocks and securities of any company, whether limited or unlimited or incorporated by Act of Parliament or otherwise, at such times and upon such terms and conditions as to remuneration and otherwise as may be agreed upon. (I) To invest and deal with the moneys of the Company not immediately required for the purposes of its business in or upon such investments and securities and in such manner as may from time to time be considered expedient. (J) To lend money or give credit on such terms as may be considered expedient and to receive money on deposit or loan from and given guarantees or become security for any persons, firms and companies. 3 (K) To enter into partnership or into any arrangement for sharing profits or to amalgamate with any person, firm or company carrying on or proposing to carry on any business which the Company is authorised to carry on or any business or transaction capable of being conducted so as directly or indirectly to benefit the Company. (L) To sell, exchange, lease, dispose of, turn to account or otherwise deal with the whole or any part of the undertaking of the Company for such consideration as may be considered expedient and in particular for shares, stock or securities of any other company formed or to be formed. (M) To promote, finance or assist any other company for the purpose of acquiring all or any part of the property rights and liabilities of the Company or for any other purpose which may seem directly or indirectly calculated to benefit the Company. (N) To remunerate any person, firm or company rendering services to the Company in any manner and to pay all or any of the preliminary expenses of the Company and of any company formed or promoted by the Company. (O) To draw, accept, endorse, negotiate, discount, execute and issue promissory notes, bills of exchange, scrip, warrants and other transferable or negotiable instruments. (P) To establish, support or aid in the establishment and support of associations, institutions, clubs, funds, trusts and schemes calculated to benefit the officers, ex-officers, employees or ex-employees of the Company or the families, dependants or connections of such persons, and to grant pensions, gratuities and allowances and to make payments towards insurance and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful objects. (Q) To enter into any arrangement with any Government or other authority, supreme, municipal, local or otherwise, and to obtain from any such Government or Authority all rights, concessions, and privileges which may seem conducive to the Company's objects or any of them, or to obtain or to endeavour to obtain, any provisional order of the Board of Trade, or any Act or Acts of Parliament for the purposes of the Company or any other company. (R) To distribute among the Members in specie any property of the Company, or any proceeds of sale or disposition of any property of the Company, and for such purpose to distinguish and separate capital from profits, but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law. (S) To do all or any of the above things in any part of the world either alone or in conjunction with others and either as principals, agents, contractors, trustees or otherwise and either by or through agents, sub-contractors, trustees or otherwise. 4 (T) To do all such other things as may be deemed incidental or conductive to the attainment of the above objects or any of them. It is hereby declared that the foregoing sub-clauses shall be construed independently of each other and that none of the objects mentioned in any sub-clause shall be deemed to be merely subsidiary to the objects mentioned in any other sub-clause. 4. The liability of the Member is limited. 5. The share capital of the Company is (pound)100 divided into 100 shares of (pound)1 each. The Company has power to increase and divide the shares into several classes and attach thereto any preferred, deferred or other special rights, privileges or conditions as the Articles of Association may from time to time prescribe. 5 WE, the several persons whose names and addresses are subscribed are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND Number of Shares taken by each Subscriber DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, ONE 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN, ONE 30, City Road, London. E.C.1. Company Director - -------------------------------------------------------------------------------- DATED the 22nd day of January 1976. WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London. E.C.1. Company Formation Assistant. THE COMPANIES ACTS 1948 to 1967. ------------ COMPANY LIMITED BY SHARES. ------------ Articles of Association OF WEIGHT WATCHERS (PUBLICATIONS) LIMITED PRELIMINARY 1. The regulations contained in Part I of Table A in the First Schedule to The Companies Act, 1948 (such Table being hereinafter called "Table A"), shall apply to the Company save in so far as they are excluded or varied hereby; that is to say, Clauses 24, 53, 75, 126 and 130 in Part I of Table A shall not apply to the Company; and in addition to the remaining Clauses in Part I of Table A, as varied by these Articles, the following shall be the regulations of the Company. 2. The Company is a private Company and Clauses 2, 3, 4, 5 and 6 in Part II of Table A as varied by these Articles shall accordingly apply to the Company. SHARES 3. The shares shall be under the control of the Directors, who may allot and dispose of or grant options over the same to such persons, on such terms, and in such manner as they think fit, subject to the provisions of the next following clause hereof (Clause 4). 4. Subject to any direction to the contrary that may be given by the Company in general meeting, any original shares for the time being unissued and any new shares from time to time to be created, shall in the first instance be offered to the members in proportion (as nearly as may be) to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time within which the offer if not accepted shall be deemed to be declined; and after the expiration of such time or on receipt of an intimation from the member to whom the notice is given that he declines to accept the shares, the Directors may dispose of the same in such manner as they think most beneficial to the Company. 2 LIEN 5. The lien conferred by Clause 11 in Part I of Table A shall attach to fully paid up Shares, and to all shares registered in the name of any person indebted or under liability to the Company, whether he shall be the sole registered holder thereof or shall be one of two or more joint holders. TRANSFER AND TRANSMISSION OF SHARES 6. Clause 3 of Part II of Table A shall not apply to any transfer to a person who is already a member of the Company or to a transferee under the next following clause hereof (Clause 7). 7. Any share may be transferred by a member to any child or other issue, wife, husband, father, mother, brother, sister, son-in-law, daughter-in-law, nephew or niece of such member and any share of a deceased member may be transferred to any such relative as aforesaid of the deceased member or to the executors or administrators of any such deceased member. Any share standing in the name of the trustees of the Will of any deceased member or of a settlement created by a member of a deceased member may be transferred upon any change of trustees to the trustees for the time being of such Will or Settlement or to a person to whom such member or deceased member would have been entitled to transfer the same. 8. The proviso to clause 32 of Part I of Table A shall not apply to the Company. GENERAL MEETING 9. Every notice convening a General Meeting shall comply with the provisions of Section 136 (2) of the Companies Act, 1948, as to giving information to Members in regard to their right to appoint proxies; and notices of and other communications relating to any General Meeting which any Member is entitled to receive shall be sent to the Auditor for the time being of the Company. 10. Clause 54 in Part I of Table A shall be read and construed as if the words "Meeting shall be dissolved" were substituted for the words "Members present shall be a quorum". DIRECTORS 11. Unless and until the Company in General Meeting shall otherwise determine, the number of Directors shall be not less than one nor more than seven. If and so long as there is a sole Director, such Director may act alone in exercising all the powers and authorities vested in the Directors. 12. The first Directors of the Company shall be determined in writing by the Subscribers to the Memorandum of Association of the Company. 3 13. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be reckoned in estimating a quorum when any such contract or arrangement is under consideration; and Clause 84 in Part I of Table A shall be modified accordingly. 14. Any Director may appoint any person approved by the Board to be an alternate Director and such appointment shall have effect and such appointee, whilst he holds office as an alternate Director, shall be entitled to receive notice of Meetings of Directors and to attend and vote thereat, but he shall not require any qualification and shall not be entitled to any remuneration from the Company otherwise than out of the remuneration of the Director appointing him and agreed between the said Director and the appointee. Such appointment may be revoked at any time by the appointor or by a resolution of the Directors or by an Ordinary Resolution of the Company in General Meeting. Any appointment or revocation made under this clause, shall be in writing under the hand of the Director making the same. DISQUALIFICATION OF DIRECTORS 15. The office of a Director shall be vacated: (1) If he resigns his office by notice in writing to the Company. (2) If he becomes bankrupt or enters into any arrangement with his creditors. (3) If he is prohibited from being a Director by an order made under section 188 of the Act. (4) If he becomes of unsound mind. (5) If he is removed from office by a resolution duly passed under section 184 of the Act. BORROWING POWERS 16. The Directors may exercise all the powers of the company to borrow money, and to mortgage or charge its undertakings, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. 17. The first Secretary of the Company shall be Brian Goldstein. 4 ACCOUNTS 18. The directors shall from time to time, in accordance with sections 148, 150 and 157 of the Companies Act 1948 and sections 16 to 22 of The Companies Act 1967, cause to be prepared and to be laid before the Company in general meting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those sections. AUDIT 19. Auditors shall be appointed and their duties regulated in accordance with sections 159 to 161 of the Companies Act 1948 and sections 13 and 14 of the Companies Act 1967. INDEMNITY 20. In addition to the indemnity contained in clause 136 of Part 1 of Table A and subject to the provisions of Section 205 of the Companies Act 1948, every director, managing director, agent, auditor, secretary and other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities incurred by him in or about the execution and discharge of the duties of his office. 5 - -------------------------------------------------------------------------------- NAMES, ADDRESS AND DESCRIPTIONS OF SUBSCRIBERS MICHAEL JOHN HOPE, 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN, 30, City Road, London. E.C.1. Company Director. - -------------------------------------------------------------------------------- DATED the 22nd day of January 1976. WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London. E.C.1. Company Formation Assistant. EX-3.27 30 EXHIBIT 3.27 Exhibit 3.27 Company No: 1243943 WEIGHT WATCHERS (ACCESSORIES) LTD At an extraordinary meeting of the above named Company held and convened at Kidwells Park House, Kidwells Park Drive, Maidenhead on the 2nd September 1993, the following special RESOLUTION was passed. SPECIAL RESOLUTION The Company name to be changed to Weight Watchers (Accessories & Publications) Ltd /s/ Linda Huett - --------------- Director [SEAL] CERTIFICATE OF INCORPORATION ON CHANGE OF NAME No. 1243943 I hereby certify that WEIGHT WATCHERS (ACCESSORIES) LIMITED having by special resolution changed its name, is now incorporated under the name of WEIGHT WATCHERS (ACCESSORIES & PUBLICATIONS) LTD Given under my hand at the Companies Registration Officer, Cardiff the 6 OCTOBER 1993 /s/ Mrs. L. Parry ----------------- MRS. L. PARRY an authorised officer ---------- COMPANY LIMITED BY SHARES. ---------- Articles of Association OF WEIGHT WATCHERS (ACCESSORIES) LIMITED PRELIMINARY 1. The regulations contained in Part I of Table A in the First Schedule of The Companies Act, 1948 (such Table being hereinafter called "Table A"), shall apply to the Company save in so far as they are excluded or varied hereby; that is to say, Clauses 24, 53, 75, 79, 126 and 130 in Part I of Table A shall not apply to the Company; and in addition to the remaining Clauses in Part I of Table A, as varied by these Articles, the following shall be the regulations of the Company. 2. The Company is a private Company and Clauses 2, 3, 4, 5 and 6 in Part II of Table A as varied by these Articles shall accordingly apply to the Company. SHARES 3. The shares shall be under the control of the Directors, who may allot and dispose of or grant options over the same to such persons, on such terms, and in such manner as they think fit, subject to the provisions of the next following clause hereof (Clause 4). 4. Subject to any direction to the contrary that may be given by the Company in general meeting, any original shares for the time being unissued and any new shares from time to time to be created, shall in the first instance be offered to the members in proportion (as nearly as may be) to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time within which the offer if not accepted shall be deemed to be declined; and after the expiration of such time or on receipt of an intimation from the member to whom the notice is given that he declines to accept the shares, the Directors may dispose of the same in such manner as they think most beneficial to the Company. 2 LIEN 5. The lien conferred by Clause 11 in Part I of Table A shall attach to fully paid up Shares, and to all shares registered in the name of any person indebted or under liability to the Company, whether he shall be the sole registered holder thereof or shall be one of two or more joint holders. TRANSFER AND TRANSMISSION OF SHARES 6. Clause 3 of Part II of Table A shall not apply to any transfer to a person who is already a member of the Company or to a transferee under the next following clause hereof (Clause 7). 7. Any share may be transferred by a member to any child or other issue, wife, husband, father, mother, brother, sister, son- in-law, daughter-in-law, nephew or niece of such member and any share of a deceased member may be transferred to any such relative as aforesaid of the deceased member or to the executors or administrators of any such deceased member. Any share standing in the name of the trustees of the Will of any deceased member or of a settlement created by a member of a deceased member may be transferred upon any change of trustees to the trustees for the time being of such Will or Settlement or to a person to whom such member or deceased member would have been entitled to transfer the same. 8. The proviso to clause 32 of Part I of Table A shall not apply to the Company. GENERAL MEETING 9. Every notice convening a General Meeting shall comply with the provisions of Section 136 (2) of the Companies Act, 1948, as to giving information to Members in regard to their right to appoint proxies; and notices of and other communications relating to any General Meeting which any Member is entitled to receive shall be sent to the Auditor for the time being of the Company. 10. Clause 54 in Part I of Table A shall be read and construed as if the words "Meeting shall be dissolved" were substituted for the words "Members present shall be a quorum". DIRECTORS 11. Unless and until the Company in General Meeting shall otherwise determine, the number of Directors shall be not less than one nor more than seven. If and so long as there is a sole Director, such Director may act alone in exercising all the powers and authorities vested in the Directors. 3 12. The first Directors of the Company shall be determined in writing by the Subscribers to the Memorandum of Association of the Company. 13. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be reckoned in estimating a quorum when any such contract or arrangement is under consideration; and Clause 84 in Part I of Table A shall be modified accordingly. 14. Any Director may appoint any person approved by the Board to be an alternate Director and such appointment shall have effect and such appointee, whilst he holds office as an alternate Director, shall be entitled to receive notice of Meetings of Directors and to attend and vote thereat, but he shall not require any qualification and shall not be entitled to any remuneration from the Company otherwise than out of the remuneration of the Director appointing him and agreed between the said Director and the appointee. Such appointment may be revoked at any time by the appointor or by a resolution of the Directors or by an Ordinary Resolution of the Company in General Meeting. Any appointment or revocation made under this clause, shall be in writing under the hand of the Director making the same. DISQUALIFICATION OF DIRECTORS 15. The office of a Director shall be vacated: (1) If he resigns his office by notice in writing to the Company. (2) If he becomes bankrupt or enters into any arrangement with his creditors. (3) If he is prohibited from being a Director by an order made under section 188 of the Act. (4) If he becomes of unsound mind. (5) If he is removed from office by a resolution duly passed under section 184 of the Act. BORROWING POWERS 16. The Directors may exercise all the powers of the company to borrow money, and to mortgage or charge its undertakings, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. 17. The first Secretary of the Company shall be Brian Goldstein. 4 ACCOUNTS 18. The directors shall from time to time, in accordance with sections 148, 150 and 157 of the Companies Act 1948 and sections 16 to 22 of The Companies Act 1967, cause to be prepared and to be laid before the Company in general meting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those sections. AUDIT 19. Auditors shall be appointed and their duties regulated in accordance with sections 159 to 161 of the Companies Act 1948 and sections 13 and 14 of the Companies Act 1967. INDEMNITY 20. In addition to the indemnity contained in clause 136 of Part 1 of Table A and subject to the provisions of Section 205 of the Companies Act 1948, every director, managing director, agent, auditor, secretary and other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities incurred by him in or about the execution and discharge of the duties of his office. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN, 30, City Road, London. E.C.1. Company Director. - -------------------------------------------------------------------------------- DATED the 29th day of January 1997. WITNESS to the above signatures: ERIC CHARLES TURNER, 5 30, City Road, London. E.C.1. Company Formation Assistant. THE COMPANIES ACTS 1948 TO 1967. ---------- COMPANY LIMITED BY SHARES. ---------- Memorandum of Association of WEIGHT WATCHERS (ACCESSORIES) LIMITED 1. The name of the Company is EVEFERN LIMITED* 2. The Registered Office of the Company will be situate in England. 3. The Objects for which the Company is established are: (A) (1) To carry on the business or businesses of general merchants, exporters, importers, manufacturers, factors, hirers, mail order dealers, brokers and dealers both wholesale and retail in all articles of commercial, industrial, scientific, surgical, manufacturing, personal and household use and consumption, ornament, recreation and amusement. (2) To undertake and execute agency or commission work of all kinds and to act generally as agents, factors and brokers for the sale or purchase of goods and the provision of services and travel. (3) To carry on all or any of the following businesses: proprietors, of shops, warehouses, workshops and factories of all kinds, hotels, cafes, restaurants, houses, launderettes, flats, furnished and unfurnished rooms, holiday camps and chalets; wine and spirit merchants, licensed victuallers, bankers, financial agents and brokers, insurance agents and brokers, builders, decorators, contractors, carpenters, joiners, civil, mechanical, heating, electrical, motor and general engineers, - ---------- * By Special Resolution passed 5th May 1976 the name of the Company was changed to "Weight Watchers (Accessories) Limited". 6 film and record producers, theatrical agents, chemists, grocers, greengrocers, tobacconists, confectioners, printers, stationers, garage proprietors, caravan dealers, funeral directors and undertakers, bookmakers, caterers, consultants, estate agents, hairdressers, photographers, security contractors, and detective agents, confirmers and shipping agents. (4) To carry on business as repairers and cleaners of any articles of commercial, manufacturing, personal and household use. (B) To carry on any other business which in the opinion of the Directors of the Company may seem capable of being conveniently carried on in connection with or as ancillary to any of the above businesses or to be calculated directly or indirectly to enhance the value of or render profitable any of the property of the Company or to further any of its objects. (C) To purchase, take on lease, exchange, hire or otherwise acquire, any real or personal property or any interest in such property and to sell, lease, let on hire, develop such property, or otherwise turn the same to the advantage of the Company. (D) To build, construct, maintain, alter, enlarge, pull down, remove or replace any buildings, works, plant and machinery necessary or convenient for the business of the Company or to join with any person, firm or company in doing any of the things aforesaid. (E) To borrow or raise money upon such terms ________ such security as may be considered ________ client and in particular by the issue _______ deposit of debentures or debenture stock and to secure the repayment of any money borrowed, raised or owing by mortgage charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital. (F) To apply for, purchase or otherwise acquire any patents, licenses and the like, conferring an exclusive or non- exclusive or limited right of user or any secret or other information as to any invention which may seem calculated directly or indirectly to benefit the Company, and to use, develop, grant licenses in respect of, or otherwise turn to account any rights and information so acquired. (G) To purchase, subscribe for or otherwise acquire and hold and deal with any shares, stocks, debentures, debenture stocks, Bonds or securities of any other company or corporation carrying on business in any part of the world. (H) To issue, place, underwrite or guarantee the subscription of, or concur or assist in the issuing or placing, undertaking, or guaranteeing the subscription of shares, debentures, debenture stock, bonds, stocks and securities of any company, whether limited or unlimited or incorporated by Act of Parliament or otherwise, at such times and upon such terms and conditions as to remuneration and otherwise as may be agreed upon. 7 (I) To invest and deal with the moneys of the Company not immediately required for the purposes of its business in or upon such investments and securities and in such manner as may from time to time be considered expedient. (J) To lend money or give credit on such terms as may be considered expedient and to receive money on deposit or loan from and give guarantees or become security for any persons, firms and companies. (K) To enter into partnership or into any arrangement for sharing profits or to amalgamate with any person, firm or company carrying on or proposing to carry on any business which the Company is authorised to carry on or any business or transaction capable of being conducted so as directly or indirectly to benefit the Company. (L) To sell, exchange, lease, dispose of, turn to account or otherwise deal with the whole or any part of the undertaking of the Company for such consideration as may be considered expedient and in particular for shares, stock or securities of any other company formed or to be formed. (M) To promote, finance or assist any other company for the purpose of acquiring all or any part of the property rights and liabilities of the Company or for any other purpose which may seem directly or indirectly calculated to benefit the Company. (N) To remunerate any person, firm or company rendering services to the Company in any manner and to pay all or any of the preliminary expenses of the Company and of any company formed or promoted by the Company. (O) To draw, accept, endorse, negotiate, discount, execute and issue promissory notes, bills of exchange, scrip, warrants and other transferable or negotiable instruments. (P) To establish, support or aid in the establishment and support of associations, institutions, clubs, funds, trusts and schemes calculated to benefit the officers, ex-officers, employees or ex-employees of the Company or the families, dependants or connections of such persons, and to grant pensions, gratuities and allowances and to make payments towards insurance and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful objects. (Q) To enter into any arrangement with any Government or other authority, supreme, municipal, local or otherwise, and to obtain from any such Government or Authority all rights, concessions, and privileges which may seem conducive to the Company's objects or any of them, or to obtain or to endeavour to obtain, any provisional order of the Board of Trade, or any Act or Acts of Parliament for the purposes of the Company or any other company. 8 (R) To distribute among the Members in specie any property of the Company, or any proceeds of sale or disposition of any property of the Company, and for such purpose to distinguish and separate capital from profits, but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law. (S) To do all or any of the above things in any part of the world either alone or in conjunction with others and either as principals, agents, contractors, trustees or otherwise and either by or through agents, sub-contractors, trustees or otherwise. (T) To do all such other things as may be deemed incidental or conductive to the attainment of the above objects or any of them. It is hereby declared that the foregoing sub-clauses shall be construed independently of each other and that none of the objects mentioned in any sub-clause shall be deemed to be merely subsidiary to the objects mentioned in any other sub-clause. 4. The liability of the Member is limited. 5. The share capital of the Company is (pound)100 divided into 100 shares of (pound)1 each. The Company has power to increase and divide the shares into several classes and attach thereto any preferred, deferred or other special rights, privileges or conditions as the Articles of Association may from time to time prescribe. 9 WE, the several persons whose names and addresses are subscribed are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND Number of Shares taken by each DESCRIPTIONS OF SUBSCRIBERS Subscriber - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, ONE 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN, ONE 30, City Road, London. E.C.1. Company Director - -------------------------------------------------------------------------------- DATED the 29th day of January 1976. WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London. E.C.1. Company Formation Assistant. 10 WE, the several persons whose names and addresses are subscribed are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND Number of Shares taken by each Subscriber DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, ONE 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN, ONE 30, City Road, London. E.C.1. Company Director - -------------------------------------------------------------------------------- DATED the 29th day of January 1976. WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London. E.C.1. Company Formation Assistant. EX-3.28 31 EXHIBIT 3.28 EXHIBIT 3.28 COMPANY LIMITED BY SHARES. ---------- Articles of Association OF WEIGHT WATCHERS (FOOD PRODUCTS) LIMITED PRELIMINARY 1. The regulations contained in Part I of Table A in the First Schedule to The Companies Act, 1948 (such Table being hereinafter called "Table A"), shall apply to the Company save in so far as they are excluded or varied hereby; that is to say, Clauses 24, 53, 75, 79, 126 and 130 in Part I of Table A shall not apply to the Company; and in addition to the remaining Clauses in Part I of Table A, as varied by these Articles, the following shall be the regulations of the Company. 2. The Company is a private Company and Clauses 2, 3, 4, 5 and 6 in Part II of Table A as varied by these Articles shall accordingly apply to the Company. SHARES 3. The shares shall be under the control of the Directors, who may allot and dispose of or grant options over the same to such persons, on such terms, and in such manner as they think fit, subject to the provisions of the next following clauses hereof (Clause 4). 4. Subject to any directions to the contrary that may be given by the Company in general meeting, any original shares for the time being unissued and any new shares from time to time to be created, shall in the first instance be offered to the members in proportion (as nearly as may be) to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time within which the offer if not accepted shall be deemed to be declined; and after the expiration of such time or on receipt of an intimation from the member to whom the notice is given that he declines to accept the shares, the Directors may dispose of the same in such manner as they think most beneficial to the Company. -PAGES 2-7 ARE MISSING- 2 13. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be reckoned in estimating a quorum when any such contract or arrangement is under consideration; and Clause 84 in Part I of Table A shall be modified accordingly. 14. Any Director may appoint any person approved by the Board to be an alternate Director and such appointment shall have effect and such appointee, whilst he holds office as an alternate Director, shall be entitled to receive notice of Meetings of Directors and to attend and vote thereat, but he shall not require any qualification and shall not be entitled to any remuneration from the Company otherwise than out of the remuneration of the Director appointing him and agreed between the said Director and the appointee. Such appointment may be revoked at any time by the appointor or by a resolution of the Directors or by an Ordinary Resolution of the Company in General Meeting. Any appointment or revocation made under this clause, shall be in writing under the hand of the Director making the same. DISQUALIFICATION OF DIRECTORS 15. The office of a Director shall be vacated:- (1) If he resigns his office by notice in writing to the Company. (2) If he becomes bankrupt or enters into any arrangement with his creditors. (3) If he is prohibited from being a Director by an order made under section 188 of the Act. (4) If he becomes of unsound mind. (5) If he is removed from office by a resolution duly passed under section 184 of the Act. BORROWING POWERS 16. The Directors may exercise all the powers of the company to borrower money, and to mortgage or charge its undertakings, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. 17. The First Secretary of the Company shall be Brian Goldstein. 3 ACCOUNTS 18. The directors shall from time to time, in accordance with sections 148, 150 and 157 of the Companies Act 1948 and sections 16 to 22 of The Companies Act 1967, cause to be prepared and to be laid before the Company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those sections. AUDIT 19. Auditors shall be appointed and their duties regulated in accordance with sections 159 to 161 of the Companies Act 1948 and sections 13 and 14 of the Companies Act 1967. INDEMNITY 20. In addition to the indemnity contained in clause 136 of Part 1 of Table A and subject to the provisions of Section 205 of the Companies Act 1948, every director, managing director, agent, auditor, secretary and other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities incurred by him in or about the execution and discharge of the duties of his office. 4 - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, 30, City Road, London. E.C.1. Company Formation Assistant. BRIAN GOLDSTEIN 30, City Road, London. E.C.1. Company Director. - -------------------------------------------------------------------------------- DATED the 30th day of October 1975 WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London. E.C.1. Company Formation Assistant. 5 THE COMPANIES ACT. 1948 to 1967 ---------- COMPANY LIMITED BY SHARES. ---------- Articles of Association OF WEIGHT WATCHERS (FOOD PRODUCTS) LIMITED 21. The name of the company is JIFGROVE LIMITED* 22. The registered office of the company will be situated in England. 23. The objects for which the company is established are:- (A) (1) To carry on business as producers, manufacturers, importers, exporters and dealers in commodities, corn, flour, fruit, nuts, tea, coffee, vegetables, sauces, spices, pickles, jams, cheese, sugar, eggs, meat, poultry, fish, oils, starches, gelatines, glucose, bacon, milk, cream, butter, bread, agricultural produce and products, general farm produce, groceries, provisions and foodstuffs and commodities generally. (2) To carry on business as wholesale and retail grocers and greengrocers, bakers, fishmongers, butchers, poulterers, florists, fruiterers and general storekeepers. (3) To carry on business as confectioners and pastrycooks, restaurant and tea room proprietors, refreshment caterers, wine and spirit merchants, hotel and inn keepers, licensed victuallers, chocolate and sweet manufacturers, coffee grinders, ice cream manufacturers and generally foodstuffs and provisions of all kinds. - ---------- * By Special Resolution passed 5th May 1976 the name of the Company was changed to "Weight Watchers (Food Products) Limited". 6 (B) To carry on any other business which in the opinion of the Directors of the Company may seem capable of being conveniently carried on in connection with or as ancillary to any of the above businesses or to be calculated directly or indirectly to enhance the value of or render profitable any of the property of the Company or to further any of its objects. (C) To purchase, take on lease, exchange, hire or otherwise acquire, any real or personal property or any interest in such property and to sell, lease, let on hire, develop such property, or otherwise turn the same to the advantage of the Company. (D) To build, construct, maintain, alter, enlarge, pull down, remove or replace any buildings, works, plant and machinery necessary or convenient for the business of the Company or to join with any person, firm or company in doing any of the things aforesaid. (E) To borrower or raise money upon such terms and on such security as may be considered expedient and in particular by the issue or deposit of debentures or debenture stock and to secure the repayment of any money borrowed, raised or owing by mortgage charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital. (F) To supply for, purchase or otherwise acquire any patents, licenses and the like, conferring an exclusive or non-exclusive or limited right of user or any secret or other information as to any invention which may seem calculated directly or indirectly to benefit the Company, and to use, develop, grant licenses in respect of, or otherwise turn to account any rights and information so acquired. (G) To purchase, subscribe for or otherwise acquire and hold and deal with any shares, stocks, debentures, debenture stocks, Bonds or securities of any other company or corporation carrying on business in any part of the world. (H) To issue, place, underwrite or guarantee the subscription of, or concur or assist in the issuing or placing, underwriting, or guaranteeing the subscription of shares, debentures, debenture stock, bonds, stocks and securities of any company, whether limited or unlimited or incorporated by Act of Parliament or otherwise, at such times and upon such terms and conditions as to remuneration and otherwise as any be agreed upon. 7 (I) To invest and deal with the moneys of the Company not immediately required for the purposes of its business in or upon such investments and securities and in such manner as may from time to time be considered expedient. (J) To lend money or give credit on such terms as may be considered expedient and to receive money on deposit or loan from and give guarantees or become security for any persons, firms and companies. (K) To enter into partnership or into any arrangement for sharing profits or to amalgamate with any person firm or company carrying on or proposing to carry on any business which the Company is authorised to carry on or any business or transaction capable of being conducted so as directly or indirectly to benefit the Company. (L) To sell, exchange, lease, dispose of, turn to account or otherwise deal with the whole or any part of the undertaking of the Company for such consideration as may be considered expedient and in particular for shares, stock or securities of any other company formed or to be formed. (M) To promote, finance or assist any other company for the purpose of acquiring all or any part of the property rights and liabilities of the Company or for any other purpose which may seem directly or indirectly calculated to benefit the Company. (N) To remunerate any person, firm or company rendering services to the Company in any manner and to pay all or any of the preliminary expenses of the Company and of any company formed or promoted by the Company. (O) To draw, accept, endorse, negotiate, discount, execute and issue promissory notes, bills of exchange, scrip, warrants and other transferable or negotiable instruments. (P) To establish, support or aid in the establishment and support of associations, institutions, clubs, funds, trusts and schemes calculated to benefit the officers, ex-officers, employees or ex- employees of the Company or the families, dependants or connections of such persons, and to grant pensions, gratuities and allowances and to make payments towards insurance and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful objects. (Q) To enter into any arrangement with any Government or other authority, supreme, municipal, local or otherwise, and to obtain from any such Government or Authority all rights, concessions, and privileges which may seem conducive to the 8 Company's objects or any of them, or to obtain or to endeavour to obtain, any provisional order of the Board of Trade, or any Act or Acts of Parliament for the purposes of the Company or any other company. (R) To distribute among the Members in specie any property of the Company, or any proceeds of sale or disposition of any property of the Company, and for such purpose to distinguish and separate capital from profits, but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law. (S) To do all or any of the above things in any part of the world either alone or in conjunction with others and either as principals, agents, contractors, trustees or otherwise and either by or through agents, sub-contractors, trustees or otherwise. (T) To do all such other things as may be deemed incidental or conducive to the attainment of the above objects or any of them. It is hereby declared that the foregoing sub-clauses shall be construed independently of each other and that none of the objects mentioned in any sub-clause shall be deemed to be merely subsidiary to the objects mentioned in any other sub-clause. 24. The liability of the Members is limited. 25. The share capital of the Company is (pound)100 divided into 100 shares of (pound)1 each. The Company has power to increase and divide the shares into several classes and attach thereto any preferred, deferred or other special rights, privileges or conditions as the Articles of Association may from time to time prescribe. WE, the several persons whose names and addresses are subscribed are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. 9 - -------------------------------------------------------------------------------- Number of Shares NAMES, ADDRESSES AND DES- taken by each CRIPTIONS OF SUBSCRIBERS Subscriber - -------------------------------------------------------------------------------- MICHAEL JOHN HOPE, ONE 30, City Road, London. E.C.1. Company Formation Assistant. - -------------------------------------------------------------------------------- ONE BRIAN GOLDSTEIN, 30, City Road, London. E.C.1. Company Director - -------------------------------------------------------------------------------- DATED the 30th day of October 1975 WITNESS to the above signatures: ERIC CHARLES TURNER, 30, City Road, London, E.C.1. Company Formation Assistant. EX-3.29 32 EXHIBIT 3.29 EXHIBIT 3.29 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- PART A: INTRODUCTION 1 Defined terms In this constitution: 1.1 The following expressions have the following meanings: the Act means the Companies Act 1993; the Board means Directors who number not less than the required quorum acting together as the board of directors of the Company or, if the Company only has one Director, that Director; the Company means Weight Watchers New Zealand Limited; this constitution means this constitution as it may be altered from time to time in accordance with the Act; Director means a person appointed as a director of the Company in accordance with this constitution; the Majority Shareholder means one or more shareholders holding Shares which carry more than 50 percent of the total votes attaching to Shares; Shares means a share in the Company; written or in writing in relation to words, figures and symbols includes all modes of presenting or reproducing those words, figures and symbols in a tangible and visible form. 1.2 Subject to clause 1.1, expressions which are defined in the Act (whether generally, or for the purposes of one or more particular provisions) have the meanings given to them by the Act. Where an expression is defined in the Act more than once and in different contexts, its meaning is governed by the context in which it appears in this constitution. 2 Construction In this constitution: 2.1 Headings appear as a matter of convenience and do not affect the interpretation of this constitution; 2 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- 2.2 The singular includes the plural and vice versa, and words importing one gender include the other genders; 2.3 A reference to an enactment or any regulations is a reference to that enactment or those regulations as amended, or to any enactment or regulations as amended, or to any enactment or regulations substituted for that enactment or those regulations; 2.4 The Schedule forms part of this constitution. PART B: SHARES AND SHAREHOLDERS SHARES 3 Company's Shares At the date of its registration under the Act the Company has 100 Shares. No money is payable for calls or otherwise on those Shares. ISSUE OF SHARES 4 Board to issue Shares 4.1 The Board may issue Shares or securities that are convertible into Shares or options to acquire Shares at any time, to any person, and in any number it thinks fit, provided: 4.1.1 those Shares are issued to existing shareholders in such proportions as maintain the voting and distribution rights which the shareholders had immediately prior to the issue; or 4.1.2 that issue has first been approved in writing by the Majority Shareholder; or 4.1.3 all entitled persons in the Company have first agreed to or concurred in the issue, in writing; or 4.1.4 in the case of Shares, those Shares are issued in accordance with: (a) the terms of conversion of securities convertible into Shares, or (b) the terms of any option to acquire Shares, which have been issued in accordance with this constitution. 3 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- 4.2 Subject to this constitution, the Board may issue Shares that rank as to voting or distribution rights, or both, equally with or prior to any existing Shares, and any such issue will not be treated as an action affecting the rights attached to existing Shares. 5 Board need not comply with statutory pre-emptive rights If the Board issues Shares that rank as to voting or distribution rights, or both, equally with or prior to existing Shares, the Board need not first offer those Shares to existing shareholders for acquisition. CALLS 6 Board may make calls The Board may make calls on any shareholder for any money that is unpaid on that shareholder's Shares and not otherwise payable at a specified time or times under this constitution, the terms of issue of those Shares or any contract for the issue of those Shares. ACQUISITION OF OWN SHARES 7 Company may acquire and hold Shares 7.1 The Company may purchase or otherwise acquire Shares and may hold those Shares in accordance with the Act. If the Company intends to transfer any Shares which it has acquired and held, such transfer will be treated as a new issue of Shares and the Board must first comply with the requirements of this constitution for issues of Shares. 7.2 The Board may purchase or otherwise acquire Shares from such shareholders and in such numbers or proportions as it thinks fit, in accordance with the Act. PART C: DIRECTORS APPOINTMENT AND REMOVAL 8 Number of Directors The minimum number of Directors shall be 1. The Majority Shareholders may change the minimum and/or the maximum number of Directors by written notice to the Company. 9 Shareholders may appoint Directors Any person who is not disqualified under the Act may be appointed as a Director or the chairperson of the Board by: 9.1 a written notice to the Company signed by the Majority Shareholder; or 9.2 an ordinary resolution, which may appoint more than one Director. 4 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - ------------------------------------------------------------------------d, the shares in respect of which the call was made will be liable to be forfeited. 10 34. POWER TO FORFEIT 34.1 If the requirements of a notice served under Article 33 are not complied with, any share in respect of which the notice has been given may at any time afterwards, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 34.2 Such a forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 35. POWERS OF DIRECTORS A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and, at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the directors think fit. 36. CONSEQUENCES OF FORFEITURE A person whose shares have been forfeited ceases to be a member in respect of the forfeited shares, but remains liable to pay to the company all money that, at the date of forfeiture, was payable by him to the company in respect of the shares (including interest at the rate of 8% per annum from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of the interest), but his liability ceases if and when the company receives payment in full of all the money (including interest) so payable in respect of the shares. 37. PRIMA FACIE EVIDENCE OF FORFEITURE A statement in writing declaring that the person making the statement is a director or a secretary of the company, and that a share in the company has been duly forfeited on a date stated in the statement, is prima facie evidence of the facts stated in the statement as against all persons claiming to be entitled to the share. 38. TRANSFERS AFTER FORFEITURE AND SALE 38.1 The company may receive the consideration (if any) given for a forfeited share on any sale or disposition of the share and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of. 38.2 Upon the execution of the transfer, the transferee shall be registered as the holder of the share and is not bound to see to the application of any money paid as consideration. 38.3 The title of the transferee to the share is not affected by any irregularity or invalidity in connection with 16 Written resolutions may be in counterparts Any written resolution may consist of several copies of the resolution, each signed or assented to by one or more of the Directors. A copy of a written resolution, which has been signed and is sent by facsimile or any similar means of communication, will satisfy the requirements of this clause. 17 Committee proceedings The provisions of this constitution relating to proceedings of the Board also apply to proceedings of any committee of Directors, except to the extent the Board determines otherwise. DIRECTORS' DUTIES 18 Directors may act in interest of holding company If at any time the Company is a wholly-owned subsidiary of a body corporate then, when exercising powers or performing duties as a Director, any Director may act in a manner which he or she believes is in the best interests of the Company's holding company even though it may not be in the best interests of the Company. REMUNERATION 19 Board's power to authorize remuneration and other benefits is limited The Board may authorize: 19.1 the payment of remuneration or the provision of other benefits by the Company to a Director for services as a Director or in any other capacity; 19.2 the payment by the Company to a Director of compensation for loss of office; 19.3 the making of loans by the Company to a Director; 19.4 the giving of guarantees by the Company for debts incurred by a Director; and 19.5 the entering into of a contract to do any of the things set out in this clause; only if the relevant action as been approved by written notice signed by the Majority Shareholder or approved by an ordinary resolution. This clause does not apply to the payment of remuneration or the provision of other benefits to an executive Director in his or her capacity as an executive or to any other Director in respect of any professional services proved by that Director to the Company. 20 Expenses 6 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- A Director may be reimbursed for reasonable traveling, accommodation and other expense incurred in the course of performing duties or exercising powers as a Director of the Company, without requiring the prior authorization of shareholders. ALTERNATE DIRECTORS 21 Directors may appoint and remove alternate Directors Every Director may: 21.1 appoint any person who is not disqualified by the Act from being a director, and whose appointment has been approved in writing by a majority of the other Directors, to act as an alternate Director in his or her place; and 21.2 remove that person from that office, by giving written notice to that effect to the Company. 22 Alternate Director has powers of appointor While acting in the place of the Director who appointed him or her, an alternate Director: 22.1 has, and may exercise and discharge, all the powers, rights, duties and privileges of that Director (including the right to receive notice of, be counted as part of the quorum of, participate in, and vote at a meeting of the Board and to sign any document, including a written resolution, and to act as chairperson of the Board, but excluding the right to appoint an alternate Director); 22.2 is also subject to the same terms and conditions of appointment as that Director, except in respect of remuneration. 23 Termination of appointment of alternate Director The appointment of an alternate Director terminates automatically if the Director who appointed him or her ceases to be a Director. PART D: GENERAL INDEMNITY AND INSURANCE FOR DIRECTORS AND EMPLOYEES 24 Company may indemnify directors and employees for certain liabilities The Company may indemnify a director or employee of the Company or a related company for any liability or costs for which a director or employee may be indemnified under the Act. The Board may determine the terms and conditions of any such indemnity. 25 Company may effect insurance for directors and employees 7 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- The Company may, with the prior approval of the Board, effect insurance for a director or employee of the Company or a related company for any liability or costs for which a company may effect insurance for a director or employee under the Act. The Board may determine the amounts and the terms and conditions of any such insurance. 8 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- EXECUTION OF DEEDS 26 Manner of execution of deeds An obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the Company in writing signed under the name of the Company by: 26.1 two or more Directors; or 26.2 if there is only one Director, that Director, whose signature must be witnessed; or 26.3 one or more attorneys appointed by the Company in accordance with the Act. 26.4 a Director, or any other person authorised by the Board whose signature must be witnessed; or LIQUIDATION 27 Distribution of assets in kind If the Company is liquidated the liquidator may, with the approval of the Majority Shareholder and any other sanction required by the Act: 27.1 divide among the shareholders in kind the whole or any part of the assets of the Company and for that purpose the liquidator may: 27.1.1 fix such values for assets as the liquidator considers to be appropriate; 27.1.2 determine how the division will be carried out as between shareholders or different classes of shareholders; and 27.1.3 vest the whole or any part of any such assets in trustees upon such trusts for the benefit such of those shareholders as the liquidator thinks fit, but so that no shareholder is compelled to accept any shares or other securities on which there is any liability. 9 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- SCHEDULE: PROCEEDINGS OF THE BOARD NOTICE OF MEETING 1 Director's power to convene meetings A Director, or any other person at the request of a Director, may convene a meeting of the Board by giving notice in accordance with this Schedule. 2 Notice to be sent to Director's address The notice of meeting must be a written notice sent to the address or facsimile number, or an electronic mail message sent to the electronic mail address, which the Director provides to the Company for that purpose, or if an address or facsimile number, or electronic mail address, is not provided, then a written notice to his or her last place of employment or residence or facsimile number known to the Company. 3 Notice to contain certain details The notice of meeting must include the date, time and place of the meeting. 4 Period of notice required to be given to Directors At least two days' notice of a meeting of the Board must be given unless the chairperson of the Board (or, in the chairperson's absence from New Zealand, any other Director) believes it is necessary to convene a meeting of the Board as a matter of urgency, in which case shorter notice of the meeting of the Board may be given, so long as at least two hour's notice is given. 5 Absent Directors If a Director, who is for the time being absent from New Zealand, supplies the Company with a facsimile number or address or electronic mail address to which notices are be sent during his or her absence, then notice must be given to that Director. Otherwise notice need not be given to any Director for the time being absent from New Zealand. However, if he or she has an alternate Director who is in New Zealand, then notice must be given to that person. 6 Directors may waive irregularities in notice Any irregularity in the notice of a meeting, or failure to comply with clauses 1 to 5 of this Schedule, is waived if all Directors entitled to receive notice of the meeting attend the meeting without protest as to the irregularity or failure, or if all Directors entitled to receive notice of the meeting agree to the waiver. MEETING AND QUORUM 7 Methods of holding meetings A meeting of the Board may be held either: 10 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- 7.1 By a number of Directors who constitute a quorum being assembled together at the place, date and time appointed for the meeting; or 7.2 By means of audio, or audio and visual, communications by which a quorum of Directors participating can simultaneously hear each other throughout the meeting. 8 Quorum for Board Meeting The quorum necessary for the transaction of business at a meeting of the Board is two Directors, unless the Company only has one Director, in which case the quorum is one Director. The Majority Shareholder may change the number of Directors required for a quorum by written notice to the Company. No business may be transacted at a meeting of the Board unless a quorum is present. 9 Meeting adjourned if no quorum If a quorum is not present within 30 minutes after the time appointed for a meeting of the Board, the meeting will be adjourned automatically until the following working day at the same time and place. If at the adjourned meeting a quorum is not present within 30 minutes from the time appointed for the meeting, the Directors present will constitute a quorum. CHAIRPERSON 10 Chairperson to chair meetings The chairperson will chair all meetings of the Board at which he or she is present. If no chairperson of the Board is elected, or if at a meeting of the Board the chairperson of the Board is not present within 5 minutes from the time appointed for the meeting, then the Directors present may elect one of their number to chair the meeting. VOTING 11 Voting on resolutions Each Director has one vote. A resolution of the Board is passed if it is agreed to by all Directors present without dissent or if a majority of the votes cast on it are in favour of it. A Director present at a meeting of the Board may abstain from voting on a resolution, and any Director who abstains from voting on a resolution will not be treated as having voted in favour of it for the purposes of the Act. 12 Chairperson does not have casting vote In the case of an equality of votes, the chairperson of the Board does not have a casting vote. 11 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- MINUTES 13 Board must keep minutes of proceedings The Board must ensure that minutes are kept of proceedings at meetings of the Board. Minutes which have been signed correct by the chairperson of the meeting are evidence of the proceedings at the meeting unless they are shown to be inaccurate. OTHER PROCEEDINGS 14 Board may regulate other proceedings Except as set out in this Schedule, the Board may regulate its own procedure. 12 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- PART A: INTRODUCTION ..........................................................1 PART B: SHARES AND SHAREHOLDERS ...............................................2 SHARES ..................................................................2 ISSUE OF SHARES .........................................................2 CALLS ...................................................................3 ACQUISITION OF OWN SHARES ...............................................3 PART C: DIRECTORS .............................................................3 APPOINTMENT AND REMOVAL .................................................3 CHAIRPERSON .............................................................4 PROCEEDINGS OF THE BOARD ................................................4 DIRECTORS' DUTIES .......................................................5 REMUNERATION ............................................................5 ALTERNATE DIRECTORS .....................................................6 PART D: GENERAL ...............................................................6 INDEMNITY AND INSURANCE FOR DIRECTORS AND EMPLOYEES .....................6 EXECUTION OF DEEDS ......................................................7 LIQUIDATION .............................................................7 SCHEDULE: PROCEEDINGS OF THE BOARD ............................................8 NOTICE OF MEETING .......................................................8 MEETING AND QUORUM ......................................................8 CHAIRPERSON .............................................................9 VOTING ..................................................................9 MINUTES ................................................................10 OTHER PROCEEDINGS ......................................................10 13 CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED - -------------------------------------------------------------------------------- ================================================================================ CONSTITUTION OF WEIGHT WATCHERS NEW ZEALAND LIMITED ================================================================================ Certified as the constitution of Weight Watchers New Zealand Limited adopted on registration. Name: Stephen Lowe Applicant for registration Date: EX-3.30 33 EXHIBIT 3.30 EXHIBIT 3.30 Form 204 ALLEN ALLEN & HEMSLEY ATTN: RUTH MCCOLL LVL 17 THE CHIFLEY TOWER 2 CHIFLEY SQ SYDNEY NSW 2000 remove this top section if declined before framing - -------------------------------------------------------------------------------- CERTIFICATE OF REGISTRATION OF A COMPANY Corporations Law Sub-section 121(1) This is to certify that WEIGHT WATCHERS INTERNATIONAL PTY LIMITED Australian Company Number 070 836 449 is a registered company under Division 1 of Part 2.2 of the Corporations Law of New South Wales and because of its registration it is an incorporated company. The company is limited by shares. The company is a proprietary company. The day of commencement of registration is the nineteenth day of September 1995. Given under the seal of the Australian Securities Commission on this nineteenth day of September, 1995. /s/ Alan Cameron ---------------- Alan Cameron Chairman - ----------------------- Date: 28 September 1999 The Corporations Law /s/ D.J. Mustow --------------- DAVID JOHN MUSTOW Blake Dawson Waldron 101 Collins Street Melbourne A natural person who is a current practitioner within the meaning of the Legal Practice Act of 1996 A company limited by shares incorporated in New South Wales - -------------------------------------------------------------------------------- MEMORANDUM and ARTICLES OF ASSOCIATION of WEIGHT WATCHERS INTERNATIONAL PTY LIMITED (ACN 070 836 449) - -------------------------------------------------------------------------------- (C)Allen Allen & Hemsley Sydney Ref: ZAHS 703308 Doc no: ixh9bfgqh Page (i) ================================================================================ TABLE OF CONTENTS ================================================================================ MEMORANDUM OF ASSOCIATION .........................1 1. Name of the Company .....................................................1 2. Share Capital ...........................................................1 3. Limited Liability .......................................................1 4. Subscribers .............................................................1 ARTICLES OF ASSOCIATION General .................................................................1 1. Interpretation ..........................................................1 2. Exclusion of Table a ....................................................1 3. Proprietary Company Provisions ..........................................2 SHARE CAPITAL ...........................................................2 4. Power of Directors to Issue Shares And Options ..........................2 5. Preference Shares .......................................................2 Conversion of Shares Into Stock .........................................2 6. Power to Convert Shares Into Stock ......................................2 7. General Application of These Articles ...................................3 8. Rights And Privileges of Stockholders ...................................3 9. Interpretation ..........................................................3 Alteration and Reduction of Capital .....................................3 10. Power to Alter Capital ..................................................3 11. Power to Reduce Capital .................................................4 Capital - General .......................................................4 12. Brokerage And Commission ................................................4 13. Recognition of Third Party Interests ....................................4 14. Share Certificates ......................................................4 Lien On Shares ..........................................................4 Page (ii) 15. Lien on Shares ..........................................................5 16. Exercise of Lien ........................................................5 17. Completion of Sale ......................................................5 18. Application of Proceeds of Sale .........................................6 Calls On Shares .........................................................6 19. Directors' Power to Make Calls ..........................................6 20. When Made And Instalments ...............................................6 21. Liability of Joint Holders For Calls ....................................6 22. Interest on Unpaid Amounts ..............................................6 23. Fixed Sums Deemed to Be Called ..........................................7 24. Differentiation Between Holders .........................................7 25. Prepayments of Calls ....................................................7 Transfer of Shares ......................................................7 26. Transferability of Shares ...............................................7 27. Registration of Transfers ...............................................8 28. Restriction on Transferability ..........................................8 29. Suspension of Registration ..............................................8 Transmission of Shares ..................................................8 30. Entitlement to Shares on Death ..........................................8 31. Registration of Persons Entitled ........................................8 32. Dividends And Other Rights ..............................................9 Forfeiture of Shares ....................................................9 33. Liability to Forfeiture .................................................9 34. Power to Forfeit ........................................................9 35. Powers of Directors ....................................................10 36. Consequences of Forfeiture .............................................10 37. Prima Facie Evidence of Forfeiture .....................................10 38. Transfers After Forfeiture And Sale ....................................10 39. Fixed Amounts Taken to Be Calls ........................................10 General Meetings .......................................................11 40. Power of Directors to Convene ..........................................11 41. Notices of Meeting .....................................................11 42. Quorum .................................................................11 Page (iii) 43. If Quorum Not Present...................................................11 44. Chairman of Meetings....................................................11 45. Adjournments............................................................12 46. Voting at General Meetings..............................................12 47. Procedure For Polls.....................................................13 48. Chairman's Casting Vote ................................................13 49. Representation of Members ..............................................13 50. Joint Holders...........................................................13 51. Members of Unsound Mind ................................................13 52. Restriction on Voting Rights - Unpaid Shares............................14 53. Objections to Qualification to Vote.....................................14 54. Proxies ................................................................14 55. Lodgement of Proxies....................................................16 56. Validity of Proxies ....................................................16 Directors ..............................................................16 57. Number of Directors ....................................................16 58. Appointment of Directors................................................17 59. Remuneration of Directors...............................................17 60. Vacation of Office......................................................17 Powers and Duties of Directors..........................................17 61. Powers of Directors.....................................................17 62. Power to Use Seals......................................................18 63. Appointment of Attorneys................................................18 64. Negotiable Instruments..................................................18 Proceedings of Directors................................................18 65. Convening Meetings......................................................18 66. Meetings of Directors...................................................18 67. Quorum at Meetings......................................................19 68. Chairman of Meetings....................................................19 69. Proceedings at Meetings ................................................19 70. Chairman's Casting Vote ................................................19 71. Disclosure of Interests ................................................19 72. Alternate Directors.....................................................20 73. Vacancies...............................................................20 74. Delegations to Committees ..............................................21 75. Circular Resolutions....................................................21 76. Defects in Appointments ................................................22 Page (iv) Managing Director.......................................................22 77. Power to Appoint Managing Director......................................22 78. Remuneration............................................................22 79. Delegation of Powers to Managing Director ..............................22 Secretary and Other Officers............................................23 80. Secretary...............................................................23 81. Other Officers..........................................................23 Seals...................................................................23 82. Safe Custody............................................................23 83. Other Seals ............................................................23 84. Use of Seals............................................................23 Inspection of Records ..................................................24 85. Inspection of Records ..................................................24 86. Rights of Members.......................................................24 Dividends and Reserves..................................................24 87. Power to Declare Dividends..............................................24 88. Differential Dividends..................................................25 89. Reserves................................................................25 90. Deduction of Unpaid Amounts ............................................25 91. Distributions in Specie.................................................26 92. Payment of Distributions................................................26 Capitalisation of Profits...............................................26 93. Capitalisation of Profits ..............................................26 94. Powers of Directors.....................................................27 Notices.................................................................27 95. Notices Generally ......................................................27 96. Notices of General Meeting..............................................28 Winding Up..............................................................28 97. Winding up..............................................................28 Page (v) Indemnity ..............................................................28 98. Indemnity ..............................................................28 The Corporations Law A company limited by shares incorporated in New South Wales --------------------------------------------------------- MEMORANDUM OF ASSOCIATION OF WEIGHT WATCHERS INTERNATIONAL PTY LIMITED (ACN 070 836 449) --------------------------------------------------------- 1. NAME OF THE COMPANY The name of the company is WEIGHT WATCHERS INTERNATIONAL PTY LIMITED. 2. SHARE CAPITAL The share capital of the company is $1000,000,000 divided into 100,000,000 shares of $1.00 each: 3. LIMITED LIABILITY The liability of the members is limited. 4. SUBSCRIBERS We, the persons whose full names, addresses and occupations are set out below, wish to form a company pursuant to this Memorandum of Association and we respectively agree to take the number of shares in the capital of the company set out opposite our respective names. 2 - -------------------------------------------------------------------------------- Full names, addresses and Number of shares taken occupations of subscribers Signatures of subscribers by each subscriber - -------------------------------------------------------------------------------- Ruth McCOLL 1 Unit 1 15 Anderson Street Neutral Bay NSW 2989 /s/ Ruth McColl Accountant --------------- Ruth McCOLL Ian Brian HOPKINS 1 29 Stonecrop Road North Turramurra NSW 2074 /s/ Ian Brian Hopkins Accountant --------------------- Ian Brian HOPKINS - -------------------------------------------------------------------------------- Dated this 19th day of September, 1995. Witness to each of the above signatures: /s/ K.A. Morrissey ------------------ Kylie-Anne MORRISSEY Level 17, The Chifley Tower 2 Chifley Square, SYDNEY NSW 2000 The Corporations Law A company limited by shares incorporated in New South Wales ------------------------------------------------------------ ARTICLES OF ASSOCIATION of WEIGHT WATCHERS INTERNATIONAL PTY LIMITED (ACN 070 836 449) ------------------------------------------------------------ GENERAL 1. INTERPRETATION 1.1 In these Articles: (a) Law means the Corporations Law; (b) Seal means the common seal of the company and includes any duplicate common seal and any official seal of the company; (c) words denoting any gender include all genders; (d) headings are for convenience only and shall not affect interpretation. 1.2 Division 10 of Part 1.2 of the Law applies in relation to these Articles as if they were an instrument made under the Law as in force on the day when these Articles become binding on the company. 1.3 Except so far as a contrary intention appears in these Articles, an expression has, in a provision of these Articles that deals with a particular provision of the Law, the same meaning as in that provision of the Law. 1.4 A reference to any legislation or to any provision of any legislation includes any modification or re-enactment of it, any legislative provision substituted for it and all regulations and statutory instruments issued under it. 2 2. EXCLUSION OF TABLE A The regulations contained in Table A of Schedule 1 to the Law shall not apply to the company. 3. PROPRIETARY COMPANY PROVISIONS 3.1 The company is a proprietary company. 3.2 The number of members of the company is limited to 50 (counting joint holders of shares as one person and not counting a person who is employed by the company or any of its subsidiaries of a person who was, while so employed, and afterwards has continued to be, a member of the company). 3.3 Any invitation to the public to subscribe for, and any offer to the public to accept subscriptions for, any shares in, or debentures of, the company is prohibited. 3.4 Any invitation to the public to deposit money with, and any offer to the public to accept deposits of money with, the company for fixed periods or payable at call, whether bearing or not bearing interest is prohibited. 3.5 The right to transfer shares is restricted as provided by these Articles. SHARE CAPITAL 4. POWER OF DIRECTORS TO ISSUE SHARES AND OPTIONS Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, but subject to the Law, shares or options over shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred, or other special rights or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the directors, subject to any resolution of the company, may decide. 5. PREFERENCE SHARES Subject to sections 192 and 200 of the Law, the company may issue preference shares that are, or at the option of the company are to be, liable to be redeemed. 3 CONVERSION OF SHARES INTO STOCK 6. POWER TO CONVERT SHARES INTO STOCK The company may by resolution passed in general meeting alter the provisions of its memorandum: (a) by converting, or providing for the conversion of, all or any of its paid up shares into stock; or (b) by reconverting, or providing for the reconversion of, any stock into paid up shares of any denomination. 7. GENERAL APPLICATION OF THESE ARTICLES 7.1 Subject to sub-article (2), where shares have been converted into stock, the provisions of these Articles relating to the transfer of shares apply, so far as they are capable of applications to the transfer of the stock or of any part of the stock. 7.2 The directors may fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the aggregate of the nominal amount of the shares from which the stock arose. 8. RIGHTS AND PRIVILEGES OF STOCKHOLDERS 8.1 The holders of stock have, according to the amount of the stock held by them, the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as they would have if they held the shares from which the stock arose. 8.2 No such privilege or advantage (except participation in the dividends and profits of the company and in the property of the company on winding up) shall be conferred by any amount of stock that would not, if existing in shares, have conferred that privilege or advantage. 9. INTERPRETATION 9.1 The provisions of these Articles that are applicable to paid up shares apply to stock, and references in those provisions to share and shareholder shall be read as including references to stock and stockholder, respectively. 4 ALTERATION AND REDUCTION OF CAPITAL 10. POWER TO ALTER CAPITAL 10.1 The company may by resolution passed in general meeting alter the provisions of its memorandum: (a) by increasing its share capital by the creation of new shares of such amount as it thinks expedient; (b) by consolidating and dividing all or any of its share capital into shares of larger amount than its existing shares; (c) by subdividing all or any of its shares into shares of smaller amount than is fixed by the memorandum but so that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each share of a smaller amount is the same as it was in the case of the share from which the share of a smaller amount is derived; or (d) by cancelling shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person or that have been forfeited and reducing its share capital by the amount of the shares so cancelled. 11. POWER TO REDUCE CAPITAL 11.1 Subject to the Law, the company may, by special resolution, reduce its share capital, any capital redemption reserve and any share premium account. CAPITAL - GENERAL 12. BROKERAGE AND COMMISSION 12.1 The company may exercise the powers to pay brokerage or commission conferred by the Law in the manner provided by the Law. 12.2 The brokerage or commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly by the payment of cash and partly by the allotment of fully or partly paid shares. 13. RECOGNITION OF THIRD PARTY INTERESTS 13.1 Except as required by law, the company shall not recognise a person as holding a share upon any trust. 5 13.2 The company is not bound by or compelled in any way to recognise (whether or not it has notice of the interest or rights concerned) any equitable, contingent, future or partial interest in any share or unit of a share or (except as otherwise provided by these Articles or by law) any other right in respect of a share except an absolute right of ownership in the registered holder. 14. SHARE CERTIFICATES 14.1 A person whose name is entered as a member in the register of members is entitled without payment to receive a certificate in respect of the share under the seal of the company in accordance with the Law but, in respect of a share or shares held jointly by several persons, the company is not bound to issue more than one certificate. 14.2 Delivery of a certificate for a share to one of several joint holders is sufficient delivery to all such holders LIEN ON SHARES 15. LIEN ON SHARES 15.1 The company has a first and paramount lien on every share (not being a fully paid share) for all money (whether presently payable or not) called or payable at a fixed time in respect of that share. 15.2 The company also has a first and paramount lien on all shares (other than fully paid shares) registered in the name of a sole holder for all money presently payable by him or his estate to the company. 15.3 The directors may at any time exempt a share wholly or in part from the provisions of this Article. 15.4 The company's lien (if any) on a share extends to all dividends payable in respect of the share. 16. EXERCISE OF LIEN 16.1 Subject to sub-article (2), the company may sell, in such manner as the directors think fit, any shares on which the company has a lien. 16.2 A share on which the company has a lien shall not be sold unless: (a) a sum in respect of which the lien exists is presently payable; and (b) the company has, not less than 14 days before the date of the sale, given to the registered holder for the time being of the share or the person entitled to the share by 6 reason of the death or bankruptcy of the registered holder a notice in writing setting out, and demanding payment of, such part of the amount in respect of which the lien exists as is presently payable. 17. COMPLETION OF SALE 17.1 For the purpose of giving effect to a sale pursuant to Article 16, the directors may authorise a person to transfer the shares sold to the purchaser of the shares. 17.2 The company shall register the purchaser as the holder of the shares comprised in any such transfer and he is not bound to see to the application of the purchase money. 17.3 The title of the purchaser to the shares is not affected by any irregularity or invalidity in connection with the sale. 18. APPLICATION OF PROCEEDS OF SALE The proceeds of a sale mentioned in Article 16 shall be applied by the company in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue (if any) shall (subject to any like lien for sums not presently payable that existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. CALLS ON SHARES 19. DIRECTORS' POWER TO MAKE CALLS 19.1 The directors may make calls upon the members in respect of any money unpaid on the shares of the members (whether on account of the nominal value of the shares or by way of premium) and not by the terms of issue of those shares made payable at fixed times. 19.2 Each member shall, upon receiving at least 14 days' notice specifying the time or place of payment, pay to the company at the time or times and place so specified the amount called on his shares. 19.3 The directors may revoke or postpone a call. 20. WHEN MADE AND INSTALMENTS 20.1 A call shall be taken to have been made at the time when the resolution of the directors authorising the call was passed. 20.2 A call may be required to be paid by instalments. 7 21. LIABILITY OF JOINT HOLDERS FOR CALLS 21.1 The joint holders of a share are jointly and severally liable to pay all calls in respect of the share. 22. INTEREST ON UNPAID AMOUNTS If a sum called in respect of a share is not paid before or on the day appointed for payment of the sum, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment of the sum to the time of actual payment at such rate not exceeding 12% per annum as the directors determine, but the directors may waive payment of that interest wholly or in part. 23. FIXED SUMS DEEMED TO BE CALLED Any sum that, by the terms of a share, becomes payable on allotment or at a fixed date, which on account of the nominal amount of the share or by way of premium, shall for the purposes of these Articles be taken to be a call duly made and payable on the date on which by the terms of issue the sum becomes payable, and, in case of non-payment, all the relevant provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise apply as if the sum had become payable by virtue of a call duly made and notified, otherwise apply as if the sum had become payable by virtue of a call duly made and notified. 24. DIFFERENTIATION BETWEEN HOLDERS The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the time of payment. 25. PREPAYMENTS OF CALLS 25.1 The directors may accept from a member the whole or a part of the amount unpaid on a share although no part of that amount has been called up. 25.2 The directors may authorise payment by the company of interest upon the whole or any part of an amount so accepted, until the amount becomes payable, at such rate, not exceeding the prescribed rate, as is agreed upon between the directors and the member paying the sum. 25.3 For the purposes of sub-article (2), the prescribed rate of interest is: (a) if the company has, by resolution, fixed a rate - the rate so fixed; and (b) in any other case - 8% per annum. 8 TRANSFER OF SHARES 26. TRANSFERABILITY OF SHARES 26.1 Subject to these Articles and the Law, a member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the directors approve. 26.2 An instrument of transfer of shares shall be executed by or on behalf of both the transferor and the transferee and shall show the jurisdiction of incorporation of the company. 26.3 A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect of the shares. 27. REGISTRATION OF TRANSFERS The instrument of transfer must be left for registration at the registered office of the company together with the certificate of the shares to which it relates and such other information as the directors properly require to show the right of the transferor to make the transfer. 28. RESTRICTION ON TRANSFERABILITY The directors in their absolute and uncontrolled discretion may refuse to register any transfer of shares and may decline to give their reasons and grounds for doing so. If the directors resolve to refuse registration of a transfer, they shall notify the transferor not later than three months after their decision is made. 29. SUSPENSION OF REGISTRATION The registration of transfers may be suspended at such times and for such periods as the directors from time to time decide not exceeding in aggregate 30 day sin any year. TRANSMISSION OF SHARES 30. ENTITLEMENT TO SHARES ON DEATH In the case of the death of a member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares, but this Article does not release the estate of a deceased joint holder from any liability in respect of a share that had been jointly held by him with other persons. 9 31. REGISTRATION OF PERSONS ENTITLED 31.1 Subject to the Bankruptcy Act 1966, a person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such information being produced as is properly required by the directors, elect either to be registered himself as holder of the share or to have some other person nominated by him registered as the transferee of the share. 31.2 If the person becoming entitled elects to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. 31.3 If he elects to have another person registered, he shall execute a transfer of the share to that other person. 31.4 All the limitations, restrictions and provisions of these Articles relating to the right to transfer, and the registration of transfer of, shares are applicable to any such notice or transfer as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member. 32. DIVIDENDS AND OTHER RIGHTS 32.1 Where the registered holder of a share dies or becomes bankrupt, his personal representative or the trustee of his estate, as the case may be, is, upon the production of such information as is properly required by the directors, entitled to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the company, or to voting or otherwise), as the registered holder would have been entitled to if he had not died or become bankrupt. 32.2 Where 2 or more persons are jointly entitled to any share in consequence of the death of the registered holder, they shall, for the purpose of these Articles, be taken to be joint holders of the share. FORFEITURE OF SHARES 33. LIABILITY TO FORFEITURE 33.1 If a member fails to pay a call or instalment of a call on the day appointed for payment of the call or instalment, the directors may, at any time afterwards, during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest that has accrued. 33.2 The notice shall name a further day (not earlier than the expiration of 14 days from the date of service of the notice) on or before which the payment required by the notice is to be made and shall state that, in the event of a non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited. 10 34. POWER TO FORFEIT 34.1 If the requirements of a notice served under Article 33 are not complied with, any share in respect of which the notice has been given may at any time afterwards, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 34.2 Such a forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 35. POWERS OF DIRECTORS A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and, at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the directors think fit. 36. CONSEQUENCES OF FORFEITURE A person whose shares have been forfeited ceases to be a member in respect of the forfeited shares, but remains liable to pay to the company all money that, at the date of forfeiture, was payable by him to the company in respect of the shares (including interest at the rate of 8% per annum from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of the interest), but his liability ceases if and when the company receives payment in full of all the money (including interest) so payable in respect of the shares. 37. PRIMA FACIE EVIDENCE OF FORFEITURE A statement in writing declaring that the person making the statement is a director or a secretary of the company, and that a share in the company has been duly forfeited on a date stated in the statement, is prima facie evidence of the facts stated in the statement as against all persons claiming to be entitled to the share. 38. TRANSFERS AFTER FORFEITURE AND SALE 38.1 The company may receive the consideration (if any) given for a forfeited share on any sale or disposition of the share and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of. 38.2 Upon the execution of the transfer, the transferee shall be registered as the holder of the share and is not bound to see to the application of any money paid as consideration. 38.3 The title of the transferee to the share is not affected by any irregularity or invalidity in connection with the forfeiture, sale or disposal of the share. 11 39. FIXED AMOUNTS TAKEN TO BE CALLS The provisions of these Articles as to forfeiture apply in the case of non-payment of any sum that, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if that sum had been payable by virtue of a call duly made and modified. GENERAL MEETINGS 40. POWER OF DIRECTORS TO CONVENE Any director may whenever he thinks fit convene a general meeting. 41. NOTICES OF MEETING A notice of a general meeting shall specify the place, the day and the hour of meeting and shall state the general nature of the business to be transacted at that meeting. 42. QUORUM 42.1 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. Except as otherwise provided in these Articles, 2 members present in person shall constitute a quorum. 42.2 For the purpose of determining whether a quorum is present, a person attending as a proxy, or as attorney for a member, or as a representative of a corporation that is a member, shall be taken to be a member. 43. IF QUORUM NOT PRESENT If a quorum is not present within half an hour from the time appointed for the meeting: (a) where the meeting was convened upon the requisition of members - the meeting shall be dissolved; or (b) in any other case: (i) the meeting stands adjourned to such day, and at such time and place, as the directors determine or, if no determination is made by the directors, to the same day in the next week at the same time and place; and (ii) if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting - the meeting shall be dissolved. 12 44. CHAIRMAN OF MEETINGS 44.1 If the directors have elected one of their number as chairman of their meetings, he shall preside as chairman at every general meeting. 44.2 Where a general meeting is held and: (a) a chairman has not been elected as provided by sub-article (1); or (b) the chairman is not present within 15 minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting. 45. ADJOURNMENTS 45.1 The chairman may with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 45.2 When a meeting is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. 45.3 Except as provided by sub-article (2), it is not necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 46. VOTING AT GENERAL MEETINGS 46.1 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demand: (a) by the chairman; (b) by at least 5 members present in person or by proxy, representative or attorney; (c) by a member or members present in person or by proxy, representative or attorney and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members present in person or by proxy, representative or attorney holding shares in the company conferring a right to vote at the meeting being shares on 13 which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid upon on all the shares conferring that right. 46.2 Unless a poll is so demanded, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company, is conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. 46.3 The demand for a poll may be withdrawn. 47. PROCEDURE FOR POLLS 47.1 If a poll is properly demanded, it shall be taken in such manner and, subject to sub-article (2), either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded. 47.2 A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. 48. CHAIRMAN'S CASTING VOTE In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, in addition to his deliberative vote (if any), has a casting vote. 49. REPRESENTATION OF MEMBERS Subject to any rights or restrictions for the time being attached to any class of shares: (a) at meetings of members or classes of members each member entitled to vote may vote in person or by representative, proxy or attorney; and (b) on a show of hands every person present who is a member or a representative of a member or an attorney for a member has one vote, and on a poll every member present in person or by representative, proxy or attorney has one vote for each share held by the member. 50. JOINT HOLDERS In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy or by representative or by attorney, shall be accepted to the exclusion of the votes of the 14 other joint holders and seniority of joint holders shall be decided by the order in which the names stand in the register of members. 51. MEMBERS OF UNSOUND MIND If a member is of unsound mind or is a person whose person or estate is liable to be dealt with in any way under the law relating to mental health, his committee or trustee or such other person as properly has the management of his estate may exercise any rights of the member in relation to a general meeting as if the committee, trustee or other person were the member. 52. RESTRICTION ON VOTING RIGHTS - UNPAID SHARES A member is not entitled to vote at a general meeting unless all calls and other sums presently payable by him in respect of shares in the company have been paid. 53. OBJECTIONS TO QUALIFICATION TO VOTE 53.1 An objection may be raised to the qualification of a voter only at the meeting or adjourned meeting at which the vote objected to is given or tendered. 53.2 Any such objection shall be referred to the chairman of the meeting, whose decision is final. 53.3 A vote not disallowed pursuant to such an objection is valid for all purposes. 54. PROXIES 54.1 An instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised. 54.2 An instrument appointing a proxy may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument but may vote as he thinks fit on any motion or resolution in respect of which no manner of voting is indicated. 54.3 An instrument appointing a proxy shall be taken to confer authority to demand or join in demanding a poll. 54.4 An instrument appointing a proxy shall be in the following form or in a form that is as similar to the following form as the circumstances allow or in such other form as the directors shall accept: 15 WEIGHT WATCHERS INTERNATIONAL PTY LIMITED (ACN 070 836 449) PROXY FORM I/We ___________________________________________________________________________ of _____________________________________________________________________________ appoint_________________________________________________________________________ or in his/her absence___________________________________________________________ of _____________________________________________________________________________ as my/our proxy to vote for me/us on my/our behalf at the [Annual] General Meeting of the Company to be held on 199 and at any adjournment of that meeting. I/We direct my/our proxy to vote in respect of each resolution to be considered as indicated with an "X" below, and to vote or abstain in respect of any procedural resolution as my/our proxy thinks fit. FOR AGAINST Resolution No. 1 |_| |_| Resolution No. 2 |_| |_| If no direction is given above, I/we authorise my/our proxy to vote or abstain as my/our proxy thinks fit in respect of each resolution (including any procedural resolution) to be considered by the meeting and any adjournment of the meeting. Dated 199 . Signature ___________________________________ Corporations should execute under seal or by attorney. 16 54.5 Notwithstanding Article 50, where an instrument of proxy is signed by all of the joint holders of any shares, the votes of the proxy so appointed shall be accepted in respect of those shares to the exclusion of any votes tendered by a proxy for any one of those joint holders. 54.6 No instrument appointing a proxy shall be treated as invalid merely because it does not contain the address of the appointor or of a proxy or is not dated or does not contain in relation to any or all resolutions an indication of the manner in which the proxy is to vote and, in any case where the instrument does not contain the name of a proxy, the instrument shall not for that reason be invalid and shall be taken to be given in favour of the chairman of the meeting. 55. LODGEMENT OF PROXIES An instrument appointing a proxy shall not be treated as valid unless the instrument, and the power of attorney or other authority (if any) under which the instrument is signed or a notarially certified copy of that power or authority, is or are deposited, not less than 24 hours (or such lesser period as the directors may permit) before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and, in the case of a poll, not less than 24 hours (or such lesser period as the directors may permit) before the time appointed for the taking of the poll, at the registered office of the company or at such other place within Australia as is specified for that purpose in the notice convening the meeting. 56. VALIDITY OF PROXIES A vote given in accordance with the terms of an instrument of proxy or of a power of attorney is valid notwithstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument (or of the authority under which the instrument was executed) or of the power, or the transfer of the share in respect of which the instrument or power is given, if no intimation in writing of the death, unsoundness of mind, revocation or transfer has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used or the power is exercised. DIRECTORS 57. NUMBER OF DIRECTORS 57.1 The number of the directors and the names of the first directors shall be decided in writing by the subscribers to the memorandum or a majority of them. 57.2 The company may, by resolution, increase or reduce the number of directors. 17 58. APPOINTMENT OF DIRECTORS A person may, by resolution of the company or by resolution of the directors, be appointed to be a director either to fill a casual vacancy or in addition to the existing directors but so that the total number of directors does not at any time exceed the number decided in accordance with these Articles. 59. REMUNERATION OF DIRECTORS 59.1 The directors shall be paid such remuneration as is from time to time decided by the company in general meeting. 59.2 That remuneration shall be taken to accrue from day to day. 59.3 The directors may also be paid all travelling and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or otherwise in connection with the business of the company. 60. VACATION OF OFFICE In addition to the circumstances in which the office of a director becomes vacant by virtue of the Law, the office of a director becomes vacant if the director: (a) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health; (b) resigns his office by notice in writing to the company; (c) is absent without the consent of the directors from meetings of the directors held during a period of 6 months; (d) is removed from office by resolution of the company. POWERS AND DUTIES OF DIRECTORS 61. POWERS OF DIRECTORS 61.1 Subject to the Law and to any other provisions of these Articles, the business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by the Law or by these Articles, required to be exercised by the company in general meeting. 18 61.2 Without limiting the generality of sub-article (1), the directors may exercise all the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. 62. POWER TO USE SEALS The directors may exercise all the powers of the company in relation to any official seal, any duplicate common seal and any branch register. 63. APPOINTMENT OF ATTORNEYS 63.1 The directors may, by power of attorney, appoint any person or persons to be the attorney or attorneys of the company for such purposes, with such powers, authorities and discretions (being powers, authorities and discretions vested in or exercisable by the directors), for such period and subject to such conditions as they think fit. 63.2 Any such power of attorney may contain such provisions for the protection and convenience of persons dealing with the attorney as the directors think fit and may also authorise the attorney to delegate all or any of the powers, authorities and discretions vested in him. 64. NEGOTIABLE INSTRUMENTS All cheques, promissory notes, bankers drafts, bills of exchange, and other negotiable instruments shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, by such persons and in such manner as the directors may decide, and unless so decided, by any 2 directors. PROCEEDINGS OF DIRECTORS 65. CONVENING MEETINGS 65.1 The directors may meet together for the despatch of business and adjourn and otherwise regulate their meetings as they think fit. 65.2 A director may at any time, and a secretary shall on the requisition of a director, convene a meeting of the directors. 66. MEETINGS OF DIRECTORS Where, through a link established by means of any system of telephone, audio or audio-visual communication approved by the directors and made known to each director for the purpose of any meeting of the directors, one or more of the directors absent from the place appointed for 19 the meeting can hear and be heard by not only one another (if more than one) but also the director or directors in attendance at that place for the purpose of being present at the meeting, such of those absent directors and the director or directors so in attendance as are able to hear and be heard by one another shall, for the purpose of every provision of these Articles concerning meetings of the directors, be taken to be assembled together at a meeting held at that place and all proceedings of those directors conducted with the aid of the link shall be as valid and effectual as if conducted at a meeting at which all of them were present. 67. QUORUM AT MEETINGS 67.1 At a meeting of directors, the number of directors whose presence is necessary to constitute a quorum is such number as is determined by the directors and, unless so determined, is 2. 67.2 The fact that a director is in any way, directly or indirectly, interested in any manner arising for decision at a meeting of directors does not prevent that director being counted in a quorum. 68. CHAIRMAN OF MEETINGS 68.1 The directors shall elect one of their number as chairman of their meetings and may decide the period for which he is to hold office. 68.2 Where such a meeting is held and: (a) a chairman has not been elected as provided by sub-article (1); or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the directors present shall elect one of their number to be chairman of the meeting. 69. PROCEEDINGS AT MEETINGS Subject to these Articles, questions arising at a meeting of directors shall be decided by a majority of votes of directors present and voting and any such decision shall for all purposes be taken to be a decision of the directors. 70. CHAIRMAN'S CASTING VOTE In case of an equality of votes, the chairman of the meeting, in addition to his deliberative vote, has a casting vote. 20 71. DISCLOSURE OF INTERESTS 71.1 A director is not disqualified by his office from contracting with the company in any capacity whatsoever. 71.2 A contract or arrangement made by the company with a director or in which a director is in any way, directly or indirectly, interested shall not be avoided merely because the director is a party to or interested in it. 71.3 Provided that a director has duly declared in accordance with the Law the nature of his interest in any contract or arrangement of the kind mentioned in sub-article (2), the director is not, merely because of his office as director of the fiduciary relationship it entails, liable to account to the company for any profit derived by him from the contract or arrangement. 71.4 A director may as a director vote in respect of any contract or arrangement of the kind mentioned in sub-article (2). 71.5 A director may hold any office of employment or profit in the company (other than auditor) in addition to holding office as a director. 72. ALTERNATE DIRECTORS 72.1 A director may, with the approval of a majority of the other directors, appoint a person (whether a member of the company or not) to be an alternate director in his place during such period as he thinks fit. 72.2 An alternate director is entitled to notice of meetings of the directors and, if the appointor is not present at such a meeting, is entitled to attend and vote in his stead. 72.3 An alternate director may exercise any powers that the appointor may exercise and the exercise of any such power by the alternate director shall be taken to be the exercise of the power by the appointor. 72.4 The appointment of an alternate director may be terminated at any time by the appointor notwithstanding that the period of the appointment of the alternate director has not expired and terminates in any event if the appointor vacates office as a director. 72.5 An appointment, or the termination of an appointment, of an alternate director shall be effected by service on the company of a notice in writing signed by the director who makes or made the appointment. 21 73. VACANCIES In the event of a vacancy or vacancies in the office of a director or offices of directors, the remaining directors may act but, if the number of remaining directors is not sufficient to constitute a quorum at a meeting of directors, they may act only for the purpose of increasing the number of directors to a number sufficient to constitute such a quorum or of convening a general meeting of the company. 74. DELEGATIONS TO COMMITTEES 74.1 The directors may delegate any of their powers to a committee or committees consisting of such of their number as they think fit and may authorise the delegate to sub-delegate all or any of the powers so delegated. 74.2 A committee to which any powers have been so delegated shall exercise the powers delegated in accordance with any directions of the directors and a power so exercised shall be taken to have been exercised by the directors. 74.3 The members of such a committee may elect one of their number as chairman of their meetings. 74.4 Where such a meeting is held and: (a) a chairman has not been elected as provided by sub-article (3); or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present may elect one of their number to be chairman of the meeting. 74.5 A committee may meet and adjourn as it thinks fit. 74.6 Questions arising at a meeting of a committee shall be determined by a majority of votes of the members present and voting. 74.7 In the case of an equality of votes, the chairman, in addition to his deliberative vote, has a casting vote. 75. CIRCULAR RESOLUTIONS 75.1 If a document containing a statement that the signatories to it are in favour of a resolution in the terms set out or otherwise identified in the document has been signed by all the directors (excluding each director, if any, who would not be entitled to vote on that resolution at a meeting of the directors), a resolution in those terms shall be taken to have been passed at a 22 meeting of the directors held on the day on which and at the time at which the document was last signed by a director. 75.2 For the purposes of sub-article (1) (a) 2 or more separate documents containing statements in identical terms each of which is signed by one or more directors shall together be taken to constitute one document containing a statement in those terms signed by those directors on the respective days on which they signed the separate documents; (b) a reference to all the directors does not include a reference to an alternate director whose appointor has signed the document, but an alternate director may sign the document in the place of his appointor; and (c) a telex, telegram or facsimile message which is received by the company and is expressed to have been sent by a director or alternate director shall be taken to be a document signed by that director or alternate director at the time of receipt of the telex, telegram or facsimile message by the company. 76. DEFECTS IN APPOINTMENTS Notwithstanding that it is afterwards discovered that there was some defect in the appointment of a person to be a director, or a member of a committee, or to act as a director, or that a person so appointed was disqualified, all acts done by any meeting of the directors or of a committee of directors or by any person acting as a director are as valid as if the person had been duly appointed and was qualified to be a director or to be a member of the committee. MANAGING DIRECTOR 77. POWER TO APPOINT MANAGING DIRECTOR 77.1 The directors may from time to time appoint one or more of their number to the office of managing director for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into a particular case, may revoke any such appointment. 77.2 A managing director's appointment shall automatically terminate if he ceases from any reason to be a director. 78. REMUNERATION A managing director shall, subject to the terms of any agreement entered into in a particular case, receive such remuneration (whether by way of salary, commission or participation in profits, or partly in one way and partly in another) as the directors decide. 23 79. DELEGATION OF POWERS TO MANAGING DIRECTOR 79.1 The directors may, upon such terms and conditions and with such restrictions as they think fit, confer upon a managing director any of the powers exercisable by them. 79.2 Subject to sub-article (3), any powers so conferred may be concurrent with the powers of the directors. 79.3 The directors may at any time withdraw or vary any of the powers so conferred on a managing director. SECRETARY AND OTHER OFFICERS 80. SECRETARY A secretary of the company holds office on such terms and conditions, as to remuneration and otherwise, as the directors decide. The directors may at any time terminate the appointment of a secretary. 81. OTHER OFFICERS The directors may from time to time create any other position or positions in the company (including but not limited to the offices of President and Vice President) with such powers and responsibilities as the directors may from time to time confer and the directors may appoint any person, whether or not a director, to any such position or positions. The directors may at any time terminate the appointment of a person holding such a position and may abolish the position. SEALS 82. SAFE CUSTODY The directors shall provide for the safe custody of the seals. 83. OTHER SEALS 83.1 The company may have for use in place of its common seal outside the jurisdiction in which its common seal is kept one or more official seals, each of which shall be a facsimile of the common seal with the addition on its face of the name of every place where it is to be used. 83.2 The company may have a duplicate common seal, which shall be a facsimile of the common seal with the addition on its face of the words "share seal" or "certificate seal". 24 84. USE OF SEALS 84.1 The common seal shall be used only by the authority of the directors, or of a committee of the directors authorised by the directors to authorise the use of the common seal, and every document to which the common seal is affixed shall be signed by a director and be countersigned by another director, a secretary or another person appointed by the directors to countersign that document or a class of documents in which that document is included. 84.2 Any seal that the company has in conformity with Article 83 shall be used only in the manner prescribed in sub-article (1) in relation to the common seal or in accordance with such regulations as the directors may from time to time by resolution prescribe in relation to the seal in question. 84.3 Regulations prescribed by the directors in relation to a particular seal that the company has in conformity with Article 83 may: (a) specify the person or persons who may affix and attest the affixing of that seal; and (b) provide that any impression of that seal or any signature attesting the affixing of it may be a facsimile impression or signature which is printed by some mechanical or electronic means. 84.4 A certificate signed by any director or the secretary which sets out the terms of any regulations so prescribed by the directors shall be, as against the company, conclusive evidence of those regulations. 84.5 Any seal that the company has in conformity with Article 83 shall be taken to be duly affixed if it is affixed and attested in the manner prescribed by sub-article (1) in relation to the common seal or in accordance with regulations prescribed by the directors in relation to that seal. INSPECTION OF RECORDS 85. INSPECTION OF RECORDS The directors shall decide whether and to what extent, and at what time and places and under what conditions, the accounting records and other documents of the company or any of them will be open to the inspection of members (other than those who are also directors). 86. RIGHTS OF MEMBERS A member other than a director does not have the right to inspect any document of the company except as provided by law or authorised by the directors or by the company in general meeting. 25 DIVIDENDS AND RESERVES 87. POWER TO DECLARE DIVIDENDS 87.1 The company in general meeting may from time to time declare dividends to be paid to members, but no dividend shall exceed that recommended by the directors. 87.2 The directors may authorise payment by the company to the members of such interim dividends as appear to the directors to be justified by the profits of the company. 88. DIFFERENTIAL DIVIDENDS 88.1 Subject to the rights of persons (if any) entitled to shares with special rights as to dividend, every dividend shall: (a) if the resolution for the payment of the dividend so directs, be paid in respect of some shares to the exclusion of others but otherwise be paid in respect of all shares; (b) if the resolution for the payment of the dividend so directs, be paid at different rates or in different amounts upon the shares in respect of which it is to be paid but otherwise be paid according to the amounts paid or credited as paid on the shares in respect of which it is to be paid; and (c) except where the resolution for the payment of the dividend otherwise directs or in the case of any share issued on terms providing that it will rank for dividend as from a particular date, be apportioned and paid proportionately to the amounts paid or credited as paid on the shares in respect of which the dividend is to be paid during any part or parts of the period in respect of which the dividend is paid. 88.2 An amount paid or credited as paid on a share in advance of a call shall not be taken for the purposes of sub-article (1) to be paid or credited as paid on the share. 88.3 In sub-article (1), dividend includes interim dividend. 89. RESERVES 89.1 The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied. 26 89.2 Pending any such application the reserves may, at the discretion of the directors, either be employed in the business of the company or be invested in such investments (other than shares in the company) as the directors may from time to time think fit. 89.3 The directors may without placing them to reserve carry forward any profits which they may think prudent not to divide. 90. DEDUCTION OF UNPAID AMOUNTS The directors may deduct from any dividend payable to a member all sums of money (if any) presently payable by the member to the company on account of calls or otherwise in relation to shares in the company. 91. DISTRIBUTIONS IN SPECIE 91.1 Any general meeting declaring a dividend may, by resolution, direct payment of the dividend wholly or partly by the distribution of specific assets, including paid up shares in, or debentures of, any other corporation, and the directors shall give effect to such a resolution. 91.2 Where a difficulty arises in regard to such a distribution, the directors may settle the matter as they consider expedient and fix the value for distribution of the specific assets or any part of those assets and may determine that cash payments will be made to any members on the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as the directors consider expedient. 92. PAYMENT OF DISTRIBUTIONS 92.1 Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque sent through the post directed to: (a) the address of the holder as shown in the register of members, or in the case of joint holders, to the address shown in the register of members as the address of the joint holder first named in that register; or (b) to such other address as the holder or joint holders in writing directs or direct. 92.2 Any one of 2 or more joint holders may give effectual receipts for any dividends, interest or other money payable in respect of the shares held by them as joint holders. 27 CAPITALISATION OF PROFITS 93. CAPITALISATION OF PROFITS 93.1 Subject to sub-article (2), the company in general meeting may resolve that it is desirable to capitalise any sum, being the whole or a part of the amount for the time being standing to the credit of any reserve account or the profit and loss account or otherwise available for distribution to members, and that that sum be applied, in any of the ways mentioned in sub-article (3), for the benefit of members in the proportions to which those members would have been entitled in a distribution of that sum by way of dividend. 93.2 The company shall not pass a resolution as mentioned in sub-article (1) unless the resolution has been recommended by the directors. 93.3 The ways in which a sum may be applied for the benefit of members under sub-article (1) are: (a) in paying up any amounts unpaid on shares held by members; (b) in paying up in full unissued shares or debentures to be issued to members as fully paid; or (c) partly as mentioned in paragraph (a) and partly as mentioned in paragraph (b). 94. POWERS OF DIRECTORS The directors shall do all things necessary to give effect to the resolution and, in particular, to the extent necessary to adjust the rights of the members among themselves, may: (a) issue fractional certificates or make cash payment in cases where shares or debentures become issuable in fractions; and (b) authorise any person to make, on behalf of all the members entitled to any further shares or debentures upon the capitalisation, an agreement with the company providing for the issue to them, credited as fully paid up, of any such further shares or debentures or for the payment up by the company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing shares by the application of their respective proportions of the sum resolved to be capitalised, and any agreement made under an authority referred to in paragraph (b) is effective and binding on all the members concerned. 28 NOTICES 95. NOTICES GENERALLY 95.1 A notice may be given by the company to any member either by serving it on him personally or by sending it by post to him at his address as shown in the register of members or the address supplied by him to the company for the giving of notices to him. 95.2 Where a notice is sent by post, service of the notice shall be taken to be effected by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected, in the case of a notice of a meeting, on the day after the date of its posting and, in any other case, at the time at which the letter would be delivered in the ordinary course of post. 95.3 A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share. 95.4 A notice may be given by the company to a person entitled to a share in consequence of the death or bankruptcy of a member by serving it on him personally or by sending it to him by post addressed to him by name, or by the title of representative of the deceased or assignee of the bankrupt, or by any like description, at the address (if any) within Australia supplied by the purpose by the person or, if such an address has not been supplied, at the address to which the notice might have been sent if the death or bankruptcy had not occurred. 96. NOTICES OF GENERAL MEETING 96.1 Notice of every general meeting shall be given in the manner authorised by Article 95 to: (a) every member; (b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and (c) the auditor for the time being of the company. 96.2 No other person is entitled to receive notices of general meetings. 29 WINDING UP 97. WINDING UP 97.1 If the company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the company and may for that purpose set such value as he considers fair upon any property to be so divided and may determine how the division is to be carried out as between the members or different classes of members. 97.2 The liquidator may, with the sanction of a special resolution, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no member is compelled to accept any shares or other securities in respect of which there is any liability. 97.3 If the company is wound up, the rights and interests of the members in the capital and in any surplus assets shall be in proportion to the amounts paid or credited as paid on the shares held by them respectively at the commencement of the winding up. INDEMNITY 98. INDEMNITY 98.1 To the extent permitted by law and without limiting the powers of the company, the company must indemnify each person who is, or has been, a director, principal executive officer or secretary of the company against any liability which results directly or indirectly from facts or circumstances relating to the person serving or having served in that capacity: (a) to any person (other than the company or a related body corporate), which does not arise out of conduct involving a lack of good faith or conduct known to the person to be wrongful; and (b) for costs and expenses incurred by the person in defending proceedings, whether civil or criminal, in which judgment is given in favour of the person or in which the person is acquitted, or in connection with any application in relation to such proceedings in which the court grants relief to the person under the Law. 98.2 The Company need not indemnify a person as provided for in paragraph (1) in respect of a liability to the extent that the person is entitled to an indemnity in respect of that liability under a contract of insurance. 98.3 To the extent permitted by law and without limiting the powers of the company, the board of directors may authorise the company to, and the company may enter into any: 30 (a) documentary indemnity in favour of; or (b) insurance policy for the benefit of, a person who is, or has been, a director, principal executive officer, secretary, auditor, employee or other officer of the company or of a subsidiary of the company, which indemnity or insurance policy may be in such terms as the board of directors approves and, in particular, may apply to acts or omissions prior to or after the time of entering into the indemnity or policy; 98.4 The benefit of each indemnity given in paragraph (1) continues, even after its terms or the terms of this paragraph (4) are modified or deleted, in respect of a liability arising out of acts or omissions occurring prior to the modification or deletion. **** 31 We, the several persons whose signatures are subscribed below, being the subscribers to the Memorandum of Association, agree to the Articles of Association set out above. - -------------------------------------------------------------------------------- Signatures of subscribers Witness - -------------------------------------------------------------------------------- ) ) ) /s/ Ruth McColl ) /s/ K.A. Morrissey - --------------- ) ------------------ Ruth McCOLL ) Kylie-Anne MORRISSEY ) Level 17, The Chifley Tower ) 2 Chifley Square, SYDNEY NSW 2000 ) ) /s/ Ian Brian Hopkins ) - --------------------- ) Ian Brian HOPKINS ) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated this 19th day of September, 1995. EX-3.31 34 EXHIBIT 3.31 EXHIBIT 3.31 ALLEN ALLEN & HEMSLEY DX: 105 SYDNEY NSW Certificate of the Registration of a Company Corporations Law Paragraph 1274(2)(b) This is to certify that FORTUITY PTY. LTD. Australian Company under 007 148 683 is taken to be registered as a company under the Corporations Law of Victoria The company is limited by shares. The company is a proprietary company. The day of commencement of registration is the sixth day of February 1989. Issued by the Australian Securities and Investments Commission on this twenty-eighth day of October, 1999. ---------------------------------------------- A delegate of the Australian Securities and Investments Commission COMPANIES (VICTORIA) CODE COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATION OF FORTUITY PTY LTD 1. The name of the Company is Fortuity Pty Ltd. 2. The nominal capital of the Company is $20,000,000 divided into 18,000,000 ordinary shares of one dollar each, and 2,000,000 "B" Class shares of one dollar each. 3. The liability of the members is limited. WE, the several persons whose names, addresses and occupations are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital on the Company set opposite our respective names:- - -------------------------------------------------------------------------------- Names, addresses & Signatures of Subscribers No. of shares taken by Occupation of Subscribers each Subscriber - -------------------------------------------------------------------------------- Mark Nicholas CERCHE 8 Burnett Street St Kilda SOLICITOR M. Cerche One Graeme Dean John HENSHAW 334 Wattletree Road East Malvern SOLICITOR G. Henshaw One - -------------------------------------------------------------------------------- DATED this 2nd day of February 1989. Witness to the above signatures: N. McKenna 119 Miller Street North Fitzroy, Victoria LAW CLERK ................................... N. McKenna COMPANIES (VICTORIA) CODE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF FORTUITY PTY LTD 1. The regulations contained in Table A in Schedule 3 to the Companies (Victoria) Code ("Table A") shall apply to the Company save insofar as they are expressly excluded or modified by these Articles. 2. The term "regulations" when used herein or in Table A shall mean Table A as modified hereby. Any reference to an Article by number is a reference to the Article of that number herein and any reference to a regulation by number is a reference to the regulation of that number in Table A. 3. a. Regulations 4(3), 21, 38, 57 to 62 (inclusive), 64, 65, 71 and 79(2) shall be excluded. b. Regulation 12 shall be modified by deleting therefrom ", except that no call shall exceed one-quarter of the sum of nominal values of the shares or be payable earlier than one month from the date fixed for the payment of the last preceding call". c. Regulation 41(2) shall be modified by deleting therefrom ", the election of directors in the place of those retiring". 4. The number of directors shall not be less than two. 5. a. The first directors shall be appointed in writing by the subscribers to the Memorandum of Association. b. The holder or holders for the time being of a majority of the issued shares in the capital of the Company conferring the right to vote at all general meetings of the Company may at any time and from time to time appoint any person to be a director to fill a casual vacancy or as an addition to the existing directors or remove a director from office. c. The directors may at any time and from time to time appoint any person to be a director to fill a casual vacancy or as an addition to the existing directors. d. Any appointment or removal under paragraph (b) may be made at any time and shall be in writing signed by or on behalf of the holder or holders for the time being of a majority 3 of the issued shares in the capital of the Company conferring the right to vote as aforesaid. Any such appointment or removal shall take effect immediately upon delivery of the instrument of appointment or removal to the registered office of the Company. e. A director need not hold any shares in the Company as a qualification for office. A director shall be entitled to attend and be heard at general meetings notwithstanding that he may not hold any shares in the Company. f. A director shall hold office subject only to Article 5(b) but his office shall be vacated if he:- i) ceases to be a director by virtue of the Code; ii) becomes bankrupt or makes any arrangement or composition with his creditors generally; iii) becomes prohibited from being a director by reason of any order under the Code; iv) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the laws relating to mental health; v) resigns his office by notice in writing to the Company. 6. A director appointed pursuant to Regulation 79(1) shall be subject to the same provisions as to resignation and removal as the other directors of the Company and if he shall cease to hold the office of director for any cause whatever he shall ipso facto and immediately cease to be a managing director. 7. a. No director shall be disqualified by his office from contracting or entering into any arrangement with the Company either as vendor, purchaser or otherwise nor shall any such contract or arrangement or any contract or arrangement entered into by or on behalf of the Company in which any director shall in any way be interested be avoided nor shall any director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such director holding that office or of the fiduciary relation thereby established. Every director shall observe the provisions of Section 228 of the Code relating to the declaration of the interests of the directors in contracts or proposed contracts with the Company or of any office or property held by the directors which might create duties or interests in conflict with their duties or interests as directors. A director may as a director vote in respect of any contract or arrangement in which he is so interested as aforesaid. 4 b. A director may hold any other office or place of profit under the Company (except that of auditor) in conjunction with his office of director and on such terms as to remuneration or otherwise as the board of directors shall approve. A director may be or become a director of or hold any other office or place of profit under any corporation promoted by the Company or in which it may be interested whether as a vendor or shareholder or otherwise and no such director shall be accountable for any benefits received as a director or member of or holder of any other office or place or profit under such corporation. 8. a. Regulation 86 shall be excluded and the following substituted therefrom - "86. 1. The directors may from time to time declare a dividend to be paid to the members entitled thereto. 2. No dividend shall be payable except out of profits and the declaration of the directors as to the amount of the net profits shall be conclusive." b. Regulation 89(1) shall be modified by deleting the word "recommending" and substituting therefore the word "declaring". c. Regulation 92(1) shall be excluded and the following substituted therefor - "92. 1. When declaring a dividend, the directors may direct payment of such dividend wholly or in part by the distribution of specific assets or documents of title and, in particular, of paid up shares, debentures or debenture stock of the Company or any other corporation or in any one or more of such ways." 9. The Company is a proprietary company and accordingly:- a. The right of the members to transfer shares in the Company is restricted in that the directors may at any time in their absolute discretion decline to register any transfer of shares. b. The number of members of the Company counting joint holders of shares as one person and not counting any person in the employment of the Company or of a subsidiary of the Company or any person who, while previously in the employment of the Company or of a subsidiary of the Company was, and thereafter has continued to be, a member of the Company is limited to not more than fifty. c. Any invitation to the public to subscribe for, and any offer to the public to accept subscriptions for, any shares in, or debentures of, the Company is prohibited. 5 d. Any invitation to the public to deposit money with, and any offer to the public to accept deposits of money with, the Company for fixed periods or payable at call, whether bearing or not bearing interest, is prohibited. 10. If at any time the capital of the Company is divided into different classes of shares, the Board may (subject to the rights of, or any restrictions on, the holder or holders of any shares created by or arising under any special agreement relating to dividends) declare dividends in respect of any such class at a different rate to those declared in respect of any other class or to the exclusion of any other class. SIGNATURE OF SUBSCRIBERS: ........................................ M. Cerche ........................................ G. Henshaw WITNESS TO THE ABOVE SIGNATURES: N. McKenna 119 Miller Street North Fitzroy Vic ........................................ N. McKenna LAW CLERK DATED this 2nd day of February 1989. SCHEDULE 2 (Repealed by No. 108 of 1983.s.125.) SCHEDULE 3 Sections 5 and 75 TABLE A REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES Interpretation 1. (1) In these regulations-- "Code" means the Companies ([name of State)] Code(1) "seal" means the common seal of the company and includes any official seal of the company; "secretary" means any person appointed to perform the duties of a secretary of the company. (2) Section 40 of the Companies and Securities (Interpretation and Miscellaneous Provisions) ([name of State]) Code2 applies in relation to these regulations as if they were an instrument made by an authority under a power conferred by the Companies ([name of State]) Code3 as in force on the date on which these regulations became binding on the company. (3) An expression used in a particular Part or Division of the Code4 that is given by that Part or Division a special meaning for the purposes of that Part or Division has, in any of these regulations that deals with a matter dealt with by that Part or Division, unless the contrary intention appears, the same meaning as in that Part or Division. - ---------- (1) A.C.T.: "'Act' means the Companies Act 1981". (2) A.C.T.: "Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980". (3) A.C.T.: "Companies Act 1980". (4) A.C.T.: "Act". 7 Share Capital and Variation of Rights 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares but subject to the Code(5), shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred or other special rights or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the directors, subject to any resolution, determine. 3. Subject to the Code(6), any preference shares may, with the sanction of a resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed. 4. (1) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the company is being wound up, be varied with the consent in writing of the holders of three-quarters of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class. (2) The provisions of these regulations relating to general meetings apply so far as they are capable of application and mutatis mutandis to every such separate meeting except that-- (a) a quorum is constituted by 2 persons who, between them, hold or represent by proxy one-third of the issued shares of the class; and (b) any holder of shares of the class, present in person or by proxy, may demand a poll. 5. (1) The company may exercise the power to make payments by way of brokerage or commission conferred by the Code(7) in the manner provided by the Code(8). (2) Payments by way of brokerage or commission may be satisfied by the payment of cash, by the allotment of fully or partly paid shares or partly by the payment of cash and partly by the allotment of fully or partly paid shares. History Reg. 5 substituted by No. 108 of 1983.s.126. - ---------- (5) A.C.T.: "Act". (6) A.C.T.: "Act". (7) A.C.T.: "Act". (8) A.C.T.: "Act". 8 6. (1) Except as required by law, the company shall not recognize a person as holding a share upon any trust. (2) The company is not bound by or compelled in any way to recognize (whether or not it has notice of the interest or rights concerned) any equitable, contingent, future or partial interest in any share or unit of a share or (except as otherwise provided by these regulations or by law) any other right in respect of a share except an absolute right of ownership in the registered holder. 7. (1) A person whose name is entered as a member in the register of members is entitled without payment to receive a certificate in respect of the shares under the seal of the company in accordance with the Code(9) but, in respect of a share or shares held jointly by several persons, the company is not bound to issue more than one certificate. (2) Delivery of a certificate for a share to one of several joint holders is sufficient delivery to all such holders. Lien 8. (1) The company has a first and paramount lien on every share (not being a fully paid share) for all money (whether presently payable or not) called or payable at a fixed time in respect of that share. (2) The company also has a first and paramount lien on all shares (other than fully paid shares) registered in the name of a sole holder for all money presently payable by him or his estate to the company. (3) The directors may at any time exempt a share wholly or in part from the provisions of this regulation. (4) The company's lien (if any) on a share extends to all dividends payable in respect of the share. 9. (1) Subject to sub-regulation (2), the company may sell, in such manner as the directors think fit, any shares on which the company has a lien. (2) A share on which the company has a lien shall not be sold unless-- (a) a sum in respect of which the lien exists is presently payable; and (b) the company has, not less than 14 days before the date of the sale, given to the registered holder for the time being of the share or the person entitled to the share by - ---------- (9) A.C.T.: "Act". 9 reason of the death or bankruptcy of the registered holder a notice in writing setting out, and demanding payment of, such part of the amount in respect of which the lien exists as is presently payable. 10. (1) For the purpose of giving effect to a sale mentioned in regulation 9, the directors may authorize a person to transfer the shares sold to the purchaser of the shares. (2) The company shall register the purchaser as the holder of the shares comprised in any such transfer and he is not bound to see to the applicable of the purchase money. (3) The title of the purchaser to the shares is not affected by any irregularity or invalidity in connection with the sale. 11. The proceeds of a sale mentioned in regulation 9 shall be applied by the company in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue (if any) shall (subject to any like lien for sums not presently payable that existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. Calls on Shares 12. (1) The directors may make calls upon the members in respect of any money unpaid on the shares of the members (whether on account of the nominal value of the shares or by way of premium) and not by the terms of issue of those shares made payable at fixed times. (2) Each member shall, upon receiving at least 14 days' notice specifying the time or times and place of payment, pay to the company at the time or times and place so specified the amount called on his shares. (3) The directors may revoke or postpone a call. 13. A call shall be deemed to have been made at the time when the resolution of the directors authorizing the call was passed and may be required to be paid by installments. 14. The joint holders of a share are jointly and severally liable to pay all calls in respect of the share. 15. If a sum called in respect of a share is not paid before or on the day appointed for payment of the sum, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment of the sum to the time of actual payment at such rate not exceeding 6% per annum as the directors determine, but the directors may waive payment of that interest wholly or in part. 10 16. Any sum that, by the terms of issue of a share, becomes payable on allotment or as a fixed date, whether on account of the nominal value of the share or by way of premium, shall for the purposes of these regulations be deemed to be a call duly made and payable on the date on which by the terms of issue the sum becomes payable, and, in case of non-payment, all the relevant provisions of these regulations as to payment of interest and expenses, forfeiture or otherwise apply as if the sum had become payable by virtue of a call duly made and notified. 17. The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the times of payment. 18. (1) The directors may accept from a member the whole or a part of the amount unpaid on a share although no part of that amount has been called up. (2) The directors may authorize payment by the company of interest upon the whole or any part of an amount so accepted, until the amount becomes payable, at such rate, not exceeding the prescribed rate, as is agreed upon between the directors and the member paying the sum. (3) For the purposes of sub-regulation (2), the prescribed rate of interest is-- (a) if the company has, by resolution, fixed a rate -- the rate so fixed; and (b) in any other case -- 8% per annum. Transfer of Shares 19. (1) Subject to these regulations, a member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the directors approve. (2) An instrument of transfer referred to in sub-regulation (1) shall be executed by or on behalf of both the transferor and the transferee. (3) A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect of the shares. 20. The instrument of transfer must be left for registration at the registered office of the company, together with such fee (if any) not exceeding $1.00 as the directors require, accompanied by the certificate of the shares to which it relates and such other information as the directors properly require to show the right of the transferor to make the transfer, and thereupon the company shall, subject to the powers vested in the directors by these regulations, register the transferee as a shareholder. 21. The registration of transfers may be suspended at such times and for such periods as the directors from time to time determine not exceeding in the whole 30 days in any year. 11 Transmission of Shares 22. In the case of the death of a member, the survivor or survivors, where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only person recognized by the company as having any title to his interest in the shares, but this regulation does not release the estate of a deceased joint holder from any liability in respect of a share that had been jointly held by him with other persons. 23. (1) Subject to the Bankruptcy Act 1966, a person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such information being produced as is properly required by the directors, elect either to be registered himself as holder of the share or to have some other person nominated by him registered as the transferee of the share. (2) If the person becoming entitled elects to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. (3) If he elects to have another person registered, he shall execute a transfer of the share to that other person. (4) All the limitations, restrictions and provisions of these rules relating to the right to transfer, and the registration of transfer of, shares are applicable to any such notice of transfer as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member. 24. (1) Where the registered holder of a share dies or becomes bankrupt, his personal representative or the trustee of his estate, as the case may be, is, upon the production of such information as is properly required by the directors, entitled to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the company, or to voting or otherwise), as the registered holder would have been entitled to if he had not died or become bankrupt. (2) Where 2 or more persons are jointly entitled to any share in consequence of the death of the registered holder, they shall, for the purpose of these regulations, be deemed to be joint holders of the share. Forfeiture of Shares 25. (1) If a member fails to pay a call or installment of a call on the day appointed for payment of the call or installment, the directors may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest that has occurred. 12 (2) The notice shall name a further day (not earlier than the expiration of 14 days from the date of service of the notice) on or before which the payment required by the notice is to be made and shall state that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited. 26. (1) If the requirements of a notice served under regulation 26 are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. (2) Such a forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 27. A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and, at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the directors think fit. 28. A person whose shares have been forfeited ceases to be a member in respect of the forfeited shares, but remains liable to pay to the company all money that, at the date of forfeiture, was payable by him to the company in respect of the shares (including interest at the rate of 8% per annum from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of the interest), but his liability ceases if and when the company receives payment in full of all the money (including interest) so payable in respect of the shares. 29. A statement in writing declaring that the person making the statement is a director or a secretary of the company, and that a share in the company has been duly forfeited on a date stated in the statement, is prima facie evidence of the facts stated in the statement as against all persons claiming to be entitled to the share. 30. (1) The company may receive the consideration (if any) given for a forfeited share on any sale or disposition of the share and may execute a transfer of the shares in favour of the person to whom the share is sold or disposed of. (2) Upon the execution of the transfer, the transferee shall be registered as the holder of the share and is not bound to see to the application of any money paid as consideration. (3) The title of the transferee to the share is not affected by any irregularity or invalidity in connection with the forfeiture, sale or disposal of the share. 31. The provisions of these regulations as to forfeiture apply in the case of non-payment of any such that, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if that sum had been payable by virtue of a call duly made and notified. 13 Conversion of Shares into Stock 32. The company may, by resolution, convert all or any of its paid up shares into stock and re-convert any stock into paid up shares of any nominal value. 33. (1) Subject to sub-regulation (2), where shares have been converted into stock, the provisions of these rules relating to the transfer of shares apply, so far as they are capable of applicable, to the transfer of the stock or of any part of the stock. (2) The directors may fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the aggregate of the nominal values of the shares from which the stock arose. 34. (1) The holders of stock have, according to the amount of the stock held by them, the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as they would have if they held the shares from which the stock arose. (2) No such privilege or advantage (except participation in the dividends and profits of the company and in the property of the company on winding up) shall be conferred by any amount of stock that would not, if existing in shares, have conferred that privilege or advantage. 35. The provisions of these regulations that are applicable to paid up shares apply to stock, and references in those provisions to share and shareholder shall be read as including references to stock and stockholder, respectively. Alteration of Capital 36. The company may by resolution-- (a) increase its authorized share capital by the creation of new shares of such amount as is specified in the resolution; (b) consolidate and divide all or any of its authorized share capital into shares of larger amount than its existing shares; (c) subdivide all or any of its shares into shares of smaller amount than is fixed by the memorandum but so that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each such share of a smaller amount is the same as it was in the case of the share from which the share of a smaller amount is derived; and (d) cancel shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person or have been forfeited and reduce its authorized share capital by the amount of the shares so cancelled. 14 37. Subject to the Code(10), the company may, by special resolution, reduce its share capital, any capital redemption reserve fund or any share premium account. General Meetings 38. Any director may whenever he thinks fit convene a general meeting. 39. (1) A notice of a general meeting shall specify the place, the day and the hour of meeting and, except as provided by sub-regulation (2), shall state the general nature of the business to be transacted at the meeting. (2) It is not necessary for a notice of an annual general meeting to state that the business to be transacted at the meeting includes the declaring of a dividend, the consideration of accounts and the reports of the directors and auditors or the appointment and fixing of the remuneration of the auditors. Proceedings at General Meetings 40. (1) No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. (2) For the purpose of determining whether a quorum is present, a person attending as a proxy, or as representing a corporation that is a member, shall be deemed to be a member. 41. If a quorum is not present within half an hour from the time appointed for the meeting-- (a) where the meeting was convened upon the requisition of members -- the meeting shall be dissolved; or (b) in any other case-- (i) the meeting stands adjourned to such day, and at such time and place, as the directors determine or, if no determination is made by the directors, to the same day in the next week at the same time and place; and (ii) if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting-- (A) 2 members constitute a quorum; or (B) where 2 members are not present -- the meeting shall be dissolved. - ---------- (10) A.C.T.: "Act". 15 42. (1) If the directors have elected one of their number as chairman of their meetings, he shall preside as chairman at every general meeting. (2) Where a general meting is held and-- (a) a chairman has not been elected as provided by sub-regulation (1); or (b) the chairman is not present within 15 minutes after the time appointed for the hold of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting. 43. (1) The chairman may with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. (2) When a meeting is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. (3) Except as provided by sub-regulation (2), it is not necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 44. (1) At any general meeting a resolution put to the voice of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded-- (a) by the chairman; (b) by at least 3 members present in person or by proxy; (c) by a member or members present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. (2) Unless a poll is so demanded, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company is conclusive evidence 16 of the fact without proof of the number of proportion of the votes recorded in favour of or against the resolution. (3) The demand for a poll may be withdrawn. 45. (1) If a poll is duly demanded, it shall be taken in such manner and (subject to sub-regulation (2)) either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded. (2) A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. 46. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, in addition to his deliberative vote (if any), has a casting vote. 47. Subject to any rights or restrictions for the time being attached to any class or classes of shares-- (a) at meetings of members or classes of members each member entitled to vote may vote in person or by proxy or attorney; and (b) on a show of hands every person present who is a member or a representative of a member has one vote, and on a poll every person present in person or by proxy or attorney has one vote for each share he holds. 48. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy or by attorney, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members. 49. If a member is of unsound mind or is a person whose person or estate is liable to be dealt with in any way under the law relating to mental health, his committee or trustee or such other person as properly has the management of his estate may exercise any rights of the member in relation to a general meeting as if the committee, trustee or other person were the member. 50. A member is not entitled to vote at a general meeting unless all calls and other sums presently payable by him in respect of shares in the company have been paid. 51. (1) An objection may be raised to the qualification of a voter only at the meetings or adjourned meetings at which the vote objected to is given or tendered. 17 (2) Any such objection shall be referred to the chairman of the meeting, whose decision is final. (3) A vote not disallowed pursuant to such an objection is valid for all purposes. 52. (1) An instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or, if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorized. (2) An instrument appointing a proxy may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument. (3) An instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. (4) An instrument appointing a proxy shall be in the following form or in a form that is as similar to the following form as the circumstances allow: [Name of company] I/we , of , being a member/members of the above-named company, hereby appoint of or, in his absence, of as my/our proxy to vote for me/us on my/our behalf at the (11)annual general/ (11)general meeting of the company to be held on the day of 19 and at any adjournment of that meeting. (12)This form is to be used(11) in favour of/(11) against the resolution. Signed this day of 19 . 53. An instrument appointing a proxy shall not be treated as valid unless the instrument, and the power of attorney or other authority (if any) under which the instrument is signed or a notarially certified copy of that power or authority, is or are deposited, not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll, - ---------- (11) Strike out whichever is not desired (12) To be inserted if desired 18 at the registered office, of the company or at such other place within the State(13) as is specified for that purpose in the notice convening the meeting. 54. A vote given in accordance with the terms of an instrument of proxy or of a power of attorney is valid notwithstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument (or of the authority under which the instrument was executed) or of the power, or the transfer of the share in respect of which the instrument or transfer has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used or the power is exercised. 55. (1) The directors shall be paid such remuneration as is from time to time determined by the company in general meeting. (2) That remuneration shall be deemed to accrue from day to day. (3) The directors may also be paid all traveling and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or otherwise in connection with the business of the company. Powers and Duties of Directors 56. (1) Subject to the Code(14) and to any other provision of these regulations, the business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by the Code15 or by these regulations, required to be exercised by the company in general meeting. (2) Without limiting the generality of sub-regulation (1), the directors may exercise all the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. 57. (1) The directors may, by power of attorney, appoint any person or persons to be the attorney or attorneys of the company for such purposes, with such powers, authorities and discretions (being powers, authorities and discretions vested in or exercisable by the directors), for such period and subject to such conditions as they think fit. - ---------- (13) A.C.T.: "Territory". Tas.: For "the State" read "Tasmania". (14) A.C.T.: "Act". (15) A.C.T.: "Act". 19 (2) Any such power of attorney may contain such provisions for the protection and convenience of persons dealing with the attorney as the directors think fit and may also authorize the attorney to delegate all or any of the powers, authorities and discretions vested in him. 58. All cheques, promissory notes, bankers drafts, bills of exchange and other negotiable instruments, and all receipts for money paid to the company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by any 2 directors or in such other manner as the directors determine. Proceedings of Directors 59. (1) The directors may meet together for the despatch of business and adjourn and otherwise regulate their meetings as they think fit. (2) A director may at any time, and a secretary shall on the requisition of a director, convene a meeting of the directors. 60. (1) Subject to these regulations, questions arising at a meeting of directors shall be decided by a majority of votes of directors present and voting and any such decision shall for all purposes be deemed a decision of the directors. (2) In case of an equality of votes, the chairman of the meeting, in addition to his deliberative vote (if any), has a casting vote. 61. (1) A director may, with the approval of the other directors, appoint a person (whether a member of the company or not) to be an alternate director in his place during such period as he thinks fit. (2) An alternate director is entitled to notice of meetings of the directors and, if the appointor is not present at such a meeting, is entitled to attend and vote in his stead. (3) An alternate director may exercise any powers that the appointor may exercise and the exercise of any such power by the alternate director shall be deemed to be the exercise of the power by the appointor. (4) An alternate director is not required to have any share qualifications. (5) The appointment of an alternate director may be terminated at any time by the appointor notwithstanding that the period of the appointment of the alternate director has not expired, and terminates in any event if the appointor vacates office as a director. 20 (6) An appointment, or the termination of an appointment, of an alternate director shall be effected by a notice in writing signed by the director who makes or made the appointment and served on the company. 62. At a meeting of directors, the number of directors whose presence is necessary to constitute a quorum is such number as is determined by the directors and, unless so determined, is 2. 63. In the event of a vacancy or vacancies in the office of a director or offices of directors, the remaining directors may act but, if the number of remaining directors is not sufficient to constitute a quorum at a meeting of directors, they may act only for the purpose of increasing the number of directors to a number sufficient to constitute such a quorum or of convening a general meeting of the company. 64. (1) The directors shall elect one of their number as chairman of their meetings and may determine the period for which he is to hold office. (2) Where such a meeting is held and-- (a) a chairman has not been elected as provided by sub-regulation (1); or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the directors present shall elect one of their number to be a chairman of the meeting. 65. (1) The directors may delegate any of their powers to a committee or committees consisting of such of their number as they think fit. (2) A committee to which any powers have been so delegated shall exercise the powers delegated in accordance with any directions of the directors and a power so exercised shall be deemed to have been exercised by the directors. (3) The members of such a committee may elect one of their number as chairman of their meetings. (4) Where such a meeting is held and-- (a) a chairman has not been elected as provided by sub-regulation (3); or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present may elect one of their number to be chairman of the meeting. 21 (5) A committee may meet and adjourn as it thinks proper. (6) Questions arising at a meeting of a committee shall be determined by a majority of votes of the members present and voting. (7) In the case of an equality of votes, the chairman, in addition to his deliberative vote (if any), has a casting vote. 66. (1) If all the directors have signed a document containing a statement that they are in favour of a resolution of the directors in terms set out in the document, a resolution in those terms shall be deemed to have been passed at a meeting of the directors held on the day on which the document was signed and at the time at which the document was last signed by a director or, if the directors signed the document on different days, on the day on which, and at the time at which, the document was last signed by a director. (2) For the purposes of sub-regulation (1), 2 or more separate documents containing statements in identical terms each of which is signed by one or more directors shall together be deemed to constitute one document containing a statement in those terms signed by those directors on the respective days on which they signed the separate documents. (3) A reference in sub-regulation (1) to all the directors does not include a reference to a director who, at a meeting of directors, would not be entitled to vote on the resolution. 67. All acts done by any meeting of the directors or of a committee of directors or by any persons acting as a director are, notwithstanding that it is afterwards discovered that there was some defect in the appointment of a person to be a director of a member of the committee, or to act as, a director, or that a person so appointed was disqualified, as valid as if the person had been duly appointed and was qualified to be a director or to be a member of the committee. Managing Director 68. (1) The directors may from time to time appoint one or more of their number to the office of managing director for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into a particular case, may revoke any such appointment. 69. A managing director shall, subject to the terms of any agreement entered into in a particular case, receive such remuneration (whether by way of salary, commission or participation in profits, or partly in one way and partly in another) as the directors determine. 70. (1) The directors may, upon such terms and conditions and with such restrictions as they think fit, confer upon a managing director any of the powers exercisable by them. 22 (2) Any powers so conferred may be concurrent with, or be to the exclusion of, the powers of the directors. (3) The directors may at any time withdraw or vary any of the powers so conferred on a managing director. Associate Directors 71. (1) The directors may from time to time appoint any person to be an associate director and may from time to time terminate any such appointment. (2) The directors may from time to time determine the powers, duties and remuneration of any person so appointed. (3) A person so appointed is not required to hold any shares to qualify him for appointment but, except by the invitation and with the consent of the directors, does not have any right to attend or vote at any meeting of directors. Secretary 72. A secretary of the company holds office on such terms and conditions, as remuneration and otherwise, as the directors determine. Seal 73. (1) The directors shall provide for the same custody of the seal. (2) The seal shall be used only by the authority of the directors, or of a committee of the directors authorized by the directors to authorize the use of the seal, and every document to which the seal is affixed shall be signed by a director and be countersigned by another director, a secretary or another person appointed by the directors to countersign that document or a class of documents in which that document is included. Inspection of Records 74. The directors shall determine whether and to what extent, and at which time and places and under what conditions, the accounting records and other documents of the company or any of them will be open to the inspection of members other than directors and a member other than a director does not have the right to inspect any document of the company except as provided by law or authorized by the directors or by the company in general meeting. 23 Dividends and Reserves 75. The directors may authorize the payment by the company to the members of such interim dividends as appear to the directors to be justified by the profits of the company. 76. Interest is not payable by the company in respect of any dividend. 77. (1) The directors may, before declaring any dividend, set aside out of the profits of the company such sums as they think proper as reserves, to be applied, at the discretion of the directors, for any purpose of which the profits of the company may be properly applied. (2) Pending any such application, the reserves may, at the discretion of the directors, be used in the business of the company or be invested in such investments as the directors think fit. (3) The directors may carry forward so much of the profits remaining as they consider ought not to be distributed as dividends without transferring those profits to a reserve. 78. (1) Subject to the rights of persons (if any) entitled to shares with special rights as in dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid. (2) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but, if any share is issued on terms providing that it will rank for dividends as from a particular date, that share ranks for dividend accordingly. (3) An amount paid or credited as paid on a share in advance of a call shall not be taken for the purposes of this regulation to be paid or credited as paid on the share. 79. The directors may deduct from any dividend payable to a member all sums of money (if any) presently payable by him to the company on account of calls or otherwise in relation to shares in the company. 80. Where a difficulty arises in regard to such a distribution, the directors may settle the matter as they consider expedient and fix the value for distribution of the specific assets or any part of those assets and may determine that cash payments will be made to any members on the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as the directors consider expedient. 81. (1) Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque sent through the post directed to-- 24 (a) the address of the holder as shown in the register of members, or in the case of joint holders, to the address shown in the register of members as the address of the joint holder first named in that register; or (b) to such other address as the holder or joint holders in writing directs or direct. (2) Any one of 2 or more joint holders may give effectual receipts for any dividends, interest or other money payable in respect of the shares held by them as joint holders. Capitalization of Profits 82. (1) Subject to sub-regulation (2), the company in general meeting may resolve that it is desirable to capitalize any sum, being the whole or a part of the amount for the time being standing to the credit of any reserve account or the profit and loss account or otherwise available for distribution to members, and that that sum be applied, in any of the ways mentioned in sub-regulation (3), for the benefit of members in the proportions to which those members would have been entitled in a distribution of that sum by way of dividend. (2) The company shall not pass a resolution as mentioned in sub-regulation (1) unless the resolution has been recommended by the directors. (3) The ways in which a sum may be applied for the benefit of members under sub-regulation (1) are-- (a) in paying up any amounts unpaid on shares held by members; (b) in paying up in full unissued shares or debentures to be issued to members as fully paid; or (c) partly as mentioned in paragraph (a) and partly as mentioned in paragraph (b). (4) The directors shall do all things necessary to give effect to the resolution and, in particular, to the extent necessary to adjust the rights of the members among themselves, may-- (a) issue fractional certificates or make cash payments in cases where shares or debentures become issuable in fractions; and (b) authorize any person to make, on behalf of all the members entitled to any further shares or debentures upon the capitalization, an agreement with the company providing for the issue to them, credited as fully paid up, of any such further shares or debentures or for the payment up by the company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing shares by the application of their respective proportions of the sum resolved to be capitalized, 25 and any agreement made under an authority referred to in paragraph (b) is effective and binding on all the members concerned. Notices 83. (1) A notice may be given by the company to any member either by serving it on him personally or by sending it by post to him at his address as shown in the register of members or the address supplied by him to the company for the giving of notices to him. (2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected, in the case of a notice of a meeting, on the day after the date of its posting and, in any other case, at the time at which the letter would be delivered in the ordinary course of post. (3) A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share. (4) A notice may be given by the company to a person entitled to a share in consequence of the death or bankruptcy of a member by serving it on him personally or by sending it to him by post addressed to him by name, or by the title of representative of the deceased or assignee of the bankrupt, or by any like description, at the address (if any) within the State16 supplied for the purpose by the person or, if such an address has not been supplied, at the address to which the notice might have been sent if the death or bankruptcy had not occurred. 84. (1) Notice of every general meeting shall be given in the manner authorized by regulation 95 to-- (a) every member; (b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and (c) the auditor for the time being of the company. (2) No other person is entitled to receive notices of general meetings. 26 Winding up 85. (1) If the company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the company and may for that purpose set such value as he considers fair upon any property to be so divided and may determine how the division is to be carried out as between the members or different classes of members. (2) The liquidator may, with the sanction of a special resolution, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no member is compelled to accept any shares or other securities in respect of which there is any liability. Indemnity 86. Every officer, auditor or agent of the company shall be indemnified out of the property of the company against any liability incurred by him in his capacity as officer, auditor or agent in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in relation to any such proceedings in which relief is under the Code(17) granted to him by the Court. TABLE B REGULATIONS FOR MANAGEMENT OF A NO LIABILITY COMPANY Interpretation 1. (1) In these regulations-- "Code" means the Companies ([name of State]) Code(18) "seal" means the common seal of the company and includes any official seal of the company; "secretary" means any person appointed to perform the duties of a secretary of the company. - ---------- (17) A.C.T.: "Act". (18) A.C.T.: "'Act' means the Companies Act 1981". 27 (2) Section 40 of the Companies and Securities (Interpretation and Miscellaneous Provisions) ([name of State]) Code(19) applies in relation to these regulations as if they were an instrument made by an authority under a power conferred by the Companies ([name of State]) Code(20) as in force on the date on which these regulations became binding on the company. (3) An expression used in a particular Part or Division of the Code(21) that is given by that Part or Division a special meaning for the purposes of that Part or Division has, in any of these regulations that deals with a matter dealt with by that Part or Division, unless the contrary intention appears, the same meaning as in that Part or Division. Share Capital and Variation of Rights 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares but subject to the Code(22), shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred or other special rights or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the directors, subject to any resolution, determine. - ---------- (19) A.C.T.: "Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980". (20) A.C.T.: "Companies Act" 1981. (21) A.C.T.: "Act". (22) A.C.T.: "Act". FORTUITY PTY LIMITED (ACN 007 148 683) MINUTES OF ANNUAL GENERAL MEETING OF THE SHAREHOLDERS HELD AT THE REGISTERED OFFICE PRINCES HIGHWAY, DANDENONG, VIC, 3175 ON TUESDAY 19 SEPTEMBER 1995 - -------------------------------------------------------------------------------- PRESENT: K A DYNON A M GAVIN ------------------------------------- SECRETARY: G NANKIN ------------------------------------- The Statutory Accounts, together with the Directors' and Auditors' Reports thereon for the 53 weeks ended 28 April 1995 were submitted. ORDINARY RESOLUTION: RESOLVED that the Statutory accounts of the Company and its subsidiary, as at 28 April 1995, together with the Reports of the directors and Auditors thereon be received, approved and adopted. SPECIAL RESOLUTION: The Company passed the following special resolution: RESOLVED: "That the Articles of Association of the Company be amended as follows: 1. Insert the following immediately following Article 78 - "78A The Board may meet either in person or by telephone or by other means of communication by which all persons participating in the meeting are able to hear and be heard by all other participants. A meeting conducted by telephone or other means of communication is deemed to be held at the place agreed upon by the Directors attending the meeting, provided that at least one of the Directors present at the meeting was at that place for the duration of the meeting. 2 78B Any director may appoint by written notice any other Director to act as his proxy at a meeting of the Board provided that a Director may not appoint a proxy and an Alternate Director. The appointment may be general or specific concerning the term of the appointment and the business upon which the proxy may vote. The Director appointing the proxy will give notice to the Company by delivering a copy of the notice to the Office. The proxy will take effect on delivery of the proxy to the Office. The Director may revoke the appointment by a written notice of revocation, a copy of which will be delivered (and take effect from the time of delivery to) the Office. The vote of a proxy will be counted on any vote as if the proxy was the Director who appointed the proxy. If the same person is appointed either Alternate Director for or the proxy of more than one Director, he will be entitled to cast a vote at meetings of the Board for each Director by whom he was appointed in addition to any vote to which he is entitled in his capacity as Director." 2. Delete Regulation 98 and substitute the following - "98. (1) The Company shall indemnify each officer of the Company and each officer of each wholly owned subsidiary of the Company out of the assets of the Company to the relevant extent against any liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer unless the liability was incurred by the officer through his or her own dishonesty, negligence, lack of good faith or breach of duty. (2) In addition to paragraph (1) of this Article, an officer of the Company and an officer of a wholly owned subsidiary of the Company may be indemnified to the relevant extent out of the assets of the Company against any liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer where the Directors consider it appropriate to do so. (3) Where the Directors consider it appropriate to do so, the Company may pay amounts by way of premium in respect of any contract effecting insurance on behalf or in respect of an officer of the Company or an officer of a wholly owned subsidiary of the Company against liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer. 3 (4) In this Article: (a) "officer" means: (i) (A) a director, secretary, executive officer or employee; or (B) a person appointed as a trustee by, or acting as a trustee at the express request of, the Company or a wholly owned subsidiary of the Company; and (ii) includes a former officer. (b) "duties of the officer" includes duties arising by reason of the appointment, nomination or secondment in any capacity of an officer by the Company or any wholly owned subsidiary of the Company to any other corporation. (c) "to the relevant extent" means: (i) to the extent the Company is not precluded by law from doing so; (ii) to the extent and for the amount that the officer is not otherwise entitled to be indemnified and is not actually indemnified by another person (including, in particular, an insurer under any insurance policy); and (d) where the liability is incurred in or arising out of the conduct of the business of another corporation or in the discharge of the duties of the officer in relation to another corporation, to the extent and for the amount that the officer is not entitled to be indemnified and is not actually indemnified out of the assets of that corporation. (e) "liability" means all costs, charges, losses, damages, expenses, penalties and liabilities of any kind including, in particular, legal costs (on a full indemnity basis) incurred in defending any proceedings (whether criminal, civil, administrative or judicial) 4 or appearing before any court, tribunal, government authority or otherwise."." There being no further business, the meeting was closed. Dated: 19 September 1995 - ----------------------------------- Chairman EX-3.32 35 EXHIBIT 3.32 EXHIBIT 3.32 Form 204 BH SHELF COMPANIES PTY LTD ATTN: JENNY BENNETT P O BOX H6 HARRIS PARK NSW 2150 Certificate of Registration of a Company Corporations Law Sub-section 121(1) This is to certify that GUTBUSTERS PTY LTD Australian Company Number 059 073 157 is a registered company under Division 1 of Part 2.2 of the Corporations Law of New South Wales and because of its registration it is an incorporated company. The company is limited by shares. The company is a proprietary company. The day of commencement of registration is the seventeenth day of February 1993. Given under the seal of the Australian Securities Commission on this seventeenth day of February, 1993. Alan Cameron Chairman Corporations Law A Company Limited by Shares Memorandum and Articles of Association of Gutbusters Pty Ltd INDEX MEMORANDUM OF ASSOCIATION Page Rights, Powers and Privileges .................................................1 Share Capital .................................................................1 Subscribers ...................................................................2 Signatures ....................................................................2 ARTICLES OF ASSOCIATION Interpretation ............................................................... 1 Preliminary ...................................................................1 Share Capital and Classes of Shares ...........................................2 Issue of Shares and Variation of Rights .......................................6 Lien ..........................................................................7 Transfer of Shares ............................................................9 Transmission of Shares .......................................................10 Forfeiture of Shares .........................................................10 Conversion of Shares into Stock ..............................................12 Alteration of Capital ........................................................12 General Meetings .............................................................13 Proceedings at General Meetings ..............................................14 Appointment, Removal and Remuneration of Directors ...........................17 Powers and Duties of Directors ...............................................18 Proceeding of Directors ......................................................19 Managing Director ............................................................22 Associate Directors ..........................................................22 Secretary ....................................................................23 Seal .........................................................................23 Inspection of Records ........................................................23 Dividends and Reserves .......................................................23 Capitalisation of Profits ....................................................26 Notices ......................................................................27 Winding up ...................................................................27 Indemnity ....................................................................28 Signatures ...................................................................29 Corporations Law A Company Limited by Shares MEMORANDUM OF ASSOCIATION OF Gutbusters Pty Ltd 1. The name of the company is Gutbusters Pty Ltd 2. Subject to the Corporations Law the company has the rights, the powers and privileges of a natural person and without limiting the generality of the foregoing, has power to: (a) issue and allot fully or partly paid shares in the Company; (b) issue debentures of the Company; (c) give security by charging uncalled capital; (d) distribute any of the property of the Company among the members; (e) grant a floating charge on property of the Company and (f) do any other act that it is authorised to do by any other law. 3. The share capital with which the Company proposes to be registered is One Million Dollars ($1,000,000.00) divided into One Million (1,000,000) shares (vide the Article hereof) of One Dollar ($1.00) each with power to increase or reduce the capital and to divide the shares in the original or increased capital for the time being into several classes and to issue any part or parts of the original capital or increased capital for the time being with such deferred qualified or special rights privileges or conditions with reference to preferential guaranteed fixed fluctuating redeemable or to other dividend or interest or with such priority in the distribution of assets or otherwise as shall from time to time be determined by the Company. 4. The liability of the members is limited. 5. The full names, addresses and occupations of the subscribers hereto and the number of shares they respectively agree to take are:- ANTONY ROBERT HARRIS 73 High Street, Parramatta, NSW, 2150 Company Director One (1) Subscriber share ROBERT GORDON HARVEY 73 High Street, Parramatta, NSW, 2150 Company Director One (1) Subscriber share The subscribers are desirous of being formed into a company in pursuance of this memorandum and respectively agree to take the number of shares in the capital of the company set opposite their respective names in the last preceding paragraph hereof. - ------------------------------------------------------------------------------- Subscribers' No of shares taken Witness' signature Signatures by each Subscriber - ------------------------------------------------------------------------------- /s/ A. R. Harris ONE (1) SUBSCRIBER /s/ J. Bennett - ---------------- -------------------------- A.R. HARRIS SHARE /s/ R.G. Harvey ONE (1) SUBSCRIBER JENNIFER LYNETTE BENNETT - --------------- 73 High Street R.G. HARVEY SHARE Parramatta NSW, 2150 Witness to both signatures - ------------------------------------------------------------------------------- dated: 17/02/93 ............... Corporations Law A Company Limited by Shares ARTICLES OF ASSOCIATION OF Gutbusters Pty Ltd INTERPRETATION 1. 1.1 In these Articles: "Law" means the Corporations Law; "representative" means a person appointed as a representative of a Company pursuant to Section 249 (3) of the Law; "seal" means the common seal of the company and includes any official seal of the company; "secretary" means any person appointed to perform the duties of a secretary of the company. 1.2 Division 10 of Part 1.2 of the Law applies in relation to these Articles as if they were an instrument made under that Law as in force on the day when these Articles become binding on the company. 1.3 Except so far as the contrary intention appears in these Articles, an expression has, in a provision of these Articles that deals with a matter dealt with by a particular provision of the Law, the same meaning as in that provision of the Law. PRELIMINARY 2. The regulations contained in Table "A" of Schedule 1 to the Law shall not apply to this company. 3. The company is a proprietary company and therefore:- 3.1 The number of members for the time being of the company (exclusive of persons who are in the employment of the company or of any subsidiary of the company and of persons who, having been formerly in the employment of the company or of any subsidiary of the company, were, while in that employment and have continued after that employment to be, members of the company) is not to exceed fifty, but where two or more persons hold one or more shares in the company jointly, they shall for the purposes of this sub-clause be treated as a single member. 3.2 Any invitation to the public to subscribe for and any offer to the public to accept subscriptions for any shares in or debentures of the company and any invitation to the public to deposit money with and any offer to the public to accept deposits of money with the company for fixed periods or payable at call, whether bearing or not bearing interest, is prohibited. 3.3 The right to transfer shares is restricted as hereinafter provided in these Articles. SHARE CAPITAL AND CLASSES OF SHARES 4. 4.1 The capital of the company is one million dollars ($1,000,000.00) divided into one million (1,000,000) shares of one dollar ($1.00) each and classified as under: 2 - Subscriber Shares 839,998 - Ordinary Shares 20,000 - "A" shares 20,000 - "B" shares 20,000 - "C" shares 20,000 - "D" shares 20,000 - "E" shares 20,000 - "F" shares 20,000 - "G" shares 10,000 - "H" redeemable preference shares 10,000 - "I" redeemable preference shares 4.2 The Subscribers' shares shall be redeemable preference shares which shall be issued on the following terms and conditions: (a) Subscribers' shares shall only be issued upon incorporation of the company and shall only be issued to the subscribers to the Memorandum and Articles of Association. (b) Subject to the provisions of Section 192 of the Law, the next issue of shares of any class or classes after the issue of the Subscribers' shares and payment up in full thereof shall be deemed to have been issued for the purposes of redeeming the Subscribers shares provided that the number of shares so issued is at least equal to the number of Subscribers' shares on issue. Upon the issue of such shares, the Subscribers' shares shall ipso facto be redeemed at par, and the issued capital of the company shall then stand at an amount equal to the par value of the total number of shares which comprised the next issue of shares. (c) (1) they shall carry no right to participate in any distribution of surplus assets or profits; (2) they shall rank as to repayment of capital on winding-up of the company before any other class of shares then on issue; (3) they shall carry no right to dividends; and (4) they shall carry the right at general meetings to exercise one vote for each Subscribers' share held (d) Upon the redemption of the Subscribers' shares in the manner provided herein, the company shall cease to be authorised to issue shares of this class. 4.3 Upon the redemption of the Subscribers' shares, the authorised number of ordinary shares shall increase by such number of Ordinary shares as is equal to the number of Subscribers' shares redeemed. 4.4 The Ordinary, "A" and "B" shares shall have the following rights and privileges; (a) They shall confer to the holders thereof the right to receive notice of and to attend any general meeting and to exercise one vote for every share held. (b) They shall confer to the holders thereof the right to participate in any dividends declared and payable by the company on the class of share held. (c) Upon a winding up of the company they shall confer to the holders thereof the right to repayment of capital paid upon such shares and to participate in any distribution of surplus assets or profits of the company. 4.5 The "C" shares shall not confer on the holders thereof any right to dividends or any right to vote at any general meeting of the company but the holders thereof shall be entitled to notice of and to attend any general meeting of the company. In all other respects the "C" shares shall have the same rights and privileges and shall rank equally with the Ordinary shares. 4.6 The "D" shares shall not confer on the holders thereof any right to dividends or any right on a winding up of the company to participate in any distribution of surplus assets or profits of the company. In all other respects the "D" shares shall have the same rights and privileges and shall rank equally with the Ordinary shares. 4.7 The "E" and "F" shares shall not confer on the holders thereof any right to vote at any general meeting of the company but the holders thereof shall be entitled to notice of and to attend any general meeting of the company. The "E" and "F" shares also shall not confer any right on a winding up of the company to participate in any distribution of surplus assets or profits of the company. In all other respects the "E" and "F" shares shall have the same rights and privileges and shall rank equally with the Ordinary shares. 4.8 The "G" shares shall not confer on the holders thereof any right to vote at any general meeting of the company but the holders thereof shall be entitled to notice of and to attend any general meeting of the company. In all other respects the "G" shares shall have the same rights and privileges and shall rank equally with the Ordinary shares. 4.9 The rights, privileges and conditions attaching to the "H" redeemable preference shares are as follows: (a) They shall entitle the holders thereof to receive notice of and to attend any general meeting of the Company but shall not confer any right to vote at such meetings except in one or more of the following circumstances: (1) on a proposal to reduce the share capital of the company; (2) on a proposal that affects rights attached to the "H" redeemable preference shares; (3) on a proposal for the disposal of the whole property, business and undertaking of the company; (4) during the winding up of the company. (b) They shall confer to the holders thereof the right to receive from the profits of the company a non-cumulative preferential dividend at the rate of 5% per annum on the capital for the time being paid up thereon in priority to the payment of any dividend on any other share in the company. (c) Upon a reduction of capital or winding up of the company they shall as regards return of paid up capital rank equally with any issued "I" redeemable preference shares and in priority to all other shares in the company, but they shall not confer any right to participate in any distribution of surplus assets or profits of the company. (d) Subject to Section 192 of the Corporations Law they shall at the option of the company be liable to be redeemed at par on or before 30 June 2050, by giving written notice to the holders at their respective registered addresses and each such notice shall be accompanied by the company's cheque for the amount payable to the holder to whom such notice is sent. The redemption shall take place on the seventh day after the date of posting such notice, and any "H" redeemable preference shares not so redeemed on 30 June 2050 shall not thereafter be capable of being redeemed. 4.10 The rights, privileges and conditions attaching to the "I" redeemable preference shares are as follows: (a) They shall entitle the holders thereof to receive notice of and to attend any general meeting of the Company but shall not confer any right to vote at such meetings except in one or more of the following circumstances: (1) on a proposal to reduce the share capital of the company; (2) on a proposal that affects rights attached to the "I" redeemable preference shares; (3) on a proposal for the disposal of the whole of the property, business and undertaking of the company; (4) during the winding up of the company. (b) They shall confer to the holders thereof the right to participate in any dividend declared and payable by the company equally with the Ordinary shares. (c) Upon a reduction of capital or a winding up of the company they shall as regards return of paid up capital rank equally with any issued "H" redeemable preference shares and in priority to all other shares in the company, but they shall not confer any right to participate in any distribution of surplus assets or profits of the company. (d) Subject to Section 192 of the Corporation Law they shall at the option of the company be liable to be redeemed at par on or before 30 June 2050, by giving written notice to the holders at their respective registered addresses and each such notice shall be accompanied by the company's cheque for the amount payable to the holder to whom such notice is sent. The redemption shall take place on the seventh day after the date of posting such notice, and any "I" redeemable preference shares not so redeemed on 30 June 2050 shall not thereafter be capable of being redeemed. ISSUE OF SHARES AND VARIATION OF RIGHTS 5. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares but subject to the Law, shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred or other special rights or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the directors subject to any resolution, determine. 6. Subject to the Law, the company may issue preference shares which are, or at the option of the company, are liable, to be redeemed and such power may be exercised by the directors. 7 7.1 If at any time the share capital is divided into different classes of shares, the rights attached to any class [unless otherwise provided by the terms of issue of the shares of that class] may whether or not the company is being wound up, be varied with the consent in writing of the holders of three-quarters of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class. 7.2 The provisions of these Articles relating to general meetings apply so far as they are capable of application and mutatis mutandis to every such separate meeting except that: (a) a quorum is constituted by 2 persons each being a member or a proxy or representative of a member who, between them, hold or represent by proxy one-third of the issued shares of the class; and (b) any holder of shares of the class, present in person or by proxy or by representative, may demand a poll. 7.3 The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking equally with the first-mentioned shares. 8. 8.1 The company may exercise the power to make payments by the way of brokerage or commission conferred by the Law in the manner provided by the Law. 8.2 Payments by way of brokerage or commission may be satisfied by the payment of cash by the allotment of fully or partly paid shares or partly by the payment of cash and partly by the allotment of fully or partly paid shares. 9. 9.1 Except as required by the law, the company shall not recognise a person holding a share upon any trust. 9.2 The company is not bound by or compelled in any way to recognize [whether or not it has notice of the interest or rights concerned] any equitable, contingent, future or partial interest in any share or unit of a share or [except as otherwise provided by these Articles or by law] any other right in respect of a share except an absolute right of ownership in the registered holder. 10. 10.1 A person whose name is entered as a member in the register of members is entitled without payment to receive a certificate in respect of the share under the seal of the company in accordance with the Law but, in respect of a share or shares held jointly by several persons, the company is not bound to issue more than one certificate. 10.2 Delivery of a certificate for a share to one of several joint holders is sufficient delivery to all such holders. LIEN 11. 11.1 The company has a first and paramount lien on every share [not being a fully paid share] for all money [whether presently payable or not] called or payable at a fixed time in respect of that share. 11.2 The company has a first and paramount lien on all shares [other than fully paid shares] registered in the name of a sole holder for all money presently payable by him or his estate to the company. 11.3 The directors may at any time exempt a share extends to all dividends payable in respect of the share. 12. 12.1 Subject to Article 11(2), the company may sell, in such manner as the directors think fit, any shares on which the company has a lien. 12.2 A share on which the company has a lien shall not be sold unless: (a) a sum in respect of which the lien exists is presently payable; and (b) the company has, not less than 14 days before the date of the sale, given to the registered holder for the time being of the share or the person entitled to the share by reason of the death or bankruptcy of the registered holder a notice in writing setting out, and demanding payment of, such part of the amount in respect of which the lien exists as is presently payable. 13. 13.1 For the purpose of giving effect to a sale mentioned in Article 12, the directors may authorise a person to transfer the shares sold to the purchaser of the shares. 13.2 The company shall register the purchaser as the holder of the shares comprised in any such transfer and he is not bound to see to the application of the purchase money. 13.3 The title of the purchaser to the shares is not affected by any irregularity or invalidity in connection with the sale. 14. The proceeds of a sale mentioned in Article 12 shall be applied by the company in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue [if any] shall [subject to any like lien for sums not presently payable, that existed upon the shares before the sale] be paid to the person entitled to the shares at the date of the sale. CALLS ON SHARES 15. 15.1 The directors may make calls upon the members in respect of any money unpaid on the shares of the members [whether on account of the nominal value of the shares or by the way of premium] and not by the terms of issue of those shares made payable at fixed times. 15.2 Each member shall, upon receiving at least 14 days' notice specifying the time or times and place of payment, pay to the company at the time or times and place so specified the amount called on his shares. 15.3 The directors may revoke or postpone a call. 16. A call be deemed to have been made at the time when the resolution of the directors authorising the call was passed and may be required to be paid by instalments. 17. The joint holders of a share are jointly and severally liable to pay all calls in respect of the share. 18. If a sum called in respect of a share is not paid before or on the day appointed for payment of the sum, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment of the sum to the time of actual payment at such rate as the directors determine, but the directors may waive payment of that interest wholly or in part. 19. Any sum that, by the terms of issue of a share, becomes payable on allotment or at a fixed date whether on account of the nominal value of the share or by way of premium, shall for the purposes of these Articles be deemed to be a call duly made and payable on the date on which by the terms of issue the sum becomes payable, and, in case of non-payment, all the relevant provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise apply as if the sum had become payable by virtue of a call duly made and notified. 20. The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the times of payment. 21. 21.1 The directors may accept from a member the whole or a part of the amount unpaid on a share although no part of that amount has been called up. 21.2 The directors may authorise payment by the company of interest upon the whole or any part of an amount so accepted, until the amount becomes payable, at such rate, not exceeding the prescribed rate, as is agreed upon between the directors and the member paying the sum. 21.3 For the purpose of Article 21(2), the prescribed rate of interest is: (a) if the company has, by resolution, fixed a rate - the rate so fixed; and (b) in any other case - 8% per annum. TRANSFER OF SHARES 22. 22.1 Subject to these Articles, a member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the directors approve. 22.2 An instrument of transfer referred to in Article 22(1) shall be executed by or on behalf of both the transferor and the transferee. 22.3 A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect of the shares. 23. The instrument of transfer must be left for registration at the registered office of the company, together with such fee [if any] not exceeding $1.00 as the directors require, accompanied by the certificate of the shares to which it relates and such other information as the directors properly require to show the right of the transferor to make the transfer, and thereupon the company shall, subject to the powers vested in the directors by these Articles, register the transferee as a shareholder. 24. 24.1 The directors in their absolute and uncontrolled discretion may refuse to register any transfer of shares without assigning any reason therefor. 24.2 No transfer of shares shall be registered if upon its registration the number of members of the company would exceed the maximum number prescribed by Article 3(1). 25. The registration of transfers may be suspended at such times and for such periods as the directors from time to time determine not exceeding in the whole 30 days in any year. TRANSMISSION OF SHARES 26. In the case of the death of a member, the survivor where the deceased was a joint holder, and the legal personal representative of the deceased where he was a sole holder, shall be the only persons recognized by the company as having any title to his interest in the shares, but this Article does not release the estate of a deceased joint holder from any liability in respect of a share that had been jointly held by him with other persons. 27. 27.1 Subject to the Bankruptcy Act 1966, a person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such information being produced as is properly required by the directors, elect either to be registered himself as a holder of the share or to have some other person nominated by him registered as the transferee of the share. 27.2 If the person becoming entitled elects to be registered himself, he shall deliver or send to the company a notice in writing signed by himself stating that he so elects. 27.3 If he elects to have another person registered, he shall execute a transfer of the share to that other person. 27.4 All the limitations, restrictions and provisions of these rules relating to the right to transfer, and the registration of transfer of, shares are applicable to any such notice or transfer as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member. 28. 28.1 Where the registered holder of a share dies or becomes bankrupt, his personal representative or the trustee of his estate, as the case may be, is, upon the production of such information as is properly required by the directors, entitled to the same dividends and other advantages, and to the same rights [whether in relation to meetings of the company, or to voting or otherwise], as the registered holder would have been entitled if he had not died or become bankrupt. 28.2 Where 2 or more persons are jointly entitled to any share in consequence of the death of the registered holder, they shall, for the purpose of these Articles, be deemed to be joint holders of the share. FORFEITURE OF SHARES 29. 29.1 If a member fails to pay a call or installment of a call on the day appointed for payment of the call or installment, the directors may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice to him requiring payment of so much of the call or installment as is unpaid, together with any interest that has accrued. 29.2 The notice shall name a further day [not earlier that the expiration of 14 days from the date of service of the notice] on or before which payment required by the notice is to be made and shall state that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited. 30. 30.1 If the requirements of a notice served under Article 29 are not complied with, any share in respect of which the notice has been given may at anytime thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 30.2 Such a forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 31. A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and, at any time before a sale or disposition, the forfeiture may be canceled on such terms as the directors think fit. 32. A person whose shares have been forfeited ceases to be a member in respect of the forfeited shares, but remains liable to pay to the company all money that, at the date of forfeiture, was payable by him to the company in respect of the shares [including interest at the rate of 8% per annum from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of the interest], but his liability ceases if and when the company receives payment in full of all the money [including interest] so payable in respect of the shares. 33. A statement in writing declaring that the person making the statement is a director or a secretary of the company, and that a share in the company has been duly forfeited on a date stated in the statement, is prima facie evidence of the facts stated, in the statements as against all persons claiming to be entitled to the share. 34. 34.1 The company may receive the consideration [if any] given for a forfeited share on any sale or disposition of the share and may execute a transfer of the share in favor of the person to whom the share is sold or disposed of. 34.2 Upon the execution of the transfer, the transferee shall be registered as the holder of the share and is not bound to see to the application of any money paid as consideration. 34.3 The title of the transferee to the share is not affected by any irregularity or invalidity in connection with the forfeiture, sale or disposal of the share. 35. The provisions of the Articles as to forfeiture apply in the case of non-payment of any sum that, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if that sum had been payable by virtue of a call duly made and notified. CONVERSION OF SHARES INTO STOCK 36. The company may, by resolution, convert all or any of its paid-up shares into stock and reconvert any stock into paid-up shares of any nominal value. 37. 37.1 Subject to Article 37(2), where shares have been converted into stock, the provisions of these rules relating to the transfer of shares apply, so far as they are capable of application, to the transfer of the stock or of any part of the stock. 37.2 The directors may fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the aggregate of the nominal values of the shares from which the stock arose. 38. 38.1 The holders of stock have, according to the amount of the stock held by them, the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as they would have if they held the shares from which the stock arose. 38.2 No such privilege or advantage (except participation in the dividends and profits of the company and in the property of the company on winding up) shall be conferred by any amount of stock that would not, if existing in shares, have conferred that privilege or advantage. 39. The provisions of these Articles that are applicable to paid up shares apply to stock, and references in those provisions to share and shareholder shall be read as including references to stock and stockholder, respectively. ALTERATION OF CAPITAL 40. The company may by resolution: (a) increase its authorized share capital by the creation of new shares of such amount as is specified in the resolution; (b) consolidate and divide all or any of its authorized share capital into shares of larger amount than its existing shares; (c) subdivide all or any of its shares into shares of smaller amount than is fixed by the memorandum but so that in the subdivision the proportion between the amount paid and the amount [if any] unpaid on each such share of a smaller amount is the same as it was in the case of the share from which the share of a smaller amount is derived; and (d) cancel shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person or have been forfeited and reduce its authorized share capital by the amount of the shares so canceled. 41. 41.1 Subject to any direction to the contrary that may be given by the company in general meeting, all unissued shares shall, before issue, be offered to members who shall be offered that proportion of the shares which the sum of the nominal values of the shares held by them bears to the nominal value of the issued share capital of the company, provided that if at any time there is more than one class of share on issue, unissued shares of any class of share shall be first offered to members who as at the date of the offer are registered as holders of shares of that class, and each such member shall be offered that proportion of the shares of that class which the sum of the nominal values of the shares of that class held by him bears to the sum of the nominal values of issued shares of that class. 41.2 The offer shall be made by notice specifying the number of shares offered and limiting a time within which the offer, if not accepted, will be deemed to be declined. 41.3 After the expiration of that time or on being notified by the person to whom the offer is made that he declines to accept the shares offered, the directors may issue those shares in such a manner as they think most beneficial to the company. 41.4 Where, by reason of the proportion that shares proposed to be issued bear to shares already held, some of the first-mentioned shares cannot be offered in accordance with Article 41(1), the directors may issue the shares that cannot be so offered in such manner as they think most beneficial to the company. 42. Subject to the Law, the company may, by special resolution, reduce its share capital, any capital redemption reserve fund or any other share premium account. GENERAL MEETINGS 43. Any director may whenever he thinks fit convene a general meeting. 44. 44.1 A notice of a general meeting shall specify the place, the day and the hour of meeting and, except as provided by Article 44(2), shall state the general nature of the business to be transacted at the meeting. 44.2 It is not necessary for a notice of an annual general meeting to state that the business to be transacted at the meeting includes the declaring of a dividend, the consideration of accounts and the reports of the directors and auditors, the election of directors in the place of those retiring or the appointment and fixing of the remuneration of the auditors. PROCEEDINGS AT GENERAL MEETINGS 45. 45.1 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. 45.2 Two persons each being a member or a proxy or a representative of a member shall be a quorum for a general meeting. 46. If a quorum is not present within half an hour from the time appointed for the meeting: (a) where the meeting was convened upon the requisition of members - the meeting shall be dissolved; (b) or in any other case: (1) the meeting stands adjourned to such day, and at such time and place, as the directors determine or, if no determination is made by the directors, to the same day in the next week at the same time and place; and (2) if at the adjourned meeting a quorum is not present within half an hour from the time appointed for such adjourned meeting, then the meeting shall be dissolved. 47. 47.1 If the directors have elected one of their number as chairman of their meetings, he shall preside as chairman at every general meeting. 47.2 Where a general meeting is held and: (a) a chairman has not been elected as provided by Article 47 (1); or (b) the chairman is not present within 15 minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting. 48. 48.1 The chairman may with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 48.2 When a meeting is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. 48.3 Except as provided by Article 48(2), it is not necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 49. 49.1 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is [before or on the declaration of the result of the show of hands] demanded: (a) by the chairman; (b) by at least 3 members present in persons or by proxy or by a representative, having the right to vote at the meeting; (c) by a member or members present in person or by proxy or by a representative, who together are entitled to and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members, present in person or by proxy or by a representative, holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. 49.2 Unless a poll is so demanded, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company, is conclusive evidence of the fact without proof of the number of proportion of the votes recorded in favor of or against the resolution. 49.3 The demand for a poll may be withdrawn. 50. 50.1 If a poll is duly demanded, it shall be taken in such manner and [subject to Article 50(2)] at once after either an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded. 50.2 A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. 51. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, in addition to his deliberative vote [if any], has a casting vote. 52. Subject to any rights or restrictions for the time being attached to any class or classes of shares: (a) at meetings of members or classes of members each member entitled to vote may vote in person or by proxy or by a representative or by attorney; and (b) on a show of hands every person present who is a member or a proxy or an attorney or a representative of a member has one vote, and on a poll every person present in person or by proxy or attorney or by a representative has one vote for each share he holds. 53. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy or by attorney, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members. 54. If a member is of unsound mind or is a person whose person or estate is liable to be dealt with in any way under the law relating to mental health, his committee or trustee or such other person as properly has the management of his estate may exercise any rights of the member in relation to a general meeting as if the committee, trustee or other person were the member. 55. A member is not entitled to vote at a general meeting unless all calls and other sums presently payable by him respect of shares in the company have been paid. 56. 56.1 An objection may be raised to the qualification of a voter only at the meeting or adjourned meeting at which the vote objected to is given or tendered. 56.2 Any such objection shall be referred to the chairman of the meeting, whose decision is final. 56.3 A vote not disallowed pursuant to such an objection is valid for all purposes. 57. 57.1 An instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorized in writing or, if the appointor is a body corporate, either under seal or under the hand of an officer or attorney duly authorized. 57.2 An instrument appointing a proxy may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote in the resolution except as specified in the instrument. 57.3 An instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 57.4 An instrument appointing a proxy shall be in the following form or in a form that is similar to the following form as the circumstances allow: [Name of company] I/we, _________________, of _________________, being a member/members of the above-named company, hereby appoint _________________ of _________________ or, in his absence, _________________ of _________________ as my/our proxy to vote for me/us on my/our behalf at the *annual general/ *general meeting of the company to be held on the ____ day of _________ 19__ and at any adjournment of that meeting. + This form is to be used in favor of/* against the resolution. Signed this ____ day of _________ 19__. * Strike out whichever is not desired. + To be inserted if desired. 58. An instrument appointing a proxy shall not be treated as valid unless the instrument, and the power of attorney or other authority [if any] under which the instrument is signed or a notarially certified copy of that power or authority, is or are deposited, not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll, at the registered office of the company or at such other place in Australia as is specified for that purpose in the notice convening the meeting. 59. A vote given in accordance with the terms of an instrument of proxy or of a power of attorney is valid notwithstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument [or of the authority under which the instrument was executed] or of the power, or the transfer of the share in respect of which the instrument or power is given, if no intimation in writing of the death, unsoundness of mind, revocation or transfer has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used or the power is exercised. APPOINTMENT, REMOVAL AND REMUNERATION OF DIRECTORS 60. 60.1 The number of the directors and the names of the first directors shall be determined in writing by the subscribers to the memorandum of association or a majority of them. 60.2 The company may, by resolution: (a) increase or reduce the number of directors; (b) remove any director from office; (c) appoint a new director to replace a director whose office has been vacated pursuant to the articles; or (d) appoint an additional director or additional directors. 61. 61.1 The directors may at any time appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, bu so that the total number of directors does not at any time exceed the number determined in accordance with these Articles. 61.2 Any director so appointed holds office only until the next following annual general meeting and is then eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting. 62. 62.1 The company may by resolution remove any director before the expiration of his period of office, and may by resolution appoint another person in his stead. 62.2 The person so appointed is subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 63. 63.1 The directors shall be paid such remuneration as is from time to time determined by the company in general meeting. 63.2 The remuneration shall be deemed to accrue from day to day. 63.3 The directors may also be paid all traveling and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or otherwise in connection with the business of the company. 64. It shall not be necessary for any director to hold any share qualification. 65. In addition to the circumstances in which the office of a director becomes vacant by virtue of the Law, the office of a director becomes vacant if the director: (a) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health; (b) resigns his office by notice in writing to the company; (c) is absent without the consent of the directors from meetings of the directors held during a period of 6 months. POWERS AND DUTIES OF DIRECTORS 66. 66.1 Subject to the Law and to any other provision of these Articles, the business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by the Law or by these Articles, required to be exercised by the company in general meeting. 66.2 Without limiting the generality of Article 66(1), the directors may exercise all the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. 67. 67.1 The directors may, by power of attorney, appoint any person or persons to be the attorney or attorneys of the company for such purposes, with such powers, authorities and discretions [being powers, authorities and discretions vested in or exercisable by the directors], for such period and subject to such conditions as they think fit. 67.2 Any such power of attorney may contain such provisions for the protection and convenience of persons dealing with the attorney as the directors think fit and may also authorize the attorney to delegate all or any of the powers, authorities and discretions vested in him. 68. All checks, promissory notes, bankers drafts, bills of exchange and other negotiable instruments, and all receipts of money paid to the company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by any 2 directors or in such other manner as the directors determine. PROCEEDING OF DIRECTORS 69. 69.1 The directors may meet together for the dispatch of business and adjourn and otherwise regulate their meetings as they think fit. 69.2 A director at any time, and a secretary shall on the requisition of a director, convene a meeting of the directors. Notice of every director's meeting shall be given to each director and alternate director who is within Australia. 70. 70.1 Subject to these Articles, questions arising at a meeting of directors shall be decided by a majority of votes of directors present and voting and any such decision shall for all purposes be deemed a decision of the directors. 70.2 In case of an equality of votes, the chairman of the meeting, in addition to his deliberative vote [if any], has a casting vote. 71. No director shall be disqualified by his office from holding any other office or place of profit under the company (other than as auditor) or from contracting with the company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the company in which any director shall be in any way interested be avoided, nor shall any director be liable to account to the company for any profit arising from such office or place of profit or realized by any such contract or arrangement by reason only of such director holding that office or of the fiduciary relationship thereby established, but it is declared that the nature of his interest must be disclosed by him in any manner required by the Law. A director may as a director vote in respect of any contract arrangement in which he is so interested as aforesaid. So long as the provisions of this article have been observed by a director with regard to any contract or arrangement in which such director shall be in any way interested, then the fact that such director affixed the company's seal to the document evidencing such contract or arrangement shall not in any way affect the validity of the said document. 72. 72.1 A director may, with the approval of the other directors, appoint a person [whether a member of the company or not] to be an alternate director in his place during such period as he thinks fit. 72.2 An alternate director is entitled to notice of meetings of the directors and, if the appointor is not present at such a meeting, is entitled to attend and vote in his stead. If the alternate director is already a director of the company he shall be entitled to vote on his own behalf as well as on behalf of the director appointing him, but for the purpose of determining whether a quorum is present, he shall be counted only once. 72.3 An alternate director may exercise any powers that the appointor may exercise and the exercise of any such power by the alternate director shall be deemed to be the exercise of the power by the appointor. 72.4 An alternate director is not required to have any share qualifications. 72.5 The appointment of an alternate director may be terminated at any time by the appointor notwithstanding that the period of the appointment of the alternate director has not expired, and terminates in any event if the appointor vacates office as a director. 72.6 An appointment, or the termination of an appointment, of an alternate director shall be effected by a notice in writing signed by the director who makes or made the appointment and served on the company. 73. At a meeting of directors, the number of directors whose presence is necessary to constitute a quorum is such number as is determined by the directors and, unless so determined, is 2. 74. In the event of a vacancy or vacancies in the office of a director or offices of directors, the remaining directors may act but, if the number of remaining directors is not sufficient to constitute a quorum at a meeting of directors, they may act only for the purpose of increasing the number of directors to a number sufficient to constitute such a quorum or of convening a general meeting of the company. 75. 75.1 The directors shall elect one of their number as a chairman of their meetings and may determine the period for which he is to hold office. 75.2 Where such a meeting is held and: (a) a chairman has not been elected as provided by Article 75(1), or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the directors present shall elect one of their number to be a chairman of the meeting. 76. 76.1 The directors may delegate any of their powers to a committee or committees consisting of such of their number as they think fit. 76.2 A committee to which any powers have been so delegated shall exercise the powers delegated in accordance with any directions of the directors and a power so exercised shall be deemed to have been exercised by the directors. 76.3 The members of such a committee may elect one of their number as chairman of their meetings. 76.4 Where such a meeting is held and: (a) a chairman has not been elected as provided by Article 76(3); or (b) the chairman is not present within 10 minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present may elect one of their number to be chairman of the meeting. 76.5 A committee may meet and adjourn as it thinks proper. 76.6 Questions arising at a meeting of a committee shall be determined by a majority of votes, of the members present and voting. 76.7 In the case of an equality of votes, the chairman, in addition to his deliberative vote [ if any], has a casting vote. 77. 77.1 If all the directors have signed a document containing a statement that they are in favor of a resolution of the directors in terms set out in the document, a resolution in those terms shall be deemed to have been passed at a meeting of the directors held on the day on which the document was signed and at the time at which the document was last signed by a director or, if the directors signed the document on different days, on the day on which, and at the time at which, the document was last signed by a director. 77.2 For the purposes of Article 77(1), two or more separate documents containing statements in identical terms each of which is signed by one or more directors shall together be deemed to constitute one document containing a statement in those terms signed by those directors on the respective days on which they signed the separate documents. 77.3 A reference in Article 77(1) to all directors does not include a reference to a director who, at a meeting of directors, would not be entitled to vote on the resolution. 78. All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director are, notwithstanding that it is afterwards discovered that there was some defect in the appointment of a person to be a director or a member of the committee, or to act as, a director, or that a person so appointed was disqualified, as valid as if the person had been duly appointed and was qualified to be a director or to be a member of the committee. MANAGING DIRECTOR 79. 79.1 The directors may from time to time appoint one or more of their number to the office of managing director for such period and on such terms as they think fit, and subject to the terms of any agreement entered into in a particular case, may revoke any such appointment. 79.2 The appointment of any such managing director shall automatically terminate if he ceases from any cause to be a director. 80. A managing director shall, subject to the terms of any agreement entered into in a particular case, receive such remuneration [whether by way of salary, commission or participation in profits, or partly in one way and partly in another] as the directors determine. 81. 81.1 The directors may, upon such terms and conditions and with such restrictions as they think fit, confer upon a managing director any of the powers exercisable by them. 81.2 Any powers so conferred may be concurrent with, or be to the exclusion of, the powers of the directors. 81.3 The directors may at any time withdraw or vary any of the powers so conferred on a managing director. ASSOCIATE DIRECTORS 82. 82.1 The directors may from time to time appoint any person to be an associate director and may from time to time terminate any such appointment. 82.2 The directors may from time to time determine the powers, duties and remuneration of any person so appointed. 82.3 A person so appointed is not required to hold any shares to qualify him for appointment but, except by the invitation and with the consent of the directors, does not have any right to attend or vote at any meeting of the directors. SECRETARY 83. A secretary of the company holds office on such terms and conditions, as to remuneration and otherwise, as the directors determine. SEAL 84. 84.1 The directors shall provide for the safety custody of the seal. 84.2 The seal shall be used only by the authority of the directors, or of a committee of the directors authorized by the directors to authorize the use of the seal, and every document to which the seal is affixed shall be signed by a director and be countersigned by another director, a secretary or another person appointed by the directors to countersign that document or a class of documents in which that document is included. INSPECTION OF RECORDS 85. The directors shall determine whether and to what extent, and at what time and places and under what conditions, the accounting records and other documents of the company or any of them will be open to the inspection of members other than directors, and a member other than a director does not have the right to inspect any document of the company except as provided by law or authorized by the directors or by the company in general meeting. DIVIDENDS AND RESERVES 86. 86.1 The company in general meeting may declare a dividend if, and only if, the directors have recommended a dividend. 86.2 A dividend shall not exceed the amount recommended by the directors. 86.3 Where at any time there is more than one class of share on issue, then subject to the rights applicable to the shares concerned, dividends whether interim or otherwise may be declared and paid at different rates for different classes of shares and may be declared and paid on the shares of any one or more class or classes of shares to the exclusion of the shares of any other class or classes of shares. 87. The directors may authorize the payment by the company to the members of such interim dividends as appear to the directors to be justified by the profits of the company. 88. Interest is not payable by the company in respect of any dividend. 89. 89.1 The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as reserves, to be applied, at the discretion of the directors, for any purpose for which the profits of the company may be properly applied. 89.2 Pending any such application, the reserves may, at the discretion of the directors, be used in the business of the company or be invested in such investments as the directors think fit. 89.3 The directors may carry forward so much of the profits remaining as they consider ought not to be distributed as dividends without transferring those profits to a reserve. 90. 90.1 Subject to the rights of persons [if any] entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the Shares in respect of which the dividend is paid. 90.2 All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid but, if any share is issued on terms providing that it will rank for dividends as from a particular date, that share ranks for dividend accordingly. 90.3 An amount paid or credited as paid on a share in advance of a call shall not be taken for the purposes of this Article to be paid or credited as paid on the share. 91. The directors may deduct from any dividend payable to a member all sums of money [if any] presently payable by him to the company on account of calls or otherwise in relation to shares in the company. 92. 92.1 Any general meeting declaring a dividend may, by resolution, direct payment of the dividend wholly or partly by the distribution of specific assets, including paid up shares in, or debentures of, any other corporation, and the directors shall give effect to such a resolution. 92.2 Where a difficulty rises in regard to such a distribution, the directors may settle the matter as they consider expedient and fix the value for the distribution of the specific assets or any part of those assets and may determine that cash payments will be made to any members on the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as the directors consider expedient. 93. 93.1 Any dividend, interest or other money payable in cash in respect of shares may be paid by check sent through the post directed to: (a) the address of the holder as shown in the register of members, or in the case of joint holders, to the address shown in the register of members as the address of the joint holder first named in that register; or (b) to such other address as the holder or joint holders in writing directs or direct. 93.2 Any one of 2 or more joint holders may give effectual receipts for any dividends, interest or other money payment in respect of the shares held by them as joint holders. CAPITALISATION OF PROFITS 94. 94.1 Subject to Article 94(2), the company in general meeting may resolve that it is desirable to capitalise any sum, being the whole or part of the amount for the time being standing to the credit of any reserve account or the profit and loss account or otherwise available for distribution to members, and that that sum be applied, in any of the ways mentioned in Article 94(3), for the benefit of members in the proportions to which those members would have been entitled in a distribution of that sum by way of dividend. 94.2 The company shall not pass a resolution as mentioned in Article 94(1) unless the resolution has been recommended by the directors. 94.3 The ways in which a sum may be applied for the benefit of members under Article 94(1) are: (a) in paying up any amounts unpaid on shares held by members; (b) in paying up in full unissued shares or debentures to be issued to members as fully paid; or (c) partly as mentioned in paragraph (a) and partly as mentioned in paragraph (b). 94.4 The directors shall do all things necessary to give effect to the resolution and, in particular, to the extent necessary to adjust the rights of the members among themselves, may: (a) issue fractional certificates or make cash payments in cases where shares or debentures become issuable in fractions; and (b) authorise any person to make, on behalf of all the members entitled to any further shares or debentures upon the capitalisation, an agreement with the company providing for the issue to them, credited as fully paid up, of any such further shares or debentures or for the payment up by the company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing shares by the application of their respective proportions of the sum resolved to be capitalised; and any agreement made under an authority referred to in paragraph (b) is effective and binding on all the members concerned. NOTICES 95. 95.1 A notice may be given by the company to any member either by serving it on him personally or by sending it by post to him at his address as shown in the register of members or the address supplied by him to the company for the giving of notices to him. 95.2 Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the notice and to have been effected in the case of a notice of a meeting, on the day after the date of its posting and, in any other case, at the time at which the letter would be delivered in the ordinary course of post. 95.3 A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share. 95.4 A notice may be given by the company to a person entitled to a share in consequence of the death or bankruptcy of a member by serving it on him personally or by sending it to him by post addressed to him by name, or by the title of representative of the deceased or assignee of the bankrupt, or by any like description, at the address [if any] within Australia supplied, at the address to which the notice might have been sent if the death or bankruptcy had not occurred. 96. 96.1 Notice of every general meeting shall be given in the manner authorised by Article 95 to: (a) every member; (b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and (c) the auditor for the time being of the company. 96.2 No other person is entitled to receive notices of general meetings. WINDING UP 97. 97.1 If the company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the company and may for that purpose set such value as he considers fair upon any property to be so divided and may determine how the division is to be carried out as between the members or different classes of members, subject to the rights of holders of shares issued with special rights on winding up of the company. 97.2 The liquidator may, with the sanction of a special resolution, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no member is compelled to accept any shares or other securities in respect of which there is any liability. INDEMNITY 98. Every officer, auditor or agent of the company shall be indemnified out of the property of the company against any liability incurred by him in his capacity as officer, auditor or agent in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in relation to any such proceedings in which relief is under Law granted to him by the Court. We the several persons whose signatures are subscribed, being subscribers to the memorandum of association, hereby agree to the following articles of association. - -------------------------------------------------------------------------------- Subscribers' Signatures Witness' signature - -------------------------------------------------------------------------------- /s/ A.R. Harris - --------------- A.R. HARRIS /s/ R.G. Harvey /s/ J. Bennett - --------------- -------------- R.G. HARVEY JENNIFER LYNETTE BENNETT 73 High Street Parramatta, NSW 2150 Witness to both signatures - -------------------------------------------------------------------------------- dated: 17/02/93........... - -------------------------------------------------------------------------------- GUTBUSTERS PTY LTD (ACN 059 073 157) NOTICE OF ANNUAL GENERAL MEETING - -------------------------------------------------------------------------------- NOTICE IS GIVEN that the Annual General Meeting of the Company will be held at Princes Highway, Dandenong, Victoria 3175 Australia on Tuesday, 19 September 1995 at 3:00 p.m. AGENDA A. Ordinary Business To receive and adopt the Statutory Accounts of the Company as at 28 April 1995 together with Group Accounts of the Company and its subsidiaries in accordance with the Corporations Law and the Reports of the Directors and Auditors thereon. B. Special Business To consider and, if thought fit, pass the following resolution which will be proposed as a special resolution: "That the Articles of Association of the Company be amended as follows: 1. Insert the following immediately following Regulation 78 - "78A The Board may meet either in person or by telephone or by other means of communication by which all persons participating in the meeting are able to hear and be heard by all other participants. A meeting conducted by telephone or other means of communication is deemed to be held at the place agreed upon by the Directors attending the meeting, provided that at least one of the Directors present at the meeting was at that place for the duration of the meeting. 78B Any Director may appoint by written notice any other Director to act as his proxy at a meeting of the Board provided that a Director may not appoint a proxy and an Alternate Director. The appointment may be general or specific concerning the term of the appointment and the business upon which the proxy may vote. The Director appointing the proxy will give notice to the Company by delivering a copy of the notice to the Office. The proxy will take effect on delivery of the proxy to the Office. The Director may revoke the appointment by a written notice of revocation, a copy of which will be delivered (and take effect from the time of delivery to) the Office. The vote of a proxy will be counted on any vote as if the proxy was the Director who appointed the proxy. If the same person is appointed either Alternate Director for or the proxy of more than one Director, he will be entitled to cast a vote at meetings of the Board for each Director by whom he was appointed in addition to any vote to which he is entitled in his capacity as Director. 2. Delete Regulation 98 and substitute the following - "98 2.1 The Company shall indemnify each officer of the Company and each officer of each wholly owned subsidiary of the Company out of the assets of the Company to the relevant extent against any liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer unless the liability was incurred by the officer through his or her own dishonesty, negligence, lack of good faith or breach of duty. 2.2 In addition to paragraph (1) of this Article, an officer of the Company and an officer of a wholly owned subsidiary of the Company may be indemnified to the relevant extent out of the assets of the Company against any liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer where the Directors consider it appropriate to do so. 2.3 Where the Directors consider it appropriate to do so, the Company may pay amounts by way of premium in respect of any contract effecting insurance on behalf or in respect of an officer of the Company or an officer of a wholly owned subsidiary of the Company against liability incurred by the officer in or arising out of the conduct of the business of the Company or of such wholly owned subsidiary (as the case may be) or in or arising out of the discharge of the duties of the officer. 2.4 In this Article: (a) "officer" means: (1) (A) a director, secretary, executive officer or employee; or (B) a person appointed as a trustee by, or acting as a trustee at the express request of, the Company or a wholly owned subsidiary of the Company; and (2) includes a former officer. (b) "duties of the officer" includes duties arising by reason of the appointment, nomination or secondment in any capacity of an officer by the Company or any wholly owned subsidiary of the Company to any other corporation. (c) "to the relevant extent" means: (1) to the extent the Company is not precluded by law from doing so; (2) to the extent and for the amount that the officer is not otherwise entitled to be indemnified and is not actually indemnified by another person (including, in particular, an insurer under any insurance policy); and (d) where the liability is incurred in or arising out of the conduct of the business of another corporation or in the discharge of the duties of the officer in relation to another corporation, to the extent and for the amount that the officer is not entitled to be indemnified and is not actually indemnified out of the assets of that corporation. (e) "liability" means all costs, charges, losses, damages, expenses, penalties and liabilities of any kind including, in particular, legal costs (on a full indemnity basis) incurred in defending any proceedings (whether criminal, civil, administrative or judicial) or appearing before any court, tribunal, government authority or otherwise."." EXPLANATORY NOTES - SPECIAL BUSINESS The following are Explanatory Notes setting out the reasons for the proposed amendments to the Articles of Association. 1. Regulation 78A - Board Meetings by telephone, etc. A new Regulation 78A is proposed to be inserted to reflect current practices and give greater flexibility to the way in which Board meetings may be conducted. 2. Regulation 78B - Directors' Proxies. Similarly, a new Regulation 78B is proposed to enable a Director to appoint a co-Director as the appointor's proxy for the purpose of one or more Board meetings. 3. Regulation 98 - Indemnity of Directors and Officers The Corporate Law Reform Act 1994, referred to above, relaxed the restrictions on a company indemnifying its officers. Previously a company was only permitted to indemnify its officers against liability arising out of the execution of the duties of their office which is incurred by them in defending proceedings, whether civil or criminal, in which judgment is given in their favour. The new provisions allow additional indemnification against liability howsoever arising, unless that liability arises out of conduct involving a lack of good faith. The Company's present Article 142 is based on the previous law and can now be widened. The Corporate Law Reform Act also allows a company to pay insurance premiums in respect of policies insuring directors and officers against liability except where that liability arises from a wilful breach of duty, the improper use of inside information or the improper use of position. Proxies Note: o A member of the Company entitled to attend and vote at the General Meeting is entitled to appoint a proxy. o A proxy need not be a member of the Company. o Forms of proxy (duly completed) must be lodged at the registered office of the Company at least 36 hours prior to the meeting. o A form of proxy accompanies this Notice of Annual General Meeting. BY ORDER OF THE BOARD /s/ G. Nankin - ------------- G. Nankin Secretary DATED: 28 August 1995. cc: Fortuity Pty Ltd Mr. K.A. Dynon Mr. G.J. Egger Mr. R.L. Penn Mr. N.J. Fielke Coopers & Lybrand GUTBUSTERS PTY LTD (ACN 059 073 157) PROXY _________________________ of _________________________ being a member of the above-named company, hereby appoints _________________________ of _________________________ or, or in his absence, the Chairman of the meeting as my proxy to vote on my/its behalf at the Annual General Meeting of the Company to be held on 19 September 1995 or at any adjournment of that meeting. DATED: _________, 1995 _________________________ For and on behalf of EX-4.1 36 EXHIBIT 4.1 EXHIBIT 4.1 ================================================================================ WEIGHT WATCHERS INTERNATIONAL, INC. Issuer 13% Senior Subordinated Notes Due 2009 -------------------- DOLLAR SECURITIES INDENTURE Dated as of September 29, 1999 --------------------- NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee ================================================================================ CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- 310(a)(1) .............................. 7.10 (a)(2) .............................. 7.10 (a)(3) .............................. N.A. (a)(4) .............................. N.A. (b) .............................. 7.08; 7.10 (c) .............................. N.A. 311(a) .............................. 7.11 (b) .............................. N.A. (c) .............................. N.A. 312(a) .............................. 2.05 (b) .............................. 11.03 (c) .............................. 11.03 313(a) .............................. 7.06 (b)(1) .............................. N.A. (b)(2) .............................. 7.06 (c) .............................. N.A. (d) .............................. 7.06 314(a) .............................. 4.03; 4.11; 11.02 (b) .............................. N.A. (c)(1) .............................. 11.04 (c)(2) .............................. 11.04 (c)(3) .............................. N.A. (d) .............................. N.A. (e) .............................. 11.05 (f) .............................. 4.11 315(a) .............................. 7.01 (b) .............................. 7.05; 11.02 (c) .............................. 7.01 (d) .............................. 7.01 (e) .............................. 6.11 316(a)(last sentence) .............................. 11.06 (a)(1)(A) .............................. 6.05 (a)(1)(B) .............................. 6.04 (a)(2) .............................. N.A. (b) .............................. 6.07 317(a)(1) .............................. 6.08 (a)(2) .............................. 6.09 (b) .............................. 2.04 318(a) .............................. 11.01 N.A. means Not Applicable. - ---------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS ARTICLE 1 Page ---- Definitions and Incorporation by Reference SECTION 1.01. Definitions ................................................. 1 SECTION 1.02. Other Definitions ........................................... 32 SECTION 1.03. Incorporation by Reference of Trust Indenture Act ............................................. 33 SECTION 1.04. Rules of Construction ....................................... 33 ARTICLE 2 The Securities SECTION 2.01. Form and Dating ............................................. 34 SECTION 2.02. Execution and Authentication ................................ 35 SECTION 2.03. Registrar and Paying Agent .................................. 35 SECTION 2.04. Paying Agent To Hold Money in Trust ......................... 36 SECTION 2.05. Securityholder Lists ........................................ 36 SECTION 2.06. Transfer and Exchange ....................................... 37 SECTION 2.07. Replacement Securities ...................................... 37 SECTION 2.08. Outstanding Securities ...................................... 38 SECTION 2.09. Temporary Securities ........................................ 38 SECTION 2.10. Cancellation ................................................ 39 SECTION 2.11. Defaulted Interest .......................................... 39 SECTION 2.12. CUSIP Numbers ............................................... 39 SECTION 2.13. Issuance of Additional Securities ........................... 39 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee .......................................... 40 SECTION 3.02. Selection of Securities To Be Redeemed ...................... 40 SECTION 3.03. Notice of Redemption ........................................ 41 SECTION 3.04. Effect of Notice of Redemption .............................. 42 SECTION 3.05. Deposit of Redemption Price ................................. 42 SECTION 3.06. Securities Redeemed in Part ................................. 42 ARTICLE 4 Covenants SECTION 4.01 Cessation of Specified Covenants ............................ 42 ii SECTION 4.02. Payment of Securities ....................................... 42 SECTION 4.03. SEC Reports ................................................. 43 SECTION 4.04. Limitation on Indebtedness .................................. 44 SECTION 4.05. Limitation on Restricted Payments ........................... 48 SECTION 4.06. Limitation on Restrictions on Distributions from Subsidiaries ........................... 52 SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock .......................................... 54 SECTION 4.08. Limitation on Transactions with Affiliates ................................................ 59 SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries .............................................. 61 SECTION 4.10. Change of Control ........................................... 62 SECTION 4.11. Compliance Certificates ..................................... 64 SECTION 4.12. Further Instruments and Acts ................................ 64 SECTION 4.13. Future Guarantors ........................................... 64 ARTICLE 5 Successor Company; Successor Subsidiary Guarantors SECTION 5.01. When Company May Merge or Transfer Assets .................................................... 64 SECTION 5.02. When Subsidiary Guarantors May Merge or Transfer Assets ........................................... 65 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default ........................................... 66 SECTION 6.02. Acceleration ................................................ 69 SECTION 6.03. Other Remedies .............................................. 69 SECTION 6.04. Waiver of Past Defaults ..................................... 70 SECTION 6.05. Control by Majority ......................................... 70 SECTION 6.06. Limitation on Suits ......................................... 70 SECTION 6.07. Rights of Holders To Receive Payment ........................ 71 SECTION 6.08. Collection Suit by Trustee .................................. 71 SECTION 6.09. Trustee May File Proofs of Claim ............................ 71 SECTION 6.10. Priorities .................................................. 72 SECTION 6.11. Undertaking for Costs ....................................... 72 SECTION 6.12. Waiver of Stay or Extension Laws ............................ 72 iii ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee ........................................... 73 SECTION 7.02. Rights of Trustee ........................................... 74 SECTION 7.03. Individual Rights of Trustee ................................ 75 SECTION 7.04. Trustee's Disclaimer ........................................ 75 SECTION 7.05. Notice of Defaults .......................................... 75 SECTION 7.06. Reports by Trustee to Holders ............................... 75 SECTION 7.07. Compensation and Indemnity .................................. 76 SECTION 7.08. Replacement of Trustee ...................................... 76 SECTION 7.09. Successor Trustee by Merger ................................. 77 SECTION 7.10. Eligibility; Disqualification ............................... 78 SECTION 7.11. Preferential Collection of Claims Against Company ........................................... 78 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance ................................................ 78 SECTION 8.02. Conditions to Defeasance .................................... 80 SECTION 8.03. Application of Trust Money .................................. 81 SECTION 8.04. Repayment to Company ........................................ 81 SECTION 8.05. Indemnity for Government Obligations ........................ 81 SECTION 8.06. Reinstatement ............................................... 82 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders .................................. 82 SECTION 9.02. With Consent of Holders ..................................... 83 SECTION 9.03. Compliance with Trust Indenture ............................. 84 SECTION 9.04. Revocation and Effect of Consents and Waivers ............................................... 84 SECTION 9.05. Notation on or Exchange of Securities ....................... 85 SECTION 9.06. Trustee To Sign Amendments .................................. 85 SECTION 9.07. Payment for Consent ......................................... 85 iv ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate .................................... 86 SECTION 10.02. Liquidation, Dissolution, Bankruptcy ........................ 86 SECTION 10.03. Default on Senior Indebtedness .............................. 87 SECTION 10.04. Acceleration of Payment of Securities ....................... 88 SECTION 10.05. When Distribution Must Be Paid Over ......................... 88 SECTION 10.06. Subrogation ................................................. 88 SECTION 10.07. Relative Rights ............................................. 88 SECTION 10.08. Subordination May Not Be Impaired by Company ................ 89 SECTION 10.09. Rights of Trustee and Paying Agent .......................... 89 SECTION 10.10. Distribution or Notice to Representative .................... 89 SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate ...................... 90 SECTION 10.12. Trust Moneys Not Subordinated ............................... 90 SECTION 10.13. Trustee Entitled To Rely .................................... 90 SECTION 10.14. Trustee To Effectuate Subordination ......................... 91 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness .................................... 91 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions .................. 91 ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls ................................ 91 SECTION 11.02. Notices ..................................................... 92 SECTION 11.03. Communication by Holders with Other Holders ................. 92 SECTION 11.04. Certificate and Opinion as to Conditions Precedent ...................................... 93 SECTION 11.05. Statements Required in Certificate or Opinion ................................................ 93 SECTION 11.06. When Securities Disregarded ................................. 93 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar ................................................. 94 SECTION 11.08. Legal Holidays .............................................. 94 v SECTION 11.09. Governing Law ............................................... 94 SECTION 11.10. No Recourse Against Others .................................. 94 SECTION 11.11. Successors .................................................. 94 SECTION 11.12. Multiple Originals .......................................... 94 SECTION 11.13. Table of Contents; Headings ................................. 94 Rule 144A/Regulation S Appendix Exhibit A - Form of Security Exhibit B - Form of Guarantee Agreement INDENTURE dated as of September 29, 1999, between WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "Company"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 13% Senior Subordinated Notes Due 2009 (the "Initial Securities") and, if and when issued pursuant to a registered exchange for Initial Securities, the Company's 13% Senior Subordinated Notes Due 2009 (the "Exchange Securities") and if and when issued pursuant to a private exchange for Initial Securities, the Company's 13% Senior Subordinated Notes Due 2009 (the "Private Exchange Securities", together with the Exchange Securities and the Initial Securities, the "Securities"): ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Additional Assets" means any: (1) property, plant, equipment or intellectual property used in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Related Business. "Affiliate" of any specified Person means: (1) any other Person, directly or indirectly, controlling or controlled by; or 2 (2) under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.05, 4.07 and 4.08 only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, trans fer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of clauses (1), (2) and (3) (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (B) any sale of Capital Stock in, or indebtedness or other securities of, an Unrestricted Subsidiary; 3 (C) a disposition of Temporary Cash Investments; (D) the disposition of all or substantially all the assets of the Company in a manner permitted pursuant to Section 5.01 or any disposition that constitutes a Change of Control; (E) sales of assets received by the Company upon the foreclosure on a Lien; (F) for purposes of Section 4.07 only, a disposi tion that constitutes a Restricted Payment permitted by Section 4.05 or a Permitted Investment; and (G) a disposition of assets with a fair market value of less than $1.0 million. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing: (1) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Indebtedness" means any and all Indebtedness and other amounts payable under or in respect of the Credit Agreement or Hedging Obligations related to the Credit Agreement, including principal, premium (if any), interest (including interest accruing at the contract rate specified in the Credit Agreement (including any rate applicable on default) on or after the filing of any petition in bankruptcy or the commencement of any similar state, Federal or foreign reorganization or liquidation proceeding relating to the Company and interest that would accrue but for the 4 commencement of such proceeding whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following events: (1) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of a Person (the "specified person") held by any other Person (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a 5 majority of the voting power of the Voting Stock of the parent entity); (2) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); (3) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66-2/3% of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (4) the adoption of a plan relating to the liquidation or dissolution of the Company; or 6 (5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person (other than, in all such cases, a Person that is controlled by the Permitted Holders), other than a transaction following which (A) in the case of a merger or consolidation transaction, securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) constitute at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction, and (B) in the case of a sale of assets transaction, the transferee Person becomes the obligor in respect of the Securities and a Subsidiary of the transferor of such assets. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period; (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such 7 period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition, including any acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and 8 Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment, acquisition or cost-reduction program occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment, acquisition or cost-reduction program occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition or cost-reduction program, the amount of income, earnings or cost savings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition or cost-reduction program which is being given pro forma effect, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable; provided, however, that, in either case, such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states (a) the amount of such adjustment or adjustments, (b) that such adjustment or adjustments are based on the reasonable good faith belief of the Officers executing such Officers' Certificate at the time of such execution and (c) that any related Incurrence of Indebtedness is permitted pursuant to this Indenture. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement 9 applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication: (1) interest expense attributable to Capital Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) capitalized interest; (3) non-cash interest expenses; (4) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (5) net payments pursuant to Hedging Obligations; (6) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Restricted Subsidiary (other than the Seller Preferred Stock and other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the issuer of such Preferred Stock); (7) interest incurred in connection with Investments in discontinued operations; (8) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary; and (9) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the sum of (1) the net income of the Company and its consolidated Subsidiaries and (2) to the extent not 10 otherwise included in the calculation of the net income of the Company and its consolidated Subsidiaries, amounts received by the Company from Warnaco Inc. in respect of the license agreement, dated as of January 8, 1999, between the Company and Warnaco Inc. and (3) to the extent deducted in calculating net income of the Company and its consolidated Subsidiaries, (A) any non-recurring fees, expenses or charges related to the Transactions and (B) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with the Transactions; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and (B) the Company's equity in a net loss of any such Person (other than a Person the Company's interest in which is accounted for pursuant to the equity method of accounting) for such period shall be included in determining such Consolidated Net Income; (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net 11 income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); provided, however, that such net income shall not be excluded in calculating Consolidated Net Income as a component of EBITDA for purposes of calculating the Consolidated Coverage Ratio; and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain (or loss) realized upon the sale or other disposition of any assets of the Company, its consolidated Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (5) extraordinary gains or losses; (6) any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes; and (7) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of Section 4.05 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of the Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under Section 4.05 pursuant to clause (3)(D) of paragraph (a) thereof. 12 "Credit Agreement" means the Credit Agreement to be entered into by and among the Company, certain of its Subsidiaries, the lenders referred to therein, The Bank of Nova Scotia, as Administrative Agent, and Credit Suisse First Boston, New York branch, as Syndication Agent, together with the related documents thereto (including, without limitation, the deed poll and transferable loan certificates issued in connection therewith, the term loans and revolving loans thereunder, any notes, instruments, guarantees, pledge agreements and security documents), in each case as amended, extended, waived, replaced, restructured, repaid, refunded, refinanced, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders and agents. Without limiting the generality of the foregoing, the term "Credit Agreement" shall include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to the Credit Agreement and all refundings, restructurings, renewals, refinancing and replacements of any facility provided for in the Credit Agreement, including any agreement or agreements (a) extending the maturity of any Indebtedness incurred thereunder or contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder or (c) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder to the extent permitted under this Indenture. "Credit Agreement Intercompany Indebtedness" means Indebtedness of the Company or a Restricted Subsidiary (the "obligor") owing to a Restricted Subsidiary of the Company (the "obligee") that is a borrower under the Credit Agreement in respect of an advance to the obligor by the obligee of funds borrowed by the obligee under the Credit Agreement; provided, however, that the amount of such Indebtedness constituting Credit Agreement Intercompany Indebtedness shall be limited to the amount actually owed by the obligee in respect of the funds advanced to the obligor under the Credit Agreement. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values. 13 "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as Designated Noncash Consideration pursuant to an Officers' Certificate setting forth the basis of such valuation, less the amount of Temporary Cash Investments received in connection with a subsequent sale of such Designated Noncash Consideration. "Designated Preferred Stock" means Preferred Stock of the Company (other than Disqualified Stock) that is issued for cash (other than to the Company, a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05. "Designated Senior Indebtedness" with respect to a Person means: (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such Person which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $20.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; 14 (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy obligations as a result of such employee's death or disability; and provided further, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if: (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Securities pursuant to Sections 4.07 and 4.10; and (2) any such requirement only becomes operative after compliance with such terms applicable to the Securities, including the purchase of any Securities tendered pursuant thereto; and, provided further, however, that the Seller Preferred Stock shall constitute Disqualified Stock. "EBITDA" for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: (1) all income tax expense of the Company and its consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries 15 (excluding amortization expense attributable to a prepaid operating activity item that was paid in cash in a prior period); (4) any non-recurring fees, expenses or charges related to any Equity Offering, Permitted Investment, acquisition or Indebtedness permitted to be Incurred by this Indenture (in each case, whether or not successful) deducted (and not subsequently added back) in such period in computing Consolidated Net Income; (5) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with acquisitions consummated after the Issue Date deducted (and not subsequently added back) in such period in computing Consolidated Net Income; and (6) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period); in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Offering" means any primary offering of common stock or Preferred Stock of the Company (other than Disqualified Stock) to Persons who are not Affiliates of the Company other than (1) public offerings with respect to the Company's common stock registered or Form S-8 and (2) issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. 16 "Euro Securities Indenture" means the Euro Securities Indenture dated as of September 29, 1999, between the Company and the Trustee, as originally executed. "Euro Securities" means the Securities issued under, and as defined in, the Euro Securities Indenture. "Euro Subsidiary Guarantee" means a Subsidiary Guarantee under, and as defined in, the Euro Securities Indenture. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Contributions" means the net cash proceeds received by the Company after the Issue Date from (1) contributions to its common equity capital and (2) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan of the Company or a Restricted Subsidiary or any other management or employee benefit plan or agreement of the Company or a Restricted Subsidiary) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entity as approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. 17 "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Guarantee Agreement" means a guarantee agreement, in substantially the form of Exhibit B hereto, pursuant to which a Subsidiary Guarantor guarantees the Company's obligations with respect to the Securities. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): 18 (1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; provided, however, that unpaid dividends in respect of the Seller Preferred Stock shall not constitute Indebtedness; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the twentieth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with Section 1.04 (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any 19 Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Dollar Securities Indenture as amended or supplemented from time to time. "Interest Rate Agreement" means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.05: (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Company's 20 "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent) by Moody's and S&P, respectively. "Investment Grade Status" shall be deemed to have been reached on the date the Securities have an Investment Grade Rating from both S&P and Moody's. "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Local Management Plan" means an equity plan or program for the issuance or sale of Capital Stock to local management or a plan for the issuance or sale of Capital Stock to local strategic investors in respect of Subsidiaries of the Company whose principal business is conducted outside of the United States. "Moody's" means Moody's Investor Services, Inc. or any successor to the rating agency business thereof. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of: 21 (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Obligations" means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness; provided, however, that Obligations with respect to the Securities shall not include fees or indemnification in favor of the Trustee and other third parties other than the holders of the Securities. "Offering Circular" means the confidential offering circular, dated September 22, 1999, relating to the offering of the Initial Securities. 22 "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means Artal Luxembourg S.A., H.J. Heinz Company and each of their respective Affiliates. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (3) cash and Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; 23 (6) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 4.07; (9) any Investment existing on the Issue Date; (10) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (10), not to exceed $15.0 million at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (11) Investments the payment for which consists of Capital Stock of the Company (other than Disqualified Stock); (12) any Guarantee Incurred in connection with a "synthetic lease" or similar financing of an acquisition or construction of property used in a Related Business by the Company or a Restricted Subsidiary; provided, however, that such Guarantee and any other Indebtedness Incurred in connection with such transaction is permitted to be Incurred pursuant to Section 4.04; (13) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (14) Investments of up to $10.0 million in WeightWatchers.com, the Company's Internet affiliate. 24 "Permitted Junior Securities" shall mean debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then-outstanding Senior Indebtedness of the Company at least to the same extent that the Securities are subordinated to the payment of all Senior Indebtedness of the Company on the Issue Date, so long as to the extent that any Senior Indebtedness of the Company outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash or Temporary Cash Investments on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that: 25 (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary; and provided further that clauses (1) and (2) of this clause will not apply to any refunding or refinancing of any Senior Indebtedness. "Registration Rights Agreement" means the Registration Rights Agreement dated September 22, 1999, among the Company, Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. "Related Business" means any business in which the Company was engaged on the Issue Date and any business related, ancillary or complementary to any business of the Company in which the Company was engaged on the Issue Date. "Representative" means with respect to a Person any trustee, agent or representative (if any) for an issue of Senior Indebtedness of such Person. "Restricted Payment" with respect to any Person means: (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or 26 distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition or Indebtedness Incurred pursuant to clause (2) of paragraph (b) of Section 4.04 and not subsequently transferred to a Person other than the Company or its Restricted Subsidiaries); or (4) the making of any Investment (other than a Permitted Investment) in any Person. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. 27 "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933. "Seller Preferred Stock" means the 6% preferred stock of the Company issued to H.J. Heinz Company on the Issue Date. "Senior Indebtedness" with respect to a Person means, without duplication: (1) Bank Indebtedness; (2) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and (3) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person to the extent post-filing interest is allowed in such proceeding) and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of clauses (1), (2) and (3), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Securities or the Subsidiary Guarantees, as the case may be; provided, however, that Senior Indebtedness shall not include: (1) any obligation of such Person to any Subsidiary (other than Credit Agreement Intercompany Indebtedness); (2) any liability for Federal, state, local or other taxes owed or owing by such Person; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities); 28 (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person; (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture; provided, however, that such Indebtedness shall be deemed not to have been Incurred in violation of this Indenture for purposes of this clause (5) if (x) the holders of such Indebtedness or their representative or the Company shall have furnished to the Trustee an opinion of recognized independent legal counsel, unqualified in all material respects, addressed to the Trustee (which legal counsel may, as to matters of fact, rely upon an Officers' Certificate) to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Indenture or (y) such Indebtedness consists of Bank Indebtedness, and the holders of such Indebtedness or their agent or representative (1) had no actual knowledge at the time of the Incurrence that the Incurrence of such Indebtedness violated this Indenture and (2) shall have received an Officers' Certificate to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Indenture; or (6) the Euro Securities. "Senior Subordinated Indebtedness" means with respect to a Person, the Securities and the Euro Securities (in the case of the Company), any Subsidiary Guarantee and any Euro Subsidiary Guarantee (in the case of a Subsidiary Guarantor) and any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank pari passu with the Securities or such Subsidiary Guarantee, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "S&P" means Standard & Poor's Rating Group (or any successor to the rating agency business thereof). 29 "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities, the Euro Securities, a Subsidiary Guarantee or a Euro Subsidiary Guarantee of such Person as the case may be, pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Subsidiary Guarantor" means any Subsidiary that provides a Guarantee under the Credit Agreement (other than special purpose vehicles used to lend cash to guarantors of the Credit Agreement). "Subsidiary Guarantee" means a Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Securities pursuant to a Guarantee Agreement. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition 30 thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; and (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Transactions" means the transactions contemplated by the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal International S.A. and any financings related thereto. 31 "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.05. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of Section 4.04 and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency 32 involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. Except as required by Section 4.04, whenever it is necessary to determine whether the Company has complied with any covenant in this Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions. Defined in Term Section ---- ------- "Additional Securities" ................ 2.02 "Affiliate Transaction" ................ 4.08(a) "Appendix" ............................. 2.01 "Bankruptcy Law" ....................... 6.01 "Blockage Notice" ...................... 10.03 "Change of Control Offer" .............. 4.10(b) "covenant defeasance option" ........... 8.01(b) "Custodian" ............................ 6.01 "Event of Default" ..................... 6.01 "legal defeasance option" .............. 8.01(b) 33 "Legal Holiday" ........................ 11.08 "Notice of Default" .................... 6.01 "Offer" ................................ 4.07(b) "Offer Amount" ......................... 4.07(c)(2) "Offer Period" ......................... 4.07(c)(2) "pay the Securities" ................... 10.03 "Paying Agent" ......................... 2.03 "Payment Blockage Period" .............. 10.03 "Purchase Date" ........................ 4.07(c)(1) "Registrar"............................. 2.03 "Successor Company" .................... 5.01 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limita tion; 34 (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemp tion or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the date the Initial Securities were originally issued. ARTICLE 2 The Securities SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix") which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture. 35 SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. On the Issue Date, the Trustee shall authenticate and deliver Securities for original issue in an aggregate principal amount of $150.0 million, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company and, at any time and from time to time thereafter, the Trustee shall authenticate and deliver additional securities ("Additional Securities") for original issue upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and, in the case of an issuance of Additional Securities pursuant to Section 2.13 after the Issue Date, shall certify that such issuance is in compliance with Section 4.04. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying 36 Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section 2.04, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may 37 request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(1) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section 2.06. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, 38 destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. 39 SECTION 2.10 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.13. Issuance of Additional Securities. The Company shall be entitled, subject to its compliance with Section 4.04, to issue Additional Securities under this Indenture which shall have identical terms as the Initial Securities issued on the Issue Date, other than with respect to the date of issuance, issue price and amount of interest payable on the first payment date applicable thereto. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor shall be treated as a single class for all purposes under this Indenture. 40 With respect to any Additional Securities, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each of which shall be delivered to the Trustee prior to the Trustee's issuance of the Additional Securities, the following information: (1) the aggregate principal amount and CUSIP number of such Additional Securities to be authenticated and delivered pursuant to this Indenture; (2) the issue price and the issue date of such Additional Securities and the amount of interest payable on the first payment date applicable thereto; provided, however, that no Additional Securities may be issued at a price that would cause such Additional Securities to have "original issue discount" within the meaning of Section 1273 of the Code; and (3) whether such Additional Securities shall be transfer restricted securities and issued in the form of Initial Securities as set forth in Exhibit 1 to the Appendix to this Indenture or shall be issued in the form of Exchange Securities as set forth in Exhibit A to the Appendix. ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the clause of paragraph 5 of the Securities pursuant to which the redemption will occur. The Company shall give each notice to the Trustee provided for in this Section 3.01 at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies 41 with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the clause of paragraph 5 of the Securities pursuant to which the Securities called for redemption are being redeemed; and 42 (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section 3.03. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants SECTION 4.01. Cessation of Specified Covenants. Following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either 43 or both of the Rating Agencies or a Default shall have occurred), the Company and its Restricted Subsidiaries will not be subject to the Sections 4.04, 4.05, 4.06, 4.07, 4.08 and 4.09, and clause (3) under Section 5.01. SECTION 4.02. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.03. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC and provide the Trustee and Holders and prospective Holders (upon request in the case of prospective Holders) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act; provided, however, that the Company shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Company will make available such information to the Trustee, Holders and prospective investors (upon request in the case of prospective investors) within 15 days after the time the Company would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement (each as defined in the Registration Rights Agreement) by the filing with the SEC of the Exchange Offer Registration Statement and/or Shelf Registration Statement, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act. The Company also will comply with the other provisions of TIA ss. 314(a). 44 In addition, the Company shall furnish to the Holders of the Securities and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities are not freely transferable under the Securities Act. SECTION 4.04. Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and its Restricted Subsidiaries will be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such Indebtedness is Incurred prior to October 1, 2002 or 2.25 to 1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding paragraph (a) of Section 4.04, the Company and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Credit Agreement; provided, however, that, after giving effect to any such Incurrence, the aggregate principal amount of such Indebtedness then outstanding does not exceed $292.0 million less the sum of all principal payments with respect to such Indebtedness pursuant to clause (3)(A) paragraph (a) of Section 4.07; (2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such Indebtedness (other than Credit Agreement Intercompany Indebtedness), such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities; (3) the Securities and the Euro Securities (other than any Additional Securities issued pursuant to the Indenture or any Additional Securities as defined in and issued pursuant to the Euro Securities Indenture), 45 the Euro Subsidiary Guarantees and the Subsidiary Guarantees; (4) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this paragraph (b) of this Section 4.04); (5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); provided, however, that on the date of such acquisition and after giving pro forma effect thereto, the Company would have been able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section 4.04; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) of Section 4.04 or pursuant to clause (3), (4) of (5) or this clause (6) of this paragraph (b) of this Section 4.04; provided, however, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be Incurred only by such Subsidiary; (7) Hedging Obligations consisting of (A) Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Company or a Restricted Subsidiary pursuant to this Indenture or (B) Currency Agreements entered into in respect of Credit Agreement Intercompany Indebtedness or in the ordinary course of business and not for the purpose of speculation; (8) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when taken together with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (8) of this paragraph (b) of this 46 Section 4.04, does not exceed 5.0% of Total Assets at the time of Incurrence; (9) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of this Indenture, other than guarantees of Indebtedness Incurred by any person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; (10) obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (11) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture; (12) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within two Business Days of its Incurrence; and (13) Indebtedness of the Company or any Restricted Subsidiaries in an aggregate principal amount which, when taken together with all other Indebtedness of the Company or any Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (12) of this paragraph (b) of this Section 4.04 or paragraph (a) of Section 4.04) does not exceed $25.0 million. (c) Notwithstanding the foregoing, neither the Company nor any Restricted Subsidiary will Incur any Indebtedness pursuant to paragraph (b) of Section 4.04 if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Restricted Subsidiary unless such Indebtedness shall be subordinated to the Securities or the applicable Restricted 47 Subsidiary to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with this Section 4.04, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses (provided that any Indebtedness classified as Incurred pursuant to clause (13) of paragraph (b) of Section 4.04 may later be reclassified as having been Incurred pursuant to paragraph (a) of Section 4.04 to the extent that such reclassified Indebtedness could be Incurred pursuant to paragraph (a) of Section 4.04 at the time of such reclassification) and (2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above. (e) Notwithstanding paragraphs (a) and (b) of Section 4.04, neither the Company nor any Subsidiary Guarantor will Incur (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of such Person, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person or (2) any Secured Indebtedness of such Person that is not Senior Indebtedness unless contemporaneously therewith such Person makes effective provision to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (f) For purposes of determining compliance with any U.S. dollar denominated restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness; provided, however, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined 48 based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess will be determined on the date such Refinancing Indebtedness is Incurred. SECTION 4.05. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 4.04; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of (without duplication): (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus (B) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and 100% of any cash contribution subsequent to the Issue Date; plus (C) the amount by which Indebtedness of the Company or any of its Restricted Subsidiaries is 49 reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or any of its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); plus (D) an amount equal to the sum of (x) the net reduction in the Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment, proceeds representing the return of capital (excluding dividends and distributions) and from repayments of loans or advances which constituted Restricted Payments, in each case received by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The provisions of paragraph (a) of Section 4.05 will not prohibit: (1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) or a substantially concurrent capital contribution; provided, however, that (A) such Restricted Payment shall be excluded in 50 the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness which is permitted to be Incurred pursuant to Section 4.04; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.07; provided, however, that such purchase or redemption shall be excluded in subsequent calculations of the amount of Restricted Payments; (4) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that such dividends shall be included in the calculation of the amount of Restricted Payments; (5) so long as no Default has occurred and is continuing, the repurchase or other acquisition of shares of Capital Stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such repurchases and other acquisitions shall not exceed $2.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over for the two succeeding calendar years); provided, further, however, that such amount may be increased by an amount not to exceed (A) the cash 51 proceeds from sales of Capital Stock of the Company (other than Disqualified Stock) to members of management or directors or consultants of the Company and its Subsidiaries that occur after the Issue Date plus (B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date (provided, however, that to the extent such amount is increased by the receipt of any such cash proceeds, such cash proceeds shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05 and the calculation of Consolidated Net Income); and provided further, however, that such repurchases and other acquisitions shall be excluded in the calculation of the amount of Restricted Payments; (6) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock (other than the Seller Preferred Stock) of the Company or any of its Restricted Subsidiaries issued or Incurred in accordance with Section 4.04; provided, however, that, to the extent included in the calculation of Consolidated Interest Expense, such dividends or distributions shall be excluded in the calculation of the amount of Restricted Payments; (7) Investments in Unrestricted Subsidiaries in an aggregate amount which, when taken together with all other Investments made pursuant to this clause (7) of this paragraph (b) of this Section 4.05, do not exceed $10.0 million provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; (8) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1.0 million and 1.0% of EBITDA and any related out-of-pocket expenses; provided, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; (9) the payment of dividends on the Company's common stock following the first public offering of common stock of the Company, after the Issue Date, of up to 6% per annum of the net proceeds received by the Company from such public offering; provided, however, that (a) the aggregate amount of all such dividends shall not exceed the aggregate amount of net proceeds 52 received by the Company from such public offering, (b) at the time of, and after giving effect to, any payment permitted under this clause (9) of this paragraph (b) of this Section 4.05, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (c) any such payment shall be included in subsequent calculations of the amount of Restricted Payments; (10) other Restricted Payments (other than dividends in respect of the Seller Preferred Stock) in an aggregate amount not to exceed $5.0 million; provided, however, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments; (11) so long as no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock issued after the Issue Date; provided, however, that for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of such determination for which financial statements are available immediately preceding the declaration of any such dividend or distribution after giving effect to such dividend or distribution on a pro forma basis, the Company would have had a Consolidated Coverage Ratio of at least 2.0 to 1; provided, however, that such dividends shall be included in the calculation of the amount of Restricted Payments; (12) Investments that are made with Excluded Contributions; provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; and (13) repurchases of Capital Stock deemed to occur upon exercise of stock options if such Capital Stock represents a portion of the exercise price of such options; provided, however, that such repurchases shall be excluded in the calculation of the amount of Restricted Payments. SECTION 4.06. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or 53 make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order or an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section 4.06 or this clause (3) of this Section 4.06 or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section 4.06 or this clause (3) of this Section 4.06; provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Securityholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements; (4) any such encumbrance or restriction consisting of customary non assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (5) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; 54 (6) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (7) any restriction on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (8) encumbrances and restrictions contained in the agreements evidencing other Indebtedness of Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant to Section 4.04; provided, however, that the encumbrances or restrictions apply only in the event of and during the continuance of a default contained in such Indebtedness or agreement; and (9) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Company, of the shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; provided that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities), that are assumed by the transferee of any such assets (provided that the Company or such Restricted Subsidiary is released from all liability with respect thereto), (B) any notes, other obligations or securities received by the Company or such Restricted Subsidiary from such transferee that are 55 converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Disposition and (C) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Disposition having an aggregate fair market value, when taken together with all other Designated Noncash Consideration received pursuant to this clause (C) of this paragraph (a) of this Section 4.07 that is at that time outstanding, not to exceed $5.0 million at time of receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for purposes of this provision and for no other purpose; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B) of this paragraph (a)(3) of this Section 4.07, to make an offer to the holders of the Securities (and to holders of other Senior Subordinated Indebtedness designated by the Company) to purchase Securities (and such other Senior Subordinated Indebtedness) pursuant to and subject to the conditions contained in this Indenture; and 56 (D) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C) of this paragraph (a) of this Section 4.07, for any general corporate purpose permitted pursuant to the terms of this Indenture; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) of this paragraph (a) of this Section 4.07, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this paragraph (a) of this Section 4.07 the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $15.0 million. Pending application of Net Available Cash pursuant to this Section 4.07, such Net Available Cash shall be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness. (b) In the event of an Asset Disposition that requires the purchase of the Securities (and other Senior Subordinated Indebtedness) pursuant to clause (3)(C) of paragraph (a) of Section 4.07, the Company will purchase Securities tendered pursuant to an offer by the Company for the Securities (and such other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their principal amount (or, in the event such other Senior Subordinated Indebtedness was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in paragraph (c) of Section 4.07. If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Securities will be denominations of $1,000 principal amount or multiples thereof. The Company 57 shall not be required to make such an Offer to purchase Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.07 if the Net Available Cash available therefor is less than $15.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) (1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of paragraph (a) of Section 4.07. On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are 58 immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount applicable to the Securities, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.07. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities (and any other Senior Subordinated Indebtedness included in the Offer) surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Securities and the other Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and the other Senior Subordinated Indebtedness in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. 59 (d) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.07. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.07, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.07 by virtue of its compliance with such securities laws or regulations. SECTION 4.08. Limitation on Affiliate Transactions. (a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm's-length dealings with a Person who is not an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5.0 million, the terms of the Affiliate Transaction are set forth in writing and a majority of directors of the Company have determined in good faith that the criteria set forth in clause (1) of this Section 4.08(a) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a Board Resolution; and (3) if such Affiliate Transaction involves an amount in excess of $25.0 million, the Board of Directors shall also have received a written opinion from an investment banking, accounting or appraisal firm of national prominence that is not an Affiliate of the Company to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of paragraph (a) of Section 4.08 will not prohibit: 60 (1) any Investment or other Restricted Payment, in each case permitted to be made pursuant to Section 4.05; (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (3) loans or advances to employees or consultants in the ordinary course of business of the Company or its Restricted Subsidiaries, but in any event not to exceed $3.0 million in the aggregate outstanding at any one time; (4) the payment of reasonable fees to officers, employees, consultants or directors of the Company or its Restricted Subsidiaries and indemnity provided on behalf of officers, employees, consultants or directors of the Company or its Restricted Subsidiaries; (5) any transaction with a Restricted Subsidiary or joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity; (6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company; (7) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1.0 million and 1.0% of EBITDA and any related out-of-pocket expenses; (8) the payment by the Company or any of its Restricted Subsidiaries of fees to The Invus Group, Ltd. and its Affiliates in connection with any acquisition or divestiture transaction entered into by the Company or any Restricted Subsidiary; provided, however, that the aggregate amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of any acquisition or divestiture transaction shall not exceed 1% of the total amount of such transaction; (9) any agreement as in effect on the Issue Date and described in the Offering Circular or any renewals, extensions or amendments of any such agreement (so long 61 as such renewals, extensions or amendments are not less favorable to the Company or the Restricted Subsidiaries) and the transactions evidenced thereby; (10) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (10) of this paragraph (b) of this Section 4.08 to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Securities in any material respect; and (11) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company (1) will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Subsidiary), and (2) will not permit any Restricted Subsidiary to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' or other legally required qualifying shares) to any Person (other than to the Company or a Wholly Owned Subsidiary), unless 62 (A) immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary; (B) immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under Section 4.05 if made on the date of such issuance, sale or other disposition; or (C) such issuance or sale is made pursuant to a Local Management Plan and, immediately after giving effect to such issuance or sale, the Company or a Wholly Owned Subsidiary owns at least 85% of the Capital Stock of such Restricted Subsidiary. SECTION 4.10. Change of Control. (a) Upon the occurrence of Change of Control, each Holder shall have the right to require that the Company repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the terms of paragraph (b) of this Section 4.10. (b) Within 30 days following any Change of Control, unless the Company has exercised its option pursuant to clause (c) of paragraph 5 of the Securities, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control (including information with 63 respect to pro forma historical income, cash flow and capitalization, each after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section 4.10, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section 4.10 shall be delivered by the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) Notwithstanding the foregoing provisions of this Section 4.10, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in Section 4.10 applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer or if the Company exercises its option to purchase the Securities pursuant to clause (c) of paragraph 5 of the Securities. (f) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.10. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.10, the Company will comply with the 64 applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.10 by virtue thereof. SECTION 4.11. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA ss. 314(a)(4). SECTION 4.12. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.13. Future Guarantors. The Company shall cause all the Subsidiary Guarantors to execute and deliver to the Trustee a Guarantee Agreement pursuant to which such Subsidiary Guarantors will Guarantee payment of the Securities on the same terms and conditions as those set forth in the Indenture on or before the later of (a) the date such Subsidiary Guarantor became a guarantor under the Credit Agreement and (b) June 22, 2000. ARTICLE 5 Successor Company; Successor Subsidiary Guarantors SECTION 5.01. When Company May Merge or Transfer Assets. The Company will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the 65 obligations of the Company under the Securities and this Indenture; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 4.04; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture; provided, however, that clauses (3) and (4) of this Section 5.01 will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company or to another Restricted Subsidiary or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction or changing the form of organization of the Company. The Successor Company will be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Securities. SECTION 5.02. When Subsidiary Guarantors May Merge or Transfer Assets. The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless: (A) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to another 66 Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Company provides an Officers' Certificate to the Trustee to the effect that the Company will comply with its obligations under Section 4.07 in respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement in form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guarantee; (B) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (C) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with the Indenture. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company (A) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise, whether or not such payment 67 shall be prohibited by Article 10, or (B) fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities, whether or not such redemption or purchase shall be prohibited by Article 10; (3) the Company fails to comply with Section 5.01 or 5.02; (4) the Company fails to comply with Section 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.13 (other than a failure to purchase Securities when required under Section 4.07 or 4.10) and such failure continues for 30 days after the notice specified below; (5) the Company or a Subsidiary Guarantor fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) or in a Subsidiary Guarantee and such failure continues for 60 days after the notice specified below; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million, or its foreign currency equivalent at the time; (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; 68 (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10.0 million or its foreign currency equivalent at the time is entered against the Company or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or (10) a Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under the Subsidiary Guarantee. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clauses (4), (5) or (9) is not an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of 69 such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (6) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable; provided, however, that so long as any Bank Indebtedness remains outstanding, no such acceleration shall be effective until the earlier of (1) five business days after the giving of written notice to the Company and the administrative agent (or similar agent if there is no administrative agent) under the Credit Agreement and (2) the day on which any Bank Indebtedness is accelerated. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. 70 The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security (ii) a Default arising from the failure to redeem or purchase any Security when required pursuant to this Indenture or (iii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; 71 (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments 72 directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter 72 in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and 74 (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01 and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; 75 provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to June 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). 76 A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and 77 may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or 78 transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a 79 notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.13 and 5.02 and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the limitations contained in Section 5.01(3) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(3) or 5.02. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. 80 Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Sections 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in 81 the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. 82 SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article 10 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10; (5) to add guarantees with respect to the Securities or to secure the Securities; 83 (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (8) to make any change that does not adversely affect the rights of any Securityholder. An amendment under this Section 9.01 may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section 9.01 becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; 84 (6) make any change in Article 10 that adversely affects the rights of any Securityholder under Article 10; (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (8) make any change in any Subsidiary Guarantee that would adversely affect the Securityholders. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the 85 Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. 86 ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment of all Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness which is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full in cash or Temporary Cash Investments of such Senior Indebtedness before the holders of the Securities are entitled to receive any payment or distribution of cash, securities or other property, except that holders of Securities may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust established pursuant to Article 8 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions of this Article 10; (2) until the Senior Indebtedness of the Company is paid in full in cash or Temporary Cash Investments, any payment or distribution to which holders of the Securities would be entitled but for the subordination provisions of this Article 10 will be made to holders of such Senior Indebtedness as their interests may appear, except that holders of Securities may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust established pursuant to Article 8 so long as, on the date or dates the 87 respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions of this Article 10; and (3) if a distribution is made to holders of the Securities that, due to the subordination provisions of this Article 10, should not have been made to them, such holders of the Securities are required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.03. Default on Senior Indebtedness. The Company may not pay the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Designated Senior Indebtedness is not paid in full in cash or Temporary Cash Investments when due or (ii) any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash or Temporary Cash Investments; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of such Designated Senior Indebtedness. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been discharged or repaid in full in cash or Temporary Cash 88 Investments. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 10.03), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after termination of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. For purposes of this Section 10.03, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration. SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: 89 (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the 90 distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any 91 payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions, and the subordination provisions contained in the Guarantee Agreement are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, or the Subsidiary Guarantees, as the case may be, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. 92 SECTION 11.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel if to the Trustee: Norwest Bank Minnesota, National Association Norwest Center 6th Street and Marquette Avenue MAC N9303-120 Minneapolis, MN 55479-0069 Attention of Corporate Trust Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). 93 SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or 94 consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 11.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 95 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. WEIGHT WATCHERS INTERNATIONAL, INC., by ------------------------ Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, by ------------------------ Name: Title: RULE 144A/REGULATION S APPENDIX PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions For the purposes of this Appendix the following terms shall have the meanings indicated below: "Depository" means The Depository Trust Company, its nominees and their respective successors. "Exchange Securities" means the 13% Senior Subordinated Notes Due 2009 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement. "Initial Purchasers" means Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. "Initial Securities" means the 13% Senior Subordinated Notes Due 2009, issued under this Indenture on or about the date hereof. "Private Exchange" means the offer by the Company, pursuant to the Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. "Purchase Agreement" means the Purchase Agreement dated September 22, 1999, between the Company and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement dated September 22, 1999, among the Company and the Initial Purchasers. 2 "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued by the Company, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement. "Transfer Restricted Securities" means Securities that bear or are required to bear the legend set forth in Section 2.3(b) hereto. 1.2 Other Definitions Defined in Term Section: ---- -------- "Agent Members"......................................................2.1(b) "Global Security"....................................................2.1(a) "Regulation S".......................................................2.1(a) "Rule 144A"..........................................................2.1(a) 2. The Securities. 2.1 Form and Dating. The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement. (a) Global Securities. Initial Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation S under the Securities Act ("Regulation S"), in each case as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a Global Security"), which shall be deposited on behalf of the 3 purchasers of the Initial Securities represented thereby with the Trustee, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) on the Issue Date, $150.0 million of 13% Senior Subordinated Notes due 2009, (2) any Additional Securities for an original issue in an aggregate principal amount specified in a written order of the Company pursuant to 4 Section 2.02 of this Indenture and (3) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. In addition, in the case of an issuance of Additional Securities pursuant to Section 2.13 of this Indenture, such order shall certify that such issuance is in compliance with Section 4.04 of this Indenture. 2.3 (a) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred. (ii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 or Section 2.09 of this Indenture, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are 5 substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION. EACH PURCHASER OF THIS NOTE IS NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF WEIGHT WATCHERS INTERNATIONAL, INC. THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted 6 Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the restricted securities legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain 7 Holders be issued in global form will still apply, and Private Exchange Securities in global form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (c) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (d) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.07, 4.10 and 9.05). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any certificated Security selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any certificated Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date. 8 (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (e) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require 9 delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a) A Global Security deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(b), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. 10 (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 to RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION. EACH PURCHASER OF THIS NOTE IS NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF WEIGHT WATCHERS INTERNATIONAL, INC. THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS 2 REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. 3 No. o $ o CUSIP NO. 948628 AA O ISIN NO. US948628AAOO 13% Senior Subordinated Notes Due 2009 WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation, promises to pay to o , or registered assigns, the principal sum of $o (o Dollars) on October 1, 2009. Interest Payment Dates: April 1 and October 1. Record Dates: March 15 and September 15 . Additional provisions of this Security are set forth on the other side of this Security. Dated: WEIGHT WATCHERS INTERNATIONAL, INC., by ----------------------- Name: Title: ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION NORWEST BANK MINNESOTA NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ----------------------------- Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 13% Senior Subordinated Note Due 2009 1. Interest WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 0.50% per annum (increasing by 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration Default occurs, up to a maximum additional interest rate of 2.00% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually on April 1 and October 1 of each year, commencing April 1, 2000. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 29, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 15 or September 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest) by mailing a check to the 5 registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, Norwest Bank Minnesota, National Association, a national banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of September 29, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.04 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture limits, among other things (i) the incurrence of additional debt by the Company and its subsidiaries, (ii) the payment of dividends on capital stock of the Company and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (iii) making of certain investments, (iv) certain transactions with 6 affiliates, (v) sales of assets, including capital stock of subsidiaries, and (vi) certain consolidations, mergers and transfers of assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. In addition, following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing under the Indenture (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or default under the Indenture), the Company and its Restricted Subsidiaries will not be subject to the covenants described above. 5. Optional Redemption (a) Except as set forth in Section 5(b) or 5(c), the Securities may not be redeemed prior to October 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning October 1, Period Percentage - ------ ---------- 2004............................... 106.500% 2005............................... 104.333% 2006............................... 102.167% 2007 and thereafter................ 100.000% (b) Before October 1, 2002, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 113%, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more Equity Offerings; provided, however, that 7 (1) at least 65% of such aggregate principal amount of the Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (c) At any time prior to October 1, 2004, the Securities may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium at the time plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). "Applicable Premium" means, with respect to a Security at any time, the greater of (1) 1.0% of the principal amount of such Security and (2) the excess of (a) the present value at such time of (i) the redemption price of such Security on October 1, 2004 plus (ii) all required interest payments due on such Security through October 1, 2004, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Security. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for repayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to October 1, 2004; provided, however, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that, if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 8 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees 9 required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add 10 guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; and (vi) certain judgments or decrees for the payment of money in excess of $10.0 million. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company 11 Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 12 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel 13 - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ________________ Your Signature: _____________________ - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) |_| to the Company; or (2) |_| pursuant to an effective registration statement under the Securities Act of 1933; or (3) |_| inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is 14 being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) |_| outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) |_| pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------ Signature Signature Guarantee: - --------------------- ------------------------ Signature must be guaranteed Signature - -------------------------------------------------------------------------------- 15 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 16 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $150,000,000 ($150.0 million dollars). The following increases or decreases in this Global Security have been made:
Principal amount Signature of Amount of decrease Amount of increase of this Global authorized officer in Principal in Principal Security following of Trustee or Date of Amount of this Amount of this such decrease or Securities Exchange Global Security Global Security increase) Custodian - -------- --------------- ------------------ ------------------ ------------------
17 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the amount in principal amount: $ Date: _______________ Your Signature: _____________________________ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: ___________________________________________________________ (Signature must be guaranteed by a member of the firm of the New York Stock Exchange or a commercial bank or trust company) EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] [*/] [**/] No. o $ o 13% Senior Subordinated Notes Due 2009 WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation, promises to pay to o , or registered assigns, the principal sum of $o (o Dollars) on , 2009. Interest Payment Dates: April 1 and October 1. Record Dates: March 15 and September 15. Additional provisions of this Security are set forth on the other side of this Security. Dated: WEIGHT WATCHERS INTERNATIONAL, INC., by ----------------------- Name: Title: ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ----------------------------- Authorized Signatory 2 - ---------- */ If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". **/ If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1. 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] 13% Senior Subordinated Note Due 2009 1. Interest WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above [; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 0.50% per annum (increasing by 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration Default occurs, up to a maximum additional interest rate of 2.00% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured] ***/. The Company will pay interest semiannually on April 1 and October 1 of each year, commencing April 1, 2000. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 29, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 15 or September 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for - -------- ***/ Insert if at the time of issuance of the Exchange Security or Private Exchange Security (as the case may be) neither the Registered Exchange Offer has been consummated nor a Shelf Registration Statement has been declared effective in accordance with the Registration Rights Agreement. 4 payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 3. Paying Agent and Registrar Initially, Norwest Bank Minnesota, National Association, a national banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of September 29, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.04 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture limits, among other things (i) the incurrence of additional debt by the Company and its subsidiaries, (ii) the payment of dividends on capital stock of the Company and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (iii) making of 5 certain investments, (iv) certain transactions with affiliates, (v) sales of assets, including capital stock of subsidiaries, and (vi) certain consolidations, mergers and transfers of assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. In addition, following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing under the Indenture (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or default under the Indenture), the Company and its Restricted Subsidiaries will not be subject to the covenants described above. 5. Optional Redemption (a) Except as set forth in Section 5(b) or 5(c), the Securities may not be redeemed prior to October 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning October 1, Period Percentage - ------ ---------- 2004............................... 106.500% 2005............................... 104.333% 2006............................... 102.167% 2007 and thereafter................ 100.000% (b) Before October 1, 2002, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 113%, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more Equity Offerings; provided, however, that 6 (1) at least 65% of such aggregate principal amount of the Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (c) At any time prior to October 1, 2004, the Securities may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium at the time plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). "Applicable Premium" means, with respect to a Security at any time, the greater of (1) 1.0% of the principal amount of such Security and (2) the excess of (a) the present value at such time of (i) the redemption price of such Security on October 1, 2004 plus (ii) all required interest payments due on such Security through October 1, 2004, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Security. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for repayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to October 1, 2004; provided, however, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that, if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 7 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar 8 need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the 9 Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or a Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; and (vi) certain judgments or decrees for the payment of money in excess of $10.0 million. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any 10 other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 11 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. ****/ 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel - -------- ****/ For Exchange or Private Exchange Security only. 12 - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ________________ Your Signature: _____________________ - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. 13 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: ________________________________________________________ (Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company) EXHIBIT B GUARANTEE AGREEMENT, dated as of , 1999, made by the undersigned subsidiary or subsidiaries (each a "Subsidiary Guarantor") of Weight Watchers International, Inc.(the "Company"), in favor of the Holders (as defined in the Indenture referred to below) and the Trustee (as defined below). Reference is made to the Indenture (as the same may be amended, restated, supplemented or modified from time to time, the "Indenture") among the Company and Norwest Bank Minnesota, National Association, as trustee (the "Trustee") dated as of September 29, 1999, relating to the Securities. WHEREAS, the Company owns directly or indirectly all or a majority of interest in each Subsidiary Guarantor; WHEREAS, the Company has agreed pursuant to the Indenture to cause the Subsidiary Guarantors to Guarantee the Securities pursuant to the terms of the Indenture and this Guarantee Agreement; NOW, THEREFORE, in consideration of the promises thereby, each Subsidiary Guarantor hereby agrees with and for the benefit of the Holders as follows: ARTICLE 1 Definitions SECTION 1.01. Defined Terms. As used in this Guarantee Agreement, terms defined in the Indenture (to the extent not otherwise defined herein) or in the preamble or recitals hereto are used herein as therein defined. ARTICLE 2 Guarantees SECTION 2.01. Guarantees. Each Subsidiary Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company 2 under the Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under the Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under the Indenture notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under the Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any such claim, demand, right or remedy; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Subsidiary Guarantor (except as provided in Section 2.06). Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Subsidiary Guarantee is, to the extent and in the manner set forth in Article 3, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guarantee and each Subsidiary Guarantee is made subject to such provisions of the Indenture. Except as expressly set forth in Section 8.01(b) of the Indenture and Sections 2.02 and 2.06 of this Guarantee Agreement, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, 3 impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under the Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 3. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the 4 maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of such Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 2.02. Limitation on Liability. Any term or provision of this Guarantee Agreement to the contrary notwithstanding, the maximum, aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Guarantee Agreement, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 2.03. Successors and Assigns. This Article 2 shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in the Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of the Indenture. Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's pro rata portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. SECTION 2.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 2 shall operate as a waiver thereof, nor shall a single or 5 partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 2 at law, in equity, by statute or otherwise. SECTION 2.05. Modification. No modification, amendment or waiver of any provision of this Article 2, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 2.06. Release of Subsidiary Guarantor. Upon (w) the sale (including any sale pursuant to any exercise of remedies by a holder of Senior Indebtedness) or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor, (x) the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company), (y) a Subsidiary Guarantor's ceasing for any reason to be a Guarantor under the Credit Agreement or (z) the exercise by the Company of its legal defeasance option or its covenant defeasance option pursuant to Article 8 of the Indenture, such Subsidiary Guarantor shall be deemed released from all obligations under this Article 2 without any further action required on the part of the Trustee or any Holder. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release. ARTICLE 3 Subordination of Subsidiary Guaranties SECTION 3.01. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each Securityholder by accepting a Security agrees, that the Obligations of such Subsidiary Guarantor are subordinated in right of payment, to the extent and in the manner provided in this Article 3, to the prior payment of all Senior Indebtedness of such Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all respects rank pari passu with all other Senior 6 Subordinated Indebtedness of such Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's Guarantee of Senior Indebtedness of the Company) shall rank senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth herein. SECTION 3.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of any Subsidiary Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property: (1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full of such Senior Indebtedness in cash or Temporary Cash Investments before Securityholders shall be entitled to receive any payment pursuant to any Obligations of such Subsidiary Guarantor; and (2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash or Temporary Cash Investments, any payment or distribution to which Securityholders would be entitled but for this Article 3 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities of such Subsidiary Guarantor that are subordinated to Senior Indebtedness, and to any debt securities received by holders of Senior Indebtedness, of such Subsidiary Guarantor to at least the same extent as the Obligations of such Subsidiary Guarantor are subordinated to Senior Indebtedness of such Subsidiary Guarantor. SECTION 3.03. Default on Senior Indebtedness of Subsidiary Guarantor. No Subsidiary Guarantor may make any payment pursuant to any of its Obligations or repurchase, redeem or otherwise retire or defease any Securities or other Obligations (collectively, "pay its Subsidiary Guarantee") if (i) any Designated Senior Indebtedness of the Company is not paid in full in cash or Temporary Cash Investments when due or (ii) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash or Temporary Cash Investments; provided, however, that 7 any Subsidiary Guarantor may pay its Subsidiary Guarantee without regard to the foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness. No Subsidiary Guarantor may pay its Subsidiary Guarantee during the continuance of any Payment Blockage Period after receipt by the Company and the Trustee of a Blockage Notice under Section 10.03 of the Indenture. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of Designated Senior Indebtedness giving such Blockage Notice or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor may resume payments pursuant to its Subsidiary Guarantee after termination of such Payment Blockage Period. SECTION 3.04. Demand for Payment. If a demand for payment is made on a Subsidiary Guarantor pursuant to Article 2, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of such demand. SECTION 3.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 3 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of the relevant Senior Indebtedness and pay it over to them or their Representatives as their interests may appear. SECTION 3.06. Subrogation. After all Senior Indebtedness of a Subsidiary Guarantor is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 3 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior Indebtedness. SECTION 3.07. Relative Rights. This Article 3 defines the relative rights of Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Agreement or the Indenture shall: (1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of such Subsidiary 8 Guarantor, which is absolute and unconditional, to pay the Obligations to the extent set forth in Article 2; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by such Subsidiary Guarantor under the Obligations, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive distributions otherwise payable to Securityholders. SECTION 3.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Obligations of such Subsidiary Guarantor shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with this Guarantee Agreement. SECTION 3.09. Rights of Trustee and Paying Agent. Notwithstanding Section 3.03, the Trustee or Paying Agent may continue to make payments on any Subsidiary Guarantee and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 3. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of any Subsidiary Guarantor may give the notice; provided, however, that, if an issue of Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not the Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 3 with respect to any Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 of the Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 of the Indenture. SECTION 3.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of any Subsidiary 9 Guarantor, the distribution may be made and the notice given to their Representative (if any). SECTION 3.11. Article 3 Not To Prevent Defaults Under a Subsidiary Guarantee or Limit Right To Demand Payment. The failure to make a payment pursuant to a Subsidiary Guarantee by reason of any provision in this Article 3 shall not be construed as preventing the occurrence of a default under such Subsidiary Guarantee. Nothing in this Article 3 shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on any Subsidiary Guarantor pursuant to Article 2. SECTION 3.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 3, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 3.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 3. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 3, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 3, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 of the Indenture shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 3. SECTION 3.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the 10 subordination between the Securityholders and the holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 3 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 3.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 3 or otherwise. SECTION 3.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions. The Indenture provides that each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 4 Miscellaneous SECTION 4.01. Notices. All notices and other communications pertaining to this Guarantee Agreement shall be in writing and shall be deemed to have been duly given upon the receipt thereof. Such notices shall be delivered by hand, or mailed, certified or registered mail with postage prepaid (a) if to the Guarantor, at the Company's address set forth in the Indenture, and (b) if to the Holders or the Trustee, as provided in the Indenture. SECTION 4.02. ParNothing expressed or mentioned in this Guarantee Agreement is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Guarantee Agreement or any provision herein contained. 11 SECTION 4.03. Governing LaTHIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 4.04. Severability Clause. In case any provision of this Guarantee Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 4.05. Waivers, Amendments and Remedies. The failure to insist in any one or more instances upon strict performance of any of the provisions of this Guarantee Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect. Except as otherwise expressly limited in this Guarantee Agreement, all remedies under this Guarantee Agreement shall be cumulative and in addition to every other remedy provided for herein or by law. SECTION 4.06. Headings. The headings of the Articles and the sections in this Guarantee Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the Subsidiary Guarantors have duly executed this Guarantee Agreement as of the date first above written. [SUBSIDIARY GUARANTOR], by ------------------------ Name: Title: [SUBSIDIARY GUARANTOR], by ------------------------ Name: Title: 12 Acknowledged: WEIGHT WATCHERS INTERNATIONAL, INC., by ----------------------- Name: Title: [TRUSTEE,] as Trustee, by ----------------------- Name: Title: EX-4.2 37 EXHIBIT 4.2 EXHIBIT 4.2 ================================================================================ WEIGHT WATCHERS INTERNATIONAL, INC. Issuer 13% Senior Subordinated Notes Due 2009 -------------------- EURO SECURITIES INDENTURE Dated as of September 29, 1999 --------------------- NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee ================================================================================ CORSS-REFERENCE TABLE TIA Indenture Section Section - ------- 310(a)(1) .............................. 7.10 (a)(2) .............................. 7.10 (a)(3) .............................. N.A. (a)(4) .............................. N.A. (b) .............................. 7.08; 7.10 (c) .............................. N.A. 311(a) .............................. 7.11 (b) .............................. N.A. (c) .............................. N.A. 312(a) .............................. 2.05 (b) .............................. 11.03 (c) .............................. 11.03 313(a) .............................. 7.06 (b)(1) .............................. N.A. (b)(2) .............................. 7.06 (c) .............................. N.A. (d) .............................. 7.06 314(a) .............................. 4.03; 4.11; 11.02 (b) .............................. N.A. (c)(1) .............................. 11.04 (c)(2) .............................. 11.04 (c)(3) .............................. N.A. (d) .............................. N.A. (e) .............................. 11.05 (f) .............................. 4.11 315(a) .............................. 7.01 (b) .............................. 7.05; 11.02 (c) .............................. 7.01 (d) .............................. 7.01 (e) .............................. 6.11 316(a)(last sentence) .............................. 11.06 (a)(1)(A) .............................. 6.05 (a)(1)(B) .............................. 6.04 (a)(2) .............................. N.A. (b) .............................. 6.07 317(a)(1) .............................. 6.08 (a)(2) .............................. 6.09 (b) .............................. 2.04 318(a) .............................. 11.01 N.A. means Not Applicable. - ---------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS ARTICLE 1 Page ---- Definitions and Incorporation by Reference SECTION 1.01. Definitions ................................................... 1 SECTION 1.02. Other Definitions .............................................33 SECTION 1.03. Incorporation by Reference of Trust Indenture Act .............33 SECTION 1.04. Rules of Construction .........................................34 ARTICLE 2 The Securities SECTION 2.01. Form and Dating ...............................................35 SECTION 2.02. Execution and Authentication ..................................35 SECTION 2.03. Registrar and Paying Agent ....................................36 SECTION 2.04. Paying Agent To Hold Money in Trust............................37 SECTION 2.05. Securityholder Lists ..........................................37 SECTION 2.06. Transfer and Exchange .........................................37 SECTION 2.07. Replacement Securities ........................................38 SECTION 2.08. Outstanding Securities ........................................38 SECTION 2.09. Temporary Securities ..........................................39 SECTION 2.10. Cancellation ..................................................39 SECTION 2.11. Defaulted Interest ............................................39 SECTION 2.12. CUSIP Numbers .................................................40 SECTION 2.13. Issuance of Additional Securities .............................40 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee ............................................41 SECTION 3.02. Selection of Securities To Be Redeemed ........................41 SECTION 3.03. Notice of Redemption ..........................................41 SECTION 3.04. Effect of Notice of Redemption ................................42 SECTION 3.05. Deposit of Redemption Price ...................................43 SECTION 3.06. Securities Redeemed in Part ...................................43 ARTICLE 4 Covenants SECTION 4.01 Cessation of Specified Covenants ..............................43 ii SECTION 4.02. Payment of Securities .........................................43 SECTION 4.03. SEC Reports ...................................................44 SECTION 4.04. Limitation on Indebtedness ....................................44 SECTION 4.05. Limitation on Restricted Payments .............................48 SECTION 4.06. Limitation on Restrictions on Distributions from Subsidiaries .53 SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock ............55 SECTION 4.08. Limitation on Transactions with Affiliates ..................................................60 SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries .....................................62 SECTION 4.10. Change of Control .............................................63 SECTION 4.11. Compliance Certificates .......................................65 SECTION 4.12. Further Instruments and Acts ..................................65 SECTION 4.13. Future Guarantors..............................................65 ARTICLE 5 Successor Company; Successor Subsidiary Guarantors SECTION 5.01. When Company May Merge or Transfer Assets .....................65 SECTION 5.02. When Subsidiary Guarantors May Merge or Transfer Assets........66 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default .............................................67 SECTION 6.02. Acceleration ..................................................70 SECTION 6.03. Other Remedies ................................................70 SECTION 6.04. Waiver of Past Defaults .......................................71 SECTION 6.05. Control by Majority ...........................................71 SECTION 6.06. Limitation on Suits ...........................................71 SECTION 6.07. Rights of Holders To Receive Payment ..........................72 SECTION 6.08. Collection Suit by Trustee ....................................72 SECTION 6.09. Trustee May File Proofs of Claim ..............................72 SECTION 6.10. Priorities ....................................................73 SECTION 6.11. Undertaking for Costs .........................................73 SECTION 6.12. Waiver of Stay or Extension Laws ..............................73 ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee .............................................74 SECTION 7.02. Rights of Trustee .............................................75 SECTION 7.03. Individual Rights of Trustee ..................................76 SECTION 7.04. Trustee's Disclaimer ..........................................76 SECTION 7.05. Notice of Defaults ............................................76 SECTION 7.06. Reports by Trustee to Holders .................................76 SECTION 7.07. Compensation and Indemnity ....................................77 SECTION 7.08. Replacement of Trustee ........................................77 SECTION 7.09. Successor Trustee by Merger ...................................78 SECTION 7.10. Eligibility; Disqualification .................................79 SECTION 7.11. Preferential Collection of Claims Against Company .............79 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance ..............79 SECTION 8.02. Conditions to Defeasance ......................................81 SECTION 8.03. Application of Trust Money ....................................82 SECTION 8.04. Repayment to Company ..........................................82 SECTION 8.05. Indemnity for Government Obligations ..........................82 SECTION 8.06. Reinstatement .................................................83 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders ....................................83 SECTION 9.02. With Consent of Holders .......................................84 SECTION 9.03. Compliance with Trust Indenture ...............................85 SECTION 9.04. Revocation and Effect of Consents and Waivers .................85 SECTION 9.05. Notation on or Exchange of Securities .........................86 SECTION 9.06. Trustee To Sign Amendments ....................................86 SECTION 9.07. Payment for Consent ...........................................86 iii ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate .....................................87 SECTION 10.02. Liquidation, Dissolution, Bankruptcy .........................87 SECTION 10.03. Default on Senior Indebtedness ...............................88 SECTION 10.04. Acceleration of Payment of Securities ........................89 SECTION 10.05. When Distribution Must Be Paid Over ..........................89 SECTION 10.06. Subrogation ..................................................89 SECTION 10.07. Relative Rights ..............................................90 SECTION 10.08. Subordination May Not Be Impaired by Company .................90 SECTION 10.09. Rights of Trustee and Paying Agent ...........................90 SECTION 10.10. Distribution or Notice to Representative .....................91 SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate ........................................91 SECTION 10.12. Trust Moneys Not Subordinated ................................91 SECTION 10.13. Trustee Entitled To Rely .....................................91 SECTION 10.14. Trustee To Effectuate Subordination ..........................92 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness .....92 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions ...................................92 ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls .................................93 SECTION 11.02. Notices ......................................................93 SECTION 11.03. Communication by Holders with Other Holders ..................94 SECTION 11.04. Certificate and Opinion as to Conditions Precedent ...........94 SECTION 11.05. Statements Required in Certificate or Opinion ................94 SECTION 11.06. When Securities Disregarded ..................................95 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar .................95 SECTION 11.08. Legal Holidays ...............................................95 v SECTION 11.09. Governing Law ................................................95 SECTION 11.10. No Recourse Against Others ...................................95 SECTION 11.11. Successors ...................................................95 SECTION 11.12. Multiple Originals ...........................................95 SECTION 11.13. Table of Contents; Headings ..................................96 Rule 144A/Regulation S Appendix Exhibit A - Form of Security Exhibit B-1 - Form of Certification to be Given by Holder of Beneficial Interest in a Temporary Regulation S Global Security Exhibit B-2 - Form of Euroclear and Cedel Certificate Exhibit C - Form of Guarantee Agreement INDENTURE dated as of September 29, 1999, between WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "Company"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 13% Senior Subordinated Notes Due 2009 (the "Initial Securities") and, if and when issued pursuant to a registered exchange for Initial Securities, the Company's 13% Senior Subordinated Notes Due 2009 (the "Exchange Securities") and if and when issued pursuant to a private exchange for Initial Securities, the Company's 13% Senior Subordinated Notes Due 2009 (the "Private Exchange Securities", together with the Exchange Securities and the Initial Securities, the "Securities"): ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Additional Assets" means any: (1) property, plant, equipment or intellectual property used in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Related Business. "Affiliate" of any specified Person means: (1) any other Person, directly or indirectly, controlling or controlled by; or 2 (2) under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.05, 4.07 and 4.08 only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of clauses (1), (2) and (3) (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (B) any sale of Capital Stock in, or indebtedness or other securities of, an Unrestricted Subsidiary; 3 (C) a disposition of Temporary Cash Investments; (D) the disposition of all or substantially all the assets of the Company in a manner permitted pursuant to Section 5.01 or any disposition that constitutes a Change of Control; (E) sales of assets received by the Company upon the foreclosure on a Lien; (F) for purposes of Section 4.07 only, a disposition that constitutes a Restricted Payment permitted by Section 4.05 or a Permitted Investment; and (G) a disposition of assets with a fair market value of less than $1.0 million. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing: (1) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Indebtedness" means any and all Indebtedness and other amounts payable under or in respect of the Credit Agreement or Hedging Obligations related to the Credit Agreement, including principal, premium (if any), interest (including interest accruing at the contract rate specified in the Credit Agreement (including any rate applicable on default) on or after the filing of any petition in bankruptcy or the commencement of any similar state, Federal or foreign reorganization or liquidation proceeding relating to the Company and interest that would accrue but for the 4 commencement of such proceeding whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following events: (1) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of a Person (the "specified person") held by any other Person (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a 5 majority of the voting power of the Voting Stock of the parent entity); (2) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); (3) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66-2/3% of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (4) the adoption of a plan relating to the liquidation or dissolution of the Company; or 6 (5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person (other than, in all such cases, a Person that is controlled by the Permitted Holders), other than a transaction following which (A) in the case of a merger or consolidation transaction, securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) constitute at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction, and (B) in the case of a sale of assets transaction, the transferee Person becomes the obligor in respect of the Securities and a Subsidiary of the transferor of such assets. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period; (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such 7 period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition, including any acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and 8 Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment, acquisition or cost-reduction program occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, or shall have implemented a cost-reduction program resulting in a permanent reduction in cash operating costs, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment, acquisition or cost-reduction program occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition or cost-reduction program, the amount of income, earnings or cost savings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition or cost-reduction program which is being given pro forma effect, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable; provided, however, that, in either case, such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states (a) the amount of such adjustment or adjustments, (b) that such adjustment or adjustments are based on the reasonable good faith belief of the Officers executing such Officers' Certificate at the time of such execution and (c) that any related Incurrence of Indebtedness is permitted pursuant to this Indenture. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement 9 applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication: (1) interest expense attributable to Capital Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) capitalized interest; (3) non-cash interest expenses; (4) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (5) net payments pursuant to Hedging Obligations; (6) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Restricted Subsidiary (other than the Seller Preferred Stock and other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the issuer of such Preferred Stock); (7) interest incurred in connection with Investments in discontinued operations; (8) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary; and (9) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the sum of (1) the net income of the Company and its consolidated Subsidiaries and (2) to the extent not 10 otherwise included in the calculation of the net income of the Company and its consolidated Subsidiaries, amounts received by the Company from Warnaco Inc. in respect of the license agreement, dated as of January 8, 1999, between the Company and Warnaco Inc. and (3) to the extent deducted in calculating net income of the Company and its consolidated Subsidiaries, (A) any non-recurring fees, expenses or charges related to the Transactions and (B) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with the Transactions; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and (B) the Company's equity in a net loss of any such Person (other than a Person the Company's interest in which is accounted for pursuant to the equity method of accounting) for such period shall be included in determining such Consolidated Net Income; (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net 11 income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); provided, however, that such net income shall not be excluded in calculating Consolidated Net Income as a component of EBITDA for purposes of calculating the Consolidated Coverage Ratio; and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain (or loss) realized upon the sale or other disposition of any assets of the Company, its consolidated Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (5) extraordinary gains or losses; (6) any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes; and (7) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of Section 4.05 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of the Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under Section 4.05 pursuant to clause (3)(D) of paragraph (a) thereof. 12 "Credit Agreement" means the Credit Agreement to be entered into by and among the Company, certain of its Subsidiaries, the lenders referred to therein, The Bank of Nova Scotia, as Administrative Agent, and Credit Suisse First Boston, New York branch, as Syndication Agent, together with the related documents thereto (including, without limitation, the deed poll and transferable loan certificates issued in connection therewith, the term loans and revolving loans thereunder, any notes, instruments, guarantees, pledge agreements and security documents), in each case as amended, extended, waived, replaced, restructured, repaid, refunded, refinanced, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders and agents. Without limiting the generality of the foregoing, the term "Credit Agreement" shall include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to the Credit Agreement and all refundings, restructurings, renewals, refinancing and replacements of any facility provided for in the Credit Agreement, including any agreement or agreements (a) extending the maturity of any Indebtedness incurred thereunder or contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder or (c) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder to the extent permitted under this Indenture. "Credit Agreement Intercompany Indebtedness" means Indebtedness of the Company or a Restricted Subsidiary (the "obligor") owing to a Restricted Subsidiary of the Company (the "obligee") that is a borrower under the Credit Agreement in respect of an advance to the obligor by the obligee of funds borrowed by the obligee under the Credit Agreement; provided, however, that the amount of such Indebtedness constituting Credit Agreement Intercompany Indebtedness shall be limited to the amount actually owed by the obligee in respect of the funds advanced to the obligor under the Credit Agreement. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values. 13 "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as Designated Noncash Consideration pursuant to an Officers' Certificate setting forth the basis of such valuation, less the amount of Temporary Cash Investments received in connection with a subsequent sale of such Designated Noncash Consideration. "Designated Preferred Stock" means Preferred Stock of the Company (other than Disqualified Stock) that is issued for cash (other than to the Company, a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05. "Designated Senior Indebtedness" with respect to a Person means: (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such Person which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $20.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; 14 (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy obligations as a result of such employee's death or disability; and provided further, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if: (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Securities pursuant to Sections 4.07 and 4.10; and (2) any such requirement only becomes operative after compliance with such terms applicable to the Securities, including the purchase of any Securities tendered pursuant thereto; and, provided further, however, that the Seller Preferred Stock shall constitute Disqualified Stock. "Dollar Securities Indenture" means the Dollar Securities Indenture dated as of September 29, 1999, between the Company and the Trustee, as originally executed. "Dollar Securities" means the Securities issued under, and as defined in, the Dollar Securities Indenture. "Dollar Subsidiary Guarantee" means a Subsidiary Guarantee under, and as defined in, the Dollar Securities Indenture. 15 "EBITDA" for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: (1) all income tax expense of the Company and its consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid operating activity item that was paid in cash in a prior period); (4) any non-recurring fees, expenses or charges related to any Equity Offering, Permitted Investment, acquisition or Indebtedness permitted to be Incurred by this Indenture (in each case, whether or not successful) deducted (and not subsequently added back) in such period in computing Consolidated Net Income; (5) any non-recurring charges related to one-time severance or lease termination costs incurred in connection with acquisitions consummated after the Issue Date deducted (and not subsequently added back) in such period in computing Consolidated Net Income; and (6) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period); in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. 16 "EMU" means economic and monetary union as contemplated in the Treaty on European Union. "Equity Offering" means any primary offering of common stock or Preferred Stock of the Company (other than Disqualified Stock) to Persons who are not Affiliates of the Company other than (1) public offerings with respect to the Company's common stock registered or Form S-8 and (2) issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. "Euro" means the single currency of participating member states of the EMU. "European Government Obligations" means securities that are (a) direct obligations denominated in Euro of the United Kingdom, France or Germany or any other member of the European Economic Community rated at least "A" by S&P or "A" by Moody's, for the timely payment of which their full faith and credit is pledged or (b) obligations denominated in Euro of a person controlled or supervised by and acting as an agency or instrumentality of the United Kingdom, France or Germany or any other member of the European Economic Community rated at least "A" by S&P or "A" by Moody's, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United Kingdom, France or Germany, which, in either case, are not callable or redeemable at the option of the issuer thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Contributions" means the net cash proceeds received by the Company after the Issue Date from (1) contributions to its common equity capital and (2) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan of the Company or a Restricted Subsidiary or any other management or employee benefit plan or agreement of the Company or a Restricted Subsidiary) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate, the cash proceeds of which are excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in: 17 (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entity as approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Guarantee Agreement" means a guarantee agreement, in substantially the form of Exhibit C hereto, pursuant to which a Subsidiary Guarantor guarantees the Company's obligations with respect to the Securities. 18 "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; provided, however, that unpaid dividends in respect of the Seller Preferred Stock shall not constitute Indebtedness; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person 19 to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the twentieth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with Section 1.04 (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Euro Securities Indenture as amended or supplemented from time to time. "Interest Rate Agreement" means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or 20 other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.05: (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent) by Moody's and S&P, respectively. "Investment Grade Status" shall be deemed to have been reached on the date the Securities have an Investment Grade Rating from both S&P and Moody's. "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). 21 "Local Management Plan" means an equity plan or program for the issuance or sale of Capital Stock to local management or a plan for the issuance or sale of Capital Stock to local strategic investors in respect of Subsidiaries of the Company whose principal business is conducted outside of the United States. "Moody's" means Moody's Investor Services, Inc. or any successor to the rating agency business thereof. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of: (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. 22 "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Obligations" means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness; provided, however, that Obligations with respect to the Securities shall not include fees or indemnification in favor of the Trustee and other third parties other than the holders of the Securities. "Offering Circular" means the confidential offering circular, dated September 22, 1999, relating to the offering of the Initial Securities. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means Artal Luxembourg S.A., H.J. Heinz Company and each of their respective Affiliates. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a 23 Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (3) cash and Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 4.07; (9) any Investment existing on the Issue Date; (10) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (10), not to exceed $15.0 million at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (11) Investments the payment for which consists of Capital Stock of the Company (other than Disqualified Stock); (12) any Guarantee Incurred in connection with a "synthetic lease" or similar financing of an acquisition or 24 construction of property used in a Related Business by the Company or a Restricted Subsidiary; provided, however, that such Guarantee and any other Indebtedness Incurred in connection with such transaction is permitted to be Incurred pursuant to Section 4.04; (13) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (14) Investments of up to $10.0 million in WeightWatchers.com, the Company's Internet affiliate. "Permitted Junior Securities" shall mean debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then-outstanding Senior Indebtedness of the Company at least to the same extent that the Securities are subordinated to the payment of all Senior Indebtedness of the Company on the Issue Date, so long as to the extent that any Senior Indebtedness of the Company outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash or Temporary Cash Investments on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. 25 "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that: (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary; and provided further that clauses (1) and (2) of this clause will not apply to any refunding or refinancing of any Senior Indebtedness. "Registration Rights Agreement" means the Registration Rights Agreement dated September 22, 1999, among the Company, Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. 26 "Related Business" means any business in which the Company was engaged on the Issue Date and any business related, ancillary or complementary to any business of the Company in which the Company was engaged on the Issue Date. "Representative" means with respect to a Person any trustee, agent or representative (if any) for an issue of Senior Indebtedness of such Person. "Restricted Payment" with respect to any Person means: (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition or Indebtedness Incurred pursuant to clause (2) of paragraph (b) of Section 4.04 and not subsequently 27 transferred to a Person other than the Company or its Restricted Subsidiaries); or (4) the making of any Investment (other than a Permitted Investment) in any Person. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933. "Seller Preferred Stock" means the 6% preferred stock of the Company issued to H.J. Heinz Company on the Issue Date. "Senior Indebtedness" with respect to a Person means, without duplication: (1) Bank Indebtedness; (2) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and (3) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person to the extent post-filing interest is allowed in such proceeding) and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable 28 unless, in the case of clauses (1), (2) and (3), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Securities or the Subsidiary Guarantees, as the case may be; provided, however, that Senior Indebtedness shall not include: (1) any obligation of such Person to any Subsidiary (other than Credit Agreement Intercompany Indebtedness); (2) any liability for Federal, state, local or other taxes owed or owing by such Person; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person; (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture; provided, however, that such Indebtedness shall be deemed not to have been Incurred in violation of this Indenture for purposes of this clause (5) if (x) the holders of such Indebtedness or their representative or the Company shall have furnished to the Trustee an opinion of recognized independent legal counsel, unqualified in all material respects, addressed to the Trustee (which legal counsel may, as to matters of fact, rely upon an Officers' Certificate) to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Indenture or (y) such Indebtedness consists of Bank Indebtedness, and the holders of such Indebtedness or their agent or representative (1) had no actual knowledge at the time of the Incurrence that the Incurrence of such Indebtedness violated this Indenture and (2) shall have received an Officers' Certificate to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Indenture; or (6) the Dollar Securities. 29 "Senior Subordinated Indebtedness" means with respect to a Person, the Securities and the Dollar Securities (in the case of the Company), any Subsidiary Guarantee and any Dollar Subsidiary Guarantee (in the case of a Subsidiary Guarantor) and any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank pari passu with the Securities or such Subsidiary Guarantee, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "S&P" means Standard & Poor's Rating Group (or any successor to the rating agency business thereof). "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities, the Dollar Securities, a Subsidiary Guarantee or a Dollar Subsidiary Guarantee of such Person as the case may be, pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. 30 "Subsidiary Guarantor" means any Subsidiary that provides a Guarantee under the Credit Agreement (other than special purpose vehicles used to lend cash to guarantors of the Credit Agreement). "Subsidiary Guarantee" means a Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Securities pursuant to a Guarantee Agreement. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; and 31 (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Transactions" means the transactions contemplated by the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal International S.A. and any financings related thereto. "Treaty on European Union" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed 32 Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.05. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of Section 4.04 and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. Except as required by Section 4.04, whenever it is necessary to determine whether the Company has complied with any covenant in this Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. 33 "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions. Defined in Term Section ---- ------- "Additional Securities" ................ 2.02 "Affiliate Transaction" ................ 2.03 "Appendix" ............................. 2.01 "Bankruptcy Law" ....................... 6.01 "Blockage Notice" ...................... 10.03 "Change of Control Offer" .............. 4.10(b) "covenant defeasance option" ........... 8.01(b) "Custodian" ............................ 6.01 "Event of Default" ..................... 6.01 "legal defeasance option" .............. 8.01(b) "Legal Holiday" ........................ 11.08 "Notice of Default" .................... 6.01 "Offer" ................................ 4.07(b) "Offer Amount" ......................... 4.07(c)(2) "Offer Period" ......................... 4.08 "pay the Securities" ................... 10.03 "Paying Agent" ......................... 2.03 "Payment Blockage Period" .............. 10.03 "Purchase Date" ........................ 4.07(c)(1) "Registrar"............................. 4.07 "Successor Company" .................... 5.01 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and 34 "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the date the Initial Securities were originally issued. 35 ARTICLE 2 The Securities SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Appendix attached hereto (the "Appendix") which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. On the Issue Date, the Trustee shall authenticate and deliver Securities for original issue in an aggregate principal amount of EURO 100.0 million, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company and, at any time and from time to time thereafter, the Trustee shall authenticate and deliver 36 additional securities ("Additional Securities") for original issue upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and, in the case of an issuance of Additional Securities pursuant to Section 2.13 after the Issue Date, shall certify that such issuance is in compliance with Section 4.04. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. For so long as the Securities are listed on the Luxembourg Stock Exchange, the Company will maintain a Paying Agent in Luxembourg. 37 The Company initially appoints Citibank, N.A. as Paying Agent and the Trustee as Registrar in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section 2.04, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(1) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company 38 may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section 2.06. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered 39 to it for cancellation and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the 40 persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.13. Issuance of Additional Securities. The Company shall be entitled, subject to its compliance with Section 4.04, to issue Additional Securities under this Indenture which shall have identical terms as the Initial Securities issued on the Issue Date, other than with respect to the date of issuance, issue price and amount of interest payable on the first payment date applicable thereto. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor shall be treated as a single class for all purposes under this Indenture. With respect to any Additional Securities, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each of which shall be delivered to the Trustee prior to the Trustee's issuance of the Additional Securities, the following information: (1) the aggregate principal amount and CUSIP number of such Additional Securities to be authenticated and delivered pursuant to this Indenture; (2) the issue price and the issue date of such Additional Securities and the amount of interest payable on the first payment date applicable thereto; provided, however, that no Additional Securities may be issued at a price that would cause such Additional Securities to have "original issue discount" within the meaning of Section 1273 of the Code; and 41 (3) whether such Additional Securities shall be transfer restricted securities and issued in the form of Initial Securities as set forth in Exhibit 1 to the Appendix to this Indenture or shall be issued in the form of Exchange Securities as set forth in Exhibit A to the Appendix. ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the clause of paragraph 5 of the Securities pursuant to which the redemption will occur. The Company shall give each notice to the Trustee provided for in this Section 3.01 at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than EURO 1,000. Securities and portions of them the Trustee selects shall be in amounts of EURO 1,000 or a whole multiple of EURO 1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of 42 redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the clause of paragraph 5 of the Securities pursuant to which the Securities called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section 3.03. In addition, as long as the Securities are listed on the Luxembourg Stock Exchange, notice of a redemption shall be published in a Luxembourg newspaper of general circulation. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued 43 interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants SECTION 4.01. Cessation of Specified Covenants. Following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or a Default shall have occurred), the Company and its Restricted Subsidiaries will not be subject to the Sections 4.04, 4.05, 4.06, 4.07, 4.08 and 4.09, and clause (3) under Section 5.01. SECTION 4.02. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the 44 Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. In addition, as long as the Securities are listed on the Luxembourg Stock Exchange, notice of any change in interest rates shall be published in a Luxembourg newspaper of general circulation. SECTION 4.03. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC and provide the Trustee and Holders and prospective Holders (upon request in the case of prospective Holders) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act; provided, however, that the Company shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Company will make available such information to the Trustee, Holders and prospective investors (upon request in the case of prospective investors) within 15 days after the time the Company would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement (each as defined in the Registration Rights Agreement) by the filing with the SEC of the Exchange Offer Registration Statement and/or Shelf Registration Statement, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act. The Company also will comply with the other provisions of TIA ss. 314(a). In addition, the Company shall furnish to the Holders of the Securities and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities are not freely transferable under the Securities Act. SECTION 4.04. Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and its Restricted Subsidiaries will be entitled to Incur 45 Indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such Indebtedness is Incurred prior to October 1, 2002 or 2.25 to 1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding paragraph (a) of Section 4.04, the Company and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Credit Agreement; provided, however, that, after giving effect to any such Incurrence, the aggregate principal amount of such Indebtedness then outstanding does not exceed $292.0 million less the sum of all principal payments with respect to such Indebtedness pursuant to clause (3)(A) paragraph (a) of Section 4.07; (2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such Indebtedness (other than Credit Agreement Intercompany Indebtedness), such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities; (3) the Securities and the Dollar Securities (other than any Additional Securities issued pursuant to the Indenture or any Additional Securities as defined in and issued pursuant to the Dollar Securities Indenture), the Dollar Subsidiary Guarantees and the Subsidiary Guarantees; (4) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this paragraph (b) of this Section 4.04); (5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit 46 support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); provided, however, that on the date of such acquisition and after giving pro forma effect thereto, the Company would have been able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section 4.04; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) of Section 4.04 or pursuant to clause (3), (4) of (5) or this clause (6) of this paragraph (b) of this Section 4.04; provided, however, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be Incurred only by such Subsidiary; (7) Hedging Obligations consisting of (A) Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Company or a Restricted Subsidiary pursuant to this Indenture or (B) Currency Agreements entered into in respect of Credit Agreement Intercompany Indebtedness or in the ordinary course of business and not for the purpose of speculation; (8) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when taken together with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (8) of this paragraph (b) of this Section 4.04, does not exceed 5.0% of Total Assets at the time of Incurrence; (9) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of this Indenture, other than guarantees of Indebtedness Incurred by any person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; 47 (10) obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (11) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture; (12) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within two Business Days of its Incurrence; and (13) Indebtedness of the Company or any Restricted Subsidiaries in an aggregate principal amount which, when taken together with all other Indebtedness of the Company or any Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (12) of this paragraph (b) of this Section 4.04 or paragraph (a) of Section 4.04) does not exceed $25.0 million. (c) Notwithstanding the foregoing, neither the Company nor any Restricted Subsidiary will Incur any Indebtedness pursuant to paragraph (b) of Section 4.04 if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Restricted Subsidiary unless such Indebtedness shall be subordinated to the Securities or the applicable Restricted Subsidiary to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with this Section 4.04, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses (provided that any Indebtedness classified as Incurred pursuant to clause (13) of paragraph (b) of Section 4.04 may later be reclassified as having been Incurred pursuant to paragraph (a) of Section 4.04 to the extent that such reclassified Indebtedness could be Incurred 48 pursuant to paragraph (a) of Section 4.04 at the time of such reclassification) and (2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above. (e) Notwithstanding paragraphs (a) and (b) of Section 4.04, neither the Company nor any Subsidiary Guarantor will Incur (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of such Person, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person or (2) any Secured Indebtedness of such Person that is not Senior Indebtedness unless contemporaneously therewith such Person makes effective provision to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (f) For purposes of determining compliance with any U.S. dollar denominated restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness; provided, however, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess will be determined on the date such Refinancing Indebtedness is Incurred. SECTION 4.05. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: 49 (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 4.04; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of (without duplication): (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus (B) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and 100% of any cash contribution subsequent to the Issue Date; plus (C) the amount by which Indebtedness of the Company or any of its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or any of its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); plus (D) an amount equal to the sum of (x) the net reduction in the Investments (other than Permitted Investments) made by the Company or any Restricted 50 Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment, proceeds representing the return of capital (excluding dividends and distributions) and from repayments of loans or advances which constituted Restricted Payments, in each case received by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The provisions of paragraph (a) of Section 4.05 will not prohibit: (1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) or a substantially concurrent capital contribution; provided, however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness which is permitted to be Incurred pursuant to Section 4.04; provided, however, that such purchase, repurchase, redemption, defeasance or other 51 acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.07; provided, however, that such purchase or redemption shall be excluded in subsequent calculations of the amount of Restricted Payments; (4) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that such dividends shall be included in the calculation of the amount of Restricted Payments; (5) so long as no Default has occurred and is continuing, the repurchase or other acquisition of shares of Capital Stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such repurchases and other acquisitions shall not exceed $2.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over for the two succeeding calendar years); provided, further, however, that such amount may be increased by an amount not to exceed (A) the cash proceeds from sales of Capital Stock of the Company (other than Disqualified Stock) to members of management or directors or consultants of the Company and its Subsidiaries that occur after the Issue Date plus (B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date (provided, however, that to the extent such amount is increased by the receipt of any such cash proceeds, such cash proceeds shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of Section 4.05 and the calculation of Consolidated Net Income); and provided further, however, that such repurchases and other 52 acquisitions shall be excluded in the calculation of the amount of Restricted Payments; (6) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock (other than the Seller Preferred Stock) of the Company or any of its Restricted Subsidiaries issued or Incurred in accordance with Section 4.04; provided, however, that, to the extent included in the calculation of Consolidated Interest Expense, such dividends or distributions shall be excluded in the calculation of the amount of Restricted Payments; (7) Investments in Unrestricted Subsidiaries in an aggregate amount which, when taken together with all other Investments made pursuant to this clause (7) of this paragraph (b) of this Section 4.05, do not exceed $10.0 million provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; (8) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1.0 million and 1.0% of EBITDA and any related out-of-pocket expenses; provided, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; (9) the payment of dividends on the Company's common stock following the first public offering of common stock of the Company, after the Issue Date, of up to 6% per annum of the net proceeds received by the Company from such public offering; provided, however, that (a) the aggregate amount of all such dividends shall not exceed the aggregate amount of net proceeds received by the Company from such public offering, (b) at the time of, and after giving effect to, any payment permitted under this clause (9) of this paragraph (b) of this Section 4.05, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (c) any such payment shall be included in subsequent calculations of the amount of Restricted Payments; (10) other Restricted Payments (other than dividends in respect of the Seller Preferred Stock) in an aggregate amount not to exceed $5.0 million; provided, however, that such Restricted Payments shall 53 be excluded in the calculation of the amount of Restricted Payments; (11) so long as no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock issued after the Issue Date; provided, however, that for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of such determination for which financial statements are available immediately preceding the declaration of any such dividend or distribution after giving effect to such dividend or distribution on a pro forma basis, the Company would have had a Consolidated Coverage Ratio of at least 2.0 to 1; provided, however, that such dividends shall be included in the calculation of the amount of Restricted Payments; (12) Investments that are made with Excluded Contributions; provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; and (13) repurchases of Capital Stock deemed to occur upon exercise of stock options if such Capital Stock represents a portion of the exercise price of such options; provided, however, that such repurchases shall be excluded in the calculation of the amount of Restricted Payments. SECTION 4.06. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order or an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement 54 relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section 4.06 or this clause (3) of this Section 4.06 or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section 4.06 or this clause (3) of this Section 4.06; provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Securityholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements; (4) any such encumbrance or restriction consisting of customary non assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (5) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; (6) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (7) any restriction on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; 55 (8) encumbrances and restrictions contained in the agreements evidencing other Indebtedness of Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant to Section 4.04; provided, however, that the encumbrances or restrictions apply only in the event of and during the continuance of a default contained in such Indebtedness or agreement; and (9) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Company, of the shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; provided that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities), that are assumed by the transferee of any such assets (provided that the Company or such Restricted Subsidiary is released from all liability with respect thereto), (B) any notes, other obligations or securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Disposition and (C) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Disposition having an aggregate fair market value, when taken together with all other Designated Noncash Consideration received pursuant to this clause (C) of this paragraph (a) of this Section 4.07 that is at that time outstanding, not to exceed $5.0 million at time of 56 receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for purposes of this provision and for no other purpose; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B) of this paragraph (a)(3) of this Section 4.07, to make an offer to the holders of the Securities (and to holders of other Senior Subordinated Indebtedness designated by the Company) to purchase Securities (and such other Senior Subordinated Indebtedness) pursuant to and subject to the conditions contained in this Indenture; and (D) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C) of this paragraph (a) of this Section 4.07, for any general corporate purpose permitted pursuant to the terms of this Indenture; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) of this paragraph (a) of this Section 4.07, the 57 Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this paragraph (a) of this Section 4.07 the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $15.0 million. Pending application of Net Available Cash pursuant to this Section 4.07, such Net Available Cash shall be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness. (b) In the event of an Asset Disposition that requires the purchase of the Securities (and other Senior Subordinated Indebtedness) pursuant to clause (3)(C) of paragraph (a) of Section 4.07, the Company will purchase Securities tendered pursuant to an offer by the Company for the Securities (and such other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their principal amount (or, in the event such other Senior Subordinated Indebtedness was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in paragraph (c) of Section 4.07. If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Securities will be denominations of EURO 1,000 principal amount or multiples thereof. The Company shall not be required to make such an Offer to purchase Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.07 if the Net Available Cash available therefor is less than $15.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). 58 (c) (1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, and, as long as the Securities are listed on the Luxembourg Stock Exchange, publish in a Luxembourg newspaper of general circulation, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of EURO 1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of paragraph (a) of Section 4.07. On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for 59 cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount applicable to the Securities, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.07. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities (and any other Senior Subordinated Indebtedness included in the Offer) surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Securities and the other Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and the other Senior Subordinated Indebtedness in denominations of EURO 1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in 60 connection with the repurchase of Securities pursuant to this Section 4.07. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.07, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.07 by virtue of its compliance with such securities laws or regulations. SECTION 4.08. Limitation on Affiliate Transactions. (a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm's-length dealings with a Person who is not an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5.0 million, the terms of the Affiliate Transaction are set forth in writing and a majority of directors of the Company have determined in good faith that the criteria set forth in clause (1) of this Section 4.08(a) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a Board Resolution; and (3) if such Affiliate Transaction involves an amount in excess of $25.0 million, the Board of Directors shall also have received a written opinion from an investment banking, accounting or appraisal firm of national prominence that is not an Affiliate of the Company to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of paragraph (a) of Section 4.08 will not prohibit: (1) any Investment or other Restricted Payment, in each case permitted to be made pursuant to Section 4.05; 61 (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (3) loans or advances to employees or consultants in the ordinary course of business of the Company or its Restricted Subsidiaries, but in any event not to exceed $3.0 million in the aggregate outstanding at any one time; (4) the payment of reasonable fees to officers, employees, consultants or directors of the Company or its Restricted Subsidiaries and indemnity provided on behalf of officers, employees, consultants or directors of the Company or its Restricted Subsidiaries; (5) any transaction with a Restricted Subsidiary or joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity; (6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company; (7) the payment of annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an amount in any fiscal year not to exceed the greater of $1.0 million and 1.0% of EBITDA and any related out-of-pocket expenses; (8) the payment by the Company or any of its Restricted Subsidiaries of fees to The Invus Group, Ltd. and its Affiliates in connection with any acquisition or divestiture transaction entered into by the Company or any Restricted Subsidiary; provided, however, that the aggregate amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of any acquisition or divestiture transaction shall not exceed 1% of the total amount of such transaction; (9) any agreement as in effect on the Issue Date and described in the Offering Circular or any renewals, extensions or amendments of any such agreement (so long as such renewals, extensions or amendments are not less favorable to the Company or the Restricted Subsidiaries) and the transactions evidenced thereby; 62 (10) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (10) of this paragraph (b) of this Section 4.08 to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Securities in any material respect; and (11) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company (1) will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Subsidiary), and (2) will not permit any Restricted Subsidiary to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' or other legally required qualifying shares) to any Person (other than to the Company or a Wholly Owned Subsidiary), unless (A) immediately after giving effect to such issuance, sale or other disposition, neither the 63 Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary; (B) immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under Section 4.05 if made on the date of such issuance, sale or other disposition; or (C) such issuance or sale is made pursuant to a Local Management Plan and, immediately after giving effect to such issuance or sale, the Company or a Wholly Owned Subsidiary owns at least 85% of the Capital Stock of such Restricted Subsidiary. SECTION 4.10. Change of Control. (a) Upon the occurrence of Change of Control, each Holder shall have the right to require that the Company repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the terms of paragraph (b) of this Section 4.10. (b) Within 30 days following any Change of Control, unless the Company has exercised its option pursuant to clause (c) of paragraph 5 of the Securities, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") and, as long as the Securities are listed on the Luxembourg Stock Exchange, publish such notice in a Luxembourg newspaper of general circulation, stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); 64 (2) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization, each after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section 4.10, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section 4.10 shall be delivered by the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) Notwithstanding the foregoing provisions of this Section 4.10, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in Section 4.10 applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer or if the Company exercises its option to purchase the Securities pursuant to clause (c) of paragraph 5 of the Securities. (f) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.10. To the extent that the provisions of any 65 securities laws or regulations conflict with provisions of this Section 4.10, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.10 by virtue thereof. SECTION 4.11. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA ss. 314(a)(4). SECTION 4.12. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.13. Future Guarantors. The Company shall cause all the Subsidiary Guarantors to execute and deliver to the Trustee a Guarantee Agreement pursuant to which such Subsidiary Guarantors will Guarantee payment of the Securities on the same terms and conditions as those set forth in the Indenture on or before the later of (a) the date such Subsidiary Guarantor became a guarantor under the Credit Agreement and (b) June 22, 2000. ARTICLE 5 Successor Company; Successor Subsidiary Guarantors SECTION 5.01. When Company May Merge or Transfer Assets. The Company will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, 66 executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 4.04; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture; provided, however, that clauses (3) and (4) of this Section 5.01 will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company or to another Restricted Subsidiary or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction or changing the form of organization of the Company. The Successor Company will be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Securities. SECTION 5.02. When Subsidiary Guarantors May Merge or Transfer Assets. The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless: 67 (A) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to another Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Company provides an Officers' Certificate to the Trustee to the effect that the Company will comply with its obligations under Section 4.07 in respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement in form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guarantee; (B) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (C) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with the Indenture. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company (A) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon 68 declaration or otherwise, whether or not such payment shall be prohibited by Article 10, or (B) fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities, whether or not such redemption or purchase shall be prohibited by Article 10; (3) the Company fails to comply with Section 5.01 or 5.02; (4) the Company fails to comply with Section 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.13 (other than a failure to purchase Securities when required under Section 4.07 or 4.10) and such failure continues for 30 days after the notice specified below; (5) the Company or a Subsidiary Guarantor fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) or in a Subsidiary Guarantee and such failure continues for 60 days after the notice specified below; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million, or its foreign currency equivalent at the time; (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; 69 (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10.0 million or its foreign currency equivalent at the time is entered against the Company or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or (10) a Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under the Subsidiary Guarantee. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clauses (4), (5) or (9) is not an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of 70 such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (6) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable; provided, however, that so long as any Bank Indebtedness remains outstanding, no such acceleration shall be effective until the earlier of (1) five business days after the giving of written notice to the Company and the administrative agent (or similar agent if there is no administrative agent) under the Credit Agreement and (2) the day on which any Bank Indebtedness is accelerated. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. 71 The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security (ii) a Default arising from the failure to redeem or purchase any Security when required pursuant to this Indenture or (iii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; 72 (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments 73 directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter 74 in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and 75 (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01 and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; 76 provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to June 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). 77 A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and 78 may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or 79 transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIAss. 310(b); provided, however, that there shall be excluded from the operation of TIAss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIAss. 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a 80 notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.13 and 5.02 and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the limitations contained in Section 5.01(3) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(3) or 5.02. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. 81 Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or European Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited European Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Sections 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be 82 subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or European Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from European Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited European Government Obligations 83 or the principal and interest received on such European Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or European Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or European Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or European Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article 10 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10; 84 (5) to add guarantees with respect to the Securities or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; (8) to make any change in the Appendix or Exhibit B-1 or B-2 thereto to facilitate trading or transferring the Securities; or (9) to make any change that does not adversely affect the rights of any Securityholder. An amendment under this Section 9.01 may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section 9.01 becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; 85 (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Article 10 that adversely affects the rights of any Securityholder under Article 10; (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (8) make any change in any Subsidiary Guarantee that would adversely affect the Securityholders. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the 86 amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid 87 to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment of all Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness which is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full in cash or Temporary Cash Investments of such Senior Indebtedness before the holders of the Securities are entitled to receive any payment or distribution of cash, securities or other property, except that holders of Securities may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust established pursuant to Article 8 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions of this Article 10; (2) until the Senior Indebtedness of the Company is paid in full in cash or Temporary Cash Investments, any payment or distribution to which holders of the Securities would be entitled but for the subordination provisions of this Article 10 will be made to holders 88 of such Senior Indebtedness as their interests may appear, except that holders of Securities may receive and retain (a) Permitted Junior Securities and (b) payments made from a trust established pursuant to Article 8 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions of this Article 10; and (3) if a distribution is made to holders of the Securities that, due to the subordination provisions of this Article 10, should not have been made to them, such holders of the Securities are required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.03. Default on Senior Indebtedness. The Company may not pay the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Designated Senior Indebtedness is not paid in full in cash or Temporary Cash Investments when due or (ii) any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash or Temporary Cash Investments; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of such Designated Senior Indebtedness. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee 89 and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been discharged or repaid in full in cash or Temporary Cash Investments. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 10.03), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after termination of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. For purposes of this Section 10.03, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration. SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and 90 Securityholders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall 91 apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of European Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish 92 evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions, and the subordination provisions contained in the Guarantee Agreement are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, or the Subsidiary Guarantees, as the case may be, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. 93 ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel if to the Trustee: Norwest Bank Minnesota, National Association Norwest Center 6th Street and Marquette Avenue MAC N9303-120 Minneapolis, MN 55479-0069 Attention of Corporate Trust Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided 94 above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. 95 SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or the city of Luxembourg. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 11.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together 96 represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 97 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. WEIGHT WATCHERS INTERNATIONAL, INC., by --------------------------------- Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, by --------------------------------- Name: Title: APPENDIX PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions For the purposes of this Appendix the following terms shall have the meanings indicated below: "Applicable Procedures" means, with respect to any transfer or transaction involving a Temporary or Permanent Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Global Security, Euroclear and Cedel, in each case to the extent applicable to such transaction and as in effect from time to time. "Cedel" means Cedel Bank, S.A., or any successor securities clearing agency. "Depository" means The Depository Trust Company, its nominees and their respective successors. "Euroclear" means the Euroclear Clearance System or any successor securities clearing agency. "Exchange Securities" means the 13% Senior Subordinated Notes Due 2009 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement. "Global Securities Legend" means the legend set forth under that caption in Exhibit 1 to this Indenture. "Initial Purchasers" means Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. "Initial Securities" means the 13% Senior Subordinated Notes Due 2009, issued under this Indenture on or about the date hereof. "Private Exchange" means the offer by the Company, pursuant to the Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. 2 "Purchase Agreement" means the Purchase Agreement dated September 22, 1999, between the Company and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement dated September 22, 1999, among the Company and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act, as amended. "Regulation S Securities" means all Initial Securities offered and sold outside the United States in reliance on Regulation S. "Restricted Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Securities. "Restricted Securities Legend" means the legend set forth in Section 2.3(c) herein. "Rule 144A" means Rule 144A under the Securities Act, as amended. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933. 3 "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued by the Company, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement. "Transfer Restricted Securities" means Securities that bear or are required to bear the legend set forth in Section 2.3(b) hereto. 1.2 Other Definitions Defined in Term Section: ---- -------- "Agent Members".........................................................2.1(b) "Global Security".......................................................2.1(a) "Permanent Regulation S Global Security"................................2.3(b) "Regulation S Global Securities"........................................2.1(a) "Rule 144A Global Security".............................................2.1(a) "Temporary Regulation S Global Security"................................2.1(a) 2. The Securities. 2.1 Form and Dating. The Initial Securities issued on the date hereof shall be (i) offered and sold by the Company pursuant to the Purchase Agreement and (ii) resold, initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such Initial Securities may thereafter be transferred to, among others, QIBs and purchasers in reliance on Regulation S. (a) Global Securities. Rule 144A Securities shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security") and Regulation S Securities shall be issued initially in the form of one or more temporary global Securities (collectively, the "Temporary Regulation S Global Security"), in each case without interest coupons and bearing the Global Securities Legend and Restricted Securities Legend, which shall be 4 deposited on behalf of the purchasers of the Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. Except as set forth in Section 2.3, beneficial ownership interests in the Temporary Regulation S Global Security shall not be exchangeable for interests in the Rule 144A Global Security or a Permanent Regulation S Global Security (as defined below) or any other Security without a Restricted Securities Legend until the expiration of the Restricted Period. Upon the expiration of the Restricted Period, beneficial interests in the Securities represented by the Temporary Regulation S Global Security may be exchanged for interests in the Permanent Regulation S Global Security as described below in Section 2.3(b). The Rule 144A Global Security, the Temporary Regulation S Global Security and the Permanent Regulation S Global Security are each referred to herein as a Global Security and are collectively referred to herein as "Global Securities." The Temporary Regulation S Global Security and the Permanent Regulation S Global Security are referred to herein as "Regulation S Global Securities." The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving 5 effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) on the Issue Date, EURO 100.0 million of 13% Senior Subordinated Notes due 2009, (2) any Additional Securities for an original issue in an aggregate principal amount specified in a written order of the Company pursuant to Section 2.02 of this Indenture and (3) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. In addition, in the case of an issuance of Additional Securities pursuant to Section 2.13 of this Indenture, such order shall certify that such issuance is in compliance with Section 4.04 of this Indenture. 2.3 (a) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred. 6 Transfers by an owner of a beneficial interest in the Rule 144A Global Security to a transferee who takes delivery of such interest through the Regulation S Global Security, whether before or after the expiration of the Restricted Period, will be made only upon receipt by the Trustee of a certification from the transferor to the effect that such transfer is being made in accordance with Regulation S or (if available) Rule 144 under the Securities Act and that, if such transfer is being made prior to the expiration of the Restricted Period, the interest transferred will be held immediately thereafter through Euroclear or Cedel. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 or Section 2.09 of this Indenture, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) Restrictions on Transfer of Temporary Regulation S Global Security. (i) Prior to the 7 expiration of the Restricted Period, interests in the Temporary Regulation S Global Security may only be held through Euroclear or Cedel. During the Restricted Period, beneficial ownership interests in the Temporary Regulation S Global Security may only be sold, pledged or transferred through Euroclear or Cedel in accordance with the Applicable Procedures and only (A) to the Company, (B) inside the United States to a person whom the seller reasonably believes is a Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (C) outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act, (D) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if available), or (E) pursuant to an effective registration statement under the Securities Act, in each of cases (A) through (E) in accordance with any applicable securities laws of any state of the United States. (ii) Upon the expiration of the Restricted Period, beneficial ownership interests in the Temporary Regulation S Global Security may be exchanged for interests in a permanent global security in definitive, fully registered form without the Restricted Security Legend (the "Permanent Regulation S Global Security") upon certification to the Trustee that such interests are owned either by non-U.S. persons or U.S. persons who purchased such interests pursuant to an exemption from, or transfer not subject to, the registration requirements of the Securities Act. On or prior to the expiration of the Restricted Period, each Holder of a Temporary Regulation S Global Security shall deliver to Euroclear or Cedel (as applicable) a Regulation S Certificate in the form of Exhibit B-1 attached hereto; provided, however, that any Holder of a Temporary Regulation S Global Security upon expiration of the Restricted Period or on any payment date that has previously delivered a Regulation S Certificate hereunder shall not be required to deliver any subsequent Regulation S Certificate (unless the certificate previously delivered is no longer true as of such subsequent date, in which case such beneficial owner shall promptly notify Euroclear and Cedel, as applicable, thereof and shall deliver to the Paying Agent or the Trustee an updated Regulation S Certificate). Euroclear or Cedel, as applicable, shall deliver to the Paying Agent or the Trustee a certificate (a "Non-U.S. Certificate") substantially in the form of Exhibit B-2 attached hereto promptly upon the receipt of each such Regulation S Certificate, and no such Holder 8 (or transferee from such Holder) shall be entitled to receive an interest in a Permanent Regulation S Global Security or any payment of distributions or a redemption price, if applicable, or any other payment with respect to its beneficial interest in a Temporary Regulation S Global Security prior to the Paying Agent or the Trustee receiving such Non-U.S. Certificate from Euroclear or Cedel with respect to the portion of the Temporary Regulation S Global Security owned by such Holder (and, with respect to an interest in the Permanent Regulation S Global Security, prior to the expiration of the Restricted Period). The Permanent Regulation S Global Security shall bear a legend in substantially the following form: THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT. (iii) Any payments of distributions or a redemption price, if applicable, or any other payment on a Temporary Regulation S Global Security received by Euroclear or Cedel with respect to any portion of such Regulation S Global Security owned by a Holder that has not delivered the Regulation S Certificate required by Section 2.3(b) shall be held by Euroclear and Cedel solely as agents for the Paying Agent and the Trustee. Euroclear and Cedel shall remit such payments to the applicable Holder (or to a Euroclear or Cedel member on behalf of such Holder) only after Euroclear or Cedel has received the requisite Regulation S Certificate. Until the Paying Agent or the Trustee has received a Non-U.S. Certificate from Euroclear or Cedel, as applicable, that it has received the requisite Regulation S Certificate with respect to the beneficial ownership of any portion of a Temporary Regulation S Global Security, the Paying Agent or the Trustee may revoke the right of Euroclear or Cedel, as applicable, to hold any payments made with respect to such portion of such Regulation S Global Security. If the Paying Agent or the Trustee exercises its right of revocation pursuant to the immediately preceding sentence, Euroclear or Cedel, as applicable, shall return 9 such payments to the Paying Agent or the Trustee and the Paying Agent or the Trustee, as applicable, shall hold such payments until Euroclear or Cedel, as applicable, has provided the necessary Non-U.S. Certificates to the Paying Agent or the Trustee (at which time the Paying Agent shall forward such payments to Euroclear or Cedel, as applicable, to be remitted to the beneficial owner that is entitled thereto on the records of Euroclear or Cedel (or on the records of their respective members)). (iv) Upon the expiration of the Restricted Period, the Issuer shall prepare and execute the Permanent Regulation S Global Security in accordance with the terms of this Indenture and deliver it to the Trustee for authentication. The Trustee shall retain the Permanent Regulation S Global Security as Securities Custodian. Any transfers of beneficial ownership interests in the Temporary Regulation S Global Security made in reliance on Regulation S shall thenceforth be recorded by the Trustee by making an appropriate increase in the principal amount of the Permanent Regulation S Global Security and a corresponding decrease in the principal amount of the Temporary Regulation S Global Security. At such time as the principal amount of the Temporary Regulation S Global Security has been reduced to zero, the Trustee shall cancel the Temporary Regulation S Global Security and deliver it to the Issuer. (c) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv) and except for the Permanent Regulation S Global Security as provided above, each Security certificate evidencing the Global Securities(and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION. EACH PURCHASER OF THIS NOTE IS NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. 10 THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF WEIGHT WATCHERS INTERNATIONAL, INC. THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Security or 11 Private Exchange Security without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the restricted securities legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply, and Private Exchange Securities in global form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (c) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (d) Obligations with Respect to Transfers and Exchanges of Securities. 12 (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities and Global Securities at the Registrar's or co-registrar's request. (ii)No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.07, 4.10 and 9.05). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any certificated Security selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any certificated Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (e) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the 13 Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a) A Global Security deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. 14 (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of EURO 1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(b), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 TO APPENDIX [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION. EACH PURCHASER OF THIS NOTE IS NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF WEIGHT WATCHERS INTERNATIONAL, INC. THAT (A) THIS Security MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS 2 REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. 3 No. o EURO CUSIP NO. ISIN NO. 13% Senior Subordinated Notes Due 2009 WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation, promises to pay to o , or registered assigns, the principal sum of EURO o (o Euro) on October 1, 2009. Interest Payment Dates: April 1 and October 1. Record Dates: March 15 and September 15 . Additional provisions of this Security are set forth on the other side of this Security. Dated: WEIGHT WATCHERS INTERNATIONAL, INC., by ----------------------- Name: Title: ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION NORWEST BANK MINNESOTA NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ----------------------------- Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 13% Senior Subordinated Note Due 2009 1. Interest WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 0.50% per annum (increasing by 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration Default occurs, up to a maximum additional interest rate of 2.00% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually on April 1 and October 1 of each year, commencing April 1, 2000. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 29, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 15 or September 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest) by mailing a check to the 5 registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, Norwest Bank Minnesota, National Association, a national banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of September 29, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.04 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture limits, among other things (i) the incurrence of additional debt by the Company and its subsidiaries, (ii) the payment of dividends on capital stock of the Company and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (iii) making of certain investments, (iv) certain transactions with 6 affiliates, (v) sales of assets, including capital stock of subsidiaries, and (vi) certain consolidations, mergers and transfers of assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. In addition, following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing under the Indenture (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or default under the Indenture), the Company and its Restricted Subsidiaries will not be subject to the covenants described above. 5. Optional Redemption (a) Except as set forth in Section 5(b) or 5(c), the Securities may not be redeemed prior to October 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning October 1, Period Percentage 2004...................................... 106.500% 2005...................................... 104.333% 2006...................................... 102.167% 2007 and thereafter....................... 100.000% (b) Before October 1, 2002, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 113%, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more Equity Offerings; provided, however, that 7 (1) at least 65% of such aggregate principal amount of the Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (c) At any time prior to October 1, 2004, the Securities may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium at the time plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). "Applicable Premium" means, with respect to a Security at any time, the greater of (1) 1.0% of the principal amount of such Security and (2) the excess of (a) the present value at such time of (i) the redemption price of such Security on October 1, 2004 plus (ii) all required interest payments due on such Security through October 1, 2004, computed using a discount rate equal to the Bund Rate plus 50 basis points, over (b) the principal amount of such Security. "Bund Rate" means the five day average of the daily fixing on the Frankfurt Stock Exchange of the rate for German Bund securities having a constant maturity most nearly equal to the period from the redemption date to October 1, 2004; provided, however, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a German Bund security for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of German Bund securities for which such yields are given, except that if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded German Bund securities adjusted to a constant maturity of one year shall be used. 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. 8 In addition, as long as the Securities are listed on the Luxembourg Stock Exchange, notice of redemption shall be published in a Luxembourg newspaper of general circulation. Securities in denominations larger than EURO 1,000 may be redeemed in part but only in whole multiples of EURO 1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of EURO 1,000 and whole multiples of EURO 1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to 9 be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or European Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any 10 request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; and (vi) certain judgments or decrees for the payment of money in excess of $10.0 million. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it 11 by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. Holders' Compliance with Registration Rights Agreement. 12 Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel 13 - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ________________ Your Signature: _____________________ - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) |_| to the Company; or (2) |_| pursuant to an effective registration statement under the Securities Act of 1933; or (3) |_| inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is 14 being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) |_| outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) |_| pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------ Signature Signature Guarantee: - --------------------- -------------------------- Signature must be guaranteed Signature - -------------------------------------------------------------------------------- 15 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security outside the United States as a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act and is aware that the sale to it is being made in reliance on Regulation S and acknowledges that a holder of an interest in a temporary Regulation S global security may not (i) receive the payment of any distributions, redemption price or any other payments with respect to the holder's beneficial interest in the temporary global security or (ii) receive an interest in a permanent Regulation S global security until (A) expiration of the 40th day after the later of the commencement of the offering of the Securities and the closing date and (B) certification that the beneficial owner of the interest in the Security is a non-U.S. person. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 16 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is EURO 100,000,000 ($100.0 million euros). The following increases or decreases in this Global Security have been made:
Principal amount Signature of Amount of decrease Amount of increase of this Global authorized officer in Principal in Principal Security following of Trustee or Date of Amount of this Amount of this such decrease or Securities Exchange Global Security Global Security increase) Custodian - -------- --------------- ------------------ ------------------ ------------------
17 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the amount in principal amount: EURO Date: _______________ Your Signature: _______________________________ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: ___________________________________________ (Signature must be guaranteed by a member of the firm of the New York Stock Exchange or a commercial bank or trust company) EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] [*/] [**/] No. o EURO o 13% Senior Subordinated Notes Due 2009 WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation, promises to pay to o , or registered assigns, the principal sum of EURO o (o Euro) on , 2009. Interest Payment Dates: April 1 and October 1. Record Dates: March 15 and September 15. Additional provisions of this Security are set forth on the other side of this Security. Dated: WEIGHT WATCHERS INTERNATIONAL, INC., by ------------------------------ Name: Title: ------------------------------ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ----------------------------- Authorized Signatory 2 - ---------- */ If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". **/ If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1. 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] 13% Senior Subordinated Note Due 2009 1. Interest WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above [; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 0.50% per annum (increasing by 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration Default occurs, up to a maximum additional interest rate of 2.00% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured] ***/. The Company will pay interest semiannually on April 1 and October 1 of each year, commencing April 1, 2000. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 29, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 15 or September 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for - -------- ***/ Insert if at the time of issuance of the Exchange Security or Private Exchange Security (as the case may be) neither the Registered Exchange Offer has been consummated nor a Shelf Registration Statement has been declared effective in accordance with the Registration Rights Agreement. 4 payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 3. Paying Agent and Registrar Initially, Norwest Bank Minnesota, National Association, a national banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of September 29, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.04 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture limits, among other things (i) the incurrence of additional debt by the Company and its subsidiaries, (ii) the payment of dividends on capital stock of the Company and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (iii) making of 5 certain investments, (iv) certain transactions with affiliates, (v) sales of assets, including capital stock of subsidiaries, and (vi) certain consolidations, mergers and transfers of assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. In addition, following the first day that (1) the Company has achieved Investment Grade Status and (2) no Default has occurred and is continuing under the Indenture (and notwithstanding that the Company may later cease to have an Investment Grade Rating from either or both of the Rating Agencies or default under the Indenture), the Company and its Restricted Subsidiaries will not be subject to the covenants described above. 5. Optional Redemption (a) Except as set forth in Section 5(b) or 5(c), the Securities may not be redeemed prior to October 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning October 1, Period Percentage ------ ---------- 2004...................................... 106.500% 2005...................................... 104.333% 2006...................................... 102.167% 2007 and thereafter....................... 100.000% (b) Before October 1, 2002, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 113%, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more Equity Offerings; provided, however, that 6 (1) at least 65% of such aggregate principal amount of the Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (c) At any time prior to October 1, 2004, the Securities may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium at the time plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). "Applicable Premium" means, with respect to a Security at any time, the greater of (1) 1.0% of the principal amount of such Security and (2) the excess of (a) the present value at such time of (i) the redemption price of such Security on October 1, 2004 plus (ii) all required interest payments due on such Security through October 1, 2004, computed using a discount rate equal to the Bund Rate plus 50 basis points, over (b) the principal amount of such Security. "Bund Rate" means the five day average of the daily fixing on the Frankfurt Stock Exchange of the rate for German Bund securities having a constant maturity most nearly equal to the period from the redemption date to October 1, 2004; provided, however, that if the period from the redemption date to October 1, 2004 is not equal to the constant maturity of a German Bund security for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of German Bund securities for which such yields are given, except that if the period from the redemption date to October 1, 2004 is less than one year, the weekly average yield on actually traded German Bund securities adjusted to a constant maturity of one year shall be used. 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. 7 In addition, as long as the Securities are listed on the Luxembourg Stock Exchange, notice of redemption shall be published in a Luxembourg newspaper of general circulation. Securities in denominations larger than EURO 1,000 may be redeemed in part but only in whole multiples of EURO 1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of EURO 1,000 and whole multiples of EURO 1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be 8 redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or European Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture 9 under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or a Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; and (vi) certain judgments or decrees for the payment of money in excess of $10.0 million. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with 10 the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 11 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. ****/ 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attention of General Counsel - -------- ****/ For Exchange or Private Exchange Security only. 12 - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ________________ Your Signature: _____________________ - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. 13 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the amount: EURO Date: __________________ Your Signature: __________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________________________ (Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company) EXHIBIT B-1 Form of Certification to be Given by Holder of Beneficial Interest in a Temporary Regulation S Global Security Re: WEIGHT WATCHERS INTERNATIONAL, INC. (the "Company") 13% Senior Subordinated Notes due 2009 (the "Notes") [Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System][Cedel, societe anonymne] Securities, [CUSIP No. ][ISIN No. ] Reference if hereby made to the Indenture dated as of September 29, 1999 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, as Trustee. Capitalized terms used herein and not otherwise defined have the meanings set forth in the Indenture. [For purposes of acquiring a beneficial interest in the Permanent Regulation S Global Security upon the expiration of the Restricted period,][For purposes of receiving payments under the Temporary Regulation S Global Security,] the undersigned Holder of a beneficial interest in the Temporary Regulation S Global Security issued under the Indenture certifies that it is [not a U.S. Person as defined by Regulation S under][a U.S. Person who purchased the beneficial interest in the Security pursuant to an exemption from, or transfer not subject to,] the Securities Act of 1933, as amended. We undertake to advise you promptly by telex on or prior to the date on which you intend to submit your corresponding certification relating to the Securities held by you if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certificate applies as of such date. We understand that this certificate is required in connection with certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocable authorize you to produce this certificate to any interested party in such proceeding. This certificate and the statements 2 contained herein are made for your benefit and for the benefit of the Initial Purchasers. Date: ________________________ By:___________________________ as, or as agent for, the Holder of a beneficial interest in the Securities to which this certificate relates 3 EXHIBIT B-2 Form of Euroclear and Cedel Certificate Re: WEIGHT WATCHERS INTERNATIONAL, INC. (the "Company") 13% Senior Subordinated Notes due 2009 (the "Notes") ________________________, as Paying Agent [address of Paying Agent] ________________________, as Trustee [address of Trustee] This is to certify that, based solely on the certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount of the Securities set forth below (our "Member Organizations") substantially to the effect set forth in the Indenture (the "Indenture") dated as of September 29, 1999, between the Company and Norwest Bank Minnesota, National Association, as Trustee, EURO ______________ principal amount of the Securities held by us or our behalf are beneficially owned by non-U.S. person(s). Capitalized terms used herein and not otherwise defined have the meanings set forth in the Indenture. As used in this paragraph, the term "U.S. person" has the meaning given to it by Regulation S under the United States Securities Act of 1933, as amended. We further certify that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any interest in the Securities identified above are no longer true and cannot be relied upon as of the date hereof. [Upon expiration of Restricted Period: We hereby acknowledge that no portion of the Temporary Regulation S Global Security shall be exchanged for an interest in the Permanent Regulation S Global Security with respect to the portion thereof for which we have not received the applicable certifications from our Member Organizations.] 4 [On ____________________ and upon any other payment under the Temporary Regulation S Global Security: We hereby agree to hold (and return to the [ ] upon request) any payments received by us on the Temporary Regulation S Global Security with respect to the portion thereof for which we have not received the applicable certificates from our Member Organizations.] We understand that this certification is required in connection with certain securities laws of the United States of America. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocable authorized you to produce this certification to any interested party in such proceedings. Dated:_______________________*****/ [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Brussels office, as operator of the Euroclear System or CEDEL, societe anonyme] By:_______________________________ Name: Title: - -------- *****/ Insert dated of expiration of Restricted Period or payment date, as the case may be. EXHIBIT C GUARANTEE AGREEMENT, dated as of , 1999, made by the undersigned subsidiary or subsidiaries (each, a "Subsidiary Guarantor") of Weight Watchers International, Inc.(the "Company"), in favor of the Holders (as defined in the Indenture referred to below) and the Trustee (as defined below). Reference is made to the Indenture (as the same may be amended, restated, supplemented or modified from time to time, the "Indenture") among the Company and Norwest Bank Minnesota, National Association, as trustee (the "Trustee") dated as of September 29, 1999, relating to the Securities. WHEREAS, the Company owns directly or indirectly all or a majority of interest in each Subsidiary Guarantor; WHEREAS, the Company has agreed pursuant to the Indenture to cause the Subsidiary Guarantors to Guarantee the Securities pursuant to the terms of the Indenture and this Guarantee Agreement; NOW, THEREFORE, in consideration of the promises thereby, each Subsidiary Guarantor hereby agrees with and for the benefit of the Holders as follows: ARTICLE 1 Definitions SECTION 1.01. Defined Terms. As used in this Guarantee Agreement, terms defined in the Indenture (to the extent not otherwise defined herein) or in the preamble or recitals hereto are used herein as therein defined. ARTICLE 2 Guarantees SECTION 2.01. Guarantees. Each Subsidiary Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under the Indenture and the Securities and (b) the full and punctual 2 performance within applicable grace periods of all other obligations of the Company under the Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under the Indenture notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under the Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any such claim, demand, right or remedy; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Subsidiary Guarantor (except as provided in Section 2.06). Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Subsidiary Guarantee is, to the extent and in the manner set forth in Article 3, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guarantee and each Subsidiary Guarantee is made subject to such provisions of the Indenture. Except as expressly set forth in Section 8.01(b) of the Indenture and Sections 2.02 and 2.06 of this Guarantee Agreement, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim 3 of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under the Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 3. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be 4 accelerated as provided in Article 6 of the Indenture for the purposes of such Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 2.02. Limitation on Liability. Any term or provision of this Guarantee Agreement to the contrary notwithstanding, the maximum, aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Guarantee Agreement, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 2.03. Successors and Assigns. This Article 2 shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in the Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of the Indenture. Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's pro rata portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. SECTION 2.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 2 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any 5 right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 2 at law, in equity, by statute or otherwise. SECTION 2.05. Modification. No modification, amendment or waiver of any provision of this Article 2, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 2.06. Release of Subsidiary Guarantor. Upon (w) the sale (including any sale pursuant to any exercise of remedies by a holder of Senior Indebtedness) or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor, (x) the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company),(y) a Subsidiary Guarantor's ceasing for any reason to be a Guarantor under the Credit Agreement or (z) the exercise by the Company of its legal defeasance option or its covenant defeasance option pursuant to Article 8 of the Indenture, such Subsidiary Guarantor shall be deemed released from all obligations under this Article 2 without any further action required on the part of the Trustee or any Holder. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release. ARTICLE 3 Subordination of Subsidiary Guaranties SECTION 3.01. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each Securityholder by accepting a Security agrees, that the Obligations of such Subsidiary Guarantor are subordinated in right of payment, to the extent and in the manner provided in this Article 3, to the prior payment of all Senior Indebtedness of such Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Subsidiary Guarantor and 6 only Senior Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's Guarantee of Senior Indebtedness of the Company) shall rank senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth herein. SECTION 3.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of any Subsidiary Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property: (1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full of such Senior Indebtedness in cash or Temporary Cash Investments before Securityholders shall be entitled to receive any payment pursuant to any Obligations of such Subsidiary Guarantor; and (2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash or Temporary Cash Investments, any payment or distribution to which Securityholders would be entitled but for this Article 3 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities of such Subsidiary Guarantor that are subordinated to Senior Indebtedness, and to any debt securities received by holders of Senior Indebtedness, of such Subsidiary Guarantor to at least the same extent as the Obligations of such Subsidiary Guarantor are subordinated to Senior Indebtedness of such Subsidiary Guarantor. SECTION 3.03. Default on Senior Indebtedness of Subsidiary Guarantor. No Subsidiary Guarantor may make any payment pursuant to any of its Obligations or repurchase, redeem or otherwise retire or defease any Securities or other Obligations (collectively, "pay its Subsidiary Guarantee") if (i) any Designated Senior Indebtedness of the Company is not paid in full in cash or Temporary Cash Investments when due or (ii) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash or Temporary Cash Investments; provided, however, that any Subsidiary Guarantor may pay its Subsidiary Guarantee 7 without regard to the foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness. No Subsidiary Guarantor may pay its Subsidiary Guarantee during the continuance of any Payment Blockage Period after receipt by the Company and the Trustee of a Blockage Notice under Section 10.03 of the Indenture. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of Designated Senior Indebtedness giving such Blockage Notice or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor may resume payments pursuant to its Subsidiary Guarantee after termination of such Payment Blockage Period. SECTION 3.04. Demand for Payment. If a demand for payment is made on a Subsidiary Guarantor pursuant to Article 2, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of such demand. SECTION 3.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 3 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of the relevant Senior Indebtedness and pay it over to them or their Representatives as their interests may appear. SECTION 3.06. Subrogation. After all Senior Indebtedness of a Subsidiary Guarantor is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 3 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior Indebtedness. SECTION 3.07. Relative Rights. This Article 3 defines the relative rights of Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Agreement or the Indenture shall: (1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of such Subsidiary 8 Guarantor, which is absolute and unconditional, to pay the Obligations to the extent set forth in Article 2; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by such Subsidiary Guarantor under the Obligations, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive distributions otherwise payable to Securityholders. SECTION 3.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Obligations of such Subsidiary Guarantor shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with the Indenture. SECTION 3.09. Rights of Trustee and Paying Agent. Notwithstanding Section 3.03, the Trustee or Paying Agent may continue to make payments on any Subsidiary Guarantee and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 3. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of any Subsidiary Guarantor may give the notice; provided, however, that, if an issue of Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not the Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 3 with respect to any Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 of the Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 of the Indenture. SECTION 3.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of any Subsidiary Guarantor, 9 the distribution may be made and the notice given to their Representative (if any). SECTION 3.11. Article 3 Not To Prevent Defaults Under a Subsidiary Guarantee or Limit Right To Demand Payment. The failure to make a payment pursuant to a Subsidiary Guarantee by reason of any provision in this Article 3 shall not be construed as preventing the occurrence of a default under such Subsidiary Guarantee. Nothing in this Article 3 shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on any Subsidiary Guarantor pursuant to Article 2. SECTION 3.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 3, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 3.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 3. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 3, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 3, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 of the Indenture shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 3. SECTION 3.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the 10 subordination between the Securityholders and the holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 3 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 3.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 3 or otherwise. SECTION 3.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions. The Indenture provides that each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 4 Miscellaneous SECTION 4.01. Notices. All notices and other communications pertaining to this Guarantee Agreement shall be in writing and shall be deemed to have been duly given upon the receipt thereof. Such notices shall be delivered by hand, or mailed, certified or registered mail with postage prepaid (a) if to the Guarantor, at the Company's address set forth in the Indenture, and (b) if to the Holders or the Trustee, as provided in the Indenture. SECTION 4.02. PartiesNothing expressed or mentioned in this Guarantee Agreement is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Guarantee Agreement or any provision herein contained. 11 SECTION 4.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 4.04. Severability Clause. In case any provision of this Guarantee Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 4.05. Waivers, Amendments and Remedies. The failure to insist in any one or more instances upon strict performance of any of the provisions of this Guarantee Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect. Except as otherwise expressly limited in this Guarantee Agreement, all remedies under this Guarantee Agreement shall be cumulative and in addition to every other remedy provided for herein or by law. SECTION 4.06. Headings.The headings of the Articles and the sections in this Guarantee Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the Subsidiary Guarantors have duly executed this Guarantee Agreement as of the date first above written. [SUBSIDIARY GUARANTOR], by ------------------------ Name: Title: [SUBSIDIARY GUARANTOR], by ------------------------ Name: Title: 12 Acknowledged: WEIGHT WATCHERS INTERNATIONAL, INC., by ----------------------- Name: Title: [TRUSTEE,] as Trustee, by ----------------------- Name: Title: EX-4.3 38 EXHIBIT 4.3 EXHIBIT 4.3 Weight Watchers International, Inc. $150,000,000 13% Senior Subordinated Notes due 2009 Euro 100,000,000 13% Senior Subordinated Notes due 2009 REGISTRATION RIGHTS AGREEMENT September 22, 1999 Credit Suisse First Boston Corporation Scotia Capital Markets (USA) Inc. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: Weight Watchers International, Inc., a Virginia corporation (the "Company"), proposes to issue and sell to Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. (collectively, the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $150,000,000 aggregate principal amount of its 13% Senior Subordinated Notes due 2009 (the "Dollar Securities") and Euro 100,000,000 of its 13% Senior Subordinated Notes due 2009 (the "Euro Securities" and together with the Dollar Securities, the "Initial Securities"). The Initial Securities will be issued pursuant to two Indentures, dated as of September 29, 1999 (the "Indentures"), between the Company and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of the Initial Purchasers and the holders of the Securities (as defined below) (collectively the "Holders"), as follows: 1. Registered Exchange Offer. Unless not permitted by applicable law (after the Company has complied with the ultimate paragraph of this Section 1), the Company shall prepare and, not later than 90 days (such 90th day being a "Filing Deadline") after the date on which the Initial Purchasers purchase the Initial Securities pursuant to the Purchase Agreement (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities of the Company issued under the Indentures, identical in all material respects to the Initial Securities and registered under the Securities Act (the "Exchange Securities"). The Company shall use its best efforts to (i) cause such Exchange Offer Registration Statement to become effective under the Securities Act within 180 days after the Closing Date (such 180th day being an "Effectiveness Deadline") and (ii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Company commences the Registered Exchange Offer, the Company (i) will be entitled to consummate the Registered Exchange Offer 30 days after such commencement (provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will be required to consummate the Registered Exchange Offer no later than 40 days after the date on which the Exchange Offer Registration Statement is declared effective (such 40th day being the "Consummation Deadline"). Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder that is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Securities (as defined below) acquired in exchange for Initial Securities constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Company shall use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indentures and identical in all material respects to the Initial Securities (the "Private Exchange Securities"). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply with all applicable laws. 2 As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange. The Indentures will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indentures and that all the Dollar Securities and the Euro Securities will each vote and consent together on all matters as one class and that none of the Dollar Securities or the Euro Securities will have the right to vote or consent as a class separate from other Dollar Securities or Euro Securities, as applicable, on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3 2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the 220th day after the Closing Date, (iii) any Initial Purchaser so requests with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Securities on the date of the exchange and any such Holder so requests, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv) the receipt of the required notice, being a "Trigger Date"): (a) The Company shall promptly (but in no event more than 60 days after the Trigger Date (such 60th day being a "Filing Deadline")) file with the Commission and thereafter use its best efforts to cause to be declared effective no later than 180 days after the Trigger Date (such 180th day being an "Effectiveness Deadline") a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof); provided, however, the Company shall not be obligated to keep the Shelf Registration Statement continuously effective to the extent set forth below if (i) the Company determines, in its reasonable judgment, upon advice of counsel, that the continued effectiveness and usability of the Shelf Registration Statement would (x) require the disclosure of material information, which the Company has a bona fide business reason for preserving as confidential, or (y) interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of it subsidiaries or its parent, provided that the failure to keep the Shelf Registration Statement effective and usable for offers and sales of Securities for such reason shall last no longer than 45 days in any 12-month period (whereafter Additional Interest (as defined in Section 6(a) shall accrue and be payable), and (ii) the Company promptly thereafter complies with the requirements of Section 3(j) hereof, if applicable; provided further that the number of days of any actual Suspension Period shall be added on to the end of the two-year period specified above. Any such period during which the Company is excused from keeping the Shelf Registration Statement effective and usable for offers and sales of Securities is referred to herein as a "Suspension Period." A Suspension Period shall commence on and include the date that the Company gives notice that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Securities and shall end on the earlier to occur of (1) the date on which each seller of Securities covered by the Shelf Registration Statement either receives the copies of the supplemented or amended prospectus contemplated by Section 3(j) hereof or is advised in writing by the Company that the use of the prospectus may be resumed and (2) the expiration of 45 days in any 12-month period during which one or more Suspension Periods has been in effect. The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any 4 untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders. (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. 5 (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities pursuant to any Registration Statement the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial 6 Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall cause each of the Indentures to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under any of the Indentures, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of such Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof; provided, further, that any persons to whom information is provided under this Section 3(p) agrees in writing to maintain the confidentiality of such information to the extent such information is not in the public domain. (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign 7 corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of each of the Indentures with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer signed opinions in the form set forth in Section 6(c) and (d) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) of the Purchase Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied. (t) The Company will use its best efforts to if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. 8 (v) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. 4. Registration Expenses. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation; (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing (including printing certificates for the Securities to be issued in the Registered Exchange Offer and the Private Exchange and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Exchange Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Initial Securities in the Registered Exchange Offer and/or selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or 9 Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, 10 access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "Registration Default"): (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline; (ii) any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline; (iii) the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or (iv) any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted by paragraph (b)) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. Additional Interest shall accrue on the Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.50% per annum (the "Additional Interest Rate") for the first 90-day period immediately following the occurrence of such Registration Default. The Additional Interest Rate shall increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional Interest Rate of 2.0% per annum. (b) A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the 11 case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured. (c) Any amounts of Additional Interest due pursuant to Section 6(a) will be payable in cash on the regular interest payment dates with respect to the Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the principal amount of the Securities and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering and shall be reasonably acceptable to the Company. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 12 9. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 1 and 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 1 and 2 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 Fax: (212) 474-3700 Attention: Kris F. Heinzelman, Esq. (3) if to the Company, at its address as follows: Weight Watchers International, Inc. c/o The Invus Group, Ltd. 135 East 57th Street, 30th Floor New York, NY 10022 Fax: (212) 371-1829 Attention: Robert W. Hollweg with a copy to: Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Fax: (212) 455-2502 Attention: Rise Norman, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage 13 prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (f) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 14 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms. Very truly yours, WEIGHT WATCHERS INTERNATIONAL, INC. by /s/ Daniel D. DeBolt Name: Daniel D. DeBolt Title: Chief Financial Officer The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION SCOTIA CAPITAL MARKETS (USA) INC. By: CREDIT SUISSE FIRST BOSTON CORPORATION by /s/ Malcom Price Name: Malcolm Price Title: Managing Director 15 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 1 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." 1 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.(1) The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. - ---------- (1) In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 1 ANNEX D |_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 1 EX-5 39 EXHIBIT 5 Exhibit 5 [SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, N.Y. 10017-3954 (212) 455-2000] December 2, 1999 Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York 11797 Ladies and Gentlemen: We have acted as counsel to Weight Watchers International, Inc., a Virginia corporation (the "Company"), and to the entities listed on Schedule A hereto (individually, a "Guarantor" and collectively, the "Guarantors"), in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Company and the Guarantors with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the issuance by the Company of $150,000,000 aggregate principal amount and (euro) 100,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2009 (the "Exchange Securities") and the issuance by the Guarantors of guarantees (the "Guarantees") with respect to the Exchange Securities. The Exchange Securities and the Guarantees will be issued under indentures, as supplemented (the "Indentures"), dated as of September 29, 1999, among the Company, the Guarantors and Norwest Bank Minnesota, National Association, as Trustee. The Exchange Securities will be offered by the Company in exchange for $150,000,000 aggregate principal amount and (euro) 100,000,000 aggregate principal amount of its outstanding 13% Senior Subordinated Notes due 2009 (the "Securities"). We have examined the Registration Statement and the Indentures, which have been filed with the Commission as exhibits to the Registration Statement. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company and the Guarantors. In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We also have assumed that the Indentures are the valid and legally binding obligations of the Trustee. We have assumed further that (1) Weight Watchers UK Holdings Ltd, Weight Watchers International Holdings Ltd, Weight Watchers (U.K.) Limited, Weight Watchers (Exercise) Ltd., Weight Watchers (Accessories & Publications) Ltd, Weight Watchers (Food Products) Limited, Weight Watchers New Zealand Limited, Weight Watchers International Pty Limited, Fortuity Pty Ltd and Gutbusters Pty Ltd (collectively, the "Foreign Guarantors") are each validly existing under the laws of their respective jurisdictions of incorporation and each of the Foreign Guarantors and the Company has duly authorized, executed and delivered the Indentures in accordance with its respective organizational documents and the laws of its respective jurisdiction of incorporation, (2) execution, delivery and performance by the Company and the Foreign Guarantors of the Indentures, the Exchange Securities and the Guarantees does not and will not violate the laws of their respective jurisdictions of incorporation or any other applicable laws (excepting the laws of the State of New York and the Federal laws of the United States) and (3) execution, delivery and performance by each Foreign Guarantor of the Indentures, the Exchange Securities and the Guarantees does not and will not constitute a breach or violation of any agreement or instrument which is binding upon the Company or any Foreign Guarantor. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 1. When the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indentures upon the exchange, the Exchange Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms. 2. When (a) the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indentures upon the exchange and (b) the Guarantees have been duly issued, the Guarantees will constitute valid and legally binding obligations of the Guarantors enforceable against the Guarantors in accordance with their terms. Our opinions set forth above are subject to the effects of (1) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (2) general equitable principles (whether considered in a proceeding in equity or at law), (3) an implied covenant of good faith and fair dealing and (4) the effects of the possible judicial application of foreign laws or foreign governmental or judicial action affecting creditors' rights. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the law of the State of New York, the Federal law of the United States and the Delaware General Corporation Law. We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. December 2, 1999 Very truly yours, /s/ SIMPSON THACHER & BARTLETT -------------------------------------------- SIMPSON THACHER & BARTLETT
2 SCHEDULE A Guarantors 58 WW Food Corp. Waist Watchers, Inc. Weight Watchers Camps, Inc. W.W. Camps and Spas, Inc. Weight Watchers Direct, Inc. W/W Twentyfirst Corporation W.W. Weight Reduction Services, Inc. W.W.I. European Services, Ltd. W.W. Inventory Service Corp. Weight Watchers North America, Inc. Weight Watchers UK Holdings Ltd Weight Watchers International Holdings Ltd Weight Watchers (U.K.) Limited Weight Watchers (Exercise) Ltd. Weight Watchers (Accessories & Publications) Ltd Weight Watchers (Food Products) Limited Weight Watchers New Zealand Limited Weight Watchers International Pty Limited Fortuity Pty Ltd Gutbusters Pty Ltd
3 EX-10.1 40 EXHIBIT 10.1 EXHIBIT 10.1 CREDIT AGREEMENT, dated as of September 29, 1999 among WEIGHT WATCHERS INTERNATIONAL, INC., as a Borrower WW FUNDING CORP., as the SP1 Borrower VARIOUS FINANCIAL INSTITUTIONS, as the Lenders CREDIT SUISSE FIRST BOSTON, as the Syndication Agent, a Lead Arranger and a Book Manager BHF (USA) CAPITAL CORPORATION, as the Documentation Agent and Table of Contents Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms............................................................3 1.2. Use of Defined Terms....................................................39 1.3. Cross-References........................................................39 1.4. Accounting and Financial Determinations.................................39 1.5. Currency Conversions....................................................39 ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES, LETTERS OF CREDIT AND TLC PROVISIONS 2.1. Loan Commitments........................................................39 2.1.1. Term Loans............................................................40 2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment..............40 2.1.3. Letter of Credit Commitment...........................................41 2.1.4. Lenders Not Permitted or Required To Make the Loans...................41 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit...........42 2.2. Reduction of the Commitment Amounts.....................................42 2.2.1. Optional..............................................................42 2.2.2. Mandatory.............................................................43 2.3. Borrowing Procedures and Funding Maintenance............................43 2.3.1. Term Loans and Revolving Loans........................................43 2.3.2. Swing Line Loans......................................................44 2.4. Continuation and Conversion Elections...................................45 2.5. Funding.................................................................46 2.6. Issuance Procedures.....................................................46 2.6.1. Other Lenders' Participation..........................................47 2.6.2. Disbursements; Conversion to Revolving Loans..........................47 2.6.3. Reimbursement.........................................................48 2.6.4. Deemed Disbursements..................................................48 2.6.5. Nature of Reimbursement Obligations...................................49 2.7. Notes...................................................................49 2.8. Registered Notes........................................................50 2.9. TLC Facility............................................................50 -i- Page ---- ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments; Application.................................50 3.1.1. Repayments and Prepayments............................................50 3.1.2. Application...........................................................55 3.2. Interest Provisions.....................................................55 3.2.1. Rates.................................................................55 3.2.2. Post-Maturity Rates...................................................56 3.2.3. Payment Dates.........................................................56 3.3. Fees....................................................................57 3.3.1. Commitment Fee........................................................57 3.3.2. Administrative Agent's Fee............................................58 3.3.3. Letter of Credit Fee..................................................58 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS 4.1. LIBO Rate Lending Unlawful..............................................58 4.2. Deposits Unavailable....................................................58 4.3. Increased LIBO Rate Loan Costs, etc.....................................59 4.4. Funding Losses..........................................................59 4.5. Increased Capital Costs.................................................60 4.6. Taxes...................................................................60 4.7. Payments, Computations, etc.............................................62 4.8. Sharing of Payments.....................................................63 4.9. Setoff..................................................................63 4.10. Mitigation.............................................................64 ARTICLE V CONDITIONS TO CREDIT EXTENSIONS 5.1. Initial Credit Extension................................................64 5.1.1. Resolutions, etc......................................................64 5.1.2. Recapitalization Documents............................................65 5.1.3. Recapitalization Certificate..........................................65 5.1.4. Closing Date Certificate..............................................65 5.1.5. Delivery of Notes and TLCs............................................65 -ii- Page ---- 5.1.6. Payment of Outstanding Indebtedness, etc............................65 5.1.7. Guaranties..........................................................66 5.1.8. Pledge Agreements...................................................66 5.1.9. Security Agreements.................................................67 5.1.10. Patent Security Agreement, Copyright Security Agreement and Trademark Security Agreement................................................68 5.1.11. Financial Information, etc.........................................68 5.1.12. Closing Fees, Expenses, etc........................................69 5.1.13. Insurance..........................................................69 5.1.14. Litigation.........................................................69 5.1.15. Material Adverse Change............................................69 5.1.16. Opinions of Counsel................................................69 5.1.17. Preferred Stock....................................................70 5.1.18. Recapitalization...................................................70 5.1.19. Acquisitions.......................................................70 5.1.20. Australian Stamp Duty..............................................70 5.1.21. Foreign Acquisitions and Takeovers Act Approval....................70 5.1.22. Intercompany Subordination Agreement................................70 5.2. All Credit Extensions.................................................70 5.2.1. Compliance with Warranties, No Default, etc.........................71 5.2.2. Credit Extension Request............................................71 5.2.3. Satisfactory Legal Form.............................................71 ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1. Organization, etc.....................................................72 6.2. Due Authorization, Non-Contravention, etc.............................72 6.3. Government Approval, Regulation, etc..................................72 6.4. Validity, etc.........................................................73 6.5. Financial Information.................................................73 6.6. No Material Adverse Change............................................73 6.7. Litigation, Labor Controversies, etc..................................73 6.8. Subsidiaries..........................................................73 6.9. Ownership of Properties...............................................74 6.10. Taxes................................................................74 6.11. Pension and Welfare Plans............................................74 6.12. Environmental Warranties.............................................74 6.13. Regulations U and X..................................................75 6.14. Accuracy of Information..............................................76 -iii- Page ---- 6.15. Seniority of Obligations, etc........................................76 6.16. Solvency.............................................................77 6.17. Contracts............................................................77 6.18. Year 2000............................................................77 ARTICLE VII COVENANTS 7.1. Affirmative Covenants..................................................77 7.1.1. Financial Information, Reports, Notices, etc.........................77 7.1.2. Compliance with Laws, etc............................................79 7.1.3. Maintenance of Properties............................................80 7.1.4. Insurance............................................................80 7.1.5. Books and Records....................................................80 7.1.6. Environmental Covenant...............................................80 7.1.7. Future Subsidiaries..................................................81 7.1.8. Future Leased Property and Future Acquisitions of Real Property......82 7.1.9. Use of Proceeds, etc.................................................83 7.1.10. Hedging Obligations.................................................83 7.1.11. U.S. Borrower as Pledged Interest Issuer............................83 7.1.12. Section 260B Compliance.............................................83 7.1.13. FNZ Security Documents...............................................84 7.1.14. U.K. Security.......................................................84 7.1.15. U.K. Procedural Requirements........................................85 7.2. Negative Covenants.....................................................86 7.2.1. Business Activities..................................................86 7.2.2. Indebtedness.........................................................86 7.2.3. Liens................................................................88 7.2.4. Financial Condition..................................................89 7.2.5. Investments..........................................................92 7.2.6. Restricted Payments, etc.............................................94 7.2.7. Capital Expenditures, etc............................................95 7.2.8. Consolidation, Merger, etc...........................................95 7.2.9. Asset Dispositions, etc..............................................96 7.2.10. Modification of Certain Agreements..................................97 7.2.11. Transactions with Affiliates........................................97 7.2.12. Negative Pledges, Restrictive Agreements, etc.......................98 7.2.13. Stock of Subsidiaries...............................................99 7.2.14. Sale and Leaseback..................................................99 7.2.15. Fiscal Year.........................................................99 7.2.16. Designation of Senior Indebtedness..................................99 -iv- I-3 Page ---- 7.3. Maintenance of Separate Existence.......................................99 ARTICLE VIII GUARANTY 8.1. The Guaranty...........................................................102 8.2. Guaranty Unconditional.................................................102 8.3. Reinstatement in Certain Circumstances.................................103 8.4. Waiver.................................................................104 8.5. Postponement of Subrogation, etc.......................................104 8.6. Stay of Acceleration...................................................104 ARTICLE IX EVENTS OF DEFAULT 9.1. Listing of Events of Default...........................................104 9.1.1. Non-Payment of Obligations...........................................105 9.1.2. Breach of Warranty...................................................105 9.1.3. Non-Performance of Certain Covenants and Obligations.................105 9.1.4. Non-Performance of Other Covenants and Obligations...................105 9.1.5. Default on Other Indebtedness........................................105 9.1.6. Judgments............................................................105 9.1.7. Pension Plans........................................................106 9.1.8. Change in Control....................................................106 9.1.9. Bankruptcy, Insolvency, etc..........................................106 9.1.10. Impairment of Security, etc.........................................107 9.1.11. Senior Subordinated Notes...........................................107 9.1.12. Redemption..........................................................107 9.2. Action if Bankruptcy, etc..............................................107 9.3. Action if Other Event of Default.......................................108 ARTICLE X THE AGENTS 10.1. Actions...............................................................108 10.2. Funding Reliance, etc.................................................109 10.3. Exculpation...........................................................109 10.4. Successor.............................................................109 -v- I-4 Table of Contents continued Page ---- 10.5. Credit Extensions by each Agent.......................................110 10.6. Credit Decisions......................................................110 10.7. Copies, etc...........................................................111 10.8. Reliance by the Administrative Agent..................................111 10.9. Defaults..............................................................111 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Waivers, Amendments, etc..............................................112 11.2. Notices...............................................................113 11.3. Payment of Costs and Expenses.........................................113 11.4. Indemnification.......................................................114 11.5. Survival..............................................................115 11.6. Severability..........................................................115 11.7. Headings..............................................................116 11.8. Execution in Counterparts, Effectiveness, etc.........................116 11.9. Governing Law; Entire Agreement.......................................116 11.10. Successors and Assigns...............................................116 11.11. Sale and Transfer of Loans and Notes; Participations in Loans, Notes and TLCs...............................................................117 11.11.1. Assignments........................................................117 11.11.2. Participations.....................................................119 11.11.3. Register...........................................................121 11.12. Other Transactions...................................................121 11.13. Forum Selection and Consent to Jurisdiction..........................121 11.14. Waiver of Jury Trial.................................................122 11.15. Confidentiality......................................................123 11.16. Judgment Currency....................................................123 11.17. Release of Security Interests........................................123 SCHEDULE I - Disclosure Schedule SCHEDULE II - Commitments and Percentages SCHEDULE III - Notice Information; Domestic Offices and LIBOR Offices EXHIBIT A-1 - Form of Revolving Note -vi- EXHIBIT A-2 - Form of Swing Line Note EXHIBIT A-3 - Form of Term-A Note EXHIBIT A-4 - Form of Term-B-1 Note EXHIBIT A-5 - Form of Term-B-2 Note EXHIBIT A-6 - Form of Registered Note EXHIBIT B-1 - Form of Borrowing Request EXHIBIT B-2 - Form of Issuance Request EXHIBIT B-3 - Form of TLC Purchase Request EXHIBIT C - Form of Continuation/Conversion Notice EXHIBIT D - Form of Closing Date Certificate EXHIBIT E - Form of Compliance Certificate EXHIBIT F-1 - Form of WWI Security Agreement EXHIBIT F-2 - Form of Australian Security Agreement EXHIBIT F-3 - INTENTIONALLY OMITTED EXHIBIT G-1 - Form of WWI Pledge Agreement EXHIBIT G-2 - Form of ARTAL Pledge Agreement EXHIBIT G-3 - Form of HJH Pledge Agreement EXHIBIT G-4 - Form of Australian Pledge Agreement EXHIBIT G-5 - INTENTIONALLY OMITTED EXHIBIT H - Form of Subsidiary Guaranty EXHIBIT H-1 - Form of Australian Guaranty EXHIBIT I - Form of Intercompany Subordination Agreement EXHIBIT J - Form of Lender Assignment Agreement EXHIBIT K-1 - Form of Opinion of New York counsel to the Obligors EXHIBIT K-2 - INTENTIONALLY OMITTED EXHIBIT K-3 - Form of Opinion of Australian counsel to the FPL EXHIBIT K-4 - Form of Opinion of Luxembourg counsel to ARTAL EXHIBIT K-5 - Form of Opinion of Virginia counsel to WWI EXHIBIT L - Form of Registration Certificate EXHIBIT M - INTENTIONALLY OMITTED EXHIBIT N - Form of TLC Deed Poll EXHIBIT O - INTENTIONALLY OMITTED EXHIBIT P - Form of Financial Assistance Certificate -vii- THE BANK OF NOVA SCOTIA as the Administrative Agent, a Lead Arranger and a Book Manager CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of September 29, 1999, is among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), WW FUNDING CORP., a Delaware corporation (the "SP1 Borrower", and together with WWI, the "Borrowers"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as the syndication agent and as a lead arranger (in such capacities, the "Syndication Agent" and a "Lead Arranger", respectively), BHF (USA) CAPITAL CORPORATION ("BHF"), as the documentation agent (the "documentation agent") and THE BANK OF NOVA SCOTIA ("Scotiabank"), as (x) the administrative agent, paying agent and registration agent for the TLCs (as defined below) and (y) a lead arranger (in such capacities, the "Administrative Agent" and a "Lead Arranger", respectively) and as Issuer (as defined below) for the Lenders. W I T N E S S E T H: WHEREAS, ARTAL (as defined below) and/or certain of its Affiliates (collectively, the "Investors") intend to consummate a recapitalization transaction (such transactions as contemplated by the Recapitalization Agreement (as defined below), together with the transactions under and as contemplated by this Agreement and each other Loan Document, the "Transaction") of WWI; WHEREAS, H.J. Heinz Company, a Pennsylvania corporation ("HJH"), WWI and ARTAL have entered into that certain Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999 among WWI and HJH (the "Recapitalization Agreement"); WHEREAS, pursuant to the Recapitalization Agreement, (i) WWI will use $497,000,000 of the proceeds under this Agreement, the Senior Subordinated Note Indenture (as defined below) and the WWI Preferred Shares (as defined below), to redeem shares of common stock of WWI, par value $1.00 per share ("WWI Common Shares"), held by HJH (the "Redemption"), (ii) immediately after the Redemption, HJH shall sell and transfer to ARTAL, and ARTAL shall purchase (the "Stock Purchase" and, together with the Redemption, the "Recapitalization") from HJH, WWI Common Shares representing 94% of the then outstanding WWI Common Shares (after giving effect to the Redemption) and (iii) HJH, upon the consummation of the Stock Purchase, will continue to own WWI Common Shares representing 6% of the then outstanding WWI Common Shares (the "Equity Rollover"); WHEREAS, in connection with the Recapitalization, WWI will issue to HJH, no par value preferred shares of WWI with an aggregate amount liquidation preference equal to $25,000,000 (the "WWI Preferred Shares"); WHEREAS, in connection with (and contemporaneously with the consummation of) the Recapitalization, WWI will issue its 13% Senior Subordinated Notes, comprised of U.S. $150,000,000 and Euro $100,000,000, pursuant to the Senior Subordinated Note Indenture under a Rule 144A private placement (the "Senior Subordinated Debt Issuance"); WHEREAS, after giving effect to the Recapitalization and the Equity Rollover, ARTAL and HJH will own all of the issued and outstanding Capital Securities of WWI; WHEREAS, in connection with the Transaction and for the ongoing working capital and general corporate needs of WWI and its Subsidiaries, WWI desires to obtain from the Lenders (and the Issuer, as the case may be), (a) a Term-A Loan Commitment and a Term-B Loan Commitment pursuant to which Borrowings of Term Loans will be made in a maximum, original principal amount of the Term-A Loan Commitment Amount (in the case of Term-A Loans) and the Term-B Loan Commitment Amount (in the case of Term-B Loans), in each case in a single Borrowing to occur on the Closing Date; (b) a Revolving Loan Commitment (to include availability for Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to which Borrowings of Revolving Loans, in a maximum aggregate principal amount (together with all Swing Line Loans and Letter of Credit Outstandings) not to exceed the Revolving Loan Commitment Amount will be made from time to time on and subsequent to the Effective Date but prior to the Revolving Loan Commitment Termination Date; (c) a Letter of Credit Commitment pursuant to which the Issuer will issue Letters of Credit for the account of WWI from time to time on and subsequent to the Effective Date but prior to the Revolving Loan Commitment Termination Date in a maximum aggregate Stated Amount at any one time outstanding not to exceed the Letter of Credit Commitment Amount (provided that the aggregate outstanding principal amount of Revolving Loans, Swing Line Loans and Letter of Credit Outstandings at any time shall not exceed the then existing Revolving Loan Commitment Amount); and (d) a Swing Line Loan Commitment pursuant to which Borrowings of Swing Line Loans in an aggregate outstanding principal amount not to exceed the Swing Line Loan Commitment Amount will be made on and subsequent to the Effective Date but prior to the Revolving Loan Commitment Termination Date (provided, that the aggregate outstanding -2- principal amount of Swing Line Loans, Revolving Loans and Letter of Credit Outstandings at any time shall not exceed the then existing Revolving Loan Commitment Amount); with all the proceeds of the Credit Extensions to be used for the purposes set forth in Section 7.1.9; WHEREAS, in connection with the Transaction, the SP1 Borrower desires to obtain from the TLC Lenders TLC Commitments to purchase TLCs in an aggregate principal amount of the TLC Commitment Amount, such purchase to occur on the Closing Date with all the proceeds of such purchase to be used for the purposes set forth in Section 7.1.9; and WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article V), to extend such Commitments and make such Loans to WWI and issue (or participate in) Letters of Credit for the account of WWI and to purchase TLCs issued by the SP1 Borrower; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Acquired Businesses" means the weight control classroom meeting business being conducted as of the date of the Recapitalization by WWI, its Subsidiaries, FPL and, prior to the completion of the Reorganization (as defined in the Recapitalization Agreement), FNZ (collectively referred to as the "Companies") and HJH and its affiliates throughout the world and all other weight control services and activities and related businesses (including, without limitation, all licensing rights with respect to the Weight Watchers trademark other than as specified in clause (y) below) being conducted as of the date of the Recapitalization by the Companies throughout the world, together with the 35% equity interest held by WWI in Weight Watchers do Brasil Programas Alimentares Ltda. and the 35% equity interest held by WWI in Vigilantes do Peso Marketing Ltda., but excluding (x) the business being conducted as of the date of the Recapitalization by Cardio-Fitness Corp. and The Fitness Institute Limited, which are subsidiaries of HJH but are not Subsidiaries of WWI, and (y) the food business described on Schedule 1.1 to the Recapitalization Agreement. Notwithstanding the foregoing, Netco and its business shall not constitute an Acquired Business. -3- "Administrative Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 10.4. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 15% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agents" means collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent. "Agreement" means this Credit Agreement, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently established by the Administrative Agent at its Domestic Office as its base rate for U.S. Dollar loans in the United States; and (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrowers and the Lenders of changes in the Alternate Base Rate. "Applicable Margin" means at all times, (a) with respect to the unpaid principal amount of Term-B Loans maintained as a (i) Base Rate Loan, 3.00% per annum; and -4- (ii) LIBO Rate Loan, 4.00% per annum; (b) with respect to the unpaid principal amount of each Revolving Loan, Swing Line Loans and each Term-A Loan maintained as a Base Rate Loan, (i) from the Effective Date through (and including) the six-month anniversary of the Effective Date, 2.250% per annum, and (ii) thereafter, at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for Base Rate Loans"; and (c) with respect to the unpaid principal amount of each Revolving Loan and each Term-A Loan maintained as a LIBO Rate Loan, (i) from the Effective Date through (and including) the sixth-month anniversary of the Effective Date, 3.250% per annum, and (ii) thereafter, at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for LIBO Rate Loans": Applicable Margin for Revolving Loans, Swing Line Loans and Term-A Loans: Applicable Margin Applicable Margin Debt to EBITDA Ratio for Base Rate Loans for LIBO Rate Loans -------------------- ------------------- ------------------- Greater than or equal to 4.75 to 1.00 2.250% 3.250% Less than 4.75 to 1.00 and greater than or equal to 4.25 to 1.00 1.875% 2.875% Less than 4.25 to 1.00 and greater than or equal to 3.75 to 1.00 1.500% 2.500% Less than 3.75 to 1.00 and greater than or equal to 3.25 to 1.00 1.125% 2.125% Less than 3.25 to 1.00 0.750% 1.750% The Debt to EBITDA Ratio used to compute the Applicable Margin for Revolving Loans and Term-A Loans shall be the Debt to EBITDA Ratio set forth in the Compliance Certificate most recently delivered by WWI to the Administrative Agent pursuant to clause (c) of Section 7.1.1; changes in the Applicable Margin for Revolving Loans and Term-A Loans resulting from a change in the Debt to EBITDA Ratio shall become effective upon delivery by WWI to the Administrative Agent of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1 (it being understood that any such change effective on the six-month anniversary of the Effective Date shall be based on the most recent Compliance Certificate delivered prior to such six-month anniversary). If WWI shall fail to deliver a Compliance Certificate within the number of days after the end of any Fiscal Quarter as required pursuant to clause (c) of Section 7.1.1 (without giving effect to any grace period), the Applicable Margin for Revolving Loans and Term-A Loans from and including the first day after the date on which -5- such Compliance Certificate was required to be delivered to but not including the date WWI delivers to the Administrative Agent a Compliance Certificate shall conclusively equal the highest Applicable Margin for Revolving Loans and Term-A Loans set forth above. "ARTAL" means ARTAL Luxembourg S.A., a corporation organized under the laws of Luxembourg. "ARTAL Pledge Agreement" means the Pledge Agreement executed and delivered by ARTAL pursuant to clause (b) of Section 5.1.8, substantially in the form of Exhibit G-2 hereto, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "ASIC" means the Australian Securities and Investments Commission. "Assignee Lender" is defined in Section 11.11.1. "Australian Corporations Law" means the Corporations Law within the meaning of the Corporations Act 1989 of Australia. "Australian Dollar" or "A$" means the lawful money of Australia. "Australian Guaranty" means the Guaranty made by WW Australia, FPL and GB executed and delivered pursuant to clause (b) of Section 5.1.7 and substantially in the form of Exhibit H-1 hereto, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. "Australian Pledge Agreement" means the Pledge Agreement executed and delivered by UKHC2, WW Australia, FPL and GB pursuant to clause (d) of Section 5.1.8, substantially in the form of Exhibit G-4 hereto, together with each Supplement thereto delivered pursuant to clause (b) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Australian Security Agreement" means the Security Agreement executed and delivered by WW Australia, FPL and GB pursuant to clause (b) of Section 5.1.9, substantially in the form of Exhibit F-2 hereto, together with each Supplement thereto delivered pursuant to clause (a) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Australian Subsidiary" means any Subsidiary that is organized under the laws of Australia or any territory thereof. -6- "Authorized Officer" means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.1. "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing: (x) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (y) the sum of all such payments. "Base Amount" is defined in Section 7.2.7. "Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Borrowers" is defined in the preamble. "Borrowing" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by the relevant Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Request" means a loan request and certificate duly executed by an Authorized Officer of the applicable Borrower, substantially in the form of Exhibit B-1 hereto. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York City; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in U.S. Dollars are carried on in the London interbank market. "Capital Expenditures" means for any period, the sum, without duplication, of (a) the aggregate amount of all expenditures of WWI and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and -7- (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "Capital Securities" means, (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type. "Capitalized Lease Liabilities" means, without duplication, all monetary obligations of WWI or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Cash Equivalent Investment" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's, or (ii) any Lender which is an Eligible Institution (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any Lender; -8- (d) short-term tax-exempt securities rated not lower than MIG-1/1+ by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (e) any money market or similar fund the assets of which are comprised exclusively of any of the items specified in clauses (a) through (d) above and as to which withdrawals are permitted at least every 90 days; or (f) in the case of any Subsidiary of WWI organized in a jurisdiction outside the United States: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof), (ii) investments of the type and maturity described in clauses (a) through (e) above foreign obligors, which investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign ratings agencies or (iii) investments of the type and maturity described in clauses (a) through (e) above of foreign obligors (or the parents of such obligors), which investments or obligors (or the parents of such obligors are not rated as provided above but which are, in the reasonable judgment of WWI, comparable in investment quality to such investments and obligors (or the parents of such obligors); provided that the aggregate face amount outstanding at any time of such investments of all foreign Subsidiaries of WWI made pursuant to this clause (iii) does not exceed $25,000,000. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means (a) at any time prior to an Initial Public Offering, the failure of the Permitted ARTAL Investor Group, to directly own, free and clear of all Liens (other than in favor of the Administrative Agent pursuant to a Loan Document), 75% of the outstanding voting shares of Capital Securities of WWI on a fully diluted basis; provided, that, all owners of such Capital Securities of WWI (whether a member of the Permitted ARTAL Investor Group, HJH or any transferee, successor or assign thereof) shall have executed a pledge agreement in favor of the Administrative Agent, substantially in the form of Exhibit G-3 hereof; (b) at any time after an Initial Public Offering, the failure of the Permitted ARTAL Investor Group to own, directly or indirectly through any Wholly-owned Subsidiaries, free and clear of all Liens, at least 51% of the outstanding voting shares of Capital Securities of WWI on a fully diluted basis; -9- (c) at any time after an Initial Public Offering, any "person" or "group" (as such terms are used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than the Permitted ARTAL Investor Group) becomes, directly or indirectly, in a single transaction or in a related series of transactions by way of merger, consolidation, or other business combination or otherwise, the "beneficial owner" (as such term is used in Rule 13d-3 of the Exchange Act) of more than 20% of the total voting power in the aggregate of all classes of Capital Securities of WWI then outstanding entitled to vote generally in elections of directors of WWI; (d) at all times, as applicable, individuals who at the Closing Date constituted the Board of Directors of WWI (together with any new directors whose election to such Board or whose nomination for election by the stockholders of WWI was approved by a member of the Permitted ARTAL Investor Group or a vote of 662/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of WWI then in office; (e) at all times, as applicable, the failure of WWI to own, free and clear of all Liens (other than in favor of the Administrative Agent pursuant to a Loan Document), all of the outstanding shares of Capital Securities of each of (x) UKHC1, UKHC2 and WW Australia (other than shares of Capital Securities issued pursuant to a Local Management Plan), and (y) the SP1 Borrower, in each case on a fully diluted basis; or (f) any other event constituting a Change of Control (as defined in the Senior Subordinated Note Indenture). "Closing Date" means the date on which the initial Credit Extension is made hereunder. "Closing Date Certificate" means a certificate of an Authorized Officer of each Borrower substantially in the form of Exhibit D hereto, delivered pursuant to Section 5.1.5. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means, as the context may require, a Lender's Letter of Credit Commitment, Revolving Loan Commitment, Swing Line Loan Commitment, Term-A Loan Commitment or Term-B Loan Commitment. "Commitment Amount" means, as the context may require, the Letter of Credit Commitment Amount, the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount, the Term-A Loan Commitment Amount or the Term-B Loan Commitment Amount. -10- "Commitment Termination Date" means, as the context may require, the Revolving Loan Commitment Termination Date, the Term-A Loan Commitment Termination Date or the Term-B Loan Commitment Termination Date. "Commitment Termination Event" means (a) the occurrence of any Event of Default described in clauses (a) through (d) of Section 9.1.9; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans and the TLCs to be due and payable pursuant to Section 9.3, or (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to WWI that the Commitments have been terminated. "Companies Act 1985" means the English Companies Act of 1985. "Compliance Certificate" means a certificate duly completed and executed by the chief financial Authorized Officer of WWI, substantially in the form of Exhibit E hereto. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the applicable Borrower, substantially in the form of Exhibit C hereto. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with WWI, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. -11- "Copyright Security Agreement" means a Copyright Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit C to the WWI Security Agreement, as amended, supplemented, amended and restated or otherwise modified. "Credit Extension" means, as the context may require, (a) the making of a Loan by a Lender; (b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any previously issued Letter of Credit, by the Issuer; or (c) the purchase of a TLC by a TLC Lender "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Current Assets" means, on any date, without duplication, all assets (other than cash) which, in accordance with GAAP, would be included as current assets on a consolidated balance sheet of WWI and its Subsidiaries at such date as current assets (excluding, however, amounts due and to become due from Affiliates of WWI which have arisen from transactions which are other than arm's-length and in the ordinary course of its business). "Current Liabilities" means, on any date, without duplication, all amounts which, in accordance with GAAP, would be included as current liabilities on a consolidated balance sheet of WWI and its Subsidiaries at such date, excluding current maturities of Indebtedness. "Debt" means the outstanding principal amount of all Indebtedness of WWI and its Subsidiaries of the type referred to in clauses (a), (b), (c) and (e) of the definition of "Indebtedness" or any Contingent Liability in respect thereof. "Debt to EBITDA Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) Debt outstanding on the last day of such Fiscal Quarter to (b) EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters; -12- "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Designated Subsidiary" means The Weight Watchers Foundation, Inc., a New York not-for-profit corporation. "Disbursement" is defined in Section 2.6.2. "Disbursement Date" is defined in Section 2.6.2. "Disbursement Due Date" is defined in Section 2.6.2. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrowers with the written consent of the Required Lenders. "Disposition" (or correlative words such as "Dispose") means any sale, transfer, lease contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, any of WWI's or its Subsidiaries, assets (including accounts receivable and Capital Securities of Subsidiaries) to any other Person (other than to another Obligor) in a single transaction or series of transactions. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such on Schedule III hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "EBITDA" means, for any applicable period, the sum (without duplication) of (a) Net Income, plus (b) the amount deducted, in determining Net Income, representing amortization of assets (including amortization with respect to goodwill, deferred financing costs, other non-cash interest and all other intangible assets), -13- plus (c) the amount deducted, in determining Net Income, of all income taxes (whether paid or deferred) of WWI and its Subsidiaries, plus (d) Interest Expense, plus (e) the amount deducted, in determining Net Income, representing depreciation of assets, plus (f) an amount equal to all non-cash charges deducted in arriving at Net Income, plus (g) an amount equal to all minority interest charges deducted in determining Net Income (net of Restricted Payments made in respect of such minority interest) plus (h) an amount equal to the cash royalty payment received pursuant to the Warnaco Agreement, to the extent not included in the calculation of Net Income, plus (i) the amount deducted, in determining Net Income, due to foreign currency translation required by FASB 52 arising after June 30, 1997, plus (j) the amount deducted, in determining Net Income, of all Specified Adjustments, minus (k) an amount equal to the amount of all non-cash credits included in arriving at Net Income. -14- "Effective Date" means the date this Agreement becomes effective pursuant to Section 11.8. "Eligible Institution" means a financial institution that either (a) has combined capital and surplus of not less than $500,000,000 or its equivalent in foreign currency, whose long-term certificate of deposit rating or long-term senior unsecured debt rating is rated "BBB" or higher by S&P and "Baa2" or higher by Moody's or an equivalent or higher rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments or (b) is reasonably acceptable to the Administrative Agent and the Issuer. "Environmental Laws" means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "Equity Rollover" is defined in the third recital. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Euro $" means the single currency of participating member States of the European Union. "Event of Default" is defined in Section 9.1. "Excess Cash Flow" means, for any Fiscal Year, the excess (if any), of (a) EBITDA for such Fiscal Year over (b) the sum, without duplication (for such Fiscal Year) of (i) Interest Expense; plus (ii) scheduled payments and optional and mandatory prepayments (other than such prepayments made under clause (c) of Section 3.1.1), to the extent actually made, of the principal amount of the Term Loans and TLCs or any other term Debt (including Capitalized Lease Liabilities) and mandatory prepayments of the principal amount of the Revolving Loans pursuant to clause (e) of Section 3.1.1 in connection with a reduction of the Revolving Loan Commitment Amount; plus -15- (iii) all federal, state and foreign income taxes actually paid in cash by WWI and its Subsidiaries; plus (iv) Capital Expenditures actually made in such Fiscal Year pursuant to Section 7.2.7 (other than clause (z) therein) (excluding Capital Expenditures constituting Capitalized Leases and by way of the incurrence of Indebtedness to a vendor of any assets permitted to be acquired pursuant to Section 7.2.8 to finance the acquisition of such assets); plus (v) the amount of the net increase (or minus a net decrease), of Current Assets over Current Liabilities of WWI and its Subsidiaries from the last day of the immediately preceding Fiscal Year; plus (vi) Investments permitted and actually made pursuant to clauses (d), (g), (h), (i) and (j) of Section 7.2.5; plus (vii) Restricted Payments permitted and actually made pursuant to Section 7.2.6; plus (viii) nonrecurring restructuring costs and costs and expenses incurred in connection with the Transaction, in an aggregate amount not to exceed $5,000,000. "Excluded Equity Proceeds" means any proceeds received by WWI or any of its Subsidiaries from the sale or issuance by such Person of its Capital Stock or any warrants or options in respect of any such Capital Stock or the exercise of any such warrants or options, in each case pursuant to any such sale, issuance or exercise constituting or resulting from (i) capital contributions to, or permitted Capital Stock issuances by, WWI (exclusive of any such contribution or issuance resulting from an Initial Public Offering or a widely distributed private offering exempted from the registration requirements of Section 5 of the Securities Act of 1933, as amended), (ii) any subscription agreement, incentive plan or similar arrangement with any officer, employee or director of WWI or any of its -16- Subsidiaries pursuant to a Local Management Plan or (iii) the exercise of any options or warrants issued to any officer, employee or director described in clause (ii) above. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letters" means, collectively, (a) the confidential fee letter, dated as of July 20, 1999, between Artal International S.A., a Luxembourg corporation ("AI"), and the Administrative Agent, as assumed by ARTAL, and (b) the confidential fee letter, dated as of July 20, 1999, among AI, the Administrative Agent and the Syndication Agent, as assumed by ARTAL. "Final Termination Date" means the later of: (x) the Stated Maturity Date with respect to Term-B-Loans and the TLCs, and (y) the date on which all Obligations are satisfied and paid in full. "Fiscal Quarter" means any three-month period ending on or about July 31, October 31, January 31 or April 30 of any Fiscal Year (as determined in accordance with WWI's historical practices); provided, that if WWI changes its Fiscal Year pursuant to Section 7.2.15, then the references in this definition to such existing Fiscal Quarter end dates shall be changed to the appropriate new Fiscal Quarter end dates. "Fiscal Year" means any calendar year ending on or about April 30 (as determined in accordance with WWI's historical practices); references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "2000 Fiscal Year") refer to the Fiscal Year ending on or about April 30 of that calendar year; provided that if WWI changes its Fiscal Year pursuant to Section 7.2.15, then the references in this definition to such existing Fiscal Year end date shall be changed to the new Fiscal Year end date. -17- "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of, for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters, (a) EBITDA minus Capital Expenditures made during such period to (b) (i) Interest Expense for such period plus (ii) scheduled repayments of Debt in respect of such period, whether or not paid plus (iii) dividends paid in cash on the WWI Preferred Shares in respect of such period. For purposes of calculating the cash Interest Expense component of the ratio as of the last day of the first, second, third and fourth Fiscal Quarters ending after the Closing Date, the amounts of cash Interest Expense included in the ratio shall be determined by multiplying cash Interest Expense for the period commencing on the Closing Date and ending as of the last day of such Fiscal Quarter by a fraction, the numerator of which is 365 and the denominator of which is the number of calendar days from the Closing Date through the last day of such Fiscal Quarter. "FNZ" means Fortuity New Zealand Limited, a New Zealand corporation which owns and operates the Weight Watchers classroom franchise and business in New Zealand. "FNZ Guaranty" means the Guaranty to be made by FNZ executed and delivered pursuant to this Agreement, in form and substance satisfactory to the Administrative Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms. "FNZ Pledge Agreement" means the Pledge Agreement to be executed and delivered by FNZ pursuant to this Agreement, in form and substance satisfactory to the Administrative Agent, together with each Supplement thereto delivered pursuant to clause (b) of Section 7.1.13, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereto. "FNZ Security Agreement" means the Security Agreement to be executed and delivered by FNZ pursuant to this Agreement, in form and substance satisfactory to the Administrative Agent, together with each Supplement thereto delivered pursuant to clause (c) of Section 7.1.13, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Foreign Currency" means any currency other than U.S. Dollars. -18- "FPL" means Fortuity Pty. Ltd. (ACN 007 148 683), an Australian company incorporated in the State of Victoria which operates the Weight Watchers classroom franchise and business in Victoria. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "GB" means Gutbusters Pty. Ltd. (ACN 059 073 157), an Australian company incorporated in the State of New South Wales. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local (or the equivalent thereof), and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guaranteed Obligations" is defined in Section 8.1. "Guaranties" means, collectively, (a) the WWI Guaranty, (b) the Australian Guaranty, (c) the Subsidiary Guaranty, (d) the FNZ Guaranty and (e) each other guaranty delivered from time to time pursuant to the terms of this Agreement. "Guarantor" means any Person which has or may issue a Guaranty hereunder. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA or equivalent applicable foreign law; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended or equivalent applicable foreign law; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. -19- "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates, including but not limited to Rate Protection Agreements. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "HJH" is defined in the second recital. "HJH Pledge Agreement" means the Pledge Agreement executed and delivered by HJH pursuant to clause (c) of Section 5.1.8, substantially in the form of Exhibit G-3 hereto, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Immaterial Subsidiary" means, at any date of determination, any Subsidiary or group of Subsidiaries of WWI having assets as at the end of or EBITDA for the immediately preceding four Fiscal Quarter period for which the relevant financial information has been delivered pursuant to clause (a) or clause (b) of Section 7.1.1 of less than 5% of total assets of WWI and its Subsidiaries or $2,000,000, respectively, individually or in the aggregate. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of any Obligor, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause such Obligor to be in default of any of its obligations under Section 7.2.4. "including" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. -20- "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments for borrowed money in respect thereof; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) net liabilities of such Person under all Hedging Obligations; (e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, other than the WWI Preferred Shares, and indebtedness (excluding prepaid interest thereon and interest not yet due) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; provided, however, that, for purposes of determining the amount of any Indebtedness of the type described in this clause, if recourse with respect to such Indebtedness is limited to specific property financed with such Indebtedness, the amount of such Indebtedness shall be limited to the fair market value (determined on a basis reasonably acceptable to the Administrative Agent) of such property or the principal amount of such Indebtedness, whichever is less; and (f) all Contingent Liabilities of such Person in respect of any of the foregoing; provided, that, Indebtedness shall not include unsecured Indebtedness incurred in the ordinary course of business in the nature of accrued liabilities and open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding the Indebtedness incurred through the borrowing of money or Contingent Liabilities in connection therewith. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer (to the extent such Person is liable for such Indebtedness). "Indemnified Liabilities" is defined in Section 11.4. "Indemnified Parties" is defined in Section 11.4. -21- "Initial Public Offering" means any sale of the Capital Securities of WWI to the public pursuant to an initial, primary offering registered under the Securities Act of 1933 and, for purposes of the Change in Control definition only, pursuant to which no less than 10% of the Capital Securities of WWI outstanding after giving effect to such offering was sold pursuant to such offering. "Intercompany Subordination Agreement" means the Intercompany Subordination Agreement, executed and delivered by WWI, the SPI Borrower and each of the Guarantors, pursuant to Section 5.1.22, substantially in the form of Exhibit I hereto. "Interest Coverage Ratio" means, at the close of any Fiscal Quarter, the ratio computed (except as set forth in the proviso set forth below) for the period consisting of such Fiscal Quarter and each of the three immediately prior Fiscal Quarters of: (a) EBITDA (for such period) to (b) Interest Expense (for such period); For purposes of calculating the cash Interest Expense component of the ratio as of the last day of the first, second, third and fourth Fiscal Quarters ending after the Closing Date, the amounts of cash Interest Expense included in the ratio shall be determined by multiplying cash Interest Expense for the period commencing on the Closing Date and ending as of the last day of such Fiscal Quarter by a fraction, the numerator of which is 365 and the denominator of which is the number of calendar days from the Closing Date through the last day of such Fiscal Quarter. "Interest Expense" means, for any Fiscal Quarter, the aggregate consolidated cash interest expense (net of interest income) of WWI and its Subsidiaries for such Fiscal Quarter, as determined in accordance with GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense. "Interest Period" means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3.1 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six or, with the consent of each applicable Lender, nine or twelve months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as WWI may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) WWI shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates; -22- (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (d) no Interest Period for any Loan may end later than the Stated Maturity Date for such Loan. "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); and (b) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such transfer or exchange. "Investors" is defined in the first recital. "Issuance Request" means a Letter of Credit request and certificate duly executed by an Authorized Officer of WWI, substantially in the form of Exhibit B-2 hereto. "Issuer" means, collectively, Scotiabank in its individual capacity hereunder as issuer of the Letters of Credit and such other Lender as may be designated by Scotiabank (and agreed to by WWI and such Lender) in its individual capacity as the issuer of Letters of Credit. "Lead Arrangers" means Scotiabank and CSFB. "Lender Assignment Agreement" means a Lender Assignment Agreement substantially in the form of Exhibit J hereto. "Lenders" is defined in the preamble. -23- "Lender's Environmental Liability" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against the Administrative Agent, the Syndication Agent, any Lead Arranger, any Lender or any Issuer or any of such Person's Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from: (a) any Hazardous Material on, in, under or affecting all or any portion of any property of WWI or any of its Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to the extent caused by Releases from WWI or any of its Subsidiaries' or any of their respective predecessors' properties; (b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 6.12; (c) any violation or claim of violation by WWI or any of its Subsidiaries of any Environmental Laws; or (d) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by WWI or any of its Subsidiaries, or in connection with any property owned or formerly owned by WWI or any of its Subsidiaries. "Letter of Credit" is defined in Section 2.1.3. "Letter of Credit Commitment" means, with respect to the Issuer, the Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and, with respect to each of the other Lenders that has a Revolving Loan Commitment, the obligations of each such Lender to participate in such Letters of Credit pursuant to Section 2.6.1. "Letter of Credit Commitment Amount" means, on any date, a maximum amount of $10,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, plus -24- (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations in respect of such Letters of Credit. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which U.S. Dollar deposits in immediately available funds are offered to the Administrative Agent's LIBOR Office in the London interbank market as at or about 11:00 a.m. London time two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of the Administrative Agent's LIBO Rate Loan and for a period approximately equal to such Interest Period. "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate ------------------------------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent from Scotiabank, two Business Days before the first day of such Interest Period. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such on Schedule III hereto or designated in the Lender Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to WWI and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. -25- "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or any filing or recording of any instrument or document in respect of the foregoing, to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "Loan" means, as the context may require, a Revolving Loan, a Swing Line Loan, a Term-A Loan, or a Term-B Loan of any type. "Loan Document" means this Agreement, the Notes, the TLCs, the Letters of Credit, each Rate Protection Agreement under which that counterpart to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender relating to Hedging Obligations of WWI or any of its Subsidiaries, the Fee Letter, each Pledge Agreement, each Guaranty, each Security Agreement, the TLC Deed Poll, the Intercompany Subordination Agreement and each other agreement, document or instrument delivered in connection with this Agreement or any other Loan Document, whether or not specifically mentioned herein or therein. "Local Management Plan" means an equity plan or program for the sale or issuance of Capital Securities of a Subsidiary in an amount not to exceed 5% of the outstanding common equity of such Subsidiary to local management or a plan or program in respect of Subsidiaries of WWI whose principal business is conducted outside of the United States. "Material Adverse Effect" means (a) a material adverse effect on the financial condition, operations, assets, business or properties of WWI and its Subsidiaries, taken as a whole, (b) a material impairment other than an event or set of circumstances described in clause (a) of the ability of any Obligor (other than any Immaterial Subsidiary) to perform its respective material obligations under the Loan Documents to which it is or will be a party, or (c) an impairment of the validity or enforceability of, or a material impairment of the rights, remedies or benefits available to the Administrative Agent, the Issuer or the Lenders under, this Agreement or any other Loan Document. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means, collectively, each Mortgage or Deed of Trust executed and delivered pursuant to the terms of this Agreement, including clause (b) of Section 7.1.8. "Net Disposition Proceeds" means, with respect to a Permitted Disposition of the assets of WWI or any of its Subsidiaries, the excess of (a) the gross cash proceeds received by WWI or any of its Subsidiaries from any Permitted Disposition and any cash payments received in respect of promissory notes or other -26- non-cash consideration delivered to WWI or such Subsidiary in respect of any Permitted Disposition, less (b) the sum of (i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and all other reasonable fees, expenses and charges, in each case actually incurred in connection with such Permitted Disposition which have not been paid to Affiliates of WWI, (ii) all taxes and other governmental costs and expenses actually paid or estimated by WWI (in good faith) to be payable in cash in connection with such Permitted Disposition, and (iii) payments made by WWI or any of its Subsidiaries to retire Indebtedness (other than the Loans) of WWI or any of its Subsidiaries where payment of such Indebtedness is required in connection with such Permitted Disposition; provided, however, that if, after the payment of all taxes with respect to such Permitted Disposition, the amount of estimated taxes, if any, pursuant to clause (b)(ii) above exceeded the tax amount actually paid in cash in respect of such Permitted Disposition, the aggregate amount of such excess shall be immediately payable, pursuant to clause (b) of Section 3.1.1, as Net Disposition Proceeds. Notwithstanding the foregoing, Net Disposition Proceeds shall not include fees or other amounts paid to WWI or its Subsidiaries in respect of a license of intellectual property (not related to the classroom business of WWI or its Subsidiaries) having customary terms and conditions for similar licenses. "Net Equity Proceeds" means with respect to the sale or issuance by WWI to any Person of any stock, warrants or options or the exercise of any such warrants or options after the Effective Date, the excess of: (a) the gross cash proceeds received by WWI from such sale, exercise or issuance (other than Excluded Equity Proceeds), over (b) all reasonable and customary underwriting commissions and legal, investment banking, brokerage and accounting and other professional fees, sales commissions and -27- disbursements and all other reasonable fees, expenses and charges, in each case actually incurred in connection with such sale or issuance which have not been paid to Affiliates of WWI in connection therewith. "Net Income" means, for any period, the net income of WWI and its Subsidiaries for such period on a consolidated basis, excluding extraordinary gains. "Netco" means Weight Watchers.com Inc., a [Delaware] corporation. "Non-Excluded Taxes" means any Taxes other than (i) net income and franchise taxes imposed with respect to any Secured Party by a Governmental Authority under the laws of which such Secured Party is organized or in which it maintains its applicable lending office and (ii) any Taxes imposed on a Secured Party by any jurisdiction as a result of any former or present connection between such Secured Party and such jurisdiction other than a connection arising from a Secured Party entering into this Agreement or making any loan hereunder. "Non-Guarantor Subsidiary" means the Designated Subsidiary and any other Subsidiary of WWI other than any Person which has or may issue a Guaranty hereunder. "Non-U.S. Lender" means any Lender (including each Assignee Lender) that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any state thereof, or (iii) any estate or trust that is subject to U.S. Federal income taxation regardless of the source of its income. "Note" means, as the context may require, a Revolving Note, a Swing Line Note, a Registered Note, a Term-A Note, or a Term-B Note. "Obligations" means all obligations (monetary or otherwise) of the Borrowers and each other Obligor arising under or in connection with this Agreement, the Notes, each Letter of Credit and each other Loan Document, and Hedging Obligations owed to a Lender or an Affiliate thereof (unless the Lender or such Affiliate otherwise agrees). "Obligor" means any Borrower or any other Person (other than any Agent, any Lender or the Issuer) obligated under any Loan Document. "Organic Document" means, relative to any Obligor, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements (or the foreign equivalent thereof) applicable to any of its authorized shares of Capital Securities. "Other Taxes" means any and all stamp, documentary or similar taxes, or any other excise or property taxes or similar levies that arise on account of any payment made or required to be made -28- under any Loan Document or from the execution, delivery, registration, recording or enforcement of any Loan Document. "Participant" is defined in Section 11.11.2. "Patent Security Agreement" means a Patent Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit A to the WWI Security Agreement, as amended, supplemented, amended and restated or otherwise modified. "PBGC" means the Pension Benefit Guaranty Corporation and any successor entity. "Pension Plan" means a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which WWI or any corporation, trade or business that is, along with WWI, a member of a Controlled Group, has or within the prior six years has had any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Percentage" means, relative to any Lender, the applicable percentage relating to Term-A Loans, Term-B Loans, Revolving Loans or TLCs, as the case may be, as set forth opposite its name on Schedule II hereto under the applicable column heading or set forth in Lender Assignment Agreement(s) under the applicable column heading, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11. A Lender shall not have any Commitment to make a particular Tranche of Loans or purchase TLCs (as the case may be) if its percentage under the respective column heading is zero. "Permitted ARTAL Investor Group" means ARTAL or any of its direct or indirect Wholly-owned Subsidiaries and ARTAL Group S.A., a Luxembourg corporation or any of its direct or indirect Wholly-owned Subsidiaries. "Permitted Disposition" means a Disposition in accordance with the terms of clause (b) (other than as permitted by clause (a)) of Section 7.2.9. "Person" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency, limited liability company or any other entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any Pension Plan or Welfare Plan. -29- "Pledge Agreements" means, collectively, (a) the WWI Pledge Agreement, (b) the ARTAL Pledge Agreement, (c) the HJH Pledge Agreement, (d) the Australian Pledge Agreement, (e) the U.K. Pledge Agreement, (f) the FNZ Pledge Agreement and (g) each other pledge agreement delivered from time to time pursuant to clause (b) of Section 7.1.7. "Pro Forma Balance Sheet" is defined in clause (b) of Section 5.1.11. "Qualified Assets" is defined in clause (b) of Section 3.1.1. "Quarterly Payment Date" means the last day of each March, June, September and December, or, if any such day is not a Business Day, the next succeeding Business Day. "Rate Protection Agreements" means, collectively, arrangements entered into by any Person designed to protect such Person against fluctuations in interest rates or currency exchange rates, pursuant to the terms of this Agreement. "Recapitalization" is defined in the third recital. "Recapitalization Agreement" is defined in the second recital. "Redemption" is defined in the third recital. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of WWI or any of its Subsidiaries existing on the Closing Date or otherwise permitted hereunder, including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that: (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; -30- (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided, further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Subsidiary that Refinances Indebtedness of WWI or (B) Indebtedness of WWI or a Subsidiary that Refinances Indebtedness of another Subsidiary. "Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2. "Register" is defined in Section 11.11.3. "Registered Note" means a promissory note of WWI payable to any Registered Noteholder, in the form of Exhibit A-6 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Registered Noteholder" means any Lender that has been issued a Registered Note. "Reimbursement Obligation" is defined in Section 2.6.3. "Release" means a "release", as such term is defined in CERCLA. -31- "Required Lenders" means, at any time, (a) prior to the date of the making of the initial Credit Extension hereunder, Lenders having at least 66 2/3% of the sum of the Revolving Loan Commitments, Term-A Loan Commitments and Term-B Loan Commitments and the TLC Commitment; and (b) on and after the date of the initial Credit Extension, (i) until such time as the Administrative Agent and the Syndication Agent have a combined Total Exposure Amount of less than 40%, Lenders having 66 2/3% of the Total Exposure Amount and (ii) thereafter Lenders holding at least 51% of the Total Exposure Amount. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time. "Restricted Payments" is defined in Section 7.2.6. "Revolving Loan" is defined in clause (a) of Section 2.1.2. "Revolving Loan Commitment" is defined in clause (a) of Section 2.1.2. "Revolving Loan Commitment Amount" means, on any date, $30,000,000, as such amount may be (i) reduced from time to time pursuant to Section 2.2 or (ii) increased pursuant to clause (c) of Section 2.1.2. "Revolving Loan Commitment Termination Date" means the earliest of (a) October 15, 1999 if the Term Loans have not been made on or prior to such date; (b) September 30, 2005; (c) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clauses (c) or (d), the Revolving Loan Commitments shall terminate automatically and without any further action. "Revolving Note" means a promissory note of WWI payable to a Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from -32- outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "Scotiabank" is defined in the preamble. "Secured Parties" means, collectively, the Lenders, the Issuers, the Administrative Agent, the Syndication Agent, the Lead Arrangers, each counterparty to a Rate Protection Agreement that is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate thereof and (in each case) and each of their respective successors, transferees and assigns. "Security Agreements" means, collectively, (a) the WWI Security Agreement, (b) the Australian Security Agreement, (c) the U.K. Security Agreement, (d) the Patent Security Agreements, the Trademark Security Agreements and the Copyright Security Agreements, (e) the FNZ Security Agreement and (f) each other security agreement executed and delivered from time to time pursuant to clause (a) of Section 7.1.7, in each case, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Senior Debt" means all Debt other than Subordinated Debt. "Senior Debt to EBITDA Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) Senior Debt outstanding on the last day of such Fiscal Quarter to (b) EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters; "Senior Subordinated Debt" means debt of WWI under its 13% Senior Subordinated Notes in an aggregate principal amount of $255,000,000, issued under the Senior Subordinated Note Indenture pursuant to a Rule 144A private placement. "Senior Subordinated Debt Issuance" is defined in the fifth recital. "Senior Subordinated Noteholder" means, at any time, any holder of a Senior Subordinated Note. "Senior Subordinated Notes" means those certain 13% Senior Subordinated Notes due 2009, issued pursuant to the Senior Subordinated Note Indenture. -33- "Senior Subordinated Note Indenture" means collectively that certain Senior Subordinated Note Indenture, dated as of September 29, 1999 between WWI and Norwest Bank Minnesota, National Association, as trustee, related to the issuance of $150,000,000 Senior Subordinated Notes and that certain Senior Subordinated Note Indenture, dated as of September 29, 1999, between WWI and Norwest Bank Minnesota, National Association, as trustee, related to the issuance of Euro$100,000,000 Senior Subordinated Notes . "Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and such person is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Specified Adjustments" means an amount equal to the sum of: (a) the amount deducted in determining Net Income, representing transaction expenses (including one time charges and transaction related management bonuses) related to the separation from HJH, plus (b) an amount deducted in arriving at Net Income, equal to restructuring charges in connection with the Transaction, not to exceed $3,000,000, plus (c) the amount deducted in determining Net Income for periods ending prior to the Closing Date representing management incentive bonuses; plus (d) for each period ending after the Closing Date, pro forma adjustments in connection with the separation from HJH in an amount not to exceed $2,500,000 for each of the Fiscal Quarters ended or ending April 24, 1999, July 24, 1999 and October 23, 1999. -34- "Stated Amount" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof. "Stated Expiry Date" is defined in Section 2.6. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Stated Maturity Date" means (a) in the case of any Revolving Loan, September 30, 2005; (b) in the case of any Term-A Loan, September 30, 2005; (c) in the case of any Term-B Loan, September 30, 2006; and (d) in the case of any TLC, September 30, 2006. "Stock Purchase" is defined in the third recital. "Subordinated Debt" means, as the context may require, (i) the unsecured Debt of WWI evidenced by the Senior Subordinated Notes and (ii) to the extent permitted by the Required Lenders, any other unsecured Debt of WWI subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Administrative Agent and Required Lenders. "Subordinated Guaranty" means collectively, (i) the Guaranty executed and delivered by certain Subsidiaries of WWI pursuant to Section 4.13 of the Senior Subordinated Note Indenture and (ii) each other guaranty, if any, executed from time to time by any Subsidiary of WWI pursuant to which the guarantor thereunder has any Contingent Liability with respect to any Subordinated Debt. "Subordination Provisions" is defined in Section 9.1.11. "Subsidiary" means, with respect to any Person, any corporation, partnership or other business entity of which more than 50% of the outstanding Capital Securities (or other ownership interest) having ordinary voting power to elect a majority of the board of directors, managers or other voting members of the governing body of such entity (irrespective of whether at the time Capital Securities (or other -35- ownership interest) of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term "Subsidiary" shall be a reference to a Subsidiary of WWI. "Subsidiary Guaranty" means the Guaranty made or to be made, as the case may be, by the U.S. Subsidiaries (other than the SP1 Borrower and the Designated Subsidiary), UKHC1, UKHC2 and WWUK and its Subsidiaries, executed and delivered pursuant to the terms of this Agreement, and substantially in the form of Exhibit H hereto, as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms. "Swing Line Lender" means Scotiabank (or another Lender designated by Scotiabank with the consent of WWI, if such Lender agrees to be the Swing Line Lender hereunder), in such Person's capacity as the maker of Swing Line Loans. "Swing Line Loan" is defined in clause (b) of Section 2.1.2. "Swing Line Loan Commitment" means, with respect to the Swing Line Lender, the Swing Line Lender's obligation pursuant to clause (b) of Section 2.1.2 to make Swing Line Loans and, with respect to each Lender with a Commitment to make Revolving Loans (other than the Swing Line Lender), such Lender's obligation to participate in Swing Line Loans pursuant to Section 2.3.2. "Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Swing Line Note" means a promissory note of WWI payable to the Swing Line Lender, in substantially the form of Exhibit A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to the Swing Line Lender resulting from outstanding Swing Line Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Syndication Agent" is defined in the preamble. "Taxes" is defined in Section 4.6. "Term Loans" means collectively, the Term-A Loans and the Term-B Loans. "Term-A Loan Commitment Amount" means $75,000,000. -36- "Term-A Loan Lender" means any Lender which, on the Effective Date, has a Percentage of the Term-A Loan Commitment Amount. "Term-A Loans" is defined in clause (a) of Section 2.1.1. "Term-A Loan Commitment Termination Date" means the earliest of : (a) October 15, 1999, if the Term-A Loans have not been made on or prior to such date; (b) the Effective Date (immediately after the making of the Term-A Loans on such date); and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clauses (b) or (c), the Term-A Loan Commitments shall terminate automatically and without any further action. "Term-A Note" means a promissory note of WWI, payable to the order of any Lender, in the form of Exhibit A-3 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term-A Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term-B Loan Commitment Amount" means $75,000,000. "Term-B Loan Lender" means any Lender which on the Effective Date has a Percentage of the Term-B Loan Commitment Amount. "Term-B Loans" is defined in clause (b) of Section 2.1.1. "Term-B Note" means a promissory note of WWI, payable to the order of any Lender, in the form of Exhibit A-4 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of WWI to such Lender resulting from outstanding Term-B Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term-B Loan Commitment Termination Date" means the earliest of (a) October 15, 1999, if the Term-B Loans have not been made on or prior to such date; -37- (b) the Effective Date (immediately after the making of the Term-B Loans on such date); and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clauses (b) or (c), the Term-B Loan Commitments shall terminate automatically and without any further action. "TLC" means an instrument executed by the SP1 Borrower, which acknowledges the Indebtedness of the SP1 Borrower with respect to any Lender, in the form of Exhibit A-6 hereto (as such instrument may be amended, endorsed or otherwise modified from time to time), and also means all other instruments accepted from time to time in substitution therefor or renewal thereof. "TLC Commitment" is defined in Section 2.9 "TLC Commitment Amount" means $87,000,000. "TLC Commitment Termination Date" means (a) October 15, 1999, if the TLCs have not been made on or prior to such date; (b) the Effective Date (immediately after the making of the TLCs on such date); and (c) the date on which any Commitment Termination Event occurs. "TLC Deed Poll" means the Deed Poll, dated as of September 29, 1999, among the SP1 Borrower and each TLC Holder (as defined therein), as amended, amended and restated, supplemented or otherwise modified from time to time. "TLC Lender" means any Lender which on the Effective Date has TLC Commitments. "Total Exposure Amount" means, on any date of determination, the then outstanding principal amount of all Term Loans and the TLCs and the then effective Revolving Loan Commitment Amount. "Trademark Security Agreement" means a Trademark Security Agreement executed and delivered by any Obligor substantially in the form of Exhibit B to the WWI Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Tranche" means, as the context may require, the (a) Loans constituting Term-A Loans, Term-B Loans, Swing Line Loans or Revolving Loans or (b) TLCs. -38- "Transaction" is defined in the first recital. "type" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York. "UKHC1" means Weight Watchers UK Holding Ltd, a company incorporated under the laws of England. "UKHC2" means Weight Watchers International Ltd, a company incorporated under the laws of England. "U.K. Pledge Agreement" means the Deed of Charge to be executed and delivered by WWI on or prior to the third Business Day after the Closing Date, in form and substance acceptable to the Administrative Agent pursuant to Section 7.1.16 (and with respect to UKHC1, UKHC2 and WWUK and its Subsidiaries, the Deed of Charge to be executed and delivered pursuant to clause (c) of Section 7.1.14 by such Subsidiaries), together with each other pledge agreement delivered pursuant to clause (b) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "U.K. Security Agreement" means the Debenture to be executed and delivered by UKHC1, UKHC2 and WWUK and each of its Subsidiaries pursuant to clause (c) of Section 7.1.14, in form and substance acceptable to the Administrative Agent, together with each other security agreement delivered pursuant to clause (a) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "U.K. Subsidiary" means any Subsidiary that is incorporated under the laws of England. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "U.S. Dollar" and the sign "$" mean lawful money of the United States. "U.S. Subsidiary" means any Subsidiary that is incorporated or organized under the laws of the United States or a state thereof or the District of Columbia. "Voting Stock" means, with respect to any Person, Capital Securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. -39- "Waiver" means an agreement in favor of the Administrative Agent for the benefit of the Lenders and the Issuer in form and substance reasonably satisfactory to the Administrative Agent. "Warnaco Agreement" means that certain License Agreement, dated as of January 8, 1999, between Warnaco Inc., a Delaware corporation, and WWI. "Welfare Plan" means a "welfare plan", as such term is defined in section 3(1) of ERISA, and to which WWI or any of its Subsidiaries has any liability. "Wholly-owned Subsidiary" shall mean, with respect to any Person, any Subsidiary of such Person all of the Capital Securities (and all rights and options to purchase such Capital Securities) of which, other than directors' qualifying shares or shares sold pursuant to Local Management Plans, are owned, beneficially and of record, by such Person and/or one or more Wholly-owned Subsidiaries of such Person. "WW Australia" means Weight Watchers International Pty. Ltd. (ACN 070 836 449), an Australian company incorporated in the State of New South Wales and resident in Australia and the direct corporate parent of FPL and the SP1 Borrower. "WWI Pledge Agreement" means the Pledge Agreement executed and delivered by WWI and its U.S. Subsidiaries (other than the Designated Subsidiary) pursuant to clause (a) of Section 5.1.8, substantially in the form of Exhibit G-1 hereto, together with each Supplement thereto delivered pursuant to clause (b) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "WWI Security Agreement" means the Security Agreement executed and delivered by WWI and all U.S. Subsidiaries of WWI (other than the Designated Subsidiary) pursuant to clause (a) of Section 5.1.9, substantially in the form of Exhibit F-1 hereto, together with each Supplement thereto delivered pursuant to clause (a) of Section 7.1.7, as amended, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms thereof. "WWI Common Shares" is defined in the third recital. "WWI Guaranty" means the Guaranty made by WWI contained in Article VIII. "WWI Preferred Shares" is defined in the fourth recital. "WWUK" means Weight Watchers UK Limited and its Subsidiaries. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used -40- in the Disclosure Schedule and in each other Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles ("GAAP") as in effect as of April 24, 1999. SECTION 1.5. Currency Conversions. If it shall be necessary for purposes of this Agreement to convert an amount in one currency into another currency, unless otherwise provided herein, the exchange rate shall be determined by reference to the New York foreign exchange selling rates (such determination to be made as at the date of the relevant transaction), as determined by the Administrative Agent (in accordance with its standard practices). ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES, LETTERS OF CREDIT AND TLC PROVISIONS SECTION 2.1. Loan Commitments. On the terms and subject to the conditions of this Agreement (including Article V), (a) each Lender severally agrees to make Loans (other than Swing Line Loans) pursuant to the Commitments and the Swing Line Lender agrees to make Swing Line Loans pursuant to the Swing Line Loan Commitment in each case as described in this Section 2.1; and (b) each Issuer severally agrees that it will issue Letters of Credit pursuant to Section 2.1.3, and each other Lender that has a Revolving Loan Commitment severally agrees that it will purchase participation interests in such Letters of Credit pursuant to Section 2.6.1. -41- SECTION 2.1.1. Term Loans. Subject to compliance by the Obligors with the terms of Sections 2.1.4, 5.1 and 5.2, in a single Borrowing on the Closing Date (which shall be a Business Day) occurring on or prior to the applicable Commitment Termination Date, each Lender (a) having a Percentage of the Term-A Loan Commitment Amount will make loans denominated in U.S. Dollars (relative to such Lender, its "Term-A Loans") to WWI equal to such Lender's Percentage, if any, of the aggregate amount of the Borrowings of Term-A Loans requested by WWI to be made on the Closing Date (with the commitment of each such Lender described in this clause (a) being herein referred to as its "Term-A Loan Commitment") and (b) having a Percentage of the Term-B Loan Commitment Amount will make loans denominated in U.S. Dollars (relative to such Lender, its "Term-B Loans") to WWI equal to such Lender's Percentage, if any, of the aggregate amount of the Borrowings of Term-B Loans requested by WWI to be made on the Closing Date (with the commitment of each such Lender described in this clause (b) herein referred to as its "Term-B Loan Commitment"). No amounts paid or prepaid with respect to Term-A Loans or Term-B Loans may be reborrowed. SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment. Subject to compliance by the Obligors with the terms of Section 2.1.4, Section 5.1, Section 5.2 and Section 5.3 the Revolving Loans and Swing Line Loans will be made as set forth below. (a) From time to time on any Business Day occurring concurrently with (or after) the making of the Term Loans but prior to the Revolving Loan Commitment Termination Date, each Lender that has a Revolving Loan Commitment will make loans (relative to such Lender, its "Revolving Loans") to WWI in U.S. Dollars, equal to such Lender's Percentage of the aggregate amount of the Borrowing of the Revolving Loans requested by such Borrower to be made on such day. The Commitment of each Lender described in this clause (a) is herein referred to as its "Revolving Loan Commitment". On the terms and subject to the conditions hereof, any Borrower may from time to time borrow, prepay and reborrow the Revolving Loans. (b) From time to time on any Business Day occurring concurrently with (or after) the making of the Term Loans, but prior to the Revolving Loan Commitment Termination Date, the Swing Line Lender will make loans (relative to the Swing Line Lender, its "Swing Line Loans") to WWI equal to the principal amount of the Swing Line Loans requested by WWI. On the terms and subject to the conditions hereof, WWI may from time to time borrow, prepay and reborrow such Swing Line Loans. (c) At any time that no Default has occurred and is continuing, and on or before September 30, 2004, WWI may notify the Administrative Agent that WWI is requesting that, on the terms and subject to the conditions contained in this Agreement, the Lenders and/or other lenders not then a party to this Agreement provide up to an aggregate amount of $20,000,000 in additional Revolving Loan Commitments. Upon receipt of such notice, the -42- Administrative Agent shall use commercially reasonable efforts to arrange for the Lenders or other Eligible Institutions to provide such additional Revolving Loan Commitments; provided that the Administrative Agent will first offer each of the Lenders that then has a Percentage of the Revolving Loan Commitment a pro rata portion of any such additional Revolving Loan Commitment. Nothing contained in this clause (c) or otherwise in this Agreement is intended to commit any Lender or any Agent to provide any portion of any such additional Revolving Loan Commitments. If and to the extent that any Lenders and/or other lenders agree, in their sole discretion, to provide any such additional Revolving Loan Commitments, (i) the Revolving Loan Commitment Amount shall be increased by the amount of the additional Revolving Loan Commitments agreed to be so provided, (ii) the Percentages of the respective Lenders in respect of the Revolving Loan Commitment shall be proportionally adjusted (provided that the Percentage of each Lender shall not be increased without the consent of such Lender), (iii) at such time and in such manner as WWI and the Administrative Agent shall agree (it being understood that WWI and the Agents will use commercially reasonable efforts to avoid the prepayment or assignment of any LIBO Rate Loan on a day other than the last day of the Interest Period applicable thereto), the Lenders shall assign and assume outstanding Revolving Loans and participations in outstanding Letters of Credit so as to cause the amounts of such Revolving Loans and participations in Letters of Credit held by each Lender to conform to the respective Percentages of the Revolving Loan Commitment of the Lenders and (iv) WWI shall execute and deliver any additional Notes or other amendments or modifications to this Agreement or any other Loan Document as the Administrative Agent may reasonably request. SECTION 2.1.3. Letter of Credit Commitment. Subject to compliance by the Obligors with the terms of Section 2.1.5, Section 5.1, Section 5.2 and Section 5.3, from time to time on any Business Day occurring from and after the Effective Date but prior to the Revolving Loan Commitment Termination Date, the Issuer will (a) issue one or more standby or documentary letters of credit (each referred to as a "Letter of Credit") for the account of WWI in the Stated Amount requested by WWI on such day; or (b) extend the Stated Expiry Date of an existing standby Letter of Credit previously issued hereunder to a date not later than the earlier of (x) the Revolving Loan Commitment Termination Date and (y) one year from the date of such extension. SECTION 2.1.4. Lenders Not Permitted or Required To Make the Loans. No Lender shall be permitted or required to, and WWI shall not request that any Lender, make (a) any Term-A Loan or Term-B Loan (as the case may be) if, after giving effect thereto, the aggregate original principal amount of all the Term-A Loans or Term-B Loans (as the case may be): -43- (i) of all Lenders would exceed the Term-A Loan Commitment Amount (in the case of Term-A Loans), or Term-B Loan Commitment Amount (in the case of Term-B Loans); or (ii) of such Lender would exceed such Lender's Percentage of the Term-A Loan Amount (in the case of Term-A Loans) or the Term-B Loan Amount (in the case of Term-B Loans); (b) any Revolving Loan or Swing Line Loan if, after giving effect thereto, the aggregate outstanding principal amount of all the Revolving Loans and Swing Line Loans (i) of all the Lenders with Revolving Loan Commitments, together with the aggregate amount of all Letter of Credit Outstandings, would exceed the Revolving Loan Commitment Amount; or (ii) of such Lender with a Revolving Loan Commitment (other than the Swing Line Lender), together with such Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings, would exceed such Lender's Percentage of the Revolving Loan Commitment Amount; or (c) any Swing Line Loan if after giving effect to the making of such Swing Line Loan, the outstanding principal amount of all Swing Line Loans would exceed the then existing Swing Line Loan Commitment Amount. SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit. No Issuer shall be permitted or required to issue any Letter of Credit if, after giving effect thereto, (a) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b) the sum of the aggregate amount of all Letter of Credit Outstandings plus the aggregate principal amount of all Revolving Loans and Swing Line Loans then outstanding would exceed the Revolving Loan Commitment Amount. SECTION 2.2. Reduction of the Commitment Amounts. The Commitment Amounts are subject to reductions from time to time pursuant to this Section 2.2. SECTION 2.2.1. Optional. WWI may, from time to time on any Business Day occurring after the time of the initial Credit Extension hereunder, voluntarily reduce the Swing Line Loan Commitment Amount, the Letter of Credit Commitment Amount or the Revolving Loan Commitment Amount; provided, however, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $100,000. Any reduction of the Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment Amount below -44- the sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit Commitment Amount shall result in an automatic and corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount (as directed by WWI in a notice to the Administrative Agent delivered together with the notice of such voluntary reduction in the Revolving Loan Commitment Amount) to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or the Issuer. SECTION 2.2.2. Mandatory. Following the prepayment in full of the Term Loans and the TLCs, the Revolving Loan Commitment Amount shall, without any further action, automatically and permanently be reduced on the date the Term Loans and the TLCs would otherwise have been required to be prepaid with any Net Disposition Proceeds, Net Equity Proceeds, or Excess Cash Flow, in an amount equal to the amount by which the Term Loans and the TLCs would otherwise be required to be prepaid if Term Loans and the TLCs had been outstanding. Any reduction of the Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment Amount below the sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit Commitment Amount shall result in an automatic and corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount (as directed by WWI in a notice to the Administrative Agent) to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or the Issuer. SECTION 2.3. Borrowing Procedures and Funding Maintenance. Loans shall be made by the Lenders in accordance with this Section. SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a Borrowing Request to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, WWI may from time to time irrevocably request, on not less than one (in the case of Base Rate Loans) and three (in the case of LIBO Rate Loans) nor more than (in each case) five Business Days' notice, that a Borrowing be made, in the case of LIBO Rate Loans, in a minimum amount of $2,000,000, and an integral multiple of $500,000, and in the case of Base Rate Loans, in a minimum amount of $500,000 and an integral multiple thereof or, in either case, in the unused amount of the applicable Commitment. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 11:00 a.m., New York time, on such Business Day each Lender shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the applicable Borrower by wire transfer to the accounts such Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. -45- SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly followed (within three Business Days) by the delivery of a confirming Borrowing Request, to the Swing Line Lender on or before 11:00 a.m., New York time, on a Business Day, WWI may from time to time irrevocably request that Swing Line Loans be made by the Swing Line Lender in an aggregate minimum principal amount of $200,000 and an integral multiple of $100,000. Each request by WWI for a Swing Line Loan shall constitute a representation and warranty by WWI that on the date of such request and (if different) the date of the making of the Swing Line Loan, both immediately before and after giving effect to such Swing Line Loan and the application of the proceeds thereof, the statements made in Section 5.2.1 are true and correct. All Swing Line Loans shall be made as Base Rate Loans and shall not be entitled to be converted into LIBO Rate Loans. The proceeds of each Swing Line Loan shall be made available by the Swing Line Lender, by its close of business on the Business Day telephonic notice is received by it as provided in the preceding sentences, to WWI by wire transfer to the accounts WWI shall have specified in its notice therefor. (b) If (i) any Swing Line Loan shall be outstanding for more than four full Business Days or (ii) after giving effect to any request for a Swing Line Loan or a Revolving Loan the aggregate principal amount of Revolving Loans and Swing Line Loans outstanding to the Swing Line Lender, together with the Swing Line Lender's Percentage of all Letter of Credit Outstandings, would exceed the Swing Line Lender's Percentage of the Revolving Loan Commitment Amount, the Swing Line Lender, at any time in its sole and absolute discretion may request each Lender that has a Revolving Loan Commitment, and each such Lender, including the Swing Line Lender hereby agrees, to make a Revolving Loan (which shall always be initially funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of the amount of the Swing Line Loans ("Refunded Swing Line Loans") outstanding on the date such notice is given. On or before 11:00 a.m. (New York time) on the first Business Day following receipt by each Lender of a request to make Revolving Loans as provided in the preceding sentence, each such Lender (other than the Swing Line Lender) shall deposit in an account specified by the Administrative Agent to the Lenders from time to time the amount so requested in same day funds, whereupon such funds shall be immediately delivered to the Swing Line Lender (and not WWI) and applied to repay the Refunded Swing Line Loans. On the day such Revolving Loans are made, the Swing Line Lender's Percentage of the Refunded Swing Line Loans shall be deemed to be paid. Upon the making of any Revolving Loan pursuant to this clause, the amount so funded shall become due under such Lender's Revolving Note and shall no longer be owed under the Swing Line Note. Each Lender's obligation to make the Revolving Loans referred to in this clause shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, WWI or any other Person for any reason whatsoever; (ii) the occurrence or -46- continuance of any Default; (iii) any adverse change in the condition (financial or otherwise) of WWI or any other Obligor, subsequent to the date of the making of a Swing Line Loan; (iv) the acceleration or maturity of any Loans or the termination of the Revolving Loan Commitment after the making of any Swing Line Loan; (v) any breach of this Agreement by WWI, any other Obligor or any other Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (c) In the event that (i) WWI or any Subsidiary is subject to any bankruptcy or insolvency proceedings as provided in Section 9.1.9 or (ii) the Swing Line Lender otherwise requests, each Lender with a Revolving Loan Commitment shall acquire without recourse or warranty an undivided participation interest equal to such Lender's Percentage of any Swing Line Loan otherwise required to be repaid by such Lender pursuant to the preceding clause by paying to the Swing Line Lender on the date on which such Lender would otherwise have been required to make a Revolving Loan in respect of such Swing Line Loan pursuant to the preceding clause, in same day funds, an amount equal to such Lender's Percentage of such Swing Line Loan, and no Revolving Loans shall be made by such Lender pursuant to the preceding clause. From and after the date on which any Lender purchases an undivided participation interest in a Swing Line Loan pursuant to this clause, the Swing Line Lender shall distribute to such Lender (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participation interest is outstanding and funded) its ratable amount of all payments of principal and interest in respect of such Swing Line Loan in like funds as received; provided, however, that in the event such payment received by the Swing Line Lender is required to be returned to WWI, such Lender shall return to the Swing Line Lender the portion of any amounts which such Lender had received from the Swing Line Lender in like funds. (d) Notwithstanding anything herein to the contrary, the Swing Line Lender shall not be obligated to make any Swing Line Loans if it has elected after the occurrence of a Default not to make Swing Line Loans and has notified WWI in writing or by telephone of such election. The Swing Line Lender shall promptly give notice to the Lenders of such election not to make Swing Line Loans. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/ Conversion Notice to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, WWI may from time to time irrevocably elect, on not less than one (in the case of a conversion of LIBO Rate Loans to Base Rate Loans) and three (in the case of a continuation of LIBO Rate Loans or a conversion of Base Rate Loans into LIBO Rate Loans) nor more than (in each case) five Business Days' notice that all, or any portion in an aggregate minimum amount of $2,000,000 and an integral multiple of $500,000, in the case of the continuation of, or conversion into, LIBO Rate Loans, or an aggregate minimum amount of $500,000 and an integral multiple thereof, in the case of the conversion into Base Rate Loans, (other than Swing Line Loans as provided in clause (a) of Section -47- 2.3.2) be, in the case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of the relevant Lenders, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan, so long as such action does not result in increased costs to WWI; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of WWI to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility; and provided, further, however, that such Lender shall cause such foreign branch, Affiliate or international banking facility to comply with the applicable provisions of clause (b) of Section 4.6 with respect to such LIBO Rate Loan. In addition, WWI hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing U.S. Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. Issuance Procedures. By delivering to the Administrative Agent an Issuance Request on or before 12:00 noon, New York time, on a Business Day, WWI may, from time to time irrevocably request, on not less than three nor more than ten Business Days' notice (or such shorter notice as may be acceptable to the Issuer), in the case of an initial issuance of a Letter of Credit, and not less than three nor more than ten Business Days' notice (unless a shorter notice period is acceptable to the Issuer) prior to the then existing Stated Expiry Date of a Letter of Credit, in the case of a request for the extension of the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable Letter of Credit for WWI's account or for the account of any wholly-owned U.S. Subsidiary of WWI that is a party to the Subsidiary Guaranty and the WWI Security Agreement and whose outstanding Capital Securities is pledged to the Administrative Agent for the benefit of the Lenders pursuant to the WWI Pledge Agreement, in such form as may be requested by WWI and approved by the Issuer, solely for the purposes described in Section 7.1.9. Notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, WWI hereby acknowledges and agrees that it shall be obligated to reimburse the Issuer upon each Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder (whether the account party on such Letter of Credit is WWI or a Subsidiary of WWI). Upon receipt of an Issuance Request, the Administrative Agent shall promptly notify the Issuer and each Lender thereof. Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier to occur of (i) the -48- Revolving Loan Commitment Termination Date or (ii) one year from the date of its issuance. The Issuer will make available to the beneficiary thereof the original of each Letter of Credit which it issues hereunder. SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each Letter of Credit issued by the Issuer pursuant hereto, and without further action, each Lender (other than the Issuer) that has a Revolving Loan Commitment shall be deemed to have irrevocably purchased from the Issuer, to the extent of its Percentage to make Revolving Loans, and the Issuer shall be deemed to have irrevocably granted and sold to such Lender a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation and all rights with respect thereto), and such Lender shall, to the extent of its Revolving Loan Commitment Percentage, be responsible for reimbursing promptly (and in any event within one Business Day) the Issuer for Reimbursement Obligations which have not been reimbursed by WWI in accordance with Section 2.6.3. In addition, such Lender shall, to the extent of its Percentage to make Revolving Loans, be entitled to receive a ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of Credit and of interest payable pursuant to Section 3.2 with respect to any Reimbursement Obligation. To the extent that any Lender has reimbursed the Issuer for a Disbursement as required by this Section, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from WWI or otherwise) in respect of such Disbursement. SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The Issuer will notify WWI and the Administrative Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on the first Business Day following the Disbursement Date (the "Disbursement Due Date"), WWI will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at the rate per annum otherwise applicable to Revolving Loans (made as Base Rate Loans) from and including the Disbursement Date to but excluding the Disbursement Due Date and, thereafter (unless such Disbursement is converted into a Base Rate Loan on the Disbursement Due Date), at a rate per annum equal to the rate per annum then in effect with respect to overdue Revolving Loans (made as Base Rate Loans) pursuant to Section 3.2.2 for the period from the Disbursement Due Date through the date of such reimbursement; provided, however, that, if no Default shall have then occurred and be continuing, unless WWI has notified the Administrative Agent no later than one Business Day prior to the Disbursement Due Date that it will reimburse the Issuer for the applicable Disbursement, then the amount of the Disbursement shall be deemed to be a Revolving Loan constituting a Base Rate Loan and following the giving of notice thereof by the Administrative Agent to the Lenders, each Lender with a commitment to make Revolving Loans (other than the Issuer) will deliver to the Issuer on the Disbursement Due Date immediately available funds in an amount equal to such Lender's Percentage of such Revolving Loan. Each conversion of Disbursement amounts into -49- Revolving Loans shall constitute a representation and warranty by WWI that on the date of the making of such Revolving Loan all of the statements set forth in Section 5.2.1 are true and correct. SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement Obligation") of WWI under Section 2.6.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon) not converted into a Base Rate Loan pursuant to Section 2.6.2, and, upon the failure of WWI to reimburse the Issuer and the giving of notice thereof by the Administrative Agent to the Lenders, each Lender's (to the extent it has a Revolving Loan Commitment) obligation under Section 2.6.1 to reimburse the Issuer or fund its Percentage of any Disbursement converted into a Base Rate Loan, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which WWI or such Lender, as the case may be, may have or have had against the Issuer or any such Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided, however, that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of WWI or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuer. SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the continuation of any Event of Default of the type described in Section 9.1.9 or, with notice from the Administrative Agent acting at the direction of the Required Lenders, upon the occurrence and during the continuation of any other Event of Default, (a) an amount equal to that portion of all Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all Letters of Credit issued and outstanding shall, without demand upon or notice to WWI or any other Person, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b) upon notification by the Administrative Agent to WWI of its obligations under this Section, WWI shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by the Issuer. Any amounts so payable by WWI pursuant to this Section shall be deposited in cash with the Administrative Agent and held as collateral security for the Obligations in connection with the Letters of Credit issued by the Issuer. At such time when the Events of Default giving rise to the deemed disbursements hereunder shall have been cured or waived, the Administrative Agent shall return to WWI all amounts then on deposit with the Administrative Agent pursuant to this Section, together with -50- accrued interest at the Federal Funds Rate, which have not been applied to the satisfaction of such Obligations. SECTION 2.6.5. Nature of Reimbursement Obligations. WWI and, to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan Commitment, shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or willful misconduct) shall not be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender with a Revolving Loan Commitment hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon WWI, each Obligor and each such Lender, and shall not put the Issuer under any resulting liability to WWI, any Obligor or any such Lender, as the case may be. SECTION 2.7. Notes. Each Lender's Loans under a Commitment for a Loan shall be evidenced, if such Lender shall request, by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the original applicable Commitment Amount. All Swing Line Loans made by the Swing Line Lender shall be evidenced by a Swing Line Note payable to the order of the Swing Line Lender in a maximum principal amount equal to the Swing Line Loan Commitment Amount. WWI hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of -51- such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall be conclusive and binding on WWI absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of WWI or any other Obligor. SECTION 2.8. Registered Notes. (a) Any Non-U.S. Lender that could become completely exempt from withholding of any Taxes in respect of payment of any interest due to such Non-U.S. Lender under this Agreement if the Notes held by such Lender were in registered form for U.S. Federal income tax purposes may request WWI (through the Administrative Agent), and WWI agrees (i) to exchange for any Notes held by such Lender, or (ii) to issue to such Lender on the date it becomes a Lender, promissory notes(s) registered as provided in clause (b) of this Section 2.8 (each a Registered Note). Registered Notes may not be exchanged for Notes that are not Registered Notes. (b) The Administrative Agent shall enter, in the Register, the name of the registered owner of the Non-U.S. Lender Obligation(s) evidenced by a Registered Note. (c) The Register shall be available for inspection by WWI and any Lender at any reasonable time upon reasonable prior notice. SECTION 2.9. TLC Facility. Each TLC Lender shall purchase, on the Closing Date, TLCs from the SP1 Borrower (with the commitment of each such TLC Lender to purchase TLCs being, its "TLC Commitment") equal to such TLC Lender's Percentage of the TLC Commitment Amount. No amounts paid or prepaid with respect to TLCs may be reborrowed. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments; Application. SECTION 3.1.1. Repayments and Prepayments. The SP1 Borrower and WWI shall repay in full the unpaid principal amount of each Loan and TLC, as applicable, upon the Stated Maturity Date therefor. Prior thereto, (a) any Borrower may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any (i) Loan (other than Swing Line Loans) or TLC, provided, however, that -52- (A) any such prepayment of the Term-A Loans or Term-B Loans or TLCs shall be made pro rata among such Term-A Loans or Term-B Loans or TLCs of the same type and if applicable, having the same Interest Period as all Lenders that have made such Term-A Loans or Term-B Loans or TLCs, and any such prepayment of Revolving Loans shall be made pro rata among the Revolving Loans of the same type and, if applicable, having the same Interest Period as all Lenders that have made such Revolving Loans; (B) the Borrowers shall comply with Section 4.4 in the event that any LIBO Rate Loan is prepaid on any day other than the last day of the Interest Period for such Loan; (C) all such voluntary prepayments shall require at least three but no more than five Business Days' prior written notice to the Administrative Agent; and (D) all such voluntary partial prepayments shall be, in the case of LIBO Rate Loans or TLCs bearing interest with reference to the LIBO Rate, in an aggregate minimum amount of $2,000,000 and an integral multiple of $500,000 and, in the case of Base Rate Loans or TLCs bearing interest with reference to the Base Rate, in an aggregate minimum amount of $500,000 and an integral multiple thereof; or (ii) Swing Line Loans, provided that all such voluntary prepayments shall require prior telephonic notice to the Swing Line Lender on or before 1:00 p.m., New York time, on the day of such prepayment (such notice to be confirmed in writing within 24 hours thereafter); provided, that in the event such prepayment of Term-B Loans or TLCs occurs (x) after the Closing Date and on any day prior to the first anniversary thereof, WWI shall pay to the Administrative Agent for the account of all Term-B Lenders or TLC Lenders, as the case may be, a fee in the amount of 2% of such prepayment and (y) on and after the date which is the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, WWI shall pay the Administrative Agent for the account of all Term-B Lenders or TLC Lenders, as the case may be, a fee in the amount of 1% of such prepayment; (b) the SP1 Borrower and WWI, as the case may be, shall no later than one Business Day following the receipt by WWI or any of its Subsidiaries of any Net Disposition Proceeds, deliver to the Administrative Agent a calculation of the amount of such Net Disposition Proceeds and, subject to the following proviso, make a mandatory prepayment of the Term Loans and TLCs in an amount equal to 100% of such Net Disposition Proceeds, to be applied -53- as set forth in Section 3.1.2; provided, however, that, at the option of WWI and so long as no Default shall have occurred and be continuing, WWI may use or cause the appropriate Subsidiary to use the Net Disposition Proceeds to purchase assets useful in the business of WWI and its Subsidiaries or to purchase a majority controlling interest in a Person owning such assets or to increase any such controlling interest already maintained by it; provided, that if such Net Disposition Proceeds arise from or are related to a Disposition of assets of a Guarantor then any such reinvestment must either be made by or in a Guarantor or a Person which upon the making of such reinvestment becomes a Guarantor (with such assets or interests collectively referred to as "Qualified Assets") within 365 days after the consummation (and with the Net Disposition Proceeds) of such sale, conveyance or disposition, and in the event WWI elects to exercise its right to purchase Qualified Assets with the Net Disposition Proceeds pursuant to this clause, WWI shall deliver a certificate of an Authorized Officer of WWI to the Administrative Agent within 30 days following the receipt of Net Disposition Proceeds setting forth the amount of the Net Disposition Proceeds which WWI expects to use to purchase Qualified Assets during such 365 day period; provided, further, that WWI and its Subsidiaries shall only be permitted to reinvest Net Disposition Proceeds in Qualified Assets to the extent permitted by Section 7.2.5 over the term of this Agreement. If and to the extent that WWI has elected to reinvest Net Disposition Proceeds as permitted above, then on the date which is 365 days (in the case of clause (b)(i) below) and 370 days (in the case of clause (b)(ii) below) after the relevant sale, conveyance or disposition, WWI shall (i) deliver a certificate of an Authorized Officer of WWI to the Administrative Agent certifying as to the amount and use of such Net Disposition Proceeds actually used to purchase Qualified Assets and (ii) deliver to the Administrative Agent, for application in accordance with this clause and Section 3.1.2, an amount equal to the remaining unused Net Disposition Proceeds; (c) the SP1 Borrower and WWI, as applicable, shall, no later than 5 Business Days following the delivery of WWI's annual audited financial reports required pursuant to clause (b) of Section 7.1.1 (beginning with the financial reports delivered in respect of the 2001 Fiscal Year), deliver to the Administrative Agent a calculation of the Excess Cash Flow for the prior Fiscal Year and no later than 5 Business Days following the delivery of such calculation, make a mandatory prepayment of the Term Loans and TLCs in an aggregate amount equal to 75% of the Excess Cash Flow (if any) for such Fiscal Year, to be applied as set forth in Section 3.1.2; (d) the SP1 Borrower and WWI, as applicable, concurrently with WWI's receipt of any Net Equity Proceeds, deliver to the Administrative Agent a calculation of the amount of such Net Equity Proceeds, and no later than 5 Business Days following the delivery of such calculation, make a mandatory prepayment of the Term Loans and TLCs in an aggregate amount equal to 50% of such Net Equity Proceeds, to be applied as set forth in Section 3.1.2; provided, that all such Net Equity Proceeds shall be deposited in a cash collateral account with the Administrative Agent upon receipt pending application to the Loans pursuant to this clause; -54- (e) WWI shall, on each date when any reduction in the Revolving Loan Commitment Amount shall become effective, including pursuant to Section 2.2 or Section 3.1.2, make a mandatory prepayment of Revolving Loans and (if necessary) Swing Line Loans, and (if necessary) deposit with the Administrative Agent cash collateral for Letter of Credit Outstandings) in an aggregate amount equal to the excess, if any, of the aggregate outstanding principal amount of all Revolving Loans, Swing Line Loans and Letters of Credit Outstanding over the Revolving Loan Commitment Amount as so reduced; (f) WWI shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term-A Loans in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date (as such amounts may have otherwise been reduced pursuant to this Agreement), as applicable: 03/31/00 through (and including) 09/30/04 $3,125,000 10/01/04 through (and including) 06/30/05 $3,906,250 07/01/05 through (and including) Stated Maturity Date $3,906,250, or the then outstanding principal amount of all Term-A Loans, if different; (g) WWI shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term-B Loans in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date (as such amounts may have otherwise been reduced pursuant to this Agreement), as applicable: 03/31/00 through (and including) $187,500 09/30/05 -55- 10/01/05 through (and including) $17,671,875 06/30/06 07/01/06 through (and including) Stated Maturity Date $17,671,875, or the then outstanding principal amount of all Term-B Loans, if different. (h) the SP1 Borrower shall, on the Stated Maturity Date and on each Quarterly Payment Date occurring on or during any period set forth below, make a scheduled repayment of the aggregate outstanding principal amount, if any, of all TLCs in an amount equal to the amount set forth below opposite the Stated Maturity Date or such Quarterly Payment Date, as applicable (as such amounts may have otherwise been reduced pursuant to this Agreement): 03/31/00 through (and including) 09/30/05 $217,500 10/01/05 through (and including) 06/30/06 $20,499,375 07/01/06 through (and including) Stated Maturity Date $20,499,375, or the then outstanding principal amount of all TLCs, if different; (i) the SP1 Borrower and WWI, as the case may be, shall, immediately upon any acceleration of the Stated Maturity Date of any Loans or Obligations pursuant to Section 9.2 or Section 9.3, repay all Loans and TLCs and provide the Administrative Agent with cash collateral in an amount equal to the Letter of Credit Outstandings, unless, pursuant to Section 9.3, only a portion of all Loans and TLCs and Obligations are so accelerated (in which case the portion so accelerated shall be so prepaid or cash collateralized with the Administrative Agent); and (j) the SP1 Borrower shall, immediately upon receipt of proceeds in connection with the repayment of any intercompany loan payable to the SP1 Borrower, make a mandatory prepayment of the TLCs, to be applied as set forth in Section 3.1.2, in an amount equal to the sum of such proceeds, other than (x) scheduled amortization payments thereof and (y) any -56- other payment to the SP1 Borrower which would otherwise result in a mandatory prepayment under this Section 3.1.1; provided that in the event such prepayment under clause (b) or (d) of this Section occurs (x) after the Closing Date and on any day prior to the first anniversary thereof, WWI shall pay to the Administrative Agent for the account of all Term-B Lenders or TLC Lenders, as the case may be, a fee in the amount of 2% of such prepayment and (y) on and after the date which is the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, WWI shall pay the Administrative Agent for the account of all Term-B Lenders or TLC Lenders, as the case may be, a fee in the amount of 1% of such prepayment. Each prepayment of any Loans or TLCs made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4. No prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to clauses (a) of Section 3.1.1 shall cause a reduction in the Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as the case may be. SECTION 3.1.2. Application. (a) Subject to clause (b), each prepayment or repayment of the principal of the Loans or TLCs shall be applied, to the extent of such prepayment or repayment, first, to the principal amount thereof being maintained as Base Rate Loans or bearing interest with reference to the Base Rate, as the case may be, and second, to the principal amount thereof being maintained as LIBO Rate Loans or bearing interest with reference to the LIBO Rate, as the case may be. (b) Each voluntary prepayment of Term Loans or TLCs and each prepayment of Term Loans and TLCs made pursuant to clauses (b), (c) and (d) of Section 3.1.1 shall be applied pro rata to a mandatory prepayment of the outstanding principal amount of all Term Loans and TLCs (with the amount of such prepayment of the Term Loans or TLCs being applied to the remaining Term Loan and TLC amortization payments, as the case may be, required pursuant to clauses (f), (g) and (h) of Section 3.1.1, in each case pro rata in accordance with the amount of each such remaining amortization payment), until all such Term Loans and TLCs have been paid in full; provided, however, that in the case of each prepayment of Term Loans and TLCs required pursuant to clauses (b), (c), and (d) of Section 3.1.1, any Lender that has Term-B Loans and TLCs outstanding (at a time when any Term-A Loans remain outstanding) may, by delivering a notice to the Administrative Agent at least one Business Day prior to the date that such prepayment is to be made, elect not to have its pro rata share of Term-B Loans or TLCs, as the case may be, prepaid, and upon any such election the Administrative Agent shall (x) apply 50% of the amount that otherwise would have prepaid such Lender's Term-B Loans or TLCs, as the case may be, to a mandatory prepayment of the Term-A Loans (until repaid in full), and then to a reduction in the Revolving Loan Commitment Amount and (y) permit the remaining 50% of such amount to be retained by the applicable Borrower. -57- SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. (a) Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, WWI may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (i) with respect to Revolving Loans and Term-A Loans, (A) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; and (B) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin; and (ii) with respect to Term-B Loans, (A) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin for such Loans; and (B) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin for such Loans; and (iii) with respect to Swing Line Loans, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of any Loan shall have become due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or any other monetary Obligation (other than overdue Reimbursement Obligations which shall bear interest as provided in Section 2.6.2) of WWI shall have become due and payable, WWI shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to -58- (a) in the case of any overdue principal amount of Loans, overdue interest thereon, overdue commitment fees or other overdue amounts owing in respect of Loans or other obligations (or the related Commitments) under a particular Tranche, the rate that would otherwise be applicable to Base Rate Loans under such Tranche pursuant to Section 3.2.1 plus 2%; and (b) in the case of overdue monetary Obligations (other than as described in clause (a)), the Alternate Base Rate plus 4%. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, in arrears on each Quarterly Payment Date occurring after the date of the initial Borrowing hereunder; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the third month anniversary of such Interest Period); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. Interest accrued on Loans, Reimbursement Obligations or other monetary Obligations (other than TLCs) arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrowers agree to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1. Commitment Fee. WWI agrees to pay to the Administrative Agent for the account of each Lender that has a Revolving Loan Commitment, for the period (including any portion -59- thereof when any of the Lender's Commitments are suspended by reason of any Borrower's inability to satisfy any condition of Article V) commencing on the Effective Date and continuing through the Revolving Loan Commitment Termination Date, a commitment fee at the rate of .50% per annum of the average daily unused portion of the Revolving Loan Commitment Amount. Such commitment fees shall be payable by WWI in arrears on each Quarterly Payment Date, commencing with the first such day following the Effective Date, and on the Revolving Loan Commitment Termination Date. The making of Swing Line Loans by the Swing Line Lender shall constitute the usage of the Revolving Loan Commitment with respect to the Swing Line Lender only and the commitment fees to be paid by WWI to the Lenders (other than the Swing Line Lender) shall be calculated and paid accordingly. Any term or provision hereof to the contrary notwithstanding, commitment fees payable for any period prior to the Effective Date shall be payable in accordance with the Fee Letter. SECTION 3.3.2. Administrative Agent's Fee. Each of the Borrowers agrees to pay to the Administrative Agent, for its own account, the non-refundable fees in the amounts and on the dates set forth in the Fee Letter. SECTION 3.3.3. Letter of Credit Fee. WWI agrees to pay to the Administrative Agent, for the pro rata account of the Issuer and each other Lender that has a Revolving Loan Commitment, a Letter of Credit fee in an amount equal to the Applicable Margin per annum for Revolving Loans that are maintained as LIBO Rate Loans, multiplied by the aggregate Stated Amount of all outstanding Letters of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date. WWI further agrees to pay to the Issuer for its own account an issuance fee in an amount as agreed to by WWI and the Issuer. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to WWI and the Lenders, be conclusive and binding on WWI) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any Loans as LIBO Rate Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist (with the date of such notice being the "Reinstatement Date"), and (i) all LIBO Rate Loans previously made by such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion and (ii) all Loans thereafter made by such Lender and outstanding prior to the Reinstatement Date shall be made as Base Rate Loans, with interest -60- thereon being payable on the same date that interest is payable with respect to corresponding Borrowing of LIBO Rate Loans made by Lenders not so affected. SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have determined that (a) U.S. Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Administrative Agent in its relevant market; or (b) by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to WWI and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify WWI and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3. Increased LIBO Rate Loan Costs, etc. WWI agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans (excluding any amounts, whether or not constituting Taxes, referred to in Section 4.6) arising after the date of any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority that results in such increase in cost or reduction in amounts receivable, except for such changes with respect to increased capital costs and Taxes which are governed by Sections 4.5 and 4.6, respectively. Such Lender shall promptly notify the Administrative Agent and WWI in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by WWI directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on WWI. SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of -61- (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to WWI (with a copy to the Administrative Agent), WWI shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on WWI. SECTION 4.5. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of its Commitments, participation in Letters of Credit or the Loans made by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to WWI shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on WWI. In determining such amount, such Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. SECTION 4.6. Taxes. The Borrowers covenant and agree as follows with respect to Taxes. (a) Unless required by law, any and all payments made by the Borrowers under this Agreement and each other Loan Document shall be made without setoff, counterclaim or other defense, and free and clear of, and without deduction or withholding for or on account of, any Taxes. In the event that any Taxes are required by law to be deducted or withheld from any payment required to be made by any Borrower to or on behalf of any Secured Party under any Loan Document, then: -62- (i) subject to clause (f) below, if such Taxes are Non-Excluded Taxes, the relevant Borrower shall together with such payment pay an additional amount so that each Secured Party receives free and clear of any Non-Excluded Taxes, the full amount which it would have received if no such deduction or withholding of such Non-Excluded Taxes had been required; and (ii) the relevant Borrower shall pay to the relevant Governmental Authority imposing such Taxes the full amount of the deduction or withholding made by it. (b) In addition, the Borrowers shall pay any and all Other Taxes imposed to the relevant Governmental Authority imposing such Other Taxes in accordance with applicable law. (c) As promptly as practicable after the payment of any Taxes or Other Taxes, and in any event within 45 days of any such payment being due, the applicable Borrower shall furnish to the Administrative Agent a copy of an official receipt (or a certified copy thereof) evidencing the payment of such Taxes or Other Taxes. The Administrative Agent shall make copies thereof available to any Lender upon request therefor. (d) Subject to clause (f) below, the Borrowers shall indemnify each Secured Party for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed on (and whether or not paid directly by) such Secured Party that have not been paid previously by the Borrowers (whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the relevant Governmental Authority). Promptly upon having knowledge that any such Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and promptly upon notice thereof by any Secured Party, the applicable Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the relevant Governmental Authority (provided, however, that no Secured Party shall be under any obligation to provide any such notice to any Borrower). In addition, provided that the Borrowers have been notified promptly by a relevant Secured Party which has determined in its sole discretion that a Non-Excluded Tax or Other Tax has been levied, imposed or assessed against such Secured Party, each Borrower shall indemnify each Secured Party for any incremental Taxes that may become payable by such Secured Party as a result of any failure of any Borrower to pay any Taxes when due to the appropriate Governmental Authority or to deliver to the Administrative Agent, pursuant to clause (c) above, documentation evidencing the payment of Taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other Taxes actually paid by any Secured Party or the indemnification provided in the immediately preceding sentence, such indemnification shall be made within 30 days after the date such Secured Party makes written demand therefor. Each Borrower acknowledges that any payment made to any Secured Party or to any Governmental Authority in respect of the indemnification obligations of the Borrowers provided in this clause shall constitute a payment in respect of which the provisions of clause (a) above and this clause shall apply. -63- (e) Each Non-U.S. Lender, on or prior to the date on which such Non-U.S. Lender becomes a Lender hereunder (and from time to time thereafter upon the request of any Borrower or the Administrative Agent, but only for so long as such Non-U.S. Lender is legally entitled to do so), shall deliver to such Borrower and the Administrative Agent either (i) (x) two duly completed copies of either (A) Internal Revenue Service Form W-8BEN or (B) Internal Revenue Service Form W-8EC1, or in either case an applicable successor form, establishing, in either case, a complete exemption from United States federal withholding taxes, and (y) for periods prior to January 1, 2001, a duly completed copy of Internal Revenue Service Form W-8 or W-9 or applicable successor form; or (ii) in the case of a Non-U.S. Lender that is not legally entitled to deliver either form listed in clause (e)(i)(x) above, (x) a certificate of a duly authorized officer of such Non-U.S. Lender to the effect that such Non-U.S. Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of WWI within the meaning of Section 881(c)(3)(B) of the Code, or (C) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code (such certificate, an "Exemption Certificate") and (y) two duly completed copies of Internal Revenue Service Form W-8 or applicable successor form. (f) None of the Borrowers shall be obligated to gross up any payments to any Lender pursuant to clause (a) above, or to indemnify any Lender pursuant to clause (d) above, in respect of United States federal withholding taxes to the extent imposed as a result of (i) the failure of such Lender to deliver to the applicable Borrower the form or forms and/or an Exemption Certificate, as applicable to such Lender, pursuant to clause (e), (ii) such form or forms and/or Exemption Certificate not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by the Lender being untrue or inaccurate on the date delivered in any material respect, or (iii) the Lender designating a successor lending office at which it maintains its Loans which has the effect of causing such Lender to become obligated for tax payments in excess of those in effect immediately prior to such designation; provided, however, that a Borrower shall be obligated to gross up any payments to any such Lender pursuant to clause (a) above, and to indemnify any such Lender pursuant to clause (d) above, in respect of United States federal withholding taxes if (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or Exemption Certificate to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable statute, treaty, regulation or other applicable law or any interpretation of any of the foregoing occurring after the date hereof, which change rendered such Lender no longer legally entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or certifications made in such form or forms or Exemption Certificate untrue or inaccurate in a material respect, (ii) the redesignation of the Lender's lending office was made at the request of any of the Borrowers or (iii) the obligation to gross up payments to any such Lender pursuant to clause (a) -64- above or to indemnify any such Lender pursuant to clause (d) is with respect to an Assignee Lender that becomes an Assignee Lender as a result of an assignment made at the request of any Borrower. (g) If a Secured Party determines in its sole discretion that it has received a refund in respect of Non-Excluded Taxes that were paid by the Borrowers, it shall pay the amount of such refund, together with any other amounts paid by the Borrowers in connection with such refunded Non-Excluded Taxes, to the Borrowers, net of any out-of-pocket expenses incurred by such Secured Party in obtaining such refund, provided, however, that the Borrowers agree to promptly return the amount of such refund to such Secured Party to the extent that such Secured Party is required to repay such refund to the IRS or any other tax authority. SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly provided, all payments by or on behalf of any Borrower pursuant to this Agreement, the Notes, each Letter of Credit, the TLCs or any other Loan Document shall be made by such Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon, New York time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the applicable Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan, TLC or Reimbursement Obligation (other than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro rata share of payments then or therewith obtained by all Lenders entitled thereto, such Lender shall purchase from the other Lenders such participation in Credit Extensions made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of -65- (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any Default described in clauses (a) through (d) of Section 9.1.9 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower then or thereafter maintained with or otherwise held by such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.8. Each Lender agrees promptly to notify the applicable Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 4.10. Mitigation. Each Lender agrees that if it makes any demand for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption or change of the type described in Section 4.1 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for WWI to make payments under Sections 4.3, 4.4, 4.5, or 4.6, or would eliminate or reduce the effect of any adoption or change described in Section 4.1. -66- ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extension. The obligations of the Lenders to make the initial Credit Extensions shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1. SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have received from each Obligor other than a natural Person a certificate, dated the date of the initial Credit Extension, of its Secretary or Assistant Secretary as to: (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes, the TLCs and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes the TLCs and each other Loan Document executed by it; and (c) in the case of WW Australia, FPL, and GB, certified copies of constitutions of WW Australia, FPL, and GB, and if any Loan Document shall be executed by WW Australia, FPL, and GB under power of attorney, certified copies of the necessary powers of attorney, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of such Obligor canceling or amending such prior certificate. SECTION 5.1.2. Recapitalization Documents. The Administrative Agent shall have received (with copies for each Lender), and each Agent shall be satisfied with the terms and conditions contained in, a fully executed copy of the Recapitalization Agreement, and, to the extent required by Section 5.1.3, all other documents and instruments delivered in connection with the consummation of the Recapitalization that are required to be delivered pursuant to the terms of the Recapitalization Agreement and agreements related thereto. The Recapitalization Agreement shall be in full force and effect and shall not have been modified or waived in any material respect, nor shall there have been any forbearance to exercise any material rights with respect to any of the terms or provisions relating to the conditions to the consummation of the Recapitalization unless otherwise agreed to by the Required Lenders. SECTION 5.1.3. Recapitalization Certificate. The Administrative Agent shall have received a certificate, dated the date of the initial Credit Extension, of an Authorized Officer of WWI certifying as to a true and complete copy of the Recapitalization Agreement and, to the extent requested by the -67- Administrative Agent, all other certificates, filings, documents, consents, approvals, board of directors resolutions and opinions furnished pursuant to or in connection with the Recapitalization Agreement. SECTION 5.1.4. Closing Date Certificate. The Administrative Agent shall have received, with counterparts for each Lender, the Closing Date Certificate, substantially in the form of Exhibit D hereto, dated the date of the initial Credit Extension and duly executed and delivered by the chief executive, financial or accounting (or equivalent) Authorized Officer of each Borrower, in which certificate each Borrower shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of the Borrowers made as of such date under this Agreement, and, at the time such certificate is delivered, such statements shall in fact be true and correct. SECTION 5.1.5. Delivery of Notes and TLCs. The Administrative Agent shall have received, for the account of each Lender that has requested a Note or a TLC , such Lender's Notes or TLC, as the case may be, duly executed and delivered by an Authorized Officer of the applicable Borrower. SECTION 5.1.6. Payment of Outstanding Indebtedness, etc. All Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full (including, to the extent necessary, from proceeds of the initial Borrowing or purchase of TLCs), and all Liens securing payment of any such Indebtedness have been released and the Administrative Agent shall have received all executed Uniform Commercial Code Form UCC-3 termination statements or other instruments as may be suitable or appropriate in connection therewith (or arrangements satisfactory to the Administrative Agent shall have been entered into relating to such release promptly following the initial Credit Extension). SECTION 5.1.7. Guaranties. The Administrative Agent shall have received, with counterparts for each Lender, (a) the Subsidiary Guaranty, dated the date hereof, duly executed and delivered by an Authorized Officer of each U.S. Subsidiary (other than the SP1 Borrower and the Designated Subsidiary); and (b) the Australian Guaranty, dated the date hereof, duly executed and delivered by an Authorized Officer of each of WW Australia, FPL and GB. SECTION 5.1.8. Pledge Agreements. The Administrative Agent shall have received, with counterparts for each Lender, -68- (a) the WWI Pledge Agreement, dated as of the date hereof, duly executed and delivered by Authorized Officers of WWI and each U.S. Subsidiary of WWI (other than the Designated Subsidiary) together with: (i) certificates evidencing (x) 100% of the issued and outstanding shares of Capital Securities of WWI's U.S. Subsidiaries (other than any inactive Subsidiary) (y) 100% of the issued and outstanding shares of Capital Securities of UKHC1 and (z) 65% of WWI's direct non-U.S. Subsidiaries (other than UKHC1 and any inactive Subsidiary), which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to the WWI Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with Articles 8 and 9 of the U.C.C. and all laws otherwise applicable to the perfection of the pledge of such shares; and (ii) all Pledged Notes (as defined in the WWI Pledge Agreement), if any, evidencing Indebtedness payable to WWI, the SP1 Borrower or any of the other U.S. Subsidiaries of WWI (other than the Designated Subsidiary), duly endorsed to the order of the Administrative Agent, together with Uniform Commercial Code Financing Statements (or similar instruments) in respect of such Pledged Notes executed by the applicable Obligor to be filed in such jurisdictions as the Administrative Agent may reasonably request; (b) the ARTAL Pledge Agreement, dated the date hereof, duly executed and delivered by an Authorized Officer of ARTAL, together with certificates evidencing all of the issued and outstanding shares of Capital Securities of WWI owned by ARTAL, which certificates shall be accompanied by undated stock powers duly executed in blank; (c) the HJH Pledge Agreement, dated the date hereof, duly executed and delivered by an Authorized Officer of HJH, together with certificates evidencing all of the issued and outstanding shares of Capital Securities of WWI owned by HJH (other than the WWI Preferred Shares), which certificates shall be accompanied by undated stock powers duly executed in blank; and (d) the Australian Pledge Agreement, dated as of the date hereof, duly executed and delivered by Authorized Officers of WW Australia, FPL and GB together with certificates (to the extent not delivered under the U.K. Pledge Agreement) evidencing (x) 100% of the issued and outstanding shares of Capital Securities of each of FPL and GB and (y) 100% of the issued and outstanding shares of Capital Securities of the SP1 Borrower, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any -69- securities pledged pursuant to the Australian Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with all laws applicable to the perfection of the pledge of such shares. In addition, the Administrative Agent and its counsel shall be satisfied that (i) the Lien granted to the Administrative Agent, for the benefit of the Secured Parties in the collateral described in this Section is a first priority (or local equivalent thereof) security interest; and (ii) no Lien exists on any of the collateral described above other than the Lien created in favor of the Administrative Agent, for the benefit of the Secured Parties, pursuant to a Loan Document. SECTION 5.1.9. Security Agreements. The Administrative Agent shall have received, with counterparts for each Lender, (a) the WWI Security Agreement, dated as of the date hereof, duly executed and delivered by Authorized Officers of WWI and each U.S. Subsidiary of WWI (other than the Designated Subsidiary) together with: (i) executed copies of Uniform Commercial Code financing statements (Form UCC-1), naming WWI and each of its U.S. Subsidiaries (other than the Designated Subsidiary) as a debtor and the Administrative Agent as the secured party, or other similar instruments or documents, to be filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interests of the Administrative Agent pursuant to the WWI Security Agreement; (ii) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (x) in any collateral described in any Security Agreement previously granted by any Person, and (y) securing any of the Indebtedness identified in Item 7.2.2(b) of the Disclosure Schedule, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Administrative Agent may reasonably request from such Obligors; and (iii) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements which name WWI or any U.S. Subsidiary of WWI (other than the Designated Subsidiary) (under its present name and any previous names) as the debtor and which are filed in the jurisdictions listed in Item 5.1.9(iii) of the Disclosure Schedule, together with copies of such financing statements (none of which shall cover any collateral described in any Security Agreement); and -70- (b) the Australian Security Agreement, dated as of the date hereof, duly executed and delivered by Authorized Officers of each of WW Australia, FPL and GB, together with: (i) ASIC Form 309 and 350 in respect of the Australian Security Agreement and the Australian Pledge Agreement to be registered under the Australian Corporations Law with the relevant agreement properly annexed to Form 309, together with the appropriate registration fee: and (ii) Forms and any other documents required to effect the registration of the Australian Security Agreement and the Australian Pledge Agreement with any other relevant Governmental Authority, together with the appropriate registration fee; in each case, free from all prior security interests and third party rights and interests except as expressly permitted by any Loan Document. SECTION 5.1.10. Patent Security Agreement, Copyright Security Agreement and Trademark Security Agreement. The Administrative Agent shall have received the Patent Security Agreement, the Copyright Security Agreement and the Trademark Security Agreement, as applicable, each dated as of the Closing Date, duly executed and delivered by each Obligor that has delivered the WWI Security Agreement. SECTION 5.1.11. Financial Information, etc. The Administrative Agent shall have received, with counterparts for each Lender, (a) the (i) unqualified audited combined balance sheets and the related combined statements of income, comprehensive income and parent company's investment and cash flows of the Acquired Businesses for the fiscal years ended April 26, 1997, April 25, 1998 and April 24, 1999 and (ii) the unaudited condensed combined financial information reviewed by PricewaterhouseCoopers LLP for the period ended July 24, 1999 prepared on a basis substantially comparable to the basis used to prepare the audited financial statements of the Acquired Businesses referred to in clause (a)(i); and (b) a pro forma condensed consolidated balance sheet of WWI and its Subsidiaries, as of July 24, 1999 (the "Pro Forma Balance Sheet"), certified by the chief financial or accounting Authorized Officer of WWI, giving effect to the consummation of the Transaction and all the transactions contemplated by this Agreement and reflecting the proposed capital structure of each Borrower, which shall be satisfactory in all respects to the Administrative Agent. -71- SECTION 5.1.12. Closing Fees, Expenses, etc. The Administrative Agent shall have received for its own account, or for the account of each Lender, or for the account of each fronting Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Sections 3.3 and 11.3, if then invoiced. SECTION 5.1.13. Insurance. The Administrative Agent shall have received, with copies for each Lender, binders of insurance, from one or more insurance companies satisfactory to the Administrative Agent, evidencing coverage required to be maintained pursuant hereto and each Loan Document. SECTION 5.1.14. Litigation. The Administrative Agent shall be satisfied in all respects that there exists no litigation, inquiry or investigation contesting the Transaction, this Agreement or any other aspect of the Transaction, or which would have a material adverse effect on the property, assets, financial condition, operations, prospects or business of the Borrowers and their Subsidiaries, taken as a whole. SECTION 5.1.15. Material Adverse Change. The Lenders shall be satisfied (as evidenced by the delivery of their respective executed signature page to this Agreement) that there has been no material adverse change in the property, assets, financial condition, operations, prospects or business of the Acquired Businesses since April 24, 1999. SECTION 5.1.16. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the date of the initial Credit Extension and addressed to the Administrative Agent and all Lenders, from: (a) Simpson Thacher & Bartlett, special New York counsel to the Borrowers and each Obligor, in form and substance satisfactory to the Administrative Agent; (b) Hunton & Williams, special Virginia counsel to WWI, in form and substance satisfactory to the Administrative Agent; (c) Allen, Allen & Hemsley, special Australian counsel to WW Australia and the Borrowers, in form and substance satisfactory to the Administrative Agent; and (d) Arendt & Medernach, special Luxembourg counsel to ARTAL, in form and substance satisfactory to the Administrative Agent. SECTION 5.1.17. Preferred Stock. The Administrative Agent shall be satisfied with the terms and conditions of the WWI Preferred Shares. -72- SECTION 5.1.18. Recapitalization. The Administrative Agent shall be satisfied that (x) the aggregate cash amount contributed by the Investors pursuant to the Recapitalization Agreement is not less than $223,700,000, and (y) the sum of clause (x) plus the value of the Equity Rollover equals an amount not less than $238,000,000. SECTION 5.1.19. Acquisitions. The Administrative Agent shall have received evidence, satisfactory to the Agents in their sole discretion, of the acquisitions by (x) UKHC2 of WW Australia and FNZ and (y) WW Australia of FPL. The terms and conditions of such acquisitions shall be (x) those set forth in the Recapitalization Agreement or (y) other terms and conditions reasonably satisfactory to the Agents. SECTION 5.1.20. Australian Stamp Duty. If stamp duty is payable with respect to the Australian Security Agreement or the Australian Pledge Agreement, the Administrative Agent shall have received all forms and other documents required to effect proper stamping, together with funds available for payment of the stamp duty. SECTION 5.1.21. Foreign Acquisitions and Takeovers Act Approval. If WWI is required to obtain an approval or an indication of non-objection under the Foreign Acquisitions and Takeovers Act 1975 of Australia or any real estate policy guidelines of the Commonwealth Government of Australia and/or an approval or certification of the Treasurer of Australia under the Foreign Acquisitions and Takeovers Regulations of Australia to enter into the Recapitali zation Agreement, or to give effect to the Transaction, WWI shall have provided to the Administrative Agent, and the Administrative Agent shall have received, copies of the application to obtain the approval or certification of the Treasurer of Australia or the statement of non-objection and copies of the relevant approval, certification or statement. SECTION 5.1.22. Intercompany Subordination Agreement. The Administrative Agent shall have received with counterparts for each Lender, the Intercompany Subordination Agreement, dated as of the date hereof, duly executed and delivered by Authorized Officers of WWI, the SP1 Borrower and each of the Guarantors. SECTION 5.2. All Credit Extensions. The obligation of each Lender and the Issuer to make any Credit Extension (including the initial Credit Extension, but subject to clauses (b) and (c) of Section 2.3.2) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2. SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension the following statements shall be true and correct: (a) both before and after giving effect to the Transaction, the representations and warranties set forth in Article VI and in each other Loan Document shall, in each case, be true -73- and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (b) no material adverse development shall have occurred in any litigation, action, proceeding, labor controversy, arbitration or governmental investigation disclosed pursuant to Section 6.7; (c) the sum of (x) the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans and (y) all Letter of Credit Outstandings does not exceed the Revolving Loan Commitment Amount; and (d) no Default shall have then occurred and be continuing. SECTION 5.2.2. Credit Extension Request. The Administrative Agent shall have received a Borrowing Request, if Loans (other than Swing Line Loans) are being requested, or an Issuance Request, if a Letter of Credit is being issued or extended or a TLC Purchase Request if TLCs are to be issued. Each of the delivery of a Borrowing Request, Issuance Request or TLC Purchase Request and the acceptance by any Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the applicable Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct. SECTION 5.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of WWI or any of its Subsidiaries or any other Obligors shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel; the Administrative Agent and its counsel shall have received all information, as the Administrative Agent or its counsel may reasonably request. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, the Issuer and the Administrative Agent to enter into this Agreement and to make Credit Extensions hereunder, each of the Borrowers, jointly and severally, represents and warrants unto the Administrative Agent, the Issuer and each Lender as set forth in this Article VI. SECTION 6.1. Organization, etc. WWI and each of its Subsidiaries (a) is a corporation validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation -74- (other than as listed in Item 6.1 ("Good Standing") or Schedule I hereto), is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except to the extent that the failure to qualify would not reasonably be expected to result in a Material Adverse Effect, and (b) has full power and authority and holds all requisite governmental licenses, permits and other approvals to (x) enter into and perform its Obligations in connection with the Transaction and under this Agreement, the Notes and each other Loan Document to which it is a party and (y) own and hold under lease its property and to conduct its business substantially as currently conducted by it except, in the case of this clause (b)(y), where the failure could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each Borrower of this Agreement, the Notes, the TLCs and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it and the Borrowers and, where applicable, each such other Obligor's participation in the consummation of the Transaction are within each such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene any such Obligor's Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting any such Obligor, where such contravention, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; or (c) result in, or require the creation or imposition of, any Lien on any of the Obligor's properties, except pursuant to the terms of a Loan Document. SECTION 6.3. Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person, is required for the due execution, delivery or performance by any Obligor of this Agreement, the Notes, the TLCs or any other Loan Document to which it is a party, or for each Obligor's participation in the consummation of the Transaction, except as have been duly obtained or made and are in full force and effect or those which the failure to obtain or make could not reasonably be expected to have a Material Adverse Effect. Neither WWI nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes and TLCs and each other Loan Document executed by any Obligor will, on the due execution and delivery thereof, -75- constitute, the legal, valid and binding obligations of such Obligor enforceable in accordance with their respective terms; in each case with respect to this Section 6.4 subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. SECTION 6.5. Financial Information. The (a) audited combined balance sheets and the related combined statements of income, comprehensive income and parent company's investment and cash flows of the Acquired Businesses as at April 24, 1999, April 25, 1998 and April 26, 1997 and the related consolidated statements of earnings and cash flow of the Acquired Businesses; and (b) unaudited interim condensed financial information of the Acquired Businesses as of the periods ended July 24, 1999 and July 25, 1998; copies of which have been furnished to the Administrative Agent and each Lender, have, in each case, been prepared in accordance with GAAP consistently applied (in the case of clause (a)) and, in the case of clause (b), on a basis substantially comparable to the basis used to prepare the financial statements referred to in clause (a), and present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended, subject, in the case of clause (b), to normal year end audit adjustments. SECTION 6.6. No Material Adverse Change. Since April 24, 1999, there has been no material adverse change in the financial condition, operations, assets, business or properties of WWI and its Subsidiaries, taken as a whole. SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending or, to the knowledge of any Borrower, threatened litigation, action, proceeding, labor controversy arbitration or governmental investigation affecting any Obligor, or any of their respective properties, businesses, assets or revenues, which (a) could reasonably be expected to result in a Material Adverse Effect, or (b) purports to affect the legality, validity or enforceability of the issuance of the Senior Subordinated Notes, this Agreement, the Notes or any other Loan Document, except as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule. SECTION 6.8. Subsidiaries. WWI has no Subsidiaries, except (after giving effect to the Transaction) those Subsidiaries (a) which are identified in Item 6.8 ("Existing Subsidiaries") of the Disclosure Schedule; or -76- (b) which are permitted to have been acquired in accordance with Section 7.2.5 or 7.2.8. SECTION 6.9. Ownership of Properties. WWI and each of its Subsidiaries own good title to all of their properties and assets (other than insignificant properties and assets), real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens or material claims (including material infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3. SECTION 6.10. Taxes. WWI and each of its Subsidiaries has filed all Federal, State, foreign and other material tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, no Pension Plan has been terminated that has resulted in a liability to any Borrower of more than $5,000,000, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in excess of $5,000,000. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by any Borrower of any material liability, fine or penalty other than such condition, event or transaction which would not reasonably be expected to have a Material Adverse Effect. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule, since the date of the last financial statement of WWI, WWI has not materially increased any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA. SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12 ("Environmental Matters") of the Disclosure Schedule or as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) all facilities and property (including underlying groundwater) owned or leased by WWI or any of its Subsidiaries have been, and continue to be, owned or leased by WWI and its Subsidiaries in compliance with all Environmental Laws; (b) there have been no past, and there are no pending or threatened -77- (i) written claims, complaints, notices or requests for information received by WWI or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) written complaints, notices or inquiries to WWI or any of its Subsidiaries regarding potential liability under any Environmental Law; (c) to the best knowledge of WWI, there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries; (d) WWI and its Subsidiaries have been issued and are in compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (e) no property now or previously owned or leased by WWI or any of its Subsidiaries is listed or, to the knowledge of WWI or any of its Subsidiaries, proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; (f) to the best knowledge of WWI, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries; (g) WWI and its Subsidiaries have not directly transported or directly arranged for the transportation of any Hazardous Material to any location (i) which is listed or to the knowledge of WWI or any of its Subsidiaries, proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list, or (ii) which is the subject of federal, state or local enforcement actions or other investigations; (h) to the best knowledge of WWI, there are no polychlorinated biphenyls or friable asbestos present in a manner or condition at any property now or previously owned or leased by WWI or any of its Subsidiaries; and (i) to the best knowledge of WWI, no conditions exist at, on or under any property now or previously owned or leased by WWI or any of its Subsidiaries which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law. SECTION 6.13. Regulations U and X. No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used to purchase or carry margin stock or otherwise for a purpose which violates, or -78- would be inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.14. Accuracy of Information. All material factual information concerning the financial condition, operations or prospects of WWI and its Subsidiaries heretofore or contemporaneously furnished by or on behalf of the Borrowers in writing to the Administrative Agent, the Issuer or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby or with respect to the Transaction is, and all other such factual information hereafter furnished by or on behalf of the Borrowers to the Administrative Agent, the Issuer or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. Any term or provision of this section to the contrary notwithstanding, insofar as any of the factual information described above includes assumptions, estimates, projections or opinions, no representation or warranty is made herein with respect thereto; provided, however, that to the extent any such assumptions, estimates, projections or opinions are based on factual matters, each of the Borrowers has reviewed such factual matters and nothing has come to its attention in the context of such review which would lead it to believe that such factual matters were not or are not true and correct in all material respects or that such factual matters omit to state any material fact necessary to make such assumptions, estimates, projections or opinions not misleading in any material respect. SECTION 6.15. Seniority of Obligations, etc. WWI has the power and authority to incur the Indebtedness evidenced by the Senior Subordinated Notes as provided for under the Senior Subordinated Note Indenture and has (or will have) duly authorized, executed and delivered the Senior Subordinated Note Indenture. WWI has (or will have) issued, pursuant to due authorization, the Senior Subordinated Notes under the Senior Subordinated Note Indenture. Once executed and delivered by WWI, the Senior Subordinated Note Indenture will constitute the legal, valid and binding obligation of WWI enforceable against WWI in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. The subordination provisions of the Senior Subordinated Notes and contained in the Senior Subordinated Note Indenture will be enforceable against the holders of the Senior Subordinated Notes by the holder of any Senior Debt (or similar term referring to the Obligations, as applicable) in the Senior Subordinated Note Indenture, which has not effectively waived the benefits thereof. All monetary Obligations, including those to pay principal of and interest (including post-petition interest, whether or not permitted as a claim) on the Loans and Reimbursement Obligations, and fees and expenses in connection therewith, constitute Senior Debt (or similar term referring to the Obligations, as applicable) in the Senior Subordinated Note Indenture, and all such Obligations are entitled to the benefits of the -79- subordination created by the Senior Subordinated Note Indenture. WWI acknowledges that the Administrative Agent and each Lender is entering into this Agreement, and is extending its Commitments, in reliance upon the subordination provisions of (or to be contained in) the Senior Subordinated Note Indenture, the Senior Subordinated Notes and this Section. SECTION 6.16. Solvency. The Transaction (including the incurrence of the initial Credit Extension hereunder, the incurrence by the Borrowers of the Indebtedness represented by the Notes and the execution and delivery by the Guaranties by the Obligors parties thereto), will not involve or result in any fraudulent transfer or fraudulent conveyance under the provisions of Section 548 of the Bankruptcy Code (11 U.S.C. ss.101 et seq., as from time to time hereafter amended, and any successor or similar statute) or any applicable state law respecting fraudulent transfers or fraudulent conveyances. After giving effect to the Transaction, WWI and each of its Subsidiaries is Solvent. SECTION 6.17. Contracts. No termination provision in any material contract under which WWI or any of its Subsidiaries are obligated, shall be triggered by the consummation of the Transaction. SECTION 6.18. Year 2000. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the Obligors' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which Obligors' systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed in all material respects by September 30, 1999. The cost to the Obligors of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Obligors (including, without limitation, reprogramming errors and the failure of other systems or equipment) will not result in any Default or Event of Default or cause a Material Adverse Effect. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. Each of the Borrowers, jointly and severally, agrees with the Administrative Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, each Borrower will perform its obligations set forth below. SECTION 7.1.1. Financial Information, Reports, Notices, etc. WWI will furnish to each Lender, the Issuer and the Administrative Agent copies of the following financial statements, reports, notices and information: -80- (a) as soon as available and in any event within 60 days after the end of each Fiscal Quarter of each Fiscal Year of WWI (or, if WWI is required to file such information on a Form 10-Q with the Securities and Exchange Commission, promptly following such filing), a consolidated balance sheet of WWI and its Subsidiaries as of the end of such Fiscal Quarter, together with the related consolidated statement of earnings and cash flow for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter (it being understood that the foregoing requirement may be satisfied by delivery of WWI's report to the Securities and Exchange Commission on Form 10-Q), certified by the chief financial Authorized Officer of WWI; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of WWI (or, if WWI is required to file such information on a Form 10-K with the Securities and Exchange Commission, promptly following such filing), a copy of the annual audit report for such Fiscal Year for WWI and its Subsidiaries, including therein a consolidated balance sheet for WWI and its Subsidiaries as of the end of such Fiscal Year, together with the related consolidated statement of earnings and cash flow of WWI and its Subsidiaries for such Fiscal Year (it being understood that the foregoing requirement may be satisfied by delivery of WWI's report to the Securities and Exchange Commission on Form 10-K), in each case certified (without any Impermissible Qualification) by PricewaterhouseCoopers LLP or another "Big Five" firm, together with a certificate from such accountants to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default that has occurred and is continuing, or, if they have become aware of such Default, describing such Default and the steps, if any, being taken to cure it; (c) together with the delivery of the financial information required pursuant to clauses (a) and (b), a Compliance Certificate, in substantially the form of Exhibit E, executed by the chief financial Authorized Officer of WWI, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenants set forth in Section 7.2.4; (d) as soon as possible and in any event within three Business Days after obtaining knowledge of the occurrence of each Default, a statement of the chief financial Authorized Officer of WWI setting forth details of such Default and the action which WWI has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within five Business Days after (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 and the action which WWI has taken and proposes to take with respect thereto or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and of the action which WWI has taken and proposes to take with respect thereto; -81- (f) promptly after the sending or filing thereof, copies of all reports and registration statements which WWI or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange or any foreign equivalent; (g) as soon as practicable after the chief financial officer or the chief executive officer of WWI or a member of WWI's Controlled Group becomes aware of (i) formal steps in writing to terminate any Pension Plan or (ii) the occurrence of any event with respect to a Pension Plan which, in the case of (i) or (ii), could reasonably be expected to result in a contribution to such Pension Plan by (or a liability to) WWI or a member of WWI's Controlled Group in excess of $5,000,000, (iii) the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, (iv) the taking of any action with respect to a Pension Plan which could reasonably be expected to result in the requirement that WWI furnish a bond to the PBGC or such Pension Plan or (v) any material increase in the contingent liability of WWI with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; (h) promptly when available and in any event within 45 days following the last day of each Fiscal Year of WWI, financial projections for the current Fiscal Year, prepared in reasonable detail by the chief accounting, financial or executive Authorized Officer of WWI; (i) promptly following the delivery or receipt, as the case may be, of any material written notice or communication pursuant to or in connection with the Senior Subordinated Note Indenture or any of the Senior Subordinated Notes, a copy of such notice or communication; and (j) such other information respecting the condition or operations, financial or otherwise, of WWI or any of its Subsidiaries as any Lender or the Issuer through the Administrative Agent may from time to time reasonably request. SECTION 7.1.2. Compliance with Laws, etc. WWI will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include (without limitation): (a) the maintenance and preservation of its corporate existence and qualification as a foreign corporation, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; and (b) the payment, before the same become delinquent, of all material taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. -82- SECTION 7.1.3. Maintenance of Properties. WWI will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties (other than insignificant properties) in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless WWI determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. SECTION 7.1.4. Insurance. WWI will, and will cause each of its Subsidiaries to, (a) maintain insurance on its property with financially sound and reputable insurance companies against loss and damage in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as the Borrower and its Subsidiaries; and (b) all worker's compensation, employer's liability insurance or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. Without limiting the foregoing, all insurance policies required pursuant to this Section shall (i) name the Administrative Agent on behalf of Secured Parties as mortgagee (in the case of property insurance) or additional insured (in the case of liability insurance), as applicable, and provide that no cancellation or modification of the policies will be made without thirty days' prior written notice to the Administrative Agent and (ii) be in addition to any requirements to maintain specific types of insurance contained in the other Loan Documents. SECTION 7.1.5. Books and Records. WWI will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect in all material respects all of its business affairs and transactions and permit the Administrative Agent, the Issuer and each Lender or any of their respective representatives, at reasonable times and intervals, and upon reasonable notice, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and WWI hereby authorizes such independent public accountant to discuss the Borrowers' financial matters with the Issuer and each Lender or its representatives whether or not any representative of WWI is present) and to examine, and photocopy extracts from, any of its books or other corporate records. SECTION 7.1.6. Environmental Covenant. WWI will, and will cause each of its Subsidiaries to, (a) use and operate all of its facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, -83- and handle all Hazardous Materials in compliance with all applicable Environmental Laws, in each case except where the failure to comply with the terms of this clause could not reasonably be expected to have a Material Adverse Effect; (b) promptly notify the Administrative Agent and provide copies of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws which relate to environmental matters which would have, or would reasonably be expected to have, a Material Adverse Effect, and promptly cure and have dismissed with prejudice any material actions and proceedings relating to compliance with Environmental Laws, except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on their books; and (c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6. SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the Effective Date, a Subsidiary of WWI, or upon WWI or any of its Subsidiaries acquiring additional Capital Securities of any existing Subsidiary, WWI shall notify the Administrative Agent of such acquisition, and (a) WWI shall promptly cause such Subsidiary to execute and deliver to the Administrative Agent, with counterparts for each Lender, (i) if such Subsidiary is a U.S. Subsidiary or a U.K. Subsidiary, a supplement to the Subsidiary Guaranty or, if such Subsidiary is an Australian Subsidiary, a supplement to the Australian Guaranty, (ii) if such a Subsidiary is a U.S. Subsidiary, a supplement to the WWI Security Agreement or, if such Subsidiary is an Australian Subsidiary, a supplement to the Australian Security Agreement or if such Subsidiary is a U.K. Subsidiary, a security agreement substantially in the form of the U.K. Security Agreement and (iii) if such Subsidiary is a U.S. Subsidiary, a U.K. Subsidiary or an Australian Subsidiary and owns any real property having a value as determined in good faith by the Administrative Agent in excess of $2,000,000, a Mortgage, together with acknowledgment copies of Uniform Commercial Code financing statements (form UCC-1) executed and delivered by the Subsidiary naming the Subsidiary as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code and any other applicable recording statutes, in the case of real property, of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interest of the Administrative Agent pursuant to the applicable Security Agreement or a Mortgage, as the case may be; and (b) WWI shall promptly deliver, or cause to be delivered, to the Administrative Agent under a supplement to the WWI Pledge Agreement (or, if such Subsidiary is an Australian Subsidiary, a supplement to the Australian Pledge Agreement or if such Subsidiary is a U.K. -84- Subsidiary, a pledge agreement substantially in the form of the U.K. Pledge Agreement), certificates (if any) representing all of the issued and outstanding shares of Capital Securities of such Subsidiary (to the extent required to be delivered pursuant to the applicable Pledge Agreement) owned by WWI or any of its Subsidiaries, as the case may be, along with undated stock powers for such certificates, executed in blank, or, if any securities subject thereto are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that appropriate book entries have been made in the relevant books or records of a financial intermediary or the issuer of such securities, as the case may be, under applicable law resulting in the perfection of the security interest granted in favor of the Administrative Agent pursuant to the terms of the applicable Pledge Agreement; provided, that notwithstanding anything to the contrary herein or in any Loan Document, in no event shall more than 65% of the Capital Securities of any non-Guarantor be required to be pledged and in no event shall non-Guarantors (other than the SP1 Borrower) be required to pledge Capital Securities of their Subsidiaries, together, in each case, with such opinions, in form and substance and from counsel satisfactory to the Administrative Agent, as the Administrative Agent may reasonably require. SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real Property. (a) Prior to entering into any new lease of real property or renewing any existing lease of real property following the Effective Date, WWI shall, and shall cause each of its U.S. Subsidiaries and each of the other Guarantor's to, use its (and their) best efforts (which shall not require the expenditure of cash or the making of any material concessions under the relevant lease) to deliver to the Administrative Agent a Waiver executed by the lessor of any real property that is to be leased by WWI or any of its U.S. Subsidiaries or any of the other Guarantor's for a term in excess of one year in any state which by statute grants such lessor a "landlord's" (or similar) Lien which is superior to the Administrative Agent's, to the extent the value of any personal property of WWI or its U.S. Subsidiaries or any of the other Guarantor's to be held at such leased property exceeds (or it is anticipated that the value of such personal property will, at any point in time during the term of such leasehold term, exceed) $5,000,000. (b) In the event that WWI or any of its U.S. Subsidiaries or any of the other Guarantors shall acquire any real property having a value as determined in good faith by the Administrative Agent in excess of $2,000,000, WWI or the applicable Subsidiary shall, promptly after such acquisition, execute a Mortgage and provide the Administrative Agent with (i) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of such Mortgage as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable effectively to create a valid, perfected first priority Lien, subject to Liens permitted by Section 7.2.3, against the properties purported to be covered thereby; -85- (ii) mortgagee's title insurance policies in favor of the Administrative Agent and the Lenders in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Administrative Agent, with respect to the property purported to be covered by such Mortgage, insuring that title to such property is marketable and that the interests created by the Mortgage constitute valid first Liens thereon free and clear of all defects and encumbrances other than as approved by the Administrative Agent, and such policies shall also include a revolving credit endorsement and such other endorsements as the Administrative Agent shall request and shall be accompanied by evidence of the payment in full of all premiums thereon; and (iii) such other approvals, opinions, or documents as the Administrative Agent may reasonably request. SECTION 7.1.9. Use of Proceeds, etc. The proceeds of the Credit Extensions shall be applied by the Borrowers as follows: (a) the proceeds of the Term-A Loans and Term-B Loans shall be applied by WWI to fund the Transaction; (b) the proceeds of the issuance of the TLCs shall be applied by the SP1 Borrower to make an intercompany loan to WW Australia to refinance Indebtedness of WW Australia; and (c) the proceeds of all Revolving Loans and Swing Line Loans, and the issuance of Letters of Credit from time to time, shall be used to fund the Transaction and for working capital and general corporate purposes of WWI and its U.S. Subsidiaries. SECTION 7.1.10. Hedging Obligations. Within 180 days following the Effective Date, the Administrative Agent shall have received evidence satisfactory to it that each of the Borrowers, as applicable, has entered into Rate Protection Agreements in such an amount and on such terms reasonably satisfactory to the respective Borrower and the Administrative Agent. SECTION 7.1.11. U.S. Borrower as Pledged Interest Issuer. WWI covenants and agrees that, in its capacity as Pledged Interest Issuer under (and as defined in) the ARTAL Pledge Agreement and the HJH Pledge Agreement, WWI agrees that it will cooperate in all reasonable respects necessary to enable the Administrative Agent to exercise its rights and remedies under the terms of the ARTAL Pledge Agreement and HJH Pledge Agreement and agrees to comply with the last sentence of Section 4.2 of the ARTAL Pledge Agreement and the last sentence of Section 4.2 of the HJH Pledge Agreement. SECTION 7.1.12. Section 260B Compliance. WWI shall cause WW Australia to provide to the Administrative Agent, on or prior to the 25th day after the Effective Date, a Financial Assistance -86- Certificate, substantially in the form of Exhibit P hereto, signed by a director or secretary of each of WW Australia and its Subsidiaries, together with all attachments referred to therein. SECTION 7.1.13. FNZ Security Documents. On or prior to the date which is 90 days after the Closing Date, WWI shall cause the Administrative Agent to receive: (a) the FNZ Guaranty, duly executed and delivered by Authorized Officers of FNZ; (b) the FNZ Pledge Agreement, duly executed and delivered by Authorized Officers of FNZ (and UKHC2 pursuant to clause (c) of Section 7.1.14), together with (i) certificates evidencing (x) 100% of the issued and outstanding shares of Capital Securities of FNZ (provided, that in no event shall such shares be required to be pledged prior to completion of the procedures specified in Section 7.1.14) and (y) 65% of FNZ's direct Subsidiaries (other than inactive Subsidiaries), which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to the FNZ Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with all laws applicable to the perfection of the pledge of such shares, and (ii) all Pledged Notes (as defined in the FNZ Pledge Agreement), if any, evidencing Indebtedness payable to FNZ, duly endorsed to the order of the Administrative Agent, together with Uniform Commercial Code Financing Statements (or similar instruments) in respect of such Pledged Notes executed by the applicable Obligor to be filed in such jurisdictions as the Administrative Agent may reasonably request; and (c) the FNZ Security Agreement, duly executed and delivered by Authorized Officers of FNZ, together with all notices of assignment and other notices required to perfect the Secured Parties' security interest in the Collateral (as defined in the FNZ Security Agreement). SECTION 7.1.14. U.K. Security. WWI shall: (a) procure that, as soon as possible and in any event within 120 days of the Transaction being consummated, each U.K. Subsidiary, where applicable, implement and consummate the provisions and procedures contained in Sections 155-158 of the Companies Act 1985 for the purposes of enabling such companies to grant the security interests and give the guarantees contemplated hereby; -87- (b) procure that each of the U.K. Subsidiaries, where applicable, shall deliver to the Administrative Agent evidence satisfactory to the Administrative Agent that each of such companies has complied with the provisions and procedures required by Sections 155-158 of the Companies Act 1985; (c) on the date on which the provisions and procedures contained in Sections 155-158 of the Companies Act 1985 have been consummated by each of the applicable U.K. Subsidiaries (the "S.155 Date"), WWI shall (i) cause each U.K. Subsidiary to execute and deliver the Subsidiary Guaranty and a U.K. Security Agreement (which such U.K. Security Agreement shall, among other things, grant, and govern the perfection of, a security interest with respect to Indebtedness payable to any of the U.K. Subsidiaries), effective, with respect to the U.K. Subsidiaries, as of the S.155 Date, (ii) cause (A) each of such U.K. Subsidiaries that in turn has any Subsidiaries organized under the laws of England and/or Wales to execute and deliver a U.K. Pledge Agreement, (B) UKHC2 to execute the Australian Pledge Agreement, and (C) UKHC2 to execute the FNZ Pledge Agreement, in each case effective, with respect to such U.K. Subsidiaries, as of the S.155 Date together with (x) certificates evidencing all of the pledged shares of Capital Securities, which certificates shall in each case be accompanied by undated stock powers or stock transfer forms duly executed in blank, resulting in the creation of an enforceable equitable security interest granted in favor of the Administrative Agent pursuant to the terms of such Pledge Agreements, and (y) all Pledged Notes, if applicable, duly endorsed to the order of the Administrative Agent, together with such documents and instruments in respect of such Pledged Notes executed by such Subsidiary, or other appropriate Person, to be filed in such jurisdictions as the Administrative Agent shall reasonably request, and (iii) deliver the items referred to in Sections 5.1.1 and 5.1.16 with respect to the Obligors executing the Loan Documents referred to herein and opinions of counsel (including, an opinion of Slaughter & May, special United Kingdom counsel to UKHC1, UKHC and WWUK, in form and substance satisfactory to the Administrative Agent). SECTION 7.1.15. U.K. Procedural Requirements. WWI shall cause the Administrative Agent to receive a certificate, dated as of the date on which the provisions set forth in Section 7.1.14 are satisfied, from the secretary of each of the applicable U.K. Subsidiaries certifying that, as of the date thereof, such U.K. Subsidiaries has implemented and consummated the provisions and procedures set out in Sections 155-158 of the Companies Act 1985 and certifying that, save as disclosed, the granting of the security interests and the giving of the guarantees contemplated by the Loan Documents does not, following compliance with the provisions and procedures of Sections 155-158 of the Companies Act 1985, constitute unlawful financial assistance within the meaning of Section 151 of the Companies Act 1985, which certificate shall be reasonably acceptable in form, scope and substance to the Administrative Agent and its counsel. SECTION 7.1.16. U.K. Pledge Agreement. The Administrative Agent shall have received, on or prior to the third Business Day after the Closing Date, (x) a U.K. Pledge Agreement, dated as of -88- the date of delivery, duly executed and delivered by Authorized Officers of WWI, together with (i) share certificates (to the extent not delivered under the WWI Pledge Agreement) evidencing 100% of the issued and outstanding shares of Capital Securities of UKHC1 which certificates shall in each case be accompanied by undated stock transfer forms duly executed in blank; and (ii) a duly completed Form 395 in respect of such U.K. Pledge Agreement and (y) an opinion of Slaughter & May, Special U.K. counsel to WWI, in form and substance satisfactory to the Administrative Agent. SECTION 7.2. Negative Covenants. Each of the Borrowers agrees with the Administrative Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, each of the Borrowers will perform the obligations set forth in this Section 7.2. SECTION 7.2.1. Business Activities. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, engage in any business activity, except business activities of the type in which WWI and its Subsidiaries are engaged on the date hereof (after giving effect to the Transaction) and such activities as may be incidental, similar or related thereto. The SP1 Borrower shall not engage in any business other than as permitted under Section 7.3. SECTION 7.2.2. Indebtedness. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations; (b) until the date of the initial Credit Extension, Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule, and any Refinancing Indebtedness, but only in amounts not in excess of the outstanding amounts on the date of such refinancing (which shall not exceed the committed amount on the Effective Date); (d) to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture, Indebtedness incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) (i) (x) to any Person providing financing for the acquisition of any assets permitted to be acquired pursuant to Section 7.2.8 to finance its acquisition of such assets and (y) in respect of Capitalized Lease Liabilities (but only to the extent otherwise permitted by Section 7.2.7) in an aggregate amount for clauses (x) and (y) not to exceed $5,000,000 at any time and (ii) from time to time for general corporate purposes in a maximum aggregate amount of all Indebtedness incurred pursuant to this clause (ii) not at any time to -89- exceed $15,000,000 less the then aggregate outstanding Indebtedness of Subsidiaries which are not Guarantors permitted under clause (f)(iii) below; (e) Hedging Obligations of WWI or any of its Subsidiaries; (f) intercompany Indebtedness of WWI owing to any of its Subsidiaries or any Subsidiary of WWI (other than the SP1 Borrower or the Designated Subsidiary) owing to WWI or any other Subsidiary of WWI or of WWI to any Subsidiary of WWI, which Indebtedness (i) if between Guarantors shall be evidenced by one or more promissory notes in form and substance satisfactory to the Administrative Agent which have been duly executed and delivered to (and endorsed to the order of) the Administrative Agent in pledge pursuant to a supplement to the applicable Pledge Agreement; (ii) if between Guarantors (other than Indebtedness incurred by WWI) shall, except in the case of Indebtedness of WWI owing to any of its Subsidiaries, not be forgiven or otherwise discharged for any consideration other than payment in cash in the currency in which such Indebtedness was loaned or advanced unless the Administrative Agent otherwise consents; and (iii) owing by Subsidiaries which are not Guarantors to Guarantors shall not exceed $15,000,000 in the aggregate at any time outstanding; (g) unsecured Subordinated Debt of WWI owing to the Senior Subordinated Noteholders in an initial aggregate outstanding principal amount not to exceed $255,000,000; (h) Indebtedness of Non-Guarantor Subsidiaries to Guarantors to the extent permitted as Investments under clause (h) of Section 7.2.5; (i) the Subordinated Guaranty; and (j) (i) guarantees by WWI or any Guarantor of any Indebtedness of WWI or any Guarantor and (ii) guarantees by any Subsidiary that is not a Guarantor of any Indebtedness of any other Subsidiary that is not a Guarantor and (iii) guarantees by WWI or any Guarantor of any unsecured Indebtedness of any Subsidiary that is not a Guarantor incurred pursuant to clause (d) (ii) of this Section; provided, that in each case, the Indebtedness being guaranteed is otherwise permitted by this Section. -90- provided, however, that no Indebtedness otherwise permitted by clause (d) or (f) (as such clause relates to Loans made by WWI to its Subsidiaries) may be incurred if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing. SECTION 7.2.3. Liens. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document; (b) until the date of the initial Credit Extension, Liens securing payment of Indebtedness of the type permitted and described in clause (b) of Section 7.2.2; (c) Liens granted prior to the Effective Date to secure payment of Indebtedness of the type permitted and described in clause (c) of Section 7.2.2; (d) Liens granted by WWI or any of its Subsidiaries (other than the SP1 Borrower) to secure payment of Indebtedness of the type permitted and described in (x) clause (d)(i) of Section 7.2.2; provided, that the obligations secured thereby do not exceed in the aggregate $5,000,000 at any time outstanding and (y) clause (d)(ii) of Section 7.2.2 owed by Subsidiaries which are not Guarantors to non-Affiliates; provided that the obligations secured thereby do not exceed $7,500,000 in the aggregate at any time outstanding; (e) Liens for taxes, assessments or other governmental charges or levies, including Liens pursuant to Section 107(l) of CERCLA or other similar law, not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens of carriers, warehousemen, mechanics, repairmen, materialmen and landlords or other like liens incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) in the ordinary course of business for sums not overdue for a period of more than 30 days or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (g) Liens incurred by WWI or any of its Subsidiaries (other than the SP1 Borrower) in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, insurance obligations, leases and contracts (other than for -91- borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (h) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full by a bond or (subject to a customary deductible) by insurance maintained with responsible insurance companies; (i) Liens with respect to recorded minor imperfections of title and easements, rights-of-way, restrictions, reservations, permits, servitudes and other similar encumbrances on real property and fixtures which do not materially detract from the value or materially impair the use by WWI or any such Subsidiary in the ordinary course of their business of the property subject thereto; (j) leases or subleases granted by WWI or any of its Subsidiaries (other than the SP1 Borrower) to any other Person in the ordinary course of business; and (k) Liens in the nature of trustees' Liens granted pursuant to any indenture governing any Indebtedness permitted by Section 7.2.2, in each case in favor of the trustee under such indenture and securing only obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof. SECTION 7.2.4. Financial Condition. (a) Fixed Charge Coverage Ratio. WWI will not permit the Fixed Charge Coverage Ratio, at any time during any period set forth below, to be less than the amount set forth opposite such period: Fixed Charge Period Coverage Ratio ------ -------------- 3rd Fiscal Quarter of Fiscal Year 2000 1.15 to 1.00 4th Fiscal Quarter of Fiscal Year 2000 1.15 to 1.00 1st Fiscal Quarter of Fiscal Year 2001 1.15 to 1.00 2nd Fiscal Quarter of Fiscal Year 2001 1.15 to 1.00 3rd Fiscal Quarter of Fiscal Year 2001 1.15 to 1.00 4th Fiscal Quarter of Fiscal Year 2001 1.20 to 1.00 1st Fiscal Quarter of Fiscal Year 2002 1.20 to 1.00 2nd Fiscal Quarter of Fiscal Year 2002 1.20 to 1.00 3rd Fiscal Quarter of Fiscal Year 2002 1.20 to 1.00 -92- 4th Fiscal Quarter of Fiscal Year 2002 1.30 to 1.00 1st Fiscal Quarter of Fiscal Year 2003 1.30 to 1.00 2nd Fiscal Quarter of Fiscal Year 2003 1.30 to 1.00 3rd Fiscal Quarter of Fiscal Year 2003 1.30 to 1.00 4th Fiscal Quarter of Fiscal Year 2003 1.40 to 1.00 1st Fiscal Quarter of Fiscal Year 2004 1.40 to 1.00 2nd Fiscal Quarter of Fiscal Year 2004 1.40 to 1.00 3rd Fiscal Quarter of Fiscal Year 2004 1.40 to 1.00 4th Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00 1st Fiscal Quarter of Fiscal Year 2005 1.50 to 1.00 2nd Fiscal Quarter of Fiscal Year 2005 1.50 to 1.00 3rd Fiscal Quarter of Fiscal Year 2005 1.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2005 1.60 to 1.00 1st Fiscal Quarter of Fiscal Year 2006 1.60 to 1.00 2nd Fiscal Quarter of Fiscal Year 2006 1.60 to 1.00 3rd Fiscal Quarter of Fiscal Year 2006 0.45 to 1.00 and each Fiscal Quarter thereafter (b) Debt to EBITDA Ratio. WWI will not permit the Debt to EBITDA Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be greater than the ratio set forth opposite such period: Debt to Period EBITDA Ratio ------ ------------ 3rd Fiscal Quarter of Fiscal Year 2000 5.75 to 1.00 4th Fiscal Quarter of Fiscal Year 2000 5.75 to 1.00 1st Fiscal Quarter of Fiscal Year 2001 5.75 to 1.00 2nd Fiscal Quarter of Fiscal Year 2001 5.75 to 1.00 3rd Fiscal Quarter of Fiscal Year 2001 5.75 to 1.00 4th Fiscal Quarter of Fiscal Year 2001 5.00 to 1.00 1st Fiscal Quarter of Fiscal Year 2002 5.00 to 1.00 2nd Fiscal Quarter of Fiscal Year 2002 5.00 to 1.00 3rd Fiscal Quarter of Fiscal Year 2002 5.00 to 1.00 4th Fiscal Quarter of Fiscal Year 2002 4.50 to 1.00 1st Fiscal Quarter of Fiscal Year 2003 4.50 to 1.00 2nd Fiscal Quarter of Fiscal Year 2003 4.50 to 1.00 3rd Fiscal Quarter of Fiscal Year 2003 4.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2003 4.00 to 1.00 1st Fiscal Quarter of Fiscal Year 2004 4.00 to 1.00 -93- 2nd Fiscal Quarter of Fiscal Year 2004 4.00 to 1.00 3rd Fiscal Quarter of Fiscal Year 2004 4.00 to 1.00 4th Fiscal Quarter of Fiscal Year 2004 3.50 to 1.00 1st Fiscal Quarter of Fiscal Year 2005 3.50 to 1.00 2nd Fiscal Quarter of Fiscal Year 2005 3.50 to 1.00 3rd Fiscal Quarter of Fiscal Year 2005 3.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2005 3.00 to 1.00 1st Fiscal Quarter of Fiscal Year 2006 3.00 to 1.00 2nd Fiscal Quarter of Fiscal Year 2006 3.00 to 1.00 3rd Fiscal Quarter of Fiscal Year 2006 3.00 to 1.00 4th Fiscal Quarter of Fiscal Year 2006 2.50 to 1.00 and each Fiscal Quarter thereafter (c) Interest Coverage Ratio. WWI will not permit the Interest Coverage Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be less than the ratio set forth opposite such period: Interest Coverage Period Ratio ------ ----------- 3rd Fiscal Quarter of Fiscal Year 2000 1.45 to 1.00 4th Fiscal Quarter of Fiscal Year 2000 1.45 to 1.00 1st Fiscal Quarter of Fiscal Year 2001 1.45 to 1.00 2nd Fiscal Quarter of Fiscal Year 2001 1.45 to 1.00 3rd Fiscal Quarter of Fiscal Year 2001 1.45 to 1.00 4th Fiscal Quarter of Fiscal Year 2001 1.60 to 1.00 1st Fiscal Quarter of Fiscal Year 2002 1.60 to 1.00 2nd Fiscal Quarter of Fiscal Year 2002 1.60 to 1.00 3rd Fiscal Quarter of Fiscal Year 2002 1.60 to 1.00 4th Fiscal Quarter of Fiscal Year 2002 1.75 to 1.00 1st Fiscal Quarter of Fiscal Year 2003 1.75 to 1.00 2nd Fiscal Quarter of Fiscal Year 2003 1.75 to 1.00 3rd Fiscal Quarter of Fiscal Year 2003 1.75 to 1.00 4th Fiscal Quarter of Fiscal Year 2003 1.90 to 1.00 1st Fiscal Quarter of Fiscal Year 2004 1.90 to 1.00 2nd Fiscal Quarter of Fiscal Year 2004 1.90 to 1.00 3rd Fiscal Quarter of Fiscal Year 2004 1.90 to 1.00 4th Fiscal Quarter of Fiscal Year 2004 2.10 to 1.00 1st Fiscal Quarter of Fiscal Year 2005 2.10 to 1.00 -94- 2nd Fiscal Quarter of Fiscal Year 2005 2.10 to 1.00 3rd Fiscal Quarter of Fiscal Year 2005 2.10 to 1.00 4th Fiscal Quarter of Fiscal Year 2005 2.30 to 1.00 1st Fiscal Quarter of Fiscal Year 2006 2.30 to 1.00 2nd Fiscal Quarter of Fiscal Year 2006 2.30 to 1.00 3rd Fiscal Quarter of Fiscal Year 2006 2.30 to 1.00 4th Fiscal Quarter of Fiscal Year 2006 2.50 to 1.00 and each Fiscal Quarter thereafter (d) Senior Debt to EBITDA Ratio. WWI will not permit the Senior Debt to EBITDA Ratio, as of the end of any Fiscal Quarter occurring during any period set forth below, to be greater than the ratio set forth opposite such period: Senior Debt to Period EBITDA Ratio ------ ------------ 3rd Fiscal Quarter of Fiscal Year 2000 3.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2000 3.50 to 1.00 1st Fiscal Quarter of Fiscal Year 2001 3.50 to 1.00 2nd Fiscal Quarter of Fiscal Year 2001 3.50 to 1.00 3rd Fiscal Quarter of Fiscal Year 2001 3.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2001 3.00 to 1.00 1st Fiscal Quarter of Fiscal Year 2002 3.00 to 1.00 2nd Fiscal Quarter of Fiscal Year 2002 3.00 to 1.00 3rd Fiscal Quarter of Fiscal Year 2002 3.00 to 1.00 4th Fiscal Quarter of Fiscal Year 2002 2.50 to 1.00 1st Fiscal Quarter of Fiscal Year 2003 2.50 to 1.00 2nd Fiscal Quarter of Fiscal Year 2003 2.50 to 1.00 3rd Fiscal Quarter of Fiscal Year 2003 2.50 to 1.00 4th Fiscal Quarter of Fiscal Year 2003 2.00 to 1.00 1st Fiscal Quarter of Fiscal Year 2004 2.00 to 1.00 2nd Fiscal Quarter of Fiscal Year 2004 2.00 to 1.00 3rd Fiscal Quarter of Fiscal Year 2004 2.00 to 1.00 4th Fiscal Quarter of Fiscal Year 2004 1.50 to 1.00 and each Fiscal Quarter thereafter SECTION 7.2.5. Investments. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: -95- (a) Investments existing on the Effective Date and identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule; (b) Cash Equivalent Investments; (c) without duplication, Investments permitted as Indebtedness pursuant to Section 7.2.2; (d) without duplication, Investments permitted as Capital Expenditures pursuant to Section 7.2.7; (e) Investments by WWI in any of its Subsidiaries which have executed Guaranties, or by any such Subsidiary (other than the SP1 Borrower) in any of its Subsidiaries, by way of contributions to capital; (f) Investments made by WWI or any of its Subsidiaries (other than the SP1 Borrower), solely with proceeds which have been contributed, directly or indirectly, to such Subsidiary as cash equity from holders of WWI's common stock for the purpose of making an Investment identified in a notice to the Administrative Agent on or prior to the date that such capital contribution is made; (g) Investments by WWI or any of its Subsidiaries (other than the SP1 Borrower) to the extent the consideration received pursuant to clause (b)(i) of Section 7.2.9 is not all cash; (h) Investments by WWI or any of its Subsidiaries in Weight Watchers Sweden AB Vikt-Vaktarna and Weight Watchers Suomi Oy to the extent that such Investments are for the purpose of acquiring any Capital Securities of such Subsidiaries not owned by WWI and its Subsidiaries on the Closing Date, in an aggregate amount not to exceed $10,000,000; (i) other Investments (not constituting Capital Expenditures attributable to the expenditure of Base Amounts) made by WWI or any of the Guarantors (other than the SP1 Borrower) in an aggregate amount, not to exceed $30,000,000; (j) other Investments made by any Non-Guarantor Subsidiary in another Non-Guarantor Subsidiary; (k) other Investments made by WWI or any Subsidiary in Qualified Assets, to the extent permitted under clause (b) of Section 3.1.1; and (l) Investments made by WWI in the Designated Subsidiary in the aggregate amount not to exceed $1,500,000. -96- provided, however, that (i) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (ii) the Investments permitted above shall only be permitted to be made to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture; (iii) no Investment otherwise permitted by clause (e), (f), (g) or (i) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing ; and (iv) except as permitted under clause (a) above, no more than $2,000,000 of Investments may be made in the Designated Subsidiary unless the Designated Subsidiary shall have taken the actions set forth in Section 7.1.7. SECTION 7.2.6. Restricted Payments, etc. On and at all times after the Effective Date: (a) WWI will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of Capital Securities (now or hereafter outstanding) of WWI or on any warrants, options or other rights with respect to any shares of any class of Capital Securities (now or hereafter outstanding) of WWI (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splits or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of Capital Securities (now or hereafter outstanding) of WWI, or warrants, options or other rights with respect to any shares of any class of Capital Securities (now or hereafter outstanding, including but not limited to the WWI Preferred Shares) of WWI (collectively, "Restricted Payments"); provided, that (x) WWI may make dividend payments under the WWI Preferred Shares so long as no Default has occurred under this Agreement or the Senior Subordinated Note Indenture or would result therefrom, (y) WWI may use 50% of Net Equity Proceeds retained by WWI or its Subsidiaries under clause (d) of Section 3.1.1, solely for the redemption, in whole or in part, of such WWI Preferred Shares and (z) WWI may repurchase its stock held by employees constituting management, in an amount not to exceed $1,000,000 in any Fiscal Year and an aggregate amount of $4,000,000 (amounts unused in any Fiscal Year may be used in the immediately succeeding Fiscal Year); (b) WWI will not, and will not permit any of its Subsidiaries to -97- (i) make any payment or prepayment of principal of, or interest on, any Senior Subordinated Notes (A) on any day other than, in the case of interest only, the stated, scheduled date for such payment of interest set forth in the applicable Senior Subordinated Notes or in the Senior Subordinated Note Indenture, or (B) which would violate the terms of this Agreement or the subordination provisions of the Senior Subordinated Note Indenture; or (ii) redeem, purchase or defease, any Senior Subordinated Notes; and (c) WWI will not, and will not permit any Subsidiary to, make any deposit for any of the foregoing purposes. SECTION 7.2.7. Capital Expenditures, etc. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, make or commit to make Capital Expenditures (other than (x) investments under (1) clause (j) of Section 7.2.5 and (2) clause (h) of Section 7.2.5 to the extent, in the case of this clause (2), that the aggregate amount of such investments does not exceed $30,000,000 (it being understood that Capital Expenditures may be made pursuant to this clause (x) whether or not constituting "Investments", but shall be treated as such for the purposes of said Sections), (y) nonrecurring restructuring costs and Transaction and related expenses and (z) proceeds of capital contributions used for Capital Expenditures in any Fiscal Year by WWI and its Subsidiaries (other than the SP1 Borrower), except, to the extent not prohibited in whole or in part by the terms of the Senior Subordinated Note Indenture, Capital Expenditures which do not aggregate in excess of the amount set forth below opposite such Fiscal Year: Maximum Capital Fiscal Year Expenditures ----------- ------------- 2000 $5,000,000 2001 $5,500,000 2002 $6,000,000 2003 $6,500,000 2004 $7,000,000 2005 and thereafter $7,500,000 provided, however, that (i) to the extent the amount of Capital Expenditures permitted to be made in any Fiscal Year pursuant to the table set forth above without giving effect to this clause (i) (the "Base Amount") exceeds the aggregate amount of Capital Expenditures actually made during such Fiscal Year, such excess amount may be carried forward to (but only to) the next succeeding Fiscal Year (any -98- such amount to be certified by WWI to the Administrative Agent in the Compliance Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any such amount carried forward to a succeeding Fiscal Year shall be deemed to be used prior to WWI and its Subsidiaries using the Base Amount for such succeeding Fiscal Year, without giving effect to such carry-forward). SECTION 7.2.8. Consolidation, Merger, etc. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except (a) any such Subsidiary (other than the SP1 Borrower) may liquidate or dissolve voluntarily into, and may merge with and into, WWI (so long as WWI is the surviving corporation of such combination or merger) or any other Subsidiary (other than the SP1 Borrower), and the assets or stock of any Subsidiary may be purchased or otherwise acquired by WWI or any other Subsidiary (other than the SP1 Borrower); provided, that notwithstanding the above, (i) a Subsidiary may only liquidate or dissolve into, or merge with and into, another Subsidiary of WWI (other than the SP1 Borrower) if, after giving effect to such combination or merger, WWI continues to own (directly or indirectly), and the Administrative Agent continues to have pledged to it pursuant to a supplement to the WWI Pledge Agreement, a percentage of the issued and outstanding shares of Capital Securities (on a fully diluted basis) of the Subsidiary surviving such combination or merger that is equal to or in excess of the percentage of the issued and outstanding shares of Capital Securities (on a fully diluted basis) of the Subsidiary that does not survive such combination or merger that was (immediately prior to the combination or merger) owned by WWI or pledged to the Administrative Agent and (ii) if such Subsidiary is a Guarantor the surviving corporation must be a Guarantor; (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, WWI or any of their Subsidiaries (other than the SP1 Borrower) may purchase all or substantially all of the assets of any Person (or any division thereof) not then a Subsidiary, or acquire such Person by merger, if permitted (without duplication) pursuant to the proviso contained in clause (a) above; and (c) a Subsidiary may merge with another Person in a transaction permitted by clause (b) of Section 7.2.9. SECTION 7.2.9. Asset Dispositions, etc. Subject to the definition of Change of Control, each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, Dispose of all or any part of its assets, whether now owned or hereafter acquired (including accounts receivable and Capital Securities of Subsidiaries) to any Person, unless -99- (a) such Disposition is made by WWI or any of its Subsidiaries (other than the SP1 Borrower) and is (i) in the ordinary course of its business (and does not constitute a Disposition of all or a substantial part of WWI or such Subsidiary's assets) or is of obsolete or worn out property or (ii) permitted by clause (a) or (b) of Section 7.2.8; (b) (i) such Disposition (other than of Capital Securities) is made by WWI or any of its Subsidiaries (other than the SP1 Borrower) and is for fair market value and the consideration consists of no less than 75% in cash, (ii) the Net Disposition Proceeds received from such Disposition, together with the Net Disposition Proceeds of all other assets sold, transferred, leased, contributed or conveyed pursuant to this clause (b) since the Effective Date, does not exceed (individually or in the aggregate) $20,000,000 over the term of this Agreement and (iii) the Net Disposition Proceeds generated from such Disposition not theretofore reinvested in Qualified Assets in accordance with clause (b) of Section 3.1.1 (with the amount permitted to be so reinvested in Qualified Assets in any event not to exceed $7,500,000 over the term of this Agreement) is applied as Net Disposition Proceeds to prepay the Loans pursuant to the terms of clause (b) of Section 3.1.1 and Section 3.1.2; or (c) such Disposition is made pursuant to a Local Management Plan. SECTION 7.2.10. Modification of Certain Agreements. (a) Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, consent to any amendment, supplement, amendment and restatement, waiver or other modification of any of the terms or provisions contained in, or applicable to, the Recapitalization Agreement or any schedules, exhibits or agreements related thereto, in each case which would adversely affect the rights or remedies of the Lenders, or WWI's or any Subsidiary's ability to perform hereunder or under any Loan Document or which would increase the purchase price with respect to the Transaction. (b) Except as otherwise permitted pursuant to the terms of this Agreement, without the prior written consent of the Required Lenders, WWI will not consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, any Subordinated Debt (including the Senior Subordinated Note Indenture or any of the Senior Subordinated Notes), or any guarantees delivered in connection with any Subordinated Debt (including any Subordinated Guaranty) (collectively, the "Restricted Agreements"), or make any payment in order to obtain an amendment thereof or change thereto, if the effect of such amendment, supplement, modification or change is to (i) increase the principal amount of, or increase the interest rate on, or add or increase any fee with respect to such Subordinated Debt or any such Restricted Agreement, advance any dates upon which payments of principal or interest are due thereon or change any of the covenants with respect thereto in a manner which is more restrictive to WWI or any of its Subsidiaries or (ii) change any event of default or condition to an event of default with respect thereto, change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof, or change -100- any collateral therefor (other than to release such collateral), if (in the case of this clause (b)(ii)), the effect of such amendment or change, individually or together with all other amendments or changes made, is to increase the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Debt, or any such Restricted Agreement (or a trustee or other representative on their behalf). SECTION 7.2.11. Transactions with Affiliates. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of their other Affiliates (other than any Obligor) (a) unless (i) such arrangement or contract is fair and equitable to WWI or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrowers or such Subsidiary with a Person which is not one of their Affiliates; (ii) if such arrangement or contract involves an amount in excess of $5,000,000, the terms of such arrangement or contract are set forth in writing and a majority of directors of WWI have determined in good faith that the criteria set forth in clause (i) are satisfied and have approved such arrangement or contract as evidenced by appropriate resolutions of the board of directors of WWI or the relevant Subsidiary; or (iii) if such arrangement or contract involves an amount in excess of $25,000,000, the board of directors shall also have received a written opinion from an investment banking, accounting or appraisal firm of national prominence that is not an Affiliate of WWI to the effect that such arrangement or contract is fair, from a financial standpoint, to WWI and its Subsidiaries; and (b) except that, so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, WWI and its Subsidiaries may pay (i) annual management, consulting, monitoring and advisory fees to The Invus Group, Ltd. in an aggregate total amount in any Fiscal Year not to exceed the greater of (x) $1,000,000 and (y) 1.0% of EBITDA for the relevant period, and any related out-of-pocket expenses and (ii) fees to The Invus Group, Ltd. and its Affiliates in connection with any acquisition or divestiture transaction entered into by WWI or any Subsidiary; provided, however, that the aggregate amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of any acquisition or divestiture transaction shall not exceed 1% of the total amount of such transaction. SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into any agreement (excluding (i) any restrictions existing under the Loan Documents or, in the case of clauses (a)(i) and (b), any other agreements in effect on the date hereof, (ii) in the case of clauses (a)(i) and (b), any restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the sale or disposition of all or substantially all of the Capital Securities or assets of such Subsidiary pursuant to a transaction otherwise permitted hereby, (iii) in the case of clause (a), restrictions in respect of Indebtedness secured by Liens permitted by Section 7.2.3, but only to the extent such -101- restrictions apply to the assets encumbered thereby, (iv) in the case of clause (a), restrictions under the Senior Subordinated Note Indenture or (v) any restrictions existing under any agreement that amends, refinances or replaces any agreement containing the restrictions referred to in clause (i), (ii) or (iii) above; provided, that the terms and conditions of any such agreement referred to in clause (i), (ii) or (iii) are not materially less favorable to the Lenders or materially more restrictive to any Obligor a party thereto than those under the agreement so amended, refinanced or replaced) prohibiting (a) the (i) creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or (ii) ability of WWI or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or (b) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrowers by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrowers. SECTION 7.2.13. Stock of Subsidiaries. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to issue any Capital Securities (whether for value or otherwise) to any Person other than WWI or another Wholly-owned Subsidiary of WWI except in connection with a Local Management Plan; provided, that, WW Australia shall at all times be the record and beneficial direct owner of all of the issued and outstanding Capital Securities of the SP1 Borrower. SECTION 7.2.14. Sale and Leaseback. Each of the Borrowers will not, and will not permit any of its respective Subsidiaries to, enter into any agreement or arrangement with any other Person providing for the leasing by WWI or any of its Subsidiaries of real or personal property which has been or is to be sold or transferred by WWI or any of its Subsidiaries to such other Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of WWI or any of its Subsidiaries. SECTION 7.2.15. Fiscal Year. Each of the Borrowers will not and will not permit any of its respective Subsidiaries to change its Fiscal Year; provided, that on or prior to the end of Fiscal Year 2001, each of the Borrowers may change its respective Fiscal Year upon at least 30 days prior written notice to the Administrative Agent and subject to such reasonable adjustments to Sections 7.1.1 and 7.2.4 (as to the measurement dates) as are agreed to by the Administrative Agent in writing. SECTION 7.2.16. Designation of Senior Indebtedness. WWI will not designate any Indebtedness as "Designated Senior Indebtedness" pursuant to clause (1) of the definition of such term in the Senior Subordinated Note Indenture, without the consent of the Required Lenders. -102- SECTION 7.3. Maintenance of Separate Existence. The SP1 Borrower covenants and agrees with the Administrative Agent, the Issuer and each Lender as follows: (a) Other Business. It will not engage in any business or enterprise or enter into any transaction other than the borrowing of Loans under the Agreement, and the incurrence and payment of ordinary course operating expenses, and as otherwise contemplated by the Loan Documents. (b) Maintenance of Separate Existence. In order to maintain its corporate existence separate and apart from that of WWI, any Subsidiary of WWI and any Affiliates thereof and any other Person, it will perform all necessary acts to maintain such separation, including without limitation, (i) practicing and adhering to corporate formalities, such as maintaining appropriate corporate books and records; (ii) complying with Article Sixth of its certificate of incorporation; (iii) owning or leasing (including through shared arrangements with Affiliates) all office furniture and equipment necessary to operate its business; (iv) refraining from (A) guaranteeing or otherwise becoming liable for any obligations of any of its Affiliates or any other Person, (B) having its Obligations guaranteed by its Affiliates or any other Person (except as otherwise contemplated by the Loan Documents), (C) holding itself out as responsible for debts of any of its Affiliates or any other Person or for decisions or actions with respect to the affairs of any of its Affiliates or any other Person, and (D) being directly or indirectly named as a direct or contingent beneficiary or loss payee on any insurance policy of any Affiliate; (v) maintaining its deposit and other bank accounts and all of its assets separate from those of any other Person; (vi) maintaining its financial records separate and apart from those of any other Person; (vii) compensating all its employees, officers, consultants and agents for services provided to it by such Persons, or reimbursing any of its Affiliates in respect of services provided to it by employees, officers, consultants and agents of such Affiliate, out of its own funds; -103- (viii) maintaining any owned or leased office space separate and apart from that of any of its Affiliates (even if such office space is subleased from or is on or near premises occupied by any of its Affiliates); (ix) accounting for and managing all of its liabilities separately from those of any of its Affiliates and any other Person, including, without limitation, payment directly by the SP1 Borrower of all payroll, accounting and other administrative expenses and taxes; (x) allocating, on an arm's-length basis, all shared corporate operating services, leases and expenses, including, without limitation, those associated with the services of shared consultants and agents and shared computer and other office equipment and software; (xi) refraining from filing or otherwise initiating or supporting the filing of a motion in any bankruptcy or other insolvency proceeding involving it, WWI, any Subsidiary of WWI, any Affiliate thereof or any other Person to substantively consolidate it with WWI, any Subsidiary of WWI, any Affiliate thereof or any other Person; (xii) remaining solvent; (xiii) conducting all of its business (whether written or oral) solely in its own name; (xiv) refraining from commingling its assets with those of any of its Affiliates or any other Person; (xv) maintaining an arm's-length relationship with all of its Affiliates; (xvi) refraining from acquiring obligations or securities of WWI, any Subsidiary of WWI or any Affiliate thereof; (xvii) refraining from pledging its assets for the benefit of any of its Affiliates or any other Person or making any loans or advances to any of its Affiliates or any other Person (in each case, except as otherwise permitted pursuant to the Loan Documents); and (xviii) correcting any known misunderstanding regarding its separate identity. (c) Independent Directors. It will not cause or allow its board of directors to take any action requiring the unanimous affirmative vote of 100% of the members of its board of -104- directors unless the Independent Director(s) (as defined in the certificate of incorporation of the SP1 Borrower) shall have participated in such vote, and it shall comply in all respects with Article Seventh of its certificate of incorporation. (d) Unanimous Consent Required for Certain Actions. It shall not, without the unanimous consent of all of the members of its board of directors, including its independent director(s), (i) file, or authorize or consent to the filing of, a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest, (ii) dissolve, liquidate, consolidate, merge, or sell all or substantially all of its assets or any other entity in which it has a direct or indirect legal or beneficial ownership interest, (iii) engage in any other business activity or (iv) amend Articles Third, Sixth and Seventh of its Certificate of Incorporation. (e) No Powers of Attorney. The SP1 Borrower shall not grant any powers of attorney to any Person for any purposes except (i) for the purpose of permitting any Person to perform any ministerial or administrative functions on behalf of the SP1 Borrower which are not inconsistent with the terms of the Loan Documents, (ii) to the Administrative Agent for the purposes of the Security Agreements, Pledge Agreements and Guaranties, or (iii) where otherwise provided or permitted by the Loan Documents. ARTICLE VIII GUARANTY SECTION 8.1. The Guaranty. WWI hereby unconditionally and irrevocably guarantees the full and prompt payment when due, whether at stated maturity, by acceleration or otherwise (including all amounts which would have become due but for the operation of the automatic stay under Section 362(a) of the Federal Bankruptcy Code, 11 U.S.C. 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), of the following (collectively, the "Guaranteed Obligations"), (a) all Obligations of the SP1 Borrower and each other Obligor to the Administrative Agent and each of the Lenders now or hereafter existing under this Agreement and each other Loan Document, whether for principal, interest, fees, expenses or otherwise; and (b) all other Obligations to the Administrative Agent and each of the Lenders now or hereafter existing under any of the Loan Documents, whether for principal, interest, fees, expenses or otherwise. The obligations of WWI under this Article VIII constitute a guaranty of payment when due and not of collection, and WWI specifically agrees that it shall not be necessary or required that the Administrative -105- Agent, any Lender or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the SP1 Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of WWI under this Article VIII. SECTION 8.2. Guaranty Unconditional. The obligations of WWI under this Article VIII shall be construed as a continuing, absolute, unconditional and irrevocable guaranty of payment and shall remain in full force and effect until the Final Termination Date. WWI guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the agreement, instrument or document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any of the Lenders with respect thereto. The liability of WWI hereunder shall be absolute and unconditional irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, the Notes, the TLCs, any Rate Protection Agreement with a Lender or any other Loan Document or any other agreement or instrument relating to any thereof; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any compromise, renewal, extension, acceleration or release with respect thereto, or any other amendment or waiver of or any consent to departure from this Agreement, the Notes, the TLCs, any Rate Protection Agreement with a Lender or any other Loan Document; (c) any addition, exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) the failure of the Administrative Agent or any Lender (i) to assert any claim or demand or to enforce any right or remedy against the SP1 Borrower, any other Obligor or any other Person (including any other guarantor) under the provisions of this Agreement, any Note, any TLC, any Rate Protection Agreement with a Lender or any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Guaranteed Obligations; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note, any TLC, any Rate Protection Agreement with a Lender or any other Loan Document; -106- (f) any defense, setoff or counter-claim which may at any time be available to or be asserted by any Obligor against the Administrative Agent or any Lender; (g) any reduction, limitation, impairment or termination of the Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and WWI hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations or otherwise; or (h) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, WWI, any other Obligor or any surety or guarantor. SECTION 8.3. Reinstatement in Certain Circumstances. If at any time any payment in whole or in part of any of the Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of WWI, any other Obligor or otherwise, WWI's obligations under this Article VIII with respect to such payment shall be reinstated as though such payment had been due but not made at such time. SECTION 8.4. Waiver. WWI irrevocably waives promptness, diligence, notice of acceptance hereof, presentment, demand, protest and any other notice with respect to any of the Guaranteed Obligations, as well as any requirement that at any time any action be taken by any Person against the SP1 Borrower or any other Person. SECTION 8.5. Postponement of Subrogation, etc. WWI will not exercise any rights which it may acquire by way of rights of subrogation by any payment made hereunder or otherwise, prior to the Final Termination Date. Any amount paid to WWI on account of any such subrogation rights prior to Final Termination Date shall be held in trust for the benefit of the Lenders and each holder of a Note and/or TLC and shall immediately be paid to the Administrative Agent and credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement; provided, however, that if (a) WWI has made payment to the Lenders and each holder of a Note of all or any part of the Guaranteed Obligations, and (b) the Final Termination Date has occurred, each Lender and each holder of a Note agrees that, at WWI's request, the Administrative Agent, on behalf of the Lenders and the holders of the Notes, will execute and deliver to WWI appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to WWI of an interest in the Guaranteed Obligations resulting from such payment by WWI. In furtherance of the foregoing, at all times prior to the Final Termination Date, -107- WWI shall refrain from taking any action or commencing any proceeding against the SP1 Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments to any Lender or any holder of a Note and/or TLC; provided, however, that WWI may make any necessary filings solely to preserve its claims against the SP1 Borrower. SECTION 8.6. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the SP1 Borrower under this Agreement or any Note or TLC is stayed upon the occurrence of any event referred to in Section 9.1.9 with respect to the SP1 Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by WWI hereunder forthwith. ARTICLE IX EVENTS OF DEFAULT SECTION 9.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 9.1 shall constitute an "Event of Default". SECTION 9.1.1. Non-Payment of Obligations. (a) Any Borrower shall default in the payment or prepayment of (i) any Reimbursement Obligation (including pursuant to Sections 2.6 and 2.6.2) on the applicable Disbursement Due Date or any deposit of cash for collateral purposes on the date required pursuant to Section 2.6.4 or (ii) any principal of any Loan when due, or (b) any Obligor (including WWI and the SP1 Borrower) shall default (and such default shall continue unremedied for a period of three Business Days) in the payment when due of any interest or commitment fee or of any other monetary Obligation. SECTION 9.1.2. Breach of Warranty. Any representation or warranty of any Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate (including the Closing Date Certificate) furnished by or on behalf of the Borrowers or any other Obligor to the Administrative Agent, the Issuer or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made in any material respect. SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations. Any Borrower shall default in the due performance and observance of any of its obligations under Section 7.1.9, Section 7.1.10, Section 7.1.12 or Section 7.2. SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days -108- after notice thereof shall have been given to WWI by the Administrative Agent at the direction of the Required Lenders. SECTION 9.1.5. Default on Other Indebtedness. A default shall occur (i) in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness, other than Indebtedness described in Section 9.1.1, of WWI or any of its Subsidiaries or any other Obligor having a principal amount, individually or in the aggregate, in excess of $1,000,000, or (ii) a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness having a principal amount, individually or in the aggregate, in excess of $5,000,000 if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 9.1.6. Judgments. Any judgment or order for the payment of money in excess of $1,000,000 (not covered by insurance from a responsible insurance company that is not denying its liability with respect thereto) shall be rendered against WWI or any of its Subsidiaries or any other Obligor and remain unpaid and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 9.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan (a) the termination of any Pension Plan if, as a result of such termination, WWI or any Subsidiary would be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $5,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in an amount in excess of $5,000,000. SECTION 9.1.8. Change in Control. Any Change in Control shall occur. SECTION 9.1.9. Bankruptcy, Insolvency, etc. WWI or any of its Subsidiaries (other than any Immaterial Subsidiary or the Designated Subsidiary) or any other Obligor shall -109- (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for WWI or any of its Subsidiaries or any other Obligor or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for WWI or any of its Subsidiaries or any other Obligor or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that WWI or each Subsidiary and each other Obligor hereby expressly authorizes the Administrative Agent, the Issuer and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of WWI or any of its Subsidiaries or any other Obligor, and, if any such case or proceeding is not commenced by WWI or such Subsidiary or such other Obligor, such case or proceeding shall be consented to or acquiesced in by WWI or such Subsidiary or such other Obligor or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that WWI, each Subsidiary and each other Obligor hereby expressly authorizes the Administrative Agent, the Issuer and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any action (corporate or otherwise) authorizing, or in furtherance of, any of the foregoing. SECTION 9.1.10. Impairment of Security, etc. Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be in full force and effect or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; any Borrower or any other Obligor shall, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability thereof; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document, except to the extent any event referred to above (a) results from the failure of the Administrative Agent to maintain possession of certificates representing securities pledged under the WWI Pledge Agreement or to file continuation statements under the Uniform Commercial Code of any applicable jurisdiction or (b) is covered by a lender's title insurance policy and the relevant insurer promptly after the occurrence thereof shall have acknowledged in writing that the same is covered by such title insurance policy. -110- SECTION 9.1.11. Senior Subordinated Notes. The subordination provisions relating to the Senior Subordinated Note Indenture (the "Subordination Provisions") shall fail to be enforceable by the Lenders (which have not effectively waived the benefits thereof) in accordance with the terms thereof, or the principal or interest on any Loan, Reimbursement Obligation or other monetary Obligations shall fail to constitute Senior Debt, or the same (or any other similar term) used to define the monetary Obligations. SECTION 9.1.12. Redemption. Any Senior Subordinated Noteholder of any Subordinated Debt shall file an action seeking the rescission thereof or damages or injunctive relief relating thereto; or any event shall occur which, under the terms of any agreement or indenture relating to Subordinated Debt, shall require WWI or any of its Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire all or any portion of the principal amount of the Subordinated Debt (other than as provided under Section 7.2.6); or WWI or any of its Subsidiaries shall for any other reason purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire, or make any other payments in respect of the principal amount of any such Subordinated Debt (other than as provided under Section 7.2.6). SECTION 9.2. Action if Bankruptcy, etc. If any Event of Default described in Section 9.1.3 (as it relates to Section 7.1.10) or in clauses (a) through (d) of Section 9.1.9 shall occur with respect to WWI, any Subsidiary or any other Obligor, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 9.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 9.1.3 (as it relates to Section 7.1.10) or clauses (a) through (d) of Section 9.1.9 with respect to WWI or any Subsidiary or any other Obligor) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to WWI declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable, require the Borrowers to provide cash collateral to be deposited with the Administrative Agent in an amount equal to the Stated Amount of all issued Letters of Credit and/or declare the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, the Borrowers shall deposit with the Administrative Agent cash collateral in an amount equal to the Stated Amount of all issued Letters of Credit and/or, as the case may be, the Commitments shall terminate. -111- ARTICLE X THE AGENTS SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its Administrative Agent and as a Lead Agent and Book Manager under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes, the TLCs, and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby appoints CSFB as the Syndication Agent and as a Lead Agent and Book Manager. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent, ratably in accordance with their respective Term Loans and TLCs outstanding and Commitments (or, if no Term Loans, TLCs or Commitments are at the time outstanding and in effect, then ratably in accordance with the principal amount of Term Loans or, as the case may be, TLCs held by such Lender, and their respective Commitments as in effect in each case on the date of the termination of this Agreement), from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agents in any way relating to or arising out of this Agreement, the Notes, the TLCs and any other Loan Document, including reasonable attorneys' fees, and as to which any Agent is not reimbursed by the Borrowers or any other Obligor (and without limiting the obligation of the Borrowers or any other Obligor to do so); provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from an Agent's gross negligence or willful misconduct. The Agents shall not be required to take any action hereunder, under the Notes, the TLCs or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes, the TLCs or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agents shall be or become, in any Agent's determination, inadequate, any Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. Notwithstanding the foregoing, the Lead Arrangers and Book Managers shall have no duties, obligations or liabilities under any Loan Document. SECTION 10.2. Funding Reliance, etc. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. If and to the extent -112- that such Lender shall not have made such amount available to the Administrative Agent, such Lender severally agrees and the Borrowers jointly and severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the applicable Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of any Borrower) and (in the case of a Lender), at the Federal Funds Rate (for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION 10.3. Exculpation. Neither any Agent nor any of their respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrowers of their obligations hereunder or under any other Loan Document. Any such inquiry which may be made by any Agent shall not obligate it to make any further inquiry or to take any action. The Agents shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agents believe to be genuine and to have been presented by a proper Person. SECTION 10.4. Successor. The Syndication Agent may resign as such upon one Business Day's notice to WWI and the Administrative Agent. The Administrative Agent may resign as such at any time upon at least 30 days prior notice to WWI and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, with the prior consent of WWI (which consent shall not be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $250,000,000; provided, however, that if, such retiring Administrative Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in above, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor as provided for above. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor -113- Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (a) this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 11.3 and Section 11.4 shall continue to inure to its benefit. SECTION 10.5. Credit Extensions by each Agent. Each Agent shall have the same rights and powers with respect to (x) the Credit Extensions made by it or any of its Affiliates, and (y) the Notes or TLCs held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any Subsidiary or Affiliate of WWI, as if such Agent were not an Agent hereunder. SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrowers, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION 10.7. Copies, etc. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by any Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by such Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from any Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement. SECTION 10.8. Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in -114- accordance with instructions given by the Required Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. For purposes of applying amounts in accordance with this Section, the Administrative Agent shall be entitled to rely upon any Secured Party that has entered into a Rate Protection Agreement with any Obligor for a determination (which such Secured Party agrees to provide or cause to be provided upon request of the Administrative Agent) of the outstanding Secured Obligations owed to such Secured Party under any Rate Protection Agreement. Unless it has actual knowledge evidenced by way of written notice from any such Secured Party and any Borrower to the contrary, the Administrative Agent, in acting hereunder and under each other Loan Document, shall be entitled to assume that no Rate Protection Agreements or Obligations in respect thereof are in existence or outstanding between any Secured Party and any Obligor. SECTION 10.9. Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or any Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 11.1) take such action with respect to such Default as shall be directed by the Required Lenders; provided, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all Lenders. ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrowers and the Required Lenders; provided, however, that no such amendment, modification or waiver shall: (a) modify this Section 11.1 without the consent of all Lenders; (b) increase the aggregate amount of any Lender's Percentage of any Commitment Amount, increase the aggregate amount of any Loans or TLCs required to be made or purchased by a Lender pursuant to its Commitments, extend the final Commitment Termination Date of Credit Extensions made (or participated in) by a Lender or reduce any fees described in Article III payable to any Lender without the consent of such Lender; -115- (c) extend the final Stated Maturity Date for any Lender's Loan or TLC, or reduce the principal amount of or rate of interest on any Lender's Loan or TLC or extend the date on which scheduled payments of principal, or payments of interest or fees are payable in respect of any Lender's Loans or TLCs, in each case, without the consent of such Lender (it being understood and agreed, however, that any vote to rescind any acceleration made pursuant to Section 9.2 and Section 9.3 of amounts owing with respect to the Loans, TLCs and other Obligations shall only require the vote of the Required Lenders); (d) reduce the percentage set forth in the definition of "Required Lenders" or any requirement hereunder that any particular action be taken by all Lenders without the consent of all Lenders; (e) increase the Stated Amount of any Letter of Credit or extend the Stated Expiry Date of any Letter of Credit to a date which is subsequent to the Revolving Loan Commitment Termination Date, in each case, unless consented to by the Issuer of such Letter of Credit; (f) except as otherwise expressly provided in this Agreement or another Loan Document, release (i) any Guarantor from its obligations under a Guaranty other than in connection with a Disposition of all or substantially all of the Capital Securities of such Guarantor in a transaction permitted by Section 7.2.9 as in effect from time to time or (ii) all or substantially all of the collateral under the Loan Documents, in either case without the consent of all Lenders; (g) change any of the terms of clause (c) of Section 2.1.4 or Section 2.3.2 without the consent of the Swingline Lender; or (h) affect adversely the interests, rights or obligations of the Administrative Agent (in its capacity as the Administrative Agent), the Syndication Agent (in its capacity as the Syndication Agent) or any Issuer (in its capacity as Issuer), unless consented to by the Administrative Agent, the Syndication Agent or such Issuer, as the case may be. No failure or delay on the part of the Administrative Agent, the Syndication Agent, any Issuer or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Borrower or any other Obligor in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent, the Syndication Agent, any Issuer or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. -116- SECTION 11.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on Schedule III hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (telephonic confirmation in the case of facsimile). SECTION 11.3. Payment of Costs and Expenses. The Borrowers jointly and severally agree to pay on demand all reasonable expenses of the Administrative Agent (including the reasonable fees and out-of-pocket expenses of Mayer, Brown & Platt, special New York counsel to the Administrative Agent and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with: (a) the syndication by the Agents of the Loans, the TLCs, the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; (b) the filing, recording, refiling or rerecording of each Mortgage, each Pledge Agreement and each Security Agreement and/or any Uniform Commercial Code financing statements or other instruments relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of such Mortgage, Pledge Agreement or Security Agreement; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrowers further jointly and severally agree to pay, and to save each Agent, the Issuer and the Lenders harmless from all liability for, any stamp or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the Credit Extensions made hereunder, or the issuance of the Notes, the TLCs and Letters of Credit or any other Loan Documents. The Borrowers also agree to reimburse the Administrative Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent, the Issuer or such Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. -117- SECTION 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrowers hereby jointly and severally indemnify, exonerate and hold the Administrative Agent, the Syndication Agent, the Issuer and each Lender and each of their respective Affiliates, and each of their respective partners, officers, directors, employees and agents, and each other Person controlling any of the foregoing within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively, the "Indemnified Parties"), free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses actually incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of any Borrower as the result of any determination by the Required Lenders pursuant to Article V not to make any Credit Extension); (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by WWI or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not the Administrative Agent, the Syndication Agent, the Issuer or such Lender is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by WWI or any of its Subsidiaries of any Hazardous Material; (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by WWI or any Subsidiary thereof of any Hazardous Material present on or under such property in a manner giving rise to liability at or prior to the time WWI or such Subsidiary owned or operated such property (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, WWI or such Subsidiary; or (f) each Lender's Environmental Liability (the indemnification herein shall survive repayment of the Notes and the TLCs and any transfer of the property of WWI or any of its Subsidiaries by foreclosure or by a deed in lieu of foreclosure for any Lender's Environmental Liability, regardless of whether caused by, or within the control of, WWI or such Subsidiary); -118- except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or willful misconduct. WWI, the Borrowers and their permitted successors and assigns hereby waive, release and agree not to make any claim, or bring any cost recovery action against, the Administrative Agent, the Syndication Agent, the Issuer or any Lender under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted, except to the extent arising out of the gross negligence or willful misconduct of any Indemnified Party. It is expressly understood and agreed that to the extent that any of such Persons is strictly liable under any Environmental Laws, any Borrower's obligation to such Person under this indemnity shall likewise be without regard to fault on the part of such Borrower with respect to the violation or condition which results in liability of such Person. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each of the Borrowers hereby jointly and severally agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 11.5. Survival. The obligations of the Borrowers under Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders under Sections 4.8 and 10.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations, the termination or expiration of all Letters of Credit and the termination of all Commitments. The representations and warranties made by the Borrowers and each other Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 11.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrowers, the Syndication Agent, the Issuer and each Lender (or notice thereof satisfactory to the Administrative Agent) shall have been received by the Administrative Agent (and the Administrative Agent shall have executed such a counterpart) and notice thereof shall have been given by the Administrative Agent to the Borrowers, the Syndication Agent, the Issuer and each Lender. -119- SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES, THE TLCS AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT), INCLUDING PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND COMMITMENT FEES, SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: (a) none of the Borrowers may assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11. SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans, Notes and TLCs. Each Lender may assign, or sell participations in, its Loans, its TLCs, Letters of Credit and Commitments to one or more other Persons, on a non pro rata basis, in accordance with this Section 11.11. SECTION 11.11.1. Assignments. Any Lender, (a) with the written consents of WWI and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and which consent, in the case of WWI, shall be deemed to have been given in the absence of a written notice delivered by WWI to the Administrative Agent, on or before the fifth Business Day after receipt by WWI of such Lender's request for such consent), may at any time assign and delegate to one or more commercial banks or other financial institutions, and -120- (b) with notice to WWI and the Administrative Agent, but without the consent of any Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates or to any other Lender, (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or any fraction of such Lender's total Loans, TLCs, participations in Letters of Credit and Letter of Credit Outstandings with respect thereto and Commitments in a minimum aggregate amount of (x) $1,000,000 (if such assignment and delegation is to a then existing Lender) or (y) $5,000,000 (if such assignment and delegation is to a Person not then a Lender; unless otherwise agreed to by the Administrative Agent and the Borrower) or the then remaining amount of a Lender's Loans and Commitments; provided, however, that (i) with respect to assignments of Revolving Loans, the assigning Lender must assign a pro rata portion of each of its Revolving Loan Commitments, Revolving Loans and interest in Letters of Credit Outstandings and (ii) the Administrative Agent, in its own discretion, or by instruction from the Issuer, may refuse acceptance of an assignment of Revolving Loans and Revolving Loan Commitments to a Person not satisfying long-term certificate of deposit ratings published by S&P or Moody's, of at least BBB- or Baa3, respectively, or (unless otherwise agreed to by the Issuer), if such assignment would, pursuant to any applicable laws, rules or regulations, be binding on the Issuer, result in a reduced rate of return to the Issuer or require the Issuer to set aside capital in an amount that is greater than that which is required to be set aside for other Lenders participating in the Letters of Credit; provided, further, that any such Assignee Lender will comply, if applicable, with the provisions contained in Section 4.6 and the Borrowers, each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (i) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrowers and the Administrative Agent by such Lender and such Assignee Lender; (ii) such Assignee Lender shall have executed and delivered to the Borrowers and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; and (iii) the processing fees described below shall have been paid. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan -121- Documents. Within ten Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the applicable Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes or TLCs, as the case may be, evidencing such Assignee Lender's assigned Loans, TLCs, TLC Commitments and Commitments and, if the assignor Lender has retained Loans, TLCs, TLC Commitments and Commitments hereunder, replacement Notes or TLCs, as the case may be, in the principal amount of the Loans or TLCs, as the case may be, and TLC Commitments or Commitments, as the case may be, retained by the assignor Lender hereunder (such Notes or TLCs, as the case may be, to be in exchange for, but not in payment of, those Notes or TLCs, as the case may be, then held by such assignor Lender). Each such Note or TLC, as the case may be, shall be dated the date of the predecessor Notes or TLCs, as the case may be. The assignor Lender shall mark the predecessor Notes or TLCs, as the case may be, "exchanged" and deliver them to the applicable Borrower. Accrued interest on that part of the predecessor Notes or TLCs, as the case may be, evidenced by the new Notes or TLCs, as the case may be, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes or TLCs, as the case may be, evidenced by the replacement Notes or TLCs, as the case may be, shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes or TLCs, as the case may be, and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement, in the amount of $3,500, unless such assignment and delegation is by a Lender to its Affiliate or if such assignment and delegation is by a Lender to the Federal Reserve Bank, as provided below. Any attempted assignment and delegation not made in accordance with this Section 11.11.1 shall be null and void. Notwithstanding any other term of this Section 11.11.1, the agreement of the Swing Line Lender to provide the Swing Line Loan Commitment shall not impair or otherwise restrict in any manner the ability of the Swing Line Lender to make any assignment of its Loans or Commitments, it being understood and agreed that the Swing Line Lender may terminate its Swing Line Loan Commitment, to the extent such Swing Line Commitment would exceed its Revolving Loan Commitment after giving effect to such assignment, in connection with the making of any assignment. Nothing contained in this Section 11.11.1 shall prevent or prohibit any Lender from pledging its rights (but not its obligations to make Loans) under this Agreement and/or its Loans and/or its Notes hereunder to a Federal Reserve Bank (or in the case of a Lender which is a fund, to the trustee of, or other Eligible Institution affiliated with, such fund for the benefit of its investors) in support of borrowings made by such Lender from such Federal Reserve Bank. In the event that S&P or Moody's shall, after the date that any Lender with a Commitment to make Revolving Loans or participate in Letters of Credit or Swing Line Loans becomes a Lender, downgrade the long-term certificate of deposit rating or long-term senior unsecured debt rating of such Lender, and the resulting rating shall be below BBB- or Baa3, then each of the Issuer and (if different) the Swing Line Lender shall have the right, but not the obligation, upon notice to such Lender and the Administrative Agent, to replace such Lender with an Assignee Lender in accordance with and subject -122- to the restrictions contained in this Section, and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in this Section) all its interests, rights and obligations in respect of its Revolving Loan Commitment under this Agreement to such Assignee Lender; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any governmental authority and (ii) such Assignee Lender shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest and fees (if any) accrued to the date of payment on the Loans made, and Letters of Credit participated in, by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. SECTION 11.11.2. Participations. (a) Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in any of the Loans, TLCs, Commitments, or other interests of such Lender hereunder; provided, however, that (i) no participation contemplated in this Section shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; (ii) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (iii) each Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (iv) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any action of the type described in clause (a), (b), (f) or, to the extent requiring the consent of each Lender, clause (c) of Section 11.1; and (v) the Borrowers shall not be required to pay any amount under this Agreement that is greater than the amount which it would have been required to pay had no participating interest been sold. The Borrowers acknowledge and agree, subject to clause (v) above, that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 11.3 and 11.4, shall be considered a Lender. Each Participant shall only be indemnified for increased costs pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which sold such participating interest to such Participant concurrently is entitled to make, and does make, a claim on any Borrower for such increased costs. Any Lender that sells a participating interest in any Loan, TLC, Commitment or other interest to a Participant under this Section -123- shall indemnify and hold harmless each Borrower and the Administrative Agent from and against any taxes, penalties, interest or other costs or losses (including reasonable attorneys' fees and expenses) incurred or payable by any Borrower or the Administrative Agent as a result of the failure of such Borrower or the Administrative Agent to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Lender or the Administrative Agent, as the case may be, which Taxes would not have been incurred or payable if such Participant had been a Non-U.S. Lender that was entitled to deliver to such Borrower, the Administrative Agent or such Lender, and did in fact so deliver, a duly completed and valid Form 1001 or 4224 (or applicable successor form) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes. (b) Each Lender agrees and represents with and for the benefit of the SP1 Borrower and WW Australia that it: (i) has not (directly or indirectly) offered by subscription or purchase or issued invitations to subscribe for or buy nor has it sold the TLCs; (ii) will not (directly or indirectly) offer for subscription or purchase or issue invitations to subscribe for or buy nor will it sell the TLCs; and (iii) has not distributed and will not distribute any draft, preliminary or definitive offering memorandum, advertisements or other offering material relating to the TLCs, in the Commonwealth of Australia, its territories or possessions, unless (x) the consideration is payable by each offeree or invitee in a minimum amount of A$500,000 or the offer or invitation is otherwise an excluded offer or excluded invitation for the purposes of the Australian Corporations Law and the Corporations Regulations made under the Australian Corporations Law, and (y) the offer, invitation or distribution complies with all applicable laws, regulations and directives and does not require any document to be lodged with, or registered by, the ASIC. (c) Each Lender agrees and represents with and for the benefit of the SP1 Borrower and WW Australia that it has not sold and will not sell the TLCs to any person if, at the time of such sale, the employees of the Lender aware of, or involved in, the sale knew or had reasonable grounds to suspect that, as a result of such sale, any TLCs or an interest in any TLCs were being, or would later be, acquired (directly or indirectly) by an associate of the SP1 Borrower or WW Australia for the purposes of section 128F(5) of the Income Tax Assessment Act 1936 of Australia. (d) The SP1 Borrower holds the benefit of the agreements and representations in para graphs (b) and (c) in trust for WW Australia. SECTION 11.11.3. Register. The Borrowers hereby designate the Administrative Agent to serve as the Borrowers' agent, solely for the purpose of this Section, to maintain a register (the -124- "Register") on which the Administrative Agent will record each Lender's Commitment, the Loans made by each Lender and the Notes evidencing such Loans and the TLCs, and each repayment in respect of the principal amount of the Loans and the TLCs of each Lender and annexed to which the Administrative Agent shall retain a copy of each Lender Assignment Agreement delivered to the Administrative Agent pursuant to this Section. Failure to make any recordation, or any error in such recordation, shall not affect any Borrower's or any other Obligor's Obligations in respect of such Loans or Notes or TLCs. The entries in the Register shall be conclusive, in the absence of manifest error, and WWI, the Borrowers, the Administrative Agent and the Lenders shall treat each Person in whose name a Loan and related Note or TLC is registered as the owner thereof for all purposes of this Agreement, notwithstanding notice or any provision herein to the contrary. A Lender's Commitment and the Loans made pursuant thereto and the Notes evidencing such Loans or TLCs may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer in the Register. Any assignment or transfer of a Lender's Commitment or the Loans or the Notes evidencing such Loans or TLCs made pursuant thereto shall be registered in the Register only upon delivery to the Administrative Agent of a Lender Assignment Agreement duly executed by the assignor thereof. No assignment or transfer of a Lender's Commitment or the Loans made pursuant thereto or the Notes evidencing such Loans or TLCs shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section. SECTION 11.12. Other Transactions. Nothing contained herein shall preclude the Administrative Agent, the Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, the Borrowers or any of their Affiliates in which any Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE LENDERS, ANY ISSUER OR THE BORROWERS IN CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWERS IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH OF THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE -125- FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY OF WWI OR THE BORROWERS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF WWI AND THE BORROWERS HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 11.14. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, EACH LENDER, EACH ISSUER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, SUCH LENDER, SUCH ISSUER OR ANY BORROWER IN CONNECTION HEREWITH OR THEREWITH. EACH OF THE BORROWERS ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. SECTION 11.15. Confidentiality. The Lenders shall hold all non-public information obtained pursuant to or in connection with this Agreement or obtained by such Lender based on a review of the books and records of WWI or any of its Subsidiaries in accordance with their customary procedures for handling confidential information of this nature, but may make disclosure to any of their examiners, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any potential bona fide transferee, participant or assignee, or in connection with the exercise of remedies under a Loan Document, or as requested by any governmental agency or representative thereof or pursuant to legal process; provided, however, that -126- (a) unless specifically prohibited by applicable law or court order, each Lender shall notify WWI of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; (b) prior to any such disclosure pursuant to this Section 11.15, each Lender shall require any such bona fide transferee, participant and assignee receiving a disclosure of non-public information to agree in writing (i) to be bound by this Section 11.15; and (ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this Section 11.15; and (c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Lender shall be obligated or required to return any materials furnished by WWI or any Subsidiary. SECTION 11.16. Judgment Currency. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder, under any Note, TLC or under any other Loan Document in another currency into U.S. Dollars or into a Foreign Currency, as the case may be, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the applicable Secured Party could purchase such other currency with U.S. Dollars or with such Foreign Currency, as the case may be, in New York City, at the close of business on the Business Day immediately preceding the day on which final judgment is given, together with any premiums and costs of exchange payable in connection with such purchase. SECTION 11.17. Release of Security Interests. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 11.1) to take any action requested by the Borrowers having the effect of releasing any collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction expressly permitted by any Loan Document or that has been consented to in accordance with Section 11.1 or (ii) under the circumstances described in paragraph (b) below. (b) At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents shall have been paid in full, the Commitments have been terminated and no letters of Credit shall be outstanding, the collateral shall be released from the Liens created by the Security Agreements, and the Security Agreements and all obligations (other than those expressly stated to survive such -127- termination) of the Administrative Agent and each Obligor under the Security Agreements shall terminate, all without delivery of any instrument or performance of any act by any Person -128- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BORROWERS WEIGHT WATCHERS INTERNATIONAL, INC. By: /s/ Robert W. Hollweg ------------------------------------ Name: Robert W. Hollweg Title: Secretary WW FUNDING CORP. By: /s/ Linda Huett ------------------------------------ Name: Linda Huett Title: Secretary AGENTS CREDIT SUISSE FIRST BOSTON as the Syndication Agent By: /s/ Douglas E. Maher ------------------------------------ Name: Douglas E. Maher Title: Vice President By: /s/ James P. Moran ------------------------------------ Name: James P. Moran Title: Director THE BANK OF NOVA SCOTIA as the Administrative Agent By: /s/ Eric M. Knight ------------------------------------ Name: Eric M. Knight Title: Authorized Signatory ISSUER THE BANK OF NOVA SCOTIA as the Issuer By: /s/ Eric M. Knight ------------------------------------ Name: Eric M. Knight Title: Authorized Signatory LENDERS THE BANK OF NOVA SCOTIA By: /s/ Eric M. Knight ------------------------------------ Name: Eric M. Knight Title: Authorized Signatory CREDIT SUISSE FIRST BOSTON, By: /s/ Douglas E. Maher ------------------------------------ Name: Douglas E. Maher Title: Vice President By: /s/ James P. Moran ------------------------------------ Name: James P. Moran Title: Director BHF (USA) Capital Corporation By: /s/ Steven Alexander ------------------------------------ Name: Steven Alexander Title: Associate By: /s/ Thomas J. Scifo ------------------------------------ Name: Thomas J. Scifo Title: Vice President Balanced High-Yield Fund II LTD. By: BHF (USA) Capital Corporation As Attorney-in-Fact By: /s/ Steven Alexander ------------------------------------ Name: Steven Alexander Title: Associate By: /s/ Thomas J. Scifo ------------------------------------ Name: Thomas J. Scifo Title: Vice President BANK ONE, NA (Main Office Chicago) By: /s/ Jeffrey S. Lubatkin ------------------------------------ Name: Jeffrey S. Lubatkin Title: Vice President CREDIT CONTACT Name: Jeffrey S. Lubatkin ------------------------------------ Address: 153 West 51st Street New York, NY 10019 Telephone: 212-373-1056 Facsimile: 212-373-1180 OPERATIONS CONTACT Name: Ben Oliva ---------------------------------- Address: 1 Bank One Plaza Chicago, IL 60670 Telephone: 312-732-5987 Facsimile: 312-732-4840 FORTIS (USA) FINANCE LLC By: /s/ David Snyder ------------------------------------ Name: David Snyder Title: Senior Vice President By: /s/ Eddie Matthews ------------------------------------ Name: Eddie Matthews Title: Senior Vice President CREDIT CONTACT Douglas D. Riahi Vice President 520 Madison Avenue New York, NY 10022 Telephone: (212) 418-8736 Facsimile: (212) 750-9597 OPERATIONS CONTACT Name: Address: Telephone: Facsimile: METROPOLITAN LIFE INSURANCE COMPANY By: /s/ James R. Dingbar ------------------------------------ Name: James R. Dingbar Title: Director CREDIT CONTACT Frank Monfalcone 334 Madison Avenue Convent Station, NJ 07760 Telephone: (973) 254-3228 Facsimile: (973) 254-3032 OPERATIONS CONTACT Neil Fredericks 4100 Bay South Blvd Tampa, FL 33607 Telephone: (813) 801-2455 Facsimile: (813) 801-2515 PPM SPYGLASS FUNDING TRUST By: /s/ Kelly C. Walker ------------------------------------ Name: Kelly C. Walker Title: Authorized Agent CREDIT CONTACT Kelly C. Walker / Ashley R. Hamilton Banc of America Securities LLC 100 North Tryon Street NC1-007-06-07 Charlotte, NC 28255 Telephone: (704) 388-8943 / (704) 387-9951 Facsimile: (704) 388-0648 OPERATIONS CONTACT Andrew Alexander / Kendra C. Dorn Bank of America, N.A. 100 North Tryon Street NC1-001-15-01 Charlotte, NC 28273 Telephone: (704) 388-3173 / (704) 387-6030 Facsimile: (704) 409-0157 / (704) 409-0169 PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management LLC, a Delaware Limited Liability Company, its Authorized Signatory By: /s/ [Illegible] ------------------------------------ Name: [Illegible] Title: By: /s/ [Illegible] ------------------------------------ Name: [Illegible] Title: [Illegible] CREDIT CONTACT William Lowry 801 Grand Avenue Des Moines, Iowa 50392-0800 Telephone: (515) 362-1538 Facsimile: (515) 248-2490 OPERATIONS CONTACT Jennifer Gallagher 801 Grand Avenue Des Moines, Iowa 50392-0960 Telephone: (515) 362-1192 Facsimile: (515) 248-2643 SRF TRADING, INC. By: /s/ Kelly C. Walker ------------------------------------ Name: Kelly C. Walker Title: Vice President CREDIT CONTACT Kelly C. Walker / Ashley R. Hamilton Banc of America Securities LLC 100 North Tryon Street NC1-007-06-07 Charlotte, NC 28255 Telephone: (704) 388-8943 / (704) 387-9951 Facsimile: (704) 388-0648 OPERATIONS CONTACT Sokya Lindsay / Margaret J. Rhodes Bank of America, N.A. 100 North Tryon Street NC1-001-15-01 Charlotte, NC 28273 Telephone: (704) 386-6395 / (704) 388-3317 Facsimile: (704) 409-0171 / (704) 409-0158 STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY By: /s/ Brian W. Good ------------------------------------ Name: Brian W. Good Title: Vice President, Stein Roe & Farnham Incorporated, as Advisor to the Stein Roe Floating Rate Limited Liability Company CREDIT CONTACT Brian W. Good One South Wacker Drive, 33rd Floor Chicago, IL 60606-4685 Telephone: (312) 368-7644 Facsimile: (312) 368-7857 OPERATIONS CONTACT Steven P. Krull One South Wacker Drive, 33rd Floor Chicago, IL 60606-4685 Telephone: (312) 368-7629 Facsimile: (312) 368-7857 EX-10.2 41 EXHIBIT 10.2 EXHIBIT 10.2 PREFERRED STOCK STOCKHOLDERS' AGREEMENT Dated as of September 29, 1999 Among WEIGHT WATCHERS INTERNATIONAL, INC., ARTAL LUXEMBOURG S.A. and H.J. HEINZ COMPANY TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES......................................1 1.1 Definitions..............................................1 1.2 Representations and Warranties of the Company............3 1.3 Representations and Warranties of Heinz..................4 1.4 Representations and Warranties of Artal..................4 ARTICLE II COVENANTS...........................................................5 2.1 Limitations on Transfer........................................5 2.2 Right of First Refusal.........................................6 ARTICLE III LEGENDS.............................................................7 3.1 Legend.........................................................7 ARTICLE IV MANDATORY REPURCHASE................................................8 4.1 ...............................................................8 ARTICLE V MISCELLANEOUS.......................................................8 5.1 Termination....................................................8 5.2 Remedies.......................................................8 5.3 Consent to Amendments..........................................9 5.4 Successors and Assigns.........................................9 5.5 Severability...................................................9 5.6 Counterparts...................................................9 5.7 Notices........................................................9 5.8 Governing Law.................................................10 5.9 Further Assurances............................................10 5.10 Jurisdiction; Venue; Process.................................10 5.11 MUTUAL WAIVER OF JURY TRIAL..................................10 i-- PREFERRED STOCK STOCKHOLDERS' AGREEMENT PREFERRED STOCK STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of September 29, 1999, among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "Company"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("Artal"), and H.J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz"). W I T N E S S E T H : WHEREAS, pursuant to the Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999, among Heinz, the Company, Artal and Artal International S.A., the Company has agreed to issue to Heinz 1,000,000 shares of Series A Preferred Stock, liquidation preference $25.00 per share ("Series A Preferred Stock"), in consideration for $25.0 million. NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES 1.1 Definitions. Capitalized terms used herein shall have the meanings set forth below: "Affiliate" means any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another Person. The term "control" includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Articles of Incorporation" means the Articles of Incorporation of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "By-Laws" means the By-Laws of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Change in Control" shall mean (a) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted 2 Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of theVoting Stock of the Company (unless the Permitted Holders shall hold a higher percentage thereof or have the ability to elect or designate for election a majority of the Board of Directors of the Company); or (b) the adoption by the stockholders of the Company of a plan or proposal for the liquidation or dissolution of the Company; or (c) the merger or consolidation of the Company with another Person that is not an Affiliate of the Company prior thereto or the sale or other disposition of all or substantially all the assets or property of the Company in one transaction or series of related transactions to a Person who is not an Affiliate of the Company prior thereto. "Closing Date" means September 29, 1999. "Election Period" shall have the meaning set forth in Section 2.2(a). "Estimate" means the holder's good faith reasonable estimate of the cash value of any non-cash consideration included in the Offer. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Investor Joinder" means a joinder agreement, substantially in the form of Exhibit 2.1(a) hereto, by which a Person becomes an Investor Stockholder after the date hereof. "Investor Stockholders" means, collectively, Heinz and any Person who hereafter becomes an Investor Stockholder pursuant to an Investor Joinder under this Agreement. "Offer" shall have the meaning set forth in Section 2.2(a). "Offered Securities" shall have the meaning set forth in Section 2.2(a). "Offer Notice" shall have the meaning set forth in Section 2.2(a). "Offeror" means a Third Party who makes an offer pursuant to Section 2.2. "Permitted Holder" shall mean Artal Luxembourg S.A. and any of its Affiliates, but in the case of any Affiliate, only for so long as it continues to be an Affiliate of Artal Luxembourg S.A. "Permitted Holder Public Sale" shall mean a sale for cash by a Permitted Holder of all or part of the Common Stock of the Company held by it in a registered, secondary public offering. 3 "Permitted Transferee" shall mean a Subsidiary of a holder of Series A Preferred Stock. "Person" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by a Person either directly or through one or more of its Subsidiaries. "Third Party" means any Person other than (a) Artal and the Company and their respective Affiliates and (b) any Permitted Transferee. "Transfer" shall be construed broadly and shall include any transfer by way of issuance, sale, assignment, hypothecation, disposition, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation. "Trigger Event" shall mean the occurrence of a Change in Control or a Permitted Holder Public Sale. "Voting Stock" of a corporation means all classes of capital stock of such corporation then outstanding and normally entitled to vote in the election of directors. 1.2 Representations and Warranties of the Company. The Company represents and warrants to each of Heinz and Artal as follows: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by Artal and Heinz, constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms; and (b) The execution, delivery and performance by the Company of this Agreement will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the Articles of 4 Incorporation or By-Laws of the Company (or the corresponding documents of any of its Subsidiaries), (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial condition, results of operations or business of the Company and its Subsidiaries, taken as a whole, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.3 Representations and Warranties of Heinz. Heinz hereby represents and warrants to each of the Company and Artal as follows: (a) Heinz is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Heinz of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Heinz. This Agreement has been duly executed and delivered by Heinz and, assuming the due authorization, execution and delivery thereof by Artal and the Company, constitutes the valid and legally binding obligation of Heinz, enforceable against Heinz in accordance with its terms; and (b) The execution, delivery and performance of this Agreement by Heinz will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the articles of incorporation or by-laws of Heinz or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Heinz is a party or by which Heinz is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Heinz, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.4 Representations and Warranties of Artal. Artal hereby represents and warrants to each of the Company and Heinz as follows: (a) Artal is a corporation duly organized, validly existing and in good standing under the laws of Luxembourg and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Artal of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Artal. This Agreement has been duly executed and delivered by Artal and, assuming the due authorization, execution and delivery thereof by the Company and Heinz, constitutes the valid and legally binding obligation of Artal, enforceable against Artal in accordance with its terms; and 5 (b) The execution, delivery and performance of this Agreement by Artal will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws of Artal or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Artal is a party or by which Artal is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Artal or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to Artal. ARTICLE II COVENANTS 2.1 Limitations on Transfer. (a) Except as permitted pursuant to Section 2.1(b), Heinz shall not Transfer any shares of Series A Preferred Stock until the fifth anniversary of the Closing Date. Prior to making any permitted Transfer of shares of Series A Preferred Stock to any Person at any time prior to the fifth anniversary of the Closing Date, Heinz shall obtain an Investor Joinder from such transferee, and such transferee shall, by execution thereof, agree to become and automatically be deemed to be an Investor Stockholder subject to all of the rights and obligations contained in this Agreement applicable to Heinz and to have made on the date thereof all representations and warranties made on the date hereof by Heinz (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person). Promptly thereafter, Heinz shall cause originally executed copies of such Investor Joinder to be delivered to the Company, Artal and the other Investor Stockholders and shall notify such Persons of the number of shares of Series A Preferred Stock Transferred. (b) The restriction on Transfer contained in the first sentence of Section 2.1(a) above shall be inapplicable with respect to: (i) any Transfers of Series A Preferred Stock to a Permitted Transferee; provided if any Permitted Transferee ceases to be a Subsidiary of the holder prior to the fifth anniversary of the Closing Date, such Permitted Transferee shall Transfer its shares of Series A Preferred Stock back to such holder or to another Subsidiary of such holder, and (ii) any Transfer after the second anniversary of the Closing Date in accordance with the provisions of Section 2.2., provided, that no such Transfer shall be permitted under this Section 2.1(b) if it would constitute a default or event of default under any agreement governing material debt of the Company or any of its Subsidiaries; provided, further, that in order to facilitate compliance with federal securities laws and the provisions of this Agreement, the aggregate number of transferees under Section 2.1(b) shall not 6 exceed 35 Persons at any time without the consent of each of the Company and Artal, which consent shall not be unreasonably withheld or delayed. (c) Any Transfer made in violation of this Section 2.1 (including, without limitation, a Transfer made without obtaining a necessary Investor Joinder) shall be null and void. The Company shall not permit such Transfer to be recorded on the Company's books and records and shall not otherwise cooperate in consummating such Transfer. (d) No Person shall be permitted to become a party to this Agreement except by executing an Investor Joinder pursuant to the terms set forth in this Section 2.1. 2.2 Right of First Refusal. (a) If, at any time after the second anniversary of the Closing Date but prior to the fifth anniversary of the Closing Date, a holder of Series A Preferred Stock receives a bona fide offer to purchase any or all of its Series A Preferred Stock (the "Offer") from an Offeror which such holder of Series A Preferred Stock wishes to accept, such holder of Series A Preferred Stock shall cause the Offer to be reduced to writing and shall notify Artal and the Company in writing (the "Offer Notice") of its wish to accept the Offer. The Offer Notice will disclose in reasonable detail the proposed number of shares of Series A Preferred Stock to be Transferred (the "Offered Securities") and the proposed terms and conditions of the Transfer (including, in the event that the consideration to be received by such holder of Series A Preferred Stock in the Offer includes non-cash consideration, such holder's Estimate of the cash value of such non-cash consideration), and shall be accompanied by a true copy of the Offer (which shall identify the Offeror). The holder of Series A Preferred Stock shall not be permitted to accept any such Offer unless (i) the Company consents to such transaction (which consent may not be unreasonably withheld or delayed) and (ii) the right of first refusal procedures set forth in this Section 2.2 are complied with. If the Company provides such consent, then in addition (and not in limitation of, or substitution for, such consent) the Company or Artal or any of their designees may elect to purchase all (but not, in the aggregate, less than all) of such Offered Securities at the price and on the terms specified in the Offer Notice by delivering written notice of such election to such holder of Series A Preferred Stock as soon as practicable, but in any event within 15 business days after delivery of the Offer Notice (the "Election Period"). In the event that the terms of any Offer provide for the delivery of non-cash consideration for the Offered Securities, the Company, Artal or their respective designee, as the case may be, may deliver cash for such Offered Securities in an amount equal to the value of such non-cash consideration either in accordance with the Estimate (or such other amount as agreed by such holder of Series A Preferred Stock and the Company or Artal, as the case may be,) or as determined by an investment banking firm of national reputation selected by mutual agreement of such holder of Series A Preferred Stock and the Company or Artal, as the case may be, provided, that such investment banking firm shall not have a material direct or indirect financial interest in or other relationship with any of the parties hereto or their respective Affiliates. (b) If the Company or Artal or any of their designees has elected to purchase all the Offered Securities from such holder of Series A Preferred Stock, the Transfer of such Offered 7 Securities shall be consummated as soon as practicable after the delivery of the election notices, but in any event within 15 days after the expiration of the Election Period (unless a longer period of time is necessary to comply with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in which case such longer period). If the Company or Artal has not elected to purchase (or has failed within such 15-day period or longer period, if applicable, to purchase after electing to do so) all of the Offered Securities being offered, such holder of Series A Preferred Stock may, within 45 days after the date of the Offer Notice, Transfer all the Offered Securities to the Offeror at a price no less than the price specified in the Offer Notice and on other terms no less favorable to such holder of Series A Preferred Stock than those contained in the Offer. If, at the end of such 45 day period, such holder of Series A Preferred Stock has not completed the Transfer of such shares of Series A Preferred Stock as aforesaid, all the restrictions on Transfer contained in this Agreement shall again be in effect with respect to such shares of Series A Preferred Stock. ARTICLE III LEGENDS 3.1 Legend. (a) Each certificate or instrument evidencing shares of Series A Preferred Stock that is held by Heinz or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement on or after the date hereof shall bear the following legend on the face thereof: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A PREFERRED STOCK STOCKHOLDERS' AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. (b) Until such time as the certificates or instruments evidencing shares of Series A Preferred Stock that are held by Heinz, or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) hereof, are no longer required to bear the legend contained in Section 3.1(a), Heinz and each such transferee agrees that it will not Transfer any shares of Series A Preferred Stock except (i) pursuant to a registration statement under the Securities Act or (ii) pursuant to an exemption from registration thereunder. 8 ARTICLE IV MANDATORY REPURCHASE 4.1 If after receiving notice of a Trigger Event a holder of Series A Preferred Stock elects in accordance with the provisions set forth in Section 6(b) of Part D of the Articles of Incorporation to require the Company to redeem any or all of its shares of Series A Preferred Stock pursuant to Section 5(b) of Part D of the Articles of Incorporation, then the Company shall be obligated to redeem such shares in accordance with the provisions set forth in Section 5(b) of Part D of the Articles of Incorporation. In the event that the Company's obligation to redeem such shares has been suspended in accordance with Section 5(b) of Part D of the Articles of Incorporation, the Company shall give notice of the suspension of its redemption obligation (the "Suspension Notice") to Artal and each holder of Series A Preferred Stock who has elected to have its shares of Series A Preferred Stock redeemed in accordance with the provisions of Section 6(b) of Part D of the Articles of Incorporation. The Company shall deliver such notice within 10 days of receiving such holder's redemption notice. If the Company's redemption obligation is suspended and the Company has not elected to acquire or redeem such shares notwithstanding such suspension, then the holder of such shares may require Artal to acquire such shares by delivering a notice to such effect to Artal (the "Artal Purchase Notice") within 15 days of receiving the Suspension Notice. Unless the Company previously acquires or redeems such shares of Series A Preferred Stock, Artal or its designee shall purchase within 45 days of receipt of the Artal Purchase Notice such shares of Series A Preferred Stock which the holder elected to have redeemed pursuant to Section 5(b) of Part D of the Articles of Incorporation at the same price as would have been paid to the holder by the Company upon such redemption. ARTICLE V MISCELLANEOUS 5.1 Termination. As to any particular Investor Stockholder, this Agreement shall no longer be binding or of further force or effect as to such Investor Stockholder, except as noted below, as of the date such Investor Stockholder has Transferred all such Investor Stockholder's interest in the Series A Preferred Stock; provided, however, that no such termination shall be effective if such Investor Stockholder is in breach of this Agreement. 5.2 Remedies. (a) Each Investor Stockholder shall have all rights and remedies reserved for such Investor Stockholder pursuant to this Agreement, the Company's Articles of Incorporation and By-Laws and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights 9 specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 5.3 Consent to Amendments. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of each of the parties hereto. 5.4 Successors and Assigns. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted transferees of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries. 5.5 Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. To the extent there exists any inconsistency between the provisions of this Agreement and the By-Laws of the Company, the provisions of this Agreement shall govern in all instances. 5.6 Counterparts. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 5.7 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company, Artal and each Investor Stockholder at the address or addresses indicated on the signature pages hereto or on the Investor 10 Joinder (as the case may be), or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 5.7 to the sending party. 5.8 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 5.9 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 5.10 Jurisdiction; Venue; Process. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action. (b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. 5.11 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. 11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WEIGHT WATCHERS INTERNATIONAL, INC. By:__________________________________ Name: Title: Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. H.J. HEINZ COMPANY By:__________________________________ Name: Title: Address for Notices: With copies to: H.J. Heinz Company H.J. Heinz Company 600 Grant Street 600 Grant Street Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102 Attn: Treasurer Attn: Senior Vice President and General Counsel 12 ARTAL LUXEMBOURG S.A. By:__________________________________ Name: Title: Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School L-1661 Luxembourg of Law Luxembourg 357 East Chicago Avenue Facsimile No.: 352-22-42-59-22 Chicago, Illinois 60611 Attn: Managing Director Facsimile No.: 1-773-388-0291 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq. EXHIBIT 2.1(a) INVESTOR JOINDER By execution of this Investor Joinder, the undersigned agrees to become a party to that certain Preferred Stock Stockholders' Agreement, dated as of September 29, 1999 (the "Agreement"), among Weight Watchers International, Inc. (the "Company"), Artal Luxembourg S.A. and H.J. Heinz Company. By execution of this Investor Joinder, the undersigned shall have all rights, and shall observe all the obligations, applicable to [fill in name of transferee] (except as otherwise set forth in the Agreement), and to have made on the date hereof all representations and warranties made by such Investor Stockholder, modified, if necessary, to reflect the nature of the undersigned as a corporation, partnership, other entity or natural person. Name:_________________________ Address for Notices: With copies to: ______________________________________ _____________________________________ ______________________________________ _____________________________________ ______________________________________ _____________________________________ ______________________________________ _____________________________________ ______________________________________ _____________________________________ If an individual, are you presently married or separated? yes _____ no _____ (If yes, you must also have your spouse execute a spousal consent in the form attached hereto.) Signature:___________________ Date:___________________ CONSENT AND AGREEMENT OF SPOUSE I, _________________________________, am the spouse of ____________________, one of the [preferred stock] stockholders of Weight Watchers International, Inc., a Virginia corporation (the "Company"). I acknowledge that my spouse is a party to that certain Preferred Stock Stockholders' Agreement, dated as of September 29, 1999, among the Company and certain stockholders of the Company, Artal Luxembourg S.A. and H.J. Heinz Company (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement. Executed this ____ day of __________, ____. ________________________________ (Signature of Consenting Spouse) EX-10.3 42 EXHIBIT 10.3 Exhibit 10.3 STOCKHOLDERS' AGREEMENT Dated as of September 29, 1999 Among WEIGHT WATCHERS INTERNATIONAL, INC., ARTAL LUXEMBOURG S.A. and H.J. HEINZ COMPANY TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES ................... 1 1.1 Definitions ................................................... 1 1.2 Representations and Warranties of the Company ................. 2 1.3 Representations and Warranties of Heinz ....................... 2 1.4 Representations and Warranties of Artal ....................... 3 ARTICLE II COVENANTS ..................................................... 4 2.1 Transfers of Common Stock ..................................... 4 2.2 [Intentionally Omitted] ....................................... 5 2.3 Tag Along ..................................................... 5 2.4 Drag Along .................................................... 7 2.5 Certain Transfers by Artal .................................... 8 ARTICLE III REGISTRATION RIGHTS ........................................... 8 3.1 Registration Rights ........................................... 8 ARTICLE IV LEGENDS ....................................................... 8 4.1 Legend ........................................................ 8 ARTICLE V MISCELLANEOUS .................................................... 9 5.1 Termination ................................................... 9 5.2 Remedies ...................................................... 9 5.3 Consent to Amendments ......................................... 10 5.4 Successors and Assigns ........................................ 10 5.5 Severability .................................................. 10 5.6 Counterparts .................................................. 10 5.7 Notices ....................................................... 10 5.8 Governing Law ................................................. 11 5.9 Further Assurances ............................................ 11 5.10 Jurisdiction; Venue; Process .................................. 11 5.11 Mutual Waiver of Jury Trial ................................... 11 STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of September 29, 1999, among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation (the "Company"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("ARTAL"), and H.J. HEINZ COMPANY, a Pennsylvania corporation ("HEINZ"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to the Recapitalization and Stock Purchase and Recapitalization Agreement, dated as of July 22, 1999, among Heinz, the Company, Artal International S.A. and Artal, (i) the Company has agreed to purchase from Heinz, and Heinz has agreed to sell to the Company, 34,947,600 shares of the Company's Common Stock, no par value per share (the "COMMON STOCK"), and (ii) Artal has agreed to then purchase from Heinz, and Heinz has agreed to sell to Artal, 22,372,000 shares of the Company's Common Stock (collectively, the "RECAPITALIZATION"). WHEREAS, upon completion of the Recapitalization, Heinz will own 1,428,000 shares of Common Stock (representing 6% of the Company's then outstanding Common Stock) and Artal will own 22,372,000 shares of Common Stock (representing 94% of the Company's then outstanding Common Stock); and NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES 1.1 DEFINITIONS. Capitalized terms used herein shall have the meanings set forth below: "AFFILIATE" means any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another Person. The term "control" includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "BY-LAWS" means the By-Laws of the Company as in effect on the date hereof, as the same may be amended, supplemented or 2 otherwise modified from time to time in accordance with the terms thereof. "CLOSING DATE" means September 29, 1999. "CORPORATE GROUP" means, with respect to any Person, (i) such Person together with its direct and indirect wholly owned subsidiaries and any entity, directly or indirectly through wholly owned subsidiaries, wholly owning such Person or (ii) if permitted by each of the agreements governing material debt of such Person, such Person together with its Affiliates. "DRAG ALONG NUMBER" shall have the meaning specified in Section 2.4. "FAMILY GROUP" means, with respect to any individual, such individual's spouse and descendants and such individual's parents, grandparents, aunts, uncles, brothers, sisters and their respective spouses and descendants (in each case, whether natural or adopted) and any trust or similar entity established and maintained solely for the benefit of such individual and/or his spouse, descendants and/or such above-listed relatives and all of the aforesaid of the grantor of a trust that is a stockholder of the Company. "INVESTOR JOINDER" means a joinder agreement, substantially in the form of Exhibit 2.1(a) hereto, by which a Person becomes an Investor Stockholder after the date hereof. "INVESTOR STOCKHOLDERS" means, collectively, Artal, Heinz and any Person who hereafter becomes an Investor Stockholder pursuant to an Investor Joinder under this Agreement. "PERMITTED TRANSFEREE" shall mean those Persons to whom Transfers are permitted pursuant to clauses (i), (ii) and (iv) of Section 2.1(b). "PERSON" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "PUBLIC OFFERING" means a public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date hereof, among the Company, Artal and Heinz. "RELEASE DATE" shall have the meaning specified in Section 2.1. 3 "SALE NOTICE" shall have the meaning specified in Section 2.3. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES HOLDING COMPANY" shall have the meaning specified in Section 2.3. "SUBSIDIARY" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by a Person either directly or through one or more of its Subsidiaries. "TRANSFER" shall be construed broadly and shall include any transfer by way of issuance, sale, assignment, hypothecation, disposition, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation. "TRANSFEROR GROUP" shall have the meaning specified in Section 2.4. 1.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Investor Stockholders as follows: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by Artal and Heinz, constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms; and (b) The execution, delivery and performance by the Company of this Agreement will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the Articles of Incorporation or By-Laws of the Company (or the corresponding documents of any of its Subsidiaries), (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which the Company or any of its Subsidiaries is a party or by 4 which the Company or any of its Subsidiaries is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial condition, results of operations or business of the Company and its Subsidiaries, taken as a whole, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.3 REPRESENTATIONS AND WARRANTIES OF HEINZ. Heinz hereby represents and warrants to the Company and each of the other Investor Stockholders as follows: (a) Heinz is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Heinz of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Heinz. This Agreement has been duly executed and delivered by Heinz and, assuming the due authorization, execution and delivery thereof by Artal and the Company, constitutes the valid and legally binding obligation of Heinz, enforceable against Heinz in accordance with its terms; and (b) The execution, delivery and performance of this Agreement by Heinz will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the articles of incorporation or by-laws of Heinz or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Heinz is a party or by which Heinz is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Heinz, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.4 REPRESENTATIONS AND WARRANTIES OF ARTAL. Artal hereby represents and warrants to the Company and each other Investor Stockholder as follows: (a) Artal is a corporation duly organized, validly existing and in good standing under the laws of Luxembourg and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Artal of this Agreement and the 5 performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Artal. This Agreement has been duly executed and delivered by Artal and, assuming the due authorization, execution and delivery thereof by the Company and Heinz, constitutes the valid and legally binding obligation of Artal, enforceable against Artal in accordance with its terms; and (b) The execution, delivery and performance of this Agreement by Artal will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws or similar constitutive documents of Artal or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Artal is a party or by which Artal is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Artal or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to Artal. ARTICLE II COVENANTS 2.1 TRANSFERS OF COMMON STOCK. (a) Except as permitted pursuant to Section 2.1(b) or with the prior written consent of Artal, Heinz shall not Transfer any shares of Common Stock until the earlier to occur of (i) the fifth anniversary of the Closing Date and (ii) the date of completion of the initial Public Offering (the "RELEASE DATE"). Prior to making any permitted (whether as result of the exceptions set forth in Section 2.1(b) or otherwise) Transfer of shares of Common Stock to any Person at any time prior to the termination of this Agreement (other than a Transfer pursuant to a Public Offering, a Transfer (provided Heinz promptly notifies the Company and the other Investor Stockholders of such Transfer and the number of shares of Common Stock Transferred) after the initial Public Offering under Rule 144 under the Securities Act (a "RULE 144 SALE") or a Transfer pursuant to Sections 2.1(b)(iii)), Heinz shall obtain an Investor Joinder from such transferee, and such transferee shall, by execution thereof, agree to become and automatically be deemed to be an Investor Stockholder subject to all of the rights and obligations contained in this Agreement applicable to Heinz and to have made on the date thereof all representations and warranties made on the date hereof by Heinz (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person). Promptly thereafter, Heinz shall cause 6 originally executed copies of such Investor Joinder to be delivered to the Company and the other Investor Stockholders and shall notify such Investor Stockholders of the number of shares of Common Stock Transferred. (b) The restriction on Transfer contained in the first sentence of Section 2.1(a) above shall be inapplicable with respect to: (i) any Transfers of Common Stock made by an individual Investor Stockholder to his or her Family Group and, thereafter, among members of such Family Group; (ii) any Transfers of Common Stock by an Investor Stockholder to a member of its Corporate Group and, thereafter, among members of such Corporate Group; PROVIDED, HOWEVER, if such transferee ceases to be a member of such Corporate Group, such transferee shall immediately Transfer such Common Stock to a member of such Investor Stockholder's Corporate Group; (iii) any Transfer of Common Stock pursuant to the terms of Sections 2.3 or 2.4 or the Registration Rights Agreement; and (iv) any Transfers of Common Stock made by an individual Investor Stockholder upon his or her death to his or her estate, PROVIDED that the beneficiaries of the estate are Persons specified in clause (i) of this Section 2.1(b); PROVIDED, that no such Transfer shall be permitted under this Section 2.1(b) if it would constitute a default or event of default under any agreement governing material debt of the Company or any of its Subsidiaries; PROVIDED, FURTHER, that in order to facilitate compliance with federal securities laws and the provisions of this Agreement, the aggregate number of Permitted Transferees under Section 2.1(b) shall not exceed 35 Persons at any time without the consent of Artal, which consent shall not be unreasonably withheld or delayed. (c) Any Transfer made in violation of this Section 2.1 (including, without limitation, a Transfer made without obtaining a necessary Investor Joinder) shall be null and void. The Company shall not permit such Transfer to be recorded on the Company's books and records and shall not otherwise cooperate in consummating such Transfer. (d) No Person shall be permitted to become a party to this Agreement except by executing an Investor Joinder pursuant 7 to the terms set forth in this Section 2.1 or pursuant to the terms set forth in Section 2.5. 2.2 [INTENTIONALLY OMITTED] 2.3 TAG ALONG. (a) At least 30 days prior to making any Transfer of any shares of Common Stock held by Artal (other than pursuant to a Public Offering or a Rule 144 Sale), Artal shall deliver a written notice (the "SALE NOTICE") to Heinz, specifying in reasonable detail the number of shares of Common Stock proposed to be transferred, the identity of the prospective transferee(s), the terms and conditions of the Transfer (including without limitation, the price to be paid, terms of payment, form of consideration and other material terms, including Artal's reasonable estimate of the fair market value of any non-cash consideration offered) and all information reasonably required to make the calculations set forth in this Section 2.3(a); PROVIDED, HOWEVER, that the provisions of this Section shall not apply to (i) any Transfer of any shares of Common Stock to any of the employees of the Company or any of its Subsidiaries (or to the Company for related issuance to such employees) in connection with management equity participation or similar contracts, plans or programs (PROVIDED, that such contracts, plans or programs are created in good faith and not for purposes of avoiding the transfer restrictions contained in this Section), (ii) any Transfer of shares of Common Stock made by an individual to his or her Family Group and, thereafter, among members of such Family Group, (iii) any Transfers by Artal to a member of its own Corporate Group and thereafter among members of such Corporate Group, (iv) any Transfers of shares of Common Stock pursuant to a pledge or similar agreement to secure debt of such Person (incurred in good faith and not for purposes of avoiding the rights granted to Heinz in this Section 2.3) owing to a bank or other BONA FIDE financial institution, including, without limitation, any such Transfer upon the exercise by such bank or other BONA FIDE financial institution of its rights under such pledge or similar agreement to acquire beneficial or other ownership of the shares of Common Stock pledged thereunder; (v) any Transfer of shares of Common Stock made by an individual upon his or her death to his or her estate; PROVIDED, that the beneficiaries of the estate are Persons specified in clause (ii) above or (vi) any Transfer of Common Stock by Artal in a transaction which does not constitute a Public Offering within 12 months of the Closing Date to the extent such Transfer under this clause (vi), together with all other Transfers made pursuant to this clause (vi) during such period, do not exceed 35% of the number of shares of Common Stock that Artal owned on the Closing Date. Heinz may elect to participate in the proposed Transfer by delivering written notice to Artal within 15 days after delivery of the Sale Notice. If Heinz has elected to participate in such Transfer pursuant to the terms hereof, Heinz shall be entitled to sell in the proposed 8 Transfer, at the same price and on the same terms and conditions as Artal, up to a number of shares of Common Stock being Transferred by Artal equal to the product of (i) the number of such shares of Common Stock then beneficially owned by Heinz MULTIPLIED BY, (ii) a percentage calculated by dividing the aggregate number of shares of Common Stock which Artal proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by Artal in the aggregate; PROVIDED that the number of shares of Common Stock which Heinz is permitted to sell pursuant to this Section 2.3(a) shall not include any shares of Common Stock acquired by Heinz in connection with or after the consummation of a Public Offering. If Heinz elects to participate in such Transfer, it shall be obligated to pay its PRO RATA portion of the transaction costs associated therewith. If the aggregate number of shares of Common Stock Heinz elects and is permitted under the foregoing provisions to sell in the proposed Transfer is, together with the aggregate number of shares of Common Stock that Artal proposes to so sell and the aggregate number of shares of Common Stock that any other Person elects and is permitted to sell pursuant to any similar agreement, more than the total number of shares of Common Stock that the transferee wishes to purchase, then each of Heinz and Artal shall be entitled to sell to the transferee that number of shares of Common Stock equal to the number of shares of Common Stock to be so purchased by the transferee from all such selling parties (including any such other Person) multiplied by a fraction, the numerator of which is the number of such shares of Common Stock such selling party elects and is permitted under the foregoing provisions to sell and the denominator of which is the aggregate number of shares of Common Stock all such selling parties elect to sell and are permitted to sell under the foregoing provisions and pursuant to any similar agreement. If and to the extent that the transferee purchases any shares of Common Stock from Artal but does not purchase, upon the same terms and conditions and for the same price, the shares of Common Stock Heinz elects and is permitted under the foregoing provisions to sell to the transferee, Artal shall, simultaneously with the sale of its shares of Common Stock, purchase from Heinz, at the same price and on the same terms and conditions as are applicable to the shares of Common Stock purchased from Artal, such shares of Common Stock of Heinz. If Heinz has not delivered written notice to Artal that Heinz elects to participate in a proposed Transfer within the 15-day period provided above for the delivering of such notice, then Artal shall have the right, for a period of 45 days after the expiration of such 15-day period, to consummate such proposed Transfer to the proposed transferee named in the related Sales Notice and at the same price and on the same terms and conditions stated in such Sales Notice. If, at the end of such 45-day period, Artal has not consummated such 9 proposed Transfer, the terms of this Section 2.3 shall again be in effect with respect to such proposed Transfer. (b) For purposes of Section 2.3(a), if Artal has Transferred all or part of its shares of Common Stock to one or more of its Subsidiaries or other similar entities controlled by it (a "SECURITIES HOLDING COMPANY"), a sale or other disposition by Artal (by merger or otherwise) of an equity or beneficial interest in a Securities Holding Company (other than a sale or disposition of the nature set forth in the proviso to the first sentence of Section 2.3(a)) shall be treated as follows: (i) if such sale or other disposition is of 50% or more of the equity or beneficial interest in such Securities Holding Company, then such sale or other disposition shall be deemed to be a Transfer of all such shares of Common Stock directly or indirectly owned or controlled by such Securities Holding Company, and (ii) if such sale or other disposition is of less than 50% of the equity or beneficial interest in such Securities Holding Company, then such sale or other disposition shall be deemed to be Transfer of a percentage of the number of shares of Common Stock directly or indirectly owned or controlled by such Securities Holding Company equal to the percentage of the equity or beneficial interest in such Securities Holding Company sold or disposed of in such transaction. In either such event, if the Securities Holding Company owns assets other than the shares of Common Stock, the consideration paid to the transferring party for the Transfer and allocable to the shares of Common Stock, in the absence of agreement of the parties to this Agreement, shall be determined by an investment banking firm of national reputation selected by mutual agreement of the parties hereto, PROVIDED, that such investment banking firm shall not have a material direct or indirect financial interest in or other relationship with any of the parties hereto or their Affiliates. (c) The exercise or nonexercise of the rights of Heinz in this Section 2.3 to participate in one or more Transfers by Artal shall not adversely affect Heinz's rights to participate in subsequent Transfers by Artal. 2.4 DRAG ALONG. (a) In the case that Artal proposes to make a Transfer of shares of Common Stock (or of a Securities Holding Company) owned by it or its Affiliates (the "TRANSFEROR GROUP") that would trigger Heinz's tag along rights pursuant to Section 2.3 (assuming solely for the purpose of this Section 2.4(a) that the exception contained in Section 2.3(a)(vi) shall not apply with respect to the provisions of Section 2.3(a)) , Artal may elect, by so specifying in the Sale Notice, to require Heinz to, and 10 Heinz will, participate in such transaction on the same terms and conditions as the Transferor Group with respect to a number of shares of Common Stock determined as set forth below. Heinz shall be required to sell in the proposed Transfer, at the same price and on the same terms and conditions as the Transferor Group, a number of shares of Common Stock equal to the lesser of (i) the product of (A) the number of shares of Common Stock then beneficially owned by Heinz MULTIPLIED BY, (B) a percentage calculated by dividing the aggregate number of shares of Common Stock which the Transferor Group proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by the Transferor Group and (ii) the number of such shares of Common Stock specified by Artal in the relevant Sale Notice (such number being hereinafter referred to as the "DRAG ALONG NUMBER"). (b) In connection with any proposed transaction described in Section 2.4(a) above, Heinz agrees (i) to consent to and raise no objections (other than with respect to its rights under this Section 2.4) to, and to take all other actions (including, without limitation, voting, or entering into written consents with respect to, all of its shares of Common Stock in favor of such transaction) necessary or desirable to cause, the consummation of such transaction and (ii) to sell, Transfer and deliver its shares of Common Stock as required by the terms of such transaction. (c) If the Drag Along Number is less than the number of shares of Common Stock Heinz may sell in the proposed Transfer pursuant to its rights under Section 2.3, then, notwithstanding the exercise by Artal of their rights under this Section 2.4, Heinz may elect to sell such additional shares of Common Stock pursuant to its rights under Section 2.3. 2.5 CERTAIN TRANSFERS BY ARTAL. Artal agrees that it will not effect any Transfer of Common Stock held by it as described in clause (ii), (iii), (iv) or (v) of the proviso in the first sentence of Section 2.3(a), unless such transferee has delivered to the Company and Heinz an Investor Joinder whereby such transferee shall, by execution thereof, agree to become and shall automatically be deemed to be an Investor Stockholder subject to all of the rights (to the extent of the terms of the assignment of such rights) and all of the obligations contained in this Agreement applicable to Artal and to have made on the date thereof all representations and warranties made on the date hereof by Artal (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person) . 11 ARTICLE III REGISTRATION RIGHTS 3.1 REGISTRATION RIGHTS. Concurrently herewith, the parties shall enter into the Registration Rights Agreement. ARTICLE IV LEGENDS 4.1 LEGEND. (a) Each certificate or instrument evidencing shares of Common Stock that is held by Heinz or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement on or after the date hereof shall bear the following legend on the face thereof: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. (b) Each certificate or instrument evidencing shares of Common Stock, which is issued to a transferee of Heinz which is not required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement (other than transferees in a Public Offering) on or after the date hereof shall bear the following legend on the face thereof: NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. (c) Upon the sale of any shares of Common Stock pursuant to an effective registration statement under the Securities Act or upon the termination or expiration of this Agreement, the certificates or instruments representing such shares of Common Stock shall be replaced, at the expense of the Company, with certificates or instruments not bearing the legends required by this Section 4.1. (d) Until such time as the certificates or instruments evidencing shares of Common Stock that are held by Heinz, or a 12 transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) hereof, are no longer required to bear either of the legends contained in Sections 4.1(a) and 4.1(b), Heinz and each such transferee agrees that it will not Transfer any shares of Common Stock except (i) pursuant to a registration statement under the Securities Act or (ii) pursuant to an exemption from registration thereunder. ARTICLE V MISCELLANEOUS 5.1 TERMINATION. As to any particular Investor Stockholder, this Agreement shall no longer be binding or of further force or effect as to such Investor Stockholder, except as noted below, as of the date such Investor Stockholder has Transferred all such Investor Stockholder's interest in the Common Stock; PROVIDED, HOWEVER, that no such termination shall be effective if such Investor Stockholder is in breach of this Agreement. 5.2 REMEDIES. (a) Each Investor Stockholder shall have all rights and remedies reserved for such Investor Stockholder pursuant to this Agreement, the Company's Articles of Incorporation and By-Laws and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 5.3 CONSENT TO AMENDMENTS. Except as expressly set forth herein, the provisions of this Agreement may only be 13 amended or waived with the prior written consent of each of the parties hereto. 5.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted transferees of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries. 5.5 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. To the extent there exists any inconsistency between the provisions of this Agreement and the By-Laws of the Company, the provisions of this Agreement shall govern in all instances. 5.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 5.7 NOTICES. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Investor Stockholder at the address or addresses indicated on the signature pages hereto or on the Investor Joinder (as the case may be), or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 5.7 to the sending party. 5.8 GOVERNING LAW. This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State 14 of New York. 5.9 FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 5.10 JURISDICTION; VENUE; PROCESS. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action. (b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. 5.11 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WEIGHT WATCHERS INTERNATIONAL, INC. By: ----------------------------------------- Name: Title: Address for Notices: With copies to: Weight Watchers International, Inc Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. H.J. HEINZ COMPANY By: ----------------------------------------- Name: Title: Address for Notices: With copies to: H.J. Heinz Company H.J. Heinz Company 600 Grant Street 600 Grant Street Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102 Attn: Treasurer and General Counsel Attn: Senior Vice President 16 ARTAL LUXEMBOURG S.A. By: ----------------------------------------- Name: Title: Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School of Law L-1661 Luxembourg 357 East Chicago Avenue Luxembourg Chicago, Illinois 60611 Facsimile No.: 352-22-42-59-22 Facsimile No.: 1-773-388-0291 Attn: Managing Director and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq. EXHIBIT 2.1(a) INVESTOR JOINDER By execution of this Investor Joinder, the undersigned agrees to become a party to that certain Stockholders' Agreement, dated as of September 29, 1999 (the "Agreement"), among Weight Watchers International, Inc. (the "Company") and certain stockholders of the Company, which stockholders included on such date Artal Luxembourg S.A. and H.J. Heinz Company. By execution of this Investor Joinder, the undersigned shall have all rights, and shall observe all the obligations, applicable to [fill in name of transferee] (except as otherwise set forth in the Agreement), and to have made on the date hereof all representations and warranties made by such Investor Stockholder, modified, if necessary, to reflect the nature of the undersigned as a corporation, partnership, other entity or natural person. Name: -------------------------------- Address for Notices: With copies to: - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- If an individual, are you presently married or separated? yes no ----- ----- (If yes, you must also have your spouse execute a spousal consent in the form attached hereto.) Signature: ---------------------------------- Date: --------------------------------------- CONSENT AND AGREEMENT OF SPOUSE I, ______________________, am the spouse of ___________________, one of the stockholders of Weight Watchers International, Inc., a Virginia corporation (the "Company"). I acknowledge that my spouse is a party to that certain Stockholders' Agreement, dated as of September 29, 1999, among the Company and certain stockholders of the Company, which stockholders included on such date Artal Luxembourg S.A. and H.J. Heinz Company (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement. Executed this ____ day of __________, 199_. ---------------------------------------- (Signature of Consenting Spouse) EX-10.4 43 EXHIBIT 10.4 EXHIBIT 10.4 LICENSE AGREEMENT THIS AGREEMENT, made and entered into this 29th day of September, 1999, by and between WW Foods, LLC, a Delaware limited liability company with offices located at Suite 603, 877 West Main Street, Boise, Idaho 83702 (hereinafter referred to as "Licensor"), and Weight Watchers International, Inc., a Virginia corporation with offices located at 175 Crossways Park West, Woodbury, New York, 11797 (together with its successors and assigns, hereinafter referred to as "Licensee" or "Weight Watchers"). WITNESSETH: WHEREAS, Licensee seeks to obtain the right to manufacture, market, distribute and sell certain food and beverage products, the Licensed Products (as hereinafter defined), using the Food Trademarks (as hereinafter defined) throughout the Territory (as hereinafter defined) as provided herein; and WHEREAS, Licensor and Licensee wish to enter into a long-term licensing relationship granting Licensee and its Sublicensees the right to use the Food Trademarks and Program Information Improvements in connection with the manufacture, marketing, distribution and sale of such Licensed Products in the Territory and setting forth the terms and conditions governing such use; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and promises hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Licensor and Licensee, intending to be legally bound, hereby agree as follows: Section 1. Definitions. For the purposes of this Agreement: "Affiliate" of any person shall mean any company controlled by, controlling or under common control (that is, ownership of greater than 50% of the voting securities) with a person after the Effective Date. "Associated Food Trademarks" shall have the meaning set forth in the License Agreement between Licensee and Licensor's other licensee dated September 29, 1999. "Confidential Information" shall have the meaning set forth in Section_14. "Effective Date" shall mean the day and year first above written. "Food Trademarks" shall mean the Formation Trademarks and New Food Trademarks. 2 "Formation Trademarks" shall mean the registered trademarks, trademark applications, and common law trademarks identified in Schedule A. "Licensed Products" shall mean, for purposes of this Agreement, all food and beverage products in categories other than those specified in Schedule B hereto, which are marketed and sold under the WEIGHT WATCHERS brand (or any derivative or translation thereof that may be adopted by Weight Watchers for use in the Weight Watchers Business in its sole discretion). "New Food Trademarks" shall mean all new common law trademarks, trademark applications and trademark registrations that may be acquired by or contributed to Licensor from time to time. "Non-Recognition Food Trademarks" shall have the meaning set forth in the License Agreement between Licensee and Licensor's other licensee dated September 29, 1999. "Program Information" shall mean the terminology used in connection with any then-current Weight Watchers Program as it may exist from time to time throughout the world (the current Weight Watchers Program in the United States, Canada, the United Kingdom, Australia, New Zealand and France being identified in the attached Schedule C), such information owned by Weight Watchers as is reasonably necessary to develop, manufacture, market and distribute food and beverage products in accordance with such Weight Watchers Program and to calculate Points(R) or other measurements relating thereto, as well as the Program Information Trademarks. "Program Information Improvements" shall mean such information and know-how as may be developed by Licensor's other licensee through use of Program Information pursuant to this Agreement that Licensor's other licensee determines would be useful for Weight Watchers in the development and application of Program Information. "Program Information Trademarks" shall mean those trademarks owned by Weight Watchers and used to identify the Program Information and Weight Watchers Program, as such Weight Watchers Program may exist from time to time, including but not limited to those current Program Information Trademarks set forth in Schedule D. Notwithstanding the foregoing, Program Information Trademarks shall not include "Just 2 Points" or any derivative thereof. "Program Information Trademark Standards" shall mean the quality control standards set forth in Schedule E pertaining to use of the Program Information Trademarks. "Quality Control Requirements" shall mean the standards for use of the Food Trademarks set forth in Schedule E. 3 "Sublicensee" shall mean any recipient, whether prior to or after the Effective Date, of a license or sublicense for use of the Food Trademarks or Program Information Improvements, and shall include Licensee's Affiliates, where applicable. "Territory" shall mean the world, but excluding the specific countries for the specific products set forth in Schedule B. "Weight Watchers" shall mean Weight Watchers International, Inc. "Weight Watchers Business" shall mean the weight control classroom meetings, business and related activities owned or controlled by Weight Watchers or Weight Watchers Affiliates, and conducted under the Weight Watchers name including the Weight Watchers Program, and all promotional activities relating thereto, including without limitation any program materials, Program Information, Weight Watchers meeting rooms, recipes, publications, newsletters, direct mail solicitations, advertising materials, posters, and other classroom media, public relations programs, and Internet websites. "Weight Watchers Program" shall mean current and future eating or lifestyle regimens to facilitate weight loss or weight control employed, designed, marketed or adopted in any part of the world by or on behalf of Weight Watchers or Weight Watchers Affiliates under the Weight Watchers trademark or service mark. "Weight Watchers Trademarks" shall mean all service marks and trademarks owned, registered, applied for, used or intended to be used by Weight Watchers, its Affiliates or Sublicensees, that are not Food & Beverage Trademarks. For purposes of this Agreement only, "Weight Watchers Trademarks" shall include "Just 2 Points" and any mark based upon, derived or translated from, or substantially similar to, "Just 2 Points." Section 2. Grant of License. (a) (i) Licensor hereby grants Licensee the exclusive right and license to use the Food Trademarks and Program Information Improvements in connection with the manufacture, marketing, distribution and sale of Licensed Products throughout the Territory. Licensee may sublicense the use of the Food Trademarks in connection with the manufacture, marketing, distribution and sale of Licensed Products in any country in the Territory. There is no limit to the number of levels of sublicense that may be authorized by Licensee to an Affiliate. Licensee and its Affiliates may grant a sublicense to a person who is not an Affiliate (the "First Unaffiliated Sublicense"), provided that all use is in compliance with the terms of this Agreement, but any such sublicense shall not include any right to sublicense to any person not an Affiliate of the First Unaffiliated Sublicensee. Notwithstanding the foregoing, Licensee may grant a sublicense to any entity that operates a website under the Weight Watchers brand pursuant to a license from Weight Watchers as if such entity were an Affiliate of Licensee, whether or not such entity meets the definition of an Affiliate set forth herein, and may authorize such entity to sublicense an unlimited number of levels of Affiliates of such entity and a First Unaffiliated Sublicensee of such entity, but any sublicense to a First Unaffiliated 4 Sublicensee shall not include any right to sublicense to any person not an Affiliate of the First Unaffiliated Sublicensee. Licensee shall, and shall require Licensee's Affiliates and Sublicensees to, use the Food Trademarks only in connection with Licensed Products which conform with the Quality Control Requirements. Licensee and Licensee's Affiliates may utilize and authorize Sublicensees to utilize the services of third party manufacturers to produce the Licensed Products and will ensure that there are quality control provisions in any third party manufacturing agreement or sublicense consistent with the requirements of Section 4 of this Agreement. (ii) Licensor hereby grants to Licensee a non-exclusive, royalty-free right and license to use the Food Trademarks and Program Information Improvements in connection with the manufacture, marketing, distribution and sale of all food and beverage products (and products comparable thereto) ("Other Products") that were sold by Licensee in a particular country within the year prior to the Effective Date (whether or not such products are Licensed Products) and to retain all proceeds therefrom, but only for the purpose of sale of such products through the same channels of distribution in the Weight Watchers Business (it being understood that this does not limit Licensee to sales made through the classrooms) through which Licensee sold such products in that country within the year prior to the Effective Date. (b) Licensor shall provide Licensee with access to all records and materials related to the Food Trademarks and Program Information Improvements upon request of Licensee. (c) Licensor shall promptly notify Licensee of any change in the Program Information Improvements of which Licensor becomes aware. Section 3. Consideration for License. As part of the consideration for the grant of this license, Licensee hereby grants Licensor access to and the right to grant to Licensor's other licensee a non-exclusive right to use the Program Information (including a right of use on new applications and any new Program Information, including calculation of Points(R) values, developed or adopted by or on behalf of Licensee, Licensee's Affiliates or Sublicensees after the Effective Date) in connection with the manufacture, marketing, distribution and sale of those food and beverage products that Licensor's other licensee is licensed to sell, but only pursuant to and conditioned upon Licensor's compliance with Sections 7, 8(c) and 8(g) of this Agreement and compliance by Licensor's other licensee with the corresponding terms of the license to be granted to Licensor's other licensee as of the Effective Date. All such new information shall automatically be included in the definition of Program Information and shall be made available to Licensor and, through Licensor, to Licensor's other licensee. Section 4. Compliance with Quality Control Requirements. The Licensed Products and Other Products will comply with the Quality Control Requirements and shall be in conformance with good manufacturing practices. Licensee shall, and shall cause its Sublicensees and Affiliates to, maintain a level of quality that is commercially reasonable and customary to the food and beverage industry. Licensee shall take such actions as may be reasonably necessary to monitor, assess and enforce the Quality Control Requirements and other quality-related obligations imposed herein, 5 including, without limitation, where necessary, engaging in appropriate quality audits of Licensee's Sublicensees and Affiliates. (a) All products manufactured, marketed, distributed and sold by Licensee, Licensee's Affiliates, or Sublicensees prior to the Effective Date utilizing the Food Trademarks and of a quality comparable to those manufactured, marketed, distributed or sold by Licensor's other licensee prior to the Effective Date utilizing the Food Trademarks, are deemed to be approved by Licensor and in compliance with the Quality Control Requirements. (b) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees will comply in all material respects with any and all laws, regulations, governmental decrees, and orders which are applicable to the manufacture, marketing, distribution or sale of the Licensed Products in all relevant jurisdictions. (c) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees shall not exercise the rights granted hereunder in any manner that would have a material tendency to denigrate or otherwise materially diminish the value of the Food Trademarks or the goodwill and reputation associated with the use of the Food Trademarks. (d) Quality control provisions relating to the Food Trademarks contained in third party manufacturing agreements and sublicenses entered into by Licensee, Licensee's Affiliates or Sublicensees or comparable to such provisions contained in such agreements that were entered into by Licensor's other licensee, that were existing on the Effective Date are deemed to be approved by the Licensor. (e) Licensee shall submit reports to Licensor on a quarterly basis regarding quality control procedures of Licensee, compliance by Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements, and such other quality-related information that Licensor may reasonably request of all of its licensees, as will be determined by the Quality Control Managers of Licensor. Section 5. Licensor's Review of New Products. Licensee shall, and shall cause Licensee's Affiliates and Sublicensees to, submit to Licensor for Licensor's written approval a minimum of two samples of any proposed new Licensed Product (including any packaging, labels, advertising or promotional materials) prior to commercial sale. Within twenty-one (21) days of receipt of such samples, Licensor shall respond to the Licensee's, Licensee's Affiliates' or Sublicensees' request for approval in writing setting forth in detail any objections, concerns or questions with reasonable specificity. If Licensor so objects, Licensee, its Affiliates and Sublicensees shall not commence sale of any proposed new Licensed Product without Licensor's express written approval. If Licensor fails to respond within twenty-one (21) days, such new Licensed Products shall be deemed approved by Licensor as submitted. Licensor may object to any proposed new Licensed Product only on the 6 grounds that such proposed new Licensed Product does not conform to the Quality Control Requirements. Section 6. Quality Control Audit. On twenty-one (21) days' prior written notice from Licensor and not more than once per calendar year, Licensee, Licensee's Affiliates and Sublicensees shall permit the Licensor or its duly authorized representatives during normal business hours and accompanied by a representative of the Licensee, Licensee's Affiliates or Sublicensees, as applicable, to visit those areas of their respective factories and premises at which the Licensed Products are manufactured or distributed to ascertain compliance by the Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. In connection with such visits, Licensor or its duly authorized representatives may review appropriate documentation to ascertain such compliance by Licensee, Licensee's Affiliates and Sublicensees, but will not be entitled to copies of such documentation, other than the Quality Control Reports for the Licensed Products. All information to which Licensor or its duly authorized representatives is exposed and the contents of the Quality Control Reports shall be treated as Confidential Information of Licensee, Licensee's Affiliates or Sublicensees, as appropriate, and returned within thirty (30) days of disclosure. (a) In the event of a recall of a Licensed Product, Licensee, Licensee's Affiliates or Sublicensees, as applicable, will inform Licensor and Licensor agrees that the handling of such matter will be the responsibility of Licensee, Licensee's Affiliates or Sublicensees in accordance with Licensee's product recall program in effect at the time. Licensor or its duly authorized representatives may review Licensee's current policy from time to time upon request. (b) Upon reasonable prior written request by Licensor or its duly authorized representative, Licensee, Licensee's Affiliates and Sublicensees shall supply to Licensor two samples of each of the Licensed Products per year to enable Licensor to confirm compliance of Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. Section 7. Use of Program Information by Licensor's Other Licensee. All products using or displaying the Program Information and Program Information Trademarks that were manufactured, marketed, distributed or sold by Licensor's other licensee, its Affiliates or Sublicensees prior to the Effective Date are deemed to be approved by Licensor and Licensee. (a) Licensor will cause Licensor's other licensee, its Affiliates and Sublicensees to submit copies of all new or changed labels, packaging and advertising materials for Licensed Products displaying or using the Program Information Trademarks (a "New Use") to Licensor for approval prior to commercial use. Licensor shall have twenty-one (21) days from receipt of such materials to respond to the party making such request for approval. Licensor shall approve the New Use of Program Information Trademarks if it is in accordance with the Program Information Trademark Standards. If Licensor fails to respond within twenty-one (21) days of receipt, such materials will be deemed approved as submitted. If Licensor indicates within such twenty-one (21) day period that it does not approve such materials. Licensor will provide written explanation setting forth with reasonable 7 specificity why the proposed New Use is not in conformance with the Program Information Trademark Standards, and Licensee, its Affiliates and Sublicensees shall not engage in the New Use without Licensor's express written approval. (b) Licensor will cause Licensor's other licensee, its Affiliates or Sublicensees, as the case may be, to submit copies of all new or changed labels, packaging, promotional or advertising materials for Licensed Products displaying or using Program Information terminology (including the calculation of Points values) to Licensee for approval prior to commercial use. Licensee shall have twenty-one (21) days from receipt of such materials to respond to the party making such request for approval. Licensee shall approve the new or changed use of Program Information terminology if the proposed display or use of Program Information terminology is substantially accurate in its presentation, application and calculation of Program Information terminology (including the calculation of Points values). If Licensee fails to respond within twenty-one (21) days of receipt, such materials will be deemed approved as submitted. If Licensee indicates within such twenty-one (21) days period that it does not approve such materials, Licensee will provide a written explanation setting forth with reasonable specificity why it objects to the proposed display or use of Program Information terminology and Licensee, its Affiliates and Sublicensees shall not engage in the proposed display or use without Weight Watchers express written approval. Licensee may object to the new or changed use of Program Information terminology pursuant to this provision only on grounds of substantial inaccuracy in the presentation, application or calculation of Program Information terminology (including Points values). (c) Licensor shall impose an obligation upon Licensor's other licensee, its Affiliates and Sublicenses to submit to Licensee a minimum of two samples of any proposed new Licensed Product utilizing Program Information (including any packaging, labels, advertising or promotional materials), or information sufficient to allow Licensee to determine with reasonable facility whether the Program Information terminology (including the calculation of Points values) is being presented, applied and calculated correctly, prior to commercial sale. Within twenty-one (21) days of receipt of such samples or other information, Licensee shall respond to the party making such request for approval. Licensee shall approve such new Licensed Product or the proposed use of Program Information terminology in connection therewith if the proposed display or use of Program Information terminology in connection with such Licensed Product is substantially accurate in its presentation, application and calculation of Program Information terminology (including the calculation of Points values). If Licensee fails to respond within twenty-one (21) days of receipt, such new Licensed Product or related materials shall be deemed approved as submitted. If Licensee indicates within such twenty-one (21) day period that it does not approve such new Licensed Product or related materials, Licensee will provide a written explanation setting forth with reasonable specificity why it objects to the proposed display or use of Program Information terminology, and Licensor's other licensee shall not, and shall cause its Affiliates and Sublicensees not to, sell the new Licensed Product utilizing the Program Information or engage in the proposed display or use without Weight Watchers express written approval. Licensee may object to the new Licensed Product or proposed use of Program Information terminology in connection therewith pursuant to this provision only on grounds of substantial inaccuracy in the 8 presentation, application or calculation of Program Information terminology (including the calculation of Points values). (d) Nothing herein shall be construed as limiting any right of approval that Licensee may otherwise have with respect to the sale of new products by Licensor's other licensee, its Affiliates and Sublicensees, as may be set forth in any agreement between Licensor, Licensee and Licensor's other licensee. Licensor acknowledges and agrees that, in performing its obligations to Licensee pursuant to Section 7(b) above regarding the exercise of quality control over Licensor's other licensee, such licensee's Affiliates and Sublicensees, it is acting pursuant to appointment by Licensee (which appointment may be revoked at any time), and that Licensor will follow Licensee's instructions with respect to its performance of such obligations. (e) Licensor acknowledges, and shall cause Licensor's other licensee and its Affiliates to acknowledge, that Licensee may change the Weight Watchers Program and Program Information in a particular jurisdiction at any time without Licensor or Licensor's other licensee's consent. If Licensee makes a change in the Program Information of a nature that requires Licensor's other licensee, its Affiliates or Sublicensees to make a change in labels, packaging, advertising or promotional materials utilizing Program Information terminology that was previously approved by Licensee for use in such jurisdiction, Licensee shall so notify Licensor and furnish Licensor with such new Program Information as may reasonably be required by Licensor's other licensee to change such materials so that the display or use of Program Information in such materials is substantially accurate in its presentation, application or calculation of Program Information terminology. Licensor shall cause Licensor's other licensee to agree (i) that within six (6) months following receipt of such notice, all Licensed Products utilizing Program Information manufactured by Licensor's other licensee or its Affiliates shall conform to the new Program Information and Program Information terminology; and (ii) that following receipt of such notice, Licensee and its Affiliates shall also use their best efforts to try to cause their Sublicensees utilizing Program Information or Program Information terminology to conform their use in such jurisdiction to the new Program Information within a reasonable period of time. Section 8. Proprietary Rights. Licensee acknowledges for itself, Licensee's Affiliates and Sublicensees that Licensor is the sole and exclusive owner of the Food Trademarks, and that Licensee, Licensee's Affiliates and Sublicensees will not contest, or take any action or make any statement inconsistent with, Licensor's exclusive title to and ownership of the Food Trademarks, or the validity of Licensor's registrations for the Food Trademarks. Licensee agrees that all goodwill resulting from use of the Food Trademarks by Licensee, Licensee's Affiliates, or Sublicensees shall inure to the benefit of Licensor. (a) Licensee shall cause, and shall cause Licensee's Affiliates and Sublicensees to cause, the following notice to be placed on all labels, advertising and promotional materials carrying the Food Trademarks: "[FOOD TRADEMARK] is the registered trademark of WW Foods LLC." 9 and when appropriate or required by local law the addition: "and used under license" or words to that effect. (b) Licensor acknowledges for itself, and shall cause its other licensee, its Affiliates and Sublicensees to acknowledge that Licensee is the sole and exclusive owner of the Program Information and that Licensor, its other licensee, its other licensee's Affiliates and Sublicensees will not contest, or take any action or make any statement inconsistent with, Licensee's exclusive title to and ownership of the Program Information or the validity of Licensee's registrations of the Program Information Trademarks. Licensor agrees, and shall cause its other licensee, its other licensee's Affiliates and Sublicensees to agree, that all goodwill resulting from use of the Program Information Trademarks by Licensor's other licensee, its Affiliates or Sublicensees shall inure to the benefit of Licensee. (c) Licensor shall cause its other licensee, its Affiliates and Sublicensees to cause the following notice to be placed on all labels, advertising and promotional materials carrying the Program Information Trademarks: "[PROGRAM INFORMATION TRADEMARK]" is the registered trademark of Weight Watchers International, Inc." and when appropriate or required by local law the addition: "and used under license" or words to that effect. (d) With respect to products or services sold in connection with the Weight Watchers business other than the Licensed Products, Licensee shall, and shall cause its Affiliates and Sublicensees to, place the following notice on all labels, advertising and promotional materials carrying the WEIGHT WATCHERS trademark or service mark: "WEIGHT WATCHERS is the registered trademark of Weight Watchers International, Inc." or "WEIGHT WATCHERS is the registered service mark of Weight Watchers International, Inc." as appropriate. 10 (e) Licensor acknowledges and shall not contest Licensee's or its Affiliates' ownership of the Program Information, including Program Information Trademarks. Licensor agrees and shall cause its other licensee, its Affiliates and Sublicensees to agree, that all goodwill resulting from use of the Program Information (including Program Information terminology and Program Information Trademarks) shall inure to the benefit of Licensee or its Affiliates, as appropriate. (f) Licensor acknowledges Licensee's (or Licensee's Affiliates' or Sublicensees', in appropriate circumstances) ownership of the Licensed Products (but not any use of the Food Trademarks or Program Information Improvements in connection therewith), as well as of the specifications, recipes, processes or other confidential or proprietary information related to the Licensed Products. Licensor further acknowledges that all such information shall be considered Licensee's (or its Affiliates' or Sublicensees', in appropriate circumstances) Confidential Information. (g) Licensor shall take such steps as may be appropriate to enforce against each of its licensees the quality control and other obligations of such licensee's respective license in a manner consistent with the LLC Agreement. Section 9. Term and Termination. This Agreement shall take effect as of the Effective Date and shall continue for an initial term of twenty-five (25) years at which time this Agreement will automatically renew for consecutive terms of twenty-five (25) years each, unless sooner terminated pursuant to Section 9(b) or (c). (a) Notwithstanding anything herein to the contrary, Licensor shall have the right to terminate this Agreement effective upon 365 days' written notice to Licensee if Licensee is no longer engaged in the bona fide commercial sale of at least one of the Licensed Products anywhere in the world for a continuous period in excess of twenty-four (24) months and does not commence the bona fide commercial sale of at least one of the Licensed Products in any country within such 365 day notice period. (b) Either party has the right to terminate this Agreement upon the written consent of the other party. (c) Upon termination of this Agreement pursuant to this Section 9, Licensee, Licensee's Affiliates and Sublicensees shall, unless otherwise agreed in writing with the Licensor, cease any and all use of the Food Trademarks and the obligations set forth in Sections 11, 12, 14 and 16 shall survive any termination of this Agreement. Section 10. Preservation of Food Trademarks. Maintenance and Renewal of Food Trademarks. Licensor agrees to act on such reasonable instructions as Licensee shall provide to maintain and renew registrations for use of the Food Trademarks in connection with 11 Licensed Products. Licensor will use its best efforts to provide Licensee with at least one hundred twenty (120) days' written notice of Food Trademark renewal and maintenance due dates except for intention to use applications, with respect to which Licensor will provide sixty (60) days' written notice. Unless otherwise instructed by Licensee and Licensor's other licensee, Licensor shall renew and maintain all such Food Trademark registrations. (a) New Registrations. Licensee shall not apply to register any trademark that is substantially similar to, based upon, or translated or derived from any Food Trademark (a "Derivative Food Trademark") in any jurisdiction in the world, except pursuant to this provision. Licensee shall request Licensor to file and prosecute such applications at Licensee's request and at Licensee's expense. Licensor shall then promptly seek and obtain an opinion of independent counsel of its choice having expertise in the trademark law of the relevant jurisdiction(s) ("Qualified Counsel") with respect to such requested registration concerning the following subjects, and Licensor shall not apply for a registration requested by Licensee in a particular jurisdiction if: (i) Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensor's other Licensee that it has received advice from Qualified Counsel retained by it, that such application or registration is likely to materially adversely affect the Food Trademarks as used by one or more licensees of Licensor or such licensee's Affiliates or Sublicensees in that jurisdiction; (ii) if there is no existing Food Trademark, Associated Food Trademark or Non-Recognition Food Trademark in that jurisdiction, Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensee or Licensor's other licensee that it has received advice from Qualified Counsel retained by it, that the law or regulatory authority of such jurisdiction likely will or would require association with another service mark or trademark registration or pending application filed or which may be filed for services or goods other than foods or beverages by Licensee for any of the Weight Watchers Trademarks (or any derivative or translation thereof) in that jurisdiction, in which case Licensor shall not make such application and Licensee may proceed to make such application if Licensee includes such application (together with any trademark registration resulting therefrom) in the definition of Associated Food Trademarks for purposes of the license between Weight Watchers and Heinz; or (iii) if there is no existing Food Trademark, Associated Food Trademark or Non-Recognition Food Trademark in that jurisdiction, Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensee or Licensor's other Licensee that it has received advice from Qualified Counsel retained by it, that the law or regulatory authority of such jurisdiction likely will not or would not register or permit the enforcement of trademarks by the LLC or an entity that owns but does not use (except through use by a registered user or licensee) a trademark in that jurisdiction, in which case Licensor shall not make such application and Licensee may proceed to make such application if Licensee includes such application (together with any trademark registration resulting therefrom) in the definition of Non-Recognition Food Trademarks for purposes of the license between Weight Watchers and Heinz. Any determination or evaluation to be made concerning the substance of the opinion or advice of Qualified Counsel, including the assessment of the likelihood of any risk or required treatment under the local law of any relevant jurisdiction, shall be made by 12 Licensee, Licensor or Licensor's other licensee in their respective sole discretion and shall not be subject to formal challenge by any other party. Licensor shall give each of its licensees prompt notice of any request made by the other licensee to apply for any new trademark registration pursuant to this provision and, to the extent permissible without violating any applicable privilege, of the substantive conclusion of any opinion of counsel received by Licensor with respect thereto. In any jurisdiction in which there is no existing Food Trademark but there is an existing Associated Food Trademark or Non-Recognition Food Trademark, Licensee may proceed to make such application, at its own initiative and expense, provided that it gives notice thereof to Licensor and Licensor's other licensee and agrees to include such application (together with any trademark registration resulting therefrom) in the appropriate definition for purposes of the license between Weight Watchers and Heinz. Any new registration made by Licensor at the request of Licensee shall become a New Food Trademark and shall be included in the definition of Food Trademarks for purpose of this Agreement. (b) Mutual Cooperation. The parties agree to cooperate with each other and with the other licensee of Licensor in protecting and defending the Food Trademarks and the Program Information. Licensee will periodically (no less than once per year or otherwise upon reasonable written request) furnish Licensor with samples of all labels, promotional, advertising, and marketing material showing its use of the Food Trademarks. Licensee also agrees to cooperate with Licensor to furnish such other information that is required for trademark maintenance and enforcement purposes, including information concerning sales volume and dollar value of Licensed Products. (c) Without limiting the generality of the foregoing, except as the parties may otherwise agree, Licensee shall not, and shall cause Licensee's Affiliates and Licensee's Sublicensees not to, apply to register or otherwise acquire in its own name in any jurisdiction any trademark identical or confusingly similar to any Food Trademark for use in relation to any food and beverage products, whether or not any such Food Trademark is registered by Licensor in such jurisdiction. (d) The parties agree to execute such documents from time to time as may be reasonably necessary to carry out the intent of this Section 10. (e) Unauthorized Use. (i) Each party agrees to notify the other in writing of any unauthorized use of the Food Trademarks or Program Information by a third party promptly after such unauthorized use comes to that party's attention. Either party may, but shall not be obligated to, bring or cause to be brought, at its own cost and expense, any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any right granted to or by it with respect to the use of the Food Trademarks and Program Information 13 hereunder to the extent permissible under local law; provided, however, that Weight Watchers, as Licensor's licensor of the Program Information, shall have sole discretion regarding any action to be taken with respect to Program Information. (ii) With respect to any infringement, unauthorized use, or interference with or violation of the Food Trademarks by a third party which does not primarily affect Licensed Products, Licensee may, in its sole discretion and at its own cost and expense, bring or cause to be brought any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any of the rights of Licensee or Licensor, provided that Licensor's other licensee whose licensed uses of the Food Trademarks are primarily affected does not bring prompt legal action. (iii) Licensor shall promptly notify Licensee in writing of any action commenced by or against Licensor or Licensor's other licensee (or such licensee's Affiliates or Sublicensees) with respect to the Food Trademarks. Licensee may, but shall not be obligated to, join as a party in such action unless the action is brought by Licensor or Licensor's other licensee and Licensee's joinder is necessary under local law for the action to proceed. (iv) In the event of any action as described above in Subsections (f)(i) or (f)(ii) brought by Licensee, Licensee's Affiliates or Sublicensees or Licensor's other licensee (or such licensee's Affiliates or Sublicensees), Licensor agrees to join any such action at the request of such licensee at such licensee's expense. (f) Licensee and Licensor shall each provide the other with such assistance and information and advice as may be reasonably available to it and which may reasonably be expected to be of assistance to the other in respect of proceedings involving a third party concerning the Food Trademarks, including being joined as a party to such proceedings (at the expense of the other party if its joinder is necessary under local law for the action to proceed), executing any and all documents and cooperating as may reasonably be necessary to assist the other party's counsel in the conduct of such defense or bringing such enforcement actions. (g) Licensor agrees to take such action or to execute such documents as may reasonably be necessary to empower the other party to bring such action on its behalf. Licensee will pay its own costs and will pay the out-of-pockets costs of Licensor in connection with any action taken in respect to this Section. The party bringing or defending proceedings against a third party will have the benefit or burden of any settlement, recovery, award, loss or expense resulting from such proceeding. 14 Section 11. Dispute Resolution. If either party commits a breach of or is in default under this Agreement, the other party shall provide written notice thereof specifying the nature of the breach or default and identifying the steps required to cure the same. (a) Upon the occurrence of any breach or default under this Agreement, Licensor or Licensee, as the case may be, in addition to any other right provided in this Agreement or otherwise, shall have the right to make application for a temporary, preliminary or permanent injunction, and/or specific performance in order to prevent the continuation of such breach or default. Each party waives any requirement that the other party be required to post a bond in connection with any request for an injunction. Each party acknowledges that an injunction or an order of specific performance may be necessary to protect the Food Trademarks, Program Information and Licensor's and Licensee's rights hereunder as the case may be, because the Food Trademarks and Program Information are unique and the success and viability of the marketing and sales of Licensed Products and of all other goods and services sold by Licensee (whether actual or potential), and the marketing and sales of Licensed Products by Licensor's other licensee, depend upon Licensor's and Licensee's compliance with the terms of this Agreement. (b) Except as provided in Section 9, it is agreed expressly by the parties to this Agreement that termination is not available as a remedy for any breach or default committed by another party under this Agreement. Section 12. Indemnification. Licensee shall indemnify and agrees to defend Licensor from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of (i) the manufacture, packaging, distribution, selling, handling, consumption or marketing of Licensed Products; (ii) use of the Food Trademarks, Program Information or Program Information Improvements by Licensee, its Affiliates and Sublicensees after the Effective Date; or (iii) any action commenced by Licensee pursuant to Section 10(f)(i) and (ii) above, or in which Licensor joins pursuant to Section 10(f)(iv) above. (a) Licensor shall cause Licensor's other licensee to indemnify and to agree to defend Licensee from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of (i) the manufacture, packaging, distribution, selling, handling, consumption or marketing of Licensed Products as defined in and pursuant to a license granted by Licensor; (ii) use of the Food Trademarks, Program Information and Program Information Improvements by Licensor's other licensee, its Affiliates and Sublicenses after the Effective Date; or (iii) any action brought or commenced by Licensor's other licensee respecting the Food Trademarks, Program Information or Program Information Improvements. 15 (b) Each party shall provide the other party with reasonable notice of any claim for which it seeks indemnification under this Section 12 and shall cooperate with the defense of any such claim. (c) Each party agrees that the provisions of this Section 12 shall survive any termination of this Agreement for the period of any applicable statute of limitations. Section 13. Insurance. At all times during the term of this Agreement, Licensee will maintain adequate professional/product liability insurance sufficient to cover claims related to the Licensed Products and the business conducted by Licensee. Licensee's insurance policy shall name Licensor and Licensor's other licensee as additional insureds. A copy of Licensee's current policy will be available to Licensor upon request. Licensor acknowledges that $10,000,000 of coverage is adequate. (a) The insurance requirements of the first sentence of Section 13(a) are waived as long as Licensee has a senior unsecured long-term debt rating of at least A or its equivalent with at least two of the following rating agencies: (i) Standard and Poor's; (ii) Moody's; (iii) I.B.C.A.; (iv) Duff and Phelps; and (v) Fitch. In the event that at least two of the agencies listed above are no longer available, the parties will use rating agencies of equivalent standing. Section 14. Obligations Concerning Confidentiality. The parties acknowledge that they will exchange certain confidential or proprietary business information and know-how (collectively, the "Confidential Information"). Except as otherwise provided in this Agreement, all information that a party wishes to have treated as Confidential Information shall be designated as such at the time of its disclosure to the other party by an appropriate marking or other form of written identification. The receiving party shall not disclose such Confidential Information to any unauthorized third party. Confidential Information of another party may be disclosed internally by the receiving party only to those who have a "need-to-know" such Confidential Information. The receiving party will make no copies of the Confidential Information except upon the written permission of the disclosing party. The obligation of confidentiality set forth herein shall not apply to information which was publicly available at the time of the disclosure to the receiving party; subsequently becomes publicly available through no fault of the receiving party; is rightfully acquired by the receiving party from a third party who is not in breach of a confidential obligation with regard to such information; is independently known by the receiving party whether prior to or during the term 16 of this Agreement; or is disclosed with the written consent of the party who owns the Confidential Information. Section 15. Assignment; Transfer. Except as provided herein, neither party may assign or transfer any or all its rights or obligations under this Agreement, directly or indirectly, without the express written consent of the other party and Licensor's other licensee. (a) Licensee may assign or transfer its rights, but not any partial interest therein, under this Agreement with the consent of Licensor and Licensor's other licensee, or without any consent if the assignment or transfer is made: to an Affiliate or to a purchaser from Licensee of all or substantially all of the assets to which Licensee's use of the Food Trademarks relates, provided that (x) the Affiliate or purchaser agrees in writing to be bound to all of the terms of this Agreement and (y) that the Affiliate or purchaser will also assume ownership in the Licensee's membership interest in WW Foods, LLC and of its rights and obligations in the Limited Liability Company Agreement of WW Foods, LLC, dated September 29, 1999 (the "LLC Agreement"). (b) For the avoidance of doubt, it is expressly understood and agreed that the sale or issuance of stock by a party, or the granting of any security interest in or pledge of a collateral interest in or to Licensee's rights under this Agreement, standing alone, shall not constitute an assignment or transfer subject to this Section 15 or otherwise require the consent of any other party or person. (c) Any attempt at assignment or transfer by any party in violation of the provisions hereof shall be void. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. (d) Licensor shall not transfer, encumber, license or dispose of any of the Food Trademarks or the Program Information without the consent of Licensee. (e) Licensor shall not borrow money, and shall incur liabilities solely in the ordinary course of its business. (f) Licensor shall not amend its certificate of formation or the LLC Agreement without the consent of Licensee and Licensor's other licensee. (g) Licensor shall not enter into or amend any license of the Food Trademarks or the Program Information without consent of Licensee and Licensor's other licensee. Section 16. Costs and Expenses. Each party agrees to be responsible for its respective costs and expenses arising from their entry into this Agreement. 17 Section 17. Notices. Unless otherwise specified herein, notices to the parties shall be sent by prepaid certified or registered mail, or by a national overnight courier service, to the parties at the following addresses (or at such other address as shall be specified by like notice) and notice will be deemed to have been received by the other party two days after mailing in the case of certified or registered mail and the day after mailing in the case of notice sent by overnight courier. Notices shall be addressed as follows: (i) if to Licensee: Weight Watchers International, Inc. 175 Crossway Parkway Woodbury, New York 11797 Attn: President with a copy to the General Counsel (ii) if to Licensor: WW Foods, LLC 877 West Main Street Suite 603 Boise, Idaho 83702 Attn: Administrative Manager Section 18. Governing Law. This Agreement is entered into in the State of New York and the validity, construction and effect of this Agreement (and all performance related thereto) shall be governed, enforced and interpreted under the laws of the State of New York relating to contracts entered into and to be fully performed therein. Section 19. Notice From Other Licensees. If Licensor receives from any licensee any notice related to the Food Trademarks, Program Information, Program Information Improvements or any of Licensor's license agreements with such licensee, its Affiliates or Sublicensees, Licensor shall provide such notice to all other licensees. Section 20. Miscellaneous. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any person other than Licensor or Licensee any rights or remedies under this Agreement. (a) The failure of either party to insist on compliance with any provision hereof shall not constitute a waiver or modification of such provision or any other provision nor shall resort to a remedy constitute a waiver of the right to resort to another remedy provided for under this Agreement. 18 (b) If any provision hereof is held to be invalid or unenforceable by any court of competent jurisdiction or any other authority vested with jurisdiction, such holding shall not affect the validity or enforceability of any other provision hereto. (c) The section order and headings are for convenience only and shall not be deemed to affect in any way the language, obligations or the provisions to which they refer. (d) The parties will not be deemed to have a relationship of joint venturer, partner or employer/employee with the other. Neither party shall have the right to incur any obligation on behalf of the other or have any interest in the profit or liabilities of the other. (e) This Agreement, including this provision of the Agreement, may be amended or modified only in writing and when executed by both parties hereto. 19 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WW FOODS, LLC By: Name: Title: WEIGHT WATCHERS INTERNATIONAL By: Name: Title: EX-10.5 44 EXHIBIT 10.5 EXHIBIT 10.5 LICENSE AGREEMENT THIS AGREEMENT, made and entered into this 29th day of September, 1999, by and between Weight Watchers International, Inc., a Virginia corporation with offices located at 175 Crossways Park West, Woodbury, New York, 11797 (hereinafter referred to as "Licensor"), and H. J. Heinz Company, a Pennsylvania corporation with offices located at 600 Grant Street, Pittsburgh, Pennsylvania, 15219 (together with its successors and assigns, hereinafter referred to as "Licensee" or "Heinz"). WITNESSETH: WHEREAS, Licensee seeks to license the right to manufacture, market, distribute and sell certain food and beverage products, the Licensed Products (as hereinafter defined), using the Trademarks (as hereinafter defined) throughout the Territory (as hereinafter defined) as provided herein; and WHEREAS, Licensor and Licensee wish to enter into a long-term licensing relationship granting Licensee and its Sublicensees the continuing right to use the Trademarks in connection with the manufacture, marketing, distribution and sale of Licensed Products in the Territory, and setting forth the terms and conditions governing such use; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, including the Recapitalization and Stock Purchase Agreement dated the 22nd day of July, 1999 (the "Principal Agreement"), the receipt and adequacy of which is hereby acknowledged, the parties intending to be legally bound agree as follows: SECTION 1. Definitions. For the purposes of this Agreement: "Affiliate" of any person shall mean any company controlled by, controlling or under common control (that is, ownership of greater than 50% of the voting securities) with a person after the Effective Date. "Associated Food Trademarks" shall mean (i) all Food & Beverage Trademarks the transfer of which to the LLC cannot be recorded prior to the closing under the Principal Agreement because of required association under the laws of a particular jurisdiction, including, but not limited to, those set forth on Schedule A and (ii) all New Associated Food Trademarks. "Confidential Information" shall have the meaning set forth in Section 12. "Derivative Food Trademark" shall have the meaning set forth in the licenses between the LLC (as hereinafter defined) and Licensor and Licensee, respectively. 2 "Effective Date" shall mean the day and year first above written. "Food & Beverage Trademarks" shall mean all registered trademarks, trademark applications, and common law trademarks covering food and beverage products, falling in or that would fall within any Food Class, owned by Weight Watchers and the Companies as defined in the Principal Agreement as of the Effective Date. "Food Classes" shall mean International Classes 1, 5, 29, 30, 31, 32, and 33 (or comparable classes) in relation to food and beverage products. "Food Trademark" shall have the meaning set forth in the licenses between the LLC (as hereinafter defined) and Licensor and Licensee, respectively. "Licensed Products" shall mean, for purposes of this Agreement, food and beverage products in categories specified in Schedule B hereto, which are marketed and sold under the Weight Watchers brand (or any derivative or translation thereof that has been specifically approved in writing by Licensor). "Licensee's Food Trademarks" shall mean all trademarks identified in Schedule C attached hereto. "Licensee Retained Trademarks" shall mean all trademarks identified in Schedule D attached hereto. "LLC" shall mean WW Foods, LLC. "LLC Trademarks" shall mean all trademark registrations and applications owned by the LLC at any time. "Multiclass Trademarks" shall mean all Food & Beverage Trademarks consisting of registrations or applications for registration in multiple registration classes, where such classes include both Food Classes and other classes, including, but not limited to, those set forth on Schedule E. "New Associated Food Trademarks" shall mean all trademark registrations and applications filed in the name of Licensor from time to time pursuant to Section 8(e) or (f) as the case may be of this Agreement. "New Non-Recognition Food Trademarks" shall mean all trademark registrations and applications filed in the name of Licensor from time to time pursuant to Section 8(e) or (f) as the case may be of this Agreement. "Non-Recognition Food Trademarks" shall mean (i) all Food & Beverage Trademarks in jurisdictions where the local law or regulatory authority does not permit, or will not 3 recognize the validity of, ownership of trademarks by a limited liability corporation or by any entity that owns but does not use (except through use by a registered user or licensee) a trademark in that jurisdiction, including, but not limited to, those set forth on Schedule F, and (ii) all New Non-Recognition Food Trademarks. "Non-Transferable Food Applications" shall mean all Food & Beverage Trademarks that are pending applications or intent-to-use applications in jurisdictions where the local law or regulatory authority does not permit, or will not recognize the validity of, an assignment or transfer of such applications, including, but not limited to, those set forth on Schedule G. "Program Information" shall mean, for purposes of this Agreement only, the terminology used in connection with any then-current Weight Watchers Program as it may exist from time to time throughout the world (the current Weight Watchers Program in the United States and Canada, the United Kingdom, Australia and New Zealand, and France being identified in the attached Schedule H). "Program Information Trademarks" shall mean those trademarks owned by Weight Watchers and used to identify the Program Information and Weight Watchers Program, as such Weight Watchers Program may exist from time to time, including but not limited to the current Program Information Trademarks set forth in Schedule I. For purposes of this Agreement only, Program Information Trademarks shall also include the "Just 2 Points" trademark and any mark based upon, derived or translated from, or substantially similar to, the "Just 2 Points" trademark. "Quality Control Requirements" shall mean the standards for use of the Trademarks set forth in Schedule J. "Smart Ones Package Design" shall mean the distinctive elements and features used in labels and packaging for food products sold under both of the Weight Watchers and Smart Ones brand names and uniquely associated therewith, including the principal color and layout and configuration thereof. "Sublicensee" shall mean any recipient, whether prior to or after the Effective Date, of a license or sublicense for use of the Trademarks, and shall include Licensee's Affiliates, where applicable. "Territory" shall mean the world except when limited to specific countries for specific Licensed Products as identified in Schedule A. "Trademarks" shall mean all Associated Food Trademarks, Non-Recognition Food Trademarks, Non-Transferable Food Applications, and Multiclass Trademarks owned by the Licensor as set forth in Schedules A, F, G and E attached hereto and made a part hereof, and any New Associated Food Trademarks and New Non-Recognition Food Trademarks that may be acquired by the Licensor from time to time. 4 "Weight Watchers Program" shall mean current and future eating or lifestyle regimens to facilitate weight loss or weight control employed, designed, marketed or adopted in any part of the world by or on behalf of Licensor or Licensor's Affiliates under the Weight Watchers trademark or service mark. "Weight Watchers Trademarks" shall mean all service marks and trademarks owned, registered, applied for, used or intended to be used by Weight Watchers or the Companies as defined in the Principal Agreement that are not Food & Beverage Trademarks. SECTION 2. Grant of License. Licensor hereby grants Licensee the exclusive right and license to use the Trademarks in connection with the manufacture, marketing, distribution and sale of Licensed Products in the Territory, subject to the restrictions of Section 2(a)(ii) of this Agreement. Licensee may sublicense the use of the Trademarks in connection with the manufacture, marketing, distribution and sale of Licensed Products to a person located or having its principal place of business in any country in the Territory in which Licensee or Licensee's Affiliates are manufacturing, marketing, distributing or selling any food or beverage products; provided, however, that this sentence will not be interpreted as a limitation on the territory that any such Sublicensee is authorized under such sublicense to distribute and sell the Licensed Products. There is no limit to the number of levels of sublicense that may be authorized by Licensee as long as such sublicensee is an Affiliate of Licensee. Licensee and its Affiliates may grant a sublicense to a person who is not an Affiliate (the "First Unaffiliated Sublicensee"), provided that all use is in compliance with the terms of this Agreement, but any such sublicense shall not include any right to sublicense to any person not an Affiliate of the First Unaffiliated Sublicensee. Licensee shall, and shall require Licensee's Affiliates and Sublicensees to, use the Trademarks only in connection with Licensed Products which conform with the Quality Control Requirements. Licensee and Licensee's Affiliates may utilize and authorize Sublicensees to utilize the services of third party manufacturers to produce the Licensed Products and will ensure that there are quality control provisions in any third party manufacturing agreement or sublicense consistent with the requirements of Section 3 of this Agreement. Licensee acknowledges and agrees that Licensor shall own and have the exclusive right to use all domain names or other means for providing direct access to a website or dedicated portion of a website using, incorporating, or derived from the Trademarks or the Weight Watchers Trademarks. Licensee shall not use any of the Licensee Retained Trademarks as a domain name or as an identifier for a means of providing access to a website or dedicated portion of a website ("Licensee Retained Trademark Website") promoting, advertising or selling Licensed Products. Licensee acknowledges and agrees further that access to such Licensee Retained Trademark Websites shall only be through a website controlled by or operated pursuant to a license from Licensor, the primary Heinz website in each of the U.S. and Canada, and the Heinz Frozen Food website; Licensee's websites promoting Licensed Products shall provide access by display of a hyperlink or other means of transfer to a website to be designated by Licensor, and the primary website operated using the Weight Watchers brand name shall provide access by display of a hyperlink or other means of transfer to Licensee Retained Trademark Websites promoting Licensed Products; and websites controlled by Licensee which advertise, promote or sell Licensed Products shall not include content substantially 5 similar in nature to any website controlled by or operated pursuant to a license from Licensor, but may include information concerning the nutritional aspects of Licensed Products, recipes and the like. For the avoidance of doubt, Licensee may promote, advertise and sell Licensed Products on a website using any of Licensee's trademarks as a domain name or identifier, other than any domain name or identifier using, incorporating, derived from or confusingly similar to Licensee's Retained Trademarks, the Trademarks, the Program Information Trademarks or the Weight Watchers Trademarks. (a) Licensor hereby grants to Licensee a non-exclusive right and license to use the Trademarks in connection with the manufacture, marketing, distribution and sale of food and beverage products other than the Licensed Products ("Other Products") throughout the world but only in respect to and to the extent strictly necessary to fulfill obligations to third parties as they may exist as of the Effective Date pursuant to those existing licenses previously granted by Weight Watchers to parties including Heinz or its Affiliates concerning rights to manufacture, market, distribute or sell Other Products under the Trademarks ("Direct Food Trademark Licenses"), including but not limited to those on the attached Schedule K, which are or will be assigned to Heinz and as to which Heinz has assumed the obligations of Weight Watchers, and sublicenses previously granted by Heinz or its Affiliates to third parties (pursuant to a license previously granted to Heinz or its Affiliates by Weight Watchers) concerning the right to manufacture, market, distribute or sell Other Products under the Trademarks ("Heinz Sublicenses"), including but not limited to those that are identified on the attached Schedule_L. The license granted hereby to Licensee, its Affiliates and Sublicensees is conditioned upon the exercise and enforcement of appropriate quality control by Heinz with respect to Other Products and all uses of the Trademarks in connection therewith. Neither Licensee, its Affiliates or Sublicensees shall have any right to use the Program Information Trademarks on any product that is not marketed or sold under the WEIGHT WATCHERS brand (or any derivative or translation thereof that is specifically approved by Weight Watchers). The license granted pursuant to this provision regarding Other Products shall have a term of five (5) years following the Effective Date, and shall not be renewable. Nothing herein shall be construed as granting to Licensee any right to enter into any new agreement or to incur any new obligation with or to third parties reflecting use of the Trademarks in connection with the marketing or sale of Other Products, or as granting to Licensee or its Affiliates any right to manufacture, distribute, market or sell Other Products for their own account. (b) To the extent that Licensee or any of its Affiliates is currently manufacturing, marketing, distributing or selling Other Products pursuant to a Direct Food Trademark License for its own account in a manner that would violate the preceding provision if engaged in after the Effective Date, Licensor hereby grants Licensee or its Affiliate, as may be appropriate, a non-exclusive right and license for a transitional period of ninety (90) days to use the Trademarks in the same manner in which Licensee or its Affiliate is using such Trademarks as of the Effective Date. Following such transitional period, Licensee or its Affiliate, as may be appropriate, shall immediately cease any and all use of such Trademarks unless it obtains a new license from Licensor with respect to such use. All use by Licensee and its Affiliates of the Trademarks during the transitional period shall otherwise be subject to the terms of this 6 Agreement. Licensor agrees to negotiate in good faith with Licensee or its Affiliates with respect to any such new license. (c) Licensor shall provide Licensee with access to all records and materials related to the Trademarks upon request of Licensee. (d) Licensor shall promptly notify Licensee of any change in the status of the Trademarks of which Licensor becomes aware. SECTION 3. Compliance with Quality Control Requirements. The Licensed Products and Other Products will comply with the Quality Control Requirements and shall be in conformance with good manufacturing practices. Licensee shall, and shall cause its Sublicensees and Affiliates to, maintain a level of quality that is commercially reasonable and customary to the food and beverage industry. Licensee shall take such actions as may be reasonably necessary to monitor, assess and enforce the Quality Control Requirements and other quality-related obligations imposed herein, including, without limitation, where necessary, engaging in appropriate quality audits of Licensee's Sublicensees and Licensee's Affiliates. (a) All products manufactured, marketed, distributed and sold by Licensee, Licensee's Affiliates, or Sublicensees prior to the Effective Date utilizing the Trademarks are deemed to be approved by Licensor and in compliance with the Quality Control Requirements. (b) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees will comply in all material respects with any and all laws, regulations, governmental decrees, and orders which are applicable to the manufacture, marketing, distribution or sale of the Licensed Products or Other Products in all relevant jurisdictions. (c) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees shall not exercise the rights granted hereunder in any manner that would have a material tendency to denigrate or otherwise materially diminish the value of the Trademarks or the goodwill and reputation associated with the use of the Trademarks. (d) Quality control provisions relating to the Trademarks in third party manufacturing agreements and sublicenses entered into by Licensee, Licensee's Affiliates or Sublicensees or by Licensor that were existing on the Effective Date are deemed to be approved by the Licensor. (e) Licensee shall submit reports on a quarterly basis to Licensor regarding quality control procedures of Licensee, compliance by Licensee, Licensee's Affiliates and Licensee's Sublicensee with the Quality Control Requirements, and such other quality-related information that Licensor may reasonably request. Licensor may, but need not, appoint the LLC to perform its rights and obligations under this provision. In the event that Licensor notifies Licensee that it has so appointed the LLC under this provision, Licensee agrees that all 7 submissions made by it pursuant to this provision shall be directed to the LLC. Licensee further acknowledges and agrees that Licensor may, upon notice to Licensee, revoke any appointment made by Licensor of the LLC, for any reason or no reason. SECTION 4. Licensor's Review of New Products. Licensee shall, and shall cause Licensee's Affiliates and Sublicensees to, submit to Licensor for Licensor's written approval a minimum of two samples of any proposed new Licensed Product (including any packaging, labels or advertising or promotional materials) for purposes of assuring compliance with the Quality Control Requirements. Within twenty-one (21) days of receipt of such samples, Licensor shall respond to the Licensee's, Licensee's Affiliates' or Sublicensees' request for approval in writing setting forth in detail any objections, concerns or questions with reasonable specificity. If Licensor so objects, Licensee, its Affiliates and Sublicensees shall not commence sale of any proposed new Licensed Product without Licensor's express written approval. If Licensor fails to respond within twenty-one (21) days, such new Licensed Products shall be deemed approved by Licensor as submitted. Licensor may object to any proposed new Licensed Product pursuant to this provision only on the grounds that such proposed new Licensed Product does not conform to the Quality Control Requirements. Licensor may, but need not, appoint the LLC to perform its rights and obligations under this provision. In the event that Licensor notifies Licensee that it has so appointed LLC, Licensee agrees that all submissions to be made by it pursuant to this provision shall be directed to the LLC. Licensee further acknowledges and agrees that Licensor may, upon notice to Licensee, revoke any appointment made by Licensor of the LLC, for any reason or no reason. Nothing herein shall be construed as limiting or delegating any right of approval that Licensor may have with respect to any new product that Licensee proposes to sell under any other agreement by or among Licensor, Licensee or the LLC. SECTION 5. Quality Control Audit. On twenty-one (21) days' prior written notice from Licensor and not more than once per calendar year, Licensee, Licensee's Affiliates and Sublicensees shall permit the Licensor or its duly authorized representatives during normal business hours and accompanied by a representative of the Licensee, Licensee's Affiliates or Sublicensees, as applicable, to visit those areas of their respective factories and premises at which the Licensed Products are manufactured or distributed to ascertain compliance by the Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. In connection with such visits, Licensor or its duly authorized representatives may review appropriate documentation to ascertain such compliance by Licensee, Licensee's Affiliates and Sublicensees, but will not be entitled to copies of such documentation, other than the Quality Control Reports for the Licensed Products. All information to which Licensor or its duly authorized representatives is exposed and the contents of the Quality Control Reports shall be treated as Confidential Information of Licensee, Licensee's Affiliates or Sublicensees, as appropriate, and returned within thirty (30) days of disclosure. Licensor may, but need not, appoint the LLC to perform its rights and obligations under this provision. In the event that Licensor notifies Licensee that it has so appointed the LLC, Licensee agrees to accord to the LLC all rights of inspection, access, audit and review granted to Licensor hereunder. Licensee further acknowledges and agrees that Licensor may, upon notice to Licensee, revoke any appointment made by Licensor of the LLC, for any reason or no reason. 8 (a) In the event of a recall of a Licensed Product, Licensee, Licensee's Affiliates or Sublicensees, as applicable, will inform Licensor and the LLC and Licensor agrees that the handling of such matter will be the responsibility of Licensee, Licensee's Affiliates or Sublicensees in accordance with Licensee's product recall program in effect at the time. Licensor or its duly authorized representatives (including the LLC, if so authorized by Licensor) may review Licensee's current policy from time to time upon request. (b) Upon reasonable prior written request by Licensor or its duly authorized representative (including the LLC, if so authorized by Licensor), Licensee, Licensee's Affiliates and Sublicensees shall supply to Licensor or to the LLC, as Licensor may direct, two samples of each of the Licensed Products per year to enable Licensor or the LLC (on behalf of Licensor, if so authorized by Licensor) to confirm compliance of Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. SECTION 6. Proprietary Rights. Licensee acknowledges for itself, Licensee's Affiliates and Sublicensees that it and they will acquire no ownership interest in or right to the Trademarks by virtue of the exercise of rights granted to them in this Agreement except as may be provided herein, and that Licensee, Licensee's Affiliates and Sublicensees will not contest, or take any action or make any statement inconsistent with, Licensor's title to and ownership of the Trademarks, or the validity of Licensor's registrations for the Trademarks. Licensee agrees that all goodwill resulting from use of the Trademarks by Licensee, Licensee's Affiliates, or Sublicensees shall inure to the benefit of the owner of the Trademarks. (a) Licensee shall cause, and shall cause Licensee's Affiliates and Sublicensees to cause, the following notice to be placed on all labels, advertising and promotional materials carrying the Trademarks: "[TRADEMARK] is the registered trademark of Weight Watchers International, Inc." and when appropriate or required by law the addition: "and used under license" or words to that effect. (i) Licensor acknowledges and shall not contest Licensee's or its Affiliates' ownership of Licensee's Food Trademarks. Licensor agrees that all goodwill associated with the use of Licensee's Food Trademarks (but not the Trademarks) resulting from Licensee's use of Licensee's Food Trademarks in connection with the sale of Licensed Products shall inure to the benefit of Licensee or its Affiliates, as appropriate. The parties recognize that Licensee's Food Trademarks have been previously used together with the Trademarks (e.g., Smart Ones and Weight Watchers, 9 Heinz and Weight Watchers) on labels, advertising and promotions, and that Licensee may continue to use Licensee's Food Trademarks together with the Trademarks in the combinations and in the jurisdictions in which they are in use as of the Effective Date, as specified in the attached Schedule B. Licensor acknowledges that distribution and use may extend beyond these countries because of external circumstances outside of the control of Licensee, such as manufacturing, warehousing, and distribution logistics or sales to multinational accounts. Any other use of the Trademarks or Weight Watchers Trademarks with any other marks that may be adopted for use on food products from time to time by Licensee, its Affiliates or Sublicensees, in such a manner as to create a material risk of the establishment of a combination mark, shall not be permitted without the permission of Licensor. Licensee shall make no claim of ownership or right in any permitted use of the Trademarks or Weight Watchers Trademarks in combination with any other mark, and the parties shall take all steps necessary to cause the cancellation of any existing registration or abandon any pending application relating to any such combination, including but not limited to "Weight Watchers from Heinz," at Licensee's expense. (ii) Licensor agrees to the continued use of the appropriate Trademarks (e.g., Main Street Bistro, Sweet Celebrations, Chocolate Treat, etc.) by Licensee, its Affiliates and Sublicensees as sub-brands in a subordinate manner to the Weight Watchers name without prior Licensor approval. Licensee, its Affiliates and Sublicensees may continue to use their names and corporate logos as corporate identifiers in a substantially subordinate manner to the Weight Watchers name for the purpose of identifying Licensee, its Affiliates or Sublicensees, as the case may be, as the manufacturer or distributor for Licensed Products. (iii) Licensor and Licensee hereby grant to each other, to the extent of their respective rights therein, a royalty-free right and license to use (A) all proprietary elements and features (regardless of the nature of the proprietary rights therein) of all labels or packaging used by either of them, their respective Affiliates or Sublicensees in connection with the marketing and sale of food and beverage products under the Weight Watchers brand name prior to the Effective Date, and (B) all proprietary elements and features (regardless of the nature of the proprietary rights therein) of all labels or packaging that either of them, their respective Affiliates or Sublicensees may create after the Effective Date that are derived therefrom, for the purpose of advertising, promoting, marketing or distributing Licensed Products (as defined in their respective licenses from the LLC); provided, however, that this provision shall not grant to Licensor any proprietary right or ownership interest in the Smart Ones Package Design, any of Licensee's Food Trademarks, or the Heinz shield and/or keystone design (as used in the United Kingdom). The licenses granted hereunder shall be exclusive with respect to each party's Licensed Products (as defined in their respective licenses from the LLC); provided, however, that uses permitted to Licensor pursuant to Section 2(a)(ii) of the license running from the LLC to Weight Watchers 10 shall not be deemed to violate the exclusive rights granted hereunder to Licensee, and uses permitted to Licensee pursuant to Section 2(b) of the license running from the LLC to Heinz or Section 2(b) of this Agreement shall not be deemed to violate the exclusive rights granted hereunder to Licensor. (iv) Licensee further grants to Licensor, to the extent of Licensee's rights therein, a royalty-free right and license to use all proprietary elements and features (regardless of the nature of the proprietary rights therein) of all labels and packaging used by Licensee, its Affiliates or Sublicensees in connection with the marketing and sale of Other Products pursuant to any Heinz Sublicense: (A) for the purpose of continuing to perform under those Heinz Sublicenses as they are transferred to Licensor, and (B) subject to the rights of any other party to the applicable Heinz Sublicense and to the limitations of the preceding paragraph, for the purpose of advertising, promoting, marketing or distributing Licensed Products (as defined in the license running from the LLC to Weight Watchers). In addition, Licensee grants to Licensor a royalty-free right and license to use the Smart Ones Package Design or any of the Licensee Retained Trademarks used by Licensee, its Affiliates or Sublicensees in connection with the advertising, promotion, marketing or distribution of Other Products pursuant to any particular Heinz Sublicense, but only in respect to and the extent strictly necessary to fulfill obligations to third parties existing as of the time such Heinz Sublicense is transferred to Licensor. Nothing herein shall be construed as granting to Licensor any right to enter into any new agreement or to incur any new obligation with or to third parties respecting use of the Licensee Retained Trademarks or the Smart Ones Package Design in connection with the sale of Licensed Products (as defined in the license running from the LLC to Weight Watchers) or granting the right to Licensor or its Affiliates to use the Licensee Retained Trademarks or Smart Ones Package Design in connection with the manufacture, marketing, distribution or sale of such Licensed Products for its own account. (b) Licensor acknowledges Licensee's (or Licensee's Affiliates' or Sublicensees', in appropriate circumstances) ownership of the Licensed Products (but not any use of the Trademarks in connection therewith), as well as the specifications, recipes, processes or other confidential or proprietary information related to the Licensed Products. Licensor further acknowledges that all such information shall be considered Licensee's (or Licensee's Affiliates' or Sublicensees' in appropriate circumstances) Confidential Information. SECTION 7. Term and Termination. This Agreement shall take effect as of the Effective Date and shall continue for an initial term of twenty-five (25) years at which time this Agreement will automatically renew for consecutive terms of twenty-five (25) years each, unless sooner terminated pursuant to Section 7(b) or (c). (a) Notwithstanding anything herein to the contrary, Licensor shall have the right to terminate this Agreement effective upon 365 days' written notice to Licensee if 11 Licensee is no longer engaged in the bona fide commercial sale of at least one of the Licensed Products anywhere in the world for a continuous period in excess of twenty-four (24) months and does not commence the bona fide commercial sale of at least one of the Licensed Products in any country within such 365 day notice period. (b) Either party has the right to terminate this Agreement upon the written consent of the other party. (c) Upon termination of this Agreement pursuant to this Section 7, Licensee, Licensee's Affiliates and Sublicensees shall, unless otherwise agreed in writing with the Licensor, cease any and all use of the Trademarks and the obligations set forth in Sections 9, 10, 12 and 14 shall survive any termination of this Agreement. SECTION 8. Preservation of Trademarks. Maintenance and Renewal of Trademarks. Licensor agrees to act on such reasonable instructions as Licensee shall provide to maintain and renew registrations for use of the Trademarks in connection with the Licensed Products. Licensor will use its reasonable efforts to provide Licensee with at least one hundred twenty (120) days' written notice of Trademark renewal and maintenance due dates, except for intention to use applications, in which case Licensor will use reasonable efforts to provide sixty (60) days' written notice. Unless otherwise instructed by Licensee, Licensor shall renew and maintain all such Trademarks. Licensor may, but need not, appoint the LLC to perform its duties and obligations under this provision. In the event that Licensor notifies Licensee that it has so appointed the LLC, Licensee agrees to direct all instructions or other communications to be made pursuant to this provision to the LLC. Licensee further acknowledges and agrees that Licensor may, upon notice to Licensee, revoke any appointment made by Licensor of the LLC, for any reason or no reason. The costs of maintaining and renewing registrations shall be shared equally among Licensor and Licensee. If Licensor does not appoint the LLC, Licensor shall, in the first instance, make any necessary payments and invoice Licensee for its portion thereof, which Licensee shall pay within thirty (30) days. If Licensor does appoint the LLC, the LLC may make appropriate arrangements respecting any necessary payments and reimbursement therefor by Licensee. (a) Splitting Multiclass Trademarks. Licensor agrees to cooperate with Licensee, at Licensee's initiative and expense, to attempt to cause the registrations for Food & Beverage Trademarks included in the Multiclass Trademarks to be split into two (2) registrations, one of which covers only Food Classes (unless such separate registration, if assigned to the LLC, would constitute an Associated Food Trademark or a Non-Recognition Food Trademark). If any such Multiclass Trademark cannot be split into two (2) registrations, Licensor shall apply for a new registration covering only the Food Classes included in such Multiclass Trademark. Upon the issuance of such new registration, Licensor shall cancel so much of the Multiclass Trademark as is covered by the new registration and assign and contribute the new registration to the LLC. Such Multiclass Trademark will then be removed from the Trademarks subject to this Agreement, with all classes other than Food Classes belonging exclusively to Licensor and Licensee having no rights therein or thereto. 12 (b) Disassociating Associated Food Trademarks. Licensor shall further cooperate, at Licensee's initiative and expense, to attempt to cause the Associated Food Trademarks to be disassociated from the Weight Watchers Trademarks where permissible under local law in such a manner as would permit the assignment of the Associated Food Trademarks to the LLC. Licensor shall have no obligation to do so in any jurisdiction concerning which it receives advice from counsel of its choice having expertise in the trademark law of that jurisdiction ("Qualified Counsel") that the Associated Food Trademarks cannot be disassociated from the Weight Watchers Trademarks or assigned to the LLC without incurring a significant risk that any of the Associated Food Trademarks or Weight Watchers Trademarks will be materially adversely affected by such disassociation or assignment. If any Associated Food Trademark is disassociated from the Weight Watchers Trademarks, and such Associated Food Trademark is not also a Non-Recognition Trademark, Licensor shall assign and contribute such Associated Food Trademark to the LLC for licensing to each of Licensor and Licensee, and such Associated Food Trademark shall be removed from the Trademarks subject to this Agreement. (c) Changes in Status of Trademarks. If Licensee believes that any Non-Recognition Food Trademark is no longer required to be classified as such under the laws of the relevant jurisdiction, it may so advise Licensor. Licensor shall thereupon obtain, at Licensee's expense, advice from Qualified Counsel as to whether such Non-Recognition Food Trademark can be owned by the LLC without incurring a significant risk that any of the Trademarks or Weight Watchers Trademarks in that jurisdiction will be materially adversely affected thereby. If Licensor determines that any Non-Recognition Food Trademark can be owned by the LLC without any such risk, such Non-Recognition Food Trademark shall be assigned and contributed to the LLC (at Licensee's expense) for licensing to Licensee and Licensor, and shall be removed from the Trademarks subject to this Agreement. (d) New Registrations in Jurisdictions with Existing Trademarks. Licensee shall not apply to register any trademark that is substantially similar to, based upon, translated or derived from any Trademark (a "Derivative Trademark") or any Weight Watchers Trademark in any jurisdiction with an existing Trademark (an "Included Jurisdiction"). Licensor shall, at Licensee's request and expense, file and prosecute an application for a Derivative Trademark in an Included Jurisdiction unless Licensor obtains advice from Qualified Counsel that such application or registration is likely to materially adversely affect the Trademarks or Weight Watchers Trademarks as used by Licensor or Licensee in that Included Jurisdiction. Upon allowance, any Derivative Trademark applied for by Licensor (at Licensee's request or upon Licensor's own initiative) in an Included Jurisdiction shall be included in the Trademarks subject to this Agreement as a New Associated Food Trademark or New Non-Recognition Food Trademark as the case may be. (e) Registrations in New Jurisdictions. Licensor shall, at Licensee's request and expense, apply to register Derivative Trademarks, or Derivative Food Trademarks that the LLC has declined to apply to register, in any jurisdiction where there is no existing Trademark 13 or Food Trademark unless Licensor obtains advice from Qualified Counsel that such application or registration is likely to materially adversely affect the Weight Watchers Trademarks in that jurisdiction. Upon allowance, any Derivative Trademark or Derivative Food Trademark applied for by Licensor (at Licensee's request or at Licensor's own initiative) in any jurisdiction in which there is no existing Trademark or Food Trademark shall be included in the Trademarks subject to this Agreement. (f) Mutual Cooperation. The parties agree to cooperate with each other and with the LLC in protecting and defending the Trademarks. Licensee will periodically (no less than once per year or otherwise upon reasonable written request) furnish to Licensor or, if requested by Licensor, to the LLC with samples of all labels, promotional, advertising, and marketing material showing its use of the Trademarks. Licensee also agrees to cooperate with Licensor and the LLC to furnish such other information that is required for trademark maintenance and enforcement purposes, including information concerning sales volume and dollar value of Licensed Products. (g) Without limiting the generality of the foregoing, Licensee shall not, and shall cause Licensee's Affiliates and Licensee's Sublicensees not to, apply to register or otherwise acquire in its own name in any jurisdiction any trademark based upon, derived or translated from, identical or confusingly similar to any Trademark for use in relation to any food and beverage products. (h) The parties agree to execute such documents from time to time as may be reasonably necessary to carry out the intent of this Section 8. (i) Unauthorized Use. (i) Each party agrees to notify the other in writing of any unauthorized use of the Trademarks by a third party promptly after such unauthorized use comes to that party's attention. Either party may, but shall not be obligated to, bring or cause to be brought, at its own cost and expense, any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any right granted to or by it hereunder to the extent permissible under local law. (ii) With respect to any infringement, unauthorized use, or interference with or violation of the Trademarks by a third party which does not primarily affect Licensed Products, Licensee may, at its cost and expense, bring or cause to be brought any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any of the rights of Licensee or Licensor, provided that Licensor does not bring prompt legal action. (iii) Licensor shall promptly notify Licensee in writing of any action commenced by or against Licensor (or Licensor's Affiliates or Sublicensees) with respect to the 14 Trademarks. Licensee may, but shall not be obligated to, join as a party in such action unless the action is brought by Licensor and Licensee's joinder is necessary under local law for the action to proceed. (iv) In the event of any action as described above in Subsections (j)(i) or (j)(ii) brought by Licensee (or Licensee's Affiliates or Sublicensees), Licensor may, but shall not be obligated to, join as a party in any such action unless its joinder is necessary under local law for the action to proceed. If Licensor's joinder is necessary, it shall join in such action at Licensee's expense. (j) Licensee and Licensor shall each provide the other with such assistance and information and advice as may be reasonably available to it and which may reasonably be expected to be of assistance to the other in respect of proceedings involving a third party concerning the Trademarks, including being joined as a party to such proceedings (at the expense of the other party if its joinder is necessary under local law for the action to proceed), executing any and all documents and cooperating as may reasonably be necessary to assist the other party's counsel in the conduct of such defense or bringing such enforcement actions. (k) Licensor agrees to take such action or to execute such documents as may be necessary to empower Licensee to bring such action on its behalf. Licensee will pay its own costs and will pay the out-of-pocket costs of Licensor in connection with any action taken in respect to this Section. The party bringing or defending proceedings against a third party will have the benefit or burden of any settlement, recovery, award, loss or expense resulting from such proceeding. (l) Licensee, on behalf of itself, its Affiliates and Sublicensees, agrees that Licensor shall not be liable for any damages of any nature resulting from actions taken or not taken by Licensor pursuant to Section 8(a) through (f) above in response to a request made by Licensee, its Affiliates and Sublicensees, and further agrees that Licensor shall not be held to any duty of care with respect to the performance of its obligations thereunder other than to act in good faith using reasonable efforts. (m) Any determination or evaluation to be made pursuant to Section 8(b) through (f) above concerning the substance of the advice of Qualified Counsel received by Licensor, including the assessment of the significance or likelihood of any risk or required treatment under the local law of any relevant jurisdiction, shall be made by Licensor in its sole discretion and shall not be subject to formal challenge by Licensee. SECTION 9. Dispute Resolution. If either party commits a breach of or is in default under this Agreement, the other party shall provide written notice thereof specifying the nature of the breach or default and identifying the steps required to cure the same. (a) Upon the occurrence of any breach or default under this Agreement, 15 Licensor or Licensee, as the case may be, in addition to any other right provided in this Agreement or otherwise, shall have the right to make application for a temporary, preliminary or permanent injunction, and/or specific performance in order to prevent the continuation of such breach or default. Each party waives any requirement that the other party be required to post a bond in connection with any request for an injunction. Each party acknowledges that an injunction or an order of specific performance may be necessary to protect the Trademarks and Licensor's and Licensee's rights hereunder as the case may be, because the Trademarks are unique and the success and viability of the sales and marketing of Licensed Products by Licensee and the sales and marketing of goods and services by Licensor (whether actual or potential) depend upon Licensor's and Licensee's compliance with the terms of this Agreement. (b) Except as provided in Section 7, it is agreed expressly by the parties to this Agreement that termination is not available as a remedy for any breach or default committed by another party under this Agreement. SECTION 10. Indemnification. Licensee shall indemnify and agrees to defend Licensor from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of (i) the manufacture, packaging, distribution, selling, handling, consumption or marketing of the Licensed Products, (ii) the use of the Trademarks by Licensee, Licensee's Affiliates and Sublicensees after the Effective Date, (iii) any action commenced by Licensee pursuant to Section_8(j)(i) or (ii) above, whether or not Licensor joins in any such action, or (iv) any action taken by Licensor in response to a request made by Licensee pursuant to Section_8(a) through (f) above. (a) Licensor shall provide Licensee with reasonable notice of any claim for which it seeks indemnification under this Section 10 and shall cooperate with the defense of any such claim. (b) Each party agrees that the provisions of this Section 10 shall survive any termination of this Agreement for the period of any applicable statute of limitations. SECTION 11. Insurance. At all times during the term of this Agreement, Licensee will maintain adequate professional/product liability insurance sufficient to cover all claims related to the Licensed Products and the business conducted by Licensee. Licensee's insurance policy shall name Licensor as an additional insured. A copy of Licensee's current policy will be available to Licensor upon request. Licensor acknowledges that $10,000,000 of coverage is adequate. (a) The insurance requirements of the first sentence of Section 11(a) are waived as long as Licensee has a senior unsecured long-term debt rating of at least A or its equivalent with at least two of the following rating agencies: (i) Standard and Poor's; 16 (ii) Moody's; (iii) I.B.C.A.; (iv) Duff and Phelps; and (v) Fitch. In the event that at least two of the agencies listed above are no longer available, the parties will use rating agencies of equivalent standing. SECTION 12. Obligations Concerning Confidentiality. The parties acknowledge that they will exchange certain confidential or proprietary business information and know-how (collectively, the "Confidential Information"). Except as otherwise provided in this Agreement, all information that a party wishes to have treated as Confidential Information shall be designated as such at the time of its disclosure to the other party by an appropriate marking or other form of written identification. The receiving party shall not disclose such Confidential Information to any unauthorized third party. Confidential Information of another party may be disclosed internally by the receiving party only to those who have a "need-to-know" such Confidential Information. The receiving party will make no copies of the Confidential Information except upon the written permission of the disclosing party. The obligation of confidentiality set forth herein shall not apply to information which was publicly available at the time of the disclosure to the receiving party; subsequently becomes publicly available through no fault of the receiving party; is rightfully acquired by the receiving party from a third party who is not in breach of a confidential obligation with regard to such information; is independently known by the receiving party whether prior to or during the term of this Agreement; or is disclosed with the written consent of the party who owns the Confidential Information. SECTION 13. Assignment; Transfer. Except as provided herein, neither party shall assign or transfer any or all its rights or obligations under this Agreement, directly or indirectly, without the express written consent of the other party. (a) Either party hereto can assign or transfer its rights, but not any partial interest therein, under this Agreement with the consent of the other party or without the consent of any other party or person if the assignment or transfer is made (i) to an Affiliate or (ii) to a purchaser of all or substantially all of the assets to which the transferor or assignor party's use of the Trademarks relates, provided that (x) the Affiliate or purchaser agrees in writing to be bound to all of the terms of this Agreement and (y) the Affiliate or purchaser will also assume ownership of the transferor or assignor party's membership interest in the LLC and of its rights and obligations under the Limited Liability Company Agreement of WW Foods, LLC, dated September 29, 1999 (the "LLC Agreement"). (b) For the avoidance of doubt, it is expressly understood and agreed that neither the sale nor issuance of stock by a party, nor the granting of any security interest in or pledge of a collateral interest in a party's rights in or to the Trademarks or this Agreement, standing alone, shall constitute an assignment or transfer subject to this Section 13 or otherwise require the consent of any other party or person. 17 (c) Any attempt at assignment or transfer by any party in violation of the provisions hereof shall be void. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. SECTION 14. Costs and Expenses. Except as expressly provided herein, each party agrees to be responsible for its respective costs and expenses arising from their entry into this Agreement. SECTION 15. Notices. Unless otherwise specified herein, notices to the parties shall be sent by prepaid certified or registered mail, or by a national overnight courier service, to the parties at the following addresses (or at such other address as shall be specified by like notice) and notice will be deemed to have been received by the other party two days after mailing in the case of certified or registered mail and the day after mailing in the case of notice sent by overnight courier. Notices shall be addressed as follows: (i) if to Licensee: H. J. Heinz Company 600 Grant Street Pittsburgh, PA 15230 Attn: President with a copy to the General Counsel (ii) if to Licensor: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, New York, 11797 Attn: President with a copy to the General Counsel SECTION 16. Governing Law. This Agreement is entered into in the State of New York and the validity, construction and effect of this Agreement (and all performance related thereto) shall be governed, enforced and interpreted under the laws of the State of New York relating to contracts entered into and to be fully performed therein. SECTION 17. Miscellaneous. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any person other than Licensor or Licensee any rights or remedies under this Agreement. (a) The failure of either party to insist on compliance with any provision hereof shall not constitute a waiver or modification of such provision or any other provision nor shall resort to a remedy constitute a waiver of the right to resort to another remedy provided for under this Agreement. 18 (b) If any provision hereof is held to be invalid or unenforceable by any court of competent jurisdiction or any other authority vested with jurisdiction, such holding shall not affect the validity or enforceability of any other provision hereto. (c) The section order and headings are for convenience only and shall not be deemed to affect in any way the language, obligations or the provisions to which they refer. (d) The parties will not be deemed to have a relationship of joint venturer, partner or employer/employee with the other. Neither party shall have the right to incur any obligation on behalf of the other or have any interest in the profit or liabilities of the other. (e) This Agreement, including this provision of this Agreement, may be amended or modified only in writing and when executed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WEIGHT WATCHERS INTERNATIONAL By: ______________________________________ Name: Title: H. J. HEINZ COMPANY By: ______________________________________ Name: Title: EX-10.6 45 EXHIBIT 10.6 EXHIBIT 10.6 LICENSE AGREEMENT THIS AGREEMENT, made and entered into this 29th day of September, 1999, by and between WW Foods, LLC, a Delaware limited liability company with offices located at Suite 603, 877 West Main Street, Boise, Idaho 83702, (hereinafter referred to as "Licensor"), and H. J. Heinz Company, a Pennsylvania corporation with offices located at 600 Grant Street, Pittsburgh, Pennsylvania, 15219 (together with its successors and assigns, hereinafter referred to as "Licensee" or "Heinz"). WITNESSETH: WHEREAS, Licensee seeks to obtain the right to manufacture, market, distribute and sell certain food and beverage products, the Licensed Products (as hereinafter defined), using the Food Trademarks (as hereinafter defined) and Program Information (as hereinafter defined) throughout the Territory (as hereinafter defined) as provided herein; and WHEREAS, Licensor and Licensee wish to enter into a long-term licensing relationship granting Licensee and its Sublicensees the continuing right to use the Food Trademarks and the Program Information in connection with the manufacture, marketing, distribution and sale of such Licensed Products in the Territory and setting forth the terms and conditions governing such use; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and promises hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Licensor and Licensee, intending to be legally bound, hereby agree as follows: SECTION 1. Definitions. For the purposes of this Agreement: "Affiliate" of any person shall mean any company controlled by, controlling or under common control (that is, ownership of greater than 50% of the voting securities) with a person after the Effective Date. "Associated Food Trademarks" shall have the meaning set forth in the License Agreement between Licensee and Weight Watchers dated September 29, 1999. "Confidential Information" shall have the meaning set forth in Section 14. "Effective Date" shall mean the day and year first above written. "Food Trademarks" shall mean the Formation Trademarks and New Food Trademarks. 2 "Formation Trademarks" shall mean the registered trademarks, trademark applications, and common law trademarks identified in Schedule A. "Licensed Products" shall mean, for purposes of this Agreement, food and beverage products in the categories specified in Schedule B hereto, which are marketed and sold under the WEIGHT WATCHERS brand (or any derivative or translation thereof that has been specifically approved in writing by Weight Watchers). "Licensee's Food Trademarks" shall mean the trademarks identified in Schedule C attached hereto. "Licensee Retained Trademarks" shall mean the trademarks identified in Schedule D hereto. "New Food Trademarks" shall mean all new common law trademarks, trademark applications and trademark registrations that may be acquired by or contributed to Licensor from time to time. "Non-Recognition Food Trademarks" shall have the meaning set forth in the License Agreement between Licensee and Weight Watchers dated September 29, 1999. "Program Information" shall mean the terminology used in connection with any then-current Weight Watchers Program as it may exist from time to time throughout the world (the current Weight Watchers Program in the United States and Canada, the United Kingdom, Australia and New Zealand, and France being identified in the attached Schedule E), such information owned by Weight Watchers as is reasonably necessary to develop, manufacture, market and distribute food and beverage products in accordance with such Weight Watchers Program and to calculate Points(R) or other measurements relating thereto, as well as the Program Information Trademarks. "Program Information Improvements" shall mean such information and knowhow as may be developed by Licensee through use of Program Information pursuant to this Agreement that Licensee determines would be useful for Weight Watchers in the development and application of Program Information. "Program Information Trademarks" shall mean those trademarks owned by Weight Watchers and used to identify the Program Information and Weight Watchers Program, as such Weight Watchers Program may exist from time to time, including but not limited to those current Program Information Trademarks set forth in Schedule F. Notwithstanding the foregoing, Program Information Trademarks shall not include "Just 2 Points" or any derivative thereof. "Program Information Trademark Standards" shall mean the quality control standards set forth in Schedule G pertaining to use of the Program Information Trademarks. 3 "Quality Control Requirements" shall mean the standards for use of the Food Trademarks set forth in Schedule G. "Sublicensee" shall mean any recipient, whether prior to or after the Effective Date, of a license or sublicense for use of the Food Trademarks or Program Information, and shall include Licensee's Affiliates, where applicable. "Territory" shall mean the world, except when limited to specific countries for specific Licensed Products as identified in Schedule B. "Weight Watchers" shall mean Weight Watchers International, Inc. "Weight Watchers Business" shall mean the weight control classroom meetings, business and related activities owned or controlled by Weight Watchers or Weight Watchers Affiliates, and conducted under the Weight Watchers name including the Weight Watchers Program, and all promotional activities relating thereto, including without limitation any program materials, Program Information, Weight Watchers meeting rooms, recipes, publications, newsletters, direct mail solicitations, advertising materials, posters, and other classroom media, public relations programs, and Internet websites. "Weight Watchers Program" shall mean current and future eating or lifestyle regimens to facilitate weight loss or weight control employed, designed, marketed or adopted in any part of the world by or on behalf of Weight Watchers or Weight Watchers Affiliates under the Weight Watchers trademark or service mark. "Weight Watchers Trademarks" shall mean all service marks and trademarks owned, registered, applied for, used or intended to be used by Weight Watchers, its Affiliates or Sublicensees, that are not Food & Beverage Trademarks. For purposes of this Agreement only, "Weight Watchers Trademarks" shall include "Just 2 Points" and any mark based upon, derived or translated from, or substantially similar to, "Just 2 Points." SECTION 2. Grant of License. Subject to the restrictions of Section 2(a)(ii) of this Agreement, Licensor hereby grants Licensee the exclusive right and license to use the Food Trademarks and Program Information in connection with the manufacture, marketing, distribution and sale of Licensed Products in the Territory. Licensee may sublicense the use of the Food Trademarks and Program Information in connection with the manufacture, marketing, distribution and sale of Licensed Products to a person located or having a principal place of business in any country in the Territory in which Licensee or Licensee's Affiliates are manufacturing, marketing, distributing or selling any food or beverage products; provided, however, that this sentence will not be interpreted as a limitation on the territory that any such Sublicensee is authorized under such sublicense to distribute and sell the Licensed Products. There is no limit to the number of levels of sublicense that may be authorized by Licensee as long as such sublicensee is an Affiliate of Licensee. Licensee and its Affiliates may grant a sublicense to a person who is not an Affiliate (the "First Unaffiliated 4 Sublicensee"), provided that all use is in compliance with the terms of this Agreement, but any such sublicense shall not include any right to sublicense to any person not an Affiliate of the First Unaffiliated Sublicensee. Licensee shall, and shall require Licensee's Affiliates and Sublicensees to, use the Food Trademarks and Program Information only in connection with Licensed Products which conform with the Quality Control Requirements. Licensee and Licensee's Affiliates may utilize and authorize Sublicensees to utilize the services of third party manufacturers to produce the Licensed Products and will ensure that there are quality control provisions in any third party manufacturing agreement or sublicense consistent with the requirements of Section 4 of this Agreement. The Program Information Trademarks shall be used only to identify the Program Information or the Weight Watchers Program and not as brands or sub-brands for Licensed Products. (a) Licensee acknowledges and agrees that Weight Watchers shall own and have the exclusive right to use all domain names or other means for providing direct access to a website or dedicated portion of a website using, incorporating, or derived from the Food Trademarks, the Program Information or the Weight Watchers Trademarks. Licensee shall not use any of the Licensee Retained Trademarks as a domain name or as an identifier for a means of providing access to a website or dedicated portion of a website promoting, advertising or selling Licensed Products ("Licensee Retained Trademark Website"). Licensee acknowledges and agrees further that access to such Licensee Retained Trademark Websites shall only be through a website controlled by or operated pursuant to license from Weight Watchers, the primary Heinz website in each of the U.S. and Canada, and the Heinz Frozen Food website; Licensee's websites promoting Licensed Products shall provide access by display of a hyperlink or other means of transfer to a website to be designated by Weight Watchers, and the primary website operated under the Weight Watchers brand name shall provide access by display of a hyperlink or other means of transfer to Licensee's websites promoting Licensed Products; and websites controlled by Licensee which advertise, promote or sell Licensed Products shall not include content substantially similar in nature to any website controlled by or operated pursuant to license from Weight Watchers, but may include information concerning the nutritional aspects of Licensed Products, recipes and the like. For the avoidance of doubt, Licensee may promote, advertise and sell Licensed Products on a website using any trademark as a domain name or identifier, other than any domain name or identifier using, incorporating, derived from or confusingly similar to Licensee Retained Trademarks, the Food Trademarks, the Program Information Trademarks or the Weight Watchers Trademarks. (b) Licensor hereby grants Licensee a non-exclusive right and license to use the Food Trademarks and Program Information in connection with the manufacture, marketing, distribution and sale of food and beverage products other than the Licensed Products ("Other Products") throughout the world, but only in respect to and to the extent strictly necessary to fulfill Licensee's obligations to third parties as they may exist as of the Effective Date pursuant to those existing (i) licenses previously granted by Weight Watchers to parties including Heinz or its Affiliates concerning rights to manufacture, market, distribute or sell Other Products under the Food Trademarks ("Direct Food Trademark Licenses"), which are or will be assigned 5 to Licensee and as to which Licensee has assumed the obligations of Weight Watchers, including but not limited to those identified on the attached Schedule H, and (ii) sublicenses previously granted by Heinz or its Affiliates to third parties (pursuant to a license previously granted to Heinz or its Affiliates by Weight Watchers) concerning the right to manufacture, market, distribute or sell Other Products under the Food Trademarks ("Heinz Sublicenses"), including but not limited to those identified on the attached Schedule I. The license granted hereby to Licensee, its Affiliates and Sublicensees is conditioned upon the exercise and enforcement of appropriate quality control by Licensee with respect to Other Products and all uses of the Food Trademarks and Program Information in connection therewith. Neither Licensee, its Affiliates or Sublicensees shall have any right to use the Program Information Trademarks on any product that is not marketed or sold under the WEIGHT WATCHERS brand (or any derivative or translation thereof that is specifically approved in writing by Weight Watchers). The license granted pursuant to this provision regarding Other Products shall have a term of five (5) years following the Effective Date, and shall not be renewable. Nothing herein shall be construed as granting to Licensee any right to enter into any new agreement or to incur any new obligation with or to third parties respecting use of the Food Trademarks or Program Information in connection with the marketing or sale of Other Products, or as granting to Licensee any right to manufacture, distribute, market or sell Other Products for their own account. (c) To the extent that Licensee or any of its Affiliates is currently manufacturing, marketing, distributing or selling Other Products pursuant to a Direct Food Trademark License for its own account in a manner that would violate the preceding provision if engaged in after the Effective Date, Licensor hereby grants Licensee or its Affiliates, as may be appropriate, a non-exclusive right and license for a transitional period of ninety (90) days to use the Food Trademarks and Program Information in the same manner in which Licensee or its Affiliate is using such Food Trademarks or Program Information as of the Effective Date. Following such transitional period, Licensee or its Affiliates, as may be appropriate, shall immediately cease any and all use of such Food Trademarks and Program Information unless it obtains a new sublicense from Licensor's other licensee with respect to such use. All use by Licensee and its Affiliates of the Food Trademarks and Program Information during the transitional period shall otherwise be subject to the terms of this Agreement. (d) Licensor shall provide Licensee with access to all records and materials related to the Food Trademarks and Program Information upon request of Licensee. (e) Licensor shall promptly notify Licensee of any change in the Program Information of which Licensor becomes aware. SECTION 3. Consideration for License. As part of the consideration for the grant of this license, Licensee hereby grants Licensor access to and the right to grant to Licensor's other licensee a non-exclusive right to use the Program Information Improvements (including a right of use on new applications and Program Information Improvements developed or adopted by or on behalf of 6 Licensee, its Affiliates or Sublicensees after the Effective Date) in connection with the manufacture, marketing, distribution and sale of those food and beverage products that Licensor's other licensee is licensed to sell. Program Information Improvements shall be made available to Licensor and, through Licensor, to Licensor's other licensee. SECTION 4. Compliance with Quality Control Requirements. The Licensed Products and Other Products will comply with the Quality Control Requirements and shall be in conformance with good manufacturing practices. Licensee shall, and shall cause its Sublicensees and Affiliates to, maintain a level of quality that is commercially reasonable and customary to the food and beverage industry. Licensee shall take such actions as may be reasonably necessary to monitor, assess and enforce the Quality Control Requirements and other quality-related obligations imposed herein, including, without limitation, where necessary, engaging in appropriate quality audits of Licensee's Sublicensees and Licensee's Affiliates. (a) All products manufactured, marketed, distributed and sold by Licensee, Licensee's Affiliates, or Sublicensees prior to the Effective Date utilizing the Food Trademarks are deemed to be approved by Licensor and in compliance with the Quality Control Requirements. (b) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees will comply in all material respects with any and all laws, regulations, governmental decrees, and orders which are applicable to the manufacture, marketing, distribution or sale of the Licensed Products or Other Products in all relevant jurisdictions. (c) During the term of this Agreement, Licensee, Licensee's Affiliates and Sublicensees shall not exercise the rights granted hereunder in any manner that would have a material tendency to denigrate or otherwise materially diminish the value of the Food Trademarks or the goodwill and reputation associated with the use of the Food Trademarks. (d) Quality control provisions relating to the Food Trademarks in third party manufacturing agreements and sublicenses entered into by Licensee, its Affiliates or Sublicensees or by Licensor's other licensee that were existing on the Effective Date are deemed to be approved by the Licensor. (e) Licensee shall submit reports to Licensor on a quarterly basis regarding quality control procedures of Licensee, compliance by Licensee, its Affiliates and Sublicensees with the Quality Control Requirements, and such other quality-related information that Licensor may reasonably request of all of its licensees, as will be determined by the Quality Control Managers of Licensor. SECTION 5. Licensor's Review of New Products. Licensee shall, and shall cause Licensee's Affiliates and Sublicensees to, submit to Licensor for Licensor's written approval a minimum of two samples of any proposed new Licensed Product (including any packaging, labels, advertising or 7 promotional materials) prior to commercial sale. Within twenty-one (21) days of receipt of such samples, Licensor shall respond to the Licensee's, Licensee's Affiliates' or Sublicensees' request for approval in writing setting forth in detail any objections, concerns or questions with reasonable specificity. If Licensor so objects, Licensee, its Affiliates and Sublicensees shall not commence sale of any proposed new Licensed Product without Licensor's express written approval. If Licensor fails to respond within twenty-one (21) days, such new Licensed Products shall be deemed approved by Licensor as submitted. Licensor may object to any proposed new Licensed Product pursuant to this provision only on the grounds that such proposed new Licensed Product does not conform to the Quality Control Requirements. SECTION 6. Quality Control Audit. On twenty-one (21) days' prior written notice from Licensor and not more than once per calendar year, Licensee, Licensee's Affiliates and Sublicensees shall permit the Licensor or its duly authorized representatives during normal business hours and accompanied by a representative of the Licensee, Licensee's Affiliates or Sublicensees, as applicable, to visit those areas of their respective factories and premises at which the Licensed Products are manufactured or distributed to ascertain compliance by the Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. In connection with such visits, Licensor or its duly authorized representatives may review appropriate documentation to ascertain such compliance by Licensee, Licensee's Affiliates and Sublicensees, but will not be entitled to copies of such documentation, other than the Quality Control Reports for the Licensed Products. All information to which Licensor or its duly authorized representatives is exposed and the contents of the Quality Control Reports shall be treated as Confidential Information of Licensee, Licensee's Affiliates or Sublicensees, as appropriate, and returned within thirty (30) days of disclosure. (a) In the event of a recall of a Licensed Product, Licensee, Licensee's Affiliates or Sublicensees, as applicable, will inform Licensor and Licensor agrees that the handling of such matter will be the responsibility of Licensee, Licensee's Affiliates or Sublicensees in accordance with Licensee's product recall program in effect at the time. Licensor or its duly authorized representatives may review Licensee's current policy from time to time upon request. (b) Upon reasonable prior written request by Licensor or its duly authorized representative, Licensee, Licensee's Affiliates and Sublicensees shall supply to Licensor two samples of each of the Licensed Products per year to enable Licensor to confirm compliance of Licensee, Licensee's Affiliates and Sublicensees with the Quality Control Requirements. SECTION 7. Use of Program Information and Program Information Trademarks. All products using or displaying the Program Information and Program Information Trademarks that were manufactured, marketed, distributed or sold by Licensee, its Affiliates, or Sublicensees prior to the Effective Date are deemed to be approved by Licensor and Licensor's other licensee. (a) Licensee, Licensee's Affiliates or Sublicensees, as the case may be, shall 8 submit copies of all new or changed labels, packaging, promotional or advertising materials for Licensed Products displaying or using the Program Information Trademarks (a "New Use") to Licensor for approval prior to commercial use. Licensor shall have twenty-one (21) days from receipt of such materials to respond to the party making such request for approval. Licensor shall approve the New Use of Program Information Trademarks if it is in accordance with the Program Information Trademark Standards. If Licensor fails to respond within twenty-one (21) days of receipt, such materials will be deemed approved as submitted. If Licensor indicates within such twenty-one (21) day period that it does not approve such materials, Licensor will provide a written explanation setting forth with reasonable specificity why the proposed New Use is not in conformance with the Program Information Trademark Standards, and Licensee, its Affiliates and Sublicensees shall not engage in the New Use without Licensor's express written approval. (b) Licensee, its Affiliates or Sublicensees, as the case may be, shall submit copies of all new or changed labels, packaging, promotional or advertising materials for Licensed Products displaying or using Program Information terminology (including the calculation of Points values) to Weight Watchers for approval prior to commercial use. Weight Watchers shall have twenty-one (21) days from receipt of such materials to respond to the party making such request for approval. Weight Watchers shall approve the new or changed use of Program Information terminology if the proposed display or use of Program Information terminology is substantially accurate in its presentation, application and calculation of Program Information terminology (including the calculation of Points values). If Weight Watchers fails to respond within twenty-one (21) days of receipt, such materials will be deemed approved as submitted. If Weight Watchers indicates within such twenty-one (21) day period that it does not approve such materials, Weight Watchers will provide a written explanation setting forth with reasonable specificity why it objects to the proposed display or use of Program Information terminology, and Licensee, its Affiliates and Sublicensees shall not engage in the proposed display or use without Weight Watchers express written approval. Weight Watchers may object to the new or changed use of Program Information terminology pursuant to this provision only on grounds of substantial inaccuracy in the presentation, application or calculation of Program Information terminology (including Points values). (c) Licensee, its Affiliates and Sublicensees shall submit to Weight Watchers a minimum of two samples of any proposed new Licensed Product utilizing the Program Information (including any packaging, labels, advertising or promotional materials) or information sufficient to allow Weight Watchers to determine with reasonable facility whether the Program Information terminology (including the calculation of Points values) is being presented, applied and calculated correctly prior to commercial sale. Within twenty-one (21) days of receipt of such samples or other information, Weight Watchers shall respond to the party making such request for approval. Weight Watchers shall approve such new Licensed Product or the proposed use of Program Information terminology in connection therewith if the display or use of Program Information terminology in connection with such Licensed Product is substantially accurate in its presentation, application and calculation of Program Information 9 terminology (including the calculation of Points values). If Weight Watchers fails to respond within twenty-one (21) days of receipt, such new Licensed Product or related materials shall be deemed approved as submitted. If Weight Watchers indicates within such twenty-one (21) day period that it does not approve such new Licensed Product or related materials, Weight Watchers will provide a written explanation setting forth with reasonable specificity why it objects to the proposed display or use of Program Information terminology, and Licensee, its Affiliates and Sublicensees shall not sell the new Licensed Product utilizing the Program Information or engage in the proposed display or use without Weight Watchers express written approval. Weight Watchers may object to the new Licensed Product or proposed use of Program Information terminology in connection therewith pursuant to this provision only on grounds of substantial inaccuracy in the presentation, application or calculation of Proposed Information terminology (including Points values). (d) Nothing herein shall be construed as limiting any right of approval that Licensor's other licensee or Licensor may otherwise have with respect to the sale of new products by Licensee, its Affiliates or Sublicensees, as may be set forth in any agreement between or among Licensor, Licensee and Licensor's other licensee. (e) Licensee, on behalf of itself and its Affiliates, acknowledges that Weight Watchers may change the Weight Watchers Program and Program Information in a particular jurisdiction at any time without Licensee's consent. If Weight Watchers makes a change in the Program Information of a nature that requires Licensee, its Affiliates or Sublicensees to make a change in labels, packaging, advertising or promotional materials utilizing Program Information terminology that was previously approved by Weight Watchers for use in such jurisdiction, Weight Watchers shall so notify Licensee and furnish Licensee with such new Program Information as may reasonably be required by Licensee to change such materials so that the display or use of Program Information in such materials is substantially accurate in its presentation, application or calculation of Program Information terminology. Within six (6) months following receipt of such notice, all Licensed Products in such jurisdiction utilizing Program Information manufactured by Licensee or its Affiliates shall conform to the new Program Information and Program Information terminology. Following receipt of such notice, Licensee and its Affiliates shall also use their best efforts to try to cause their Sublicensees utilizing Program Information or Program Information terminology to conform their use in such jurisdiction to the new Program Information within a reasonable period of time. SECTION 8. Proprietary Rights. Licensee acknowledges for itself, its Affiliates and Sublicensees that Licensor is the sole and exclusive owner of the Food Trademarks, and that Licensee, Licensee's Affiliates and Sublicensees will not contest, or take any action or make any statement inconsistent with, Licensor's exclusive title to and ownership of the Food Trademarks, or the validity of Licensor's registrations for the Food Trademarks. Licensee agrees that all goodwill resulting from use of the Food Trademarks by Licensee, Licensee's Affiliates, or Sublicensees shall inure to the benefit of Licensor. 10 (a) Licensee shall cause, and shall cause Licensee's Affiliates and Sublicensees to cause, the following notice to be placed on all labels, advertising and promotional materials carrying the Food Trademarks: "[FOOD TRADEMARK] is the registered trademark of WW Foods, LLC" and when appropriate or required by local law the addition: "and used under license" or words to that effect. (b) Licensee acknowledges for itself, its Affiliates and Sublicensees that Weight Watchers is the sole and exclusive owner of the Program Information, that Licensee's rights of access and use of the Program Information have been granted to Licensee by Licensor who has been licensed rights of access and use and the right to license the Program Information to Licensee, Licensee's Affiliates and Sublicensees. Licensee, Licensee's Affiliates and Sublicensees will not contest, or take any action or make any statement inconsistent with Weight Watchers exclusive title to and ownership of the Program Information and Program Information Trademarks, or the validity of Weight Watchers registrations of the Program Information Trademarks. Licensee agrees that all goodwill resulting from use of the Program Information by Licensee, Licensee's Affiliates and Sublicensees shall inure to the benefit of Weight Watchers. (c) Licensee shall cause, and shall cause its Affiliates and Sublicensees to cause, the following notice to be placed on all labels, advertising and promotional materials carrying the Program Information Trademarks: "[PROGRAM INFORMATION TRADEMARK]" is the registered service mark [or trademark] of Weight Watchers International, Inc." and when appropriate or required by local law, the addition: "and used under license"or words to that effect. (i) Licensor acknowledges and shall not contest Licensee's or its Affiliates' ownership of Program Information Improvements and of Licensee's Food Trademarks. Licensor agrees that all goodwill resulting from use of Licensee's Food Trademarks (but not the Food Trademarks) in connection with the sale of Licensed Products shall inure to the benefit of Licensee or its Affiliates, as appropriate. The parties recognize that Licensee's Food Trademarks have been previously used together with the Food 11 Trademarks (e.g., Smart Ones and Weight Watchers, Heinz and Weight Watchers) on labels, advertising and promotions, and that Licensee may continue to use Licensee's Food Trademarks together with the Food Trademarks in the combinations and in the jurisdictions in which they are in use as of the Effective Date, as specified in the attached Schedule F. Licensor acknowledges that distribution and use may extend beyond these countries because of external circumstances outside of the control of Licensee, such as manufacturing, warehousing, and distribution logistics or sales to multinational accounts. Licensee, its Affiliates and Sublicensees shall not use the Food Trademarks with Licensee's Food Trademarks or any other trademarks that may be adopted for use on food products from time to time by Licensee, its Affiliates or Sublicensees, in such a manner as to create a material risk of the establishment of a combination mark, without the permission of Licensor and Licensor's other licensee. Licensee shall make no claim of ownership or right in any permitted use of the Food Trademarks in combination with any other mark, and the parties shall take all steps necessary to cause the cancellation of any existing registration or abandon any pending application relating to any such combination, including but not limited to "Weight Watchers from Heinz," at Licensee's expense. (ii) Licensor agrees to the continued use of the appropriate Formation Trademarks (e.g., Main Street Bistro, Sweet Celebrations, Chocolate Treat, etc.) by Licensee, its Affiliates or Sublicensees as sub-brands in a subordinate manner to the Weight Watchers name without prior approval by Licensor. Licensee, its Affiliates and Sublicensees may continue to use their names and corporate logos as corporate identifiers in a substantially subordinate manner to the Weight Watchers name for the purpose of identifying them, its Affiliates or Sublicensees, as the case may be, as the manufacturer or distributor for Licensed Products. (d) Licensor acknowledges Licensee's (or Licensee's Affiliates' or Sublicensees', in appropriate circumstances) ownership of the Licensed Products (but not any use of the Food Trademarks or Program Information in connection therewith), as well as of the specifications, recipes, processes or other confidential or proprietary information related to the Licensed Products. Licensor further acknowledges that all such information shall be considered Licensee's (or its Affiliates' or Sublicensees' in appropriate circumstances) Confidential Information. (e) Licensor shall take such steps as may be appropriate to enforce against each of its licensees the quality control and other obligations of such licensee's respective license in a manner consistent with the LLC Agreement. SECTION 9. Term and Termination. This Agreement shall take effect as of the Effective Date and shall continue for an initial term of twenty-five (25) years at which time this Agreement will automatically renew for consecutive terms of twenty-five (25) years each, unless sooner 12 terminated pursuant to Section 9(b) or 9(c). (a) Notwithstanding anything herein to the contrary, Licensor shall have the right to terminate this Agreement effective upon 365 days' written notice to Licensee if Licensee is no longer engaged in the bona fide commercial sale of at least one of the Licensed Products anywhere in the world for a continuous period in excess of twenty-four (24) months and does not commence the bona fide commercial sale of at least one of the Licensed Products in any country within such 365 day notice period. (b) Either party has the right to terminate this Agreement upon the written consent of the other party. (c) Upon termination of this Agreement pursuant to this Section 9, (i) Licensee, Licensee's Affiliates and Sublicensees shall, unless otherwise agreed in writing with the Licensor, cease any and all use of the Food Trademarks, and Program Information, including the Program Information Trademarks and (ii) the obligations set forth in Sections 11, 12, 14 and 16 shall survive any termination of this Agreement. SECTION 10. Preservation of Food Trademarks. Maintenance and Renewal of Food Trademarks. Licensor agrees to act on such reasonable instructions as Licensee shall provide to maintain and renew registrations for use of the Food Trademarks in connection with the Licensed Products. Licensor will use its best efforts to provide Licensee with at least one hundred twenty (120) days' written notice of Food Trademark renewal and maintenance due dates except for intention to use applications, with respect to which Licensor will provide sixty (60) days' written notice. Unless otherwise instructed by Licensee and Licensor's other licensee, Licensor shall renew and maintain all such Food Trademark registrations. (a) New Registrations. Licensee shall not apply to register any trademark that is substantially similar to, based upon, translated or derived from any Food Trademark (a "Derivative Food Trademark") in any jurisdiction in the world, except pursuant to this provision. Licensee may request Licensor to file and prosecute such applications at Licensee's request and at Licensee's expense, Licensor shall then promptly seek and obtain an opinion of independent counsel of its choice having expertise in the trademark law of the relevant jurisdiction(s) ("Qualified Counsel") with respect to such requested registration concerning the following subjects, and Licensor shall not apply for a registration requested by Licensee in a particular jurisdiction if: Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensor's other licensee that it has received advice from Qualified Counsel retained by it, that such application or registration is likely to materially adversely affect the Food Trademarks or Program Information Trademarks as used by one or more licensees of Licensor, or such licensee's Affiliates or Sublicensees in that jurisdiction; if there is no existing Food Trademark, Associated Food Trademark or Non-Recognition Food Trademark in that jurisdiction, Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensor's other licensee that it has received advice from Qualified Counsel retained by it, 13 that the law or regulatory authority of such jurisdiction likely will or would require association with another service mark or trademark registration or pending application filed or which may be filed for services or goods other than foods or beverages by Weight Watchers for any of the Weight Watchers Trademarks (or any derivative or translation thereof) in that jurisdiction, in which case Licensor shall not make such application and Licensor's other licensee may proceed to make such application, at Licensee's initiative and expense, if Licensee agrees to include such application (together with any trademark registration resulting therefrom) in the definition of Associated Food Trademarks for purposes of the license between Weight Watchers and Heinz; or if there is no existing Food Trademark, Associated Food Trademark or Non-Recognition Food Trademark in that jurisdiction, Qualified Counsel retained by Licensor opines, or Licensor receives notice from Licensor's other Licensee that it has received advice from Qualified Counsel retained by it, that the law or regulatory authority of such jurisdiction likely will not or would not register or permit the enforcement of trademarks by the LLC or an entity that owns but does not use (except through use by a registered user or licensee) a trademark in that jurisdiction, in which case Licensor shall not make such application and Licensor's other licensee may proceed to make such application, at Licensee's initiative and expense, if Licensee agrees to include such application (together with any trademark registration resulting therefrom) in the definition of Non-Recognition Food Trademarks for purposes of the license between Weight Watchers and Heinz. In any jurisdiction in which there is no existing Food Trademark but there is an existing Associated Food Trademark or Non-Recognition Food Trademark, Licensee may request that Licensor's other licensee make such application, at Licensee's initiative and expense, if Licensee agrees to include such application (together with any trademark registration resulting therefrom) in the appropriate definition for purposes of the license between Weight Watchers and Heinz, or Licensee may request that Licensor make such application, in which case the procedure set forth in subsections (ii) and (iii) above shall be followed, but Licensee shall pay the reasonable expenses of Licensor and Licensor's other licensee with respect to the obtaining of opinion or advice by Qualified Counsel with respect thereto. Any determination or evaluation to be made concerning the substance of the opinion or advice of Qualified Counsel by either Licensor or Licensor's other licensee, respectively, including the assessment of the likelihood of any risk or required treatment under the local law of any relevant jurisdiction, shall be made by Licensor or Licensor's other licensee in their respective sole discretion and shall not be subject to formal challenge by Licensee. Licensor shall give each of its licensees prompt notice of any request made by the other licensee to apply for any new trademark registration pursuant to this provision and, to the extent possible without violating any applicable privilege, of the substantive conclusion of any opinion of counsel received by Licensor with respect thereto. Any new registration made by Licensor at the request of Licensee shall become a New Food Trademark and shall be included in the definition of Food Trademarks for purposes of this Agreement. (b) Mutual Cooperation. The parties agree to cooperate with each other and with the other licensee of Licensor in protecting and defending the Food Trademarks and the Program Information. Licensee will periodically (no less than once per year or otherwise upon reasonable written request) furnish Licensor with samples of all labels, promotional, advertising, 14 and marketing material showing its use of the Food Trademarks. Licensee also agrees to cooperate with Licensor to furnish such other information that is required for trademark maintenance and enforcement purposes, including information concerning sales volume and dollar value of Licensed Products. (c) Without limiting the generality of the foregoing, Licensee shall not, and shall cause Licensee's Affiliates and Licensee's Sublicensees not to, apply to register or otherwise acquire in its own name in any jurisdiction any trademark based upon, derived or translated from, identical or confusingly similar to any Food Trademark or Program Information Trademark for use in relation to any food and beverage products. (d) The parties agree to execute such documents from time to time as may be reasonably necessary to carry out the intent of this Section 10. (e) Unauthorized Use. (i) Each party agrees to notify the other in writing of any unauthorized use of the Food Trademarks or Program Information by a third party promptly after such unauthorized use comes to that party's attention. Either party may, but shall not be obligated to, bring or cause to be brought, at its own cost and expense, any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any right granted to or by it with respect to the use of the Food Trademarks and Program Information hereunder to the extent permissible under local law; provided, however, that Weight Watchers, as Licensor's licensor of the Program Information, shall have sole discretion regarding any action to be taken with respect to Program Information. (ii) With respect to any infringement, unauthorized use, or interference with or violation of the Food Trademarks by a third party which does not primarily affect Licensed Products, Licensee may, in its sole discretion and at its own cost and expense, bring or cause to be brought any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any of the rights of Licensee or Licensor, provided that Licensor's other licensee whose licensed uses of the Food Trademarks are primarily affected does not bring prompt legal action. (iii) Licensor shall promptly notify Licensee in writing of any action commenced by or against Licensor or Licensor's other licensee (or such licensee's Affiliates or Sublicensees) with respect to the Food Trademarks. Licensee may, but shall not be obligated to, join as a party in such action unless the action is brought by Licensor or Licensor's other licensee and Licensee's joinder is necessary under local law for the action to proceed. (iv) In the event of any action as described above in Subsections (f)(i) or (f)(ii) 15 brought by Licensee or Licensor's other licensee (or such licensee's Affiliates or Sublicensees), Licensor agrees to join any such action at the request of such licensee at such licensee's expense. (f) Licensee and Licensor shall each provide the other with such assistance and information and advice as may be reasonably available to it and which may reasonably be expected to be of assistance to the other in respect of proceedings involving a third party concerning the Food Trademarks, including being joined as a party to such proceedings (at the expense of the other party if its joinder is necessary under local law for the action to proceed), executing any and all documents and cooperating as may reasonably be necessary to assist the other party's counsel in the conduct of such defense or bringing such enforcement actions. (g) Licensor agrees to take such action or to execute such documents as may reasonably be necessary to empower Licensee to bring such action on its behalf. Licensee will pay its own costs and will pay the out-of-pocket costs of Licensor in connection with any action taken in respect to this Section. The party bringing or defending proceedings against a third party will have the benefit or burden of any settlement, recovery, award, loss or expense resulting from such proceeding. SECTION 11. Dispute Resolution. If either party commits a breach of or is in default under this Agreement, the other party shall provide written notice thereof specifying the nature of the breach or default and identifying the steps required to cure the same. (a) Upon the occurrence of any breach or default under this Agreement, Licensor or Licensee, as the case may be, in addition to any other right provided in this Agreement or otherwise, shall have the right to make application for a temporary, preliminary or permanent injunction, and/or specific performance in order to prevent the continuation of such breach or default. Each party waives any requirement that the other party be required to post a bond in connection with any request for an injunction. Each party acknowledges that an injunction or an order of specific performance may be necessary to protect the Food Trademarks, Program Information and Licensor's and Licensee's rights hereunder as the case may be, because the Food Trademarks and Program Information are unique and the success and viability of the marketing and sales of Licensed Products by Licensee and of the marketing and sales of services and products by Licensor's other licensee (whether actual or potential) depend upon Licensor's and Licensee's compliance with the terms of this Agreement. (b) Except as provided in Section 9, it is agreed expressly by the parties to this Agreement that termination is not available as a remedy for any breach or default committed by another party under this Agreement. SECTION 12. Indemnification. Licensee shall indemnify and agrees to defend Licensor and Licensor's other licensee from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of (i) the 16 manufacture, packaging, distribution, selling, handling, consumption or marketing of Licensed Products; (ii) the use of the Food Trademarks, Program Information or Program Information Improvements by Licensee, its Affiliates and Sublicensees after the Effective Date or (iii) any action commenced by Licensee pursuant to Section 10(f) (i) and (ii) above, or in which Licensor joins pursuant to Section 10(f) (iv) above. (a) Licensor shall cause Licensor's other licensee to indemnify and to agree to defend Licensee from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of (i) the manufacture, packaging, distribution, selling, handling, consumption or marketing of Licensed Products as defined and pursuant to a license granted by Licensor; (ii) use of Food Trademarks, Program Information and Program Information Improvements by Licensor's other licensee, its Affiliates and Sublicensees after the Effective Date; or (iii) any action brought or commenced by Licensor's other licensee respecting the Food Trademarks, Program Information or Program Information Improvements. (b) Each party shall provide the other party with reasonable notice of any claim for which it seeks indemnification under this Section 12 and shall cooperate with the defense of any such claim. (c) Each party agrees that the provisions of this Section 12 shall survive any termination of this Agreement for the period of any applicable statute of limitations. SECTION 13. Insurance. At all times during the term of this Agreement, Licensee will maintain adequate professional/product liability insurance sufficient to cover claims related to the Licensed Products and the business conducted by Licensee. Licensee's insurance policy shall name Licensor and Licensor's other licensee as additional insureds. A copy of Licensee's current policy will be available to Licensor upon request. Licensor acknowledges that $10,000,000 of coverage is adequate. (a) The insurance requirements of the first sentence of Section 13(a) are waived as long as Licensee has a senior unsecured long-term debt rating of at least A- or its equivalent with at least two of the following rating agencies: (i) Standard and Poor's; (ii) Moody's; (iii) I.B.C.A.; (iv) Duff and Phelps; and (v) Fitch. In the event that at least two of the agencies listed above are no longer available, the parties will use rating agencies of equivalent standing. 17 SECTION 14. Obligations Concerning Confidentiality. The parties acknowledge that they will exchange certain confidential or proprietary business information and know-how (collectively, the "Confidential Information"). Except as otherwise provided in this Agreement, all information that a party wishes to have treated as Confidential Information shall be designated as such at the time of its disclosure to the other party by an appropriate marking or other form of written identification. The receiving party shall not disclose such Confidential Information to any unauthorized third party. Confidential Information of another party may be disclosed internally by the receiving party only to those who have a "need-to-know" such Confidential Information. The receiving party will make no copies of the Confidential Information except upon the written permission of the disclosing party. The obligation of confidentiality set forth herein shall not apply to information which (a) was publicly available at the time of the disclosure to the receiving party; (b) subsequently becomes publicly available through no fault of the receiving party; (c) is rightfully acquired by the receiving party from a third party who is not in breach of a confidential obligation with regard to such information; (d) is independently known by the receiving party whether prior to or during the term of this Agreement; or (e) is disclosed with the written consent of the party who owns the Confidential Information. SECTION 15. Assignment; Transfer. Except as provided herein, neither party may assign or transfer any or all its rights or obligations under this Agreement, directly or indirectly, without the express written consent of the other party and Licensor's other licensee. (a) Licensee may assign or transfer its rights, but not any partial interest therein, under this Agreement with the consent of Licensor and Licensor's other licensee, or without any consent if the assignment or transfer is made: to an Affiliate or to a purchaser from Licensee of all or substantially all of the assets to which Licensee's use of the Food Trademarks relates, provided that (x) the Affiliate or purchaser agrees in writing to be bound to all of the terms of this Agreement and (y) that the Affiliate or purchaser will also assume ownership in the Licensee's membership interest in WW Foods, LLC and of its rights and obligations in the Limited Liability Company Agreement of WW Foods, LLC, dated September 29, 1999 (the "LLC Agreement"). (b) For the avoidance of doubt, it is expressly understood and agreed that the sale or issuance of stock by a party, or the granting of any security interest in or pledge of a collateral interest in or to Licensee's rights under this Agreement, standing alone, shall not constitute an assignment or transfer subject to this Section 15 or otherwise require the consent of any other party or person. (c) Any attempt at assignment or transfer by any party in violation of the provisions hereof shall be void. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. (d) Licensor shall not transfer, encumber, license or dispose of any of the Food 18 Trademarks or the Program Information without the consent of Licensee and Licensor's other licensee. (e) Licensor shall not borrow money, and shall incur liabilities solely in the ordinary course of its business. (f) Licensor shall not amend its certificate of formation or the LLC Agreement without the consent of Licensee and Licensor's other licensee. (g) Licensor shall not enter into or amend any license of the Food Trademarks or the Program Information without consent of Licensee and Licensor's other licensee. SECTION 16. Costs and Expenses. Each party agrees to be responsible for its respective costs and expenses arising from their entry into this Agreement. SECTION 17. Notices. Unless otherwise specified herein, notices to the parties shall be sent by prepaid certified or registered mail, or by a national overnight courier service, to the parties at the following addresses (or at such other address as shall be specified by like notice) and notice will be deemed to have been received by the other party two days after mailing in the case of certified or registered mail and the day after mailing in the case of notice sent by overnight courier. Notices shall be addressed as follows: (i) if to Licensee: H. J. Heinz Company 600 Grant Street Pittsburgh, PA 15230 Attn: President with a copy to the General Counsel (ii) if to Licensor: WW Foods, LLC 877 West Main Street Suite 603 Boise, Idaho 83702 Attn: Administrative Manager SECTION 18. Governing Law. This Agreement is entered into in the State of New York and the validity, construction and effect of this Agreement (and all performance related thereto) shall be governed, enforced and interpreted under the laws of the State of New York relating to contracts entered into and to be fully performed therein. SECTION 19. Notice From Other Licensees. If Licensor receives from any licensee 19 any notice related to the Food Trademarks, Program Information, Program Information Improvements or any of Licensor's license agreements with such licensee, its Affiliates or Sublicensees. Licensor shall provide such notice to all other licensees. SECTION 20. Miscellaneous. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any person other than Licensor or Licensee any rights or remedies under this Agreement. (a) The failure of either party to insist on compliance with any provision hereof shall not constitute a waiver or modification of such provision or any other provision nor shall resort to a remedy constitute a waiver of the right to resort to another remedy provided for under this Agreement. (b) If any provision hereof is held to be invalid or unenforceable by any court of competent jurisdiction or any other authority vested with jurisdiction, such holding shall not affect the validity or enforceability of any other provision hereto. (c) The section order and headings are for convenience only and shall not be deemed to affect in any way the language, obligations or the provisions to which they refer. (d) The parties will not be deemed to have a relationship of joint venturer, partner or employer/employee with the other. Neither party shall have the right to incur any obligation on behalf of the other or have any interest in the profit or liabilities of the other. (e) This Agreement, including this provision of this Agreement, may be amended or modified only in writing and when executed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WW FOODS, LLC By:__________________________________ Name: Title: H. J. HEINZ COMPANY By:__________________________________ 20 Name: Title: EX-10.7 46 EXHIBIT 10.7 EXHIBIT 10.7 LIMITED LIABILITY COMPANY AGREEMENT TABLE OF CONTENTS Page ARTICLE 1 General Provisions Section 1.01. Definitions....................................1 Section 1.02. Establishment of Limited Liability Company.....2 Section 1.03. Name of Limited Liability Company..............3 Section 1.04. Principal Business Office of the Company.......3 Section 1.05. Registered Office of the Company...............3 Section 1.06. Registered Agent of the Company................3 Section 1.07. Members........................................3 Section 1.08. Certificate of Formation.......................3 ARTICLE 2 Operation of the Company Section 2.01. Purpose........................................4 Section 2.02. Powers.........................................4 Section 2.03. Management.....................................4 Section 2.04. Activities of the Company......................6 Section 2.05. Other Business.................................8 Section 2.06. Rights and Duties of the Managers..............9 Section 2.07. Officers......................................11 Section 2.08. Limited Liability.............................11 ARTICLE 3 Certain Distributions Section 3.01. Certain Contributions.........................11 Section 3.02. Additional Contributions......................13 Section 3.03. Allocation of Profits and Losses..............13 1 Section 3.04. Costs.........................................14 ARTICLE 4 Books, Records and reports Section 4.01. Books and Records............................15 Section 4.02. Reports......................................15 Section 4.03. Tax Matters..................................15 Section 4.04. Tax Returns and Other Elections..............16 2 ARTICLE 5 Exculpation and Indemnification Section 5.01. Exculpation and Indemnification..............16 ARTICLE 6 Alienation of Membership Interest Section 6.01. Assignments..................................17 Section 6.02. Resignation or Retirement....................18 Section 6.03. Admission of Additional Members..............18 ARTICLE 7 Dissolution Section 7.01. Dissolution..................................18 Section 7.02. Waiver of Partition; Nature of Interest......18 Section 7.03. Benefits of Agreement; No Third-party Rights.19 Section 7.04. Severability of Provisions...................19 Section 7.05. Entire Agreement.............................19 Section 7.06. Binding Agreement............................19 Section 7.07. Governing Law................................19 Section 7.08. Notices......................................19 Section 7.09. Effectiveness................................19 Section 7.10. Rules of Construction........................19 Section 7.11. Execution by Company.........................20 Section 7.12. Counterparts.................................20 3 EXHIBIT 10.7 LIMITED LIABILITY COMPANY AGREEMENT OF WW FOODS, LLC This agreement (hereinafter the "LLC Agreement") by and between H. J. Heinz Company ("Heinz"), a Pennsylvania corporation, and Weight Watchers International, Inc. ("Weight Watchers"), a Virginia corporation, with their offices located at 600 Grant Street, Pittsburgh, Pennsylvania 15219 and 175 Crossways Parkwest, Woodbury, New York 11797, respectively, or their respective permitted successors and assigns from time to time (collectively, the "Members"). WHEREAS, pursuant to the Recapitalization and Stock Purchase Agreement among Weight Watchers and Heinz and Artal International S.A. dated July ___, 1999 (the "Principal Agreement"), Weight Watchers and Heinz shall jointly establish WW Foods, LLC (the "Company") with each party contributing US$2,500 in exchange for a Member's certificate issued by the Company representing fifty percent (50%) of the limited liability company interest in the Company; and WHEREAS, the Company shall be hereby established as a limited liability company pursuant to and in accordance with the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the "Act") (6del.c.ss.18-101, et seq.); and WHEREAS, the parties desire to hereby establish the Company and the terms and conditions governing the business and operations of the Company. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto intending to be legally bound agree as follows: ARTICLE GENERAL PROVISIONS SECTION .0. Definitions. For purposes of this LLC Agreement: "Administrative Manager" shall mean, ProMark International, Inc., or its duly appointed successor as Administrative Manager hereunder. 4 "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, or controlled by, or under direct or indirect common control (that is, ownership of greater than 50% of the voting securities) of, such Person. "Affiliated with" shall have correlative meaning. "Associated Food Trademarks" shall mean all Food & Beverage Trademarks the transfer of which cannot be recorded prior to the closing under the Principal Agreement because of required association under the laws of a particular jurisdiction. "Covered Persons" shall have the meaning set forth in Section 5.01. "Custodial Trademarks" shall mean the Associated Food Trademarks, the Non-Recognition Food Trademarks, the Non-Transferable Food Applications, and those portions of the Multiclass Trademarks in Food Classes. "Effective Date" shall mean the day and year first above written. "First Quality Control Manager" shall mean the individual appointed by Heinz identified in Schedule A hereto, or such Person's duly appointed successor as First Quality Control Manager hereunder. "Food & Beverage Trademarks" shall mean all registered trademarks, trademark applications, and common law trademarks covering food and beverage product, falling in or that would fall within any Food Class, owned by Weight Watchers and the Companies as defined in the Principal Agreement as of the Effective Date. "Food Classes" shall mean International Classes 1, 5, 29, 30, 31, 32, and 33 (or comparable classes) in relation to food and beverage products. "Food Trademarks" shall mean the Formation Trademarks and New Food Trademarks. "Formation Trademarks" shall mean all Food & Beverage Trademarks less all Weight Watchers Retained Trademarks, Parent Retained Trademarks, and any "Weight Watchers From Heinz' trademarks. "Lien" shall mean any mortgage, lien, pledge, charge, conditional assignment as security, security interest, encumbrance or adverse claim of any kind, or any other type of preferential arrangement that has a practical effect of creating a security interest. 5 "Managers" shall mean the managers of the Company from time to time duly appointed and acting hereunder. "Multiclass Trademarks" shall mean all Food & Beverage Trademarks consisting of registrations or applications for registration in multiple registration classes, where such classes include both Food Classes and other classes. "New Food Trademarks" shall mean all new common law trademarks, trademark applications, and trademark registrations that may be acquired by or contributed to the LLC from time to time. "Non-Recognition Food Trademarks" shall mean all Food & Beverage Trademarks in jurisdictions where the local law or regulatory authority does not permit, or will not recognize the validity of, ownership of trademarks by a limited liability corporation or an entity that owns but does not use the trademarks (use is by a licensee or a permitted or registered user). Non-Transferable Food Applications" shall mean all Food & Beverage Trademarks that are pending applications or intent-to-use applications in jurisdictions where the local law or regulatory authority does not permit, or will not recognize the validity of, an assignment or transfer of such applications. "Officers" shall have the meaning set forth in Section 2.07. "Parent Retained Trademarks" shall mean certain Food & Beverage Trademarks to be transferred by Weight Watchers to Heinz and to be retained by Heinz, as identified in Schedule 8.1 of the Principal Agreement. "Person" shall mean any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority. "Program Information" shall mean the terminology used in connection with the Weight Watchers Program, such information owned by Weight Watchers as is reasonably necessary to develop, manufacture, market and distribute food and beverage products in accordance with such Weight Watchers Program and to calculate Points(R) or other measurements relating thereto, as well as those trademarks owned by Weight Watchers and used to identify such terminology and Weight Watchers Program, as such Weight Watchers Program may exist from time to time 6 "Program Information Trademarks" shall mean trademarks owned by Weight Watchers and used to identify such terminology and Weight Watchers Program, as such Weight Watchers Program may exist from time to time. "Quality Control Managers" means the First Quality Control Manager and the Second Quality Control Manager, collectively. "Quality Control Requirements" shall have the meaning set forth in Section 2.06(c). "Second Quality Control Manager" shall mean the individual appointed by Weight Watchers identified in Schedule [ ] hereto, or such Person's duly appointed successor as Second Quality Control Manager hereunder. "Weight Watchers Program" shall mean current and future eating or lifestyle regimens employed, designed, marketed or adopted by or on behalf of Weight Watchers or Weight Watchers Affiliates to facilitate weight loss or weight control throughout the world under the Weight Watchers trademark or servicemark. "Weight Watchers Retained Trademarks" shall mean all Associated Food Trademarks, Non-Recognition Food Trademarks, Non-Transferable Food Applications, Multiclass Trademarks, and Program Information Trademarks. SECTION 1.02. Establishment of Limited Liability Company. Heinz and Weight Watchers, by execution of this LLC Agreement on the date above written, hereby establish WW Foods, LLC, the Company, a limited liability company pursuant to and in accordance with the provisions of the Act, with each party contributing US$2,500 in exchange for a Members certificate issued by the Company representing fifty percent (50%) of the limited liability company interest in the Company. SECTION .03. Name of Limited Liability Company. The name of the limited liability company formed hereby is WW Foods, LLC. SECTION .04. Principal Business Office of the Company. The principal business office of the Company shall be located at Suite 510, 877 West Main Street, Boise, Idaho 83702, Attention: Robert Yoshida, or such other location as may hereafter be determined by the Administrative Manager. SECTION .05. Registered Office of the Company. The address of the registered office of the Company in the State of Delaware is c/o CT Corporation. SECTION .06. Registered Agent of the Company. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is CT Corporation. SECTION .07. Members. () Schedule C hereto contains the address of each Member as of the date of 7 this LLC Agreement. Schedule C shall be revised by the Administrative Manager from time to time to reflect the admission or withdrawal of a Member, the transfer or assignment of interests in the Company and other modifications to or changes in the information set forth therein, all in accordance with the terms of this LLC Agreement. The Members' certificates received by the Members are in the form set forth in Schedule D hereto. Such certificates are fully paid and nonassessable except as otherwise set forth in this LLC Agreement. () Subject to Sections 2.03(f) and 2.04(a), the Members may act by written consent. SECTION .08. Certificate of Formation. Dean A. Bierkan is hereby designated as an "authorized person" within the meaning of the Act, and has executed, delivered and filed the Certificate of Formation of the Company with the Secretary of State of the State of Delaware on September 15, 1999. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" ceased, and the Administrative Manager thereupon became a designated "authorized person" and shall continue as a designated "authorized person" within the meaning of the Act. ARTICLE OPERATION OF THE COMPANY SECTION .0. Purpose. The purpose for which the Company is formed is to engage in the following activities: () Ownership, Control and Preservation of Food Trademarks and Program Information. The Company is established for the purpose of owning, controlling and preserving the Food Trademarks, controlling and preserving the Custodial Trademarks, granting rights in and preserving the Program Information, [and exercising such rights respecting use of the Program Information Trademarks as may be delegated to it by Weight Watchers as the owner and licensor thereof]. In connection with the foregoing, the Company shall be responsible for maintaining or renewing registrations, and for filing and prosecuting new and existing applications worldwide, for the Food Trademarks. () Food Trademark and Program Information Licensing. The Company, by or through the Administrative Manager on behalf of the Company, shall enter into license agreements with the Members in the form attached hereto as Exhibits I and II . The Company, by or through the Administrative Manager on behalf of the Company, may perform and administer such agreements and execute all documents, agreements or certificates contemplated thereby or related thereto, all without any further act, vote or approval of the Members. 8 () Quality Control of Custodial Trademarks. The Company, by and through the Administrative Manager on behalf of the Company, shall and hereby does accept from Weight Watchers the delegation of certain rights and obligations of Weight Watchers regarding quality control of the Custodial Trademarks (as specified in the license running from Weight Watchers to Heinz regarding the use thereof), [and regarding use of the Program Information Trademarks (as specified in the license thereto granted to the Company by Weight Watchers and attached hereto as Exhibit II)], which rights and obligations shall be exercised by the Company in the manner specified in Sections 2.06(c) and (d) below. SECTION .0. Powers. Subject to Section 2.04(a), the Company (i) shall have and exercise all powers necessary, convenient or incidental to accomplish its purposes as set forth in Section 2.01 and (ii) shall have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act. SECTION .0. Management. () Managers. On the Effective Date, the Administrative Manager, the First Quality Control Manager and the Second Quality Control Manager shall become Managers of the Company. Each Manager shall be appointed in accordance with this Section 2.03. The initial Managers (and any successor Managers duly appointed hereunder) shall indicate acceptance of appointment as a Manager hereunder by execution of a counterpart of this LLC Agreement or by delivery to the Company of a letter indicating such acceptance in substantially the form attached hereto as Schedule [ ]. Each Manager shall hold office until a successor is selected and qualified or until such Manager's earlier death, resignation or, subject to Section 2.03(d), removal. The business, property and affairs of the Company shall be managed solely by or under the direction of the Managers, as and to the extent set forth in this Section 2.03. The Members (in their capacity as members of the Company) shall have no power or authority with regard to the management of the business and affairs of the Company in any respect except as may be specified in this LLC Agreement, and the Members (in their capacity as members of the Company) shall have no authority to act for or bind the Company. () Powers. Subject to Section 2.04(a), the Managers shall collectively have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes set forth in Section 2.01, including all powers, statutory or otherwise, provided, however, that the Quality Control Managers shall have the power to act on behalf of the Company solely in respect of the matters referred to in Sections 2.06(c) and (d), and the Administrative Manager shall have the power to act on behalf of the Company solely in respect of all other matters as to which the Managers have the power to act. Subject to the foregoing and to Sections 2.01 and 2.04(a), each Manager has the authority individually to bind the Company. 9 () Compensation of the Administrative Manager. The Administrative Manager shall be entitled to annual compensation for its services pursuant to a management agreement to be entered into by the Company and the Administrative Manager, in the form annexed hereto as Schedule F . The Quality Control Officers shall not be entitled to any compensation for their services, subject to Article 5 below. () Removal of Managers; Appointment of Successors. () For a period of eighteen (18) months following the Effective Date, the Administrative Manager may be removed at any time () by any Member, for failure to perform its duties or for other cause, and () by the owners of a majority of the ownership interests in the Company at any time, with or without cause. Thereafter, the Administrative Manager may be removed at any time by any Member for any reason or no reason, with or without cause. Any vacancy caused by any such removal, or by the death or resignation of the Administrative Manager, may be filled by the owners of a majority of the ownership interests in the Company; provided, however, that if the owners of a majority of the ownership interests in the Company, following good faith consultation, are unable to agree upon the appointment of a successor within ninety (90) days following the removal, death or resignation of the Administrative Manager, until such time as such owners are able to agree upon the appointment of a successor, the powers of the Administrative Manager shall be exercised on an interim basis by a law firm of national reputation having expertise in relevant areas of trademark law that is not in an attorney-client relationship with any Member. Such law firm shall be appointed by the owners of a majority of the ownership interests in the Company or, if they are unable to agree, by the Executive Director of the International Trademark Association or such other person as he or she may designate to make such appointment. In all events, the Administrative Manager shall hold office until an interim or successor Administrative Manager has been appointed and has accepted such appointment. () The First Quality Control Manager may be removed by Heinz, with or without cause, at any time. Any vacancy caused by any such removal, or by the death or resignation of the First Quality Control Manager, may be filled by Heinz. () The Second Quality Control Manager may be removed by Weight Watchers, with or without cause, at any time. Any vacancy caused by any such removal, or by the death or resignation of the Second Quality Control Manager, may be filled by Weight Watchers. () Managers as Agents. To the extent of their respective powers set forth herein and subject to 10 Section 2.04(a), Managers are agents of the Company for the purpose of the Company's business, and the actions of the Managers taken in accordance with the powers set forth herein shall bind the Company. () Amendment of LLC Agreement. Neither the Members nor the Managers shall amend, alter, change or repeal any of Sections 1.01 and Articles 2-7. The Managers shall have no duty or obligation to approve any amendment or other modification of this LLC Agreement which affects the rights, duties or immunities of the Managers. SECTION .0. Activities of the Company. () The Company shall not engage in any business or investment activities other than the ownership, control and preservation of the Food Trademarks, the control and preservation of the Custodial Trademarks, the preservation of the Program Information, and the licensing of Food Trademarks and Program Information, [and the exercise of such rights respecting use of the Program Information Trademarks as may be delegated to it by Weight Watchers as the owner and licensor thereof]; provided that the Company, by or through the Administrative Manager on behalf of the Company, may make temporary investments of funds to provide for anticipated expenses in the upcoming year in instruments with maturities of no longer than one year, including certificates of deposit, securities issued by the United States or its instrumentalities, and investments of similar liquidity and quality. Notwithstanding any other provision of this LLC Agreement, the Company (by or through the Administrative Manager or otherwise) shall not execute any instrument, assignment, deed of transfer or any other form of document transferring or purporting to transfer ownership of any Food Trademark or Custodial Trademark to or from the Company before providing each Member with an authentic copy (and translation, where appropriate) of any such instrument, assignment, deed of transfer or other form of document, and providing each Member with a reasonable opportunity to review and comment thereupon. The Company acting by or through the Administrative Manager, shall give due and deliberate consideration to the comments of the Members regarding such instrument, assignment, deed of transfer, or other form of document, but shall in all events be entitled to rely upon the advice of counsel to the Company (which, for purposes of such reliance, shall not also be employed by or acting as counsel to either Member) in determining whether to execute any such instrument, assignment, deed of transfer, or other form of document. () The Members shall cause the Company to operate separately and independently from any other party and be the sole owner of its properties. Without limiting the generality of the foregoing and notwithstanding any other provision of this LLC Agreement, the Company shall, and the Managers shall cause the Company to: () act solely in its own name and through its own agents; () maintain its own separate books, records and financial statements, which shall be 11 audited annually by certified public accountants of nationally recognized standing at the request of either Member, who shall bear the cost thereof; () maintain a place of business separate from that of the Members and maintain its own separate bank accounts; () maintain its assets, investments and funds in its own name and separately from those of any other party; () incur liability solely in the ordinary course of its activities; () not borrow money; () not incur any liabilities that are guaranteed by any third party; () not acquire obligations or securities of, or make loans or advances to any Member, or any affiliate, licensee or franchisee thereof; () not enter into any future business transactions with the Members not expressly contemplated herein; () not consolidate or merge with or into any Person, or convey, transfer or lease the properties and assets of the Company substantially as an entirety to any Person, or permit any Person to consolidate or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company; () not dissolve, liquidate or wind-up the Company; (xii) at all times hold itself out to the public (including, without limitation, any creditors of any Member or any of their Affiliates) under the Company's own name and as a separate and distinct legal entity from the Members, any of their Affiliates or any other Person; (xi) allocate and apportion fairly any overhead (including cost of office space, utilities and routine services, if any) or other expenses (including employee salaries and benefits) shared between the Company and any other Person, if any, provided, however, that this principle shall not be used to alter or vary the terms of the Management Agreement with the initial Administrative Manager or any successor agreement thereto; 12 (x) use its own stationery, invoices and checks; (x) correct any known misunderstanding regarding its separate identity; (xi) maintain adequate capital in light of its contemplated business purposes; (xi) to the fullest extent permitted by law, not institute proceedings to have the Company be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Company, or file a petition seeking, or consent to, reorganization or relief with respect to the Company under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, or make any assignment for the benefit of creditors of the Company, or admit in writing the Company's inability to pay its debts generally as they become due, or take any corporate or other action in furtherance of any such action at any time when the Company is able to pay its debts generally as they become due; and (xi) not transfer, encumber or dispose of any right, title or interest in or to any of the Food Trademarks, Custodial Trademarks or of rights in the Program Information or attempt to take any of such actions, except as expressly permitted by this LLC Agreement, and not grant any right, license or consent to use any of the Food Trademarks, Custodial Trademarks or Program Information to any Person who is not a Member. SECTION .0. Other Business. Subject to the provisions of any other agreement between or among them or between any Member and the Company, the Members and any of their Affiliates may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this LLC Agreement. SECTION .0. Rights and Duties of the Managers. () To the fullest extent permitted by Section 18-1101(c) of the Act, the Managers shall consider only the interests of the Company in acting on the matters referred to in Sections 2.03(b), 2.03(f), 2.04(a), 2.06(c) and 2.06(d); provided, however, that the Company shall also consider the interests of Weight Watchers in exercising those rights and obligations delegated to it by Weight Watchers concerning the Custodial Trademarks [and Program Information Trademarks]. No resignation or retirement of an Administrative Manager, and no appointment of a successor Administrative Manager, shall be effective until the successor Administrative Manager shall have accepted appointment by executing a copy of the appointment letters attached in Schedule G. All right, power and authority of 13 the Managers shall be limited to the extent necessary to exercise those rights and perform those duties of the respective Managers specifically set forth in this LLC Agreement. Notwithstanding any other provision of this LLC Agreement, in exercising their rights and performing their duties under this LLC Agreement each of the Managers is authorized, at the expense of the Company, to consult with and rely upon the advice of counsel, and in relying upon such advice the Managers shall be conclusively presumed to have acted in good faith. () Each Manager who accepts the rights and authority of a Manager under this LLC Agreement pursuant to Section 2.03(a) agrees to perform and discharge the duties and obligations of such Manager under this LLC Agreement, and, in the case of the Administrative Manager, further agrees that such rights, authorities, duties and obligations under this LLC Agreement shall continue until his successor as Administrative Manager or any interim Administrative Manager has accepted appointment in accordance with this LLC Agreement. () The Quality Control Managers shall have sole responsibility on behalf of the Company with respect to setting and monitoring compliance with appropriate standards for the use of the Food Trademarks, Custodial Trademarks and [Program Information Trademarks] ("Quality Control Requirements"), as set forth in Schedule H hereto, as well as for the enforcement of Quality Control Requirements against licensees of the Company. Subject to the provisions of Section 2.06(d) below, and the terms of any license between the Company and any licensee, (or, with respect to the Custodial Trademarks, the terms of any license between the Members) either Quality Control Manager may take on behalf of the Company such actions as he deems necessary or appropriate to assure compliance with Quality Control Requirements, including, without limitation, the retention of counsel or other professionals, and the commencement of legal action on behalf of the Company. If both Quality Control Managers agree upon the propriety of the commencement of legal action, the expenses relating thereto (including attorneys' fees) shall be borne by the Company and shared equally by the Members; if both Quality Control Managers do not agree, the expenses (including attorneys' fees) shall be borne exclusively by the Member having the right to appoint the Quality Control Manager determining to commence legal action. () In the event a Quality Control Manager identifies a failure to comply with Quality Control Requirements, such Quality Control Manager (the "Notifying Manager") shall promptly notify the other Quality Control Manager and each Member of the details of such failure. The Notifying Manager shall, to the greatest extent possible consistent with protection of the Food Trademarks, Custodial Trademarks, and [Program Information Trademarks], initially endeavor to cause such failure to be rectified through voluntary action on the part of the non-complying party and shall confer promptly and in good faith with the other Quality Control Manager concerning the nature of the failure to comply and the measures that would be sufficient to cure the failure to comply, if any. If such failure 14 to comply is, in the reasonable judgment of the Notifying Manager, susceptible to cure but is not cured within thirty (30) days of receipt of notice by the other Quality Control Manager, then the Notifying Manager may, after further consultation with the other Quality Control Manager, take such other action as may be available to the Company pursuant to the terms of any relevant license agreement with respect to enforcement of Quality Control Requirements as the Notifying Manager, in his sole reasonable judgment (exercised pursuant to the provisions of Section 2.06(a) above), deems necessary or appropriate to protect and preserve the value of the Food Trademarks, Custodial Trademarks and the [Program Information Trademarks]; provided, however, that the Notifying Manager shall not cause the Company to commence any legal proceeding concerning such failure to comply if the failure is susceptible to cure and any Member can demonstrate that (i) substantial, good faith efforts have been made to cure the failure, (ii) the failure is reasonably likely to be cured within a period of time reasonable in relation to the nature of the failure, and (iii) neither the Food Trademarks, Custodial Trademarks nor the [Program Information Trademarks] will be materially damaged if an additional period of time to achieve cure is allowed. In no event shall any Quality Control Manager, without the written approval of the other Quality Control Manager, commence any legal proceeding or take any action of any nature on behalf of the Company seeking monetary damages of any nature from any Member or Affiliate of a Member or licensee or sublicensee thereof relating to any failure to comply with any Quality Control Requirement. In exercising their powers under this provision, neither Quality Control Manager shall contend that the continued sale of any product, or of any product substantially similar in quality to a comparable product, that was sold by any Member, its Affiliates or their respective licensees or sublicensees as of the Effective Date fails to comply with the Quality Control Requirements. () Each Manager agrees, solely in such Manager's capacity as a creditor of the Company on account of any indemnification or other payment owing to such Manager by the Company, not to petition or otherwise invoke or cause the Company to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, acquiesce in any such event, or order or acquiesce in the ordering of the winding up or liquidation of the affairs of the Company. SECTION .0. Officers. The Administrative Manager may, from time to time as he deems advisable, select natural persons who are employees or agents of the Company and designate them as officers of the Company (the "Officers") and assign titles (including, without limitation, President, Vice President, Secretary, and Treasurer) to any such person. Unless the Administrative Manager decides otherwise, if the title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of 15 the authorities and duties of the Administrative Manager that are normally associated with that office. Any delegation pursuant to this Section 2.07 may be revoked at any time by the Administrative Manager. An Officer may be removed as an Officer with or without cause by the Administrative Manager. SECTION .0. Limited Liability. Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither the Members nor any Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being or acting as a Member or a Manager of the Company. ARTICLE CERTAIN DISTRIBUTIONS SECTION .0. Certain Distributions. () Simultaneously with the execution hereof, () Heinz shall transfer and assign its entire interest in the Formation Trademarks to the Company, and () Weight Watchers shall execute the license attached hereto as Schedule [ ] conveying rights in the Program Information to the Company and shall deliver to the Company, pursuant to such license, such documents and other materials as may be necessary for the Company to exercise its rights with regard to all material Program Information existing at such time. () Heinz represents and warrants to the Company that the transfer and assignment of the Formation Trademarks accomplished pursuant to Section 3.01(a) above will be accomplished and completed as necessary to effectuate the valid assignment of the Formation Trademarks to the Company, and that it will cause such assignments to be duly and properly recorded in any jurisdiction where such recordation is allowed. () Each of the Members respectively represents, warrants and agrees on the date hereof as follows: () Such Member is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with power and authority (corporate and other) to carry on its business as now conducted. () The execution, delivery and performance by such Member of this LLC Agreement, and consummation of the transactions contemplated hereby, have been duly authorized by all necessary action on the part of such Member. This LLC Agreement is being 16 duly and validly executed and delivered by such Member and constitutes a valid and binding agreement of such Member, enforceable against such Member in accordance with its terms. () The execution, delivery and performance of this LLC Agreement by such Member will not (x) result in a breach or violation of, conflict with, or constitute a default under such Member's organizational documents, or any material law or regulation or any material judgment, agreement or instrument to which such Member is a party or by which such Member or any of its properties are bound, or (y) result in the creation or imposition of any Lien on any asset of such Member. () No consent, approval, authorization, order, license, registration or qualification of or with any court or governmental agency or body is required for the entry of such Member into this LLC Agreement or performance of its obligations hereunder. () There is no action, suit or proceeding pending against, or, to the best knowledge of such Member, threatened against, or affecting, such Member before any court or arbitrator or any governmental body, agency or official, which in any manner involves this LLC Agreement or any transaction contemplated hereby or thereby. SECTION .0. Additional Contributions. The Members are not required to make any additional capital contribution to the Company. The provisions of this LLC Agreement, including this Section 3.02, are intended solely to benefit the Members and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this LLC Agreement) and the Members shall not have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this LLC Agreement. SECTION .0. Allocation of Profits and Losses. () If any income, gain, deduction, loss or credit is imputed to the Company for any income or franchise tax purposes in respect of a license, or other use, of the Food Trademarks and/or the Program Information to or by a Member (or an Affiliate of a Member), such imputed income or gain shall be allocated to the Member that is licensing or using (or whose Affiliate is licensing or using) the Food Trademark and/or Program Information in respect of which such income, gain, deduction, loss or credit is imputed. () Notwithstanding anything to the contrary in Section 3.03(a), if a Member pays, directly or indirectly, any costs or expenses of the Company, or contributes cash or other property to the Company in order to allow it to pay such costs or expenses, the amount of such costs or expenses shall be allocated to the Member who paid, or who provided or contributed the funds for the payment of, such costs or expenses. 17 () Any other income, gains, losses, deductions and credits of the Company that is not allocated to a Member pursuant to Section 3.03(a) or (b) above or Section 3.03(d) below) shall be allocated to the Members, in accordance with their respective interests in the Company. () Notwithstanding anything to the contrary in this Section 3.03, any portion of any income, gain, loss or deduction with respect to property contributed to the Company by a Member shall be allocated among the Members in accordance with Internal Revenue Code Section 704(c) and any applicable Treasury Regulations thereunder so as to take into account the variation, if any, between the adjusted tax basis of the property to the Company and its fair market value at the time of the contribution, provided however that allocations to Members under this subsection shall not offset the respective ownership interests of the Members. SECTION .0. Costs. () The parties shall reimburse the Company for its costs of operations. The parties agree to the following allocation of costs: () Administrative costs are the costs and expenses of the Administrative Manager and related costs of administration of the LLC Agreement. Such costs shall be paid equally by the Members, except that if ProMark is the Administrative Manager during the period, Weight Watchers shall not be obligated to pay more than a maximum payment to be phased in over 5 years as follows. Year 1 US$2,500 Year 2 US$5,000 Year 3 US$7,500 Year 4 US$10,000 Year 5 US$12,500. () Weight Watchers, at Weight Watchers' option, may use ProMark as its Quality Control Manager. If Weight Watchers so elects to utilize ProMark as its Quality Control Manager, then administrative costs in combination with the procurement by Weight Watchers of quality control services from ProMark under this LLC Agreement shall be payable equally by the Members, except that Weight Watchers shall not be obligated to pay more than a maximum annual payment to be phased in as follows: Year 1 US$20,000 Year 2 US$40,000 Year 3 US$60,000 18 Year 4 US$80,000 Year 5 US$100,000. () Maintenance costs shall be those costs to renew and/or file use registrations for the Food Trademarks hereunder. Maintenance costs (with the exception of maintenance costs for newly initiated registrations, which shall be paid by the party requesting such registrations) shall be shared equally by Heinz and Weight Watchers. Heinz currently estimates, but does not warrant, that such Maintenance costs will be approximately US$30,000 per year. Costs to maintain the Custodial Trademarks shall be paid for as may be agreed to by Heinz and Weight Watchers. The costs to transfer and assign the Formation Trademarks to the Company in accordance with Section 3.01(a)(i), and to transfer and assign any Custodial Trademarks to the Company at any time, shall be paid and borne entirely by Heinz and shall not be subject to sharing with Weight Watchers. () The parties agree that the foregoing estimated payments will be reviewed by the Members and the Administrative Manager eighteen (18) months following the Effective Date and yearly thereafter. If the Members and the Administrative and/or Quality Control Managers are unable to agree on their respecting compensation, the Administrative and/or Quality Control Managers for the following year may resign at such time. (v) If and to the extent any payment of costs to be made by Weight Watchers in this Section 3.04 does not constitute full reimbursement of the Company for the costs of the Company outlined in this Section 3.04, then any such additional costs of the Company shall be paid by Heinz during the first 5 years of this Agreement. () For the years subsequent to the first five years after the Effective Date, the maximum payment amounts of Weight Watchers stated in subparts (i) and (ii) of Section 3.04(a) shall automatically increase each year by a percentage equal to the increase or decrease in the U.S. consumer products index for the previous twelve month period. () The costs of any Food Trademark or Custodial Trademark enforcement matter shall be borne by the Member requesting such enforcement. Enforcement includes requiring the Company to initiate legal proceedings and any costs of settlement. Where such enforcement is requested by both Members, such costs shall be shared equally. ARTICLE 19 BOOKS, RECORDS AND REPORTS SECTION .0. Books and Records. The Company shall keep or cause to be kept complete and accurate books of account and records with respect to the Company's business. The Members and their duly authorized representatives shall have the right to examine the Company's books, records and documents during normal business hours. The Company, and the Managers on behalf of the Company, shall not have the right to keep confidential from the Members any information that the Managers would otherwise be permitted to keep confidential from the Members pursuant to Section 18-305(c) of the Act. The Company's books of account shall be kept using the method of accounting determined by the owners of a majority of the ownership interests in the Company; in the absence of agreement by the Members with respect thereto, the Managers shall decide based on the best interests of the Company. Any Member may, at its own expense, cause an audit to be conducted of the Company books and records by an independent public accounting firm selected by it. SECTION .0. Reports. () For each fiscal quarter and for each fiscal year, the Administrative Manager shall cause to be prepared a report setting forth as of the end of such fiscal quarter or such fiscal year, as the case may be: () a balance sheet of the Company; () an income statement of the Company; and () a report of the affairs of the Company regarding its activities and expenses in the preceding period, including registrations, renewals, prosecution, enforcement, quality control and general administrative matters. () The Administrative Manager shall, after the end of each fiscal year, which shall correspond to the fiscal calendar then employed by Weight Watchers, cause the preparation of and shall transmit to the Members or their assignees such tax information as may be reasonably necessary to enable the Members or their assignees to prepare all federal, state and local income tax returns relating to such fiscal year. SECTION .0. Tax Matters. Weight Watchers shall be the "Tax Matters Partner" under Internal Revenue Code Section 6231(a)(7). Weight Watchers shall not take any action in respect of any tax matter, including making any election, without the prior written consent of all Members. The Members shall cooperate with each other with respect to any proposed assessment or other proceedings brought by the Internal Revenue Service against the Company. 20 SECTION .0. Tax Returns and Other Elections. The Administrative Manager shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Internal Revenue Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Members within a reasonable time after the end of the Company's fiscal year. Any election permitted to be made by the Company under federal or state laws shall be made only with the prior written consent of all Members. ARTICLE EXCULPATION AND INDEMNIFICATION SECTION .0. Exculpation and Indemnification. () No Officer or Manager of the Company (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this LLC Agreement, except that such limitation shall not limit the liability, if any, of a Covered Person to the Company or the Members for any such loss, damage or claim to the extent incurred by reason of such Covered Person's gross negligence or willful misconduct. () To the fullest extent permitted by applicable law, the Company hereby indemnifies each Covered Person for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this LLC Agreement, except that no Covered Person shall be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's gross negligence or willful misconduct with respect to such acts or omissions. () To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 5.01. 21 () A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who, if selected by the Covered Person, has been selected with reasonable care. () To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to the Members, a Covered Person acting under this LLC Agreement shall not be liable to the Company or to the Members for its good faith reliance on the provisions of this LLC Agreement or any approval or authorization granted by the Company or the Members. To the extent that the provisions of this LLC Agreement restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, such provisions are agreed by the Members to replace such other duties and liabilities of such Covered Person. () The foregoing provisions of this Section 5.01 shall survive any termination of this LLC Agreement. ARTICLE ALIENATION OF MEMBERSHIP INTEREST SECTION .0. Assignments. Any Member can sell, assign or transfer its entire membership interest, but not any partial interest therein, under this LLC Agreement without the consent of any other Member (i) to an Affiliate or (ii) in the event of a sale by the Member of substantially all of the assets to which the Member's use of the Food Trademarks relates, provided that (x) the Affiliate, buyer, assignee or transferee agrees in writing to be bound to all of the terms of this LLC Agreement and (y) that the transferring Member's license with the Company is simultaneously assigned to the Affiliate, buyer, assignee or transferee of the transferring Member's interest. Except as specified in this provision, no sale, assignment or transfer of all or any portion of a Member's interest shall be made without the written consent of all other Members, and any purported sale, transfer or assignment made in violation of this provision shall be null and void. This LLC Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Members and their respective successors and assigns. For the avoidance of doubt, it is expressly understood and agreed that a change in control of either party by means of an acquisition of a controlling interest in the ownership of stock, or the issuance of a majority of shares to the public, shall not, standing alone, constitute an event requiring the other party's consent 22 pursuant to this provision. SECTION .0. Resignation or Retirement. No Member may resign as Member, except by transferring its membership interest in the Company pursuant to Section 6.01. Neither the bankruptcy nor dissolution of a Member nor any other event or circumstance referenced in Section 18-304 of the Act shall cause the Member to cease to be a member of the Company. SECTION .0. Admission of Additional Members. Except with the prior written concurrence of the owners of one hundred percent (100%) of the membership interests in the Company, no additional Members of the Company may be admitted to the Company. ARTICLE DISSOLUTION SECTION .0. Dissolution. () The Company shall not be dissolved, nor shall its affairs be wound up, upon the occurrence of any of the retirement, resignation, expulsion, bankruptcy or dissolution of any Member or the occurrence of any other event that terminates the continued membership of any Member in the Company, unless within 90 days following the occurrence of any such event, and subject to Section 2.04(a), all of the Members agree in writing to dissolve the Company (as contemplated in Section 18-801(b) of the Act). () The Company shall be dissolved and its affairs shall be wound up upon the entry of a decree of judicial dissolution under Section 18-802 of the Act. () In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act. () The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company shall have been distributed to the Members in the manner provided for in this LLC Agreement and (ii) the Certificate of Formation shall have been canceled in the manner required by the Act. SECTION .0. Waiver of Partition; Nature of Interest. Except as otherwise expressly provided in this LLC 23 Agreement, to the fullest extent permitted by law, the Members hereby irrevocably waive any right or power that the Members might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company. The Members shall not have any interest in any specific assets of the Company, and the Members shall not have the status of a creditor with respect to any distribution. The interest of the Members in the Company is personal property. SECTION .0. Benefits of Agreement; No Third-party Rights. None of the provisions of this LLC Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Members. Nothing in this LLC Agreement shall be deemed to create any right in any Person not a party hereto, and this LLC Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any such Person. SECTION .0. Severability of Provisions. Each provision of this LLC Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, those portions of this LLC Agreement which are valid, enforceable and legal shall remain in force and operation as among the parties and this LLC Agreement shall be construed, so far as possible, in such a manner as would give effect to the original intention of the parties in entering into the LLC Agreement notwithstanding the invalidity, unenforceability or illegality of one or more of its provisions. SECTION .0. Entire Agreement. This LLC Agreement constitutes the entire agreement of the Members and the Company with respect to the formation, governance and conduct of the Company. SECTION .0. Binding Agreement. Notwithstanding any other provision of this LLC Agreement, the Members agree that this LLC Agreement constitutes a legal, valid and binding agreement of the Members. SECTION .0. Governing Law. This LLC Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of laws principles of the State of Delaware or any other jurisdiction that would call for the application of the substantive laws of any jurisdiction other than the State of Delaware. SECTION .0. Notices. Any notices required to be delivered hereunder shall be in writing and personally delivered, mailed or sent by facsimile or other similar form of rapid transmission, and shall be deemed 24 to have been duly given upon receipt (a) in the case of the Company, to the Company at its address in Section 1.03; (b) in the case of the Members, to such Member at its address in Section 1.06; and (c) in the case of either of the foregoing, at such other address as may be designated by written notice to the other party. SECTION .0. Effectiveness. Pursuant to Section 18-201(d) of the Act, this LLC Agreement shall be effective as of the time of the filing of the Certificate of Formation in the Office of the Delaware Secretary of State on September 15, 1999. SECTION .. Rules of Construction. Definitions in this LLC Agreement (including Section 1.01) apply equally to both the singular and plural forms of the defined terms. The words "include" and "including" shall be deemed to be followed by the phrase "without limitation." The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this LLC Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this LLC Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this LLC Agreement. SECTION .. Execution by Company. The parties hereto hereby acknowledge and agree that the Company will become a party to this LLC Agreement by execution of a copy hereof by the Administrative Manager on behalf of the Company and, in connection therewith, the Company shall have the right to enforce the terms of this LLC Agreement. SECTION .. Counterparts. This LLC Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this LLC Agreement and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Limited Liability Company Agreement as of September __, 1999. H.J. HEINZ COMPANY By: Name: Mitchell A. Ring Title: Vice President, Business Development 25 WEIGHT WATCHERS INTERNATIONAL, INC. By: Name: Robert W. Hollweg Title: Vice President, General Counsel 26 In accordance with Section 7.11 of this LLC Agreement, WW Foods, LLC hereby executes this LLC Agreement for the purpose of becoming a party hereto and agreeing to perform its obligations and duties hereunder and becoming entitled to enjoy its rights and benefits hereunder. WW Foods, LLC By: Name: Mark V. Matera Title: Vice President 27 EX-10.8 47 EXHIBIT 10.8 Exhibit 10.8 OPERATING AGREEMENT BETWEEN WEIGHT WATCHERS INTERNATIONAL, INC. AND H.J. HEINZ COMPANY DATED AS OF SEPTEMBER 29, 1999 OPERATING AGREEMENT This Agreement made and entered into this 29th day of September, 1999 by and between WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation with offices located at 175 Crossways Park West, Woodbury, New York 11797 (hereinafter referred to as "Weight Watchers") and H.J. HEINZ COMPANY, a Pennsylvania corporation with offices located at 600 Grant Street, Pittsburgh, Pennsylvania 15219 (hereinafter referred to as "Heinz"). WHEREAS, WW Foods, LLC ("the LLC") has licensed to Heinz and to Weight Watchers the right to use the Food Trademarks (as hereinafter defined) and certain Program Information (as hereinafter defined) in connection with certain food and beverage products; and WHEREAS, Heinz and Weight Watchers therefore have a mutual interest in preserving and enhancing the value of the Food Trademarks and the Program Information, and of their respective licenses thereof, and in facilitating orderly and effective use of the Food Trademarks and the Program Information; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, including the Recapitalization and Stock Purchase Agreement dated the 22nd day of July, 1999 (the "Principal Agreement"), the receipt and adequacy of which is hereby acknowledged, the parties intending to be legally bound agree as follows: ARTICLE 1 GENERAL PROVISIONS SECTION 1.01. Definitions. For the purposes of this Agreement: "Affiliate" of any person shall mean any company controlled by, controlling or under common control (that is, ownership of greater than 50% of the voting securities) with a person after the Effective Date. "Associated Food Trademarks" shall mean all Food & Beverage Trademarks the transfer of which cannot be recorded prior to the closing under the Principal Agreement because of required association under the laws of a particular jurisdiction. "Confidential Information" shall have the meaning set forth in Section 2.12. "Effective Date" shall mean the day and year first above written. 2 "Endorse" or "Endorsement" shall mean using the Weight Watchers Business to endorse, recommend, promote, advertise, sponsor, or imply an association with, expressly or impliedly, for cash or non-cash consideration. "Food & Beverage Trademarks" shall mean all registered trademarks, trademark applications, and common law trademarks covering food and beverage products, falling in or that would fall within any Food Class, owned by Weight Watchers and the Companies as defined in the Principal Agreement as of the Effective Date. "Food Classes" shall mean International Classes 1, 5, 29, 30, 31, 32, and 33 (or comparable classes) in relation to food and beverage products. "Food Trademarks" shall mean the Formation Trademarks and New Food Trademarks. "Formation Trademarks" shall mean all Food & Beverage Trademarks less all Weight Watchers Retained Trademarks, Parent Retained Trademarks, and any "Weight Watchers From Heinz" trademarks. "Heinz License" shall mean the license dated September 29, 1999 between Heinz and the LLC, pursuant to which Heinz licenses the right to use the Food Trademarks and the Program Information on certain food and beverage products, as identified in Schedule __________ hereto and made a part hereof. "Heinz Licensed Products" shall mean the "Licensed Products" as defined in the Heinz License and as set forth in Schedule A attached hereto. "HJH Food Trademarks" shall mean those trademarks used on food and beverage products identified in Schedule B attached hereto and made a part hereof. "Licensed Products" means the Heinz Licensed Products and the Weight Watchers Licensed Products, as the context may require. "LLC" shall mean the WW Foods, LLC. "LLC Agreement" shall mean the Limited Liability Company Agreement of the LLC, having an Effective Date (as defined therein) of September 29, 1999. "Multiclass Trademarks" shall mean all Food & Beverage Trademarks consisting of registrations or applications for registration in multiple registration classes, where such classes include both Food Classes and other classes. 3 "New Food Trademarks" shall mean all new common law trademarks, trademark applications and trademark registrations that may be acquired by or contributed to the LLC from time to time. "Non-Recognition Food Trademarks" shall mean all Food & Beverage Trademarks in jurisdictions where the local law or regulatory authority does not permit, or will not recognize the validity of, ownership of trademarks by a limited liability corporation. "Non-Transferable Food Applications" shall mean all Food & Beverage Trademarks that are pending applications or intent-to-use applications in jurisdictions where the local law or regulatory authority does not permit, or will not recognize the validity of, an assignment or transfer of such applications. "Parent Retained Trademarks" shall mean certain Food & Beverage Trademarks to be transferred by Weight Watchers to Heinz and to be retained by Heinz, as identified in Schedule 8.1 of the Principal Agreement. "Program Information" shall mean the terminology used in connection with the Weight Watchers Program identified in the attached Schedule [C], such information owned by Weight Watchers as is reasonably necessary to develop, manufacture, market and distribute food and beverage products in accordance with such Weight Watchers Program and to calculate Points(R) or other measurements relating thereto, as well as those trademarks owned by Weight Watchers and used to identify such terminology and Weight Watchers Program, as such Weight Watchers Program may exist from time to time ("Program Information Trademarks"). "Program Information Improvements" shall mean such information and know-how as may be developed by Heinz through use of Program Information under the Heinz License that Heinz determines would be useful for Weight Watchers in the development and application of Program Information. "Standards" shall have the meaning set forth in Section 2.04(a) below. "Sublicensee" shall mean any recipient of a license or sublicense for use of the Food Trademarks, the Program Information, or the Weight Watchers Retained Food Trademarks as the context may require, and shall include a party's Affiliates, where applicable. "Weight Watchers Business" shall mean the weight control classroom meetings, business and related activities owned or controlled by Weight Watchers or Weight Watchers Affiliates, and conducted under the Weight Watchers name including the Weight Watchers Program, and all promotional activities relating thereto, including without limitation any program materials, Program Information, Weight Watchers meeting rooms, recipes, publications, newsletters, direct mail 4 solicitations, advertising, materials, posters, and other classroom media, public relations programs, and Internet websites. "Weight Watchers Franchisee" shall mean any franchisee of Weight Watchers or its Affiliates using the Weight Watchers name or with respect to the Weight Watchers Business. "Weight Watchers License" shall mean the license dated September 29, 1999 between Weight Watchers and the LLC, pursuant to which Weight Watchers licenses the right to use the Food Trademarks and Program Information Improvements on certain food and beverage products, as identified in Schedule _____ hereto and made a part hereof. "Weight Watchers Licensed Products" shall mean the "Licensed Products" as defined in the Weight Watchers License. "Weight Watchers Non-Food Trademarks" shall mean all trademarks owned, registered, applied for, used or intended to be used by Weight Watchers or the Companies as defined in the Principal Agreement that are not Food Trademarks. "Weight Watchers Program" shall mean current and future eating or lifestyle regimens to facilitate weight loss or weight control employed, designed, marketed or adopted in any part of the world by or on behalf of Weight Watchers or Weight Watchers Affiliates under the Weight Watchers trademark or service mark. "Weight Watchers Retained Trademarks" shall mean all Associated Food Trademarks, Non-Recognition Food Trademarks, Non-Transferable Food Applications, Multiclass Trademarks, and Program Information Trademarks. ARTICLE 2 FOOD TRADEMARKS SECTION 2.01. Non-endorsement. (a) (i) Weight Watchers may Endorse the Licensed Products; provided however, that Weight Watchers shall not and shall cause Weight Watchers Affiliates not to enter into any agreement of any nature or adopt any policy to Endorse any branded food product that competes with a Heinz Licensed Product in any country if Heinz, its Affiliates or Sublicensees are selling or have sold a competing Heinz Licensed Product in that country within the previous year. If Heinz, on behalf of itself, its Affiliates or Sublicensees, intends to commence or recommence sale of a 5 Heinz Licensed Product in a country and wishes to avail itself of this provision with regard to that country, it shall so notify Weight Watchers no later than thirty (30) days before the commencement of bona fide commercial sales of the Heinz Licensed Product in that country. Weight Watchers thereupon shall use its best efforts to cease and to cause Weight Watchers Affiliates to cease to Endorse the branded food product in competition with the Heinz Licensed Product within one year of receipt of such notice or upon expiration of any contractual commitment to a third party concerning that branded food product, whichever is later. It is expressly understood and agreed that accurate, factual references to branded food products other than Heinz Licensed Products made in the ordinary course of the Weight Watchers Business other than for cash or non-cash consideration shall not constitute an Endorsement. (ii) Heinz acknowledges that Weight Watchers cannot control the individual recommendations of Weight Watchers service providers; however, Weight Watchers will not enter into any agreement or adopt any policy to encourage such service providers to engage in conduct that Weight Watchers is unable to engage in pursuant to the terms of this provision. (b) Weight Watchers may sell Licensed Products through the Weight Watchers Business or otherwise but shall not, and shall cause Weight Watchers Affiliates not to, sell any branded food product in any country if Heinz or its Affiliates or Sublicensees is selling a competing Licensed Product in that country. (c) Weight Watchers shall follow the same policies and practices in dealing with Endorsement and sales by a Weight Watchers Franchisee of branded food products that compete with Heinz Licensed Products, that Weight Watchers would apply to dealing with Endorsement and sales by that franchisee of branded food products that compete with Weight Watchers Licensed Products. SECTION 2.02. Quality Control. (a) All use of the Formation Trademarks, Weight Watchers Retained Trademarks and Program Information by Heinz, Weight Watchers, their respective Affiliates and their respective Sublicensees prior to the Effective Date are deemed to comply with the Quality Control Requirements as defined in the LLC Agreement. (b) Heinz and Weight Watchers and their respective Affiliates shall comply with all of the terms and conditions of their respective licenses from the LLC. 6 (c) It is expressly understood and agreed between Heinz and Weight Watchers that the LLC shall have exclusive responsibility for quality control of all Food Trademarks as set forth in Section 2.06 of the LLC Agreement. Heinz represents and warrants that the LLC has been duly formed and is in good standing, that all assignments of Formation Trademarks contemplated by the Principal Agreement and this Agreement from Heinz to the LLC have been duly and properly made in accordance with the terms thereof, and that the representations and warranties made by or on behalf of Heinz and Weight Watchers in Section 3.01 (b) of the LLC Agreement were true and correct when made and are true and correct as of the date hereof. SECTION 2.03. Transitional Issues. (a) On the Effective Date, (i) all existing licenses by Weight Watchers to parties including Heinz or its Affiliates granting rights to manufacture, market, distribute or sell food products under the Food Trademarks (the "Direct Food Trademark Licenses"), including but not limited to those identified in Schedule ______ hereto, shall be assigned by Weight Watchers to Heinz, and Heinz shall assume the obligations of Weight Watchers with respect thereto pursuant to an assignment and assumption agreement in form and substance reasonably satisfactory to Heinz and Weight Watchers, and (ii) Heinz shall retain all existing sublicenses by Heinz or any Heinz Affiliates to third parties granting rights to manufacture, market, distribute or sell food products under the Food Trademarks (the "Heinz Sublicenses"), including but not limited to those identified in Schedule ______ hereto. All subsequent use of the Food Trademarks pursuant to this provision will otherwise be subject to the terms of the Heinz License. Heinz and its Affiliates, as the case may be, may, in their discretion, assign any of the Direct Food Trademark Licenses or the Heinz Sublicenses to any Heinz Affiliate. (b) Heinz shall be entitled to payment in full of all royalties and other amounts payable under the Direct Food Trademark Licenses and the Heinz Sublicenses (or agreements related thereto) for a period of five years from the Effective Date (whether or not such agreements cover Heinz Licensed Products and whether or not such agreements have been transitioned to Weight Watchers). During such five-year period, the ownership of the Direct Food Trademark Licenses and Heinz Sublicenses covering Weight Watchers Licensed Products will be transitioned to Weight Watchers by Heinz or its Affiliates assigning such agreements to Weight Watchers at the end of the five (5) year period or by enabling Weight Watchers to renew such agreements as they expire or become eligible for renewal, whichever is sooner. Heinz shall give Weight Watchers ninety (90) days' notice of the expiration or renewal date of all Direct Food Trademark Licenses and Heinz Sublicenses covering Weight Watchers Licensed Products expiring or having a renewal date during the five year period, and Weight Watchers shall have the option to determine, to the extent permissible 7 under the terms of the agreement with the third party, to renew or not to renew such agreement with regard to Weight Watchers Licensed Products. If any Direct Food Trademark Licenses or Heinz Sublicenses covers both Heinz Licensed Products and Weight Watchers Licensed Products (as of the date of renewal or assignment pursuant to the two immediately preceding sentences), the parties will use their reasonable best efforts to reach agreement with the licensees or sublicensees to separate the products into separate license/sublicense agreements with Weight Watchers (for Weight Watchers Licensed Products) and Heinz and its Affiliates (for Heinz Licensed Products). (c) If Heinz desires to terminate any Direct Food Trademark License or Heinz Sublicense covering Weight Watchers Licensed Products, it will first consult with Weight Watchers, which shall advise, within twenty-one (21) days from the date of notice, whether it desires for Heinz to assign such license or sublicense to Weight Watchers. To the extent that Weight Watchers assumes or renews any of the Direct Food Trademark Licenses or Heinz Sublicenses, Heinz shall assign or license at Heinz' discretion, such intellectual property rights as may be necessary for Weight Watchers to continue to perform under any such agreement with regard to Weight Watchers Licensed Products. (d) In the event that any Direct Food Trademark License or Heinz Sublicense is assigned to Weight Watchers or renewed by or on behalf of Weight Watchers during the five-year transition period, the royalties or other payments received by Weight Watchers from any such license/sublicense will be paid over to Heinz upon receipt without demand until the expiration of the five-year transition period. As between Heinz and Weight Watchers, Heinz shall assume all administrative costs relating to such licenses/sublicenses. In the event that any Direct Food Trademark License or Heinz Sublicense covering Weight Watchers Licensed Products is not assigned to Weight Watchers and has not expired at the end of the five-year transition period, the royalties or other payments received by Heinz from any such license/sublicense will be paid over to Weight Watchers upon receipt without demand thereafter, and Heinz shall assign or license (at Heinz' discretion) such intellectual property rights as may be necessary to perform Licensor's obligations thereunder. As between Heinz and Weight Watchers, Weight Watchers shall assume all administrative costs relating to such licenses/sublicenses. (e) During the five-year transition period, Heinz will pay to Weight Watchers annually a sum of $1.2 million as a custodial fee to hold certain of the Weight Watchers Retained Trademarks for the benefit of the LLC, as identified in Schedule ___________ hereto. Such annual payment shall be payable in quarterly installments of $300,000 payable in arrears. Such trademarks shall consist of the Associated Food Trademarks, the Non-Recognition Food Trademarks, the Non Transferable Food Applications, and those portions of the Multiclass Trademarks in Food Classes (the "Custodial Trademarks"). All use of, and expenses relating to, such Custodial Trademarks shall be governed by the provisions of this 8 Agreement, the LLC Agreement and the terms of the license agreement between Heinz and Weight Watchers attached as Schedule________ hereto. Heinz and Weight Watchers shall take all reasonable steps necessary to transfer all such Custodial Trademarks to the LLC at an appropriate time and in an appropriate manner, consistent with the intent of this Agreement and the purpose of the LLC when permissible to do so under local law. (f) Notwithstanding any other provision of this Agreement, the LLC Agreement, or any license between or among Heinz, Weight Watchers and the LLC, Weight Watchers shall have the right to continue to sell through particular channels of distribution in the Weight Watchers Business conducted in any country all food and beverage products and comparable products sold in such channels of distribution in that country within the preceding year (whether or not such products are Weight Watchers Licensed Products) and to retain all proceeds therefrom. (g) Heinz shall change or cause to be changed the name of any Affiliate using the Weight Watchers name or any derivative thereof that is not Weight Watchers or one of the Companies as defined in the Principal Agreement to a name not using the Weight Watchers name, or any derivative thereof. SECTION 2.04. Compatibility with Weight Watchers Program. (a) Heinz shall, and will cause its Sublicensees to, use the Food Trademarks, Weight Watchers Retained Trademarks and Program Information only on Heinz Licensed Products that have been specially formulated to be compatible with the dietary principles of the Weight Watchers Program (the "Standards"). The Heinz Licensed Products being marketed by Heinz on the Effective Date are deemed to meet the Standards. (b) (i) Heinz shall not be required to change the formulation of any Heinz Licensed Product due solely to changes in the Weight Watchers Program. However, Heinz recognizes that as the Weight Watchers Program changes over time, it is in the interest of both parties that formulations for the food and beverage products bearing the Food Trademarks should be changed in a consistent manner. Heinz will use reasonable efforts to reformulate, if possible, and in a manner and on a timetable reasonably acceptable to Heinz, existing categories of products sold under the Food Trademarks to meet over time the new or evolving dietary principles incorporated into the Weight Watchers Program with a goal of having such products fit the Standards. Heinz will not be mandated to make changes to meet the Weight Watchers Program that materially increase costs, materially degrade palatability or consumer acceptance or eliminate major ingredient types required in the production 9 of Heinz Licensed Products. Other changes shall be implemented on a reasonable timetable consistent with product development and restage cycles. (ii) Weight Watchers shall construe and interpret the Weight Watchers Program in good faith (A) to apply its dietary principles without discriminating between Heinz Licensed Products and Weight Watchers Licensed Products, and (B) to permit, where possible in Weight Watchers' reasonable discretion, those ingredients and processing techniques required to manufacture and market the Heinz Licensed Products on a competitive basis in the marketplace. (c) All new Heinz Licensed Products shall comply with the Standards then in effect; provided, however, that a product that is a reformulation or repackaging of an existing product, or a product that is an extension of an existing product line that is substantially similar to other products in that product line, shall not require approval as a new Heinz Licensed Product. Heinz shall, and shall cause its Affiliates and Sublicensees to, submit to Weight Watchers a minimum of two samples of any proposed new Heinz Licensed Product for the determination of its compatibility with the dietary principles of the Weight Watchers Program. Weight Watchers shall respond to Heinz or its Affiliates or Sublicensees, as the case may be, in writing setting forth in detail any concerns or questions with reasonable specificity. If Weight Watchers fails to respond within twenty-one (21) days of receipt of such samples, such new Heinz Licensed Products shall be deemed to be approved by Weight Watchers. For purposes of this provision, Weight Watchers may object, subject to the terms of Section 2.04(b)(ii) above, to any proposed new Heinz Licensed Product only in the exercise of a reasonable good faith belief that such new Heinz Licensed Product does not conform to the Standards that are in effect at the time of the development of the new Heinz Licensed Product. Heinz shall not sell any new Heinz Licensed Product to which Weight Watchers objects in accordance with this Section 2.04(c) until Weight Watchers agrees that any such objection has been satisfactorily resolved. SECTION 2.05. Changes to Graphic Representation of the Food Trademarks. Heinz recognizes that as the Weight Watchers Program changes its graphic presentation over time, it is in the interest of both parties to continue having similar graphic presentations. Accordingly, Heinz agrees to consult with Weight Watchers and to use its reasonable efforts to develop and implement in a manner and on a timetable reasonably acceptable to Heinz comparable graphic presentations of the Food Trademarks. Heinz shall not be required to change package design, coloration, or other trade dress features of its existing products solely to conform to changes in Weight Watchers' graphic presentation. 10 SECTION 2.06. Third Party Intellectual Property Licenses. Weight Watchers shall exercise reasonable efforts to cause any license granted to Weight Watchers for the use of any trademarks, service marks or other intellectual property from a third party for use on Weight Watchers Licensed Products now or in the future (excluding the license granted to Weight Watchers by the LLC), to be offered to Heinz for use on the Heinz Licensed Products on comparable terms and conditions; provided, however, that Weight Watchers shall have no obligation to incur any substantial out-of-pocket expenses in exercising such efforts but shall offer Heinz an opportunity to pay any additional amount necessary to obtain such rights for Heinz to use. SECTION 2.07. Proprietary Rights. (a) Proprietary Rights of Heinz. (i) Weight Watchers acknowledges and shall not contest Heinz' or Heinz Affiliates' ownership of Program Information Improvements and the HJH Food Trademarks. Weight Watchers agrees that all use of HJH Food Trademarks shall inure to the benefit of Heinz' or Heinz Affiliates' ownership rights in HJH Food Trademarks as appropriate. The parties recognize that the HJH Food Trademarks have been previously used together with the Food Trademarks and Weight Watchers Retained Trademarks (e.g., Smart Ones and Weight Watchers, Heinz and Weight Watchers) on labels, advertising and promotions, and Weight Watchers agrees that Heinz may continue to use the HJH Food Trademarks together with the Food Trademarks and Weight Watchers Retained Trademarks in the countries in which they are in use as of the Effective Date, as specified in the attached Schedule B. Weight Watchers acknowledges that distribution and use may extend beyond these countries because of external circumstances outside of the control of Heinz, such as manufacturing, warehousing, and distribution logistics or sales to multinational accounts. Any other use of the Food Trademarks and Weight Watchers Retained Trademarks with any other trademarks that may be adopted for use on food products from time to time by Heinz or Heinz Affiliates or Sublicensees, in such a manner as to create a material risk of the establishment of a combination mark, shall not be permitted without the permission of Weight Watchers. Heinz shall make no claim of ownership or right in any permitted use of the Food Trademarks and Weight Watchers Retained Trademarks in combination with any 11 other mark, and the parties shall take all steps necessary to cause the cancellation of any existing registration or abandon any pending application relating to any such combination, including but not limited to "Weight Watchers from Heinz," at Heinz' expense. Weight Watchers agrees to the continued use of the appropriate Formation Trademarks (e.g., Main Street Bistro, Sweet Celebrations, Chocolate Treat, etc.) as sub-brands in a subordinate manner to the Weight Watchers name without prior Weight Watchers approval. Heinz, its Affiliates and Sublicensees may continue to use their names and corporate logos as corporate identifiers in a substantially subordinate manner to the Weight Watchers name to identify Heinz, its Affiliates or Sublicensees as the case may be, for the purpose of identifying them as the manufacturer or distributor for Heinz Licensed Products. Subject to Weight Watchers' ownership of Program Information and Weight Watchers Non-Food Trademarks, Weight Watchers acknowledges Heinz' (or Heinz Affiliates' or Heinz Sublicensees in appropriate circumstances) ownership of the specifications, recipes, manufacturing process or other confidential or proprietary information or materials related to Heinz Licensed Products and developed or owned by Heinz and that all such information shall be considered Heinz' (or Heinz Affiliates' in appropriate circumstances) Confidential Information and shall be subject to the provisions of Section 2.12. (b) Proprietary Rights of Weight Watchers. (i) Heinz acknowledges and shall not contest Weight Watchers' or Weight Watchers Affiliates' ownership of Program Information and Weight Watchers Non-Food Trademarks. Heinz agrees that all use of Program Information Trademarks and Weight Watchers Non-Food Trademarks shall inure to the benefit of Weight Watchers' or Weight Watchers Affiliates' ownership rights therein as appropriate. (ii) Heinz acknowledges Weight Watchers' (or Weight Watchers Affiliates' in appropriate circumstances) ownership of the specifications, recipes, manufacturing process or other confidential or proprietary information or materials related to Weight Watchers Licensed Products developed or owned by Weight Watchers and that all such information shall be considered Weight Watchers' (or Weight Watchers Affiliates' in appropriate circumstances) Confidential Information and shall be subject to the provisions of Section 2.14. Additionally, Heinz hereby grants to Weight Watchers a Non-exclusive royalty-free license to use formulations and recipes owned by Heinz and used in the past in Weight Watchers Licensed Products as they are transferred. 12 (iii) Heinz acknowledges and agrees that Weight Watchers shall own and have the exclusive right to use all domain names or other means for providing direct access to a website or dedicated portion of a website using, incorporating, or derived from the Food Trademarks, the Program Information or the Weight Watchers Non-Food Trademarks. Heinz shall not use any Parent Retained Trademark as a domain name or as an identifier for a means of providing access to a website or dedicated portion of a website ("Parent Retained Trademark Website") promoting, advertising or selling Heinz Licensed Products. Heinz and Weight Watchers acknowledge and agree further that (A) access to such Parent Retained Trademark Websites shall only be through a website controlled by Weight Watchers, the primary Heinz website in each of the U.S. and Canada, and the Heinz Frozen Food website; (B) Heinz' websites promoting Licensed Products shall provide access by display of a hyperlink or other means of transfer, to the primary website controlled by Weight Watchers and the primary website controlled by Weight Watchers shall provide access by display of a hyperlink or other means of transfer to the Heinz websites promoting Licensed Products; and (C) websites controlled by Heinz which advertise, promote or sell the Heinz Licensed Products shall not include content substantially similar in nature to the Weight Watchers websites but may include information concerning the nutritional aspects of Heinz Licensed Products, recipes and the like. For the avoidance of doubt, Heinz may promote, advertise and sell Heinz Licensed Products on a website using any Heinz trademark as a domain name or identifier, other than any domain name or identifier using, incorporating, derived from or confusingly similar to the Parent Retained Trademarks, the Food Trademarks, the Program Information or the Weight Watchers Non-Food Trademarks. (c) Limitation on Proprietary Rights. No party shall assert any right or title to or interest in or to any slogan, trade name, symbol, emblem, insignia, design, trade dress, or advertising theme devised by the other party for use in connection with its products or services, except for the rights granted to or received by that party under any agreement between or among them and the LLC. Any new trademark used or intended to be used by any party covering any food or beverage product that is derived from, identical to or confusingly similar to any Food Trademark shall be contributed to the LLC. SECTION 2.08. Preservation of Trademarks; Responses to Third Party Activity. (a) Actions by Weight Watchers with Respect to Trademarks or Service Marks Used in the Weight Watchers Business. If Weight Watchers determines not to renew the registration of any Weight Watchers trademarks or service marks (other than the Food Trademarks) used in the Weight Watchers 13 Business, Weight Watchers will notify Heinz at least one hundred and twenty (120) days prior to such renewal, except for intention to use applications, in which case Weight Watchers will provide sixty (60) days' written notice of use requirements. If Heinz thereafter requests, Weight Watchers will renew the registration at Heinz's sole expense. (b) Mutual Cooperation. The parties agree to cooperate with each other and with the LLC in protecting and defending the Food Trademarks and the Program Information in a manner consistent with the terms and conditions of this Agreement, and Weight Watchers and Heinz agree to comply with the terms and conditions of any license agreement between or among them and the LLC. The parties will periodically (no less than once per year or otherwise upon reasonable written request) furnish the LLC and each other with samples of all labels, advertising, promotional and marketing material showing its use of the Food Trademarks for the purpose of supporting the fame, notoriety and reputation of the Food Trademarks and for registration, maintenance, and prosecution and renewal purposes. The parties also agree to cooperate to furnish such other information that is required for trademark prosecution and enforcement purposes, including information concerning sales volume and dollar value of Licensed Products bearing the Food Trademarks. (c) Further Documents. The parties agree to execute such documents from time to time as may be necessary to carry out the intent of this Section 2.08. (d) Unauthorized Use of the Food Trademarks. Each party agrees to promptly notify the other and the LLC in writing of any unauthorized use of the Food Trademarks or Program Information by a third party promptly after such unauthorized use comes to that party's attention. Either party, at its cost and expense, may bring or cause to be brought or cause the LLC to bring or cause to be brought any prosecution, lawsuit, action, or proceeding for infringement, unauthorized use, or interference with or violation of any such right, to the extent permissible under local law. Each party shall provide the other with such assistance and information and advice as may be reasonably available to it and which may be of assistance to the other in respect of proceedings involving a third party concerning the Food Trademarks, including being joined as a party to such proceedings, executing any and all documents and cooperating as may reasonably be necessary to assist the other party's counsel in the conduct of such defense or prosecution. For purposes of bringing such enforcement actions, the parties agree to take such action or to execute such documents as may be necessary to empower the other party to bring such action on its behalf. Each party will pay its own costs in connection with any action taken in respect to this Section and will pay the reasonable out of pocket costs of the LLC in accordance with the applicable license. The party bringing or defending proceedings against a third party will have the benefit or burden of any settlement with such third party. Rights acquired by operation of law will be assigned to the appropriate party. 14 SECTION 2.09. Dispute Resolution. (a) If either party commits a breach of or is in default under this Agreement, the other party shall provide written notice thereof specifying the nature of the breach or default and identifying the steps required to cure the same. (b) Upon the occurrence of any breach or default under this Agreement, each Party, in addition to any other right provided in this Agreement or otherwise, shall have the right to make application for a temporary, preliminary or permanent injunction and/or specific performance in order to prevent the continuation of such breach or default. Each party waives any requirement that the other party be required to post a bond in connection with any request for an injunction. Each party acknowledges that an injunction or an order of specific performance may be necessary to protect the Food Trademarks and Program Information and the rights of Weight Watchers and Heinz hereunder as the case may be, because the Food Trademarks and Program Information are unique and the success and viability of sales of the Licensed Products and the marketing of the Weight Watchers Business depends upon Weight Watchers and Heinz performance. (c) Notwithstanding Section 2.09(b), it is agreed expressly by the parties to this Agreement that termination is not available as a remedy for any breach or default committed by another party under this Agreement. SECTION 2.10. Insurance. (a) At all times during the term of this Agreement, Weight Watchers and Heinz will maintain adequate professional/product liability insurance to cover claims related to (i) Weight Watchers Business in the case of insurance held by Weight Watchers; (ii) the Heinz Licensed Products in the case of insurance held by Heinz and (iii) the Weight Watchers Licensed Products in the case of insurance held by Weight Watchers. Weight Watchers' insurance policy will name Heinz and its Sublicensees specified by Heinz as additional insureds. Heinz' insurance policy will name Weight Watchers and Weight Watchers Affiliates and Sublicensees specified by Weight Watchers as additional insureds. A copy of each parties' current policy will be available to the other party upon request. Heinz acknowledges that $10,000,000 of coverage is adequate for purposes of this provision. (b) The insurance requirements of the first sentence of Section 2.l0(a) are waived for either party as long as that party has a senior unsecured long-term debt rating of at least A- or its equivalent with at least two of the following rating agencies: (i) Standard and Poor's; (ii) Moody's; (iii) I.B.C.A.; (iv) Duff and Phelps; and (v) Fitch. In the event that the above agencies are no longer available the parties will use rating agencies of equivalent standing. SECTION 2.11. Indemnification. (a) Each party shall indemnify and agrees to defend the other party and the other party's Affiliates and Sublicensees, from 15 any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of the manufacture, packaging, distribution, selling, handling, consumption or marketing of the Licensed Products by the indemnifying party after the Effective Date, except to the extent such claims, liabilities and damages are the result of or caused by the negligence of the indemnified party or its Affiliates or Sublicensees. (b) Weight Watchers shall indemnify and agrees to defend Heinz and its Affiliates and Sublicensees from any and all claims, liabilities and damages (but excluding any incidental or consequential damages, or claims for lost profits) resulting from or arising out of the conduct or operation of Weight Watchers Business or any other use by Weight Watchers or Weight Watchers Affiliates or their respective licensees of the Food Trademarks or the Program Information, after the Effective Date, except to the extent Heinz is required to indemnify and defend Weight Watchers and Weight Watchers Affiliates under Section 2.12(a). (c) Each party seeking indemnification hereunder: (i) shall provide the other party with reasonable notice of any such claim and cooperate with the defense of any such claim, and (ii) agrees that the provisions of this Section 2.11 shall survive any termination of this Agreement for the period of any applicable statute of limitations. SECTION 2.12. Obligations Concerning Confidentiality. The parties acknowledge that they will exchange certain confidential or proprietary business information and know-how (collectively the "Confidential Information"). The receiving party shall not disclose such Confidential Information to any unauthorized third party. Confidential Information of another party may be disclosed internally by the receiving party only to those who have a "need-to-know" such Confidential Information. The receiving party will make no copies of the Confidential Information except upon the written permission of the disclosing party. The obligation of confidentiality set forth herein shall not apply to information which (a) was publicly available at the time of the disclosure to the receiving party; (b) subsequently becomes publicly available through no fault of the receiving party; (c) is rightfully acquired by the receiving party from a third party who is not in breach of a confidential obligation with regard to such information; (d) is independently known by the receiving party whether prior to or during the term of this Agreement; or (e) is disclosed with the written consent of the party who owns the Confidential Information. SECTION 2.13. Costs and Expenses. (a) Except as may be otherwise agreed, each party agrees to be responsible for their respective costs and expenses arising from their entry and continued performance of this Agreement. (b) Except as may be otherwise agreed, each party will pay and discharge any and all expenses, charges, fees and taxes arising out of and 16 incidental to the carrying on of its respective business and will save the other party harmless against any and all claims by third parties for such expenses, charges, fees and taxes (except for any taxes imposed on the income of the other). This provision shall survive any termination of this Agreement for the period of any applicable statute of limitations. SECTION 2.14. Profits and Revenue Sharing; Assignment of Existing Licenses. (a) Heinz hereby agrees to annually pay Weight Watchers an amount equal to the amount that Weight Watchers is obligated to pay to Weight Watchers Franchisees pursuant to agreements in effect on the Effective Date (collectively, the "Sharing Agreements") between Weight Watchers and Weight Watchers franchisees, but only in respect to and to the extent of distributions such franchisees would be entitled to receive under such Sharing Agreements from revenues of Weight Watchers arising from the sale and distribution of food products based on the food licensing agreements between Weight Watchers and Heinz Affiliates identified on Schedule [ ] (the "Food License Agreements") as are in effect immediately prior to the Effective Date. Heinz will have sole responsibility for any obligations under the Sharing Agreements pertaining to Heinz Licensed Products or arising from the Heinz Sublicenses for the period specified in Section 2.03 hereof. Weight Watchers will have sole responsibility for any obligations under the Sharing Agreements pertaining to Weight Watchers Licensed Products or arising from Heinz Sublicenses when transitioned to Weight Watchers as contemplated in Section 2.03. (b) The parties agree that, notwithstanding the calculations required to be made pursuant to the Sharing Agreements, Heinz is not obligated to reimburse Weight Watchers for amounts which otherwise would be paid to (i) franchisees that have been reacquired by Weight Watchers or Weight Watchers Affiliates prior to the Effective Date, and (ii) those Weight Watchers Franchisees that have assigned their rights under Sharing Agreements to Weight Watchers or Weight Watchers Affiliates prior to the Effective Date. Heinz acknowledges that the membership statistics of the Weight Watchers Franchisees noted in (i) and (ii) above, among others, will be used in calculating the Weight Watchers Franchisees' payments pursuant to such Sharing Agreements and the amount of the reimbursement required to be paid by Heinz to Weight Watchers hereunder. (c) For purposes of Section 2.14(a) only, the royalty rate payable under the Food License Agreements as of the Effective Date shall be used in determining Weight Watchers Related Business Income and Franchisor's Shared Revenues, as those terms are defined in the Sharing Agreements. Heinz acknowledges that it has read and is familiar with the terms and conditions of the Sharing Agreements and Heinz agrees that the information that it will supply to Weight Watchers for purposes of Weight Watchers computing its obligations under the Sharing Agreements will be true and accurate in all material respects and in conformance with the requirements of the Sharing Agreements so that Weight Watchers Franchisees will continue to receive the benefit of distributions 17 under the Sharing Agreements they would otherwise be entitled to receive notwithstanding the assignment of the Food Licensing Agreements to Heinz pursuant to a license agreement between Heinz and the LLC. Heinz' obligations under Section 2.14(a) shall be limited to the obligations of Weight Watchers to such Weight Watchers Franchisees as such obligations exist as of the Effective Date and as they may be subsequently reduced pursuant to Sections 2.14(b)(i) and (ii), it being understood that Heinz' obligations hereunder shall not be increased in any way as a result of any amendments or modifications to the Sharing Agreements which become effective after the Effective Date. (d) Heinz acknowledges that Weight Watchers is required to make payments under the Sharing Agreements on or before the first day of the fifth calendar month following the end of Weight Watchers Fiscal Year as defined in the Sharing Agreements. Heinz shall provide Weight Watchers with the information concerning its Revenues, as defined in the Food Licensing Agreements, and the reimbursement payments pursuant to this Section 2.14, in sufficient time to enable Weight Watchers to make the required calculations on a timely basis. Heinz shall cooperate, and cause its auditors to cooperate, with Weight Watchers auditors in furnishing Weight Watchers Franchisees with the audited information specified in the Sharing Agreements. Heinz agrees to pay Weight Watchers its obligations hereunder no later than ten (10) days prior to the date Weight Watchers is obligated to make payment to Weight Watchers Franchisees or ten (10) days after being advised by Weight Watchers of the amount of such obligation, whichever is later. SECTION 2.15. Term. This Agreement shall take effect as of the Effective Date and shall continue for an initial term of twenty-five (25) years at which time this Agreement will automatically renew for consecutive terms of twenty-five (25) years each, unless terminated pursuant to Section 2.16. SECTION 2.16. Termination. (a) Notwithstanding anything herein to the contrary, either party shall have the right to terminate this Agreement to be effective upon 365 days written notice to the other party if the other party has ceased all bona fide commercial sale of Licensed Products everywhere in the world for a continuous period in excess of twenty-four (24) months and does not commence bona fide commercial sale of any Licensed Product in any country within such 365 day notice period. (b) Either party has the right to terminate this Agreement upon the written consent of the other party. SECTION 2.17. Assignment. Either party can assign or transfer its rights, but not any partial interest therein, under this Agreement without the consent of 18 the other party to an Affiliate or in the event of a change-in-control of the party or of a sale by the party of all or substantially all of the assets to which the party's use of the Food Trademarks relates, provided that the buyer, assignee or transferee agrees in writing to be bound to all of the terms of this Agreement and that the party to whom this Agreement is transferred will also assume ownership in the transferring party's membership interest in the LLC and its rights and obligations in the LLC Agreement. Except as specified in this provision, no sale, assignment or transfer of all or any portion of a party's interest shall be made without the written consent of the other party, and any purported sale, transfer or assignment made in violation of this provision shall be null and void. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION 2.18. Relationship of Parties. Nothing herein contained shall be deemed to create the relationship of partnership or joint venture between the parties. The parties shall have neither the right to incur any obligation to third parties which shall be binding upon the other nor have any interest in the profits and liabilities of the other arising out of or resulting from the subject matter of this Agreement. SECTION 2.19. Relationship with the LLC. Weight Watchers and Heinz agree that they each shall conduct their respective affairs, and shall cause their affiliates, licensees and franchisees to conduct their respective affairs, in such a manner as to fully honor, recognize, preserve and maintain the LLC as a separate and distinct entity with the sole right, title and interest in and to its property. Without limiting the generality of the foregoing, the parties agree that they and their affiliates, licensees and franchisees: (a) shall maintain their place of business in locations separate from those of the LLC; (b) shall maintain their books and records separately from those of the LLC; (c) shall maintain their assets and funds separately from those of the LLC; (d) shall maintain their respective financial statements such that, to the extent any interest in the LLC or their respective assets is reflected on such financial statements, such financial statements shall disclose, in a footnote or otherwise, the existence of the LLC and its sole and exclusive ownership of its property; 19 (e) shall not hold themselves out to any person as owner of or as having any direct ownership in or as having any direct interest in the property of the LLC and any reference to ownership of such property, whether written or oral, shall disclose the ownership thereof by the LLC; and (f) shall not guarantee or otherwise become a co-obligor on any debts of the LLC. SECTION 2.20. Notices. Unless otherwise specified herein, notices to the parties shall be sent by prepaid certified or registered mail, or by a national overnight courier service, to the parties at the following addresses (or at such other address as shall be specified by like notice) and notice will be deemed to have been received by the other party two days after mailing in the case of certified or registered mail and the day after mailing in the case of notice sent by overnight courier. (A) if to Heinz: H.J. Heinz Company 600 Grant Street Pittsburgh, PA 15230 Attn: President with a copy to the General Counsel (B) If to Weight Watchers: Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Attn: President with a copy to the General Counsel SECTION 2.21. Governing Law. This Agreement is entered into in the State of New York and the validity, construction and effect of this Agreement (and all performance related thereto) shall be governed, enforced and interpreted under the laws of the State of New York relating to contracts entered into and to be fully performed therein. SECTION 2.22. Miscellaneous. (a) Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any person other than Weight Watchers or Heinz any rights or remedies under this Agreement. (b) The failure of either party to insist on compliance with any provision hereof shall not constitute a waiver or modification of such provision or any other provision nor shall resort to a remedy constitute a waiver of the right to resort to another remedy provided for under this Agreement. (c) If any provision hereof is held to be invalid or unenforceable by any court of competent jurisdiction or any other authority vested with jurisdiction, 20 such holding shall not affect the validity or enforceability of any other provision hereto. (d) The section order and headings are for convenience only and shall not be deemed to affect in any way the language, obligations or the provisions to which they refer. (e) This Agreement may be amended or modified only in writing and when executed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WEIGHT WATCHERS INTERNATIONAL, INC. By: ______________________________________________ Name: ____________________________________________ Title: ___________________________________________ H.J. HEINZ COMPANY By: ______________________________________________ Name: ____________________________________________ Title: ___________________________________________ 21 EX-10.9 48 EXHIBIT 10.9 EXHIBIT 10.9 SUBSCRIPTION AGREEMENT Dated as of September 29, 1999 Among WEIGHTWATCHERS.COM, INC., WEIGHT WATCHERS INTERNATIONAL, INC., ARTAL LUXEMBOURG S.A., and H.J. HEINZ COMPANYc SUBSCRIPTION AGREEMENT SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of September 29, 1999, among WEIGHTWATCHERS.COM, INC., a Delaware corporation (the "Company"), WEIGHT WATCHERS INTERNATIONAL, INC. a Virginia corporation ("WWI"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("Artal"), and H.J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz" and, together with WWI and Artal, the "Purchasers"). W I T N E S S E T H : WHEREAS, the Company desires to issue and sell newly issued shares of its common stock, par value $0.01 per share ("Common Stock"), to the Purchasers. WHEREAS, each Purchaser desires to subscribe for the number of shares of Common Stock set forth opposite its name on Schedule I hereto. NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE Section 1.1 Agreement to Purchase and Sell. On and subject to the terms and conditions herein contained, the Company agrees to issue and sell to each Purchaser, and each Purchaser agrees to purchase, on the date hereof, the aggregate number of shares of Common Stock set forth opposite such Purchaser's name on Schedule I hereto. The aggregate purchase price payable by Artal and Heinz for such shares of Common Stock is set forth opposite such Purchaser's name on Schedule I hereto. The shares of Common Stock issuable to WWI are being issued in consideration of the grant by WWI to the Company of an exclusive license with respect to WWI's internet and related assets. ARTICLE II REPRESENTATIONS AND WARRANTIES OF PURCHASERS Section 2.1 Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company as follows: 2 (a) Each Purchaser has been given the opportunity to obtain information and to ask questions and receive answers about such information, the Company and the business and prospects of the Company which such Purchaser deems necessary to evaluate the merits and risks related to such Purchaser's investment in the Common Stock. (b) Each Purchaser further represents and warrants that (i) such Purchaser's financial condition is such that such Purchaser can afford to bear the economic risk of holding the shares of Common Stock for an indefinite period of time and has adequate means for providing for such Purchaser's current needs and personal contingencies, (ii) such Purchaser can afford to suffer a complete loss of his or its investment in the shares of Common Stock, (iii) such Purchaser has evaluated and understands the risks and terms of investing in the Common Stock and (iv) such Purchaser's knowledge and experience in financial and business matters are such that such Purchaser is capable of evaluating the merits and risks of such Purchaser's purchase of the shares of Common Stock as contemplated by this Agreement or, in the alternative, such Purchaser has obtained such professional advice as such Purchaser determined was necessary to enable such Purchaser to evaluate such merits and risks. (c) Each Purchaser is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended. Each Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the relative merits and risks of purchasing the Common Stock. (d) Such Purchaser is purchasing its shares of Common Stock for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. (e) Such Purchaser is a corporation, duly organized, validly existing and in good standing, under the laws of its jurisdiction of organization. (f) The execution, delivery and performance by such Purchaser of this Agreement and the transactions contemplated hereby are within its corporate powers, and have been duly authorized by all necessary action on the part of such Purchaser. This Agreement has been duly executed and delivered by such Purchaser. Assuming due authorization, execution and delivery by the Company and the other Purchasers, this Agreement constitutes a valid and binding agreement of such Purchaser, enforceable against such Purchaser in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement or creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy. (g) The execution, delivery and performance by such Purchaser of this Agreement require no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official except 3 such as have been obtained or except where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not, in the aggregate, reasonably be expected to adversely affect the ability of such Purchaser to perform its obligations hereunder. (h) The execution, delivery and performance of this Agreement by such Purchaser will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws or similar constitutive documents of such Purchaser or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which such Purchaser is a party or by which such Purchaser is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of such Purchaser or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to such Purchaser. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser as follows: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by each of the Purchasers, constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms; and (b) The execution, delivery and performance of this Agreement by the Company will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws or similar constitutive documents of the Company or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which the Company is a party or by which the Company is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of the Company or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to the Company. ARTICLE IV 4 MISCELLANEOUS Section 4.1 Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. Section 4.2 Counterparts. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. Section 4.3 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Purchaser at the address or addresses indicated on the signature pages hereto, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 4.3 to the sending party. Section 4.4 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. Section 4.5 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. Section 4.6 Jurisdiction; Venue; Process. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself and in respect of its property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action. (b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. Section 4.7 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WEIGHTWATCHERS.COM, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: WeightWatchers.com, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. WEIGHT WATCHERS INTERNATIONAL, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. H.J. HEINZ COMPANY By:_______________________________________ Name: Title: Address for Notices: With copies to: H.J. Heinz Company H.J. Heinz Company 600 Grant Street 600 Grant Street Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102 Attn: Treasurer Attn: Senior Vice President and General Counsel ARTAL LUXEMBOURG S.A. By:_______________________________________ Name: Title: Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School L-1661 Luxembourg of Law Luxembourg 357 East Chicago Avenue Facsimile No.: 352-22-42-59-22 Chicago, Illinois 60611 Attn: Managing Director Facsimile No.: 1-733-388-0291 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq. SCHEDULE I Number of Shares Aggregate Purchaser of Common Stock Purchase Price - --------- --------------- --------------- Weight Watchers International, Inc. 47,124 Payment in-kind Artal Luxembourg S.A. 179,424 $94,000. H.J. Heinz Company 11,452 $ 6,000. EX-10.10 49 EXHIBIT 10.10 EXHIBIT 10.10 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 29, 1999, by and among WEIGHTWATCHERS.COM, INC., a Delaware corporation (the "Company"), WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), H.J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz"), and ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("Artal"). RECITALS WHEREAS, pursuant to a Subscription Agreement, dated as of the date hereof (the "Subscription Agreement"), among the Company, WWI, Heinz and Artal, each of WWI, Heinz and Artal has subscribed for shares of common stock of the Company, $0.01 par value per share (the "Common Stock"). WHEREAS, the Company, WWI, Heinz and Artal will enter into a Stockholders' Agreement (the "Stockholders' Agreement") concurrently with the execution hereof. NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, in the Subscription Agreement and in the Stockholders' Agreement, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: Section 1.1 Definitions. Capitalized terms used in this Agreement shall have the meanings set forth below: "Advice" shall have the meaning specified in Section 2.4. "Artal Assignee" means a Person to whom Artal has transferred Artal Registrable Securities and to whom Artal has assigned its rights hereunder with respect to such Artal Registrable Securities, but only to the extent of the terms of the assignment of such rights. "Artal Registrable Securities" means, collectively, (a) the Common Stock acquired by Artal on the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Except for the Artal Registrable Securities transferred to the Future Investors within 60 days of the date hereof, Artal Registrable Securities shall remain Artal Registrable Securities in the hands of any transferee. Any particular Artal Registrable Securities shall cease to be Artal Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a 2 legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding. "Conversion Securities" shall have the meaning specified in Section 3.11. "Demanding Party" shall have the meaning specified in Section 2.1(a). "Demand Notice" shall have the meaning specified in Section 2.1(a). "Demand Registration" shall have the meaning specified in Section 2.1(a). "Demand Registration Statement" shall have the meaning specified in Section 2.1(b). "Effectiveness Date" shall have the meaning specified in Section 2.1(b). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Executive Agreements" shall have the meaning specified in Section 2.9. "Filing Date" shall have the meaning specified in Section 2.1(b). "Future Investor" means any Person who purchases Common Stock from Artal pursuant to a stock purchase agreement which designates such Person to be a Future Investor for purposes of this Agreement and who agrees to become a party to, and agrees to be bound by, the provisions of this Agreement with respect to Future Investors by delivering a joinder agreement, substantially in the form of Exhibit A hereto, to the Company. "Future Investors' Registrable Securities" means, collectively, (a) the Common Stock acquired from Artal by each Future Investor within 60 days of the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Future Investors' Registrable Securities that are transferred in accordance with the provisions of the applicable stockholders' agreement to which such Future Investor and Artal are parties, shall remain Future Investors' Registrable Securities in the hands of any such transferee. Any particular Future Investors' Registrable Securities shall cease to be Future Investors' Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding. 3 "Heinz Registrable Securities" means, collectively, (a) the Common Stock acquired by Heinz on the date hereof and (b) all securities issued with respect to the Common Stock described in clause (a) above by way of a Recapitalization. Heinz Registrable Securities that are transferred in accordance with the provisions of the Stockholders' Agreement shall remain Heinz Registrable Securities in the hands of any such transferee. Any particular Heinz Registrable Securities shall cease to be Heinz Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding. "Holder" means any holder of Registrable Securities. "Incidental Registration" shall have the meaning specified in Section 2.2(a). "Indemnified Party" shall have the meaning specified in Section 2.6(a). "Inspectors" shall have the meaning specified in Section 2.4(n). "Losses" shall have the meaning specified in Section 2.6(a). "NASDAQ" means the National Association of Securities Dealers Automated Quotation System. "Other Holder" shall have the meaning specified in Section 2.2(b). "Other Investors' Registrable Securities" means, collectively, the Heinz Registrable Securities, the WWI Registrable Securities and the Future Investors' Registrable Securities. "Other Registrable Securities" shall have the meaning specified in Section 2.2(b). "Person" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "Proceeding" shall have the meaning specified in Section 2.6(c). "Prospectus" means the prospectus included in the Registration Statement, including any form of prospectus or any preliminary prospectus, as amended or supplemented by any prospectus supplement and by all other amendments or supplements to such prospectus, 4 including all post-effective amendments and all material, if any, incorporated by reference or deemed to be incorporated by reference into such prospectus. "Recapitalization" means any stock split, reverse stock split, dividend or combination, or any recapitalization, reclassification, merger, consolidation, exchange or other similar reorganization. "Registrable Securities" means the Artal Registrable Securities, the Heinz Registrable Securities, , the WWI Registrable Securities, the Future Investors' Registrable Securities and any securities deemed to be Registrable Securities pursuant to Section 2.9 hereof. "Registration Notice" shall have the meaning specified in Section 2.1(b). "Registration Statement" means any registration statement of the Company under which any of the Registrable Securities are included therein pursuant to the provisions of this Agreement, including the prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the SEC under the Securities Act as such rule may be amended from time to time, or any similar rule then in force. "Rule 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Special Counsel" means a single law firm selected by a majority of the Holders of the Registrable Securities being registered pursuant to any Registration Statement. "Underwriter" has the meaning set forth in Section 2(11) of the Securities Act. "WWI Registrable Securities" means, collectively, (a) the Common Stock acquired by WWI on the date hereof, (b) all Common Stock acquired by WWI in the future upon the exercise of warrants granted to WWI by the Company and (c) all securities issued with respect to the Common Stock described in clauses (a) and (b) above by way of a Recapitalization. WWI Registrable Securities that are transferred in accordance with the provisions of the Stockholders' Agreement shall remain WWI Registrable Securities in the hands of any such transferee. Any particular WWI Registrable Securities shall cease to be WWI Registrable Securities when (i) a Registration Statement with respect to such securities shall have been declared effective under the Securities Act and such 5 securities shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such securities are distributed to the public pursuant to Rule 144 (or any successor provisions promulgated under the Securities Act); (iii) such securities shall have been otherwise transferred and new certificates for it not bearing a legend restricting further transfer shall have been delivered by the Company; or (iv) such securities shall have ceased to be outstanding. Section 2.1 Demand Registrations. (a) Demand Registrations. At any time and from time to time, the Company shall, upon receipt of a written request (the "Demand Notice") given by Artal or an Artal Assignee (each a "Demanding Party") to register the Artal Registrable Securities, file a Registration Statement and shall, subject to the provisions of Section 2.1(c), include in the Registration Statement for registration the Registrable Securities requested to be registered by such Demanding Party. A registration effected pursuant to this Section 2.1(a) is referred to herein as a "Demand Registration". (b) Filing and Effectiveness. Each Registration Statement filed in connection with a Demand Registration (the "Demand Registration Statement") shall be on Form S-1 or another available form acceptable to the Demanding Party permitting registration of such securities for resale by the Demanding Party in the manner or manners designated by it (including, without limitation, one or more underwritten offerings). The Company shall file the Demand Registration Statement as promptly as practicable but in any event within 60 days after receiving a Demand Notice (the "Filing Date") and shall use its best efforts to cause the same to be declared effective by the SEC within 120 days (in each case, the "Effectiveness Date") of the date on which the Demanding Party gives the Demand Notice required by Section 2.1(a) hereof with respect to such Demand Registration. Within ten days after receipt of such Demand Notice, the Company shall serve written notice (the "Registration Notice") of such registration request and the intended method of distribution to all other Holders of Registrable Securities and shall, subject to the provisions of Section 2.1(c) hereof, include in such registration all Registrable Securities of the class then being registered with respect to which the Company receives written requests for inclusion therein within fifteen (15) business days after the receipt of the Registration Notice by the applicable Holder. All requests made pursuant to this Section 2.1 will specify the number of Registrable Securities to be registered. The Company hereby agrees to use its best efforts to comply with all necessary provisions of the federal securities laws in order to keep such Registration Statement effective for a period of 180 days from its Effectiveness Date. (c) Priority on Demand Registrations. If the Registrable Securities registered pursuant to a Demand Registration are to be sold in one or more firm commitment underwritten offerings, and the managing Underwriter of such underwritten offering advises the Holders of such securities that, in its opinion, the amount of securities requested to be included in such registration exceeds the number which can be sold in such offering without a reasonable likelihood of adversely affecting the price, timing or distribution of the securities being offered, then the Company shall register (i) first, the 6 maximum number of Registrable Securities and Other Registrable Securities requested to be included in such registration by the Holders and the Other Holders pursuant to any incidental or piggyback registration rights contained in any similar registration rights agreement which in the Underwriter's opinion can be sold, pro rata based on the number of Registrable Securities and Other Registrable Securities requested to be included by such Holders and such Other Holders, until all of such Registrable Securities and Other Registrable Securities have been registered, and (ii) second, the maximum number of securities of the class then being registered requested to be included in such registration by the Company which in the managing Underwriter's opinion can be sold without having such an adverse effect. (d) Shelf Registrations. Upon receipt of a written request by a Demanding Party, the Company shall use its best efforts to file and maintain an effective Registration Statement on Form S-3 at any time the Company is eligible to register securities on such form; provided, however, that the Company shall not be obligated to comply with this Section 2.1(d) at any time that the Board of Directors of the Company determines, in its good faith judgment, that complying with this Section would interfere with a valid need not to disclose confidential information or because it would materially interfere with any financing, acquisition, corporate reorganization or merger or other transaction involving the Company. (e) Other Registrations. The Company shall not effect any registration of its securities (except on Form S-8, S-4 or any successor or similar forms), or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any Holder or Holders of such securities (other than pursuant to and in accordance with this Section 2.1), from the date of a request to register Registrable Securities pursuant to and in accordance with this Section 2.1 until the earlier of (i) 90 days after the date on which all securities covered by such Demand Registration have been sold or (ii) 180 days after the date such Demand Registration has been declared effective by the SEC unless the Company shall have first notified in writing the Holders of the Registrable Securities covered by such Registration Statement of its intention to do so, and the Holders of a majority of the Registrable Securities, Artal or the managing Underwriter, if any, shall have consented thereto in writing; provided, that the restriction contained in this clause shall only be applicable to securities of the Company of the same class as the Registrable Securities which are the subject of any such request. (f) Postponement of Registration. Notwithstanding anything to the contrary contained herein, the Company may postpone for up to ninety (90) days the filing or the effectiveness of a Registration Statement for a registration requested if its Board of Directors reasonably believes the requested registration would have a material adverse effect on, or interfere in any material respect with, any proposal or plan by the Company to engage in any public financing or any material pending corporate development or transaction, including, without limitation, a material acquisition of assets (other than in the ordinary course of business), any tender offer or any merger, consolidation or other similar transaction material to the Company and its subsidiaries taken as a whole. 7 Section 2.2 Incidental Registrations. (a) "Piggy-Back' Registrations". If the Company at any time proposes to register any Common Stock (or any class of securities which were also issued with respect to Common Stock by way of a Recapitalization) under the Securities Act (other than a registration on Form S-8, S-4 or any successor or similar forms) for public offerings for cash, whether or not for its own account, it will each such time give prompt written notice to all Holders of its intention to do so and of such Holders' rights under this Section 2.2 (it being understood that only those Holders of Registrable Securities of the class then being registered shall have any rights under this Section 2.2 with respect to such registration), at least 30 days prior to the anticipated date of the initial filing of the registration statement relating to such registration. Such notice shall offer all such Holders the opportunity to include in such registration statement such number of Registrable Securities of the class then being registered as each such Holder may request. Upon the written request of any such Holder made within 20 days after the receipt of the Company's notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder), the Company shall use its best efforts to effect the registration under the Securities Act of all Registrable Securities of the class then being registered which the Company has been so requested to register by the Holders thereof, to permit the disposition of the Registrable Securities to be so registered, provided that (i) if such registration involves an underwritten offering, all Holders of Registrable Securities requesting to be included in the Company's registration must sell their Registrable Securities to the Underwriters selected by the Company on the same terms and conditions as apply to the Company (except that indemnification obligations of the Holders shall be limited to those obligations set forth in Section 2.6(b)) and (ii) if, at any time after giving written notice of its intention to register any securities pursuant to this Section 2.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give written notice to all Holders of Registrable Securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. A registration effected pursuant to this Section 2.2(a) is referred to herein as an "Incidental Registration". (b) Priority in Incidental Registrations. If a registration pursuant to this Section 2.2 involves an underwritten offering and the managing Underwriter advises the Company that, in its opinion, the number of securities (including all Registrable Securities) which the Company, the Holders and any other Persons propose to include in such registration exceeds the number which can be sold in such offering without a reasonable likelihood of adversely affecting the price, timing or distribution of the securities being offered, the Company will include in such registration (i) first, all the securities the Company initially proposes to sell for its own account if the Company initiates such Incidental Registration or for the account of any security holder pursuant to any contractual requirement to register securities (unless such holder is exercising incidental registration rights subject to a proration provision similar to the provisions set forth in this Section 2.2(b) or demand registration rights subject to a proration provision similar to the provisions applicable to a Demanding Party as set forth in Section 2.1(c) hereof, in which case the provisions of the following clause (ii) shall apply to the securities of such holder), (ii) second, to the extent that the number of securities referred to in clause (i) is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, all Registrable Securities requested to be included in such registration by the Holders pursuant to Section 2.2(a) and all securities of the class then being registered ("Other Registrable Securities") requested to be included by any holder (each, an "Other Holder") of Other Registrable Securities pursuant to any similar registration rights agreement, provided, that if the number of Registrable Securities and Other Registrable Securities so requested to be included in such registration, together with the number of securities to be included in such registration pursuant to clause (i) of this Section, exceeds the number which the Company has been advised can be sold in such offering without 8 having the adverse effect referred to above, the number of such Registrable Securities and Other Registrable Securities requested to be included in such registration by the Holders pursuant to Section 2.2(a) and the Other Holders pursuant to any similar registration rights agreement shall be limited to such extent and shall be allocated pro rata among (A) all Holders requesting such registration pursuant to Section 2.2(a) and (B) all Other Holders requesting such registration pursuant to any similar registration rights agreement on the basis of the relative number of securities requested to be included in such registration, and (iii) third, if the Company does not initiate the Incidental Registration, to the extent the number of securities referred to in clauses (i) and (ii) is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, securities of the class then being registered the Company proposes to sell for its own account up to the number of such securities that, in the opinion of the managing Underwriter, can be sold without having such adverse effect. Section 2.3 Hold-Back Agreements. Each Holder of Registrable Securities agrees, if requested (pursuant to a timely written notice) by the managing Underwriter in an underwritten offering, not to effect any public sale or distribution of any of the issue being registered or a similar security of the Company or any securities convertible or exchangeable or exercisable for such securities including a sale pursuant to Rule 144 or Rule 144A (except as part of such underwritten offering), during the period beginning 10 days prior to, and ending 180 days after, the closing date of each underwritten offering made pursuant to such Registration Statement (or such shorter period as the managing Underwriter may agree), to the extent timely notified in writing by the Company or by the managing Underwriter. Section 2.4 Registration Procedures. In connection with the registration of any Registrable Securities, the Company shall effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible: (a) Prepare and file with the SEC a Registration Statement or Registration Statements on Form S-1 or such other form available for the sale of the Registrable Securities by the Holders thereof in accordance with the intended method of distribution thereof, and use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that before filing any Registration Statement or Prospectus or any amendments or supplements thereto (not including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall afford the Holders of the Registrable Securities covered by such Registration Statement, their Special 9 Counsel and the managing Underwriter, if any, an opportunity to review copies of all such documents proposed to be filed. The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders have a right to review prior to the filing of such document, if the Holders of a majority of the Registrable Securities covered by such Registration Statement, their Special Counsel, or the managing Underwriter, if any, shall reasonably object, in writing, on a timely basis. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the effectiveness period; cause the related Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the selling Holders of Registrable Securities, their Special Counsel and the managing Underwriter, if any, promptly (but in any event within 10 business days), and confirm such notice in writing, (i) when a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, all documents incorporated or deemed to be incorporated by reference and all exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Securities the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 2.4(k) below cease to be true and correct in all material respects, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of such Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light 10 of the circumstances under which they were made, not misleading, and (vi) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. (d) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment. (e) If requested by the managing Underwriter, if any, or the Holders of a majority of the Registrable Securities being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing Underwriter, if any, or such Holders reasonably request to be included therein to comply with applicable law, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement; provided, however, that the Company shall not be required to take any actions under this Section 2.4(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law. (f) Furnish to each selling Holder of Registrable Securities who so requests and to Special Counsel and each managing Underwriter, if any, without charge, one conformed copy of the Registration Statement or Statements and each post-effective amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) Deliver to each selling Holder of Registrable Securities, their Special Counsel, and the Underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the Underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and an amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities, to use its best efforts to register or qualify, and cooperate with the selling Holders of Registrable Securities, the Underwriters, if any, the sales agent and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions within the United States as any selling Holder or the managing Underwriter, if any, reasonably request in writing, provided, that where Registrable Securities are offered other than 11 through an underwritten offering, the Company agrees to cause its counsel to perform "blue sky" investigations and file registrations and qualifications required to be filed pursuant to this Section 2.4(h); use its best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period during which the related Registration Statement is required to be kept effective and use its best efforts to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) take any action that would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject. (i) Cooperate with the selling Holders of Registrable Securities and the managing Underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the managing Underwriter, if any, or Holders may reasonably request at least two business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering, or at least 10 business days prior to any other such sale. (j) Upon the occurrence of any event contemplated by clause (v) or (vi) of Section 2.4(c) above, as promptly as practicable prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) If the offering is to be underwritten, enter into an underwriting agreement in form, scope and substance as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing Underwriter in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, (i) make such representations and warranties to the Underwriters, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to Underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions shall be reasonably satisfactory (in form, scope and substance) to the managing Underwriter), addressed to the Underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the Underwriters; (iii) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the 12 Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the Underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 2.6 hereof (or such other provisions and procedures acceptable to Holders of a majority of the Registrable Securities covered by such Registration Statement and the managing Underwriter or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (l) Use its best efforts to cause the Registrable Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if applicable, if so requested by the Holders of a majority of the Registrable Securities covered by such Registration Statement or the managing Underwriter, if any. (m) Use its best efforts to cause all Registrable Securities covered by such Registration Statement to be (i) listed on each securities exchange on which securities issued by the Company are then listed, or (ii) authorized to be quoted on the NASDAQ or the National Market System of the NASDAQ if the securities so qualify, in each case, if requested by the Holders of a majority of the Registrable Securities covered by such Registration Statement or the managing Underwriter, if any. (n) Make available for inspection by a representative of the Holders of Registrable Securities being sold, any Underwriter participating in any such disposition of Registrable Securities, if any, and any accountant retained by such representative of the Holders or Underwriter or Special Counsel (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information, shall be kept confidential by such Inspector unless (i) disclosure of such information is required by court or administrative order, (ii) disclosure of such information, in the opinion of counsel to such Inspector, is necessary to avoid or correct a misstatement or omission of a material fact in the Registration Statement, Prospectus or any supplement or post-effective amendment thereto or disclosure is otherwise required by law, or (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector; without limiting the foregoing, no such information shall be used by such Inspector as the basis for any market transactions in securities of the Company or its subsidiaries in violation of law. 13 (o) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements satisfying the provisions of Section ll(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to Underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to Underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the Effectiveness Date of a Registration Statement, which statements shall cover said 12-month periods. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing, provided, that such information shall be used only in connection with such registration. The Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information promptly after receiving such request. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (ii), (iv), (v) or (vi) of Section 2.4(c), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 2.4(j), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Company shall give any such notice at any time during the effectiveness period of a Registration Statement for registration of an offering on a continuous basis under Rule 415, the effectiveness period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 2.4(j) or (y) the Advice. Section 2.5 Registration Expenses. (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registration Statement is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the National Association of Securities Dealers, Inc. in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or "blue sky" laws (including, without limitation, fees and disbursements of counsel for the Underwriters or counsel for the Company, in connection with "blue sky" qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as provided in Section 2.4(h), in the case of Registrable Securities)), (ii) printing expenses (including, without limitation, expenses of printing 14 certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing Underwriter, if any, or by the Holders of a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and disbursements of all independent certified public accountants referred to in Section 2.4(k) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Underwriters' fees and expenses (excluding discounts, commissions, or fees of Underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities, but including the fees and expenses of any "qualified independent Underwriter" or other independent appraiser participating in an offering pursuant to Schedule E to the By-laws of the National Association of Securities Dealers, Inc.), (vii) rating agency fees, (viii) Securities Act liability insurance, if the Company so desires such insurance, (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and (xii) the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Registration Statement hereunder, the Holders of the Registrable Securities being registered shall bear the discounts, commissions, or fees of Underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities and the fees and disbursements of Special Counsel or such other counsel chosen by the Holders. Section 2.6 Indemnification, Contribution. (a) Indemnification by the Company. The Company shall indemnify and hold harmless, to the full extent permitted by law, each Holder of Registrable Securities, the officers, directors and agents and employees of each of them, each Person who controls each such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), the officers, directors, agents and employees of each such controlling person and any financial or investment adviser (each, an "Indemnified Party"), from and against any and all losses, claims, damages, liabilities, actions or proceedings (whether commenced or threatened), reasonable costs (including, without limitation, reasonable costs of preparation and reasonable attorneys' fees) and reasonable expenses (including reasonable expenses of investigation) (collectively, "Losses"), as incurred, arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or form of prospectus or in any amendment or supplements thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein (in the case of any Prospectus or form of prospectus or any amendment or supplement thereto or any preliminary prospectus, in light of the circumstances under which they were made) or necessary to make the statements therein not misleading, except to the extent that the same arise out of or are based upon information furnished in writing to the Company by such Indemnified Party or the related Holder of Registrable Securities expressly for use therein or (ii) any violation by the 15 Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration; provided, however, that the Company shall not be liable to any Indemnified Party to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (x) such Indemnified Party or the related Holder of Registrable Securities failed to send or deliver (if it had a duty to do so) a copy of the Prospectus with or prior to the delivery of written confirmation of the sale by such Indemnified Party or the related Holder of Registrable Securities to the Person asserting the claim from which such Losses arise, (y) the Prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, and (z) the Company has complied with its obligations under Section 2.4(c). For purposes of the last proviso to the immediately preceding sentence, the term "Prospectus" shall not be deemed to include the documents incorporated by reference therein. Such indemnity and reimbursement of costs and expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. (b) Indemnification by Holder of Registrable Securities. In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder of Registrable Securities or an authorized officer of such Holder of Registrable Securities shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any Registration Statement or Prospectus and agrees, severally and not jointly, to indemnify, to the full extent permitted by law, the Company and its respective directors, officers, agents and employees each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling persons, from and against all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, or form of prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein (in the case of any Prospectus or form of prospectus or any amendment or supplement thereto or any preliminary prospectus, in light of the circumstances under which they were made) or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement is contained in, or such omission or alleged omission is required to be contained in, any information so furnished in writing by such Holder to the Company expressly for use in such Registration Statement or Prospectus and that such statement or omission was relied upon by the Company in preparation of such Registration Statement, Prospectus or form of prospectus; provided, however, that such Holder of Registrable Securities shall not be liable in any such case to the extent that the Holder has furnished in writing to the Company within a reasonable period of time prior to the filing of any such Registration Statement or Prospectus or amendment or supplement thereto information expressly for use in such Registration Statement or Prospectus or any amendment or supplement thereto which corrected or made not misleading, information previously furnished to the Company, and the Company failed to include such information therein. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party. 16 (c) Conduct of Indemnification Proceedings. If any Person shall be entitled to indemnity hereunder (an "indemnified party"), such indemnified party shall give prompt notice to the party or parties from which such indemnity is sought (the "indemnifying parties") of the commencement of any action, suit, proceeding or investigation or written threat thereof (a "Proceeding") with respect to which such indemnified party seeks indemnification or contribution pursuant hereto; provided, however, that the failure to so notify the indemnifying parties shall not relieve the indemnifying parties from any obligation or liability except to the extent that the indemnifying parties have been materially prejudiced by such failure. The indemnifying parties shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such Proceeding, to assume, at the indemnifying parties' expense, the defense of any such Proceeding with counsel reasonably satisfactory to such indemnified party; provided, however, that an indemnified party or parties (if more than one such indemnified party is named in any Proceeding) shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless: (1) the indemnifying parties agree to pay such fees and expenses; (2) the indemnifying parties fail promptly to assume the defense of such Proceeding or fail to employ counsel reasonably satisfactory to such indemnified party or parties; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such indemnified party or parties and the indemnifying parties or an affiliate of the indemnifying parties or such indemnified parties, and there may be one or more defenses available to such indemnified party or parties that are different from or additional to those available to the indemnifying parties, in which case, if such indemnified party or parties notifies the indemnifying parties in writing that it elects to employ separate counsel at the expense of the indemnifying parties, the indemnifying parties shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying parties, it being understood, however, that, unless there exists a conflict among indemnified parties, the indemnifying parties shall not, in connection with any such Proceeding and any substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such indemnified party or parties. Whether or not such defense is assumed by the indemnifying parties, such indemnifying parties or indemnified party or parties will not be subject to any liability for any settlement made without its or their consent (which consent shall not be unreasonably withheld or delayed). The indemnifying parties shall not consent to entry of any judgment or enter into any settlement which (i) provides for other than monetary damages without the consent of the indemnified party or parties (which consent shall not be unreasonably withheld or delayed) or (ii) that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party or parties of a release, in form and substance satisfactory to the indemnified party or parties, from all liability in respect of such Proceeding for which such indemnified party would be entitled to indemnification hereunder. (d) Contribution. If the indemnification provided for in this Section 2.6 is unavailable to an indemnified party or is insufficient to hold such indemnified party harmless for any Losses in respect of which this Section 2.6 would otherwise apply by its terms, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as 17 is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any Proceeding, to the extent such party would have been indemnified for such expenses if the indemnification provided for in Section 2.6(a) or 2.6(b) was available to such party. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.6(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provision of this Section 2.6(d), an indemnifying party that is a selling Holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such indemnifying party exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Section 2.7 Rules 144 and 144A. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Securities make publicly available other information so long as such information is necessary to permit sales under Rules 144 and 144A), and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A. Upon the request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Section 2.8 Underwritten Registrations. If any of the Registrable Securities covered by any Demand Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Company with the consent of a majority of the Registrable Securities included in such registration. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Person initiating such registration and (b) completes and executes all 18 questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Section 2.9 Other Investors. The Company may enter into employment and related agreements ("Executive Agreements") with other purchasers of Common Stock who are directors and/or employees of the Company or one of its subsidiaries or affiliates, which agreements will incorporate the provisions of this Agreement and give such purchasers all of the rights, preferences and privileges of an original party to this Agreement (other than the Company) pursuant to this Agreement; provided that, pursuant to any such agreement, such purchaser shall expressly agree to be bound by all of the terms, conditions and obligations of this Agreement as if such purchaser were an original party (other than the Company) hereto; and provided further that such purchaser shall not obtain any right to request a Demand Registration pursuant to Section 2.1. All Common Stock (including all securities issued with respect to such Common Stock by way of a Recapitalization) issued or issuable pursuant to Executive Agreements shall be deemed to be Registrable Securities for purposes of this Agreement. Section 3.1 Termination. This Agreement will no longer be binding or of further force or effect as to any Holder as of the date such Holder no longer holds any Registrable Securities. Section 3.2 Remedies. (a) Each Holder shall have all rights and remedies reserved for such Holder pursuant to this Agreement and all rights and remedies which such Holders have been granted at any time under any other agreement or contract and all of the rights which such Holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. Section 3.3 Consent to Amendments. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Company and Artal. Notwithstanding the foregoing, no waiver or amendment which materially adversely affects a party hereto shall be effective with respect to such Person without the prior written consent of such Person. Section 3.4 Successors and Assigns. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure 19 to the benefit of the respective successors and permitted transferees (as specified in the applicable stockholders' agreement) of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries. Section 3.5 Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. Section 3.6 Counterparts. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. Section 3.7 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Holder at the address or addresses indicated on the signature pages hereto, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 3.7 to the sending party. Section 3.8 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. Section 3.9 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. Section 3.10 Jurisdiction; Venue; Process. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably 20 waive any objection that such court is an improper or inconvenient forum for the resolution of such action. (b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. Section 3.11 Merger, Amalgamation or Consolidation of the Company. If the Company is a party to any merger, amalgamation, or consolidation pursuant to which the Registrable Securities are converted into or exchanged for securities or the right to receive securities of any other person ("Conversion Securities"), the issuer of such Conversion Securities shall assume (in a writing delivered to all Holders) all obligations of the Company hereunder. The Company will not effect any merger, amalgamation, or consolidation described in the immediately preceding sentence unless the issuer of the Conversion Securities complies with this Section 3.11. Section 3.12 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WEIGHTWATCHERS.COM, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: WeightWatchers.com, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. WEIGHT WATCHERS INTERNATIONAL, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. 22 H.J. HEINZ COMPANY By:_______________________________________ Name: Title: Address for Notices: With copies to: H.J. Heinz Company H.J. Heinz Company 600 Grant Street 600 Grant Street Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102 Attn: Treasurer Attn: Senior Vice President and General Counsel 23 ARTAL LUXEMBOURG S.A. By:_______________________________________ Name: Title: Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School L-1661 Luxembourg of Law Luxembourg 357 East Chicago Avenue Facsimile No.: 352-22-42-59-22 Chicago, Illinois 60611 Attn: Managing Director Facsimile No.: 1-773-388-0291 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq. EXHIBIT A JOINDER AGREEMENT By execution of this Joinder Agreement, the undersigned agrees to become a party to that certain Registration Rights Agreement, dated as of September 29, 1999 (the "Agreement"), among WeightWatchers.com, Inc., Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company. By execution of this Joinder Agreement, the undersigned shall have all rights, and shall observe all the obligations, applicable to Future Investors (as defined in the Agreement) under the Agreement. Name:_________________________ Address for Notices: With copies to: - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ If an individual, are you presently married or separated? yes _____ no _____ (If yes, you must also have your spouse execute a spousal consent in the form attached hereto.) Signature:___________________ Date:___________________ CONSENT AND AGREEMENT OF SPOUSE I, _________________________________, am the spouse of ____________________, one of the stockholders of WeightWatchers.com, Inc., a Delaware corporation (the "Company"). I acknowledge that my spouse is a party to that certain Registration Rights Agreement, dated as of September 29, 1999, among the Company, Weight Watchers International, Inc., Artal Luxembourg S.A. and the H.J. Heinz Company (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement. Executed this ____ day of __________, 199_. -------------------------------- (Signature of Consenting Spouse) EX-10.11 50 EXHIBIT 10.11 EXHIBIT 10.11 STOCKHOLDERS' AGREEMENT Dated as of September 29, 1999 Among WEIGHTWATCHERS.COM, INC., WEIGHT WATCHERS INTERNATIONAL, INC., ARTAL LUXEMBOURG S.A. and H.J. HEINZ COMPANY TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES..............................................1 1.1 Definitions......................................................1 1.2 Representations and Warranties of the Company....................3 1.3 Representations and Warranties of WWI............................3 1.4 Representations and Warranties of Heinz..........................4 1.5 Representations and Warranties of Artal..........................4 ARTICLE II COVENANTS...................................................................5 2.1 Transfers of Common Stock........................................5 2.2 [Intentionally Omitted]..........................................6 2.3 Tag Along........................................................6 2.4 Drag Along.......................................................8 2.5 Certain Transfers by Artal.......................................9 ARTICLE III REGISTRATION RIGHTS..........................................................9 3.1 Registration Rights...............................................9 ARTICLE IV LEGENDS......................................................................9 4.1 Legend............................................................9 ARTICLE V MISCELLANEOUS...............................................................10 5.1 Termination......................................................10 5.2 Remedies.........................................................10 5.3 Consent to Amendments............................................11 5.4 Successors and Assigns...........................................11 5.5 Severability.....................................................11 5.6 Counterparts.....................................................11 5.7 Notices..........................................................11 5.8 Governing Law....................................................12 5.9 Further Assurances...............................................12 5.10 Jurisdiction; Venue; Process.....................................12 5.11 Mutual Waiver of Jury Trial......................................12 -i- STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of September 29, 1999, among WEIGHTWATCHERS.COM, INC., a Delaware Corporation (the "Company"), WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation ("WWI"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation ("Artal"), and H.J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz" and, together with WWI, the "HW Investors"). W I T N E S S E T H : WHEREAS, pursuant to a Subscription Agreement, dated as of the date hereof (the "Subscription Agreement"), among the Company, WWI, Heinz and Artal, each of WWI, Heinz and Artal has subscribed for shares of common stock of the Company, $0.01 par value per share (the "Common Stock"). NOW, THEREFORE, in connection with the foregoing subscription and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS; REPRESENTATIONS AND WARRANTIES 1.1 Definitions. Capitalized terms used herein shall have the meanings set forth below: "Affiliate" means any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another Person. The term "control" includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Articles of Incorporation" means the Articles of Incorporation of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "By-Laws" means the By-Laws of the Company as in effect on the date hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Closing Date" means September 29, 1999. 2 "Corporate Group" means, with respect to any Person, (i) such Person together with its direct and indirect wholly owned subsidiaries and any entity, directly or indirectly through wholly owned subsidiaries, wholly owning such Person or (ii) if permitted by each of the agreements governing material debt of such Person, such Person together with its Affiliates. "Drag Along Number" shall have the meaning specified in Section 2.4. "Family Group" means, with respect to any individual, such individual's spouse and descendants and such individual's parents, grandparents, aunts, uncles, brothers, sisters and their respective spouses and descendants (in each case, whether natural or adopted) and any trust or similar entity established and maintained solely for the benefit of such individual and/or his spouse, descendants and/or such above-listed relatives and all of the aforesaid of the grantor of a trust that is a stockholder of the Company. "Investor Joinder" means a joinder agreement, substantially in the form of Exhibit 2.1(a) hereto, by which a Person becomes an Investor Stockholder after the date hereof. "Investor Stockholders" means, collectively, WWI, Artal, Heinz and any Person who hereafter becomes an Investor Stockholder pursuant to an Investor Joinder under this Agreement. "Permitted Transferee" shall mean those Persons to whom Transfers are permitted pursuant to clauses (i), (ii) and (iv) of Section 2.1(b). "Person" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "Public Offering" means a public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company, WWI, Artal and Heinz. "Release Date" shall have the meaning specified in Section 2.1. "Sale Notice" shall have the meaning specified in Section 2.3. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Holding Company" shall have the meaning specified in Section 2.3. 3 "Subsidiary" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by a Person either directly or through one or more of its Subsidiaries. "Transfer" shall be construed broadly and shall include any transfer by way of issuance, sale, assignment, hypothecation, disposition, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation. "Transferor Group" shall have the meaning specified in Section 2.4. 1.2 Representations and Warranties of the Company. The Company represents and warrants to each of the Investor Stockholders as follows: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by WWI, Artal and Heinz, constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms; and (b) The execution, delivery and performance by the Company of this Agreement will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the Articles of Incorporation or By-Laws of the Company, (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which the Company is a party or by which the Company is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial condition, results of operations or business of the Company, taken as a whole, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.3 Representations and Warranties of WWI. WWI represents and warrants to the Company and each of the Investor Stockholders as follows: (a) WWI is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by WWI of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of WWI. This Agreement has been duly executed and delivered by WWI and, assuming the due authorization, execution and delivery thereof by the Company, Artal and Heinz, constitutes the valid and legally binding obligation of WWI, enforceable against WWI in accordance with its terms; and 4 (b) The execution, delivery and performance by WWI of this Agreement will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the Articles of Incorporation or By-Laws of WWI (or the corresponding documents of any of its Subsidiaries), (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which WWI or any of its Subsidiaries is a party or by which WWI or any of its Subsidiaries is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial condition, results of operations or business of WWI and its Subsidiaries, taken as a whole, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.4 Representations and Warranties of Heinz. Heinz hereby represents and warrants to the Company and each of the other Investor Stockholders as follows: (a) Heinz is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Heinz of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Heinz. This Agreement has been duly executed and delivered by Heinz and, assuming the due authorization, execution and delivery thereof by Artal, WWI and the Company, constitutes the valid and legally binding obligation of Heinz, enforceable against Heinz in accordance with its terms; and (b) The execution, delivery and performance of this Agreement by Heinz will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the articles of incorporation or by-laws of Heinz or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Heinz is a party or by which Heinz is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Heinz, or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to it. 1.5 Representations and Warranties of Artal. Artal hereby represents and warrants to the Company and each other Investor Stockholder as follows: (a) Artal is a corporation duly organized, validly existing and in good standing under the laws of Luxembourg and has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Artal of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action of Artal. This Agreement has been duly executed and delivered by Artal and, assuming the due authorization, execution and delivery thereof by the Company, WWI and Heinz, constitutes the valid and legally binding obligation of Artal, enforceable against Artal in accordance with its terms; and 5 (b) The execution, delivery and performance of this Agreement by Artal will not, with or without the giving of notice or lapse of time, or both, (i) conflict with the certificate of incorporation or by-laws or similar constitutive documents of Artal or (ii) result in any breach of any terms or provisions of, or constitute a default under, or conflict with any material contract, agreement or instrument to which Artal is a party or by which Artal is bound, except for such breaches, defaults or conflicts which, individually or in the aggregate, would not be likely to have a material adverse effect on the financial position, results of operations or business of Artal or (iii) violate any material provision of law, statute, rule or regulation to which it is subject or any material order, judgment or decree applicable to Artal. ARTICLE II COVENANTS 2.1 Transfers of Common Stock. (a) Except as permitted pursuant to Section 2.1(b) or with the prior written consent of Artal, a HW Investor shall not Transfer any shares of Common Stock until the earlier to occur of (i) the fifth anniversary of the Closing Date and (ii) the date of completion of the initial Public Offering (the "Release Date"). Prior to making any permitted (whether as result of the exceptions set forth in Section 2.1(b) or otherwise) Transfer of shares of Common Stock to any Person at any time prior to the termination of this Agreement (other than a Transfer pursuant to a Public Offering, a Transfer (provided such HW Investor promptly notifies the Company and the other Investor Stockholders of such Transfer and the number of shares of Common Stock Transferred) after the initial Public Offering under Rule 144 under the Securities Act (a "Rule 144 Sale") or a Transfer pursuant to Sections 2.1(b)(iii)), such HW Investor shall obtain an Investor Joinder from such transferee, and such transferee shall, by execution thereof, agree to become and automatically be deemed to be an Investor Stockholder subject to all of the rights and obligations contained in this Agreement applicable to such HW Investor and to have made on the date thereof all representations and warranties made on the date hereof by such HW Investor (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person). Promptly thereafter, such HW Investor shall cause originally executed copies of such Investor Joinder to be delivered to the Company and the other Investor Stockholders and shall notify such Investor Stockholders of the number of shares of Common Stock Transferred. (b) The restriction on Transfer contained in the first sentence of Section 2.1(a) above shall be inapplicable with respect to: (i) any Transfers of Common Stock made by an individual Investor Stockholder to his or her Family Group and, thereafter, among members of such Family Group; (ii) any Transfers of Common Stock by an Investor Stockholder to a member of its Corporate Group and, thereafter, among members of such Corporate Group; provided, 6 however, if such transferee ceases to be a member of such Corporate Group, such transferee shall immediately Transfer such Common Stock to a member of such Investor Stockholder's Corporate Group; (iii) any Transfer of Common Stock pursuant to the terms of Sections 2.3 or 2.4 or the Registration Rights Agreement; and (iv) any Transfers of Common Stock made by an individual Investor Stockholder upon his or her death to his or her estate, provided that the beneficiaries of the estate are Persons specified in clause (i) of this Section 2.1(b); provided, that no such Transfer shall be permitted under this Section 2.1(b) if it would constitute a default or event of default under any agreement governing material debt of the Company; provided, further, that in order to facilitate compliance with federal securities laws and the provisions of this Agreement, the aggregate number of Permitted Transferees under Section 2.1(b) shall not exceed 35 Persons at any time without the consent of Artal, which consent shall not be unreasonably withheld or delayed. (c) Any Transfer made in violation of this Section 2.1 (including, without limitation, a Transfer made without obtaining a necessary Investor Joinder) shall be null and void. The Company shall not permit such Transfer to be recorded on the Company's books and records and shall not otherwise cooperate in consummating such Transfer. (d) No Person shall be permitted to become a party to this Agreement except by executing an Investor Joinder pursuant to the terms set forth in this Section 2.1 or pursuant to the terms set forth in Section 2.5. 2.2 [Intentionally Omitted] 2.3 Tag Along. (a) At least 30 days prior to making any Transfer of any shares of Common Stock held by Artal (other than pursuant to a Public Offering or a Rule 144 Sale), Artal shall deliver a written notice (the "Sale Notice") to the HW Investors, specifying in reasonable detail the number of shares of Common Stock proposed to be transferred, the identity of the prospective transferee(s), the terms and conditions of the Transfer (including without limitation, the price to be paid, terms of payment, form of consideration and other material terms, including Artal's reasonable estimate of the fair market value of any non-cash consideration offered) and all information reasonably required to make the calculations set forth in this Section 2.3(a); provided, however, that the provisions of this Section shall not apply to (i) any Transfer of any shares of Common Stock to any of the employees of the Company (or to the Company for related issuance to such employees) in connection with management equity participation or similar contracts, plans or programs (provided, that such contracts, plans or programs are created in good faith and not for purposes of avoiding the transfer restrictions contained in this Section), (ii) any Transfer of shares of Common Stock made by an individual to his or her Family Group and, thereafter, among members of such Family Group, (iii) any Transfers by Artal to 7 a member of its own Corporate Group and thereafter among members of such Corporate Group, (iv) any Transfers of shares of Common Stock pursuant to a pledge or similar agreement to secure debt of such Person (incurred in good faith and not for purposes of avoiding the rights granted to the HW Investors in this Section 2.3) owing to a bank or other bona fide financial institution, including, without limitation, any such Transfer upon the exercise by such bank or other bona fide financial institution of its rights under such pledge or similar agreement to acquire beneficial or other ownership of the shares of Common Stock pledged thereunder; (v) any Transfer of shares of Common Stock made by an individual upon his or her death to his or her estate; provided, that the beneficiaries of the estate are Persons specified in clause (ii) above or (vi) any Transfer of Common Stock by Artal in a transaction which does not constitute a Public Offering within 12 months of the Closing Date to the extent such Transfer under this clause (vi), together with all other Transfers made pursuant to this clause (vi) during such period, do not exceed 35% of the number of shares of Common Stock that Artal owned on the Closing Date. Each HW Investor may elect to participate in the proposed Transfer by delivering written notice to Artal within 15 days after delivery of the Sale Notice. If any HW Investor elects to participate in such Transfer pursuant to the terms hereof, such HW Investor shall be entitled to sell in the proposed Transfer, at the same price and on the same terms and conditions as Artal, up to a number of shares of Common Stock being Transferred by Artal equal to the product of (i) the number of such shares of Common Stock then beneficially owned by such HW Investor multiplied by, (ii) a percentage calculated by dividing the aggregate number of shares of Common Stock which Artal proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by Artal in the aggregate; provided that the number of shares of Common Stock which such HW Investor is permitted to sell pursuant to this Section 2.3(a) shall not include any shares of Common Stock acquired by such HW Investor in connection with or after the consummation of a Public Offering. If any HW Investor elects to participate in such Transfer, such HW Investor shall be obligated to pay its pro rata portion of the transaction costs associated therewith. If the aggregate number of shares of Common Stock that the HW Investors elect and are permitted under the foregoing provisions to sell in the proposed Transfer is, together with the aggregate number of shares of Common Stock that Artal proposes to so sell and the aggregate number of shares of Common Stock that any other Person elects and is permitted to sell pursuant to any similar agreement, more than the total number of shares of Common Stock that the transferee wishes to purchase, then each of Heinz, WWI and Artal shall be entitled to sell to the transferee that number of shares of Common Stock equal to the number of shares of Common Stock to be so purchased by the transferee from all such selling parties (including any such other Person) multiplied by a fraction, the numerator of which is the number of such shares of Common Stock such selling party elects and is permitted under the foregoing provisions to sell and the denominator of which is the aggregate number of shares of Common Stock all such selling parties elect to sell and are permitted to sell under the foregoing provisions and pursuant to any similar agreement. If and to the extent that the transferee purchases any shares of Common Stock from Artal but does not purchase, upon the same terms and conditions and for the same price, the shares of Common Stock the HW Investors elect and are permitted under the foregoing provisions to sell to the transferee, Artal shall, simultaneously with the sale of its shares of Common Stock, purchase from the HW Investors, at the same price and on the same terms and conditions as are applicable to the shares of Common Stock purchased from Artal, such shares of Common Stock of the HW Investors. If a HW Investor has not delivered written notice to Artal that such HW Investor elects to participate in a proposed Transfer 8 within the 15-day period provided above for the delivering of such notice, then Artal shall have the right, for a period of 45 days after the expiration of such 15-day period, to consummate such proposed Transfer to the proposed transferee named in the related Sales Notice and at the same price and on the same terms and conditions stated in such Sales Notice. If, at the end of such 45-day period, Artal has not consummated such proposed Transfer, the terms of this Section 2.3 shall again be in effect with respect to such proposed Transfer. (b) For purposes of Section 2.3(a), if Artal has Transferred all or part of its shares of Common Stock to one or more of its Subsidiaries or other similar entities controlled by it (a "Securities Holding Company"), a sale or other disposition by Artal (by merger or otherwise) of an equity or beneficial interest in a Securities Holding Company (other than a sale or disposition of the nature set forth in the proviso to the first sentence of Section 2.3(a)) shall be treated as follows: (i) if such sale or other disposition is of 50% or more of the equity or beneficial interest in such Securities Holding Company, then such sale or other disposition shall be deemed to be a Transfer of all such shares of Common Stock directly or indirectly owned or controlled by such Securities Holding Company, and (ii) if such sale or other disposition is of less than 50% of the equity or beneficial interest in such Securities Holding Company, then such sale or other disposition shall be deemed to be Transfer of a percentage of the number of shares of Common Stock directly or indirectly owned or controlled by such Securities Holding Company equal to the percentage of the equity or beneficial interest in such Securities Holding Company sold or disposed of in such transaction. In either such event, if the Securities Holding Company owns assets other than the shares of Common Stock, the consideration paid to the transferring party for the Transfer and allocable to the shares of Common Stock, in the absence of agreement of the parties to this Agreement, shall be determined by an investment banking firm of national reputation selected by mutual agreement of the parties hereto, provided, that such investment banking firm shall not have a material direct or indirect financial interest in or other relationship with any of the parties hereto or their Affiliates. (c) The exercise or nonexercise of the rights of each HW Investor in this Section 2.3 to participate in one or more Transfers by Artal shall not adversely affect such HW Investor's rights to participate in subsequent Transfers by Artal. 2.4 Drag Along. (a) In the case that Artal proposes to make a Transfer of shares of Common Stock (or of a Securities Holding Company) owned by it or its Affiliates (the "Transferor Group") that would trigger the HW Investors' tag along rights pursuant to Section 2.3 (assuming solely for the purpose of this Section 2.4(a) that the exception contained in Section 2.3(a)(vi) shall not apply with respect to the provisions of Section 2.3(a)), Artal may elect, by so specifying in the Sale Notice, to require the HW Investors to, and the HW Investors will, participate in such transaction on the same terms and conditions as the Transferor Group with respect to a number of shares of Common Stock determined as set forth below. Each HW Investor shall be required to sell in the proposed Transfer, at the same price and on the same terms and conditions as the Transferor Group, a number of shares of Common Stock equal to the lesser of (i) the product of (A) the number of shares of Common Stock then 9 beneficially owned by such HW Investor multiplied by, (B) a percentage calculated by dividing the aggregate number of shares of Common Stock which the Transferor Group proposes to sell in the aggregate in such Transfer by the total number of shares of Common Stock then owned by the Transferor Group and (ii) the number of such shares of Common Stock specified by Artal in the relevant Sale Notice (such number being hereinafter referred to as the "Drag Along Number"). (b) In connection with any proposed transaction described in Section 2.4(a) above, each HW Investor agrees (i) to consent to and raise no objections (other than with respect to its rights under this Section 2.4) to, and to take all other actions (including, without limitation, voting, or entering into written consents with respect to, all of its shares of Common Stock in favor of such transaction) necessary or desirable to cause, the consummation of such transaction and (ii) to sell, Transfer and deliver its shares of Common Stock as required by the terms of such transaction. (c) If the Drag Along Number is less than the number of shares of Common Stock a HW Investor may sell in the proposed Transfer pursuant to its rights under Section 2.3, then, notwithstanding the exercise by Artal of their rights under this Section 2.4, such HW Investor may elect to sell such additional shares of Common Stock pursuant to its rights under Section 2.3. 2.5 Certain Transfers by Artal. Artal agrees that it will not effect any Transfer of Common Stock held by it as described in clause (ii), (iii), (iv) or (v) of the proviso in the first sentence of Section 2.3(a), unless such transferee has delivered to the Company, WWI and Heinz an Investor Joinder whereby such transferee shall, by execution thereof, agree to become and shall automatically be deemed to be an Investor Stockholder subject to all of the rights (to the extent of the terms of the assignment of such rights) and all of the obligations contained in this Agreement applicable to Artal and to have made on the date thereof all representations and warranties made on the date hereof by Artal (modified, if necessary, to reflect the nature of such Person as a corporation, partnership, other entity or natural person) . ARTICLE III REGISTRATION RIGHTS 3.1 Registration Rights. Concurrently herewith, the parties shall enter into the Registration Rights Agreement. ARTICLE IV LEGENDS 4.1 Legend. (a) Each certificate or instrument evidencing shares of Common Stock that is held by a HW Investor or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement on or after the date hereof shall bear the following legend on the face thereof: 10 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. (b) Each certificate or instrument evidencing shares of Common Stock, which is issued to a transferee of a HW Investor which is not required to execute an Investor Joinder pursuant to Section 2.1(a) of this Agreement (other than transferees in a Public Offering) on or after the date hereof shall bear the following legend on the face thereof: NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. (c) Upon the sale of any shares of Common Stock pursuant to an effective registration statement under the Securities Act or upon the termination or expiration of this Agreement, the certificates or instruments representing such shares of Common Stock shall be replaced, at the expense of the Company, with certificates or instruments not bearing the legends required by this Section 4.1. (d) Until such time as the certificates or instruments evidencing shares of Common Stock that are held by each HW Investor, or a transferee thereof which is required to execute an Investor Joinder pursuant to Section 2.1(a) hereof, are no longer required to bear either of the legends contained in Sections 4.1(a) and 4.1(b), each HW Investor and each such transferee agrees that it will not Transfer any shares of Common Stock except (i) pursuant to a registration statement under the Securities Act or (ii) pursuant to an exemption from registration thereunder. ARTICLE V MISCELLANEOUS 11 5.1 Termination. As to any particular Investor Stockholder, this Agreement shall no longer be binding or of further force or effect as to such Investor Stockholder, except as noted below, as of the date such Investor Stockholder has Transferred all such Investor Stockholder's interest in the Common Stock; provided, however, that no such termination shall be effective if such Investor Stockholder is in breach of this Agreement. 5.2 Remedies. (a) Each Investor Stockholder shall have all rights and remedies reserved for such Investor Stockholder pursuant to this Agreement, the Company's Articles of Incorporation and By-Laws and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 5.3 Consent to Amendments. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of each of the parties hereto. 5.4 Successors and Assigns. Except as otherwise expressly provided herein, all provisions contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted transferees of the parties hereto whether so expressed or not. This Agreement is not intended to create any third party beneficiaries. 5.5 Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law. The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the extent permitted by law. To the extent there exists any inconsistency between the provisions of this Agreement and the By-Laws of the Company, the provisions of this Agreement shall govern in all instances. 12 5.6 Counterparts. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 5.7 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing or sent by facsimile and shall be deemed to have been given (i) when personally delivered or sent by facsimile (with proof of receipt at the number to which notices are required to be sent), (ii) one business day after being sent by overnight courier (receipt confirmation requested) or (iii) five business days after being mailed by certified or registered mail (return receipt requested and postage prepaid) to the recipient. Such notices, demands and other communications will be sent to the Company and each Investor Stockholder at the address or addresses indicated on the signature pages hereto or on the Investor Joinder (as the case may be), or to such other address or to the attention of such other person as the recipient party has specified by prior written notice under this Section 5.7 to the sending party. 5.8 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 5.9 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 5.10 Jurisdiction; Venue; Process. (a) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly lie and shall be brought in any federal or state court located in the State of New York. By execution and delivery of this Agreement, each party hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby irrevocably waive any objection that such court is an improper or inconvenient forum for the resolution of such action. (b) Artal hereby irrevocably and unconditionally designates and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding related to this Agreement and agrees that service upon such agent shall constitute valid and effective service upon Artal and that failure of such agent to give any notice of such service to Artal shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. 5.11 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO 13 ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WEIGHTWATCHERS.COM, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: WeightWatchers.com, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. WEIGHT WATCHERS INTERNATIONAL, INC. By:_______________________________________ Name: Title: Address for Notices: With copies to: Weight Watchers International, Inc. Simpson Thacher & Bartlett 175 Crossways Park West 425 Lexington Avenue Woodbury, NY 11797 New York, New York 10017 Facsimile No.: 516-390-1795 Facsimile No.: 212-455-2502 Attn: Chief Executive Officer Attn: Robert E. Spatt, Esq. 15 H.J. HEINZ COMPANY By:_______________________________________ Name: Title: Address for Notices: With copies to: H.J. Heinz Company H.J. Heinz Company 600 Grant Street 600 Grant Street Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Facsimile No.: 412-456-6015 Facsimile No.: 412-456-6102 Attn: Treasurer Attn: Senior Vice President and General Counsel 16 ARTAL LUXEMBOURG S.A. By:_______________________________________ Name: Title: Address for Notices: With copies to: Artal Luxembourg S.A. David Van Zandt 105, Grand-Rue Northwestern University School L-1661 Luxembourg of Law Luxembourg 357 East Chicago Avenue Facsimile No.: 352-22-42-59-22 Chicago, Illinois 60611 Attn: Managing Director Facsimile No.: 1-773-388-0291 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Facsimile No.: 1-212-455-2502 Attn: Robert E. Spatt, Esq. EXHIBIT 2.1(a) INVESTOR JOINDER By execution of this Investor Joinder, the undersigned agrees to become a party to that certain Stockholders' Agreement, dated as of September 29, 1999 (the "Agreement"), among WeightWatchers.com, Inc., and certain stockholders of the Company, which stockholders included on such date Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company. By execution of this Investor Joinder, the undersigned shall have all rights, and shall observe all the obligations, applicable to [fill in name of transferee] (except as otherwise set forth in the Agreement), and to have made on the date hereof all representations and warranties made by such Investor Stockholder, modified, if necessary, to reflect the nature of the undersigned as a corporation, partnership, other entity or natural person. Name:_________________________ Address for Notices: With copies to: - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ If an individual, are you presently married or separated? yes _____ no _____ (If yes, you must also have your spouse execute a spousal consent in the form attached hereto.) Signature:___________________ Date:___________________ CONSENT AND AGREEMENT OF SPOUSE I, _________________________________, am the spouse of ____________________, one of the stockholders of WeightWatchers.com, Inc. a Delaware corporation (the "Company"). I acknowledge that my spouse is a party to that certain Stockholders' Agreement, dated as of September 29, 1999, among the Company and certain stockholders of the Company, which stockholders included on such date Weight Watchers International, Inc., Artal Luxembourg S.A. and H.J. Heinz Company (the "Agreement"), and that I have read the Agreement. I consent to, agree to, approve and ratify each and every one of the terms and provisions of the Agreement, and I further agree to provide all notices and information required of me in the time and manner set forth in the Agreement. Executed this ____ day of __________, ____. -------------------------------- (Signature of Consenting Spouse) EX-10.12 51 EXHIBIT 10.12 EXHIBIT 10.12 THE INVUS GROUP, LTD. September 29, 1999 Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797 Dear Sirs: This letter serves to confirm the retention of The Invus Group, Ltd. ("Invus") by Weight Watchers International, Inc. (the "Company") to provide management, consulting and financial services to the Company and to its divisions, subsidiaries and affiliates (collectively, "WW"), as follows: 1. The Company has retained Invus, and Invus hereby agrees to accept such retention, to provide to WW, when and if called upon, certain management, business strategy, consulting and financial services of the type customarily performed by us. The Company agrees to pay us an aggregate annual fee equal to the greater of (i) one million dollars ($1,000,000) and (ii) 1.0% of the Company's EBITDA (as defined in the Company's Offering Circular, dated September 22, 1999), payable in quarterly installments in arrears at the end of each calendar quarter, commencing on December 31, 1999 (the fee for the period from the date hereof until December 31, 1999 being pro rated based on the number of days elapsed from September 29, 1999 through December 31, 1999); provided Invus may elect, at any time or 2 from time to time, to defer the payment to it of such fee and such deferred payment (and any other payments not made when due hereunder) shall accrue interest at a rate of 6% per annum until paid in full. Any such deferred payment shall be payable upon demand of Invus. From time to time after the date hereof, we may notify the Company in writing of a different amount of such annual fee for any particular year or for subsequent years, and, in such event, from and after such notification, such annual fee shall be the annual fee. If any other entity owned by our affiliates on the date hereof shall be combined with the Company after the date hereof, then we agree that we will terminate any requirement for such other entity to pay an annual fee for services of the type referred to in this paragraph 1. 2. We may also invoice the Company for additional investment banking fees in connection with acquisition, divestiture or certain other transactions or in the event that we or any of our affiliates, performs services for WW above and beyond those called for by this agreement. 3. In addition to any fees that may be payable to us under this agreement, the Company also agrees to reimburse us and our affiliates, from time to time upon request, for all reasonable out-of-pocket expenses incurred, including unreimbursed expenses incurred to the date hereof, in connection with this retention, including travel expenses and expenses of our counsel. 3 4. The Company agrees to indemnify and hold us and our affiliates, partners, executives, officers, directors, employees, agents and controlling persons (each such person, including Invus, respectively, being an "Indemnified Party") harmless from and against any and all losses, claims, damages and liabilities (including, without limitation, losses, claims, damages and liabilities arising from or in connection with legal actions brought by or on behalf of the holders or future holders of the outstanding securities of WW or creditors or future creditors of WW), joint, several or otherwise, to which such Indemnified Party may become subject under any applicable federal or state law, or otherwise, related to or arising out of any activity contemplated by this agreement or the retention of us pursuant to, and our or our affiliates' performance of the services contemplated by, this agreement and will reimburse any Indemnified Party for all expenses (including counsel fees and disbursements) upon request as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by the Company and/or WW; provided, however, that the Company will not be liable to an Indemnified Party under the foregoing indemnification provision (and amounts previously paid that are determined not required to be paid by the Company pursuant to the terms of this 4 paragraph shall be repaid promptly) to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified Party. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to WW related to or arising out of the retention of Invus pursuant to, or the performance by affiliates of Invus, of the services contemplated by, this agreement except to the extent that any loss, claim, damage, liability or expense is found in a final, non-appealable judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of Invus. The Company also agrees that, without our prior written consent, the Company and WW will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which an Indemnified Party is an actual or potential party and in respect of which indemnification could be sought under the indemnification provision in the immediately preceding paragraph, unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding. Promptly after receipt by an Indemnified Party of notice of any suit, action, proceeding or investigation with respect to which an Indemnified Party may be entitled to indemnification 5 hereunder, such Indemnified Party will notify the Company in writing of the assertion of such claim or the commencement of such suit, action, proceeding or investigation, but the failure so to notify the Company shall not relieve the Company from any liability which it may have hereunder, except to the extent that such failure has materially prejudiced the Company. If the Company so elects within a reasonable time after receipt of such notice, the Company may participate at its own expense in the defense of such suit, action, proceeding or investigation. Each Indemnified Party may employ separate counsel to represent it or defend it in any such suit, action, proceeding or investigation in which it may become involved or is named as a defendant; provided, however, that the Company will not be required in connection with any such suit, action, proceeding or investigation, or separate but substantially similar actions arising out of the same general allegations or circumstances, to pay the fees and disbursements of more than one separate counsel (other than local counsel) for all Indemnified Parties in any single action or proceeding. Whether or not the Company participates in the defense of any claim, both the Company and Invus shall cooperate in the defense thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearing, trial and appeals, as may be reasonably requested in connection therewith. 6 If the indemnification provided for hereunder is finally judicially determined by a court of competent jurisdiction to be unavailable to an Indemnified Party, or insufficient to hold any Indemnified Party harmless, in respect of any losses, claims, damages or liabilities (other than any losses, claims, damages or liabilities found in a final judgment by a court to have resulted from the willful misconduct, bad faith or gross negligence of Invus), then the Company, on the one hand, in lieu of indemnifying such Indemnified Party, and Invus, on the other hand, will contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received, or sought to be received, by WW, on the one hand, and Invus, solely in its capacity as advisor under this agreement, on the other hand, in connection with the transactions to which such indemnification, contribution or reimbursement is sought, or (ii) if (but only if) the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of WW, on the one hand, and Invus, on the other hand, as well as any other relevant equitable considerations; provided, however, that in no event shall our aggregate contribution hereunder exceed the amount of fees actually received by us, in respect of the advice, opinion or transaction at issue pursuant to this agreement. 7 The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above will be deemed to include any legal or other fees or expenses reasonably incurred in defending any action or claim. The Company and Invus agree, severally and not jointly, that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or by any other method which does not take into account the equitable considerations referred to in this paragraph. The indemnity, contribution and expenses reimbursement obligations the Company has under this paragraph shall be in addition to any liability the Company or WW may have, and notwithstanding any other provision of this letter, shall survive the termination of this agreement. 5. Any advice or opinions provided by Invus may not be disclosed or referred to publicly or to any third party (other than WW's legal, tax, financial or other advisors), except in accordance with our prior written consent. 6. We shall act as independent contractors. The provisions hereof shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns. Nothing in this agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, and, to the extent expressly set forth herein, the Indemnified Parties, any rights or remedies under 8 or by reason of this agreement. Without limiting the generality of the foregoing, the parties acknowledge that nothing in this agreement, expressed or implied, is intended to confer on any present or future holders of any securities of the Company or its subsidiaries or affiliates, or any present or future creditor of the Company or its subsidiaries or affiliates, any rights or remedies under or by reason of this agreement or any performance hereunder. 7. This agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 8. The terms of this agreement are effective as of September 29, 1999. Except as otherwise provided herein, this agreement may be amended only with the consent of the parties hereto. This agreement may be terminated by Invus at any time. 9. Each party hereto represents and warrants that the execution and delivery of this agreement by such party has been duly authorized by all necessary action of such party. 10. If any term or provision of this agreement or the application thereof shall, in any jurisdiction and to any extent, be invalid and unenforceable, such term or provision shall be ineffective, as to such jurisdiction, solely to the extent of such invalidity or unenforceability without rendering invalid or unenforceable any remaining terms or provisions hereof or affecting the validity or enforceability of such term or provision in any other jurisdiction. To the extent permitted by applicable law, the parties 9 hereto waive any provision of law that renders any term or provision of this agreement invalid or unenforceable in any respect. 11. Each of WW and Invus waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of the retention of Invus pursuant to, or the performance by Invus, or their respective affiliates, of the services contemplated by this agreement. 12. It is expressly understood that the foregoing paragraphs 2 through 5, 7, 11 and 12 in their entirety survive any termination of this agreement. 10 If the foregoing sets forth the understanding among us, please so indicate on the enclosed signed copy of this letter in the space provided therefor and returning it to us, whereupon this letter shall constitute a binding agreement among us. Very truly yours, THE INVUS GROUP, LTD. By: ----------------------------------- Title: AGREED AND ACCEPTED WEIGHT WATCHERS INTERNATIONAL, INC. By: -------------------------------- Title: EX-10.13 52 EXHIBIT 10.13 EXHIBIT 10.13 INDUSTRIAL & RESEARCH ASSOCIATES CO. LANDLORD WITH WEIGHT WATCHERS INTERNATIONAL, INC. TENANT AGREEMENT OF LEASE Premises - 175 Crossways Park West Woodbury, New York 11797 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- THIS INDENTURE OF LEASE made the 1st day of August, 1995, by and between INDUSTRIAL & RESEARCH ASSOCIATES CO., a co-partnership, with offices at 7600 Jericho Turnpike, Woodbury, New York 11797, hereinafter referred to as the "LANDLORD" and WEIGHT WATCHERS INTERNATIONAL, INC., with offices at 500 North Broadway, Jericho, New York 11753, hereinafter referred to as the "TENANT". W I T N E S S E T H WHEREAS, the LANDLORD is the owner in fee of the premises hereinafter demised NOW, THEREFORE, LANDLORD and TENANT covenant and agree as follows: ARTICLE I DEMISE Section 1.1 The LANDLORD, for and in consideration of the rents, covenants and agreements hereinafter reserved and contained herein, hereby leases and TENANT does hereby take and hire, upon and subject to the covenants and conditions hereinafter expressed which the TENANT agrees to keep and perform, the premises shown on the floor plan annexed hereto as Exhibit "A", consisting of 35,000 square feet, hereinafter called the "Demised Premises" in the building as shown on the Plan annexed hereto and marked Exhibit "B", situated at 175 Crossways Park West, Woodbury, New York 11797, together with the right to use, in common with other tenants of the LANDLORD in this and other buildings, the parking area shown on Exhibit "B" (hereinafter called "parking area") for the parking of automobiles of employees, customers, invitees or licensees of the TENANT and other tenants of the LANDLORD. LANDLORD will provide at least 163 parking spaces for TENANT's use, as depicted on Exhibit "B" attached hereto and made a part hereof. The parking area will be lighted pursuant to applicable and municipal rules and regulations. In addition, if TENANT takes the expansion space (in accordance with Section 33.1) in its entirety, LANDLORD will provide an additional 25 parking spaces for TENANT's use. There shall be no charge to TENANT for parking as noted above. Section 1.2 During the initial term and any renewals thereof, TENANT acknowledges that 12 parking spaces as shown on Exhibit "B-1" shall remain under the control of the LANDLORD along with reasonable access thereto. -2- ARTICLE II TERM Section 2.1 The basic terms of this lease (hereinafter referred to as the "Term") shall commence upon the date the LANDLORD delivers possession of the Demised Premises to TENANT. At the time of the commencement of the lease the LANDLORD shall have received a permanent Certificate of Occupancy for the Building and the air conditioning, heating, plumbing and electrical systems in the Demised Premises shall be in working order and the said Demised Premises shall be free of debris. "Delivery of Possession" shall be defined as, and deemed to occur on, the date on which the latest of all of the following shall be fulfilled: (a) LANDLORD's work shall be substantially completed pursuant to Exhibit "C". All such work shall meet all local building and other applicable codes. The exterior parking areas and basic landscaping shall be substantially completed and all of the Demised Premises shall be clean and free of construction equipment and materials. (b) Actual physical possession of the Demised Premises, with the exception of LANDLORD's contractors, shall have been delivered to TENANT, in a clean condition and all of LANDLORD's work substantially completed, except for normal punchlist items, if any, which punchlist items shall be completed within thirty (30) days thereafter, free of all leases (other than this Lease) and occupants and free and clear of any liens and encumbrances, except those of -3- record which do not affect TENANT's use of the Demised Premises as contemplated herein. (c) If requested by the Town of Oyster Bay, both the LANDLORD and the TENANT shall file their respective plans with the Building Department. TENANT's opening of the Demised Premises for business, whether prior or subsequent to Delivery of Possession, shall not relieve LANDLORD of its obligation of providing any certificates and approvals required hereunder. Section 2.2 The term of this lease shall be for ten (10) years and two (2) months. The term "lease year" as used herein or "year" as used herein, shall mean a twelve (12) month period. The first lease year shall commence on the date of the term hereof, but if such date of commencement shall be a date other than the first day of a month, the first lease year shall commence on the first day of the month following the month in which the term of the lease commences. Each succeeding lease year during the term hereof shall commence on the anniversary date of the first lease year. Section 2.3 Immediately following the determination of the commencement date of the term of this lease, the LANDLORD and the TENANT, at the request of either party, shall execute an agreement in recordable form, setting forth both the dates of the commencement of the term of this lease and the date of the termination hereof. Section 2.4 The parties expect that the term of this lease will commence on the 1st day of November, 1995, and end on the 31st day of December, 2005. In the event, however, that the LANDLORD is unable to substantially complete the work set forth on Exhibit "C" by reason of strikes, -4- inability to obtain materials, governmental regulations, acts of God or other matters beyond LANDLORD's control then and in that event the provisions of Section "2.1" shall control the commencement of the term hereof. Section 2.5 LANDLORD represents that LANDLORD shall correct and complete any items on a punchlist with reasonable diligence, but in any event within thirty (30) days after the preparation of the punchlist. LANDLORD agrees to repair any latent defects in the Demised Premises of which it receives notice, so long as said notice is received within twelve (12) months of delivery of possession of the Demised Premises to TENANT. All necessary utilities will be stubbed to the Demised Premises at LANDLORD's expense. Section 2.6 TENANT shall not be required to pay for any LANDLORD imposed plan review charges, engineering review charges or other construction-related review charges. -5- ARTICLE III BASIC RENT -- ADDITIONAL RENT Section 3.1 Commencing two (2) months after the lease commencement date, hereafter referred to as "the Rent Commencement Date", the TENANT shall pay to the LANDLORD an Annual Basic Rent to INDUSTRIAL & RESEARCH ASSOCIATES CO. at PO. Box 9020, Hicksville, New York 11802-9020 in equal monthly installments in advance of or on the first day of each month without notice and demand and except as otherwise provided herein, without abatement, deduction or set-off of any amount whatsoever based upon the following schedule: TERM ANNUAL RENT MONTHLY RENT ---- ----------- ------------ 01/01/96 - 10/31/96 $352,810.68 $29,400.89 11/01/96 - 12/31/2005 $730,310.65 $60,859.22 The fractional rent, if any, from the Rent Commencement Date (as above provided) to the date of the first day of the following month shall be paid by the TENANT to the LANDLORD within ten (10) days after the Rent Commencement Date. The LANDLORD acknowledges receipt of $147,004.45 representing the rent for the first five full months for which rent is due hereunder. Section 3.2 As additional rent during each and every year during the term hereof and any renewals the TENANT shall pay to the LANDLORD its proportionate share of any increase in real estate taxes paid for the building within which the Demised Premises form a part, over the Base Tax Year (1995/96 School Tax and the 1996 Town Tax). If there is a tax abatement program in effect at any time during the Base Tax year which reduces the real estate taxes, the Base Tax Year shall be -6- computed as if there were no such abatement. LANDLORD shall furnish TENANT with an invoice for the real estate tax escalation, together with copies of all tax bills upon which such escalation is based, at the close of each tax year. Notwithstanding anything to the contrary contained herein, TENANT and LANDLORD agree that should the building be reassessed due to the capital improvements as contemplated in Exhibit "C", then the Base Year Taxes shall be increased by an amount equal to such final full reassessment and the first increase in taxes, up to $1.00 per square foot, shall be split by the LANDLORD and TENANT on an equal basis. Should the tax increase be greater than $1.00 per square foot, due to the work as contemplated in Exhibit "C", then the LANDLORD agrees to pick up 100% of the increase over said $1.00 per square foot. A. TENANT's proportionate share of any such increase shall be determined by multiplying any such increase by a fraction, the numerator of which shall be the total gross rentable area of the Demised Premises (i.e., 35,000 square feet) and the denominator of which shall be the total gross rentable area of the building of which the Demised Premises form a part (i.e., 40,000 square feet), i.e., 88%. B. TENANT shall similarly pay its proportionate share as determined in sub- paragraph "A" above of any ad valorem assessments, or impositions against the real property of which the Demised Premises form a part and its proportionate share of any taxes which shall be imposed in lieu of any ad valorem real property tax as the same is presently considered, except that TENANT shall not be obligated to pay any portion of any assessment or impositions (whether payable in installments or otherwise) which have become a lien prior to the commencement of the term of this lease. In the event that there shall be any general or special assessments or impositions against the said real property -7- which the TENANT is obligated to pay a proportionate share, the LANDLORD agrees that if the said assessments or impositions may be paid in installments that the LANDLORD will elect to pay the same in the maximum number of installments permitted by law prior to the time interest or penalties shall be payable and the TENANT shall only be responsible to pay its proportionate share of those installments which cover the period of the term of the lease. C. Nothing contained herein shall be construed to include as a tax which shall be the basis of real estate taxes, any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax or capital levy that is or may be imposed upon LANDLORD. In addition, there shall be excluded from the definition of real estate taxes any taxes based on increases in assessed value due to: (i) any sale of the Building; (ii) the creation of a ground or net lease; (iii) any mortgaging or refinancing of the Building; (iv) improvements for other occupants of the Building; (v) increases in the rentable area of the Building or additions to the land (unless same are for the benefit of the TENANT); and (vi) subject to the terms of the first paragraph of this Section 3.2, capital improvements to the building subsequent to the initial installation as contemplated in Exhibit "C", with the exception of any capital improvements made at the request of the TENANT. Section 3.3 In the event that LANDLORD or any major tenant of the building should contest any taxes or assessments levied against the building, the TENANT agrees to cooperate but is not obligated to contribute to any expenses incurred by the LANDLORD in any such proceeding or action. In the event that there shall be any refunds of taxes by reason of any such action or proceeding, the TENANT shall be entitled to receive back its proportionate share of the net refund (after deducting therefrom the cost of the action or proceeding including, without limitation, fees for -8- experts, court costs, attorney's etc.). In no event shall TENANT be entitled to any refund in excess of the amount of taxes paid by the TENANT for the year for which such refund was made. Notwithstanding anything contained herein, tax-related costs deducted from any such refund shall be reasonable and actually paid by LANDLORD to third parties not associated with or under the direct control of LANDLORD or its managing agent. Section 3.4 Rent and Additional Rent shall be payable in lawful money of the United States to the LANDLORD at P.O. Box 9020, Hicksville, New York 11802-9020, or at such other place as the LANDLORD may from time to time designate, in advance, without notice, demand, offset or deduction except as specifically set forth herein. In the event any payment of Basic Rent or Additional Rent shall not be made to LANDLORD within ten days of the due date thereof and in the case of additional rent, within ten (10) days of receipt of written notice, there shall be added to the amount a sum equal to $1,000.00 to help to defray LANDLORD's additional costs for additional bookkeeping and other costs in connection therewith for the first two times of a similar late payment during any year and then, after notice from the LANDLORD, there shall be added to the amount a sum equal to five percent of the unpaid items. Section 3.5 In the event that LANDLORD shall fail to bill TENANT for may additional rent pursuant to this Article within twelve (12) months following the expiration or termination of the term of this Lease, then LANDLORD shall be deemed to have waived its right to collect such additional rent. -9- ARTICLE IV UTILITIES AND SERVICES Section 4.1 Throughout the term of this lease TENANT shall contract with and pay directly to the utility company servicing the Building for the electricity and gas used in and about the Demised Premises as determined by the utility meters which shall be installed at LANDLORD's expense. TENANT shall post with the utility company any deposits associated with said meters. Notwithstanding the above, however, LANDLORD shall sub-meter the electrical consumption for the balance of the space in the building (approximately 5,000 square feet). Upon LANDLORD or other tenant occupying such space, LANDLORD shall reimburse TENANT the sum of $1,000.00 per month for same. At the end of each lease year period, said amount shall be adjusted based on the average cost per kilowatt as determined on the bills the TENANT receives for electrical consumption times the actual consumption used on the sub-meter. If the amount is greater or less than $12,000.00 per year, LANDLORD shall either pay to TENANT or receive a reimbursement from TENANT within thirty (30) days after such adjustment is determined. LANDLORD shall be responsible to TENANT for all consumption registered on said sub-meter for such periods as the balance of the space remains unoccupied. Section 4.2 Throughout the term of this lease, TENANT shall contract with the local water company for all water used or consumed in conjunction with this building. Section 4.3 The LANDLORD covenants to provide and pay for cleaning services by LANDLORD's cleaner as per the Cleaning Specification attached hereto and made a part hereof as Exhibit "D". -10- Section 4.4 TENANT shall use the loading areas designated by LANDLORD for moving and deliveries, and to otherwise abide by the reasonable Rules established by LANDLORD as respect deliveries to or moving into or out of the Demised Premises. Section 4.5 LANDLORD covenants and agrees to exercise all reasonable commercial efforts not to interfere with the conduct of TENANT's business in the Demised Premises and to exercise due diligence in repairing, replacing or restoring any interruption in service or utilities caused by the LANDLORD, its agents, employees contractors. If any utility to the Demised Premises should become unavailable due to the acts or omissions of LANDLORD, its agents, employees or contractors for a period in excess of twenty- four (24) consecutive hours and TENANT, in its reasonable business judgment, elects to close the Demised Premises as a result thereof, all Rental shall abate from the commencement of said unavailability of such utility services until such time as said utility service is restored to the Demised Premises. -11- ARTICLE V LANDLORD'S WORK, REPAIR AND MAINTENANCE Section 5.1 The LANDLORD agrees at its own cost and expense to diligently and promptly complete the work relating to the Demised Premises in accordance with the Work Letter attached hereto, as Exhibit "C", in a first class and professional manner. Provided the lease is executed and the TENANT provides full, final working drawings to the LANDLORD on or before August 1, 1995, then in the event LANDLORD is unable, through no fault of TENANT, to complete the LANDLORD's work in the Demised Premises on or before November 13, 1995, then in such event TENANT shall have the right to terminate this Lease upon thirty (30) days written notice to LANDLORD. If LANDLORD, in LANDLORD's reasonable business judgment, feels that the LANDLORD's work in the Demised Premises shall be substantially completed within thirty (30) days of TENANT's notice to cancel, LANDLORD shall notify TENANT and TENANT's notice to the LANDLORD shall be null and void and of no further force and effect should LANDLORD complete the work within said thirty (30) days. If TENANT does not terminate this Lease as aforesaid, and LANDLORD is unable, through no fault of TENANT, to complete LANDLORD's work in the Demised Premises on or before January 10, 1996, then until such time as LANDLORD delivers possession of the Demised Premises in accordance with the terms of Section 2.1 hereof, LANDLORD will pay to TENANT upon demand the following amounts, hereafter collectively referred to as "Late Delivery Expenses": A) Any amount of rent which TENANT must pay for temporary or alternate premises, or for TENANT's continued occupancy in TENANT's present location; and -12- B) Any additional expenses which TENANT incurs in continuing to occupy its present location or in moving to a temporary location; and C) Any other costs, liabilities or damages, including reasonable attorney's fees, incurred as a result of such delay in the occupancy of the Demised Premises. Notwithstanding anything contained herein to the contrary, LANDLORD's liability for Late Delivery Expenses under this Section 5.1 shall not exceed $250,000.00 per month. Any sums due TENANT as a Late Delivery Expense under this section shall be offset against the next Monthly Basic Rent and Additional Rent coming due in an amount equal to the Late Delivery Expense. All dates as noted in Section 5.1 shall be adjusted accordingly based upon the TENANT's execution and delivery of the lease and delivery of full and final working drawings to the LANDLORD by August 1, 1995. Section 5.2 TENANT may have its workmen commence work in the Demised Premises prior to the substantial completion of LANDLORD's work, provided that such workmen do not in may manner interfere with or impede LANDLORD's workers. In the event that TENANT's workers shall interfere with or impede LANDLORD's workers, then upon notice from LANDLORD, TENANT will immediately remove its workers from the Demised Premises. TENANT's entry into the Demised Premises for the purpose of making TENANT's installations shall not be deemed a waiver of any of the TENANT's rights under the lease, nor shall the same be deemed an acceptance of the work to be done by the LANDLORD hereunder. Section 5.3 The TENANT covenants throughout the term of this lease, at the TENANT's sole cost and expense to take good care of the interior of the Demised Premises and keep -13- the same in good order and condition and to promptly and diligently make all non-structural repairs therein except as provided in Section "5.4" hereof. Section 5.4 The LANDLORD covenants throughout the term of this lease, at the LANDLORD's sole cost and expense, to promptly and diligently make all structural repairs to the building in which the Demised Premises are located and shall also maintain and keep in good repair and working order the building's sanitary, electrical, heating, air conditioning and other systems servicing or located, in or passing through the Demised Premises, other than (i) To any systems, facilities and equipment installed by the TENANT; and (ii) To any of the non-structural improvements to the interior of the Demised Premises undertaken and completed by the TENANT; and (iii) Any repairs which are necessitated by any act or omission of the TENANT, its agents, servants, employees or invitees, which repairs TENANT shall make at its own cost and expense. In addition, LANDLORD, at its sole cost and expense, shall maintain in good condition and repair in accordance with customary practice of the management of first class office buildings of a similar nature in the locality where the Building is situated the common areas of the project including, but not limited to, exterior maintenance (e.g., landscaping, snow removal, parking lot repairs, sidewalks, curbs and site lighting), roof, foundation, structural supports, sprinkler systems, underground or -14- otherwise concealed plumbing to the point of entry to the Demised Premises, exterior walls (including entrance and vestibules, doors or door frames, windows, window glass and plate glass, installed by LANDLORD, pursuant to Work Letter, Exhibit "C"), exterior painting, unexposed and exterior electrical systems to the point of entry to the Demised Premises, and the sewer lines serving the Demised Premises, and all repairs and replacements necessitated by any present statute, regulation, or directive of any governmental agency, including without limitation the Americans with Disabilities At, except to the extent that any of the foregoing items require repair or maintenance as a result of any act or omission to act of TENANT, its agents or employees or to the extent that any of the foregoing are required because of TENANT's particular use and occupancy of the Demised Premises. Section 5.5 Except as expressly provided otherwise in this lease, there shall be no allowance to the TENANT or diminution of rent and no liability on the part of the LANDLORD by reason of inconvenience, annoyance or injury to business arising from the making of any repairs, alterations, additions or improvements in or to any portion of the building, on the Demised Premises, in the parking area, or in and to the fixtures, appurtenances and equipment thereof. The LANDLORD agrees to do any work to be done by it in such a manner as not to unreasonably interfere with the TENANT's use of the Demised Premises. -15- ARTICLE VI CHANGES AND ALTERATIONS -- SURRENDER OF DEMISED PREMISES Section 6.1 The TENANT shall have the right, at any time and from time to time, during the term of this lease to make such nonstructural changes and alterations to the Demised Premises as the TENANT shall deem necessary or desirable. However, all changes and alterations must be made with the written consent of the LANDLORD which shall not be unreasonably withheld or delayed and, after the Lease Commencement Date, any alterations affecting HVAC and electrical work, including lighting, must be done by the LANDLORD at TENANT's sole cost and expense. Notwithstanding the above, TENANT shall be permitted to make decorative alterations, not to exceed $20,000.00 per lease year, without LANDLORD's consent, but with prior written notice to the LANDLORD. Section 6.2 Except as otherwise provided in Article XXIX hereof, the TENANT agrees not to place any signs on the roof or on or about the inside or outside of the building in which the Demised Premises are situated, except for signs inside of the Demised Premises which may not be seen from the outside. Section 6.3 All permanently affixed improvements and alterations made or installed by or on behalf of the TENANT, shall immediately upon completion of installation thereof be and become the property of the LANDLORD without payment therefor by the LANDLORD. Section 6.4 The TENANT shall, upon the expiration or earlier termination of this lease, surrender to the LANDLORD the Demised Premises, together with all alterations and -16- replacement thereto, in good order and condition, except for reasonable wear and tear or damage by fire and casualty. TENANT covenants and agrees as follows: (i) to remove, at the termination of this Lease, such of TENANT's goods and effects (including, but not limited to, its signs) as are not permanently affixed to the Demised Premises; (ii) to remove such of the alterations and additions made by TENANT as LANDLORD may request; provided, however, that LANDLORD shall not request TENANT to remove any improvements permanently affixed to the Demised Premises; (iii) to repair any damage caused by such removal; and (iv) to peaceably yield up to the Demised Premises and all alterations and additions thereto (except such as LANDLORD has requested TENANT to remove) and all fixtures, furnishings, floor coverings and equipment which are permanently affixed to the Demised Premises, which shall thereupon become the property of LANDLORD, in clean and good order, repair and condition. Any personal property of TENANT not removed within thirty (30) days following such termination shall, at LANDLORD's option, become the property of LANDLORD and shall be disposed of by LANDLORD at TENANT's sole cost and expense. Section 6.5 In connection with any alterations to the Demised Premises done by TENANT including decorating, prior to any work being commenced, TENANT shall supply to LANDLORD: (i) liability insurance from the Contractor doing the work in an amount not less than Three Million Dollars, naming LANDLORD as an additionally named insured and after the initial build-out liability insurance in an amount not less than two million dollars; (ii) evidence that all workers doing work in the Demised Premises are covered by Workmen's Compensation Insurance, (iii) after the initial build-out, an agreement from TENANT's contractor to remove all debris from the premises shown on -17- Exhibit "B" after 6:00 P.M. at the end of each day's work. In the event TENANT's contractor shall fail to remove debris on a daily basis, as hereinabove provided, LANDLORD shall have the option not to clean the affected areas of the Demised Premises until such time as the debris shall be removed as required herein, at which time LANDLORD's cleaning obligations shall resume; (iv) all debris must be disposed of at TENANT's sole cost and expense in TENANT's dumpster. -18- ARTICLE VII COMPLIANCE WITH ORDERS, ORDINANCES, ETC. Section 7.1 The TENANT covenants throughout the term of this lease and any renewals hereof, at the TENANT's sole cost and expense, to comply with all laws and ordinances and the orders and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof, which may be applicable to the TENANT's use or occupancy of the Demised Premises. Section 7.2 The TENANT shall have the right to contest by appropriate legal proceedings, in the name of the TENANT or the LANDLORD or both, but without cost or expense to the LANDLORD, the validity of any law, ordinance, order or requirement of the nature referred to in Section "7.1" hereof. Provided such noncompliance does not subject the LANDLORD to any criminal liability for failure so to comply therewith, the TENANT may postpone compliance therewith until the final determination of any proceedings, provided that all such proceedings shall be prosecuted with all due diligence and dispatch, and if any lien or charge is incurred by reason of noncompliance, the TENANT may nevertheless make the contest aforesaid and delay compliance as aforesaid, provided that the TENANT indemnifies the LANDLORD against any loss or injury by reason of such noncompliance or delay therein. Section 7.3 LANDLORD covenants and agrees that at the time of the commencement of the term of this lease Demised Premises comply with all laws, ordinances and regulations applicable thereto. -19- LANDLORD shall, in the operation of the Building, comply with all applicable laws, ordinances, regulations and requirements of governmental authorities having jurisdiction thereof. In the event any resolution or order is imposed against the Building or the Demised Premises, and same is not the result of TENANT's use or manner of use of the Demised Premises, then in such event LANDLORD shall, with all due diligence, remedy such violation or comply with such order. -20- ARTICLE VIII MECHANIC'S LIENS Section 8.1 The TENANT covenants not to suffer or permit any mechanic's liens to be filed against the fee interest of the LANDLORD nor against TENANT's leasehold interest in the Demised Premises by reason of work, labor, services or materials supplied or claimed to have been supplied to the TENANT or any contractor, subcontractor or any other party or person acting at the request of the TENANT, or anyone holding the Demised Premises or any part thereof through or under the TENANT. TENANT agrees that in the event any mechanic's lien shall be filed against the fee interest of the LANDLORD or against the TENANT's leasehold interest the TENANT shall, within thirty (30) days after receiving notice of the filing thereof, cause the same to be discharged of record by payment, deposit, bond or order of a court of competent jurisdiction or otherwise. If TENANT shall fail to cause such lien to be discharged or bonded within the period aforesaid, then in addition to any other right or remedy, LANDLORD may, but shall not be obligated to, discharge the same by paying the amount claimed to be due, by procuring the discharge of such lien by deposit by bonding proceedings, and in any such event, LANDLORD shall be entitled, if LANDLORD so elects, to compel the prosecution of any action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest, costs and allowances. Any amount so paid by LANDLORD and all reasonable costs and expenses incurred by LANDLORD or the fee owner in connection therewith, including but not limited to premiums on any bonds filed and attorneys' fees, shall constitute Additional Rental payable by TENANT under this lease and shall be paid by TENANT to LANDLORD within ten days of demand therefor. -21- Nothing contained herein shall obligate TENANT to pay, discharge or bond-over any lien created by LANDLORD or any party other than TENANT, its agents, employees or contractors. -22- ARTICLE IX INSPECTION OF DEMISED PREMISES BY LANDLORD Section 9.1 The TENANT agrees to permit the LANDLORD and the authorized representatives of the LANDLORD to enter the Demised Premises at all reasonable times during TENANT's usual business hours for the purpose of (a) inspecting the same, and (b) making any necessary repairs to the Demised Premises. Section 9.2 The LANDLORD is hereby given the right during TENANT's usual business hours to enter the Demised Premises to exhibit the same for the purpose of sale or mortgage and, during the last six (6) months of the initial term or at any time if the TENANT defaults in any of the terms, covenants and conditions of this lease, to exhibit the same to prospective tenants for the purposes of renting. Section 9.3 With regard to Sections 9.1 and 9.2, LANDLORD shall endeavor to give reasonable notice to TENANT of LANDLORD's intention to inspect the premises or to make repairs. Section 9.4 LANDLORD agrees to use reasonable commercial efforts to keep such entries to a minimum and, further, during any such entry, LANDLORD shall use reasonable commercial efforts not to disturb or inconvenience TENANT in the conduct of TENANT's business in the Demised Premises. -23- ARTICLE X RIGHT TO PERFORM COVENANTS Section 10.1 The TENANT covenants and agrees that if the TENANT shall at any time fail to make any payment or perform any other act on its part to be made or performed under this lease, the LANDLORD, after the expiration of any time limitation set forth in this lease (except in cases of emergency) may, but shall not be obligated to, make such payment or perform such other act to the extent the LANDLORD may deem desirable, and in connection therewith to pay expenses and employ counsel. All sums so paid by the LANDLORD and all expenses in connection therewith shall be deemed additional rent hereunder and be payable to the LANDLORD on the first day of the next month and the LANDLORD shall have the same rights and remedies for the nonpayment thereof as in the case of default in the payment of the basic rent reserved hereunder. Notwithstanding anything to the contrary contained in this lease, except for an emergency situation, LANDLORD agrees that LANDLORD shall provide a minimum of five (5) days written notice to the TENANT of LANDLORD's intention of making any payment or performing any act on behalf of the TENANT. -24- ARTICLE XI DAMAGE OR DESTRUCTION Section 11.1 A. If the Demised Premises or any part thereof shall be damaged by fire or other casualty, TENANT shall give immediate notice thereof to LANDLORD and this lease shall continue in full force and effect except as hereinafter set forth. B. If the Demised Premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of LANDLORD to the extent that said damages include those installations originally installed by LANDLORD. C. If the Demised Premises are totally damaged or rendered wholly unusable by fire or other casualty, then the LANDLORD shall have the right to elect not to restore the same as hereinafter provided. D. If the Demised Premises are rendered wholly unusable or (whether or not the Demised Premises are damaged in whole or in part) if the building shall be so damaged that LANDLORD shall decide to demolish it or not to rebuild it, then, in any of such events, LANDLORD may elect to terminate this lease or rebuild by written notice to TENANT given within ninety (90) days after such fire or casualty specifying a date for the expiration of the lease or rebuilding, which date shall not be more than sixty (60) days after the giving of such notice. Upon the date specified in a notice of termination the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and TENANT shall forthwith quit, surrender and vacate the premises without prejudice however, to LANDLORD's rights and remedies against TENANT under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date -25- and any payments of rent made by TENANT which were on account of any period subsequent to such date shall be returned to TENANT. Unless LANDLORD shall serve a termination notice as provided for herein, LANDLORD shall make the repairs and restorations under the conditions of "B" and "C" hereof, with all reasonable expedition subject to delays due to adjustment of insurance claims, labor troubles and causes beyond LANDLORD's control. E. Nothing contained hereinabove shall relieve TENANT from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectable and to the extent permitted by law, LANDLORD and TENANT each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. LANDLORD and TENANT's insurance policies shall contain a clause providing that such a release or waiver shall not invalidate the insurance and also, provided that such policy can be obtained without additional premiums. In the event that there are additional premiums for such waiver of subrogation, the party in whose favor such waiver is intended shall have the option to either pay the additional premium or waive the condition that the other's policy contain the same. TENANT acknowledges that LANDLORD will not carry insurance on TENANT's furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by TENANT and agrees that LANDLORD will not be obligated to repair any damage thereto or replace the same. F. To the extent not expressly prohibited by law, LANDLORD and TENANT each (in either case, the "Indemnitor") agree to hold harmless and indemnify the other and the other's -26- respective agents, shareholders, directors, partners and employees (collectively, the "Indemnitees") from any losses, damages, judgments, claims, expenses, costs and liabilities imposed upon or incurred by or asserted against the Indemnitees, including reasonable attorney's fees and expenses, for death or injury to third parties other than Indemnitees or loss of or damage to property of third parties other than Indemnitees that may arise from or be caused by the negligence or willful misconduct of the Indemnitor. Such third parties shall not be deemed third party beneficiaries of this agreement. G. TENANT hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. Section 11.2 The TENANT shall not knowingly do or permit to be done any act or thing upon the Demised Premise, which will invalidate or be in conflict with fire insurance policies covering the building of which Demised Premises form a part, and fixtures and property therein. The TENANT shall at its expense comply with all rules, orders, regulations or requirements of the New York Board of Fire Underwriters, or any other similar body, which may be applicable to the TENANT's use and occupancy of the Demised Premises, provided that the necessity for such compliance results from the use and occupancy of the Demised Premises by the TENANT, and shall not do, or permit anything to be done, in or upon the Demised Premises or bring or keep anything therein, or use the Demised Premises in a manner which shall increase the rate of fire insurance on the building of which the Demised Premises form a party, or on the property located therein, over that in effect when the lease commenced, unless the TENANT shall reimburse the LANDLORD, as additional rent hereunder, for that part of all insurance premiums thereafter paid by the LANDLORD, which shall have been charged because of such failure or use by the TENANT, and shall make such reimbursement -27- upon the first day of the month following receipt of notice of such outlay by the LANDLORD and evidence of the payment thereof. Section 11.3 Notwithstanding anything contained herein to the contrary, if LANDLORD is unable or unwilling to commence to repair, restore or rebuild the Demised Premises within nine (9) months after the occurrence of any such casualty or substantially complete repairs to the Demised Premises within twelve (12) months after the occurrence of such casualty, TENANT may terminate this lease upon thirty (30) days notice to LANDLORD after the expiration of the applicable time period and upon the expiration of said thirty (30) day notice period, neither party hereto shall have any further obligation to the other with respect to this lease or the tenancy created hereby except for obligations occurring or accruing prior to such termination. Section 11.4 Notwithstanding anything to the contrary contained in this lease, during any period after damage or destruction and until the premises have been restored, the TENANT shall be entitled to an abatement of rent and additional rent for the unusable portion of the Demised Premises, on a square foot basis. Section 11.5 TENANT shall have the option to terminate this lease if the Demised Premises are rendered untenantable by reason of fire or other casualty during the last two (2) years of the term and LANDLORD cannot restore the Demised Premises to operating conditions within thirty (30) days from such occurrence. TENANT shall provide written notice to the LANDLORD of its intention to cancel the lease term. Said notice shall be given no later than thirty (30) days after the occurrence of such fire or other casualty. -28- Section 11.6 In the event that LANDLORD shall enter the Demised Premises under non-emergency situations in order to perform alterations, improvements, and/or repairs thereto, and as a result thereof, TENANT cannot, in the exercise of reasonable business judgment, operate its business and in fact closes the entire Demised Premises to the public, LANDLORD agrees that rent and all other charges payable by TENANT hereunder shall be abated commencing twenty-four (24) hours after the date of such closure and continuing until such time as the condition giving rise to said closure has been corrected, at which time TENANT shall resume the payments required hereunder. -29- ARTICLE XII CONDEMNATION Section 12.1 If the whole of the Demised Premises shall be taken for any public or quasi-public use by any lawful power or authority by exercise of the right of condemnation or eminent domain, or by agreement between LANDLORD and those having the authority to exercise such right (hereinafter called "Taking"), the term of this lease and all rights of TENANT hereunder, except as hereinafter provided, shall cease and expire as of the date of vesting of title as a result of the Taking and the rent or additional rent paid for a period after such date shall be refunded to TENANT upon demand. Section 12.2 In the event of Taking of less than the whole of the Demised Premises, or the whole or part of the parking area, this lease shall cease and expire in respect of the portion of the Demised Premises and/or the parking area taken upon vesting of title as a result of the Taking, and, if the Taking results in the portion of the Demised Premises remaining after the Taking being inadequate, in the judgment of TENANT, for the efficient economical operation of the TENANT's business conducted at such time in the Demised Premises, TENANT may elect to terminate this lease by giving notice to LANDLORD of such election not more than forty-five (45) days after the actual Taking by the condemning authority, stating the date of termination, which date of termination shall be not more than thirty (30) days after the date on which such notice to LANDLORD is given, and upon the date specified in such notice to LANDLORD, this lease and the term hereof shall cease and expire. If TENANT does not elect to terminate this lease aforesaid: -30- (i) The new rent payable under this lease shall be the product of the basic rent payable under this lease multiplied by a fraction, the numerator of which is the net rentable area of the Demised Premises remaining after the Taking, and the denominator of which is the net rentable area of the Demised Premises immediately preceding the Taking, and (ii) The net award for the Taking shall be paid to and first used by LANDLORD, subject to the rights of mortgagee, to restore the portion of the Demised Premises and the building remaining after the Taking to substantially the same condition and tenantability (hereinafter called the "Pre-Taking Condition") as existed immediately preceding the date of the Taking. Section 12.3 In the event of a Taking of less than the whole of the Demised Premises which occurs during the period of two (2) years next preceding the date of expiration of the term of this lease, LANDLORD or TENANT may elect to terminate this lease by giving notice to the other party to this lease of such election, not more than forty-five (45) days after the actual Taking by the condemning authority, stating the date of termination, which date of termination shall be not more than thirty (30) days after the date on which such notice of termination is given, and upon the date specified in such notice, this lease and the term hereof shall cease and expire and all rent and additional rent paid under this lease for a period after such date of termination shall be refunded to TENANT upon demand. On or before such date of termination, TENANT shall vacate the Demised Premises, and any of -31- TENANT's property remaining in the Demised Premises subsequent to such date of termination shall be deemed abandoned by TENANT and shall become the property of LANDLORD. Section 12.4 In the event of a Taking of the Demised Premises or any part thereof, and whether or not this lease is terminated, TENANT shall have no claim against LANDLORD or the condemning authority for the value of the unexpired term of this lease, but: (i) TENANT may interpose and prosecute in any proceedings in respect of the Taking, independent of any claim of LANDLORD, a claim for the reasonable value of TENANT'S fixtures and (ii) A claim for TENANT's moving expenses. Provided TENANT's claim does not impede LANDLORD'S claim against the condemning authority, then: (i) TENANT shall be entitled to receive and retain amounts which may be specifically awarded to TENANT in any such condemnation proceedings due to the taking of its trade fixtures, leasehold improvements, moving expenses and such business loss as TENANT shall separately and specifically establish. (ii) LANDLORD agrees that it shall not discriminate against TENANT in the exercise of its rights to terminate this lease in accordance with the provisions of this section. -32- ARTICLE XIII BANKRUPTCY OR OTHER DEFAULT Section 13.1 A. Events of Bankruptcy. The following shall be Events of Bankruptcy under this lease: 1. TENANT's becoming insolvent, as the term is defined in Title 11 of the United States Code, entitled Bankruptcy, 11 U.S.C. Sec. 101 et seq. (the "Bankruptcy Code") or under the insolvency laws of New York State; 2. The appointment of a Receiver of Custodian for any or all of TENANT's property or assets; 3. The filing of a voluntary petition under the provisions of the Bankruptcy Code or Insolvency Laws; 4. The filing of an involuntary petition against TENANT as the subject debtor under the Bankruptcy Code or Insolvency Laws, which is either not dismissed within sixty days of filing, or results in the issuance of an order for relief against the debtor, whichever is later; or 5. TENANT's making or consenting to an assignment for the benefit of creditors of a common law composition of creditors. A. Landlord's Remedies. 1. Termination of Lease. Upon the occurrence of an Event of Bankruptcy, LANDLORD shall have the right to terminate this lease by giving thirty days prior written notice to TENANT, provided, however, that this Section -33- "13.1(B)(i)" shall have no effect while a case in which TENANT is the subject debtor under the Bankruptcy Code is pending, unless TENANT or its Trustee in Bankruptcy is unable to comply with the provisions of Sections "13.1(B)(v)" and "13.1(B)(vi)" below. If TENANT or its Trustee is unable to comply with Sections "13.1(B)(v)" and "13.1(B)(vi)" below, this lease shall automatically cease and terminate, and TENANT shall be immediately obligated to quit the premises upon the giving of notice pursuant to this Section "13.1(B)(i)". Any other notice to quit, or notice of LANDLORD's intention to re-enter is hereby expressly waived. If LANDLORD elects to terminate this lease, everything contained in this lease on the part of LANDLORD to be done and performed shall cease without prejudice, subject, however, to the right of LANDLORD to recover from TENANT all rent and any other sums accrued up to the time of termination or recovery of possession by LANDLORD, whichever is later. 2. Suit for Possession. Upon termination of this lease pursuant to Section "13.1(B)(i)", LANDLORD may proceed to recover possession under any by virtue of the provisions of the laws of the State of New York, or by such other proceedings, including re-entry and possession, as may be applicable. 3. Reletting of Premises. Upon termination of this lease pursuant to Section "13.1(B)(i)", the premises may be relet by LANDLORD for such rent and upon such terms as are not unreasonable under the circumstances, and if the full rental reserved under this lease (and any of the costs, expenses, or damages indicated below) shall not be realized by LANDLORD, TENANT shall be liable for all damage -34- sustained by LANDLORD, including, without limitation, deficiency in rent, reasonable attorneys' fees, brokerage fees, and expenses of placing the premises in the first class rentable condition. LANDLORD, in putting the premises in good order or preparing the same for re-rental may, at LANDLORD's option, make such alterations, repairs, or replacements in the premises as LANDLORD, in LANDLORD's reasonable judgment, considers advisable and necessary for the purpose of reletting the premises, and the making of such alterations, repairs, or replacements shall not operate or be construed to release TENANT from liability hereunder as aforesaid. LANDLORD shall in no event be liable in any way whatsoever for failure to relet the premises, or in the event that the premises are relet, for failure to collect the rent thereof under such reletting, and in no event shall TENANT be entitled to receive any excess, if any, of such net rent collected over the sums payable by TENANT to LANDLORD hereunder. 4. Monetary Damages. Any damage or loss of rent sustained by LANDLORD as a result of an Event of Bankruptcy may be recovered by LANDLORD, at LANDLORD's option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive relettings, or, in a single proceeding deferred until the expiration of the term of this lease (in which event TENANT hereby agrees that the cause of action shall not be deemed to have accrued until the date of expiration of said term). In the event TENANT becomes the subject debtor in a case under the -35- Bankruptcy Code the provisions of this Section "13.1(B)(iv)" may be limited by the limitations of damage provisions of the Bankruptcy Code. 5. Assumption or Assignment by Trustee. In the event TENANT becomes the subject debtor in a case pending under the Bankruptcy Code, LANDLORD's right to terminate this lease pursuant to this Section "13.1" shall be subject to the rights of the Trustee in Bankruptcy to assume or assign this lease. The Trustee shall not have the right to assume or assign this lease unless the Trustee: (a) promptly cures all defaults under this lease, (b) promptly compensates LANDLORD for monetary damages incurred as a result of such default, and (c) provides adequate assurance of future performance. 6. Adequate Assurance of Future Performance. LANDLORD and TENANT hereby agree in advance that adequate assurance of future performance, as used in Section "13.1(B)(v)" above, shall mean that all of the following minimum criteria must be met: (a) The Trustee must pay to LANDLORD, at the time the next payment of rent is then due under this lease, in addition to such payment of rent, an amount equal to the next month's rent due under this lease, said amount to be held by LANDLORD in escrow until either the Trustee or TENANT defaults in its payment of rent or other obligations under this lease (whereupon LANDLORD shall have the right to draw such escrow funds) or until the expiration of this lease (whereupon the funds shall be returned to the Trustee or TENANT); -36- (b) The TENANT or Trustee must agree to pay to the LANDLORD, at any time the LANDLORD is authorized to and does draw on the funds escrowed pursuant to Section "13.1(B)(vi)(a)" above, the amount necessary to restore such escrow account to the original level required by said provision; (c) TENANT must pay its estimated pro-rata share of the cost of all services provided by LANDLORD (whether directly or through agents or contractors, and whether or not the cost of such service is to be passed through to TENANT) in advance of the performance or provision of such services; (d) The Trustee must agree that TENANT's business shall be conducted in a first class manner, and that no liquidating sales, auctions, or other non-first class business operations shall be conducted on the premises; (e) The Trustee must agree that the use of the premises as stated in this lease will remain unchanged: (f) The Trustee must agree that the assumption or assignment of this lease will not violate or affect the rights of other tenants of the LANDLORD. 7. Failure to Provide Adequate Assurance. In the event TENANT is unable to: (a) cure its defaults; or (b) reimburse LANDLORD for its monetary damages; or (c) pay the rent due under this lease, on time (or within five days of the due date); or, -37- (d) meet the criteria and obligations imposed by Section "13.1(B)(vi)" above; then TENANT agrees in advance that it has not met its burden to provide adequate assurance of future performance, and this lease may be terminated by LANDLORD in accordance with Section "13.1(B)(i)" above. Section 13.2 Default of Tenant A. Events of Default. The following shall be Events of Default under this lease. (i) TENANT's failure to pay any monthly installment of Basic Annual Rent or Additional Rent, the amount of which has been ascertained, within ten days after notice of such failure from LANDLORD. (ii) TENANT's failure to make any other payment required under this lease if such failure shall continue beyond ten days after LANDLORD's notice that the same has not been paid. (iii) TENANT's violation or failure to perform any of the other terms, conditions, covenants or agreements herein made by TENANT if such violation or failure continues for a period of five business days or fifteen business days if same does not affect other tenants of the building or of Nassau Crossways International Plaza, then after LANDLORD's written notice thereof to TENANT, provided that no such notice shall be required if TENANT has received a similar notice within one -38- hundred eighty days of such violation or failure. In the event of any violation or failure to perform a covenant as contemplated herein, and if such covenant cannot be performed within the said five business day or fifteen business day period, whichever the case may be, then and in that event, providing TENANT has promptly commenced to cure such violation and is diligently proceeding with the cure the time within which TENANT may cure the same shall be extended to such reasonable time as may be necessary to cure the same with all due diligence. B. If an Event of Default as hereinabove specified in Section '13.2(A)(i), (ii) or (iii)' shall occur, and shall not be cured within the time period specified in LANDLORD's notice, or as to a default provided for in Section '13.2(A)(iii)' if same shall recur within 180 days of LANDLORD's last notice of same or if TENANT has commenced a cure but fails to diligently proceed with same after five (5) business days or fifteen (15) business days notice, whichever the case may be, from LANDLORD then: (i) LANDLORD may give TENANT a five day notice of its intention to end the term of this lease, and thereupon, at the expiration of said five day period, this lease shall expire as fully and completely as if the day were the date herein originally fixed for the expiration of the term, and TENANT shall then quit and surrender the premises to LANDLORD but TENANT shall continue to remain liable as hereinafter provided; or, (ii) LANDLORD, without prejudice to any other right or remedy of LANDLORD, held hereunder or by operation of law, and notwithstanding any waiver of any breach of a condition or Event of Default hereunder, may, at its option and without further notice, -39- re-enter the Demised Premises or dispossess TENANT and any legal representative or successor of TENANT or other occupant of the premises by summary proceedings or other appropriate suit, action or proceeding or otherwise and remove his, her or its effects and hold the Demised Premises as if this lease had not been made; and TENANT hereby expressly waives the service of notice of intention to re-enter or to institute legal proceedings to that end. Section 13.3 Notwithstanding such default, re-entry, expiration and/or dispossession by summary proceedings or otherwise, as provided in Section '13.2' above, TENANT shall continue liable during the full period which would otherwise have constituted the balance of the term hereof, and shall pay as liquidated damages at the same times as the Basic Annual Rent and Additional Rent and other charges become payable under the terms hereof, a sum equivalent to the Basic Annual Rent and Additional Rent and other charges reserved herein (less only the net proceeds of reletting as hereinafter provided), and LANDLORD may rent the Demised Premises either in the name of LANDLORD or otherwise, reserving the right to rent the Demised Premises for a term or terms which may be less than or exceed the period which would otherwise have been the balance of the term of this lease without releasing the original TENANT from any liability, applying any monies collected, first to the expense of resuming or obtaining possession, next to restoring the premises to a rentable condition, and then to the payment of any brokerage commissions and legal fees in connection with the reletting of the Demised Premises and then to the payment of the Basic Annual Rent, Additional Rent and other charges due and to grow due to LANDLORD hereunder, together with reasonable legal fees of LANDLORD therefore. -40- Section 13.4 LANDLORD and TENANT do hereby mutually waive trial by jury in any action, proceeding or counterclaim brought by either LANDLORD and TENANT against the other with regard to any matters whatsoever arising out of or in any way connected with this lease, the relationship of LANDLORD and TENANT, and TENANT's use or occupancy of the Demised Premises, provided such waiver is not prohibited by any laws of the State of New York. Any action or proceeding brought by either party hereto against the other, directly or indirectly, arising out of this agreement (except for a summary proceeding), shall be brought in a court in the County in which the Demised Premises are located and all motions in any such action shall be made in such County. Section 13.5 TENANT hereby agrees that in any action or summary proceeding brought by LANDLORD for the recovery of Basic Annual Rent or Additional Rent, it will not interpose any counter-claim or set-off nor will TENANT seek to consolidate or join for trial any such action or proceeding with any other action or proceeding. Section 13.6 If TENANT shall default in the observance or performance of any term or covenant on TENANT's part to be observed or performed under or by virtue of any of the terms or provisions in this article of this lease, LANDLORD may immediately or at any time thereafter and upon prior written notice perform the same for the account of TENANT, and if LANDLORD makes any expenditures or incurs any obligations for the payment of money in connection therewith including, but not limited to, attorneys' fees in instituting, prosecuting or defending any action or proceeding such sums paid or obligations incurred with interest and costs shall be deemed to be additional rent hereunder and the sum shall be due immediately upon LANDLORD incurring same and may be included as an item of additional rent in any summary proceeding instituted by the LANDLORD. -41- Notwithstanding anything to the contrary contained in this lease, except for an emergency situation, LANDLORD agrees that LANDLORD shall provide a minimum of five days written notice to the TENANT of LANDLORD's intention of making any payment or performing any act on behalf of the TENANT. Section 13.7 In the event the parties hereto become involved in any proceeding to enforce this Lease or the rights, duties or obligations hereunder, the prevailing party in such proceedings shall be entitled to receive, as part of any award, reasonable attorneys fees. Section 13.8 No reference to any specific right or remedy shall preclude TENANT from exercising any other rights or from having any other remedy or from maintaining any action to which it may otherwise be entitled at law or in equity. No failure by TENANT to insist upon the strict performance of any agreement, term, covenant or condition hereof, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach, agreement, terms, covenant or condition. No waiver by TENANT of any breach by LANDLORD under this Lease shall affect this Lease in any way whatsoever. Section 13.9 Notwithstanding anything to the contrary set forth in this Lease: (1) If there is any material slow-down, interruption or stoppage of any of the services required to be provided by LANDLORD pursuant to this Lease (unless the foregoing results from causes beyond LANDLORD's reasonable control) or if LANDLORD fails to make any repairs required to be made by LANDLORD pursuant to this Lease, or if LANDLORD makes any repairs, alterations, additions or improvements in or to any portion of the Building or in the Demised Premises, in the parking area or in or to the fixtures, appurtenances and equipment thereof, which prevents TENANT from utilizing the -42- Demised Premises from its normal business use, or if LANDLORD has otherwise failed to perform its obligations, agreements or covenants under this agreement, and LANDLORD has failed to commence to cure or remedy such problem within fifteen (15) business days after TENANT's written notice thereof, or if LANDLORD should fail thereafter to proceed diligently to remedy such problem or make such repairs, then TENANT shall have the right, but not the obligation, to take reasonable corrective measures to remedy the problem and insure proper operating conditions in the Demised Premises, including having the necessary work performed by a responsible contractor. (2) If TENANT has elected to have the work performed, then LANDLORD shall promptly reimburse TENANT for the reasonable cost of such work and repairs. If LANDLORD fails to reimburse TENANT within thirty (30) days after receipt of TENANT's invoice, TENANT shall have the right to deduct the reasonable cost of such work from the Base Rent and Additional Rent payable under this Lease provided such cost is not in dispute. Notwithstanding the foregoing, in the event LANDLORD, within thirty days of receipt of TENANT's invoice, in good faith disputes either a) LANDLORD's obligation to perform such work and repairs, b) the necessity to perform such work and repairs, or c) the reasonableness of the cost of such work and repair, then in such event, TENANT shall not be entitled to deduct the disputed portion of the cost of such work and repair from the Base Rent and Additional Rent until such time as TENANT receives a final judgment beyond any time to appeal. -43- ARTICLE XIV CUMULATIVE REMEDIES -- NO WAIVER Section 14.1 The specific remedies to which the LANDLORD or the TENANT may resort under the terms of this lease are cumulative and are not intended to be exclusive of any other remedies or means of redress of which they may be lawfully entitled in case of any breach or threatened breach by either of them of any provision of this lease. The failure of the LANDLORD or TENANT to insist in any one or more cases upon the strict performance of any of the covenants of this lease, or to exercise any option herein contained, shall not be construed as a waiver or relinquishment for the future of such covenant or option. A receipt by the LANDLORD of rent with knowledge of the breach of any covenant thereof shall not be deemed a waiver of such breach, and no waiver, change, modification or discharge by either party hereto of any provision in this lease shall be deemed to have been made or shall be effective unless expressed in writing and signed by both the LANDLORD and the TENANT. Payment by TENANT of any Rent, Additional Rent and/or charges with knowledge of the breach of any covenant or condition of this Lease by LANDLORD shall not be deemed a waiver by TENANT of such breach. In addition to the other remedies in this lease provided, the LANDLORD or TENANT shall be entitled to restraint by injunction of any violation, or attempted or threatened violation, of any of the covenants, conditions or provisions of this lease or to a decree compelling performance of any such covenants, conditions or provisions. -44- ARTICLE XV SUBORDINATION Section 15.1 It is hereby expressly agreed that this lease and all rights of the TENANT hereunder shall be subject and subordinate at all times to any mortgages and any renewals, replacements, extensions or modifications thereof which may not be or shall hereafter become liens on the Demised Premises or the land and building of which the same form a part. The TENANT agrees that at any time upon ten (10) days' written notice the TENANT will execute and deliver to the LANDLORD a subordination agreement confirming the provisions of this article. Failure of TENANT to execute and deliver such agreement shall not affect the subordination provided for hereunder. Section 15.2 This lease is specifically made subordinate to a mortgage given to the Principal Mutual Life Insurance Company and notwithstanding whether or not any formal subordination agreement is executed, this lease shall at all times be subordinate to any replacements, extensions, modifications or consolidations thereof. Section 15.3 Provided TENANT is not in default hereunder, LANDLORD and TENANT agree that TENANT's covenant to subordinate this Lease to any future mortgage shall be conditioned upon the mortgagee's agreement to recognize TENANT's rights and obligations under this Lease and to deliver to TENANT a non-disturbance agreement in form reasonably satisfactory to TENANT upon an attornment to such mortgage by TENANT. -45- ARTICLE XVI QUIET ENJOYMENT Section 16.1 The LANDLORD covenants and agrees that the TENANT, upon paying the basic rent and all other charges herein provided and observing and keeping the covenants, agreements and conditions of this lease on its part to be kept, shall and may peaceably and quietly hold, occupy and enjoy the Demised Premises during the term of this lease. Section 16.2 Notwithstanding anything to the contrary contained in this Lease, LANDLORD represents, covenants and warrants (i) that LANDLORD has lawful title to the Building and parking area legally described on Exhibit "B" and has full right, power and authority to enter into this Lease; (ii) there are no easements or other encumbrances or restrictions whether or not of record which might restrict TENANT'S ability to conduct its business as contemplated herein or otherwise impair TENANT's rights under this Lease; (iii) that in the construction of the Demised Premises and the operation of the Building, LANDLORD shall employ with all applicable laws, ordinances, regulations and requirements of governmental authorities having jurisdiction thereof; (iv) the roof and all other portions of the Demised Premises, including, without limitation, all electrical, lighting, plumbing, mechanical, heating, ventilating and air conditioning systems within or servicing the Demised Premises, are in good condition and working order and free of defects and shall remain in good condition and repair and free of defects for one (1) year following the Commencement Date to the extent LANDLORD has originally installed same; (v) the Building will be developed, managed and maintained in a neat, attractive and reputable manner; (vi) LANDLORD will not lease space in the Building for any illegal or immoral purposes. -46- ARTICLE XVII NOTICES Section 17.1 All notices, demands, and requests which may or are required to be given by either party to the other shall be in writing. All notices, demands and requests by the LANDLORD to the TENANT shall be deemed to have been properly given if sent by United States registered or certified mail, postage prepaid or overnight carrier, such as Federal Express, addressed to the TENANT, Attention: Real Estate Department, at the Demised Premises or Temporary Demised Premises, or at such other place as the TENANT may from time to time designate in a written notice to the LANDLORD. All notices, demands and requests by the TENANT to the LANDLORD shall be deemed to have been properly given if sent by United States registered or certified mail, or overnight carrier such as Federal Express, postage prepaid, addressed to the LANDLORD at the address first above written, or at such other place as the LANDLORD may from time to time designate in a written notice to the TENANT. Notices to the TENANT may be given by the attorney for the LANDLORD. Certilman Balin Adler & Hyman, LLP, 90 Merrick Avenue, East Meadow, New York 11554, with the same force and effect as if given by the LANDLORD. LANDLORD shall have the right to designate another law firm to serve any notices to the TENANT. Notices, demands and requests which shall be served upon LANDLORD or TENANT in the manner aforesaid shall be deemed to have been served or given for all purposes under this Lease at the time such notice, demand or requests shall be received or returned by Post Office or by an overnight carrier, such as Federal Express, as having been "refused" or "undeliverable". -47- ARTICLE XVIII DEFINITION OF CERTAIN TERMS, ETC. Section 18.1 The captions of this lease are for convenience and reference only and in no way define, limit or describe the scope or intention of this lease or in any way affect this lease. Section 18.2 The term "TENANT" as referred to hereunder shall refer to this TENANT and any successor or assignee of this TENANT. Section 18.3 The term "LANDLORD" as used hereunder shall mean only the owner for the time being of the land and building of which the Demised Premises form a part, so that in the event of any sale or sales, or in the event of a lease of said land and building this LANDLORD shall be and hereby is entirely free and relieved of all covenants and obligations of LANDLORD hereunder arising thereafter and it shall be deemed and construed without further agreement between the parties, or their successors in interest, that the purchaser or lessee of the building has agreed to carry out all of the terms and covenants and obligations of the LANDLORD hereunder. -48- ARTICLE XIX INVALIDITY OF PARTICULAR PROVISIONS Section 19.1 If any term or provision of this lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this lease, or the application of such term of provision to persons or circumstances other than those as to which it is held invalid or enforceable, shall not be affected thereby, and each term and provision of this lease shall be valid and be enforced to the fullest extent permitted by law. -49- ARTICLE XX COVENANTS TO BIND AND BENEFIT RESPECTIVE PARTIES Section 20.1 It is further covenanted and agreed by and between the parties hereto that the covenants and agreements herein contained shall bind and inure to the benefit of the LANDLORD, its successors and assigns, and the TENANT, its successors and assigns, subject to the provisions of this lease. -50- ARTICLE XXI INSURANCE Section 21.1 TENANT shall at all times during the term hereby carry Public Liability Insurance for the Demised Premises naming LANDLORD as an additional insured with limits of $3,000,000.00 for injury to persons and $250,000.00 for property damage. Section 21.2 Prior to taking possession, TENANT shall deliver to the LANDLORD a certificate of the insurance company licensed to do business in the State of New York with a Bests rating of A, certifying that the aforesaid liability policy is in full force and effect. A certificate evidencing the renewal of such liability insurance policy shall be delivered to the LANDLORD at least twenty (20) days before the expiration thereof and each such renewal certificate shall include the LANDLORD as an additional insured. TENANT may carry aforesaid insurance as a part of a blanket policy provided, however, that a certificate thereof naming the LANDLORD as an additional insured is delivered to the LANDLORD as aforesaid. Such policy of insurance or certificate shall also provide that said insurance may not be canceled unless then (10) days' notice is given to the LANDLORD prior to such cancellation and that the insurance as to the interest of the LANDLORD shall not be invalidated by any act or neglect of the TENANT. Section 21.3 TENANT shall prior to doing any work in the Demised Premises obtain any and all permits necessary therefore and will provide Worker's Compensation Insurance and Liability Insurance in the limits provided for in Section "21.1" hereof. -51- Section 21.4 LANDLORD warrants and represents that it maintains policies of all risks insurance covering the Building for the full replacement value thereof, less commercially reasonable deductible, if any. -52- ARTICLE XXII USE, ASSIGNMENT OR SUBLETTING Section 22.1 The TENANT agrees to use the premises for general offices and for no other purpose. TENANT shall not permit occupancy of the Demised Premises which in the aggregate exceeds one person for every two hundred square feet of usable area. Section 22.2 Unless the LANDLORD shall have given its consent thereto, this lease may not be assigned nor may the Demised Premises be sublet in whole or in part. Such approval will not be unreasonably withheld or delayed. In determining the reasonableness, the LANDLORD shall take into consideration the use to which the sub-tenant will put the space and the nature of the sub-tenant's business in order to maintain the integrity of the building as a whole. Section 22.3 Notwithstanding anything herein to the contrary, LANDLORD shall have the right of first refusal to recapture the leased premises or any part thereof, prior to any sublet or assignment. In the event TENANT shall desire to assign or subject this lease, TENANT shall provide written notice of same to LANDLORD. LANDLORD shall, within sixty (60) days of receipt of such notice, notify TENANT as to whether or not LANDLORD desires to recapture the Demised Premises. In the event that LANDLORD shall elect to recapture the Demised Premises or any part thereof, it shall be deemed that the space is recaptured by the LANDLORD on the thirtieth (30th) day following LANDLORD's notice to TENANT of its election. Within said thirty (30) day period, TENANT shall remove all of TENANT's effects and personal property therefrom. If LANDLORD shall elect not to recapture the Demised Premises or any part thereof, TENANT may after prior written consent of the LANDLORD, assign or sublet the Demised Premises subject to Section 22.4. -53- Notwithstanding the foregoing, TENANT shall have the right, without LANDLORD's consent, to assign this Lease or sublease the Demised Premises to (a) an affiliate, subsidiary or parent of TENANT; (b) an entity with which TENANT is merged or consolidated; or (c) an entity which purchases or otherwise acquires the assets and/or stock of TENANT, provided such entity shall continue to use the Demised Premises for the purposes specified herein and ins substantially the same manner as TENANT and provided that the successor TENANT shall have a net worth equal to or greater than ten million dollars ($10,000,000.00). Section 22.4 In the event that TENANT shall assign this lease and shall receive any consideration therefore in excess of Basic Annual Rent and Additional Rents therein, one-half of such consideration less transaction costs incurred by TENANT in connection with such assignment or subletting, including reasonable attorney fees, reasonable alteration costs and usual and customary brokerage commissions shall be paid to the LANDLORD as additional rent. In the event TENANT shall subject any of the space demised hereunder and the rent and/or additional rent reserved under any such sublease shall be in excess of the rent provided for hereunder, TENANT shall pay to the LANDLORD, as additional rent, as and when same is collected, one-half the difference between the rent and additional rent reserved herein and the rent and additional rent reserved in such sublease less transaction costs incurred by TENANT in connection with such assignment or subletting, including reasonable attorney fees, reasonable alteration costs and usual and customary brokerage commissions. Section 22.5 In the event that any sub-tenant should hold over in the premises beyond the expiration of the term of this lease, the TENANT hereunder shall be responsible to the -54- LANDLORD for all Basic Annual Rent and Additional Rent until the premises are delivered to the LANDLORD in the condition provided for in this lease. Section 22.6 TENANT shall pay LANDLORD's reasonable legal fees with reference to approving any assignment and assumption agreement. -55- ARTICLE XXIII RULES AND REGULATIONS Section 23.1 The TENANT agrees that it will abide by the rules and regulations attached hereto as Exhibit "E" and any reasonable amendments or additions thereto, provided the same are uniform as to all tenants. Notwithstanding anything to the contrary contained herein, all rules and regulations, whether now existing or hereafter adopted by LANDLORD, shall be reasonable in nature, non-discriminatory and uniformly enforced, if at all, against all tenants of the Building and shall not adversely affect the conduct of TENANT's business within the Demised Premises. -56- ARTICLE XXIV LANDLORD'S LIABILITY Section 24.1 In the event that the LANDLORD shall default under the terms of this lease and the TENANT shall recover a judgment against the LANDLORD by reason of such default or for any reason arising out of the tenancy or use of the premises by the TENANT or the lease of the premises to the TENANT, the LANDLORD's liability hereunder shall be limited to the LANDLORD's interest in the land and building of which the Demised Premises form a part and no further and the TENANT agrees that in any proceeding to collect such judgment, the TENANT'S right to recovery shall be limited to the LANDLORD's interest in the building of which the Demised Premises form a part. Notwithstanding anything to contrary contained herein, in the event the LANDLORD'S interest in the Building within which the Demised Premises are situated is insufficient to satisfy any judgment that TENANT may have or obtain against LANDLORD, then in such event TENANT shall have the right to abate payment of rent and additional rent to the extent of such judgment. -57- ARTICLE XXV ENTIRE AGREEMENT Section 25.1 This instrument contains the entire agreement between the parties hereto and the same may not be changed, modified or altered except by a document in writing executed and acknowledged by the parties hereto. -58- ARTICLE XXVI CERTIFICATES Section 26.1 Upon request by the LANDLORD, the TENANT agrees to execute any certificate or certificates evidencing the commencement date of the term of the lease and the fact that the lease is in full force and effect, if such is the case, and that there are no set-offs or other claims against the LANDLORD or stating those claims which the TENANT might have against the LANDLORD. TENANT shall have the right to demand a similar certificate or certificates from LANDLORD. Section 26.2 Upon request by LANDLORD, the TENANT agrees to execute a memorandum of this lease in recordable form which memorandum shall set forth the commencement dates of the lease and the subordination of the lease to a permanent first mortgage to be held by Principal Mutual Life Insurance Company or other institutional lender. Section 26.3 Provided TENANT is not in default hereunder, LANDLORD and TENANT agree that TENANT'S covenant to subordinate this Lease to any future mortgage shall be conditioned upon the mortgagee's agreement to recognize TENANT'S rights and obligations under this Lease and to deliver to TENANT a non-disturbance agreement in form reasonably satisfactory to TENANT upon an attornment to such mortgagee by TENANT. -59- ARTICLE XXVII SECURITY Section 27.1 THIS ARTICLE DELETED -60- ARTICLE XXVIII BROKER Section 28.1 By separate instrument, LANDLORD has entered into a brokerage agreement with Alliance Partners, Inc. ("Broker"), whose commission shall be paid by LANDLORD. Except as expressly set forth in the preceding sentence, LANDLORD and TENANT covenant and represent to each other that no other parties are entitled to be paid a fee or commission in connection with transaction contemplated by this lease. If any individual or entity shall assert a claim to a finder's fee or commission as a broker or a finder, then the party who is alleged to have retained such individual or entity shall defend, indemnify and hold harmless the other party from and against any such claim and all costs, expenses, liabilities and damages incurred in connection with such claim or any action or proceeding brought thereon. -61- ARTICLE XXIX SIGNS Section 29.1 TENANT, at TENANT'S sole cost and expense, shall be permitted to use 80% of any signage on the exterior of the building (or 100% should TENANT occupy the entire building). TENANT shall not maintain or display any sign, lettering, or lights on the exteriors of the Demised Premises, unless approved by LANDLORD in writing, which consent or approval shall not be unreasonably withheld or delayed. TENANT may provide and maintain a proper sign or signs on the exterior of the Demised Premises of such size, color, design and location as approved by LANDLORD, which consent or approval shall not be unreasonably withheld or delayed. No rights to use of the outer walls or roof of the Demised Premises are granted to TENANT without LANDLORD'S written consent, which consent or approval shall not be unreasonably withheld or delayed. TENANT shall be liable for any damages or injuries to the structure and building occasioned by such signs or installation or removal thereof. Section 29.2 LANDLORD agrees that it will not withhold its consent to a sign similar to other signs on buildings owned by LANDLORD as of the date hereof in the Nassau Crossways International Plaza. Section 29.3 TENANT shall, at its own cost and expense, obtain any governmental approvals necessary for any sign installed by TENANT in accordance with the other provisions of this Article. -62- ARTICLE XXX HOLDING OVER Section 30.1 TENANT covenants that it will vacate the Premises immediately upon the expiration or sooner termination of this lease. If the TENANT retains possession of the premises or any part thereof after the termination of the term, the TENANT shall pay the LANDLORD Annual Basic Rent at 150% of the monthly rate specified in Section 3.1 for the time the TENANT thus remains in possession and, in additional thereto, shall pay the LANDLORD for all damages, consequential as well as direct, sustained by reason of the TENANT'S retention of possession. If the TENANT remains in possession of the Premises, or any part thereof, after the termination of term, such holding over shall, constitute a renewal of this lease on a month-to-month basis. The provisions of this Section do not exclude the LANDLORD'S rights of re-entry or any other right hereunder, including without limitation, the right to refuse 150% of the monthly rent and instead to remove TENANT through summary proceedings for holding over beyond the expiration of the term of this lease. -63- ARTICLE XXXI CONSTRUCTION Section 31.1 LANDLORD shall provide a construction allowance in the amount of $1,000,000.00 ("TENANT Construction Allowance") for the TENANT to use towards the construction of the interior of TENANT'S Demised Premises. Any unused portion of the TENANT Construction allowance can be applied by the TENANT for any future rent obligations or for use towards TENANT'S relocation costs, including, but not limited to, furniture, telephones, etc. A) LANDLORD shall release the TENANT Construction Allowance as follows: LANDLORD will wire transfer $50,000.00 per week to TENANT'S bank with the first payment being made within ten days of execution of the lease and LANDLORD'S receipt of full and final working drawings. Once, per week, until TENANT occupies the Demised Premises, LANDLORD will continue to wire transfer $50,000.00 to TENANT'S bank. Any balance due, if any, after TENANT occupies the Demised Premises, shall be wire transferred to TENANT'S bank within ten days of TENANT'S occupancy of the Demised Premises. LANDLORD shall be obligated to continue the wire transfer so long as the TENANT diligently and professionally proceeds with the TENANT'S construction. Should TENANT either stop the construction or default under any of the terms, covenants and conditions of the lease (prior to TENANT'S occupying the Demised Premises), the LANDLORD will cease payments until such time as the TENANT either recommences the construction or cures any such default under the lease. -64- (B) Any sums due TENANT as TENANT Construction Allowance which are not paid in accordance with Section 31.1A above, shall be offset against the next Monthly Basic Rent and Additional Rent coming due in an amount equal to such unpaid TENANT Construction Allowance. Section 31.2 No later than August 1, 1995, TENANT shall provide to the LANDLORD full architectural and mechanical drawings for the interior of TENANT'S Demised Premises. All plans provided by the TENANT shall meet any and all applicable codes and LANDLORD shall have the right to review the plans and suggest changes to same if the plans do not meet code(s). LANDLORD shall notify TENANT as to any changes suggested within five (5) days of receipt of plans. Section 31.3 LANDLORD shall have the right to bid any of TENANT'S construction in excess of $10,000.00 during the tem of this lease. TENANT, at its sole discretion, shall award the bid(s) for TENANT'S construction. LANDLORD shall have no right to examine any of TENANT'S submitted bids. TENANT shall employ only licensed, insured contractors, to do TENANT'S construction. TENANT represents that TENANT shall offer the same complete bid package to all contractors bidding for TENANT'S work. -65- ARTICLE XXXII OPTION TO RENEW Section 32.1 TENANT shall have one five year option to renew its lease provided: A. TENANT is not in default under the terms, covenants, and conditions of this lease agreement. B. TENANT provide notice to the LANDLORD of TENANT'S intention to extend its lease term one year prior to the expiration of TENANT'S initial lease term. C. Throughout the term of this lease extension, TENANT shall pay an Annual Rent of $964,950.00 payable in equal monthly installments of $80,412.50. D. All other terms of the Basic Lease shall remain in full force and effect. -66- ARTICLE XXXIII OPTION TO EXPAND Section 33.1 TENANT shall have the option to lease the additional space as noted on the plan attached hereto as Exhibit "A-1" provided: A. TENANT is not in default under the terms, covenants and conditions of the lease at the time of notification or thirty (30) days prior to any work being done in the expansion space on behalf of the TENANT; B. TENANT shall notify LANDLORD of its desire to lease the expansion space; C. LANDLORD agrees that LANDLORD shall limit the initial term to another tenant in the expansion space for a term of not more than five years. LANDLORD further represents that LANDLORD shall use reasonable commercial efforts to include in the lease for the other tenant that LANDLORD shall have the right to relocate the other tenant during its initial term. Should TENANT elect to have the other tenant relocated, then all reasonable costs incurred in connection with such early relocation of the other tenant, shall be paid for by TENANT; D. LANDLORD shall respond in writing, within ten days, as to the availability date of the expansion space and if TENANT decides that the occupancy date does not meet TENANT'S needs, TENANT can cancel this option to expand by giving LANDLORD ten days written notice of same within ten days after written notice of LANDLORD'S response to TENANT of the availability date of the expansion space. E. Should TENANT exercise its option to lease the expansion space, then: -67- 1) The Annual Basic Rent for the expansion space shall be computed at the Annual Basic Rent per square foot at the then current rent for the Demised Premises. 2) TENANT shall be entitled to a work letter valued at $2.86 per square foot per lease year for the expansion term, i.e., five year term in the expansion space shall equate to a work letter contribution by the LANDLORD valued at $14.30 per square foot. F. Notwithstanding anything to the contrary contained herein, prior to the LANDLORD preparing a lease for another tenant, the LANDLORD shall notify the TENANT of the LANDLORD'S intentions to enter into a lease with another tenant. TENANT shall have the option to secure said expansion space by notifying the LANDLORD in writing within five (5) business days of receipt of LANDLORD'S notice to the TENANT of LANDLORD'S intention to lease the expansion space to another TENANT. -68- ARTICLE XXXIV HAZARDOUS MATERIALS Section 34.1 A. LANDLORD represents and warrants that the Demised Premises are free of all asbestos, asbestos containing materials and other hazardous or toxic materials (collectively, "Hazardous Materials"). Notwithstanding any provision of the Lease of the contrary, TENANT shall have no obligation to make any repairs, alteration or improvements to the Demised Premises or incur any costs or expenses whatsoever as a result of Hazardous Materials in the Demised Premises, other than those Hazardous Materials brought onto the Demised Premises by TENANT. LANDLORD shall be solely responsible for any changes to the Demised Premises relating to Hazardous Materials or as required by any present of future laws, ordinances or regulations of any governmental authority, insurance carrier or any similar body, other than those Hazardous Materials brought onto the Demised Premises by TENANT. B. In the event TENANT should desire to make any alterations, additions or improvements to the Demised Premises and is forced to incur any identifiable charges or expenses arising as a result of Hazardous Materials in or at the Demised Premises, other than those Hazardous Materials brought into the Demised Premises by TENANT and which would not have otherwise been incurred with respect to such measures, LANDLORD shall be fully responsible for and shall reimburse TENANT for such expenses and rent and all other charges payable by TENANT hereunder shall abate and the Lease, at TENANT'S option, shall be extended for a period equal to the period of the delay caused by the existence of said Hazardous Materials. -69- C. LANDLORD shall indemnify and hold TENANT harmless from and against all liabilities, costs, damages and expenses which TENANT may incur (including, without limitation, reasonable attorneys' fees and disbursements) in enforcing the provisions of this Article or as the result of the presence of Hazardous Materials at the Demised Premises, other than those Hazardous Materials brought onto the Demised Premises by TENANT. -70- IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. INDUSTRIAL & RESEARCH ASSOCIATES CO. BY:______________________________________ WEIGHT WATCHERS INTERNATIONAL, INC. BY:______________________________________ -71- EXHBIBIT "A" -72- EX-10.14 53 EXHIBIT 10.14 EXHIBIT 10.14 THIS AGREEMENT, made the 1st day of April, 1997 by and between JUNTO INVESTMENTS 33 Cotters Lane East Brunswick, New Jersey 08816 (hereinafter called the "Landlord"); and WEIGHT WATCHERS NORTH AMERICA, INC. 175 Crossway Park West Woodbury, NY 11797 (hereinafter called the "Tenant"). W I T N E S S E T H: WHEREAS, the Landlord owns certain lands and premises in the Township of Paramus, County of Bergen, and State of New Jersey, located on the parcel described as Lot 4 in Block 5304 situated in the Paramus Industrial Park, County of Bergen, New Jersey, and containing 113,400 square feet of building, (the "Premises"); and WHEREAS, the Landlord intends to lease to the Tenant that portion of said building containing approximately 14, 360 square feet, outside dimensions, as shown on Schedule "A" annexed hereto and made a part hereof (the "Leased Premises"); NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for the rents reserved, the mutual considerations herein and the parties mutually intending to be legally bound hereby, the Landlord does demise, lease and let unto the Tenant; and the Tenant does rent and take from the Landlord the Leased Premises as described in Article #1 hereof and the Landlord and Tenant do hereby mutually covenant and agree as follows: 1. LEASED PREMISES The Leased Premises shall consist of (that portion of a one-story building) approximately 14,360 square feet outside dimensions located on a portion of the Premises as shown in Schedule "A". The Leased Premises shall be altered in accordance with plans and specifications as shall be mutually approved in writing by the Landlord and Tenant, and shall be incorporated by reference herein, made a part hereof and referred to as Schedule "B." 2. TERM OF LEASE (a) The Landlord leases unto the Tenant and the Tenant hires the aforementioned Leased Premises for the term of ten (10) years to commence on the earlier of (i) the date Tenant opens 2 for business at the Leased Premises or (ii) or about September 1, 1997, and to terminate on August 31, 2007. (b) If the Landlord is unable to give possession of the Leased Premises on or before September 1, 1997 due to the fact that the work set forth in Schedule "B" is not sufficiently completed or for any reason whatsoever, the Landlord shall not be subject to any liability for the failure to give possession on said date. Under such conditions, the rent to the paid herein shall not commence until the possession of the Leased Premises is given or made available for occupancy by the Tenant. No such failure to give possession on the date of commencement shall affect the validity of the Lease or the obligations of the Tenant hereunder. (c) Provided the Tenant is not in default under any of the terms, covenants or conditions of this Lease, Tenant shall have the right to cancel this Lease on or after the 60th month of the term provided twelve (12) months prior written notice of its intent to cancel is delivered by Tenant to Landlord. Should Tenant exercise its cancellation right, Tenant agrees to pay Landlord (at the time of its notice of cancellation) the following: (i) $43,000.00, and (ii) the unamortized portion of the real estate brokerage commission in the amount of $26,925.00 ($107,700.00 x 5 years x 5%). 3. FIXED BASE RENT (a) (i) Subject to adjustment as provided in paragraph 3(a)(ii), the fixed annual basic rent during the term of this Lease shall be $107,700.00 per year payable by the Tenant in equal monthly installments of $8,975.00 each on or before the first day of each month, in advance, except that the Tenant shall pay the first monthly installment on the execution hereof. (ii) Landlord and Tenant will consult and agree on the specifications for alterations and improvements to the Leased Space. After agreement on the specifications, Landlord shall provide to Tenant an estimate of the cost for performing the alterations and improvements which cost shall be reviewed by Tenant and approved or rejected within five (5) business days of Tenant's receipt of same. After Tenant's approval of the cost of the alterations and improvements Landlord shall perform the work to make the alterations and improvements at the approved cost. Landlord shall pay the first $70,000.00 of the cost of such alterations and improvements. The balance of the cost will be paid by Tenant either in a lump sum or monthly over the term of the lease. Tenant will promptly notify Landlord as to whether it elects to pay its portion of such costs in a lump sum or over the term of the lease in which event if the payment is to be made by a lump sum the payment will be made by Tenant within 15 days of the date of Tenant's receipt of Landlord's invoice and if the payment is to be made over the remaining term of the lease then the base rent payable by Tenant pursuant to paragraph (3)(a)(i) above shall be increased by $13.10 per month for each one thousand dollars (or pro-rated portion thereof) of Tenant's share of the cost of such improvements (as in example, if the total cost of the construction of the improvements is $230,500.00 Landlord's share will be $70,000.00 and Tenant's share will be $160,500.00. If Tenant elects to pay such sum over the remaining term of the lease the base rent as set forth above will be increased by $2,102.55 per month, which is calculated by taking the Tenant's share 3 of the cost ($160,500.00) divided by 1000, and multiplying the result (160.5) times $13.10 which equals $2,102.55 per month) and the Tenant will enter into an amendment to the lease confirming the revised amount of base rent payable pursuant to paragraph 3 above and confirming both the commencement date and termination date of the term of the lease. (b) All rents due herein and other sums due under the Lease shall be paid in U.S. funds payable on a U.S. bank at the office of the Landlord or at such other place designated by Landlord from time to time, without any prior demand and without any deduction or set-off whatsoever except as otherwise provided herein promptly on the dates due. (c) In those instances where Tenant is required to pay additional rent herein; Tenant's proportionate share shall be on the basis of 14,360 square feet over 113,400 square feet. If Tenant's actual use is more than that of other tenants then the basis for the computing of said additional rent shall be reasonably adjusted based on such actual use. (d) Any additional rent required to be paid by Tenant shall be due and payable no later than ten (10) days of the date of receipt by Tenant of statement by Landlord. (e) Tenant hereby acknowledges that late payment to Landlord of rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. If any rent or other sums due from Tenant is not received by Landlord within ten (10) days after its due date, than Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount, plus costs and reasonable attorneys' fees, if any, incurred by Landlord to collect amounts due from Tenant. The parties hereby agree that such late charges represent a fair and reasonable estimate of the cost that Landlord will incur by reason of Tenant's late payment. Landlord's acceptance of such late charges shall not constitute a waiver of Tenant's default with respect to each overdue amount or estop Landlord from exercising any of the other rights and remedies provided under this Lease or at law. Payment by Tenant of any Rent, Percentage Rent, Additional Rent and/or charges with knowledge of the breach of any covenant or condition of this Lease by Landlord shall not be deemed a waiver by Tenant of such breach. 4. USE Tenant shall use the Leased Premises for warehousing and offices subject to and in accordance with all rules, regulations, laws, ordinances, statutes and requirements of all government authorities, including the fire insurance rating organization and Board of Fire Underwriters and any similar bodies having jurisdiction over the Leased Premises. Tenant warrants to the Landlord it will not permit any flammable or hazardous materials to enter, be stored, used or remain on the Leased Premises. 5. REPAIRS AND MAINTENANCE 4 (a) The Tenant shall, at it own cost and expense, make all repairs and replacements to the Leased Premises, except structural (structural defined as load bearing walls, steel, foundation and roof structure not including roof membrane), including the maintenance of same as the same may be required during the term of this Lease, provided that any damage to the foregoing is not caused by the negligence or other such intentional act of the Landlord, its servants, employees or agents. (b) The Tenant covenants and agrees that it shall not cause or permit any waste (other than reasonable wear and tear), damage, disfigurement or injury to the Leased Premises, or any overloading of the floors of the building constituting part of the Leased Premises. (c) The Tenant expressly covenants and agrees at its sole expense to replace with similar quality glass any broken glass in the windows, doors or other apertures of the Leased Premises which may become damaged or injured. (d) (i) The Landlord, at Tenant's cost and expense based on Tenant's proportionate share per Section 3(c), shall maintain, repair and keep free and clear of ice and snow, the driveways and parking areas. (ii) The Tenant shall at its coat and expense, maintain, repair and keep free and clear of ice and snow the sidewalks, steps and approach sidewalks to the Leased Premises; and the Tenant shall further, at its own cost and expense, keep the exterior of the Leased Premises free and clear of paper and other debris so as to keep same in a good and orderly manner as reasonably prescribed by Landlord. (iii) In the event the Landlord expends any amounts in fulfilling the Tenant's obligation herein, then the Tenant shall pay as additional rent its proportionate share of such amounts expended as provided under the formula in Article 3 hereof. (e) (i) The Landlord agrees to maintain the roof membrane of the Leased Premises for the Tenant upon the payment by the Tenant of the sum of $100.00 per month during the first five (5) years of the term of this Lease and $120.00 per month during the last five (5) years of the term. The maintenance of the roofing membrane shall consist of a combination of inspections and repairs as Landlord deems necessary. Tenant shall immediately notify the Landlord in writing of any leaks or damage to the roof membrane and the Landlord shall use his best efforts to correct same. However, the Landlord assumes no responsibility for any damage to Tenant's property or any third party's property held by Tenant in the Leased Premises for any reason or causes whatsoever. (ii) It is further understood and agreed that should the Tenant elect to maintain the roof, then the payment under (i) above shall cease thirty days after receipt of written notice by the Landlord from the Tenant; and Landlord shall have no further obligations to maintain the roof membrane on behalf of Tenant. 5 (f) The Landlord shall contract for and bill the Tenant its proportionate share for all landscape maintenance as to Premises as described above, such maintenance shall conform with existing standards set forth by Paramus Industrial Park, Paramus, New Jersey. Tenant, upon receipt of said bill, shall promptly pay same. Such amount shall be treated as additional rent due hereunder. Additionally, Landlord, at its sole cost and expense, shall maintain in good condition and repair the foundation, structural supports, exterior walls (excluding store fronts, doors or door frames, windows, window glass and plate glass) and exterior painting. Landlord, at Tenant's proportionate share of the cost and expense, shall maintain and repair the unexposed and exterior electrical systems to the point of entry to the Premises and the sewer lines serving the Premises provided that if Tenant's proportionate share of any such maintenance or repair shall exceed $25,000.00 per occurrence the amount of the repair will be amortized over the useful life of the system so repaired and Tenant shall be responsible to pay to Landlord that portion of the amortized cost as is attributable to the remaining term of this Lease. Except in the event of any emergency, Landlord shall not be liable to Tenant for failure to make repairs as herein specifically required unless Tenant has previously notified Landlord in writing of the need for such repairs and Landlord has failed to commence and complete said repairs within a reasonable period of time following receipt of such notification. 6. UTILITIES The Tenant shall be responsible for, and at its own cost and expenses, shall arrange with Public Service Electric & Gas Co. for electric and/or gas and shall pay all utility meter charges, deposits, service charges and use of utilities, including gas, electric, water, sewer, garbage disposal and standby sprinkler charges, if any. All utilities not separately metered shall be assessed against Tenant and other tenants sharing same as provided in the formula in Article 3(c). 7. TAXES (a) The Tenant shall pay as additional rent its proportionate share of all real estate and personal property taxes assessed against the Leased Premises including the land and buildings (including such added assessment or omitted assessment which may be levied against the premises for the year following this Lease) by the Township of Paramus, during the term of this Lease, said obligation to commence and be prorated as of the date of commencement of this Lease and as of the date of termination hereunder. In addition to the obligation to pay real estate taxes as hereinabove set forth, the Tenant shall, during the term of this Lease, pay, as additional rent, its proportionate share of any levy for the installation of local improvements and any municipal license fees affecting the Leased Premises or the building in which the Leased Premises is located as may be assessed by any governmental agencies, boards or bureaus having jurisdiction thereof. Nothing contained herein shall be construed to include as a tax which shall be the basis of real estate taxes, any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax or capital levy that is or may be imposed upon Landlord. The Landlord represents that the storm sewer, sanitary sewer, fully paved street and curbs have been installed by the Landlord, at its cost and expense and accepted by the Township of Paramus. Any assessment or imposition for capital or public improvements which may be 6 payable by law at the option of the taxpayer in installments, shall be paid by the Tenant with any interest that may be due thereon before any fine, penalty, interest or cost shall be added thereto, and all such payments shall be apportioned over term remaining on this Lease and those payments due after the expiration of this Lease shall be the obligation of the Landlord. With respect to any special assessments which may be levied as part of the Taxes, Tenant shall have the right to pay such assessments in equal installments over the longest legally available period, whether or not Landlord elects to pay in installments, provided that Landlord has the option of paying said assessment over the longest period of time. If Landlord secures an abatement or refund of any Taxes, Tenant shall receive its proportionate share of the amount of such abatement or refund (i.e., the net amount remaining after paying all reasonable costs and expenses of securing the abatement or refund, including reasonable attorneys' fees) as a credit to be applied by Landlord against Rent next becoming due (or, if no further Rent is due from Tenant, by a cash payment by Landlord to Tenant). (b) In the event the Tenant wishes to contest any assessment or levy of taxes on the Leased Premises herein, the Landlord covenants and agrees that it will lend its name and execute all papers necessary to aid the Tenant in contesting or litigating said assessment; provided, however, that said litigation or contest shall be at the cost and expense of the Tenant, and shall not affect Landlord's ownership of or title to premises or cause forfeiture thereof. (c) The Tenant shall deposit with the Landlord at the signing of this Lease an amount of money equal to three (3) months of estimated real estate taxes, to be used by Landlord to pay that portion of real estate payable under this Lease by Tenant. Thereafter Tenant shall pay to Landlord with each monthly rent payment an amount equal to one-twelfth (1/12th) of the estimated real estate taxes due hereunder. 8. INSURANCE (a) The Tenant will pay as additional rent Tenant's proportionate share of the annual insurance premium to enable Landlord to carry for the benefit of the Landlord fire insurance with full extended coverage in the broadest form obtainable, including vandalism and malicious mischief in the Paramus, New Jersey area, in an amount equivalent, in Landlord's reasonable judgment, to the full replacement value of the insurable improvements to the Premises. Said insurance, in any event, shall not be less than the amount of any first bona fide mortgage to be placed or on the Premises; and which said insurance shall be contracted with an authorized and recognized fire insurance company authorized to do business in the state of New Jersey. (b) The Tenant covenants and agrees that it will carry liability insurance, which said insurance shall be in the minimum amount of $2,000,000.00 per accident, and a minimum amount of $250,000.00 for property damage, and the Tenant further covenants and agrees that it will add and maintain as a party insured by such policy the interest of the Landlord and Landlord's managing agent (currently Frank A. Greek & Son, Inc.), and will furnish Landlord, prior to the commencement of the lease and thereafter at least thirty (30) days prior to the expiration of each policy, with a certificate of 7 said liability insurance satisfactory to Landlord. The amount of Tenant's insurance shall not limit Tenant's liability hereunder. (c) It is expressly understood and agreed that all above-mentioned policies of insurance shall contain a clause that the same will not be canceled except upon thirty (30) days' written notice to any and all parties in interest. Tenant may maintain the required liability insurance in the form of a blanket policy covering other locations of Tenant in addition to the Premises; provided, however, that Tenant shall provide Landlord with a certificate of insurance specifically naming the location of the Premises and naming Landlord as required in this section, the limits of which coverage are to be in the amounts set forth in this action. (d) The Tenant shall place with the Landlord an amount in escrow sufficient to cover one (1) year's premium for insurance purchases by the Landlord covering Tenant's proportionate share hereunder. Thereafter Tenant shall pay to Landlord with each monthly rent payment an amount equal to one-twelfth (l/12th) of the estimated insurance escrow due hereunder. 9. FIXTURES (a) The Tenant is given the right and privilege of installing and removing (without damage to real property) his personal property, furniture, equipment and fixtures in the Leased Premises during the term of the lease, it being understood and agreed, however, that in the event of: (i) default by the Tenant under the terms and conditions of this lease; or (ii) upon the expiration of this Lease; or (iii) if the Tenant moves out or is dispossessed and fails to remove any such property, equipment and fixtures or other property within thirty (30) days after such default or removal pursuant to the applicable terms and conditions of this Lease; then and in any such event, the said property, equipment and fixtures or other property shall be deemed, at the option of the Landlord, to be abandoned, (and become Landlord's property) or in lieu thereof, at the Landlord's option, it may remove such property and charge the reasonable cost and expense of removal and storage to the Tenant. (b) Anything to the contrary contained herein notwithstanding it is expressly understood and agreed that the Tenant may without injury to real property install, connect and operate equipment as may be deemed necessary by the Tenant to conduct its business subject to applicable rules and regulations of governmental agencies, boards and bureaus having jurisdiction thereof; provided, in any event, that subject to the terms and conditions of this article and article 9(a), the machinery and fixtures belonging to the Tenant shall, at all times, be considered and intended to be personal property of the Tenant, and not part of the realty, and subject to removal, by the Tenant, provided at the time of such removal that the Tenant is not in default pursuant to the terms and conditions of this Lease, and that the Tenant, at its own cost and expense, pays for any damage to the Leased Premises caused by such installation and removal. 8 10. ASSIGNMENT AND SUBLETTING (a) Tenant will not assign this Lease in whole or part, nor sublet all or any part of the Leased Premises, without the prior written approval of the Landlord in each instance, which approval shall not be unreasonably withheld, provided that (i) Tenant is not in default under any of the terms and conditions of this lease and (ii) if Landlord has any concern about the environmental impact of any proposed subtenant or assignee on the Leased Premises any such concern shall be deemed to be a reasonable basis for withholding consent. Notwithstanding the foregoing provisions of this Article 10, Tenant shall have the right without Landlord's consent to assign this Lease or sublet all or any portion of the Leased Premises to a corporation or other entity which controls, is controlled by or is controlled in common with Tenant or to a successor by merger, consolidation or a sale of all or substantially all of the assets or the capital stock of Tenant. The term "control" as used herein shall mean holding more than fifty percent (50%) of the voting interest in such entity. Notwithstanding any approved assignment or approved sublease, the Tenant shall remain fully liable on this Lease and shall not be released from performing any of the terms, covenants and conditions of this Lease. (b) If at any time during the term or any renewal term, Tenant shall have received a bona fide offer from a prospective subtenant of the Leased Premises with respect to proposed occupancy as subtenant of all or a portion of the Leased Premises, Tenant shall furnish a copy of such offer to Landlord. In addition to the right to exercise consent with respect to the proposed subtenancy, Landlord shall have the right, by written notice given to Tenant within twenty (20) days of Landlord's receipt of the copy of such offer, to agree to accept the proposed subtenant as a direct tenant of Landlord. In the event that (i) Landlord shall have given timely notice as aforesaid to Tenant, (ii) Landlord and the prospective subtenant shall have entered into written agreement for direct tenancy by such subtenant, and (iii) such subtenant shall have entered into occupancy of the Leased Premises and commenced direct payment of rent to Landlord, then automatically upon the occurrence of all three such events, Landlord and Tenant hereunder shall be and become released from any further obligation under this Lease with respect to the portion of the Leased Premises recaptured and the Lease between Landlord and Tenant hereunder shall be deemed terminated and of no further force and effect (rental to be adjusted as of the date of termination) as to such portion of the Leased Premises. It is understood and agreed that neither party hereto shall be released from its obligations to the other party as to the recaptured portion of the Leased Premises unless and until Landlord shall have entered into an agreement in writing as aforesaid with the proposed subtenant and the term of the tenancy with such subtenant shall have commenced. Unless and until the said events shall have occurred by virtue of which Landlord and Tenant shall have been released from their obligations under this Lease with respect to the recaptured portion of the Leased Premises this Lease shall remain in full force and effect and shall continue to be binding upon Landlord and Tenant as to the entire Leased Premises. 11. FIRE OR OTHER CASUALTY LOSS (a) In case of damage by fire or other casualty to the building in which the Leased Premises is located, if the damage is so extensive as to require substantial reconstruction of such 9 building, this Lease shall cease at the Landlord's option and the rent shall be apportioned as of the time of damage. Substantial reconstruction shall mean damage so extensive that the cost of restoration shall be 50% of the entire cost of the demolition of the damaged building and the erection of a new building of the same size and design shall exceed 50% of the replacement cost of the building immediately prior to such damage. (b) In all other cases of damages by fire or other casualty to the Leased Premises or the building of which it is a part, the Landlord shall repair (using proceeds of insurance claim) the damage with reasonable dispatch. In determining what constitutes reasonable dispatch, consideration shall be given to delays caused by strikes, governmental approvals, adjustment of insurance claims and other causes beyond the Landlord's control. In the event the Premises are completely or partially destroyed or so damaged by fire or other casualty that the Premises cannot, in Tenant's reasonable business judgment, be used by Tenant for their intended purposes, or can only be partially used by Tenant, (it being understood that Tenant, in its reasonable business judgment, shall decide whether to remain open prior to the completion of repairs to the Premises) and this Lease is not terminated as above provided, there shall be an equitable (equal to the number of days Tenant elects to close the Premises, further adjusted by the percentage of the sales area of the Premises closed) abatement of rent and other charges payable by Tenant hereunder. (c) If the restoration is not completed within nine (9) months after the occurrence of the fire or other casualty, Tenant shall have the right to terminate this Lease by forthwith giving written notice thereof to Landlord. (d) Notwithstanding anything in this Lease to the contrary, if the casualty, or the repairing or rebuilding thereof, shall render the Premises untenantable, in whole or in part, a proportionate abatement of rent and other charges payable by Tenant hereunder shall be allowed from the date when such damage occurred until the date of termination as heroin provided, said abatement to be computed on the basis of relation which the square foot area of the portion of the Premises rendered untenantable bears to Tenant's total rentable area. If more than fifty percent (50%) of the building is damaged and Landlord does not elect to terminate this Lease, Tenant may terminate this Lease, or, at its option shall not be required to occupy the Premises and rent and other charges payable by Tenant hereunder shall abate totally until the later of (a) the date that the Premises are made tenantable and Tenant commences operating its business in the Premises, or (b) seventy-five percent (75%) or more of the Building is tenantable. For purposes of this section, "untenantable" shall be defined to mean damage or destruction of the Premises to an extent that such damage or destruction prevents Tenant from conducting its business in the Premises or substantially impairs its ability to conduct its business in the Premises. (e) Notwithstanding anything contained herein to the contrary, if the Leased Premises are partially destroyed or damaged during the last twenty-four (24) months of the Term of this Lease, Landlord may, at Landlord's option, cancel and terminate this Lease, as of the date of 10 occurrence of such damage by giving written notice to Tenant of Landlord's election to do so within thirty (30) days after the date of occurrence of such damage. 12. COMPLIANCE WITH LAWS, RULES AND REGULATIONS (a) Tenant shall, at Tenant's sole cost and expense, without notice or demand from Landlord, faithfully observe and comply with all laws, rules and requirements of all county, municipal, state, federal and other applicable governmental authorities, now in force, or which may hereafter be in force, pertaining to Tenant's occupancy and use of the Leased Premises. Landlord shall, in the operation of the common areas of the Building, comply with all applicable laws, ordinances, regulations and requirements of governmental authorities having jurisdiction thereof. In the event any resolution or order is imposed against the common areas of the Building or the Premises, and same is not the result of Tenant's use or manner of use of the Leased Premises, the n in such event Landlord shall, with all due diligence, remedy such violation or comply with such order. (b) Tenant's Standard Industrial Classification Number is 7299. Tenant will immediately notify Landlord of any changes in this number during the term of this Lease. Tenant agrees to comply with all the requirements of the Industrial Site Recovery Act ("ISRA") N.J.S.A. 13:1K-6 et seq. and the Spill Compensation and Control Act ("Spill Act") N.J.S.A. 58:10-23 et seq., and all regulations promulgated in connection therewith regarding any substances or materials placed or used upon the Leased Premises by Tenant, its agents, employees or contractors. All references to ISRA and/or the Spill Act in this Lease shall be deemed to include any predecessor or successor statute(s) to same. (c) That in case the Tenant shall fall or neglect to comply with the aforesaid statutes, ordinances, rules, orders, regulations and requirements or any of them, or in case the Tenant shall neglect to maintain the Leased Premises or fail to make any necessary repairs called for in the Lease, then the Landlord or the Landlord's agents may after ten (10) days' written notice, (except, in the case of an emergency, action may be taken immediately) enter Leased Premises and make such repairs, effect such maintenance and comply with any and all of the said statutes, ordinances, rules, orders, regulations or requirements, at the cost and expense (including experts and reasonable attorney's fees) of the Tenant and in case of the Tenant's failure to pay therefor, the said cost and expense shall be added to the next month's rent and be due and payable as such, or the Landlord may deduct the same from the balance of any monies remaining with Landlord. The failure by the Landlord to take any action hereunder, or the delay by Landlord in taking any action, shall not place any liability or obligation on the Landlord. This provision is in addition to the right of the Landlord to terminate this Lease by reason of any default on the part of the Tenant. Notwithstanding anything contained in this Lease to the contrary, Landlord shall make no payments on behalf of Tenant until first having given Tenant prior written notice thereof and a full and fair opportunity to appear, intervene or otherwise assert and protect Tenant's rights and interests. 13. INSPECTION BY LANDLORD 11 (a) The Tenant agrees that the said Landlord's agents, and other representatives, shall have the right to enter into and upon Leased Premises, or any part thereof, at all reasonable hours for the purpose of inspecting the same upon reasonable advance notice, except in the event of emergency, for effecting such maintenance, making such repairs or alterations therein as may be necessary for the safety and preservation thereof. Landlord shall have the right at all reasonable times upon reasonable advance notice to Tenant (and without notice in cases of emergency), to enter the Premises to inspect, maintain, repair and/or make replacements as required under this Lease, to show the Premises to prospective purchasers of the Building, and during the last one-hundred and twenty (120) days of the term hereof, as same may be extended, to show the Premises to prospective tenants. Landlord agrees to use its best efforts to keep such entries to a minimum, and, further, during any such entry, Landlord shall use its best efforts not to disturb or inconvenience Tenant in the conduct of Tenant's business in the Premises. Except as otherwise expressly provided in this Lease, Landlord shall refrain from entering the Premises or conducting any work therein without the prior written consent of Tenant. In the event that Landlord shall enter the Premises under non-emergency situations in order to perform alterations, improvements, and/or repairs thereto, and as a result thereof, Tenant cannot, in the exercise of reasonable business judgment, operate its business and in fact closes the entire Premises to the public, Landlord agrees that rent and all other charges payable by Tenant hereunder shall be abated from the date of such closure until such time as the condition giving rise to said closure has been corrected, at which time Tenant shall resume the payments required hereunder. 14. RIGHT OF RE-ENTRY If the Leased Premises, or any part thereof, shall become vacant due to the Tenant's removal or failure to pay rent and other charges payable hereunder during the said term, or should the Tenant be evicted by summery proceedings or otherwise, the Landlord or Landlord's representatives may re-enter the same, either by force or otherwise, without being liable to prosecution therefor; and relet the Leased Premises as the Agent of the Tenant and receive rent thereof; applying the sure, first to the payment of such expenses as the Landlord may incur in reentering, and then to the payment of the rent due by these presents. The Tenant, however, shall continue to remain liable for any deficiency. 15. DEFAULT (a) It is expressly understood and agreed that subject to the terms and conditions of the within Lease, in case the Leased Premises shall be deserted or vacated due to the Tenant's removal or failure to pay rent punctually, or if default be made in the payment of the rent or other monetary obligations hereunder to be paid for by the Tenant, or any part thereof as herein specified, and such default shall continue for a period of ten (10) days after written notice from the Landlord to the Tenant, and if such default shall have not been remedied or cured within said ten (10) day period; or (b) If the Tenant defaults in the prompt and full performance of any of the provisions of this Lease (except those set forth in Paragraph 15(a) hereof), or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders, regulations and requirements of the federal, 12 state, county and municipal government, or if the Tenant shall file a petition in bankruptcy or arrangement, or be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, or any involuntary petition or similar pleading is filed in any court under any section of any state or federal bankruptcy act seeking to declare Tenant bankrupt or seeking a plan of reorganization for Tenant and such petition or pleading is not removed within thirty (30) days after its filing; (c) Then and in any such event of default under (a) and (b) above Landlord may, with or without any demand whatsoever or further notice, pursue any one or more of the following remedies: (i) Landlord shall have the right, at its election, to cancel and terminate this Lease and dispossess Tenant; or, (ii) Landlord may elect to enter and repossess the Leased Premises and relet the Leased Premises for Tenant's account, holding Tenant liable in damages for all expenses incurred in any such reletting (including without limitation advertising expenses, brokerage commissions, attorney's fees, and repairs, replacements, alterations and improvements) and for any difference between the amount of rent received from such reletting and that due and payable under the terms of this Lease; or (iii) Landlord may enter upon the Leased Premises and do whatever Tenant is obligated to do under the terms of this Lease (and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in effecting compliance with Tenant's obligations under this Lease and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action). All such remedies of Landlord shall be cumulative, and in addition, Landlord may pursue any other remedies that may be permitted by law or in equity. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. (d) It is expressly understood and agreed, however, that the Landlord's right to terminate this Lease, pursuant to the terms and conditions of the foregoing subparagraph (b) as to failure to comply with said statutes, etc., of the federal, state, county and municipal government, shall be subject to the Tenant's right of curing, or beginning to cure, any condition or event upon which the Landlord relies for terminating this Lease, within thirty (30) days after the written notice provided in subparagraph (b) above. If the Tenant shall (if the same does not cause any forfeiture of title to Landlord), in good faith, contest any of the rules and regulations or decision of any applicable federal, state, county or municipal government as aforementioned, the Landlord's right to terminate this Lease shall be suspended during the period of such contest, or action to cure, so long as the Tenant prosecutes its objections or otherwise moves promptly; and provided further, that the Tenant hereby covenants and agrees, at its own cost and expense, to provide a Bond or Surety satisfactory to Landlord and to indemnify and defend the Landlord against any prosecution, fine or judgment, civil or criminal, as a result of any violation by the Tenant of any federal, state, county or municipal regulation as aforementioned which the Tenant shall contest. (e) No reference to any specific right or remedy shall preclude Tenant from exercising any other rights or from having any other remedy or from maintaining any action to which it may otherwise be entitled at law or in equity. No failure by Tenant to insist upon the strict performance 13 of any agreement, term, covenant or condition hereof, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach, agreement, terms, covenant or condition. No waiver by Tenant of any breach by Landlord under this Lease shall affect this Lease in any way whatsoever. In the event Landlord defaults in the performance of any of its obligations, covenants and warranties hereunder and such default continues for a period of thirty (30) days after written notice thereof to Landlord from Tenant specifying the nature of such default, or such additional period as Landlord may reasonably require to cure the same (except in an emergency that Landlord shall fall to cure immediately), in addition to all other rights and remedies available to Tenant, Tenant may, at its option, cure the same on behalf of Landlord, whereupon the cost of such curing shall be immediately due and payable to Tenant from Landlord upon written demand therefor by Tenant. 16. NOTICES All notices required or permitted to be given to the Landlord or to the Tenant shall be given by certified mail, return receipt requested, addressed to the Landlord at 33 Cotters Lane, East Brunswick, New Jersey 08816; and to the Tenant at the Leased Premises with a copy to Tenant at: 175 Crossways Park West, Woodbury, NY 11797, Attention: Real Estate Department and/or such other place as the Landlord or Tenant shall designate in writing. 17. NONWAIVER BY LANDLORD Failure of Landlord to insist upon the strict performance of any provision or to exercise any option or enforce any rules and regulations shall not be construed as a waiver for the future of any such provision, rule or option. The receipt by Landlord of rent with knowledge of the breach of any provision of this Lease shall not be deemed a waiver of such breach. No provision of this Lease shall be deemed to have barn waived unless such waiver be in writing signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent shall be deemed to be other than on account of the earliest rent then unpaid nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease. 18. LIABILITY OF TENANT FOR DEFICIENCY In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terror and conditions contained in this Lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable to pay in monthly payments the rent which accrued subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained the difference between the rent reserved and the rent collected and received (after deducting costs and expenses), if any, by the Landlord, during the remainder of the unexpired term, and such difference or deficiency between the 14 rent reserved herein and the rent collected, if any, shall became due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained. 19. RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS (a) Except as otherwise provided herein, the Tenant may not make alterations, additions or improvements to the Leased Premises without the written consent of the Landlord, which shall not be unreasonably withheld or delayed. Such alterations, additions or improvements shall be in conformity with applicable governmental and insurance company requirements and at the end of the term of this Lease shall (at the sole option of the Landlord) either be removed by the Tenant or remain as part of the Leased Premises. In the event the Landlord requires that they be removed the Tenant shall place the Leased Premises in the same condition as it was prior to such alterations, additions or improvements (reasonable wear and tear excepted). Notwithstanding anything contained in this Lease to the contrary, at any time during the term, Tenant shall have the right to make non-structural alterations or additions to the interior of the Premises without first obtaining the consent of the Landlord, the cost of which is less than $10,000.00, and subject to such limitation. Landlord hereby consents to Tenant making such alterations or additions to the Premises as Tenant deems necessary and appropriate from time to time. (b) Nothing herein contained shall be construed as a consent on the part of the Landlord to subject the estate of the Landlord to liability under the Construction Lien Law of the State of New Jersey, it being expressly understood that the Landlord's estate shall not be subject to such liability. The Tenant shall have no power or right to do any act or make any contract which may create or be the format for any lien, mortgage or other encumbrance upon the estate of the Landlord. 20. NON-LIABILITY OF LANDLORD It is expressly understood and agreed by and between the parries to this agreement that the Landlord shall not be liable for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building, or from any damage or injury resulting or arising from any other cause or happening whatsoever, nor shall Landlord be liable for any damage caused by other tenants, if any, or person in, upon or about Leased Premises unless due to the negligent acts or omissions of Landlord, its employees, contractors, agents or invitees. It is expressly understood and agreed, in any event, that the Tenant assumes all risk of damage to its property occurring in or about the Leased Premises. 21. HOLDOVER If the Tenant remains in the premises beyond the expiration date of this Lease, as it may have been extended or renewed, such holding over in itself shall not constitute a renewal or extension of 15 this Lease, but in such event a tenancy from "month to month" shall arise at one and one half times the then monthly rent. 22. QUIET ENJOYMENT Upon payment by the Tenant of the rents herein provided, and upon the observance and performance of all the covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject, nevertheless, to the terms and conditions of this Lease. Notwithstanding anything to the contrary contained in thee Lease, Landlord represents, covenants and warrants (i) that Landlord has lawful title to the Building legally described on Exhibit A and has full right, power and authority to enter into this lease; (ii) there are no easements or other encumbrances or restrictions whether or not of record which might restrict Tenant's ability to conduct its business as contemplated herein or otherwise impair Tenant's rights under this Lease; (iii) that in the construction of the Premises and the operation of the common areas of the Building, Landlord shall comply with all applicable laws, ordinances, regulations and requirements of governmental authorities having jurisdiction thereof; (iv) the roof and all other portions of the Premises, including, without limitation, all electrical, lighting, plumbing, mechanical, heating, ventilating and air conditioning systems within or servicing the Premises, are in good condition and working order and free of defects; (v) the Building well be developed, managed and maintained in a neat, attractive and reputable manner; (vi) Landlord well lease space in the Building only to reputable tenants and will not lease space in the Building for any illegal purposes. 23. RESERVATION OF EASEMENT The Landlord reserves the right to grant itself easements and to enter on the Leased Premises during normal business hours and after notice to Tenant in order to install, at its own cost and expense, driveways, storm drains, sewers and/or utility lines in connection therewith as may be required by the Landlord. The Landlord covenants to use its best efforts so that the foregoing work and easements shall not interfere with the normal operation of Tenant's business. In the event that Landlord shall enter the Premises under non-emergency situations in order to perform alterations, improvements, and/or repairs thereto, and as a result thereof, Tenant cannot, in the exercise of reasonable business judgment, operate its business and in fact closes the entire Premises to the public, Landlord agrees that rent and all other charges payable by Tenant hereunder shall be abated from the date of such closure until such time as the condition giving rise to said closure has been corrected, at which time Tenant shall resume the payments required hereunder. 24. ENVIRONMENTAL RESPONSIBILITY (a) Tenant expressly covenants and agrees to indemnify the Landlord against any claim, damage, liability, costs, penalties or fines which the Landlord may suffer as a result of the 16 Tenant's violation of any portion of ISRA, the Spill Act or any other environmental pollution caused by the Tenant in its use of the Leased Premises. The Tenant covenants and agrees to notify the Landlord immediately of any claim or notice served upon it with respect to any such claim the Tenant is in violation of ISRA or the Spill Act or is causing other environmental pollution and at its sole cost and expense to immediately take any and all actions required by law. (b) Upon the Tenant's removal from the premises he agrees, at all times after said removal to comply with and to indemnify, defend and save Landlord harmless in respect to any and all claims or causes or actions which may be asserted against Landlord by reason of Tenant's use and occupancy under ISRA, the Spill Act and any other environmental laws. Tenant further agrees to provide to Landlord, at least one month prior to the Tenant's removal from the Premises, either a Letter of Non-Applicability from the New Jersey Department of Environmental Protection and Energy ("DEPE") or a Negative Declaration and No Further Action Letter stating that there has been no discharge of hazardous substances or wastes (as defined by ISRA and the DEPE) in or around the Premises or at any other site to which discharged hazardous substances or hazardous wastes originating in or around the Premises have migrated and that any such discharged hazardous substances or hazardous wastes present at the Premises or that have migrated from the Premises have been remediated in accordance with applicable remediation regulations. (c) (i) Landlord will, at Tenant's sole expense except as provided for in paragraph 24(d)(ii) below, have Raritan Enviro Sciences, Inc., or such other environmental consultant appointed by Landlord, conduct an environmental survey and inspection annually (or more often, if required by Landlord) so that any environmental violations may be discovered and corrected in the quickest time possible at the Tenant's cost and expense. Tenant shall have the right to designate an alternate company to complete the annual (or more often, if required by Landlord) environmental survey, provided, however, that Landlord beforehand in writing approve said company which approval shall not be unreasonably withheld. (ii) Landlord shall agree to pay for any and all surveys and inspections mentioned in paragraph 24(d)(i) above provided that the survey and/or inspection shows that the Tenant is not in violation of any environmental law, regulations, etc. In the event the Tenant is found to be in violation, he shall pay for that survey and/or inspection and all subsequent surveys and/or inspections the Landlord deems necessary. (d) The Tenant hereby agrees not to handle, store or dispose of any hazardous or toxic waste substance upon the Premises which is prohibited by any federal, state or local statute, ordinance or regulation. (e) The Tenant's obligations under this Article shall survive the expiration or termination of this Lease. 17 (f) Landlord represents and warrants that the Leased Premises are free of all asbestos, asbestos-containing materials and other hazardous or toxic materials (collectively, "Hazardous Materials"). Notwithstanding any provision of the Lease to the contrary, Tenant shall have no obligation to make any repairs, alterations or improvements to the Premises or incur any costs or expenses whatsoever as a result of Hazardous Materials in the Premises, other than those Hazardous Materials brought onto the Premises by Tenant. Landlord shall be solely responsible for any changes to the Premises relating to Hazardous Materials or as required by any present or future laws, ordinances or regulations of any governmental authority, insurance carrier or any similar body, other than those Hazardous Materials brought onto the Premises by Tenant. (g) In the event Tenant should desire to make any alterations, additions or improvements to the Premises and is forced to incur any identifiable charges or expenses arising as a result of Hazardous Materials in or at the Premises, other than those Hazardous Materials brought onto the Premises by Tenant and which would not have otherwise been incurred with respect to such measures, Landlord shall be fully responsible for and shall reimburse Tenant for such expenses and rent and all other charges payable by Tenant hereunder shall abate and the Lease, at Tenant's option, shall be extended for a period equal to the period of the delay caused by the existence of said Hazardous Materials. (h) Landlord shall indemnify and hold Tenant harmless from and against all liabilities, costs, damages and expenses which Tenant may incur (including, without limitation, reasonable attorneys' fees and disbursements) in enforcing the provisions of this Article or as the result of the presence of Hazardous Materials at the Premises, other than those Hazardous Materials brought onto the Premises by Tenant. The indemnity obligations of the Landlord under this section shall survive the expiration or earlier termination of this Lease. 25. SUBORDINATION OF LEASE This Lease and the terms and estate hereby granted are and shall be subject and subordinate to the lien of all mortgages which may now or at any time hereafter affect all or any portion of the land or building of the Landlord's interest therein, and to all renewals, modifications, consolidations, replacements and extensions thereof. The foregoing provisions for the subordination of this Lease shall be self-operative and no further instrument shall be required to effect any such subordination; but Tenant shall, however, upon request by Landlord, at any time or times execute and deliver any and all instruments that may be necessary or proper to effect such subordination or to confirm or evidence the same. If Tenant shall fail or otherwise refuse to execute a subordination in accordance with this paragraph, then, and upon such event, Tenant shall be deemed to have breached a material obligation hereunder. Landlord shall use its best efforts to obtain from any mortgagee an agreement providing that so long as Tenant is not in default under the terms of this Lease, the leasehold estate of Tenant created hereby and Tenant's peaceful and quiet possession of the Demised Premises shall be undisturbed by any foreclosure so long as Tenant continues to comply with the terms of this Lease. Such agreement may also provide that Tenant shall attorn to such mortgagee if such holder 18 succeeds to the interest of Landlord in the Property, the Leased Premises or any part or parts thereof by foreclosure proceedings or as a result of any conveyance in lieu of foreclosure proceedings. 26. STATEMENTS BY LANDLORD AND TENANT (a) If the Landlord desires to procure a mortgage loan (or loans), or desires to recast an existing mortgage on the premises, then and at the request of Landlord, Tenant will furnish to Landlord data, including financial information, which may be reasonably required by any mortgagee in connection with the Leased Premises. For purposes of this paragraph, a consolidated financial statement which includes Tenant's assets, liabilities and operations and certification of Tenant's net worth from Tenant's chief financial officer will satisfy Tenant's obligations. Tenant further agrees that at any time after the commencement of the term and from time to time upon not less than fifteen (15) days' prior written request by Landlord, to immediately execute, acknowledge and deliver to Landlord a statement (in the form of Schedule "C" or such other form reasonably requested by the mortgagee) in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications or exceptions, that the same is in full force and effect as modified or excepted, and stating the modifications and exceptions, if any), and the date to which the rental and other charges have been paid in advance, if any, it being intended that any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser of the fee, or any mortgagee or assignee of any mortgage upon the fee, of the Leased Premises. Tenant shall have the right to demand a similar statement from Landlord. (b) If any lender with which Landlord has negotiated or may negotiate financing for the property on which the Leased Premises is located shall require a change or changes in this Lease provided such change shall not restrict Tenant's ability to conduct its business or otherwise impair Tenant's rights under this Lease as a condition or one of the conditions of its approval of this Lease for such financing; and if within ten (10) days after notice from Landlord, Tenant fails or refuses to execute with Landlord the amendments to this Lease accomplishing the change or changes which are stated by Landlord to be required in connection with approval of this Lease for purposes of such financing, Landlord shall have the right to cancel this Lease. In the event of cancellation by Landlord hereunder, this Lease shall be and become null and void. (c) Upon the Tenant's accepting the Leased Premises and entering possession, pursuant to the terms and conditions hereof, the Tenant covenants and agrees that it will furnish to the Landlord a statement that it accepts the Leased Premises, subject to the terms and conditions of the Lease as herein contained; form of said letter attached hereto as Schedule "C". 27. SURRENDER OF DEMISED PREMISES Upon the expiration or other termination of the term of this Lease, Tenant shall quit and surrender to the Landlord the Leased Premises in compliance with all governmental regulations as mentioned herein, broom clean and in good order, ordinary wear and tear and casualty damage 19 excepted. The Tenant shall remove all property of the Tenant as directed by Landlord, and failing to do so, Landlord may cause all of said property to be removed at the cost and expense of the Tenant, and Tenant agrees to promptly pay all costs and expenses incurred thereby. If the Landlord suffers any costs or expenses, including loss of rent, due to the fact that Tenant does not surrender on the date stated herein, Landlord may recover such costs and expenses as Landlord might incur if Landlord has to assume any of the Tenant's obligations herein. The Tenant's obligations under this section shall survive the expiration or termination of this Lease. 28. CONDEMNATION If the whole or any part of the Leased Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the term of this Lease shall, at the option of the Landlord, cease and terminate as of the date of title vesting in such proceedings and all rentals shall be paid up to that date and Tenant shall have no claim against Landlord nor the condemning authority for the value of any unexpired term of this Lease. Tenant shall be entitled to seek a separate award against the condemning authority for its fixtures, equipment and moving expenses but same shall have no affect upon Landlord's claim. 29. MEMORANDUM OF LEASE Tenant shall not record this Lease, but if either party should desire to record a short form Memorandum of Lease setting forth only the parties, the Leased Premises and the term, such Memorandum of Lease shall be executed, acknowledged and delivered by both parties upon notice from either party. 30. SECURITY (NONE) 31. EXCUSABLE DELAYS In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this paragraph shall not operate to excuse the Tenant from the prompt payment of rent, additional rent or any other payments required by the terms of this Lease. 32. BROKERS COMMISSION 20 By separate instrument, Landlord has entered into a brokerage agreement with Alliance Partners Inc. ("Broker"), whose commission shall be paid by Landlord. Except as expressly set forth in the preceding sentence, Landlord and Tenant covenant and represent to each other that no other parties are entitled to be paid a fee or commission in connection with transaction contemplated by this Lease. If any individual or entity shall assert a claim to a finder's fee or commission as a broker or a finder, then the party who is alleged to have retained such individual or entity shall defend, indemnify and hold harmless the other party from and against any such claim and all costs, expenses, liabilities and damages incurred in connection with such claim or any action or proceeding brought thereon. 33. FEES AND EXPENSES (a) In the event the parties hereto become involved in any proceeding to enforce this Lease or the rights, duties or obligations hereunder, the prevailing party in such proceedings shall be entitled to receive, as part of any award, reasonable attorneys fees. (b) In the event Tenant shall fail to pay any rent or other sums due, and such failure shall continue for ten (10) days after receipt of written notice thereof, then, in addition to Landlord's rights herein, interest shall accrue thereon at the rate of 18% per annum from the tenth day after due date to the date of payment. 34. NO REPRESENTATIONS BY LANDLORD Neither Landlord nor Landlord's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the Leased Premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the Premises except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease. Tenant has inspected the building and the Leased Premises and is thoroughly acquainted with their condition, and agrees to take the same "as is" and acknowledges that the taking of possession of the Leased Premises by Tenant shall be conclusive evidence that the Leased Premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. Tenant's acceptance of the Premises shall not be conditioned upon completion and correction of punch list items and latent defects which do not materially interfere with Tenant's ability to occupy the Leased Premises and conduct its business. Landlord shall complete the items on the punch list with reasonable diligence, but in any event within thirty (30) days after the preparation of the punch list. Tenant shall not be required to pay for any Landlord imposed plan review charges, engineering review charges, barricade fees, signage fees or other construction-related charges. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Landlord and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. 21 35. OPTION TO RENEW (a) The Tenant is hereby given an option to renew this Lease for one (1) additional term of five (5) years commencing April 1, 2007 through March 31, 2012 from the term hereof upon all the terms and conditions herein, except that the amount of the monthly rent due and payable during the renewal period pursuant to Paragraph #3 shall be increased and calculated in the manner hereinafter set forth; and provided that (a) written notice of the exercise of option is sent by certified mail, return receipt requested, to Landlord at least nine (9) months prior to the expiration of the original term; and further, (b) that Tenant shall not be in default under the terms of this Lease. (b) The Base Monthly Rental as set forth in Paragraph #3 shall be adjusted upon the commencement of the aforesaid Renewal Term (the "Adjusted Date") to reflect any increase in the cost of living as such increase, if any, is reflected by a change in the "All Items" Index for the "Consumers Price Index for all Urban Consumers" (Revised CPI-U) (1982-84=100) published by the Bureau of Labor Statistics of the U.S. Dept. of Labor. (c) On the Adjustment Date, the increased Base Monthly Rental as provided for in Paragraph #3 hereof shall be determined by multiplying the Base Monthly Rental by a fraction, the denominator of which is the Consumer Price Index for the first month of the Lease and the numerator of which is the Index number for the last month of the term of this Lease, as hereinafter described in "Example Formula." If the C.P.I. is discontinued, then the parties shall, in good faith, agree on a suitable substitute. EXAMPLE FORMULA CPI for last month of term Base Monthly Rental x ---------------------------- CPI for first month of term 36. TENANT'S REMEDIES Anything in this Lease to the contrary notwithstanding, Tenant agrees that it shall look solely to the estate and property of the Landlord in the Leased Premises subject to prior rights of any mortgagee of the Leased Premises or any part thereof, for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed and/or performed by Landlord, and no other assets of the Landlord shall be subject to levy, execution or other procedures for the satisfaction of Tenant's remedies. In the event Landlord transfers this Lease, or sells the Leased Premises, then upon such transfer Landlord will be released from all liability and obligations hereunder providing this Lease is assumed by the new owner. 37. BIND AND INURE 22 The terms, covenants and conditions of the written Lease shall be binding upon and inure to the benefit of each of the parties hereto, their respective executors, administrators, heirs and successors and assigns, as the case may be. IN WITNESS WHEREOF, the parties hereto above placed their hands and seals or caused these presents to be signed by their proper corporate officers and caused their proper corporate seals to be hereunto affixed, the day and year first above written. WITNESS: JUNTO INVESTMENTS ----------------------------------------- FRANK A. GREEK, JR. A PARTNER - ----------------------- ATTEST: WEIGHT WATCHERS NORTH AMERICA, INC. By: - ----------------------- -------------------------------------- 23 STATE OF NEW YORK ) ) ss: COUNTY OF NASSAU ) BE IT REMEMBERED, that on this 25 day of April, 1997, before me, the subscriber, personally doth depose and make proof to my satisfaction that he is the Secretary of named in the within instrument; that Kent Q. Kreh is the President of said corporation; that the execution, as well as the making of this instrument, has been duly authorized by a proper resolution of the Board of Directors of the said corporation; the deponent well knows the corporate seal of said corporation; and the seal affixed to said instrument is such corporate seal and was thereto affixed and said instrument signed and delivered by the said President as and for his voluntary act and deed and as and for the voluntary act and deed of said corporation, in presence of deponent, who thereupon subscribed his name thereto as witness. ------------------------------------ SECRETARY Sworn to and subscribed before me the date aforesaid - ------------------------------ Notary Public STATE OF NEW JERSEY ) ) ss: COUNTY OF MIDDLESEX ) BE IT REMEMBERED, that on this 8th day of May, 1997, before me, the subscriber personally appeared FRANK A. GREEK, JR., who I am satisfied is the person named in and who executed the within instrument, and thereupon he acknowledged that he signed, sealed and delivered the same as his act and deed, for the uses and purposes therein expressed. ------------------------------------ NOTARY PUBLIC EX-10.15 54 EXHIBIT 10.15 EXHIBIT 10.15 LER/FL-89STATE 8900 STATE LINE OFFICE BUILDING LEASE WITNESSETH, that for and in consideration of mutual covenants, Landlord and Tenant hereby agree as follows: Section A - Basic Lease Definitions. Date of Lease: August 31, 1995 Landlord: 89 STATE LINE Limited Partnership, a Kansas limited partnership c/o Copaken, White & Blitt 8900 State Line Road, Suite 333 Leawood, Kansas 66206 Tenant: Weight Watchers North America, Inc. Building: The multiple story office building constructed or to be constructed on the Building Land. Building Land: The Land described in Exhibit C attached hereto. Total Building Facilities: The Building Land and the Building and other improvements now or hereafter constructed on the Building Land. Lease Term: The term of this Lease shall commence on October 1, 1995, and end on September 30, 2000. Lease Commencement Date: The date landlord shall substantially complete construction of Landlord's Work described on Exhibit B and deliver the Premises to Tenant free of all leases (other than this Lease) and occupants, and free and clear of any liens and encumbrances, as of the date of this Lease, except those of record which do not affect Tenant's use of the Premises. The term "substantially complete" shall mean that Landlord shall have completed all of Landlord's Work described in Exhibit B with the exception of normal punchlist items which do not materially interfere with Tenant's use of the Premises, which punchlist items shall be completed within thirty (30) days thereafter. Rent Commencement Date: October 1, 1995 Lease Year: A period of twelve consecutive calendar months, except for the last Lease Year which shall commence on the anniversary of the first Lease Year and end on the last day of the term of this Lease. The first Lease Year shall begin on the Rent Commencement Date if the Rent Commencement Date is the first day of a calendar month and if not, then the first Lease Year shall begin on the first day of the calendar month next following the Rent Commencement Date. Each subsequent Lease Year shall begin on the anniversary of the commencement of the first Lease Year. Confirmation Agreement: As soon as reasonably practical after the Commencement Date has been determined, Landlord and Tenant shall execute a Confirmation Agreement confirming the Term Commencement Date, Rent Commencement Date, Term Expiration Date, Tenant's Opening Date and the floor area of the Premises. Premises: The premises located on the 2nd floor of the Building which are outlined in red on Exhibit Am which consist of approximately 9,136 square feet of Net Usable Footage and which are commonly known as Suite #250. Net Usable Footage of the Premises: The number of square feet of floor area within the exterior faces of exterior walls (except party walls as to which the center thereof instead of the exterior faces thereof shall be used) constructed for occupancy in the Building. No deduction or exclusion shall be made from Net Usable Footage by reason of interior partitions or other interior construction or equipment Net Usable Footage of the Building 74,962 square feet. Net Rentable Footage of the Premises: 10,232 square feet, which is equal to the sum of (i) the number of square feet of Net Usable Footage in the Premises plus (ii) 1,096 square feet representing the amount of square feet of floor area in the Building common area which is deemed to be the pro rata share thereof attributable to the Net Usable Footage in the Premises. Net Rentable Footage of the Building: 83,957 square feet. Minimum Rent: Payable as follows: October 1, 1995 through September 30, 1996 - $10,625.00 per month October 1, 1996 through September 30, 2000 - $10,919.00 per month Tenant's Percentage of Excess Total Expenses: 12% The percentage calculated by dividing the Net Usable Footage of the Premises by the Net Usable Footage [74,962] of the Building). Permitted Uses: General office use, including but not limited to operation of national/regional customer service center. Security Deposit: NA Estimated Completion Date: September 25, 1995 2 Total Expenses and Tenant's Expense Charge: As those terms are defined in Section 4 of the Lease. Each reference in this Lease to any of the foregoing Basic Lease Definitions shall be deemed to incorporate all of the terms provided under each such Basic Lease Definition. Section B. Enumeration of Exhibits. The Exhibits enumerated in this Section and attached to this Lease are hereby incorporated in this Lease by this reference and each party agrees to perform all obligations binding upon it under such Exhibits. Exhibit A - Plan delineating the Premises. Exhibit B - Description of Landlord's Work. 1. Premises. Landlord hereby leases the Premises to Tenant and Tenant hereby rents the Premises from Landlord. 2. Construction of Improvements. Landlord agrees to perform the Landlord's Work in the Premises described in Exhibit B. Landlord shall have no obligation to perform any work in the Premises other than Landlord's Work described in Exhibit B. Landlord shall endeavor to substantially complete Landlord's Wok by the Estimated Completion Date set forth in Section A - Basic Lease Definitions, but Landlord shall have no liability whatsoever for failure to complete Landlord's Work by the Estimated Completion Date nor shall Tenant have any rights hereunder on account of such failure. Entry into possession of the Premises shall be deemed conclusive approval by Tenant of all of Landlord's Work except for items thereof which are not completed or do not conform to Exhibit B and as to which Tenant shall have given notice to Landlord within 60 days after the commencement of the Lease Term. In the event Landlord is not required to perform any Landlord's Work pursuant to Exhibit A, then tenant acknowledges that Tenant has fully inspected the Premises, and that Tenant shall accept the Premises in its existing condition on an "as is" basis. Landlord agrees to repair any latent defects in the Premises of which it receives notice, so long as said notice is received within twelve (12) months of delivery of possession to Tenant. All normal utilities are available on the same floor as the Leased Premises. Tenant shall not be charged for Landlord's review of plans and specifications as referred to in Exhibit "B". 3. Rent. Tenant shall, commencing with the Rent Commencement Date and continuing thereafter throughout the remainder of the Lease Term, pay Landlord the "Minimum Rent" specified in Section A - Basic Lease Definitions, without demand, set-off or deduction whatsoever, except as otherwise provided in this Lease, in equal monthly installments on the first day of each calendar month in advance at the address of Landlord set forth in Section A - Basic Lease Definitions or at such other place as Landlord may from time to time designate. Minimum Rent shall be prorated for any fractional 3 calendar month. In addition to the rent therein provided, Tenant shall pay as additional rent all charges required to be paid by Tenant under this Lease, whether or not designated as "additional rent". 4. Total Expenses Escalation; Additional Rent. (A) The term "Total Expenses" shall mean the sum of (i) the "Operating Expenses" (as defined in paragraph (C) of this Section) plus (ii) the "Taxes" (as defined in paragraph (D) of this Section). (B) For each calendar year falling wholly or partially within the term of this Lease after the Rent Commencement Date in which the Total Expenses shall exceed the product obtained by multiplying $6.51 by the Net Usable Footage of the Building ("Base Expenses"), Tenant shall pay a portion of such excess amount ("Excess Total Expenses") determined by multiplying the Excess Total Expenses for such calendar year by Tenant's Percentage of Excess Total Expenses (such amount to be paid by Tenant being herein called "Tenant's Expense Charge"). Tenant's Expense Charge for each calendar year shall be reasonably estimated by Landlord from time to time, and Tenant shall pay the amount so estimated to Landlord in monthly installments on the first day of each calendar month in advance. Within 90 days following the end of each calendar year during the term of this Lease after the Rent Commencement Date in which there shall be excess Total Expenses, Landlord shall furnish Tenant with a statement in reasonable detail of the Total Expenses for such calendar year and, within thirty days after its receipt, Tenant shall pay Landlord, any further amount of Tenant's Expense Charge shown to be due by the statement. If such statement shall disclose that Tenant shall have overpaid Tenant's Expense Charge for such calendar year, such overpayment shall be applied against the next ensuing payment(s) of Tenant's Expense Charge or upon the expiration of the Lease Term refunded to Tenant if Tenant has discharged all of its obligations under the Lease. The failure of Landlord to bill any amount due under this paragraph for the calendar year in which such amount was incurred shall not be deemed a waiver of Landlord's right to so bill such amount at a subsequent time. (See Rider, Paragraph 1) (C) The term "Operating expenses" shall include the total costs and expenses incurred by Landlord in operating and maintaining the Total Building Facilities, including, without limitation, the cost and expense of the following: snow removal, gardening, landscaping, planting, replanting, and replacing flowers and shrubbery; cleaning, striping and resurfacing of parking areas; public liability, property damage, and fire insurance for the Total Building Facilities with such extended coverage, such loss of rental and vandalism endorsements as Landlord may, from time to time, deem necessary, plus "all risk" or "DOC" insurance; repairs and maintenance, painting and decorating of nonrentable square feet; electricity (exclusive of electrical service furnished to rentable space in excess of that normally provided by Landlord and for which Landlord receives payment specifically therefor from the occupant of such space), water, gas and other utilities (including, without limitation, all capital expenditures intended to reduce the cost of any utilities); maintenance and replacement of fixtures and bulbs; elevators and service contracts thereon, parking operating systems, and regulating automobile and pedestrian traffic; water retention ponds; sanitary control, extermination, and sump maintenance 4 and improvements; removal of rubbish, garbage and other refuse; security systems and policing of the Total Building Facilities; sewer charges; machinery and equipment used in the operation and maintenance of the common areas (including the costs of inspection and depreciation thereof but not the capital cost thereof); replacement of paving, curbs and walkways and drainage facilities; music program services and loud speaker systems; heating, ventilating and air conditioning the Building; cleaning and janitorial services; maintenance of decorations, lavatories and elevators; maintenance and repair of all doors and glass in common areas and building roof and exterior walls and glass; landscaping and fire sprinkler systems; cost of personnel directly involved in implementing all of the aforementioned (including fringe benefits and workmen's compensation insurance covering personnel), plus an amount equal to 15% of the total of all of the foregoing as an agreed upon reimbursement covering the administrative costs to be incurred by Landlord in connection with the administration of the Operating Expenses. (See rider, Paragraph 2) (D) (1) The term "Taxes" as used in this Section shall mean for each calendar year falling wholly or partially within the term of this Lease after the Rent Commencement Date all real estate taxes, assessments, water and sewer rents and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, foreseeable and unforeseeable (including, without limitation, assessments for public improvements or benefits and interest on unpaid installments thereof), and each and every installment thereof which shall or may during any full or partial calendar year be levied, assessed, imposed, become due and payable, or liens upon or arising in connection with the use, occupancy or possession of or grow due or be payable out of, or for, the Total Building Facilities or any part thereof (including leasehold improvements, betterments and other permanent improvements). A tax bill or copy thereof submitted by Landlord to Tenant shall be conclusive evidence of the amount of Taxes or installments thereof (see Rider, Paragraph 3) (2) Taxes shall not include any inheritance, estate, succession, transfer, gift, franchise, corporation income or profit tax or capital levy that is or may be imposed upon Landlord; provided, however, that if, at any time during the term of this Lease, the method of taxation prevailing at the execution of this Lease shall be altered so that in lieu of or as a substitute to the whole or any part of the taxes not levied, assessed or imposed on real estate as such, there shall be levied, assessed or imposed (i) a tax on the rents received from real estate, or (ii) a license fee measured by the rent receivable by Landlord for the Total Building Facilities or any portion thereof, or (iii) a tax or license fee imposed on Landlord which is otherwise measured by or based, in whole or in part, upon the Total Building Facilities or any portion thereof, or (iv) any other tax or levy imposed in lieu of or as a supplement to Taxes which are in existence as of the date of execution of this Lease, then the same shall be included in the computation of Taxes hereunder, computed as if the amount of such tax or fee so payable were that due if the Total Building Facilities were the only property of Landlord subject thereto. (E) For the partial calendar years, if any, which fall immediately after the Rent Commencement Date or at the end of the Lease Term, (i) Tenant's Expense Charge shall be prorated and (ii) the Base Expenses shall, for the purpose of applying the provisions of paragraph (B) of this 5 Section, be reduced to any amount computed by multiplying the Base Expenses by a fraction, the numerator of which is the number of days in such partial calendar year and the denominator of which is 360 days. 5. Late Charges. If Tenant shall fail to pay any rent or any other charge payable under this Lease within ten days after notice that the same is due and payable, Tenant shall pay Landlord interest on the past due amount at a rate of interest equal to the lesser of (i) the highest lawful rate of interest per annum that may be charged to Tenant under the laws of the State of Kansas, or (ii) the rate of twenty percent per annum, from the due date to the date of payment. 6. Security Deposit. 7. Use. Tenant shall use the Premises solely for the Permitted Uses set forth in Section A - Basic Lease Definitions, and for no other use or purpose whatsoever. Anything in this Lease to the contrary notwithstanding, in no event shall Tenant operate a commercial bank or savings and loan association in the Premises. 8. Assignment and Subletting. (A) Tenant shall not voluntarily, involuntarily or by operation of law assign or encumber this Lease, in whole or in part, nor sublet all or any part of the Premises without the prior consent of Landlord in each instance. The consent by Landlord to any assignment, encumbrance or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment, encumbrance or subletting. Notwithstanding any assignment or subletting, Tenant shall remain fully liable under this Lease and shall not be relieved from performing any of its obligations hereunder. As a condition to any assignment of this Lease by Tenant which is permitted under this Lease, the assignee thereof shall be required to execute and deliver to Landlord an agreement, in recordable form, whereby such assignee assumes and agrees with Landlord to discharge all obligations of Tenant under this Lease. (B) If Tenant shall request Landlord's consent to any assignment of this Lease or to any subletting of all or any part of the Premises, Tenant shall submit to Landlord with such request the name of the proposed assignee or subtenant, such information concerning its business, financial responsibility and standing as Landlord may reasonably require, and the consideration and rents (and terms and conditions thereof) to be paid for and the effective date of the proposed assignment or subletting. Upon receipt of such request and all such information, Landlord shall have the right (without limiting Landlord's right of consent in respect of such assignment or subletting), by giving notice to Tenant within fifteen (15) days thereafter, (i) to terminate this Lease if the request is for an assignment or a subletting of all the Premises, or (ii) if such request is to sublet a portion of the Premises only, to terminate this Lease with respect to such portion. If Landlord exercises its right to terminate this Lease, the effective date of termination shall be set forth in Landlord's notice to Tenant, but such date shall not be earlier than the effective date of the proposed assignment or subletting nor later than ninety (90) days thereafter. If Landlord so elects to terminate this Lease, Tenant shall continue to pay the Minimum Rent 6 and other charges hereunder to Landlord until the effective date of termination, on which date Tenant will surrender possession of the Premises, or the portion thereof subject to such right of termination, to Landlord in accordance with the provisions of Section 17 hereof. If Landlord shall terminate this Lease as to a portion of the Premises only, then following such termination the Minimum Rent and Tenant's Percentage of Excess Total Expense shall be reduced in the same proportion as the number of square feet of Net Useable Footage in such portion of the Leased Premises bears to the number of square feet of Net Useable Footage in the Premises immediately prior to such termination. (C) If Tenant shall request Landlord's consent to an assignment of this Lease and Landlord shall consent thereto, the assignee ("Assignee") shall pay directly to Owner, as additional rent hereunder, at such times as the Assignee shall have agreed to pay Tenant, an amount equal to any consideration the Assignee shall have agreed to pay Tenant on account of such assignment, less the reasonable costs incurred by Tenant in procuring such assignment or sublease. If Assignee shall fail to pay Landlord any such consideration when due, such failure shall constitute a default under this Lease. (D) If Tenant shall request Landlord's consent to a subletting of the Leased Premises or any part thereof and Landlord shall consent thereto, Tenant shall pay Landlord, as additional rent, in addition to the Minimum Rent and other charges payable hereunder, an amount equal to any consideration paid by the subtenant to Tenant in excess of (i) the Minimum Rent and other charges payable hereunder if all of the Premises are so sublet or (ii) if less than all of the Premises are so sublet, the Minimum Rent and other charges payable hereunder allocable to the portion of the Premises so sublet based on the number of square feet of Net Useable Footage in the Premises so sublet to the total number of square feet of Net Useable Footage in the Premises less the reasonable costs incurred by Tenant in procuring such assignment or sublease. The foregoing amount shall be determined monthly and paid by Tenant to Landlord on the first day of each calendar month in advance during the term of such sublease. If Tenant shall fail to pay Landlord any such consideration, such failure shall be a default under this Lease. The Landlord's consent to any subletting shall be conditioned upon the proposed sublease containing a prohibition against the payment of rent by the proposed subtenant ("Subtenant") based in whole or in part on the net income or profits derived by Subtenant from the Premises, it being agreed that Tenant and Subtenant shall not enter into any sublease, license, concession or other agreement for any use, occupancy or utilization of the Premises which provides for a rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from that portion of the Premises so leased, used, occupied or utilized. (E) If Tenant is a corporation, Tenant shall be deemed in default hereunder if a cumulative total of more than 49% of Tenant's stock shall be transferred in any manner during the Lease Term to other than the present holders thereof or the spouse or lineal descendant of any present holder who is a natural person. (See Rider, Paragraph 4) (F) Tenant agrees to reimburse Landlord for reasonable attorney's fees incurred by Landlord in connection with the processing and documentation of any assignment, subletting, change of 7 ownership or other transfer under this Section for which Landlord's consent is required or sought, it being agreed that Landlord shall not be required to take any action thereon until Landlord is paid such amount. (G) If Landlord conveys or transfers its interest in the Total Building Facilities, upon such conveyance or transfer, Landlord (and in the case of any subsequent conveyances or transfers, the then grantor or transferor) shall be entirely released from all liability with respect to the performance of any obligations on the part of Landlord to be performed hereunder from and after the date of such conveyance or transfer. 9. Subordination; Attornment. (A) Upon the written request of the holder (the "Mortgagee") of any mortgage now or hereafter encumbering the Total Building Facilities or any part thereof, Tenant shall subordinate its rights under this Lease to the lien of such mortgage. Notwithstanding the foregoing, if the Mortgagee elects to have this Lease superior to its mortgage, then upon Mortgagee's request, Tenant shall execute, acknowledge and deliver an instrument, in the form used by said Mortgagee, effecting such priority; PROVIDED, HOWEVER, with respect to the priority of entitlement to insurance proceeds or any award in condemnation, the mortgage shall remain prior to this Lease. In the event proceedings are brought for the foreclosure of, or the exercise of a power of sale under, any such mortgage, or in the event of the sale of the Total Building Facilities, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease. Tenant, upon Landlord's request, shall execute, acknowledge and deliver such instruments as are required to effect the intent of this paragraph. Notwithstanding anything to the contrary herein contained, Tenant shall not subordinate its rights under this Lease to the lien of any junior or second mortgage covering all or part of the Total Building Facilities without the prior consent of the holder of the first mortgage covering all or any part of the Total Building Facilities. Mortgagee shall have no liability for Landlord's failure to perform any of the covenants and obligations Landlord is required to perform hereunder prior to the date, if such date shall ever occur, that Mortgagee shall succeed to Landlord's interest under this Lease. (See Rider, Paragraph 16) (B) If any liens are created in favor of Tenant pursuant to any provision of this Lease, such liens shall be deemed, without the execution of any confirmatory agreement, to be subordinate to the lien of any mortgage now or hereafter covering any part of the Total Building Facilities and all advances made or hereafter to be made upon the security thereof. 10. Estoppel Certificate. Tenant agrees to execute, acknowledge and deliver to and in favor of any proposed mortgagee or purchaser of the Total Building Facilities or any part thereof, within fifteen (15) days after written request by Landlord an estoppel certificate, stating, among other things: (i) whether this Lease is in full force and effect, (ii) whether this Lease has been modified or amended and, if so, identifying and describing any such modification or amendment, (iii) the date to which rent and any other charge has been paid, (iv) whether 8 Tenant knows of any default on the part of Landlord or has any claim against Landlord and, if so, specifying the nature of such default or claim, (v) the date Tenant took possession of the Premises, (vi) the expiration date of the term of the Lease, (vii) the amount, if any, of any rent prepaid by Tenant, and (viii) whether Landlord is required to make any payments to Tenant for leasehold improvements and, if so, whether such payments have been made. Landlord agrees to provide Tenant an estoppel certificate stating that this Lease is in full force and effect upon written request, but in no event _________________________________. 11. Services to be Performed by Landlord. Landlord, at its cost, shall furnish the following services to Tenant: (A) Air conditioning and heating as required (in Landlord's reasonable judgment) for comfortable use and occupancy under normal office conditions, from 8:00 AM to 6:00 PM Monday through Friday, and from 8:00 AM to 1:00 PM on Saturdays, but not on Sundays or legal holidays. (See Rider, Paragraph 5) (B) Water for drinking, lavatory and toilet purposes (but this shall not be construed as requiring Landlord to install plumbing facilities in the Premises). (C) The furnishing of janitor service by Landlord for the Premises shall only include the dusting of ceiling light fixtures and air grills, the washing of windows, the sweeping and cleaning of floors (exclusive of rug shampooing and spot removal) and the disposal of trash from the normally used receptacles for such trash. (D) Electrical energy for the Premises, PROVIDED, HOWEVER, in the event the electrical energy estimated by Landlord's engineer, from time to time during the term of this Lease, to be used in the Premises, shall exceed three (3) watts per square foot of Net Useable Footage Tenant shall pay Landlord the increase in cost incurred by Landlord, as determined by Landlord's engineer, in furnishing to Tenant such excess electrical energy, such amount to be paid monthly, as additional rent, together with Tenant's monthly installment of rent. (E) Self-operated passenger elevator service. Except as otherwise provided herein, no interruption or malfunction of any of such services stall constitute an eviction of Tenant or a breach by Landlord of any of its obligations hereunder or render Landlord liable for damages or entitle Tenant to be relieved from any of its obligations hereunder (including its obligation to pay Minimum Rent, additional rent and other charges) or create in Tenant any right of. set-off or recoupment. In the event of any such interruption, Landlord shall use reasonable diligence to restore such service. (See Rider, Paragraph 6) 12. Repair and Maintenance. 9 (A) Tenant shall take good care of the Premises and the fixtures and equipment therein, and shall comply with all federal, state, municipal and other laws, ordinances, rules and regulations applicable to the Premises and the business conducted therein and with the rules and recommendations of Landlord's insurance carriers. (B) Subject to the provisions of Sections 15 and 16, Landlord shall make or cause to be made all necessary repairs to the Building and to the Premises, except where the repair is made necessary by misuse or neglect by Tenant, its agents, servants, subtenants or invitees, in which event Tenant shall make such repair with due diligence. Landlord shall not be deemed to have breached its obligation to make the repairs required to be made by Landlord unless Landlord fails to make the same within a reasonable period (taking into consideration the type of repair involved) after receiving notice from Tenant of the need therefor. 13. Indemnity; Insurance; Mechanics Liens. (A) Except for the default or negligence of Landlord, its agents or employees, Tenant shall indemnify and hold Landlord harmless from and against any and all actions, claims, demands, costs (including reasonable attorney's fees), damages or expenses of any kind which may be asserted against or incurred by Landlord as the result of any occurrence in or about the Premises or by reason of Tenant's use or occupancy of the Premises, or by reason of the failure of Tenant to perform any of its obligations under this Lease. Tenant agrees to maintain during the term, comprehensive general public liability insurance under which Landlord and Tenant are named as insureds, with minimum limits of not less than $1,000,000 (combined single limit bodily injury and property damage), and containing a contractual endorsement covering Tenant's indemnity obligations under this paragraph. A current certificate of such insurance shall be deposited with Landlord at all times which shall provide that such insurance may not be altered, terminated or lapse without at least 10 days prior written notice to Landlord. (See Rider, Paragraph 7) (B) Tenant shall not suffer any mechanics' or materialmen's lien to be filed against the premises or the Total Building Facilities or any part thereof by reason of work, labor, services or materials performed or furnished to Tenant or anyone holding the Premises under Tenant. (See Rider, Paragraph 8) (C) Anything in this Lease to the contrary notwithstanding, it is agreed that each party (the "Releasing Party") hereby releases the other (the "Released Party ") from any liability which the Released Party would, but for this paragraph (C), have had to the Releasing Party during the term of this Lease, resulting from the occurrence of any accident or occurrence or casualty (i) which is or would be covered by a fire and extended coverage policy (with a vandalism and malicious mischief endorsement attached) or by a sprinkler leakage, boiler and machinery or water damage policy in the State of Kansas (irrespective of whether such coverage is being carried by the Releasing Party), or (ii) covered by any other casualty or property damage insurance being carried by the Releasing Party at the time of such occurrence, which accident, occurrence or casualty may have resulted in whole or in part 10 from any act or neglect of the Released Party, its officers, agents or employees; PROVIDED, HOWEVER, the release hereinabove set forth shall become inoperative and null and void it the Releasing party wishes to place the appropriate insurance with an insurance company which (y) takes the position that the existence of such release vitiates or would adversely affect any policy so insuring the Releasing Party in a substantial manner and notice thereof is given to the Released Party, or (z) requires the payment of a higher premium by reason of the existence of such release, unless in the latter case the Released Party within 10 days after notice thereof from the Releasing Party pays such increase in premium. 14. Liability of Landlord. Unless due to the negligent acts or omissions of Landlord or its agents, Landlord shall not be liable for damage to property in or on the Premises resulting from the condition of the Premises or the Total Building Facilities or any part thereof or from the act or omission of Tenant or of any other tenant or from the bursting or leaking of any pipes, utility lines, equipment or apparatus in, on or about the Premises or the Total Building Facilities or any part thereof, or from water, rain or snow which may leak into, issue or flow from any part of the Building or due to fire, explosion, action of the elements, or other casualty, or due to any lack of, or failure to provide, security with respect to the Total Building Facilities or any part thereof and Tenant hereby releases Landlord from any liability which Landlord would otherwise have therefor. Tenant shall give Landlord prompt written notice of any accident to or defect in the Total Building Facilities or any portion thereof of which Tenant has knowledge. 15. Fire or Other Casualty. If the Premises or the Building shall be destroyed by fire or other casualty, then Landlord shall repair or restore the Premises and the Building with reasonable diligence (subject to delays caused by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power or other reasons of a like nature not the fault of Landlord), and during the period of such restoration or repair the Minimum Rent shall equitably abate to the extent the Premises are materially affected thereby; PROVIDED, HOWEVER, in the event any such casualty damage renders the Premises or the Building partially or totally untenantable (in Landlord's sole judgment), Landlord shall have the right to terminate this Lease by giving notice thereof to Tenant within 30 days following the occurrence of such casualty, and if Landlord so elects, (i) Landlord shall have no obligation to repair or restore the Premises or the Building, (ii) this Lease shall automatically terminate as of the date of such notice, (iii) the Minimum Rent, additional rent and other charges shall be adjusted as of the date of the occurrence of such casualty and (iv) neither party shall have any liability by reason of such termination. (See Rider, Paragraph 9) 16. Eminent Domain. If the Total Building Facilities or any part thereof shall be taken by eminent domain, or conveyed in lieu thereof, Landlord shall have the right to terminate this Lease by giving notice thereof to Tenant, and if Landlord so elects, this Lease shall cease, and the charges payable hereunder shall be adjusted, as of the date 30 days following the giving of such notice. If this Lease is not terminated, then Landlord shall repair any damage to the Building, this Lease shall continue in full force and effect, and the Minimum Rent, additional rent and other charges shall not be abated or reduced, except if a portion of the Premises is taken in which event the Minimum Rent and other 11 charges shall be reduced in proportion to the amount of Net Useable Footage of the Premises so taken. Irrespective of whether this Lease is terminated, Landlord shall receive the entire condemnation award, and Tenant hereby assigns to Landlord all of Tenant's interest therein. (See Rider, Paragraph 17) 17. Surrender and Alterations. (A) On the last day of the term or on the sooner termination thereof, Tenant shall, (i) subject to the provisions of Section 15, peaceably surrender the Premises broom-clean and in good order and repair (subject to Landlord's obligations under paragraph (B) of Section 12), except for reasonable wear and tear, and (ii) at its expense, remove from the Premises its office supplies, moveable office furniture and equipment and personal property ("Tenant's Property"), and any of Tenant's Property not so removed may, at Landlord's option and without limiting Landlord's right to compel the removal thereof, be deemed abandoned, in which event Landlord, in addition to its other rights and remedies and without liability to Tenant or to any other party, shall be entitled to retain such property as its own free and clear of all claims of Tenant or any other party. The removal of any of Tenant's Property shall be at Tenant's expense and Tenant shall not damage the Building or the Premises during the course of such removal. Any expense incurred or damage suffered by Landlord in connection with such removal may, without limiting Landlord's other rights and remedies, be deducted by Landlord from the Security Deposit. (B) The title to all alterations, additions, improvements, repairs and decorations (including paneling, wall coverings, wall to wall carpeting and any other article affixed or attached to the walls, floors, ceilings or windows) shall vest in Landlord upon the installation thereof and shall be surrendered with the Premises as a part thereof, without charge. (C) Tenant shall not make any alterations, additions or improvements to the Premises without the prior written consent of Landlord. 18. Access to Premises. Landlord, its agents and employees, shall have the right to enter the Premises at any time for any purpose deemed reasonable by Landlord. Landlord expressly reserves the right to run necessary pipes, conduits and ducts through the Premises and to carry on work in the vicinity thereof, and Tenant hereby waives any claim for damages or inconvenience caused by reason thereof. (See Rider, Paragraph 10) 19. Default and Remedies. (A) Each of the following shall constitute an "Event of Default": (1) If Tenant shall fail to pay when due any Minimum Rent, additional rent or other charge payable by Tenant under this Lease and such default shall continue for ten (10) days after Landlord gives written notice thereof to Tenant; or 12 (2) If Tenant shall fail to observe or perform any other provision of this Lease, and such default shall continue for a period of thirty (30) days after Landlord gives written notice thereof to Tenant; or (3) If Tenant vacates or abandons the Premises. (B) In the Event of Default, Landlord may, at its option, either (i) terminate this Lease, or (ii) without terminating this Lease, take possession of the Premises, with or without process of law, using such force as may be necessary to remove all persons and personal property therefrom, and in the event of such re-entry without termination, Landlord may (but shall have no obligation to do so), lease the Premises for the remainder of the term or for a lesser or longer period on such terms and conditions as Landlord, in its sole judgement, deems advisable and for the purpose of such re-letting, Landlord is hereby authorized to make such repairs and alterations as Landlord deems necessary. Notwithstanding any re-letting without termination, (y) Tenant shall remain liable for payment of the Minimum Rent, additional rent and all other charges and for the performance of all other obligations to be performed by Tenant under this Lease, and (z) Landlord may at any time thereafter elect to terminate this Lease for such previous breach. The rentals received from any such re-letting shall first be applied to the expenses of such re-letting (including alteration and repair expenses, and reasonable brokerage and attorney's fees) and second to the payment of rent and other charges due and unpaid hereunder. Tenant shall not be entitled to receive any surplus funds received by Landlord from any such re-letting. If such funds from the re-letting are less than those required to be paid by Tenant hereunder for any month, such deficiency shall be calculated and payable monthly by Tenant. Landlord shall also be entitled to collect from Tenant any other loss or damage which Landlord may sustain by reason of Tenant's default under this Lease. (C) If the estate created hereby shall be taken from Tenant by execution, or by other process of law, or if Tenant applies for or consents to the appointment of a receiver or a receiver is appointed for Tenant who is not discharged within thirty (30) days from the date of his appointment, or if all or a substantial part of Tenant's property is taken into the possession of any officer or agency, state or federal, or by any person or persons legally designated by such officer or agency under powers conferred upon such officer or agency by the laws of the State of Kansas or the United States, for the purpose of liquidating or winding up Tenant's affairs and such possession continues for thirty (30) days, or if any bankruptcy, reorganization, debt arrangement or other proceedings under any bankruptcy or insolvency law now or hereafter enacted or any dissolution or liquidation proceedings whatsoever, is instituted by or against Tenant which remains undismissed for thirty (30) days, then and in every such event, Landlord may at its option declare the term hereof ended without notice and this Lease shall forthwith be considered forfeited and the term hereof ended. (D) (See Rider, Paragraph 11) 20. Landlord's Rights to Cure Defaults. If Tenant fails to perform any obligation on its part to be performed under this Lease, Landlord shall have the right (i) if no emergency exists, to 13 perform the same after giving 20 days notice to Tenant; and (ii) in any emergency situation to perform the same immediately without notice or delay. Tenant shall on demand reimburse Landlord for the costs incurred by Landlord in rectifying Tenant's defaults as aforesaid, including reasonable attorneys' fees. Except for negligence by Landlord, Landlord shall not be liable or in any way responsible for any loss, inconvenience or damage resulting to Tenant for any action taken by Landlord pursuant to this Section. 21. Legal Expanses; Remedies Cumulative. (A) In case suit shall be brought because of the breach by Tenant of any of its obligations under this Lease, Landlord shall be entitled to recover all expenses incurred in connection with such breach, including reasonable attorney's fees. (See Rider, Paragraph 12) (B) Landlord's rights and remedies shall be cumulative and may be exercised and enforced concurrently, and no right or remedy of Landlord shall be deemed to be exclusive of any other right or remedy it may have. 22. Building Name. Landlord reserves the right to change the name of the Building from time to time, and Landlord shall have no liability to Tenant in connection therewith. 23. Landlord's Right to Alter. Landlord shall have the right at any time (and from time to time) (i) to alter the size, area, level and location of hallways, entrances, parking areas, driveways, sidewalks, landscaped areas and all other portions of the Total Building Facilities, (ii) to construct additional stories on the Building, and additional buildings in the vicinity thereof, (iii) to permit owners or occupants of land outside the Building Land and their invitees to use the parking areas, roads and sidewalks on the Building Land, (iv) to relocate all or any part of any building or parking area, and (v) to relocate the premises leased to any other tenant. 24. Notices. Any notice or approval required or given in connection with this Lease shall be in writing and shall either be delivered by hand or shall be sent by United States certified mail, postage prepaid: If to Landlord, at its address set forth in Section A - Basic Lease Definitions, and to Lewis, Rice & Fingersh, One Petticoat Lane, 1010 Walnut Street, Suite 500, Kansas City, Missouri 64106 If to Tenant, Weight Watchers North America, Inc., 500 N. Broadway, Jericho, New York 11753-2196. Attention Real Estate Department. cc: Leased Premises Each party's address may be changed from time to time by such party's giving notice as provided above. Notice shall be deemed given when delivered (if delivered by hand) or when postmarked (if sent by mail). Whenever Landlord's consent or approval is required (i) the same must be obtained in 14 writing, and oral consents shall be of no effect and (ii) such consent or approval shall not be unreasonably withheld or delayed. 25. Rules and Regulations. Tenant agrees to comply with and observe the following Rules and Regulations. Landlord reserves the right, at any time, once or more often, by notice to Tenant, to amend or supplement said Rules and Regulations in a reasonable manner. (See Rider, Paragraph 13) (A) Tenant shall not obstruct any of the Building common areas, nor shall any litter or material be placed in the common areas, nor shall such areas be used for any purpose except for ingress and egress, nor shall Tenant have any special rights in the common areas on account of the use of the common areas square footage to calculate the Premises Net Leaseable Footage under Section A - Basic Lease Provisions. (B) Tenant shall not have any sign or lettering on any part of the Building, or on any part of the Premises which can be seen from the outside of the Premises, except for Tenant's identification in the Building directory and on the entrance to the Premises, each of which identifications shall be of a design designated by Landlord, and shall be at Tenant's expense. (C) Tenant shall not place any unsightly thing (in Landlord's judgment) in the Premises which is visible from outside the Premises. Blinds, shades, draperies or other forms of inside window coverings shall not be placed in the Premises except to the extent, if any, that the appearance thereof is approved by Landlord, and Tenant shall not do any painting or decorating in the Premises nor make, paint, cut or drill into, drive nails or screws into, nor in any way deface any part of the Premises or the Building without the prior consent of Landlord. Tenant shall not overload any floor or facility in the Building. Tenant shall keep the Premises sightly and clean. (D) Tenant shall not attach additional locks or similar devices to any door or window, change existing locks, or make or permit to be made any additional keys. If more than two keys for one lock are desired, Landlord will provide them upon payment therefor by Tenant. Upon termination of this Lease or Tenant's possession, Tenant shall promptly surrender to Landlord all keys to the Premises. (E) Tenant shall not use or permit to be brought into the Building hazardous materials. (See Rider, Paragraph 14) (F) Tenant shall not obstruct or interfere with the rights of other tenants, nor in any way injure or annoy them, nor do anything which would constitute a nuisance or which would damage the reputation of the Building. (G) The bringing into the Building or removal therefrom of furniture, fixtures or supplies, when of large weight or bulk, shall be done at such times and along such Building routes as the 15 custodian of the Building shall require. All damage to the Building caused by such deliveries or removals shall be repaired at the expense of Tenant. (H) If Tenant desires telephone connections, Landlord will designate the location and manner in which the wires shall be introduced, and no other boring or cutting for wires will be permitted. (I) Tenant shall not install any internal combustion engine, boiler, refrigerator (except small household type refrigerators customarily used in general offices), or heating or air conditioning apparatus in the Building, carry on any mechanical business in the Building, use the Premises for housing, lodging or sleeping purposes, permit preparation or warming of food in the Premises nor permit food to be brought into the Premises for consumption therein (warming of coffee and individual lunches of employees excepted), place any radio or television antennae other than inside of the Premises, operate any sound-producing instrument which may be heard outside the Premises, operate any electrical device from which may emanate electrical waves which may interfere with or impair radio or television broadcasting or reception from or in the Building or elsewhere, bring into the Building any bicycle or other vehicle, or dog (except in the company of a blind person), or other animal, insect or bird, permit any objectionable noise or odor to emanate from the Premises, disturb, solicit or canvass any occupant of the Building, use the plumbing facilities for any purpose other than that for which they are constructed, or waste any of the utilities furnished by Landlord. (J) Tenant shall not burn any trash, rubbish or garbage in or about the Premises or the Building. Tenant shall not store any trash, rubbish or garbage in the Premises except in a sanitary and inoffensive manner inside the Premises or in areas approved by Landlord. (K) Tenant shall use its best efforts to secure compliance with these rules and regulations (together with any authorized amendment or supplement thereto) by Tenant's customers and other invitees. 26. Parking Areas. To serve generally Landlord's designees and the occupants of the Building and their invitees, Landlord shall, subject to any governmental taking or conveyance in lieu thereof, maintain parking areas on the Building Land, which shall be subject to the exclusive control of Landlord. Tenant agrees to furnish Landlord upon request with the license numbers of all automobiles of Tenant and its employees, and agrees to keep such list current. Landlord reserves the right to designate the portions of the parking areas in which Tenant and its employees must park their automobiles. If Tenant or its employees shall park their automobiles in areas other than those designated by Landlord, Landlord shall have the right with respect to each such automobile (i) to affix a notice of violation of this rule on such automobiles, (ii) to have such automobiles towed away at Tenant's expense (and Landlord shall have no liability in connection with any damage to such automobile resulting therefrom) and/or (iii) to fine Tenant $10 per day for each day or portion thereof such automobiles are parked in violation of this provision. Landlord shall have the right to reduce (but 16 not below the amount required by code) and rearrange the layout or location of the parking areas from time to time. Tenant and its employees shall not park their automobiles within any fire lanes or driveways on the Building Land or within any areas in which parking is prohibited by applicable governing ordinance. 27. Non-Waiver. Neither acceptance of rent by Landlord or failure by Landlord to complain of any default of Tenant shall constitute a waiver of any of Landlord's rights hereunder. Waiver by Landlord of any breach of any provision herein by Tenant shall not be deemed a waiver of any subsequent breach of the same or any other provision herein contained. No provision of this Lease shall be deemed to have been waived unless such waiver shall be in writing and signed by Landlord. Receipt by Landlord of Tenant's keys to the Premises shall not constitute an acceptance of surrender of the Premises. (See Rider, Paragraph 15) 28. Holding Over. If Tenant remains in possession of the Premises after the expiration of the term of this Lease, without the execution of a new lease, then, at Landlord's option, Tenant shall be deemed to be occupying the Premises as a month to month Tenant, subject to all the provisions of this Lease insofar as they are applicable to a month to month tenancy, but at a daily rental of 1-1/2 the per day rental provided under this Lease, computed on the basis of a thirty (30) day month. 29. Limitation on Landlord's Liability. Notwithstanding anything set forth in this Lease to the contrary, it is agreed that Tenant shall look solely to the equity of Landlord in the Total Building Facilities for the satisfaction of the remedies of Tenant in the event of a breach by Landlord of any of the provisions of this Lease, and Landlord shall not be liable for any such breach except to the extent of Landlord's equity in the Total Building Facilities. 30. Entire Agreement and Binding Effect. This instrument and any attached addenda or exhibits signed or initialled by the parties constitute the entire agreement between Landlord and Tenant; no prior written or prior or contemporaneous oral promises or representations shall be binding. This Lease shall not be amended, changed or extended except by written instrument signed by both parties hereto. Section captions herein are for convenience only, and neither limit nor amplify the provisions of this instrument. The provisions of this Lease shall be construed in accordance with the laws of the State of Kansas. The provisions of this instrument shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties, but this provision shall in no way alter the restriction in this Lease against assignment and subletting by Tenant. If there is more than one Tenant under this Lease, they shall be bound jointly and severally by all provisions herein contained. 31. Rights of Landlord's Mortgagee. Within fifteen (15) days after demand by the holder of any mortgage covering all or any part of the Total Building Facilities, Tenant shall execute, acknowledge and deliver an agreement in favor of and in the form customarily used by such encumbrance holder, by the terms of which Tenant will agree to give prompt notice to such encumbrance holder in the event of any casualty damage to the Premises or in the event of any default on the part of Landlord under this Lease, and will agree to allow such encumbrance holder a 17 reasonable length of time (taking into consideration for the purpose of determining such permitted length of time any delays encountered by reason of strikes, lockouts, labor troubles, inability to procure materials, riots, failure of power and other reasons of a like nature not the fault of such encumbrance holder) after notice to cure or cause the curing of such default before exercising Tenant's rights of self-help under this Lease, if any, or terminating or declaring a default under this Lease. 32. TRIAL BY JURY WAIVER. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, OR TENANT'S USE AND OCCUPANCY OF THE PREMISES. 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 89 STATE LINE LIMITED PARTNERSHIP By: CWB ASSOCIATES, INC. By:________________________________ Printed Name:______________________ Title:_____________________________ Landlord WEIGHT WATCHERS NORTH AMERICA, INC. By:________________________________ Printed Name:______________________ Title:_____________________________ Tenant ATTEST: ___________________________ Printed Name:______________ Title:_____________________ 19 RIDER 1. Tenant shall have the right to audit the common area expenses and any and all other costs, charges or expenses (collectively, the "charges") for which Tenant is responsible to reimburse Landlord pursuant to this Lease, and Landlord agrees to cooperate with any such audit. Landlord shall maintain complete books and records in accordance with generally accepted accounting principles. Such audit(s) shall take place within one (1} year after such costs, charges or expenses are due in accordance with the terms hereof. If it shall be determined as a result of such audit(s) that Tenant has overpaid any of such charges, Landlord shall promptly refund to Tenant the amount of such overpayment. If the amount of Tenant's overpayment exceeds five percent (5%) of said charges, Landlord shall promptly pay the cost of said audit(s) upon Tenant's submission of an invoice for same. 2. Operating expenses shall not include any of the following, except as otherwise specifically provided below: a. Any ground lease rental; b. Capital expenditures as follows: those required by Landlord's failure to comply with the laws enacted before or during the term of this Lease; those which would add net rentable area to the Building; and/or those relating to paintings, sculptures, or similar works of art; c. Costs of capital improvements made to reduce Annual Operating Expenses above the amount actually saved as the result of such capital improvements; d. Costs incurred by Landlord for the repair of damage to the Building, to the extent that Landlord is reimbursed by insurance proceeds or to the extent such damage occurs as a result of a casualty as to which the insurance provisions of this Lease apply; e. Costs, including permit, license and inspections costs, incurred with respect to the installation of tenant renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building; f. Depreciation and amortization, except as provided herein and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation and amortization would otherwise have been included in the charge for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied; 1 g. Leasing commission, attorney's fees, and other costs and expenses incurred in connection with the following: negotiations or disputes with present or prospective tenants or other occupants of the Building; and/or sale or refinancing of the Project; h. Expenses in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged for directly but which are provided to another tenant or occupant of the Building; i. Costs incurred by Landlord due to the violation by Landlord or any tenants of the terms and conditions of any lease of space in the Building; j. Overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for services in the Building to the extent the same exceeds the cost of such class office buildings in the Metropolitan area; k. Interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debit instrument encumbering the Project; l. Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord (and any costs for capital improvements associated with such commercial concessions). m. Except for making repairs or keeping permanent systems in operation while repairs are being made, rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered of a capital nature, except equipment not affixed to the Building, which is used in providing janitorial or similar services; n. Advertising and promotional expenditures and costs of signs in or on the Building identifying the Owner of the Building, other than in connection with the use and operation of the Project; o. Electric power costs for which any tenant directly contracts with the local public service company; p. Costs incurred in connection with the cleanup or removal of any Hazardous Materials in or about the Building; q. Any other expenses which, in accordance with generally accepted accounting principles, consistently applied, would not normally be treated as an Operating Expense by landlords of comparable first-class institutional quality office buildings. 2 r. Interest and penalties resulting from Landlord's intentional or negligent violation of applicable laws. s. Costs incurred in the upgrading of the building to comply with the handicap, life, fire and safety codes in effect as of the date of this Lease. 3. With respect to any special assessments which may be levied as part of the Taxes, Tenant shall pay such assessment in installments over the time period as Landlord elects to pay installments. If Landlord secures an abatement or refund of any Taxes, Tenant shall receive its proportionate share of the amount of such abatement or refund (i.e., the net amount remaining after paying all reasonable costs and expenses of securing the abatement or refund, including reasonable attorneys' fees) as a credit to be applied by Landlord against Rent (so long as credit does not reduce Tenant's pro rata share of operating expenses below $6.51 per Net Usable Square Foot) next becoming due (or, if no further Rent is due from Tenant, by a cash payment by Landlord to Tenant). 4. (E) Tenant shall have the right to assign this lease or sublet the Premises subject to Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Tenant shall have the right, without Landlord's consent, to assign this Lease or sublease the premises to (a) an affiliate, subsidiary or parent of Tenant; (b) an entity with which Tenant is merged or consolidated; (c) an entity which purchases or otherwise acquires the assets and/or stock of Tenant, provided such entity shall continue to use the Premises for the purposes specified herein and in substantially the same manner, or (d) and said assignee has a net worth equal or greater than the Tenant. 5. The general design criteria for the office area shall produce 75 degrees F. inside when the outside temperature is 95 degrees F. Heating shall produce 70 degrees F. inside when the outside temperature is 5 degrees F. 6. Landlord covenants and agrees to exercise all reasonable efforts not to interfere with the conduct of Tenant's business in the Premises and to exercise due diligence in repairing, replacing or restoring any interruption in service or utilities. If any utility to the Premises should become unavailable for a period in excess of forty-eight (48) consecutive hours and Tenant elects to close the Premises as a result thereof, all Rental shall abate from the commencement of said unavailability of such utility services until such time as said utility service is restored to the Premises. 7. Tenant may maintain the required liability insurance in the form of a blanket policy covering other locations of Tenant in addition to the Premises; provided, however, that Tenant shall provide Landlord with a certificate of insurance specifically naming the location of the Premises, 3 and naming Landlord as required in this section, the limits of which coverage are to be in the amounts set forth in this section. 8. Nothing contained herein shall obligate Tenant to pay, discharge or bond-over any lien created by Landlord or any party other than Tenant, its agents, employees or contractors. 9. Notwithstanding anything contained herein to the contrary, if Landlord is unable to commence to repair, restore or rebuild the Premises within nine (9) months after the occurrence of any such casualty or substantially complete repairs to the Premises within twelve (12) months after the occurrence of such casualty, Tenant or Landlord may terminate this Lease upon thirty (30) days notice to the other after the expiration of the applicable time period and upon the expiration of said thirty (30) day notice period, neither party hereto shall have any further obligation to the other with respect to this Lease or the tenancy created hereby except for obligations occurring or accruing prior to such terminate. Landlord agrees that it shall not discriminate against Tenant in the exercise of its right to terminate this Lease in accordance with the provisions of this section. 10. Landlord shall have the right at all reasonable times upon reasonable advance notice to Tenant (and without notice in cases of emergency), to enter the premises to inspect, maintain, repair and/or make replacements as required under this Lease, so show the Premises to prospective purchasers of the Building, and during the last ninety (90) days of the term hereof, as same may be extended, to show the Premises to prospective tenants. Landlord agrees to use its best efforts to keep such entries to a minimum and, further, during any such entry Landlord shall use its best efforts not to disturb or inconvenience Tenant in the conduct of Tenant's business in the Premises. Except as otherwise expressly provided in this Lease, Landlord shall refrain from entering the Premises or conducting any work therein without the prior consent of Tenant. 11. (D) No reference to any specific right or remedy shall preclude Tenant or Landlord from exercising any other rights or from having any other remedy or from maintaining any action to which it may otherwise be entitled at law or in equity. No failure by Tenant or Landlord to insist upon the strict performance of any agreement, term, covenant or condition hereof, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver cf any such breach, agreement, terms, covenant or condition. No waiver by Tenant or Landlord of any breach by other under this Lease shall affect this Lease in any way whatsoever. In the event Landlord defaults in the performance of any of its obligations, covenants and warranties hereunder and such default continues for a period of thirty (30) days after written notice thereof to Landlord from Tenant specifying the nature of such default, or such additional period as Landlord may reasonably require to cure the same, Tenant may, at its option, cure the same on behalf of Landlord, whereupon the cost of such curing shall be immediately due and payable to Tenant from Landlord upon written demand therefor by Tenant. 4 12. (A) In the event the parties hereto become involved in any proceeding to enforce this Lease or the rights, duties or obligations hereunder, the prevailing party in such proceedings shall be entitled to receive, as part of any award, reasonable attorneys' fees. 13. Notwithstanding anything to the contrary contained herein, all rules and regulations, whether now existing or hereafter adopted by Landlord, shall be non-discriminatory and uniformly enforced, if at all, against all tenants of the Building and shall not adversely affect the conduct of Tenant's business within the Premises. 14. Landlord represents and warrants that the Premises are free of all asbestos, asbestos containing materials and other hazardous or toxic materials (collectively, "Hazardous Materials"). Notwithstanding any provision of the Lease to the contrary, Tenant shall have no obligation to make any repairs, alterations or improvements to the Premises or incur any costs or expenses whatsoever as a result of Hazardous Materials in the Premises, other than those Hazardous Materials brought onto the Premises by Tenant. Landlord shall be solely responsible for any changes to the Premises relating to Hazardous Materials or as required by any present or future laws, ordinances or regulations of any governmental authority, insurance carrier or any similar body, other than those Hazardous Materials brought onto the Premises by Tenant. 15. Payment by Tenant of any Rent, Percentage Rent, Additional Rent and/or charges with knowledge of the breach of any covenant or condition of this Lease by Landlord shall not be deemed a waiver by Tenant of such breach. 16. Provided Tenant is not in default hereunder, Landlord and tenant agree that Tenant's covenant to subordinate this Lease to any present or future mortgage or ground lease shall be conditioned upon the Landlord using its best efforts to obtain the mortgagee's or ground lessor's agreement to recognize Tenant's rights and obligations under this Lease and to deliver to Tenant a nondisturbance agreement in form reasonably satisfactory to Tenant upon an attornment to such mortgage or ground lessor by Tenant. 17. Tenant shall be entitled to receive and retain amounts which may be received by a separate award is any such condemnation proceedings due to the taking of its trade fixtures, leasehold improvements beyond the "Tenant Finish Allowance" (as referenced in Exhibit "B"), moving expense and such business expenses as Tenant shall separately establish. 5 Exhibit A EXHIBIT B Attached to and forming a part of 8900 State Line Office Building Lease LANDLORD'S AND TENANT'S WORK I. LANDLORD'S WORK Landlord shall construct and install all leasehold improvements (other than "Tenant's Property" as defined in Section 17 of the Lease) in the Premises ("Landlord's Work") in accordance with plans and specifications prepared by architect (at Tenant's expense), and submitted to and approved by Tenant, which approval shall not be unreasonably withheld, delayed or conditioned (the "Final Plans") PROVIDED, HOWEVER, in no event shall Landlord's Work be of a character which will require changes to be made outside the Premises, or to the exterior facade of the Building or will adversely affect the legality of the use of the Building or the cost of fire insurance for the Building; PROVIDED, FURTHER, in no event shall any change requested by Tenant in the Final Plans after the Final Plans have been approved by Tenant affect the Rent Commencement Date. All "change orders" to the Final Plans must be approved in writing by Landlord and Tenant. II. TENANT'S WORK All work not specifically designated above as Landlord's Work and required to complete and place the Premises in finished condition for opening for business (including the installation of Tenant's Property) shall be furnished by Tenant at Tenant's expense. III. TENANT FINISH ALLOWANCE Landlord shall provide Tenant with a leasehold improvement allowance ("Tenant Finish Allowance") equal to (i) 107,500.00, or ____________; PROVIDED, HOWEVER, the cost and expense of purchasing and installing Tenant's Property shall not be included in calculating the Tenant Finish Allowance. Tenant shall pay all costs and expenses for the construction of Landlord's Work in excess of Tenant's Finish Allowance (the "Excess"). In the event Landlord's Work is less than the Tenant Finish Allowance, such amount shall be credited against the Minimum Rent as same becomes due. Initialled by:________________________ Landlord ________________________ Tenant B-1 EXHIBIT C LEGAL DESCRIPTION BUILDING LAND Commencing at the Northwest corner of the South 1/2 of the North 1/2 of fractional Section 35, Township 12, Range 25, in Leawood, Johnson County, Kansas; thence East along the North line of the above described tract of land having a course of North 89(degrees)-52'-03" East, 490 feet to a point; thence Southeasterly along a line having a course of South 42(degrees)-57'-57" East, a distance of 34.09 feet to a point in the South line of 89th Street, as now established, said point being the point of true beginning for this further described tract; thence continuing Southeasterly a prolongation of the last mentioned course, a distance of 40.91 feet to a point; thence South easterly along a line which course has a bearing of South 41(degrees)-12'-57" East, a distance of 105 feet to a point; thence Southeasterly along a line which course has a bearing of South 30(degrees)-07'-57" East, a distance of 100 feet to a point; thence Southeasterly along a line which course has a bearing of South 17(degrees)-17'-57" East, a distance of 120 feet to a point; thence Southwesterly along a line which course has a bearing of South 15(degrees)-19'-57" West, a distance of 181.73 feet to a point; thence Southwesterly along a line which course has a bearing of South 19(degrees)-59'-49" West, a distance of 62.30 feet to a point; thence Southwesterly along a line which course has a bearing of South 05(degrees)-13'-55" West, a distance of 59.10 feet to a point; thence Southeasterly along a line which course has a bearing of South 11(degrees)-14' East, a distance of 146.39 feet to a point; thence Southeasterly along a line which course has a bearing of South 76(degrees)-10'-15" East, a distance of 241.92 feet to a point; thence Northeasterly along a line which course has a bearing of North 89(degrees)-19'-38" East, a distance of 77.78 feet to a point in the Westerly line of the Missouri-Kansas State Line Road, as now established, said point being 70 feet West and parallel to said centerline; thence Northerly along said right-of-way line which course has a bearing of North 00(degrees)-40'-22" West, a distance of 50.56 feet to a point; thence East at right angles to the last described course, a distance of 20 feet to a point 50 feet West of said centerline; thence Northerly along said right-of-way line, being 50 feet West of and parallel to said centerline, a distance of 20 feet to a point; thence East at right angles to the last described course, a distance of 10 feet to a point 40 feet West of the centerline of said road; thence Northerly along said right-of-way line being 40 feet West of and parallel to said centerline, a distance of 592.90 feet to a point; thence Southwesterly along a line at right angles to the last described course, said line having a bearing of South 89(degrees)-19'-38" West, a distance of 2.32 feet to a point; thence Northwesterly along a line following a curve bearing to the right and having a radius of 295 feet, a distance of 210.63 feet to a point of reverse curve; thence Northwesterly and Westerly along a line following a curve bearing to the left and having a radius of 295 feet whose initial tangent has a bearing of North 49(degrees)-45'-57" West, a distance of 207.84 feet to a point; thence Westerly along the South line of 89th Street which course has a bearing of South 89(degrees)-52'-03" West, a distance of 84.09 feet to the point of beginning, except any part in roads; C-1 FIRST LEASE MODIFICATION AGREEMENT THIS AGREEMENT is made as of the ___ day of _______________, 1995, by and between 89 STATE LINE PARTNERSHIP, a Kansas limited partnership, as Landlord, and, WEIGHT WATCHERS INTERNATIONAL, INC., as Tenant. WITNESSETH: WHEREAS, Landlord demised to Tenant and Tenant leased from Landlord certain premises in the 8900 State Line Office Building, 8900 State Line, Leawood, Kansas pursuant to that certain Lease dated August 31, 1995 (the "LEASE"); and WHEREAS, the parties hereto desire to modify the Lease upon the terms and certain conditions hereinafter set forth. NOW, THEREFORE, in consideration of mutual covenants and other good and valuable consideration, the legal sufficiency and receipt of which is hereby acknowledged the parties hereto agree as follows: 1. The Rent Commencement Date shall be hereby amended to read October 16, 1995. 2. All other terms, conditions, covenants and agreements contained in the Lease as herein modified shall continue in full force and effect and shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 8900 STATE LINE LIMITED By: CWB ASSOCIATES, INC. By:_______________________________ Name:_____________________________ Title:____________________________ "Landlord" WEIGHT WATCHERS INTERNATIONAL, INC. By:_______________________________ Name:_____________________________ Title:____________________________ "Tenant" EX-10.16 55 EXHIBIT 10.16 EXHIBIT 10.16 [LETTERHEAD OF WEIGHT WATCHERS INTERNATIONAL, INC.] CONFIDENTIAL August 30, 1996 Mr. Robert Mallow 12506 Slater Overland Park, KS 66213 Dear Bob: I am pleased to confirm your promotion to Vice President of NACO, our North American Company-Owned Operations. Your newly adjusted bi-weekly salary will be $4,154, effective date to be discussed. You have significant scope to grow as the salary range for this position extends to over $150,000. In addition, you will participate in the HJH Shareholder's Success Plan incentive bonus scheme that is designed to award outstanding achievement generously. This year (FY97), WWI's operating income goals and the awards, stated as a percentage of your salary range mid-point of $132,417, are as follows:
MINIMUM TARGET MAXIMUM -------- -------- -------- Consolidated O.I................................ $12MM $15MM $18MM Award........................................... 12% 40% 100%
Therefore, at Target, your bonus would be $53,000. You will no longer participate in the NACO Bonus Plan. You will be entitled to the use of a Company car with a value up to $25,000 while you are employed by WWI pursuant to the Heinz Executive Automobile Policy and Guidelines. Insurance, gas and maintenance are covered. You may spend up to $1,000 annually (any 12 months) for membership to a health club. You will be entitled to four weeks' vacation per year. You have already been awarded 5,000 options of Heinz stock in anticipation of this new assignment and you will be eligible for further awards under the Heinz policy. We have agreed that your primary residence and business location will remain in the Kansas City area, but that you will spend one to two weeks per month in our headquarters office in Woodbury, NY as necessary to fulfill your assignment. WWI will reimburse you for the traveling expenses incurred in this arrangement as per existing Company travel policies. In the event of termination of your employment by WWI for just cause, you will be eligible for salary continuation for a period of one year. I look forward to extending the long and mutually rewarding association we have had well into the future. You are being put in a position with the ability to make a significant contribution to the growth of WWI as a senior member of our management team. Sincerely, EX-12.1 56 EXHIBIT 12.1 Exhibit 12.1 Ratio of Earnings to Fixed Charges
- ------------------------------------------------------------------------------------------------------------------------------------ Unaudited Fiscal Year Ended Fiscal Quarter Ended - ------------------------------------------------------------------------------------------------------------------------------------ April 25, April 27, April 26, April 25, April 24, July 25, July 24, 1995 1996 1997 1998 1999 1998 1999 - ------------------------------------------------------------------------------------------------------------------------------------ (In millions, except ratios) (In millions, except ratios) - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS (Loss): Income (loss) before income taxes and minority interests 4.9 18.5 (36.3) 44.5 85.8 22.6 28.8 - ----------------------------------------------------------------------------------------------------------------------------------- Interest expense 13.8 18.4 13.8 8.6 8.9 2.0 1.4 - ----------------------------------------------------------------------------------------------------------------------------------- Rental expense interest component 7.0 6.6 6.4 4.1 3.7 0.8 0.8 -------- -------- -------- -------- -------- -------- -------- - ----------------------------------------------------------------------------------------------------------------------------------- Earnings (Loss) 25.7 43.5 (16.1) 57.2 98.4 25.4 31.0 -------- -------- -------- -------- -------- -------- -------- - ------------------------------------------------------------------------------------------------------------------------------------ FIXED CHARGES: - ------------------------------------------------------------------------------------------------------------------------------------ Interest expense 13.8 18.4 13.8 8.6 8.9 2.0 1.4 - ------------------------------------------------------------------------------------------------------------------------------------ Rental expense interest component 7.0 6.6 6.4 4.1 3.7 0.8 0.8 -------- -------- -------- -------- -------- -------- -------- - ------------------------------------------------------------------------------------------------------------------------------------ Fixed charges 20.8 25.0 20.2 12.7 12.6 2.8 2.2 -------- -------- -------- -------- -------- -------- -------- - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of earnings to fixed charges 1.2x 1.7x (a) 4.5x 7.8x 9.1x 14.1x - ------------------------------------------------------------------------------------------------------------------------------------
The data above sets forth the ratio of earnings to fixed charges of Weight Watchers International, Inc. and Subsidiaries ("WWI") for each of the years in the five-year period ended April 24, 1999 and for the quarters ended July 25, 1998 and July 24, 1999. The data for each of the years in the five-year period ended April 24, 1999 are derived from the audited historical financial statements of WWI, included elsewhere in this document. The data for each of the quarters ended July 25, 1998 and July 24, 1999 have been derived from the unaudited historical financial statements of WWI which are included elsewhere in this document. 2 (a) Earnings for the period ended April 26, 1997 were inadequate to cover fixed charges and resulted in a coverage deficiency of approximately $.8 million. EX-12.2 57 EXHIBIT 12.2 Exhibit 12.2 Pro Forma Ratio of Earnings to Fixed Charges
Unaudited Fiscal Quarter Ended -------------------------- April 24, July 25, July 24, 1999 1998 1999 --------- -------- -------- (In millions, except ratios) EARNINGS: Income before income taxes and minority interests 28.1 8.6 14.5 Interest expense 55.5 13.9 13.9 Amortization of deferred financing costs 2.0 0.5 0.5 Rental expense interest component 3.7 0.8 0.8 ------ ------ ------ Earnings 89.3 23.8 29.7 ------ ------ ------ FIXED CHARGES: Interest expense 55.5 13.9 13.9 Amortization of deferred financing costs 2.0 0.5 0.5 Rental expense interest component 3.7 0.8 0.8 ------ ------ ------ Fixed charges 61.2 15.2 15.2 ------ ------ ------ Ratio of earnings to fixed charges 1.5x 1.6x 2.0x
- -------------------------------------------------------------------------------- The data above sets forth the ratio of earnings to fixed charges of Weight Watchers International, Inc. and Subsidiaries ("WWI") for the year ended April 24, 1999 and for the quarters ended July 25, 1998 and July 24, 1999 on a proforma basis. The data for the year ended April 24, 1999 is derived from the unaudited pro forma financial statements of WWI, included elsewhere in this document. 2 The data for each of the quarters ended July 25, 1998 and July 24, 1999 have been derived from the unaudited proforma financial statements of WWI which are included elsewhere in this document. EX-21.1 58 EXHIBIT 21.1 EXHIBIT 21 SUBSIDIARIES OF REGISTRANT WEIGHT WATCHERS INTERNATIONAL, INC.
SUBSIDIARY JURISDICTION OF ORGANIZATION W.W. Inventory Service Corp. Delaware W.W. Weight Reduction Services, Inc. New York W/W Twentyfirst Corporation New York Weight Watchers Direct, Inc. Delaware W.W.I. European Services, Ltd. New York Weight Watchers North America, Inc. Delaware Weight Watchers (U.K.) Limited United Kingdom Weight Watchers France SARL France Weight Watchers Sweden Vikt-Vaktarna Sweden Akiebolag Il Salvalinea, S.R.L. Italy Weight Watchers Belgium, N.V. Belgium Weight Watchers Deutschland GmbH Germany Weight Watchers Eesti Aktiaselts Estonia Weight Watchers Suomi Oy Finland Gutbusters Pty Ltd Australia Fortuity Pty Ltd Australia Weight Watchers (Switzerland) S.A. Switzerland Weight Watchers Polska Sp. z.o.o. Poland Weight Watchers Latvia Latvia Weight Watchers Nederlands, B.V. Netherlands Weight Watchers International Pty Limited Australia Weight Watchers (Accessories & Publications) United Kingdom Ltd Weight Watchers (Exercise) Ltd. United Kingdom Weight Watchers (Food Products) Limited United Kingdom Waist Watchers, Inc. Delaware Weight Watchers UK Holdings Ltd United Kingdom Weight Watchers International Holdings Ltd United Kingdom Weight Watchers New Zealand Limited New Zealand Weight Watchers Funding, Inc. Delaware 58 WW Food Corp. New York Weight Watchers Camps, Inc. New York W.W. Camps and Spas, Inc. Delaware WW Foods, LLC Delaware
EX-23.2 59 EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of Weight Watchers International Inc. and Subsidiaries of our reports dated July 23, 1999, except for Note 18, for which the date is September 29, 1999, relating to the financial statements and financial statement schedule of Weight Watchers International Inc. and Subsidiaries, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Melville, New York December 2, 1999 EX-25 60 EXHIBIT 25 ================================================================================ EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------------- |_| CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. National Banking Association 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) ----------------------------- WEIGHT WATCHERS INTERNATIONAL, INC. (Exact name of obligor as specified in its charter) Virginia 11-6040273 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 175 Crossways Park West Woodbury, New York 11797 (Address of principal executive offices) (Zip code) ----------------------------- 13% Senior Subordinated Notes due 2009 (100,000,000 (Title of the Indenture securities) ================================================================================ Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15.Foreign Trustee. Not applicable. Item 16.List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Norwest Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.* Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* 2 d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* Exhibit 3. A copy of the authorization of the trustee to exercise corporate trustpowers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.* Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.** Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. 3 ** Incorporated by reference to exhibit number 25 filed with registration statement number 333-84849. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Norwest Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 22nd day of October 1999. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION ---------------------- Timothy P. Mowdy Corporate Trust Officer EXHIBIT 6 October 22, 1999 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION ---------------------- Timothy P. Mowdy Corporate Trust Officer EX-27.1 61 EXHIBIT 27.1
5 0000105319 Weight Watchers 1,000 YEAR YEAR APR-24-1999 APR-25-1998 APR-26-1998 APR-27-1997 APR-24-1999 APR-25-1998 19,515 11,829 0 0 12,397 12,523 994 876 7,580 7,652 186,754 182,732 55,153 60,216 46,428 50,210 371,434 370,799 95,554 116,940 0 0 0 0 0 0 0 0 248,948 229,089 371,434 370,799 404,842 334,313 404,842 334,313 178,925 159,961 320,927 290,323 5,248 4,281 34 240 8,859 8,576 85,835 44,585 36,360 19,969 47,982 23,771 0 0 0 0 0 0 47,982 23,771 0 0 0 0
EX-27.2 62 EXHIBIT 27.2
5 0000105319 Weight Watchers 1,000 YEAR APR-26-1997 APR-28-1996 APR-26-1997 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 332,739 332,739 230,440 364,798 3,346 (198) 13,849 (36,998) (12,997) (24,089) 0 0 0 (24,089) 0 0
EX-27.3 63 EXHIBIT 27.3
5 0000105319 Weight Watchers 1,000 3-MOS 3-MOS APR-29-1999 APR-24-2000 APR-25-1998 APR-26-1999 JUL-24-1998 JUL-25-1999 26,034 0 0 0 8,429 0 994 0 7,697 0 54,839 0 55,040 0 46,975 0 236,947 0 72,818 0 0 0 0 0 0 0 0 0 143,975 0 236,947 0 96,415 92,293 96,415 92,293 42,709 41,116 68,113 69,805 1,165 1,304 (213) (14) 1,454 2,015 28,807 22,648 11,338 9,642 17,095 12,708 0 0 0 0 0 0 17,095 12,708 0 0 0 0
EX-99.1 64 EXHIBIT 99.1 EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR $150,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 OF WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 (THE "EXPIRATION DATE") UNLESS EXTENDED BY WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT IS: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION FOR DELIVERY BY REGISTERED OR CERTIFIED FOR OVERNIGHT DELIVERY ONLY: MAIL: Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association 608 Second Avenue South Sixth Street and Marquette Avenue Northstar East Building, 12th Floor MAC N9303-121 MAC N9303-121 Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department Attention: Corporate Trust Department BY HAND: BY FACSIMILE TRANSMISSION Norwest Bank Minnesota, (FOR ELIGIBLE INSTITUTIONS ONLY): National Association (612) 667-4927 608 Second Avenue South CONFIRM FACSIMILE BY TELEPHONE ONLY: Northstar East Building, 12th Floor (612) 667-9764 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated December , 1999 (the "Prospectus") of Weight Watchers International, Inc. (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange its dollar-denominated 13% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Notes") for each of its dollar-denominated 13% Senior Subordinated Notes due 2009 (the "Old Notes" and, together with the Exchange Notes, the "Notes") from the holders thereof. The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus). YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, 608 SECOND AVENUE SOUTH, NORTHSTAR EAST BUILDING, 12TH FLOOR, MINNEAPOLIS, MN 55479-0069, (612) 667-9764. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF OLD NOTES TENDERED HEREWITH AGGREGATE NAME(S) AND ADDRESS(ES) OF REGISTERED PRINCIPAL AMOUNT HOLDER(S) CERTIFICATE REPRESENTED BY PRINCIPAL (PLEASE FILL IN) NUMBER(S)* OLD NOTES* AMOUNT TENDERED** Total * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See instruction 2.
Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Old Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Old Notes are held of record by The Depository Trust Company ("DTC"). / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) _______________________________________________ Name of Eligible Institution that Guaranteed Delivery ______________________ Date of Execution of Notice of Guaranteed Delivery _________________________ If Delivered by Book-Entry Transfer: Name of Tendering Institution ______________________________________________ Account Number _____________________________________________________________ Transaction Code Number ____________________________________________________ 2 / / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL: Name _______________________________________________________________________ Address ____________________________________________________________________ / / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: Name _______________________________________________________________________ Address ____________________________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Old Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company, in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Old Notes or transfer ownership of such Old Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Old Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement, dated September 22, 1999 (the "Registration Rights Agreement"), among the Company, Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. and that the Company shall have no further obligations or liabilities thereunder except as provided in the first paragraph of Section 2 of such agreement. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer--Certain Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Old Notes tendered hereby and, in such event, the Old Notes not exchanged will be returned to the undersigned at the address shown above, promptly following the expiration or termination of the Exchange Offer. In addition, the Company may amend the Exchange Offer at any time prior to the Expiration Date if any of the conditions set forth under "The Exchange Offer--Certain Conditions to the Exchange Offer" occur. The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Company's acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes. By tendering shares of Old Notes and executing this Letter of Transmittal, the undersigned represents that Exchange Notes acquired in the exchange will be obtained in the ordinary course of business of the undersigned, that the undersigned has no arrangement or understanding with any 4 person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes, that the undersigned is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that if the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a person in the United Kingdom, the undersigned represents that its ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business. Any holder of Old Notes using the Exchange Offer to participate in a distribution of the Exchange Notes (i) cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or similar interpretive letters and (ii) must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale transaction. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable. Certificates for all Exchange Notes delivered in exchange for tendered Old Notes and any Old Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. The undersigned, by completing the box entitled "Description of Old Notes Tendered Herewith" above and signing this letter, will be deemed to have tendered the Old Notes as set forth in such box. 5 - -------------------------------------------------------------------------------- TENDERING HOLDER(S) SIGN HERE (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OLD NOTES HEREBY TENDERED OR IN WHOSE NAME OLD NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3. ____________________________________________________________________________ ____________________________________________________________________________ (SIGNATURE(S) OF HOLDER(S)) Date _______________________________________________________________________ Name(s)_____________________________________________________________________ ____________________________________________________________________________ (PLEASE PRINT) Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDING ZIP CODE) Daytime Area Code and Telephone No. ________________________________________ Taxpayer Identification No. ________________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTION 3) Authorized Signature _______________________________________________________ Date _______________________________________________________________________ Name _______________________________________________________________________ Title ______________________________________________________________________ Name of Firm _______________________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. ---------------------------------------------------------------------------- 6 - ------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Old Notes not tendered are to be issued in the name of someone other than the registered holder of the Old Notes whose name(s) appear(s) above. Issue / / Old Notes not tendered to: / / Exchange Notes to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ ___________________________________________________________________________ (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. ______________________________________________________________ Tax Identification No. _____________________________________________________ - ------------------------------------------- - ------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Old Notes not tendered are to be sent to someone other than the registered holder of the Old Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail / / Old Notes not tendered to: / / Exchange Notes to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. ______________________________________________________________ - ------------------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. A holder of Old Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Old Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Old Notes may tender Old Notes by book-entry transfer by crediting the Old Notes to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) on or prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution a letter, telegram or facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) setting forth the name and address of the tendering holder, the names in which such Old Notes are registered, and, if applicable, the certificate numbers of the Old Notes to be tendered; and (iii) all tendered Old Notes (or a confirmation of any book-entry transfer of such Old Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the 8 Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Old Notes tendered in the box entitled "Description of Old Notes Tendered Herewith." A newly issued certificate for the Old Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Old Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at one of the addresses for the Exchange Agent set forth above before the Company notifies the Exchange Agent that it has accepted the tender of Old Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Old Notes to be withdrawn; (iii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Old Notes and the principal amount of Old Notes represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Old Notes exchanged; and (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Old Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. 9 If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Old Notes listed, such Old Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Old Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution, unless Old Notes are tendered: (i) by a holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Institution (as defined below). In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution"). If Old Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Old Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. 5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If a transfer tax is imposed for any reason 10 other than the transfer and exchange of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. SUBSTITUTE FORM W-9 Each holder of Old Notes whose Old Notes are accepted for exchange (or other payee) is required to provide a correct taxpayer identification number ("TIN"), generally the holder's Social Security or federal employer identification number, and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other payee) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 31% federal income tax backup withholding on payments made in connection with the Old Notes. The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or other payee) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is not provided by the time any payment is made in connection with the Old Notes, 31% of all such payments will be withheld until a TIN is provided. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 11 IMPORTANT TAX INFORMATION Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are accepted for exchange may be subject to backup withholding unless the holder provides Norwest Bank Minnesota, National Assocation, as Paying Agent (the "Paying Agent"), through the Exchange Agent, with either (i) such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder of Old Notes is awaiting a TIN) and that (A) the holder of Old Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the holder of Old Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such holder of Old Notes is an individual, the TIN is such holder's social security number. If the Paying Agent is not provided with the correct TIN, the holder of Old Notes may be subject to certain penalties imposed by the Internal Revenue Service. Certain holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. However, exempt holders of Old Notes should indicate their exempt status on Substitute Form W-9. For example, a corporation must complete the Substitute Form W-9, providing its TIN and indicating that it is exempt from backup withholding. In order for a foreign individual to qualify as an exempt recipient, the holder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Paying Agent is required to withhold 31% of any such payments made to the holder of Old Notes or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of the tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the surrendering holder of Old Notes has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder of Old Notes or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Paying Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Paying Agent. The holder of Old Notes is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Old Notes. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYER.--Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service. - ----------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF - ----------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor- revocable savings trustee(1) trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - ----------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF - ----------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, The legal entity(4) estate, or pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or The broker or registered nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments
- --------------------------------------------- - --------------------------------------------- (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. PRIVACY ACT NOTICE.--Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. PAYER'S NAME: SUBSTITUTE PART 1--PLEASE PROVIDE Social Security Number FORM W-9 YOUR TIN IN THE BOX AT or RIGHT AND CERTIFY BY Employer Identification Number SIGNING AND DATING BELOW. PART 2--Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification and (or I am waiting for a number to be issued to DEPARTMENT OF THE TREASURY me), and INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding because (a) I am exempt PAYER'S REQUEST FOR TAXPAYER from backup withholding, or (b) I have not been notified by the IDENTIFICATION NUMBER (TIN) Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGN HERE --> SIGNATURE PART 3-- DATE / / Awaiting TIN
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature ___________________________ Date ___________________________ , 2000 EX-99.2 65 EXHIBIT 99.2 EXHIBIT 99.2 LETTER OF TRANSMITTAL FOR [EURO]100,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 OF WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 (THE "EXPIRATION DATE") UNLESS EXTENDED BY WEIGHT WATCHERS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT IS: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION FOR DELIVERY BY REGISTERED OR CERTIFIED FOR OVERNIGHT DELIVERY ONLY: MAIL: Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association 608 Second Avenue South Sixth Street and Marquette Avenue Northstar East Building, 12th Floor MAC N9303-121 MAC N9303-121 Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department Attention: Corporate Trust Department BY HAND: BY FACSIMILE TRANSMISSION Norwest Bank Minnesota, (FOR ELIGIBLE INSTITUTIONS ONLY): National Association (612) 667-4927 608 Second Avenue South CONFIRM FACSIMILE BY TELEPHONE ONLY: Northstar East Building, 12th Floor (612) 667-9764 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated December , 1999 (the "Prospectus") of Weight Watchers International, Inc. (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange its euro-denominated 13% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Notes") for each of its euro-denominated 13% Senior Subordinated Notes due 2009 (the "Old Notes" and, together with the Exchange Notes, the "Notes") from the holders thereof. The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus). YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, 608 SECOND AVENUE SOUTH, NORTHSTAR EAST BUILDING, 12TH FLOOR, MINNEAPOLIS, MN 55479-0069, (612) 667-9764. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF OLD NOTES TENDERED HEREWITH AGGREGATE NAME(S) AND ADDRESS(ES) OF REGISTERED PRINCIPAL AMOUNT HOLDER(S) CERTIFICATE REPRESENTED BY PRINCIPAL (PLEASE FILL IN) NUMBER(S)* OLD NOTES* AMOUNT TENDERED** Total * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See instruction 2.
Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Old Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Old Notes are held of record by The Depository Trust Company ("DTC"). / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) _______________________________________________ Name of Eligible Institution that Guaranteed Delivery ______________________ Date of Execution of Notice of Guaranteed Delivery _________________________ If Delivered by Book-Entry Transfer: Name of Tendering Institution ______________________________________________ Account Number _____________________________________________________________ Transaction Code Number ____________________________________________________ 2 / / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL: Name _______________________________________________________________________ Address ____________________________________________________________________ / / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: Name _______________________________________________________________________ Address ____________________________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Old Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company, in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Old Notes or transfer ownership of such Old Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Old Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement, dated September 22, 1999 (the "Registration Rights Agreement"), among the Company, Credit Suisse First Boston Corporation and Scotia Capital Markets (USA) Inc. and that the Company shall have no further obligations or liabilities thereunder except as provided in the first paragraph of Section 2 of such agreement. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer--Certain Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Old Notes tendered hereby and, in such event, the Old Notes not exchanged will be returned to the undersigned at the address shown above, promptly following the expiration or termination of the Exchange Offer. In addition, the Company may amend the Exchange Offer at any time prior to the Expiration Date if any of the conditions set forth under "The Exchange Offer--Certain Conditions to the Exchange Offer" occur. The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Company's acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes. By tendering shares of Old Notes and executing this Letter of Transmittal, the undersigned represents that Exchange Notes acquired in the exchange will be obtained in the ordinary course of business of the undersigned, that the undersigned has no arrangement or understanding with any 4 person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes, that the undersigned is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that if the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a person in the United Kingdom, the undersigned represents that its ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business. Any holder of Old Notes using the Exchange Offer to participate in a distribution of the Exchange Notes (i) cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or similar interpretive letters and (ii) must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale transaction. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable. Certificates for all Exchange Notes delivered in exchange for tendered Old Notes and any Old Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. The undersigned, by completing the box entitled "Description of Old Notes Tendered Herewith" above and signing this letter, will be deemed to have tendered the Old Notes as set forth in such box. 5 - -------------------------------------------------------------------------------- TENDERING HOLDER(S) SIGN HERE (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OLD NOTES HEREBY TENDERED OR IN WHOSE NAME OLD NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3. ____________________________________________________________________________ ____________________________________________________________________________ (SIGNATURE(S) OF HOLDER(S)) Date _______________________________________________________________________ Name(s)_____________________________________________________________________ ____________________________________________________________________________ (PLEASE PRINT) Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDING ZIP CODE) Daytime Area Code and Telephone No. ________________________________________ Taxpayer Identification No. ________________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTION 3) Authorized Signature _______________________________________________________ Date _______________________________________________________________________ Name _______________________________________________________________________ Title ______________________________________________________________________ Name of Firm _______________________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. ---------------------------------------------------------------------------- 6 - ------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Old Notes not tendered are to be issued in the name of someone other than the registered holder of the Old Notes whose name(s) appear(s) above. Issue / / Old Notes not tendered to: / / Exchange Notes to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ ___________________________________________________________________________ (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. ______________________________________________________________ Tax Identification No. _____________________________________________________ - ------------------------------------------- - ------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Old Notes not tendered are to be sent to someone other than the registered holder of the Old Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail / / Old Notes not tendered to: / / Exchange Notes to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. ______________________________________________________________ - ------------------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. A holder of Old Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Old Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Old Notes may tender Old Notes by book-entry transfer by crediting the Old Notes to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) on or prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution a letter, telegram or facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) setting forth the name and address of the tendering holder, the names in which such Old Notes are registered, and, if applicable, the certificate numbers of the Old Notes to be tendered; and (iii) all tendered Old Notes (or a confirmation of any book-entry transfer of such Old Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the 8 Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Old Notes tendered in the box entitled "Description of Old Notes Tendered Herewith." A newly issued certificate for the Old Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Old Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at one of the addresses for the Exchange Agent set forth above before the Company notifies the Exchange Agent that it has accepted the tender of Old Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Old Notes to be withdrawn; (iii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Old Notes and the principal amount of Old Notes represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Old Notes exchanged; and (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Old Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. 9 If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Old Notes listed, such Old Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Old Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution, unless Old Notes are tendered: (i) by a holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Institution (as defined below). In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution"). If Old Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Old Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. 5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If a transfer tax is imposed for any reason 10 other than the transfer and exchange of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. SUBSTITUTE FORM W-9 Each holder of Old Notes whose Old Notes are accepted for exchange (or other payee) is required to provide a correct taxpayer identification number ("TIN"), generally the holder's Social Security or federal employer identification number, and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other payee) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 31% federal income tax backup withholding on payments made in connection with the Old Notes. The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or other payee) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is not provided by the time any payment is made in connection with the Old Notes, 31% of all such payments will be withheld until a TIN is provided. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 11 IMPORTANT TAX INFORMATION Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are accepted for exchange may be subject to backup withholding unless the holder provides Citibank, N.A., as Paying Agent (the "Paying Agent"), through the Exchange Agent, with either (i) such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder of Old Notes is awaiting a TIN) and that (A) the holder of Old Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the holder of Old Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such holder of Old Notes is an individual, the TIN is such holder's social security number. If the Paying Agent is not provided with the correct TIN, the holder of Old Notes may be subject to certain penalties imposed by the Internal Revenue Service. Certain holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. However, exempt holders of Old Notes should indicate their exempt status on Substitute Form W-9. For example, a corporation must complete the Substitute Form W-9, providing its TIN and indicating that it is exempt from backup withholding. In order for a foreign individual to qualify as an exempt recipient, the holder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Paying Agent is required to withhold 31% of any such payments made to the holder of Old Notes or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Certain holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. However, exempt holders of Old Notes should indicate their exempt status on Substitute Form W-9. For example, a corporation must complete the Substitute Form W-9, providing its TIN and indicating that it is exempt from backup withholding. In order for a foreign individual to qualify as an exempt recipient, the holder must submit a Form W-8, signed under penalties of perjury, attestingtaxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the surrendering holder of Old Notes has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder of Old Notes or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Paying Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Paying Agent. The holder of Old Notes is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Old Notes. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYER.--Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service. - ----------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF - ----------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor- revocable savings trustee(1) trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - ----------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF - ----------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, The legal entity(4) estate, or pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or The broker or registered nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments
- --------------------------------------------- - --------------------------------------------- (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. PRIVACY ACT NOTICE.--Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. PAYER'S NAME: SUBSTITUTE PART 1--PLEASE PROVIDE Social Security Number FORM W-9 YOUR TIN IN THE BOX AT or RIGHT AND CERTIFY BY Employer Identification Number SIGNING AND DATING BELOW. PART 2--Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification and (or I am waiting for a number to be issued to DEPARTMENT OF THE TREASURY me), and INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding because (a) I am exempt PAYER'S REQUEST FOR TAXPAYER from backup withholding, or (b) I have not been notified by the IDENTIFICATION NUMBER (TIN) Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGN HERE --> SIGNATURE PART 3-- DATE / / Awaiting TIN
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature ___________________________ Date ___________________________ , 2000 EX-99.3 66 EXHIBIT 99.3 EXHIBIT 99.3 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING $150,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR NEW $150,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 OF WEIGHT WATCHERS INTERNATIONAL, INC. Registered holders of outstanding dollar-denominated 13% Senior Subordinated Notes due 2009 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of new dollar-denominated 13% Senior Subordinated Notes due 2009 (the "Exchange Notes") and whose Old Notes are not immediately available or who cannot deliver their Old Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Norwest Bank Minnesota, National Association (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION FOR DELIVERY BY REGISTERED OR CERTIFIED FOR OVERNIGHT DELIVERY ONLY: MAIL: Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association 608 Second Avenue South Sixth Street and Marquette Avenue Northstar East Building, 12th Floor MAC N9303 - 121 MAC N9303 - 121 Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department Attention: Corporate Trust Department BY HAND: BY FACSIMILE TRANSMISSION Norwest Bank Minnesota, (FOR ELIGIBLE INSTITUTIONS ONLY): National Association (612) 667-4927 608 Second Avenue South CONFIRM FACSIMILE BY TELEPHONE ONLY: Northstar East Building, 12th Floor (612) 667-9764 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an eligible institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Old Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus dated , 1999 of Weight Watchers International, Inc. (the "Prospectus"), receipt of which is hereby acknowledged. DESCRIPTION OF OLD NOTES TENDERED CERTIFICATE NAME AND NUMBER(S) OF ADDRESS OF OLD NOTES REGISTERED TENDERED (OR HOLDER AS IT ACCOUNT APPEARS ON THE NUMBER AT PRINCIPAL OLD NOTES BOOK-ENTRY AMOUNT OLD NAME OF TENDERING HOLDER (PLEASE PRINT) FACILITY) NOTES TENDERED
SIGN HERE Name of Registered or Acting Holder: ___________________________________________ Signature(s): __________________________________________________________________ Name(s) (Please Print): ________________________________________________________ Address: _______________________________________________________________________ Telephone Number: ______________________________________________________________ Date: __________________________________________________________________________ IF OLD NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: ________________________________________________________ Date: ______________________________________________________________________ 2 THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date (as defined in the Letter of Transmittal). Name of Firm: (AUTHORIZED SIGNATURE) Address: Title: Name: (ZIP CODE) (PLEASE TYPE OR PRINT) Area Code and Date: Telephone No.:
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.4 67 EXHIBIT 99.4 EXHIBIT 99.4 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING [EURO]100,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR NEW [EURO]100,000,000 13% SENIOR SUBORDINATED NOTES DUE 2009 OF WEIGHT WATCHERS INTERNATIONAL, INC. Registered holders of outstanding euro-denominated 13% Senior Subordinated Notes due 2009 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of new euro-denominated 13% Senior Subordinated Notes due 2009 (the "Exchange Notes") and whose Old Notes are not immediately available or who cannot deliver their Old Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Norwest Bank Minnesota, National Association (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION FOR DELIVERY BY REGISTERED OR CERTIFIED FOR OVERNIGHT DELIVERY ONLY: MAIL: Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association 608 Second Avenue South Sixth Street and Marquette Avenue Northstar East Building, 12th Floor MAC N9303 - 121 MAC N9303 - 121 Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department Attention: Corporate Trust Department BY HAND: BY FACSIMILE TRANSMISSION Norwest Bank Minnesota, (for eligible institutions only): National Association (612) 667-4927 608 Second Avenue South CONFIRM FACSIMILE BY TELEPHONE ONLY: Northstar East Building, 12th Floor (612) 667-9764 Minneapolis, MN 55479-0069 Attention: Corporate Trust Department
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an eligible institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Old Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus dated , 1999 of Weight Watchers International, Inc. (the "Prospectus"), receipt of which is hereby acknowledged. DESCRIPTION OF OLD NOTES TENDERED CERTIFICATE NAME AND NUMBER(S) OF ADDRESS OF OLD NOTES REGISTERED TENDERED (OR HOLDER AS IT ACCOUNT APPEARS ON THE NUMBER AT PRINCIPAL OLD NOTES BOOK-ENTRY AMOUNT OLD NAME OF TENDERING HOLDER (PLEASE PRINT) FACILITY) NOTES TENDERED
SIGN HERE Name of Registered or Acting Holder: ___________________________________________ Signature(s): __________________________________________________________________ Name(s) (Please Print): ________________________________________________________ Address: _______________________________________________________________________ Telephone Number: ______________________________________________________________ Date: __________________________________________________________________________ IF OLD NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: ________________________________________________________ Date: ______________________________________________________________________ 2 THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date (as defined in the Letter of Transmittal). Name of Firm: (AUTHORIZED SIGNATURE) Address: Title: Name: (ZIP CODE) (PLEASE TYPE OR PRINT) Area Code and Date: Telephone No.:
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 -----END PRIVACY-ENHANCED MESSAGE-----